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As filed with the Securities and Exchange Commission on March 31, 2023
Registration No. 333-269894​
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1/A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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Atmus Filtration Technologies Inc.
(Exact name of registrant as specified in its charter)
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Delaware
(State or Other Jurisdiction of
Incorporation or Organization)​
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3714
(Primary Standard Industrial
Classification Code Number)​
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88-1611079
(I.R.S. Employer
Identification Number)
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26 Century Boulevard
Nashville, Tennessee 37214
(615) 514-7339
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)​
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Toni Y. Hickey
26 Century Boulevard
Nashville, Tennessee 37214
(615) 514-7339
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent For Service)​
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Mark Mandel, Esq.
Baker & McKenzie LLP
452 Fifth Avenue
New York, New York 10018
(212) 626-4100
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Roxane F. Reardon, Esq.
Lesley Peng, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
​ Large accelerated filer    ☐ ​ ​ Accelerated filer   ☐ ​ ​ Non-accelerated filer   ☒ ​ ​ Smaller reporting company   ☐ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Emerging growth company   ☐ ​
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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The information in this preliminary prospectus is not complete and may be changed. The debt-for-equity exchange parties may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 31, 2023
PRELIMINARY PROSPECTUS
       Shares
Atmus Filtration Technologies Inc.
Common Stock
$      per share
This is an initial public offering of shares of common stock of Atmus Filtration Technologies Inc. (“Atmus”). All of our shares of common stock are currently held by Cummins Inc. (“Cummins”).
In connection with this offering, Cummins will exchange shares of our common stock for indebtedness of Cummins held by J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC, which we refer to, in such role, as the “debt-for-equity exchange parties,” for short term indebtedness in the form of commercial paper to be issued by, or a loan made to, Cummins prior to the pricing of this offering. We refer to such commercial paper or loan as the “indebtedness”. The indebtedness will be held 50% and 50% by J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC, respectively. The debt-for-equity exchange parties will then sell these shares pursuant to this offering. As a result, the debt-for-equity exchange parties, and not Cummins or Atmus, will receive the net proceeds from the sale of the shares in this offering. Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $      and $      . We have applied to have our common stock listed on the New York Stock Exchange (“NYSE”) under the symbol “ATMU.”
Following this offering, Cummins will own approximately      % of the voting power of our capital stock. As a result, we will be a “controlled company” within the meaning of the corporate governance rules of the NYSE. See “Management — Director Independence and Controlled Company Exemption.”
Investing in our common stock involves risks. See “Risk Factors” beginning on page 19 to read about factors you should consider before buying shares of our common stock.
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Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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Per Share
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Total
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Initial public offering price
​ ​ ​ $     ​ ​ ​ ​ $     ​ ​
Underwriting discount(1)
​ ​ ​ $ ​ ​ ​ ​ $ ​ ​
Proceeds, before expenses, to the debt-for-equity exchange parties
​ ​ ​ $ ​ ​ ​ ​ $ ​ ​ ​
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(1)
We have agreed to reimburse the underwriters for certain expenses in connection with this offering. We refer you to “Underwriting (Conflicts of Interest),” beginning on page 154 of this prospectus, for additional information regarding total underwriter compensation.
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To the extent that the underwriters sell more than                 shares of our common stock, the debt-for-equity exchange parties have granted the underwriters an option to purchase up to an additional           shares at the initial price to the public less the underwriting discount within 30 days from the date of this prospectus. The debt-for-equity exchange parties, and not Cummins or Atmus, will receive the net proceeds from any shares of common stock sold pursuant to this option to purchase additional shares.
The underwriters expect to deliver the shares to investors against payment in New York, New York on                 , 2023.
Joint Lead Book-Running Managers
​ Goldman Sachs & Co. LLC ​ ​
J.P. Morgan
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Joint Book-Running Managers
​ Baird ​ ​
BofA Securities
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Wells Fargo Securities
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Prospectus dated           , 2023
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Through and including                 , 2023 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
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You should rely only on the information contained in this prospectus or in any free writing prospectus we may specifically authorize to be delivered or made available to you. None of Cummins, Atmus, the debt-for-equity exchange parties and the underwriters (nor any of our or their respective affiliates) have authorized anyone to provide any information other than that contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. None of Cummins, Atmus, the debt-for-equity exchange parties or the underwriters (nor any of our or their respective affiliates) take any responsibility for, and neither we nor they provide any assurance as to the reliability of, any other information that others may give you. None of Cummins, Atmus, the debt-for-equity exchange parties or the underwriters (nor any of our or their respective affiliates) are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus or any free writing prospectus is only accurate as of its date, regardless of its time of delivery or the time of any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.
In connection with the consummation of this offering, we will enter into a series of transactions with Cummins pursuant to which Cummins will transfer the assets and liabilities of its filtration business to
 
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us. In exchange, we will, as consideration, issue to Cummins shares of our common stock and intend to pay to Cummins upon the completion of this offering the amount of existing cash, plus the net proceeds of the term loan that we will enter into prior to the closing of this offering, plus any amounts drawn under the revolving credit facility, less an amount of cash to be retained by us in an amount to be determined by Cummins. We will also enter into a separation agreement with Cummins and various other agreements to provide a framework for our relationship with Cummins after our separation from Cummins. We refer to these transactions, as further described in the section entitled “The Separation and Split-Off Transactions — The Separation,” collectively as the “separation.” Except as otherwise indicated or unless the context otherwise requires, the information included in this prospectus about Atmus assumes the completion of the separation. See “The Separation and Split-Off Transactions” for a description of the separation.
Unless we state otherwise or the context requires otherwise:
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references to “Atmus,” “our company,” “we,” “us” or “our” refer to Atmus Filtration Technologies Inc., a Delaware corporation, and its subsidiaries after giving effect to the transactions described under “The Separation and Split-Off Transactions — The Separation” or for periods prior to such transactions, Atmus, a business of Cummins Inc., the combined businesses operating within Cummins’ filtration division that have been or will be contributed to Atmus Filtration Technologies Inc., as part of such transactions (but such references do not include the three joint ventures that we have entered into as of the date of this prospectus, which include Fleetguard Filters Private Ltd., Filtrum Fibretechnologies Pvt. Ltd. and Shanghai Fleetguard Filter Co., Ltd.); and
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references to “Cummins” or “Parent” refer to Cummins Inc., an Indiana corporation, and its subsidiaries other than Atmus.
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Explanatory Note
Atmus Filtration Technologies Inc. was formed in April 2022 to be the publicly listed company after giving effect to the transactions described under “The Separation and Split-Off Transactions — The Separation.” Atmus Filtration Technologies Inc. elected not to include its historical financial statements in this registration statement as, until the consummation of the separation transaction, it has no assets, does not operate any businesses and has not conducted any material activities other than those incident to its formation and the pending separation and split-off transaction. The historical financial statements included in this registration statement are those of Atmus, a business of Cummins Inc., the combined businesses operating within Cummins’ filtration division that have been or will be contributed to Atmus Filtration Technologies Inc. as part of such transactions.
Glossary
“aftermarket” means the subset of the filtration market that excludes first-fit sales and includes sales of consumable or replacement products such as replacement filter elements, service parts, chemicals and coolant.
“Asia Pacific” means the Asia Pacific region, including Asia, Southeast Asia, Indonesia, Australia, India and China and excluding Russia and the other Commonwealth of Independent States.
“crankcase ventilation” refers to our oil mist separators filtration products that remove contaminants from gases that collect in the section of an internal combustion engine known as the crankcase. Crankcase gases build during engine operation and must be vented either into the atmosphere or into the intake air stream, so crankcase ventilation filters are used to remove contaminants from the vented gas.
“filtration media” means the separating component of a filter through which the fluid and air passes and by which contaminants are removed. Engine air and liquid filter media usually consists of layers of cellulose or synthetic fibers, but general filtration media also includes sand beds, foam, woven screens, technical textiles, membranes and other means of separation.
 
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“first-fit” means a product applied to the engine or vehicle by the OEM and shipped as a part of the new equipment.
“GHG” means greenhouse gas.
“heavy-duty engine” means engines with displacement between 10.0-16.9 liters.
“industrial filtration market” means the subset of the filtration market (excluding engine applications and passenger cars) that includes machinery and equipment, oil and gas, pharmaceuticals, food and beverage, and metals and mining.
“Latin America” means Central and South American countries and Mexico.
“medium-duty engine” means engines with displacement between 5.0-9.9 liters.
“OEM” means original equipment manufacturer, which refers to Atmus customers that manufacture engines and vehicles. The term “OEM” as used throughout this prospectus also includes Cummins.
“off-highway” means the subset of the engine and transportation filtration market relating to vehicles or equipment that are used off-road, such as vehicles and equipment used in the agriculture, construction, defense, marine, mining, oil and gas, power generation and rail industries.
“on-highway” means the subset of the engine and transportation filtration market relating to vehicles that are used on-road, such as trucks, buses, recreational vehicles, emergency vehicles and vocational vehicles.
“passenger car market” means the subset of the filtration market relating to motor vehicles, other than motorcycles, multipurpose passenger vehicles, or trailers, that are designed to carry up to 10 people.
“service intervals” means the recommended interval between filter replacements, usually measured in miles or kilometers for on-highway applications, and usually measured in hours of operation for off-highway applications. Other equivalent terms are maintenance interval and operational interval.
Market and Industry Information
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general expectations and market position, market opportunity and market share, is based on information from third-party sources and management estimates. Our management estimates have not been verified by any independent source. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors.” These and other factors could cause future performance to differ materially from our assumptions and estimates. See “Cautionary Note Regarding Forward-Looking Statements.”
Trademarks and Trade Names
The name Atmus Filtration Technologies Inc., the trade name Atmus and other trademarks, trade names and service marks of Atmus appearing in this prospectus, including Fleetguard®, StrataPore® and NanoNet®, are the property of Atmus or licensed to Atmus. The name and mark, Cummins Inc., and other trademarks, trade names and service marks of Cummins appearing in this prospectus are the property of Cummins. Solely for convenience, trademarks, trade names and service marks referred to in this prospectus may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent permitted under the applicable law, our rights or the rights of the applicable licensor to these trademarks, trade names and service marks. This prospectus also contains additional trade names, trademarks and service marks belonging to other companies. We do not intend our use or display of other parties’ trademarks, trade names or service marks to imply, and such use or display should not be construed to imply, a relationship with, or endorsement or sponsorship of us by, these other parties.
 
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PROSPECTUS SUMMARY
This summary highlights information included elsewhere in this prospectus and does not contain all of the information you should consider in making an investment decision. You should read this entire prospectus carefully, including the sections entitled “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” “Unaudited Pro Forma Combined Financial Information” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical combined financial statements and the notes thereto before making an investment decision regarding our common stock.
Overview
Atmus is one of the global leaders of filtration products for on-highway commercial vehicles and off-highway agriculture, construction, mining and power generation vehicles and equipment. We design and manufacture advanced filtration products, principally under the Fleetguard brand, that enable lower emissions and provide superior asset protection. We estimate that approximately 16% of our net sales in 2022 were generated through first-fit sales to OEMs, where our products are installed as components for new vehicles and equipment, and approximately 84% were generated in the aftermarket, where our products are installed as replacement or repair parts, leading to a strong recurring revenue base. Building on our 60-year history, we continue to grow and differentiate ourselves through our global footprint, comprehensive offering of premium products, technology leadership and multi-channel path to market.
For the year ended December 31, 2022, we generated $1,562.1 million in net sales, $170.1 million in net income and $234.0 million in EBITDA. See “Summary Historical and Unaudited Pro Forma Combined Financial Data” for a description of EBITDA and a reconciliation of EBITDA to net income, the most directly comparable financial measure calculated in accordance with U.S. GAAP.
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2022 Net Sales By Product
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2022 Net Sales By Geography
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Our Global Footprint
Our global footprint serves end-users in approximately 150 countries, with approximately 49% of our net sales in 2022 from outside of the United States and Canada. We believe that we, together with our joint ventures in China and India, have a leading position in our on-highway and off-highway markets (our “core markets”) based on net sales in 2022. We maintain strong global customer relationships, supported by an established salesforce with work locations in 25 countries as of December 31, 2022. Also, as of December 31, 2022, we operate through 12 distribution centers, nine manufacturing facilities and five technical facilities plus 10 manufacturing facilities and two technical facilities operated by our joint ventures, giving us presence on six continents.
Our Premium Products
We offer a full spectrum of filtration solutions that enable lower emissions and provide superior asset protection. Our filtration products provide comprehensive and differentiated solutions, which allow
 
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our end-users to extend service intervals, reduce maintenance costs and increase uptime. Our products include fuel filters, lube filters, air filters, crankcase ventilation, hydraulic filters and coolants and other chemicals. Our broad range of products in each of our core markets enables one-stop shopping, which we believe is a key competitive advantage.
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Our Markets
We believe the filtration product market is large and attractive, with estimated total product sales of approximately $74 billion in 2021, of which we believe the total engine products market — consisting of our core markets and the passenger car market — was approximately $30 billion. Within the total engine products market, we estimate that our core markets had a total addressable market of approximately $13 billion in 2021, having grown by approximately 2% CAGR over the last five-year period ending in 2021. We estimate that the passenger car market had a total addressable market of approximately $17 billion in 2021. The balance of the filtration product market is made up of industrial filtration markets, which we estimate had a total addressable market of approximately $44 billion in 2021. Our strategy includes a focus on expanding into industrial filtration markets in the future; these markets have grown by approximately 5% CAGR over the five year period ending 2021. Looking ahead, we expect the industrial filtration markets to grow by approximately 4% CAGR and our core markets by approximately 2% CAGR, in each case through the five-year period ending in 2025.
The engine filtration market is impacted by the following key drivers and trends:
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Growth in freight volumes (on-highway) and industrial activity (off-highway):    We believe broader economic growth is a strong indicator for our business. The U.S. Bureau of Transportation Statistics’ Freight Analysis Framework forecasted (as of December 2022) that between 2020 and 2050 U.S. freight activity will double in value, and expected that trucks will remain the predominant freight carrier in the future. Off-highway activity is correlated with the overall construction industry. Dodge Construction Network predicted (as of November 2022) that the U.S. construction industry will remain flat for 2023, and the Construction Industry Databook expected (as of October 2022) a 5.5% CAGR from 2022 to 2026.
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Growth in emerging markets:   Global growth in core markets is being driven by macro-economic expansion, including the build-out of infrastructure. Asian markets, including India, are currently positioned for high growth. According to the International Monetary Fund, from 2017 to 2022, gross domestic product in India has grown at a compounded annual growth rate of 5.5%. The growth in India is primarily driven by the increasing demand for transportation as well as emission regulations. Although growth in China was depressed in 2022 due to the COVID-19 response and declining economic conditions, China had experienced high growth in the prior years and we expect a partial recovery over the next few years. Gross domestic product in China has grown at a compounded annual growth rate of 8.3% from 2017 to 2022 according to the International Monetary Fund. The growth in China is primarily driven by investments in infrastructure and emission regulations.
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More stringent emissions standards:   Our core markets will need to comply with more stringent regulatory standards on emissions driving the requirement for higher quality, increased content and higher priced filtration systems.
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Technology transition:   There is broad based recognition that GHG emissions are driving climate change. Increasingly, our customers, governments, and investors are making commitments to reduce their GHG emissions, including pledges to achieve net zero GHG
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emissions by 2050. While the pace of adoption will vary by region, our core markets may be impacted by technology transitions, including transition to battery-electric vehicles, fuel cell electric vehicles and alternate power sources.
Our Competitive Strengths
Technology leadership and deep industry knowledge enable us to deliver better customer solutions
We combine a culture of innovation with deep-seated experience in our industry to deliver superior filtration solutions for our customers. Our technical team develops a range of filtration technologies, including filtration media, filter element formation, filtration systems integration and service-related solutions such as remote digital diagnostic and prognostic platforms and analytics. Our technical team of approximately 350 engineers, scientists and technical specialists are located in five technical centers around the world, with approximately 25% holding advanced technical degrees. Our team draws on a 60-year history focused on filtration and media technologies. We have a broad IP portfolio with over 1,300 worldwide active or pending patents and patent applications and over 500 worldwide trademark registrations and applications as of December 31, 2022.
We have leveraged this expertise not only to develop our cutting-edge filters, filter systems and filtration media but also to manufacture a large portion of our proprietary filtration media. This allows us to move swiftly from development to application of filtration technologies that protect and enhance the operation of our customer’s equipment and machines. StrataPore, NanoNet, NanoForce, and most recently, NanoNet Plus product families have enabled engines and equipment to meet continually changing emissions and performance requirements.
Our technical team works closely with our customers to develop and apply filtration technologies that help them improve their operations. For example, we helped a key customer and partner in China to be one of the first to extend maintenance intervals on both lube and fuel filtration systems from 20,000 kilometers to 100,000 kilometers. Additionally, our NanoNet Plus fuel filtration and fluid control systems have delivered fuel system component protection meeting stringent European and North American requirements while still providing enhanced service intervals, and our electric rotating crankcase ventilation (eRCV) product families continue to offer crankcase emissions performance control across European, North American, and China-based customers. Our technology allows us to deliver performance-enabling and customized filtration solutions for our end-users, which creates long-lasting partnerships with our customers.
Iconic Fleetguard brand with premium products
We believe that Fleetguard is a premium, leading brand that is strongly associated with reliability and strong performance. We offer a full suite of Fleetguard-branded filtration products. With its broad line of high-quality filtration products, our Fleetguard brand provides filters for nearly all makes of vehicles and equipment in our core markets, which further enhances our availability, visibility and brand recognition. Our Fleetguard brand is further supported by a competitive warranty that gives our customers and end-users high confidence in the performance and durability of our products.
Partnering with leading OEMs
We have a strong history as a supplier to leading OEMs, including CNH Industrial, Cummins, Daimler, Deere, Doosan, Foton, Komatsu, PACCAR/DAF, the Traton Group (Navistar/Scania/MAN) and Volvo. We sell both first-fit and aftermarket products to these customers and have been selling to each of them for at least 10 years. These customers in the aggregate accounted for approximately 68% of our net sales in 2022 and have consistently accounted for more than 66% of our net sales in each of the last 5 years. We have written agreements with most of our key customers that specify certain purchase parameters, but do not obligate them to specific volumes. We invest in our relationships and utilize our technical strengths to win first-fit business with these OEMs, which drives our installed base, yielding strong recurring revenue streams in the aftermarket. The OEMs also provide us with early insight into technological developments and evolving product requirements within the broader
 
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engine and industrial application industry, allowing us to be well positioned as the world shifts towards more complex modular filtration systems and filtration for other power sources.
Cummins is our largest customer and accounted for approximately 19% of our net sales in 2022. Following the offering, this relationship will be defined by the first-fit supply agreement and the aftermarket supply agreement. See “Certain Relationships and Related Party Transactions — Relationship with Cummins — First-Fit Supply Agreement” and “Certain Relationships and Related Party Transactions — Relationship with Cummins  — Aftermarket Supply Agreement.” These long-term supply agreements will help give us visibility and stability to our future sales within the terms of the agreements. In addition, for 65 years, our sales and technical teams have been embedded with Cummins, allowing us to have a deep understanding of their needs, which enables us to deliver high-quality, high-performance products that deliver value to Cummins. We partner with Cummins channels in all regions to win end-user accounts in the aftermarket and create a preference for the Fleetguard brand.
Multi-channel path to diverse global markets
Our global presence provides a diverse and stable customer base across truck, bus, agriculture, construction, mining and power generation vehicles and equipment markets. Our current core markets are on-highway and off-highway, representing approximately 59% and 41% of our net sales in 2022, respectively.
We estimate that approximately 84% of our net sales in 2022 were generated in the aftermarket. To drive these net sales, we have developed a multi-channel path to global markets that ensures broad product availability and provides end-users with choice and flexibility in purchasing. We distribute our products through a broad range of OEM dealers, independent distributors, and retail outlets, including truck stops.
The dealers of the OEMs are typically the channel preferred by customers in many markets. Our close relationships with the OEMs and strong first-fit installed base position us well with the OEM dealer network and large fleet customers. For example, the dealers of four of the largest North America on-highway OEMs carry a significant range of our products at their dealerships.
In addition, Cummins distributors, independent distributors and retailers enable us to reach a broader end-user market and create additional points of sale or service. We estimate that, as of December 31, 2020, our filters were available in over 45,000 independent aftermarket retail outlets globally, including approximately 5,800 locations in North America, approximately 33,000 retail outlets in India, and approximately 2,000 retail outlets in China. We also work directly with major customers of our channel partners (such as large fleets or mining companies), across our end markets, to create strong brand preference, which, in turn, leads to strong demand for our products and generates recurring revenue. We continue to increase geographic coverage within regions to better serve our customers.
We typically ship directly from our 12 distribution centers (as of December 31, 2022) worldwide to our channel partners, which provides direct connection and detailed understanding of our customer and end-user base. Our comprehensive distribution and market coverage is vital to maintaining our broad reach, global presence, and brand recognition.
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Comprehensive aftermarket coverage and large installed base
We have a large installed base driven by first-fit relationships with leading OEMs, leading to long product life cycles and a strong stable revenue base. In the last few years our business strategy has put increased focus on releasing first-fit OEM parts, which we believe will increase aftermarket retention. Our large installed base protects against cyclicality in truck sales and creates a long tail of revenue due to the long lifespans of commercial vehicles and equipment, together with the extensive aftermarket service they require throughout their useful lives. For example, the LF670 filter was first installed on trucks in the 1970s and continues to generate an aftermarket revenue stream approximately 50 years post launch. Aftermarket product sales tend to have a higher profit margin, relative to first-fit systems, driving higher operational cash flow and stability throughout the business cycle.
Our end-user relationships provide critical market intelligence that help drive up-sell and cross-sell opportunities, while providing us direct visibility to market opportunities. Additionally, these end-user relationships enable us to accelerate the launch of a broad range of products where we are not the first-fit.
Scalable global manufacturing operations
We maintain a global manufacturing footprint with highly capable manufacturing facilities in six continents. As of December 31, 2022, we had nine manufacturing sites for Atmus, and 10 for our joint ventures, allowing us to maintain proximity with our customers and global scale. All nine of our manufacturing facilities have obtained either ISO 9001 or ISO/TS 16949 quality management certifications. Additionally, our global warehousing footprint enhances this proximity with 12 distribution centers (as of December 31, 2022) strategically located around the world.
Our significant volumes allow us to take advantage of economies of scale. We have invested strategically in automation and optimization of core filtration manufacturing processes to deliver cost efficiencies.
Attractive margins and strong operating cash flow generation
Our business benefits from attractive margins and a track record of strong cash flow generation. Our high percentage of recurring revenue, relative to other industrial businesses, helps mitigate market cyclicality and revenue volatility. We realized a net income margin of 10.9% and an EBITDA margin of 15.0% in 2022. Our business is resilient, which is evidenced by the fact that despite the changes in economic conditions due to the COVID-19 pandemic, our net sales rebounded with a 16.7% increase in 2021 (as compared to 2020) and increased by 8.6% in 2022 (as compared to 2021). We generate strong operating cash flow from operations with high cash flow conversion, delivering $592.4 million from 2020 to 2022.
Experienced leadership team with a proven track record of driving growth
We are led by an energized and experienced senior leadership team with extensive industry experience with Cummins and other leading industrial companies. Our strategic vision and culture are directed by our executive leadership team under the leadership of our Chief Executive Officer, Steph Disher, our Chief Financial Officer, Jack Kienzler, our Chief Human Resources Officer, Mark Osowick, our Chief Legal Officer, Toni Y. Hickey and our Vice President, Engine Products, Charles Masters. Steph Disher joined Cummins in 2013 and has over 20 years of experience in leadership positions, including international assignments in Australia, Asia, and the United States. Most recently, Steph Disher served as Vice President of Cummins Filtration where she has demonstrated a continued track record of strong business performance, innovation, and operational excellence. Jack Kienzler joined Cummins in 2014 and has over 13 years of finance experience. He most recently served as the Executive Director of Investor Relations at Cummins, having formerly led the Corporate Development team. Mark Osowick joined Cummins in 2007 and has over 30 years of experience in human resource management and project management leadership roles. Toni Y. Hickey joined Cummins in 2012 and has over 24 years of experience as an intellectual property lawyer. Charles Masters joined Cummins in 2003 and has over 19 years of experience in global sales and operational leadership roles within Cummins. Our leadership
 
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team has the ability to develop and execute our strategic vision and aims to create long-term shareholder value. We benefit from our team’s industry knowledge and track record of successful product innovation and financial performance. Additionally, members of our senior leadership team have strong experience executing and integrating acquisitions and strategic partnerships to drive accelerated growth and improved profitability.
Our Business Strategy
Grow share in first-fit in core markets
Our organic first-fit growth opportunities are centered on four pillars:
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Grow market share with leading OEMs:   We benefit from deep relationships with leading OEMs. Our technology innovations, global footprint and preferred brand position us well to grow along with the leading OEMs. As our OEM partners continue to grow in share and through consolidation in their respective markets, we will partner with them to grow. This growth with OEMs in turn increases the installed base for our products, which drives recurring aftermarket revenue.
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Support technology transitions with leading OEMs:   We plan to further build on our relationship with OEMs as they transition to alternate fuel technologies, such as hydrogen-powered internal combustion engines, battery-electric vehicles and fuel cell electric vehicles. Some of our current developments in the alternative fuel space include hydrogen water separators, air filtration products, coolants, water filters, and de-ionizers. We currently have a number of alternative fuel development programs underway with our existing customer base. We are well positioned for the broader transition of technology through our existing relationships with customers.
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Enhanced product content per vehicle:   We have a focus on offering system modules and highly integrated solutions as customers and end-users seek improved filtration performance and quality, which we believe will result in increased first-fit content per vehicle. We are also extending into smart filtration solutions, including embedded sensors, prediction algorithms, and data analytics tools.
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Accelerate new product development:   We are accelerating our new product development cycle by continued investment in advanced system level testing capabilities, leveraging in-house 3D printing capabilities, utilizing powerful simulation tools and applying machine learning tools throughout our product development cycle.
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Accelerate profitable growth in the aftermarket
We estimate that aftermarket net sales represented approximately 84% of our existing business in 2022, and has significant opportunity for further growth through these strategic initiatives:
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Expand our product portfolio:   Offering a comprehensive product portfolio provides a ‘one-stop shop’ for our customers. We offer a wide range of products to ensure product coverage and continue to release new products on a yearly basis. We launched approximately 400 new products annually, on average, over the last three years. We have a team dedicated to tracking new filter releases and launching new competitive products rapidly.
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Use analytics to target and capture growth opportunities:   We will continue to develop and enhance analytic tools, including using machine learning and artificial intelligence, to identify cross-sell or up-sell opportunities, and new or underserved customers, and precisely estimate the opportunity for additional sales of our Fleetguard-branded products. We work directly with end-users or through our channel partners to define, track and measure opportunities and conversion rates.
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Expand reach through multi-channel distribution:   It is important that we can reach end-users no matter where they are, or how they choose to purchase our products. We continue to expand our presence with OEM dealers, independent distributors, service centers and retail outlets.
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Invest in product technology advantage to enhance value and protect revenue:   Where Atmus is the first-fit, we increase customer retention on aftermarket opportunities by using advanced technologies and proprietary product designs that drive improved performance and create preference for our products. Where Atmus is not the first-fit, we continue to develop products that meet or exceed the first-fit product, supporting our brand position as premium quality and performance, and leading to high customer loyalty.
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Transform our supply chain
We are focused on transforming our supply chain to improve customer experience, which will drive growth and reduce overall cost, leading to margin enhancement. Our strategic initiatives have four pillars:
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Drive service and availability:   Synchronize global planning across the network to focus on on-shelf availability.
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Optimize network:   Invest in the physical footprint to provide superior availability while minimizing material and part movement.
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Transform cost structure:   Optimize supplier management and spend, increase throughput across our network of plants and increase automation.
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Invest in capabilities for the future:   Deploy robust processes across the organization from forecasting through customer orders to fulfillment, and invest in critical global systems infrastructure to provide best-in-class functionality.
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Expand our technology and diversify our distribution channels beyond our core markets
We are focused on building sustainable growth by expanding and diversifying into the industrial filtration market, which includes machinery and equipment, oil and gas, pharmaceuticals, food and beverage, and metals and mining. We believe we can leverage our global footprint and existing technical capabilities, including our proprietary filtration media technology, into these markets to open new opportunities for growth. We anticipate achieving this by expanding our focus to include non-engine products that we can sell to our current and new customers within our existing markets by utilizing our global footprint. We are working on developing capabilities, whether organically or through acquisitions or strategic partnerships, to enter new markets with long term growth prospects which will further diversify our revenue base. To the extent that we consider acquisitions, we will apply a disciplined financial framework in assessing these opportunities.
The Separation
Immediately prior to the completion of this offering, we will be a wholly-owned subsidiary of Cummins and all of our outstanding shares of common stock will be owned by Cummins.
Prior to the completion of this offering, we will enter into a separation agreement with Cummins. We will also enter into various other agreements to provide a framework for our relationship with Cummins after the separation, including an employee matters agreement, an intellectual property license agreement, a registration rights agreement, a first-fit supply agreement, an aftermarket supply agreement, a tax matters agreement, a data sharing agreement, a royalty sharing agreement, a transition services agreement and a transitional trademark license agreement. These agreements will provide for the allocation between us and Cummins of Cummins’ employees, assets, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after the separation and will govern certain relationships between us and Cummins after the separation. For additional information regarding the separation agreement and such other agreements, please refer to sections entitled “The Separation and Split-Off Transactions — The Separation,” “Risk Factors — Risks Related to the Separation and Our Relationship with Cummins” and “Certain Relationships and Related Party Transactions.”
We believe, and Cummins has advised us that it believes, that the separation, this offering and the split-off will provide a number of benefits to our business and to Cummins’ business. These intended
 
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benefits include improving the strategic and operational flexibility of both companies, enhancing the focus of the management teams on their respective business operations, allowing each company to tailor the capital structure and investment policy best suited to its financial profile and business needs and providing each company with its own equity to better incentivize employees and facilitate acquisitions. In addition, as we will be a standalone company, potential investors will be able to invest directly in our business. There can be no assurance that we will achieve the expected benefits of the separation and the split-off in a timely manner or at all. See “Risk Factors — Risks Related to the Separation and our Relationship with Cummins.”
The Underwriting and the Debt-for-Equity Exchange
Instead of selling shares of our common stock directly to the underwriters for cash, Cummins will first exchange the shares of our common stock to be sold in this offering with J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC, which we refer to, in such role, as the “debt-for-equity exchange parties,” for short term indebtedness in the form of commercial paper to be issued by, or a loan made to, Cummins prior to the pricing of this offering. The indebtedness will be held 50% and 50% by J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC, respectively. The debt-for-equity exchange parties will then sell the shares to the underwriters for cash. The debt-for-equity exchange between Cummins and the debt-for-equity exchange parties is expected to occur on or before the settlement date of this offering, and the consummation of the debt-for-equity exchange is a condition to the settlement of the debt-for-equity exchange parties’ sale of the shares to the underwriters. If the underwriters exercise their option to purchase additional shares of common stock from the debt-for-equity exchange parties, Cummins will exchange such additional shares of common stock for additional outstanding indebtedness of Cummins held by the debt-for-equity exchange parties with the debt-for-equity exchange parties. The debt-for-equity exchange parties will then sell such additional shares of common stock to the underwriters for cash. We refer to these exchanges collectively as the “debt-for-equity exchange.”
We expect that the indebtedness of Cummins held by the debt-for-equity exchange parties will have an aggregate principal amount of at least $        based on a maximum assumed initial public offering price of $       per share, which is the high point of the price range set forth on the cover of this prospectus. The amount of indebtedness of Cummins held by the debt-for-equity exchange parties is expected to be sufficient to acquire all of the shares of our common stock to be sold in this offering, inclusive of the shares that may be sold pursuant to the underwriters’ option to purchase additional shares. Upon completion of the debt-for-equity exchange, the Cummins indebtedness exchanged in such debt-for-equity exchange will be retired. We do not guarantee or have any other obligations in respect of the Cummins indebtedness. See “Underwriting (Conflicts of Interest) — The debt-for-equity exchange.”
Debt Transactions
On September 30, 2022, we entered into a credit agreement (the “credit agreement”) with Cummins and a syndicate of banks providing for a five-year $400 million revolving credit facility and a $600 million term loan facility (the “term loan” and collectively with the revolving credit facility, the “debt financing”). The credit agreement also allows us to request incremental commitments on either the revolving credit facility or the term loan of up to $250 million, subject to certain conditions and adjustments. The debt financing will not be available for borrowings until the date on which certain conditions are satisfied, which we expect will be satisfied prior to the completion of this offering. Prior to the completion of this offering, we intend to borrow approximately $600 million pursuant to the term loan and $50 million pursuant to the revolving credit facility.
As described in the section entitled “Use of Proceeds,” the amount of existing cash, plus the net proceeds from the term loan plus any amounts drawn under the revolving credit facility will be paid to Cummins upon completion of this offering less an amount of cash to be retained by us in an amount to be determined by Cummins, as partial consideration for the filtration business Cummins is contributing to us in connection with the separation. For additional information regarding the debt financing, please refer to the section entitled “Description of Material Indebtedness.”
 
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The Split-off
Cummins has informed us that, as of the date of this prospectus, it intends, following this offering, to make a tax-free split-off, pursuant to which Cummins will offer its stockholders the option to exchange their shares of Cummins common stock for shares of our common stock in an exchange offer. If the exchange offer is undertaken and consummated and not fully subscribed because less than all shares of our common stock owned by Cummins are exchanged, the remaining shares of our common stock owned by Cummins may be offered in one or more subsequent exchange offers (together with the initial exchange offer, the “exchange offer(s)”) and/or distributed on a pro rata basis to Cummins stockholders whose shares of Cummins common stock remain outstanding after consummation of the exchange offer(s) (such distribution, together with the exchange offer(s), the “split-off”). Cummins has agreed not to effect the split-off for a period of 180 days after the date of this prospectus without the prior written consent of Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC. See “Underwriting (Conflicts of Interest).”
While, as of the date of this prospectus, Cummins intends to effect the split-off, Cummins has no obligation to pursue or consummate any further dispositions of its ownership interest in us, including through the split-off, by any specified date or at all. If pursued, the split-off may be subject to various conditions, including receipt of any necessary regulatory or other approvals, the existence of satisfactory market conditions and the receipt of a private letter ruling (which has been received) from the Internal Revenue Service, or IRS and an opinion of a nationally recognized law or accounting firm to the effect that the separation and the debt-for-equity exchange, together with such split-off, will qualify as a transaction that is tax-free to Cummins and its shareholders for U.S. federal income tax purposes. The conditions to the split-off may not be satisfied, Cummins may decide not to consummate the split-off even if the conditions are satisfied or Cummins may decide to waive one or more of these conditions and consummate the split-off even if all of the conditions are not satisfied.
The split-off is not being effected pursuant to this prospectus, and the underwriters of this offering may or may not act as underwriters for the split-off.
Upon completion of the split-off, we will no longer qualify as a controlled company and will be required to fully implement NYSE corporate governance requirements within one year of the distribution.
Change in Control Considerations
Transactions to implement this offering, the separation and the split-off will constitute a change in control under the governing documents of our joint venture in India, Fleetguard Filter Private Ltd. (“FFPL”), resulting in the loss of rights to board representation. This would effectively result in the loss of our ability to prevent certain significant actions and may result in a reduction or elimination of dividends. See “Risk Factors — Risks Related to our Business Operations.”
Conflicts of Interest
The offering is being conducted in accordance with the applicable provisions of Rule 5121 of the Conduct Rules of the Financial Industry Regulatory Authority, Inc., or FINRA, because Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC, who are acting as underwriters in this offering will have a “conflict of interest” pursuant to Rule 5121(f)(5)(C)(ii) by virtue of their role as debt-for-equity exchange parties, since all of the net proceeds of this offering will be received by the debt-for-equity exchange parties. Rule 5121 requires that a “qualified independent underwriter” as defined in Rule 5121 must participate in the preparation of the prospectus and perform its usual standard of diligence with respect to the registration statement and this prospectus. Accordingly, BofA Securities, Inc. is assuming the responsibilities of acting as the qualified independent underwriter in the offering. See “Underwriting (Conflicts of Interest) —  Conflicts of interest.”
Corporate Information
Atmus was incorporated in Delaware as FILT Red, Inc. on April 1, 2022, for the purpose of holding Cummins’ filtration business in connection with the separation and this offering. On December 5, 2022,
 
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we filed a Certificate of Amendment with the Delaware Secretary of State to change our name from “FILT Red, Inc.” to “Atmus Filtration Technologies Inc.” Prior to the separation, we have had no operations. Our principal executive offices are located at 26 Century Boulevard, Nashville, Tennessee 37214, and our telephone number is (615) 514-7339. Prior to completion of this offering, we will establish a corporate website at Atmus.com. Our website and the information contained on, or that can be accessed through, our website will not be deemed to be incorporated by reference in, and will not considered part of, this prospectus. You should not rely on any such information in making your decision whether to purchase our common stock.
Risk Factor Summary
Investing in our common stock involves a number of risks. These risks include, but are not limited to, challenges related to the separation, the split-off, the successful implementation of our strategy, and our ability to grow our business. Some of the more significant challenges and risks relating to an investment in our company include, among other things, the following:
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We have significant customer concentration, with Cummins, PACCAR and the Traton Group respectively accounting for approximately 19%, 16% and 12% of our net sales in 2022, and the loss of such net sales would have a material and adverse effect on our business, financial condition and results of operations.
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The loss of a top OEM relationship, or changes in the preferences of our aftermarket end-users, could adversely impact the recurring nature of our aftermarket sales.
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We derive significant earnings from investees that we do not directly control.
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Transactions to implement this offering, the separation and the split-off will constitute a change in control under our joint venture in India (FFPL), resulting in the loss of rights to board representation, which would effectively result in the loss of the ability to prevent certain significant actions and may result in a reduction or elimination of dividends.
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We may be adversely impacted by work stoppages and other labor matters.
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Our products are exposed to variability in material and commodity costs.
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We are vulnerable to raw material, transportation and labor price increases and supply shortages, which have adversely impacted and could continue to adversely impact our operations.
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Complexity of supply chain and manufacturing could cause inability to meet demand and result in the loss of customers.
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We face significant competition in the markets we serve and maintaining a competitive advantage requires consistent investment with uncertain returns.
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Evolving customer needs and developing technologies may threaten our existing business and growth.
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We face risks from strategic transactions, such as acquisitions, divestitures, joint ventures and other similar arrangements that we may pursue or undertake.
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Our long term performance targets assume certain ongoing productivity improvements; if we do not successfully manage productivity improvements, we may not realize the expected benefits.
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A number of our customers operate in similar cyclical industries and economic conditions in these industries could impact our sales.
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Failure to protect or enforce our intellectual property could reduce or eliminate any competitive advantage and reduce our sales and profitability and the cost of protecting or enforcing our intellectual property may be significant.
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If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial
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reports, the market price of our common stock may be negatively affected and we may default on outstanding debt obligations.
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Sales of counterfeit versions of our products, as well as unauthorized sales of our products, may adversely affect our reputation, business, financial condition, results of operations and cash flows.
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We operate our business on a global basis and changes in international, national and regional trade laws, regulations, and policies affecting and/or restricting international trade, including sanctions resulting from Russia’s military operation in Ukraine, could adversely impact the demand for our products and our competitive position.
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Unanticipated changes in our effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities could adversely affect our profitability and cash flow. In addition, audits by tax authorities could result in additional tax payments for prior periods.
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Changes in tax law relating to multinational corporations could adversely affect our tax position.
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Our global operations are subject to laws and regulations that impose significant compliance costs and create reputational and legal risk.
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We may be adversely impacted by the effects of climate change and may incur increased costs and experience other impacts due to climate change.
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Our information technology environment and our products are exposed to potential security breaches or other disruptions, which may adversely impact our operations.
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A number of our operations depend on sophisticated information technology and infrastructure, which may be disrupted by the separation.
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We are subject to foreign currency exchange rate and other related risks.
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Political, economic and social uncertainty in geographies where we have significant operations or large offerings of our products could significantly change the dynamics of our competition, customer and end-user base and product offerings and impact our growth opportunities globally.
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The anticipated benefits of the separation may not be achieved and the separation may adversely affect our business.
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As a result of the separation, we will lose Cummins’ reputation, economies of scale, capital base and other resources and may experience difficulty operating as a standalone company.
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For so long as Cummins controls a majority of the voting power of our outstanding common stock, we will qualify for, and intend to rely on, certain exemptions from NYSE corporate governance requirements. Stockholders will not have the same protections afforded to stockholders of companies that are subject to all NYSE corporate governance requirements.
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Following the completion of this offering, Cummins will continue to have significant control over us for a period of time, which could continue indefinitely, preventing you and other stockholders from influencing significant decisions.
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We, or Cummins, may fail to perform under various transaction agreements that will be executed as part of the separation or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.
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After the separation, certain of our executive officers and directors may have actual or potential conflicts of interest because of their equity interest in Cummins. Also, certain of Cummins’ current executive officers also serve as directors of our company, which may create conflicts of interest, or the appearance of conflicts of interest.
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If Cummins completes the split-off, and there is later a determination that the separation, the debt-for-equity exchange and/or the split-off is taxable for U.S. federal income tax purposes because the facts, assumptions, representations or undertakings underlying the Internal Revenue Service (“IRS”) private letter ruling and/or any opinion of a nationally recognized law or accounting firm are incorrect or for any other reason, then Cummins and its stockholders could incur significant U.S. federal income tax liabilities, and we could incur significant liabilities.
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We may be affected by significant restrictions in the tax matters agreement, including on our ability to engage in certain corporate transactions for a two-year period after the split-off in order to avoid triggering significant tax-related liabilities for Cummins.
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The foregoing is only a summary of some of the risks related to an investment in our common stock. For a more detailed discussion of these and other risks you should consider before making an investment in our common stock, see “Risk Factors.”
 
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The Offering
Common stock offered in this offering
        shares of common stock (or     shares of common stock if the underwriters exercise their option to purchase additional shares in full).
Common stock to be held by Cummins immediately after this offering
      shares of common stock (or       shares of common stock if the underwriters exercise their option to purchase additional shares in full).
Common stock to be outstanding immediately after this offering
       shares of common stock.
Option to purchase additional shares of common stock
The underwriters have an option to purchase up to      additional shares of common stock from the debt-for-equity exchange parties, as described in “Underwriting (Conflicts of Interest).”
Voting rights
Shares of common stock are entitled to one vote per share on all matters presented to our stockholders generally.
Upon the completion of this offering, Cummins will hold approximately    % of the total voting power of our outstanding capital stock (or    % if the underwriters exercise in full their option to purchase additional shares of our common stock). As such, Cummins will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of directors, amendments of our organizational documents and any merger, consolidation, sale of all or substantially all of our assets or other major corporate transactions. See “Security Ownership of Certain Beneficial Owners and Management” and “Description of Capital Stock.”
Additionally, upon completion of this offering, we will be a “controlled company” within the meaning of the rules of the NYSE and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. See “Management — Controlled Company Exception.”
Use of proceeds
We will not receive any proceeds from the sale of our common stock in this offering. All of the net proceeds from this offering will be received by the debt-for-equity exchange parties. Immediately prior to the settlement of the debt-for-equity exchange parties’ sale of the shares to the underwriters, the debt-for-equity exchange parties will acquire the common stock being sold in this offering from Cummins in exchange for outstanding Cummins indebtedness held by the debt-for-equity exchange parties. See “Use of proceeds.”
As part of the separation and upon the completion of this offering, we intend to pay Cummins, as partial consideration for the filtration business that Cummins is contributing to us in connection with the separation, the amount of existing cash, plus the net proceeds of the term loan that we will enter into prior to the closing of this offering plus any amounts drawn under
 
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the revolving credit facility, less an amount of cash to be retained by us in an amount to be determined by Cummins.
The determination of the amount of our cash upon the completion of this offering will be made by Cummins in good faith and will be final and binding on us.
See “Description of Material Indebtedness” and “Use of Proceeds.”
Dividend policy
We have not yet determined the extent to which we will pay any dividends on our common stock. The payment of any dividends in the future, and the timing and amount thereof, is within the discretion of our board of directors (the “Board”) in accordance with applicable law. The Board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our debt that we will enter into prior to the closing of this offering and in the future, industry practice, legal requirements and other factors that the Board deems relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if we commence paying dividends. See “Dividend Policy.”
Selling stockholder (for purposes of the U.S. Securities laws)
In connection with this offering, Cummins, as a selling stockholder for purposes of the U.S. securities laws, will exchange shares of our common stock for indebtedness of Cummins held by the debt-for-equity exchange parties. The debt-for-equity exchange parties will then sell these shares pursuant to this offering.
Upon completion of this offering, Cummins will continue to own a controlling interest in us. Accordingly, we intend to avail ourselves of the “controlled company” exemptions under the corporate governance rules of the NYSE. See “Management — Director Independence and Controlled Company Exemption” and “Security Ownership of Certain Beneficial Owners and Management.”
Conflicts of interest
The offering is being conducted in accordance with the applicable provisions of Rule 5121 of the Conduct Rules of the Financial Industry Regulatory Authority, Inc., or FINRA, because Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC, who are acting as underwriters in this offering, will have a “conflict of interest” pursuant to Rule 5121(f)(5)(C)(ii) by virtue of their role as debt-for-equity exchange parties, since all of the net proceeds of this offering will be received by the debt-for-equity exchange parties. Rule 5121 requires that a “qualified independent underwriter” as defined in Rule 5121 must participate in the preparation of the prospectus and perform its usual standard of diligence with respect to the registration statement and this prospectus. Accordingly, BofA Securities, Inc. is assuming the responsibilities of acting as the qualified independent underwriter in the offering.
 
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See “Underwriting (Conflicts of Interest).”
Listing
We have applied to have our common stock listed on the NYSE under the symbol “ATMU.”
Risk factors
Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 19 and the other information included in this prospectus for a discussion of factors you should carefully consider before investing in our common stock.
Unless the context requires otherwise, references to the number and percentage of shares of our common stock to be outstanding immediately after this offering are based on           shares of our common stock outstanding as of           , 2023. Certain monetary amounts, percentages and other figures included in this prospectus have been subject to rounding adjustments. Certain other amounts that appear in this prospectus may not sum due to rounding.
Unless otherwise indicated, the information presented in this prospectus:
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gives effect to the transactions described under “The Separation and Split-Off Transactions — The Separation;”
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assumes an initial public offering price of $      per share (the midpoint of the estimated public offering price range set forth on the cover page of this prospectus); and
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excludes           shares of our common stock that have been reserved under our equity incentive plan, from which we expect to grant the following equity awards:
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      shares of our common stock underlying performance stock unit awards to be granted under our long-term incentive compensation program, with primarily a three-year performance period;
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      shares of our common stock underlying restricted stock unit awards to be granted under our long-term incentive compensation program, with three-year ratable vesting; and
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      shares of our common stock underlying the restricted stock units to be granted to certain of our non-employee directors. These restricted stock units will vest in equal quarterly installments until the earlier of the first anniversary of the grant date or the date of our next annual meeting of stockholders. The actual number of shares underlying the restricted stock units to be granted to each of our non-employee directors will equal to $120,000 divided by the initial public offering price per share of our common stock.
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See “Executive and Director Compensation — Compensation Discussion and Analysis — Long-Term Incentive Compensation” for additional information regarding our equity incentive plans and grants we intend to make at the completion of this offering.
 
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SUMMARY HISTORICAL AND UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following summary historical and unaudited pro forma combined financial data reflects the combined financial statements of the filtration business of Cummins. We derived the summary historical combined statements of net income data and cash flow data for the years ended December 31, 2022, December 31, 2021, and December 31, 2020 and the summary historical combined balance sheet data as of December 31, 2022 and December 31, 2021, as set forth below, from our audited historical combined financial statements, which are included elsewhere in this prospectus. We derived the summary unaudited pro forma combined statements of net income data for the year ended December 31, 2022 and the summary unaudited pro forma combined balance sheet data as of December 31, 2022, as set forth below, from our unaudited pro forma combined financial information included in the “Unaudited Pro Forma Combined Financial Information” section of this prospectus.
Our underlying financial records were derived from the financial records of Cummins for the periods reflected herein. We have prepared the historical combined financial statements and have included all adjustments to state fairly the financial information set forth in those statements. Our historical results may not necessarily reflect our results of operations, financial position and cash flows for future periods or what they would have been had we been a separate, publicly-traded company during the periods presented.
We have historically operated as part of Cummins and not as a separate, publicly-traded company. Our historical combined financial statements have been derived from Cummins’ historical accounting records and are presented on a carve-out basis. All sales and costs as well as assets and liabilities directly associated with our business activity are included as a component of the historical combined financial statements. The historical combined financial statements also include allocations of certain general, administrative, sales and marketing expenses and cost of sales from Cummins’ corporate office and from other Cummins businesses to us. The allocations have been determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the historical combined financial statements had we been an entity that operated separately from Cummins during the periods presented.
The summary unaudited pro forma combined financial data presented has been prepared to reflect the transactions described in the “Unaudited Pro Forma Combined Financial Information” section of this prospectus. The summary unaudited pro forma combined statements of net income data presented reflect the financial results as if such transactions had occurred on January 1, 2022. The summary unaudited pro forma combined balance sheet data reflects the financial position as if such transactions occurred on December 31, 2022. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information.
The unaudited pro forma combined financial information are not necessarily indicative of our results of operations or financial condition had the separation and our anticipated post-separation capital structure been completed on the dates assumed. Also, they may not reflect the results of operations or financial condition that would have resulted had we been operating as a separate, publicly-traded company during such periods. In addition, they are not necessarily indicative of our future results of operations, financial position or cash flows.
This summary historical and unaudited pro forma combined financial data should be reviewed in combination with “Unaudited Pro Forma Combined Financial Information,” “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical combined financial statements and accompanying notes included in this prospectus.
 
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​ ​ ​
Years ended December 31,
​
​ ​ ​
2022
​ ​
2021
​ ​
2020
​
$ in millions
​ ​
Pro Forma
​ ​
Actual
​ ​
Actual
​ ​
Actual
​
Summary Statements of Net Income Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net Sales
​ ​ ​ $ 1,562.1 ​ ​ ​ ​ $ 1,562.1 ​ ​ ​ ​ $ 1,438.8 ​ ​ ​ ​ $ 1,232.6 ​ ​
Cost of sales
​ ​ ​ ​ 1,200.7 ​ ​ ​ ​ ​ 1,203.2 ​ ​ ​ ​ ​ 1,088.3 ​ ​ ​ ​ ​ 923.2 ​ ​
Gross margin
​ ​ ​ $ 361.4 ​ ​ ​ ​ $ 358.9 ​ ​ ​ ​ $ 350.5 ​ ​ ​ ​ $ 309.4 ​ ​
Selling, general, and administrative expenses
​ ​ ​ ​ 154.5 ​ ​ ​ ​ ​ 139.7 ​ ​ ​ ​ ​ 126.2 ​ ​ ​ ​ ​ 112.1 ​ ​
Research, development and engineering
expenses
​ ​ ​ ​ 38.6 ​ ​ ​ ​ ​ 38.6 ​ ​ ​ ​ ​ 42.0 ​ ​ ​ ​ ​ 39.0 ​ ​
Equity, royalty, and interest income from
investees
​ ​ ​ ​ 28.0 ​ ​ ​ ​ ​ 28.0 ​ ​ ​ ​ ​ 32.4 ​ ​ ​ ​ ​ 40.7 ​ ​
Other operating expense, net
​ ​ ​ ​ 5.0 ​ ​ ​ ​ ​ 5.0 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Operating Income
​ ​ ​ $ 191.3 ​ ​ ​ ​ $ 203.6 ​ ​ ​ ​ $ 214.7 ​ ​ ​ ​ $ 199.0 ​ ​
Interest expense
​ ​ ​ ​ 39.2 ​ ​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.4 ​ ​
Other income, net
​ ​ ​ ​ 8.8 ​ ​ ​ ​ ​ 8.8 ​ ​ ​ ​ ​ 3.9 ​ ​ ​ ​ ​ 2.0 ​ ​
Income before income
taxes
​ ​ ​ $ 160.9 ​ ​ ​ ​ $ 211.7 ​ ​ ​ ​ $ 217.8 ​ ​ ​ ​ $ 200.6 ​ ​
Income tax expense
​ ​ ​ ​ 32.9 ​ ​ ​ ​ ​ 41.6 ​ ​ ​ ​ ​ 46.5 ​ ​ ​ ​ ​ 57.8 ​ ​
Net Income
​ ​ ​ $ 128.0 ​ ​ ​ ​ $ 170.1 ​ ​ ​ ​ $ 171.3 ​ ​ ​ ​ $ 142.8 ​ ​
Summary Statements of Cash Flows Data ​ ​ ​ ​ ​
Net cash (used in) provided by: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating activities
​ ​ ​ ​ ​ ​ ​ ​ ​ $ 177.0 ​ ​ ​ ​ $ 202.3 ​ ​ ​ ​ $ 213.1 ​ ​
Investing activities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (33.4) ​ ​ ​ ​ ​ (31.9) ​ ​ ​ ​ ​ (26.5) ​ ​
Financing activities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (143.6) ​ ​ ​ ​ ​ (170.4) ​ ​ ​ ​ ​ (186.6) ​ ​
Other Data: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Gross margin as a percent of net sales
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 23.0% ​ ​ ​ ​ ​ 24.4% ​ ​ ​ ​ ​ 25.1% ​ ​
Operating income as a percent of net sales
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 13.0% ​ ​ ​ ​ ​ 14.9% ​ ​ ​ ​ ​ 16.1% ​ ​
EBITDA(1) ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 234.0 ​ ​ ​ ​ $ 240.2 ​ ​ ​ ​ $ 222.1 ​ ​
Net income margin
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10.9% ​ ​ ​ ​ ​ 11.9% ​ ​ ​ ​ ​ 11.6% ​ ​
EBITDA margin(1)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15.0% ​ ​ ​ ​ ​ 16.7% ​ ​ ​ ​ ​ 18.0% ​ ​
 
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​ ​ ​ ​ ​ ​ ​ ​ ​
December 31,
​
​ ​ ​
2022
​ ​
2022
​ ​
2021
​
$ in millions
​ ​
Pro Forma
​ ​
Actual
​ ​
Actual
​
Summary Balance Sheet Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total current assets
​ ​ ​ $ 622.3 ​ ​ ​ ​ $ 512.3 ​ ​ ​ ​ $ 482.1 ​ ​
Total current liabilities
​ ​ ​ ​ 349.1 ​ ​ ​ ​ ​ 349.1 ​ ​ ​ ​ ​ 319.9 ​ ​
Property, plant and equipment, net
​ ​ ​ ​ 148.4 ​ ​ ​ ​ ​ 148.4 ​ ​ ​ ​ ​ 141.1 ​ ​
Total assets
​ ​ ​ ​ 989.4 ​ ​ ​ ​ ​ 879.4 ​ ​ ​ ​ ​ 848.3 ​ ​
Total liabilities
​ ​ ​ ​ 1,081.6 ​ ​ ​ ​ ​ 429.9 ​ ​ ​ ​ ​ 411.1 ​ ​
Total net parent investment
​ ​ ​ ​ (92.2) ​ ​ ​ ​ ​ 449.5 ​ ​ ​ ​ ​ 437.2 ​ ​
​
(1)
Non-GAAP financial measures
​
In addition to the results reported in accordance with U.S. GAAP, we have provided information regarding EBITDA and EBITDA margin, which are non-GAAP financial measures and the key measures we use for determining how our business is performing. EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and EBITDA margin is defined as EBITDA as a percent of net sales. We believe EBITDA and EBITDA margin are useful measures of our operating performance as they assist investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors. Additionally, we believe these metrics are widely used by investors, securities analysts, ratings agencies and others in our industry in evaluating performance.
EBITDA and EBITDA margin are not in accordance with, or alternatives for, U.S. GAAP financial measures and may not be consistent with measures used by other companies. It should be considered supplemental data; however, the amounts included in the EBITDA and EBITDA margin calculations are derived from amounts included in the combined statements of net income. We do not consider our non-GAAP financial measures as superior to, or a substitute for, the equivalent measures calculated and presented in accordance with GAAP. Some of the limitations are:
•
such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
​
•
such measures do not reflect changes in, or cash requirements for, our working capital needs;
​
•
such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
​
•
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
​
•
other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
​
To properly and prudently evaluate our business, we encourage you to review the historical combined financial statements included elsewhere in this prospectus, and not rely on a single financial measure to evaluate our business. A reconciliation of net income to EBITDA is shown in the table below:
​ ​ ​
Years ended December 31,
​
$ in millions
​ ​
2022
​ ​
2021
​ ​
2020
​
NET INCOME
​ ​ ​ $ 170.1 ​ ​ ​ ​ $ 171.3 ​ ​ ​ ​ $ 142.8 ​ ​
Plus: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Interest expense
​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.4 ​ ​
Income tax expense
​ ​ ​ ​ 41.6 ​ ​ ​ ​ ​ 46.5 ​ ​ ​ ​ ​ 57.8 ​ ​
Depreciation and Amortization
​ ​ ​ ​ 21.6 ​ ​ ​ ​ ​ 21.6 ​ ​ ​ ​ ​ 21.1 ​ ​
EBITDA (non-GAAP)
​ ​ ​ $ 234.0 ​ ​ ​ ​ $ 240.2 ​ ​ ​ ​ $ 222.1 ​ ​
Net Sales
​ ​ ​ $ 1,562.1 ​ ​ ​ ​ $ 1,438.8 ​ ​ ​ ​ $ 1,232.6 ​ ​
Net income margin
​ ​ ​ ​ 10.9% ​ ​ ​ ​ ​ 11.9% ​ ​ ​ ​ ​ 11.6% ​ ​
EBITDA margin (non-GAAP)
​ ​ ​ ​ 15.0% ​ ​ ​ ​ ​ 16.7% ​ ​ ​ ​ ​ 18.0% ​ ​
 
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should consider carefully the following risks, together with all the other information in this prospectus, including our combined financial statements and notes thereto, before you invest in our common stock. If any of the following risks actually materializes, our business, financial condition and results of operations could be materially adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment.
Risks Related to Our Business Operations
We have significant customer concentration, with Cummins, PACCAR and the Traton Group respectively accounting for approximately 19%, 16% and 12% of our net sales in 2022, and the loss of such net sales would have a material and adverse effect on our business, financial condition and results of operations.
Cummins is our largest customer. For fiscal year ended 2022, net sales to Cummins accounted for approximately 19% of our net sales. Sales to Cummins joint ventures and to distributors with which Cummins has a relationship also account for a portion of our net sales. A portion of our net sales is dependent upon customer acceptance of and demand for Cummins’ engines or generators that use our filters. This customer concentration increases the risk of fluctuations in our operating results and our sensitivity to any material adverse developments experienced by Cummins. While our relationship with Cummins following the offering will be defined by our first-fit supply agreement and after market supply agreement, we may fail in the future to renew these contracts, and, moreover, even if renewed, Cummins’ purchasing power may give it the ability to make greater demands on us with regard to pricing and contractual terms in general.
Our relationship with Cummins following the offering will be defined by our first-fit supply agreement and aftermarket supply agreement. Cummins may procure supplemental supply of top volume aftermarket products from alternative suppliers for a limited time if we fail to meet certain delivery performance requirements or if we do not offer a product or similar product for sale. The delivery performance requirements will be effective no sooner than January 1, 2024 and will require an improvement by us to our current on-time delivery to meet these requirements on a consistent basis.
Cummins historically has not sought competitive bids for filtration products. However, Cummins recently initiated a competitive process to source a selective group of future first-fit programs and associated aftermarket products from its suppliers, including us. Subsequently, we were successful in being awarded this business. In the future, we expect that Cummins will continue to seek competitive bids for new filtration products and, while we will have a preferred supplier relationship with Cummins, we will have to successfully win bids through their bidding process in order to maintain or grow our current level of sales to Cummins and cannot guarantee that Cummins will always select our products. The loss of, or any substantial reduction in sales to, Cummins would have a material adverse effect on our business, financial condition and results of operations. See “Certain Relationships and Related Party Transactions — Relationship with Cummins — First-Fit Supply Agreement” and “Certain Relationships and Related Party Transactions — Relationship with Cummins — Aftermarket Supply Agreement.”
For fiscal year ended 2022, net sales to PACCAR and the Traton Group accounted for approximately 16% and 12%, respectively, of our net sales. We cannot guarantee that PACCAR or the Traton Group will always choose to purchase our products. The loss or cancellation of business from PACCAR or the Traton Group could materially and adversely affect our business, financial condition or results of operations.
In addition, our association with Cummins has contributed to the relationships we have with certain significant customers due to the relationship those customers had with Cummins. After the separation, we may not be able to attract new customers of Cummins, or retain existing customers, without Cummins’ support. See “— As a result of the separation, we will lose Cummins’ reputation, economies of scale, capital base and other resources and may experience difficulty operating as a standalone company.”
 
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The loss of a top OEM relationship, or changes in the preferences of our aftermarket end-users, could adversely impact the recurring nature of our aftermarket sales.
We supply filtration products to many of the largest OEMs for both first-fit and aftermarket, which results in recurring revenue for our products. Our relationships with these OEMs also allow us to be closely attuned to our customers' requirements and preferences and react quickly to any changes. The use of our filtration products as a standard first-fit component creates a steady demand for that product in the aftermarket, as end-users often return to the OEM for aftermarket service for multiple years and may continue to prefer our products as replacement or repair parts.
We may not be able to maintain our current top OEM relationships in the future or may not become the preferred supplier for additional OEMs. In addition, our channel partners’ and end-users’ preferences for replacement or repair filtration products may change in the future. The loss of a top OEM relationship, or changes in the preferences of our aftermarket end-users, could adversely impact the recurring nature of our aftermarket sales.
We derive significant earnings from investees that we do not directly control.
We earn equity, royalty and interest income from our joint venture in China — Shanghai Fleetguard Filter Co. Ltd., where we indirectly hold 50% of the economic interest. We also earn equity, royalty and interest income from our joint ventures in India — Fleetguard Filter Private Ltd. (“FFPL”), where we directly hold 49.491% of the economic interest (and 50% of the voting interest), and Filtrum Fibretechnologies Pvt. Ltd., where we hold, directly or indirectly, 49.75% of the economic interests (25% directly and 24.75% indirectly through our proportionate ownership of FFPL’s 50% ownership interest). For 2022, we recognized $28.0 million of equity, royalty and interest income from investees, compared to $32.4 million in 2021 and $40.7 million in 2020. Of these amounts, $17.1 million, $16.4 million and $24.9 million, respectively, were from our joint venture in India — FFPL. Although a significant percentage of our net income is derived from these unconsolidated entities (which were approximately 16.5% in 2022, approximately 18.9% in 2021 and approximately 28.5% in 2020, of which approximately 10.1%, approximately 9.6% and approximately 17.4% were from FFPL in 2022, 2021 and 2020, respectively), we do not unilaterally control their management or their operations, which puts a substantial portion of our net income and cash flow through dividend payments at risk from the actions or inactions of these entities. A significant reduction in the level of contribution by these entities to our net income would likely have a material adverse effect on our business, financial condition or results of operations.
Transactions to implement this offering, the separation and the split-off will constitute a change in control under our joint venture in India, resulting in the loss of rights to board representation, which would effectively result in the loss of the ability to prevent certain significant actions, and may result in a reduction or elimination of dividends.
Under the terms of the FFPL articles of association (the “FFPL Articles”), a change in control occurs when Cummins ceases to have control or ownership in Cummins Filtration Inc. (“CFI”) or loses majority voting rights in CFI. Transactions to implement the offering, the separation and the proposed subsequent split-off will result in a change in control of CFI under the terms of the FFPL Articles. Upon a change in control, our joint venture partner will hold a 50.51% voting interest in FFPL. In addition, as noted above, CFI will lose its guaranteed right to board representation and a mandatory dividend payment provision will no longer be operative. The loss of these rights may have a material adverse impact on our ability to influence our business operations in India and to access the equity, royalty and interest income from FFPL. See “We derive significant earnings from investees that we do not directly control.”
We may be adversely impacted by work stoppages and other labor matters.
As of December 31, 2022, we employed approximately 4,250 persons worldwide. Approximately 55% of our employees worldwide are represented by various unions under collective bargaining agreements that expire between December 2023 and February 2024. While we have no reason to believe that we will be materially impacted by work stoppages or other labor matters, there can be no
 
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assurance that future issues with our labor unions will be resolved favorably or that we will not encounter future strikes, work stoppages, or other types of conflicts with labor unions or our employees. For example, during periodic collective bargaining in 2020, the United Auto Workers union representing manufacturing employees at the Cookeville, Tennessee site conducted a strike for six weeks after failing to accept modified terms and conditions offered by the company. Any of these consequences may have an adverse effect on us or may limit our flexibility in dealing with our workforce. In addition, many of our customers and suppliers have unionized work forces. Work stoppages or slowdowns experienced by us, our customers or suppliers could result in slowdowns or closures that would have a material adverse effect on our business, financial condition or results of operations.
Our products are exposed to variability in material and commodity costs.
Our businesses establish prices with our customers in accordance with contractual timeframes; however, the timing of material and commodity market price increases may prevent us from passing these additional costs on to our customers through timely pricing actions, which may lead to an adverse impact on our profit margins. For example, our gross margin decreased by 1.4 percentage points from 2021 (24.4%) to 2022 (23.0%) as a result of our material and freight costs increasing at a faster rate than the increase in net sales. Additionally, higher material and commodity costs around the world may offset our efforts to reduce our cost structure. Economies around the world have also generally seen significant inflationary pressures since 2021, which may persist in 2023 and beyond. If inflation continues to increase or stays above levels seen in recent years, we could face further material and commodity price fluctuations. As of the date of this prospectus, we have not entered into any hedging arrangements or agreements with respect to the purchase of the commodities used in our products. While we customarily have contractual pricing adjustment mechanisms with our customers that attempt to address some of these risks (notably with respect to steel and resins), there can be no assurance that material and commodity price fluctuations will not adversely affect our results of operations and cash flows. In addition, while the use of contractual pricing adjustments may provide us with some protection from adverse fluctuations in commodity prices, we potentially forego the benefits that might result from favorable fluctuations in costs. As a result, higher material and commodity costs, as well as hedging these commodity costs during periods of decreasing prices, could result in declining margins.
We are vulnerable to raw material, transportation and labor price increases and supply shortages, which have adversely impacted and could continue to adversely impact our operations.
We have experienced supply chain disruptions, including longer lead times for materials used in manufacturing our products and increased commodity prices and related challenges throughout the supply chain. We source a significant number of parts and raw materials critical to our business operations. Any delay in our suppliers’ deliveries may adversely affect our operations at multiple manufacturing locations, forcing us to seek alternative supply sources to avoid serious disruptions. Delays may be caused by factors affecting our suppliers (including the COVID-19 pandemic, capacity constraints, port congestion, labor disputes, economic downturns, availability of credit, impaired financial condition and geopolitical turmoil), suppliers’ allocations to other purchasers, weather emergencies, natural disasters, acts of government or acts of war or terrorism. In particular, if there are extended periods of travel, commercial and other restrictions due to COVID-19 infections or restrictions or other geopolitical turmoil, we could incur global supply disruptions. Any extended delay in receiving critical supplies could impair our ability to deliver products to our customers and have a material adverse effect on our business, financial condition or results of operations. Our North America plants, in particular, experienced reduced capacity for an extended period throughout 2021 and into 2022, primarily due to a lack of available components. This was primarily due to shortages in steel, resin, other petrochemical products and electronic components, as well as shortages in labor at our suppliers. Additionally, we have experienced plant closures due to COVID-19 restrictions. For example, our Mexico production was suspended for four weeks in 2020, our French facility was closed for one week in 2020, and our Shanghai facility experienced significantly reduced production in 2022.
In addition, the current economic environment has resulted, and may continue to result, in price increases and other volatility and inflation of many of our raw material, transportation and labor costs as a result of many factors, including our suppliers of resin and microprocessors exercising force majeure
 
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clauses, shortages of steel supply, general inflationary market pressures, pay rate increases at individual facilities and logistical issues, including global transportation delays and rising costs. These challenges can lead to increased material and conversion cost, which in turn leads to increased inventory balances. In 2021 and 2022, we experienced increased commodity prices, including for steel, resin and other petrochemical products. Additionally, shipping has experienced, and is continuing to experience, longer and more volatile time in transit, which further increases inventory balances.
Further, the labor market for skilled manufacturing remains tight as the U.S. economy recovers after the COVID-19 pandemic shutdowns and our labor costs have increased as a result. We have also experienced periodic absenteeism in our plants due to local COVID-19 outbreaks, leading to temporary production reductions. In the United States, in particular, we have experienced difficulty recruiting and retaining labor, leading to lower production and increased costs due to additional recruiting incentives. Material, transportation, labor and other cost inflation has adversely impacted, and could continue to adversely impact, our business, financial condition or results of operations.
Although we have taken a number of actions to mitigate these impacts, including, but not limited to, adding new supply sources, moving production among our facilities or outsourcing production to third-party manufacturers, adapting product design to reduce reliance on constrained materials, and investing in additional tooling and equipment, these mitigating actions may not be sufficient to overcome these impacts.
Complexity of supply chain and manufacturing could cause inability to meet demand and result in the loss of customers.
Our ability to fulfill customer orders is dependent on our manufacturing and distribution operations. Although we forecast demand, additional plant capacity takes significant time to bring online and thus changes in demand could result in longer lead times. We cannot guarantee that we will be able to adjust manufacturing capacity, in the short-term, to meet higher customer demand. For example, the COVID-19 pandemic caused lower levels of production at our manufacturing plants, including a four-week government-mandated shutdown at our manufacturing plant in Mexico, labor shortages, manufacturing disruptions and temporary shutdowns of business at some of our customers and suppliers. These disruptions impacted the availability of raw materials, including steel, resin, other petrochemical products and electronic components, and freight availability and reliability, which resulted in increased lead times. Efficient operations require streamlining processes, which we may not be capable of achieving. Unacceptable levels of service for key customers may result if we are not able to fulfill orders on a timely basis or if product quality or warranty or safety issues result from compromised production. Due to the complexity of our manufacturing operations, we may be unable to timely respond to fluctuations in demand, which could adversely impact our business, financial condition or results of operations.
While we have not experienced significant global surges or declines in demand, for much of 2022, overall demand exceeded our ability to fully meet such demand, resulting in an elevated level of backlog. As we moved through 2022, there was a reduction in these backlogs from peak levels, and we expect further stabilization in the first half of 2023.
We face significant competition in the markets we serve and maintaining a competitive advantage requires consistent investment with uncertain returns.
The businesses and product lines in which we participate are very competitive and we risk losing business based on a wide range of factors, including price, quality, technological and engineering capability, manufacturing and distribution capability, innovation, performance, reliability and availability, geographic coverage, delivery and customer service. Our customers continue to seek technological innovation, productivity gains and competitive prices from us and their other suppliers. As a result of these and other factors, if we do not meet our customers’ expectations, we may not be able to compete effectively.
Additionally, we operate in highly competitive markets and have numerous competitors who are well-established in those markets. Our competitors include companies that may have greater name recognition or financial, technical, operational, marketing or other resources than us. We expect our
 
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competitors to continue improving the design and performance of their products and to introduce new products that could be competitive in both price and performance. We believe that we have certain technological advantages over our competitors in the markets in which we operate, but maintaining these advantages requires us to consistently invest in research and development, sales and marketing and customer service and support. There is no guarantee that we will be successful in maintaining these advantages.
The competitive environment in which we operate is also subject to change. There is no guarantee that we will be successful in implementing new product expansions, as we may fail to successfully complete product development or achieve the level of sales for these products that we expect. There may also be unexpected costs for such new product offerings, which would lower their margins. In addition, certain competitors may have a competitive advantage in these new markets and if they are able to successfully develop a product before we do, they could reach the market before we do or gain broader market acceptance.
Evolving customer needs and developing technologies may threaten our existing business and growth.
The ongoing energy transition away from fossil fuels and the increased adoption of electrified powertrains in some market segments could result in lower demand for current diesel or natural gas engines and components and, over time, reduce the demand for related parts and service revenues. Specifically, our core markets may be impacted by technology transitions including transition to battery-electric vehicles, fuel cell electric vehicles and alternate power sources. Substantially all of our net sales are related to internal combustion engine filtration products. Concerns regarding the effects of emissions of GHG on the climate have driven (and will likely continue to drive) international, national, regional and local legislative and regulatory responses, imposing more stringent emissions standards and requiring higher fuel efficiency. Such responses may generate or accelerate changes in technology and in customer and end-user preference, including wider adoption of and preference for technologies providing alternatives to diesel engines such as electrification of equipment, which could reduce or eliminate the demand for our products. Moreover, on November 15, 2019, Cummins, our largest customer, established a new set of goals for 2030 as part of their environmental sustainability strategy. Among these new goals is reducing GHG from facilities and operations by 50% and from newly sold products by 25%. As a result of these risks, and as we have seen OEMs begin to invest heavily in these new technologies and launch new non internal combustion engines, we have been working, and continue to work, to expand our product offerings across industries and application types, including electric powertrain and fuel cells, among others. However, there can be no assurance that we will be successful in doing so, or even if we are successful, that such new products will generate the same revenue or margin as internal combustion engine filtration products. Such disruptive innovation could create new markets for others and displace existing companies and products. If we are unsuccessful in adapting our technologies or expanding into adjacent markets, these disruptions could result in significant negative consequences for our company. Our future growth is dependent on properly addressing future customer and end-user needs and adapting our products in line with global technology trends.
We rely on our executive leadership team and other key personnel as a critical part of our human capital resources.
We depend on the skills, institutional knowledge, working relationships and continued services and contributions of key personnel, including our executive leadership team as critical parts of our human capital resources. In addition, our ability to achieve our operating and strategic goals depends on our ability to identify, hire, train and retain qualified individuals. We compete with other companies both within and outside of our industry for talented personnel and we may lose key personnel or fail to attract, train and retain other talented personnel. Any such loss or failure could have material adverse effects on our results of operations, financial condition and cash flows.
In particular, our continued success will depend in part on our ability to retain the talents and dedication of key employees. As of December 31, 2022, we employed approximately 350 total technical
 
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resources. As of December 31, 2022, 48% of our technical employees are employed outside the United States, in India, China and France, many of whom we consider key employees. If enough key employees terminate their employment or become ill or otherwise cannot work as a result of the COVID-19 pandemic or otherwise, our business activities may be adversely affected and our management team’s attention may be diverted. In addition, we may not be able to locate suitable replacements for any key employees who leave.
We face risks from strategic transactions, such as acquisitions, divestitures, joint ventures and other similar arrangements that we may pursue or undertake.
We periodically evaluate potential strategic acquisition or investment opportunities and consider divestitures of non-strategic business lines and have historically pursued and undertaken certain of those opportunities. For example, in 1987 and 1994, we established our joint ventures in India and China, respectively, for our entry into those two markets, and have continued to explore additional joint ventures since then. Acquisitions, joint ventures and strategic investments could negatively impact our profitability and financial condition due to operating and integration inefficiencies, the incurrence of debt, contingent liabilities and amortization of expenses related to intangible assets. There are also a number of other risks inherent to acquisitions, including the potential loss of key customers and suppliers of the acquired businesses or adverse effects on relationships with existing customers and suppliers; the inability to identify all issues or potential liabilities during diligence; difficulties or delays in integrating and assimilating the acquired operations and products or in realizing projected efficiencies, growth prospects, cost savings and synergies; the loss of key employees; the potential increase in exposure to more onerous or costly legal and regulatory requirements and the diversion of management’s time and attention away from other business matters, which may prevent us from realizing the anticipated return on our investment. Additionally, we may require substantial additional capital, which could be raised pursuant to debt or equity financings, to pursue acquisitions and other business ventures, if any, in the future. We cannot assure you that we will be able to raise such additional capital on commercially reasonable terms, or at all. Divestitures may involve significant challenges and risks, such as difficulty separating out portions of our business or the potential loss of revenue or negative impacts on margins. Divestitures may also result in ongoing financial or legal proceedings, such as retained liabilities, which could have an adverse impact on our results of operations, financial condition and cash flows. Further, during the pendency of a proposed transaction, we may be subject to risks related to a decline in the business, loss of employees, customers or suppliers and the risk that the transaction may not close, any of which could adversely impact our business. Additionally, because acquisitions, divestitures, joint ventures, strategic partnerships and other similar arrangements are inherently risky, any such transaction may not be successful and may, in some cases, harm our business, financial condition or results of operations. Failure to complete any such planned transaction may adversely impact our business, financial condition or results of operations.
Our long term performance targets assume certain ongoing productivity improvements; if we do not successfully manage productivity improvements, we may not realize the expected benefits.
Our long term performance targets assume certain ongoing productivity improvements as a key component of our business strategy to, among other things, contain operating expenses, increase operating efficiencies and align manufacturing capacity to demand. We may not be able to realize the expected benefits and cost savings if we do not successfully execute these plans while continuing to invest in business growth. Factors that can cause us to not realize expected benefits or execute our plans for productivity improvements include, but are not limited to, unanticipated costs or complications resulting from the separation, unforeseen complications arising from leveraging existing filtration technology to new industries, global commodities pricing and availability, manufacturing costs and delays, inflationary pressures and labor availability. If any of these, or other, difficulties are encountered, expected benefits of such cost savings may not otherwise be realized, which could adversely impact our business, financial condition or results of operations.
A number of our customers operate in similar cyclical industries and economic conditions in these industries could impact our sales.
Three customers each accounted for 10% or more of our net sales in 2022 and 2021. Cummins is one of our key customers and accounted for approximately 19% of our net sales in 2022. While our
 
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relationship with Cummins will be secured through our first-fit supply agreement and aftermarket supply agreement, Cummins operates in both global off-highway and on-highway industries and is subject to the cyclicality of those industries. A number of our other customers, including PACCAR and the Traton Group, are also concentrated in similar cyclical industries, including off-highway industries such as construction, agriculture, mining, oil and gas and power generation, as well as on-highway industries such as truck, bus, vocational and recreational vehicles. This exposes our business to additional risk based on our customers’ respective economic conditions. Our success is also dependent on retaining key customers, which requires us to successfully manage relationships and anticipate the needs of our customers in the channels in which we sell our products. Changes in the economic conditions could materially and adversely impact our business, financial condition or results of operations.
Unexpected events, including natural disasters, may increase our cost of doing business or disrupt our operations.
There could be an occurrence of one or more unexpected events, including a terrorist attack, war or civil unrest, a weather event, an earthquake, a pandemic or other catastrophe in countries in which we operate or in which our suppliers are located.
Such an event could result in physical damage to and complete or partial closure of one or more of our headquarters, manufacturing facilities or distribution centers, temporary or long-term disruption in the supply of component products from some local and international suppliers, disruption in the transport of our products to customers and disruption of information systems. Prior to the split-off, Cummins’ existing insurance coverage, and following the split-off, the insurance coverage we expect to enter into, may not provide protection for all costs that may arise from any such event. Any disruption in our operations could have an adverse impact on our ability to meet our customer needs or may require us to incur additional expense in order to produce sufficient inventory. Certain unexpected events could adversely impact our business, financial condition or results of operations.
Our business is exposed to potential warranty claims.
We face an inherent business risk of exposure to warranty claims if our products’ failure to perform to specification results, or is alleged to result in property damage. At any given time, we are subject to various and multiple warranty claims, any one of which, if decided adversely to us, may have a material adverse effect on our reported results of operation in the period in which our liability with respect to any such claim is recognized.
Our products are subject to recall for performance or safety-related issues.
Our products are subject to recall for performance or safety-related issues. Product recalls subject us to reputational risk, loss of current and future customers, reduced revenue and product recall costs. Product recall costs are incurred when we decide, either voluntarily or involuntarily, to recall a product through a formal campaign to solicit the return of specific products due to known or suspected performance or safety issues. For example, quality issues were identified with a particular application of a fuel heater, which primarily impacted one customer, resulting in a recall campaign. See Note 11, “PRODUCT WARRANTY LIABILITY” to the historical combined financial statements for additional details. Any significant product recalls could have material adverse effects on our results of operations, financial condition and cash flows. Additionally, any significant returns or warranty claims, as well as the timing of such returns or claims, could result in significant additional costs to us and could adversely affect our business, financial condition or results of operations.
Failure to protect or enforce our intellectual property could reduce or eliminate any competitive advantage and reduce our sales and profitability and the cost of protecting or enforcing our intellectual property may be significant.
Our long-term success depends on our ability to market innovative competitive products. We own a number of patents, trade secrets, copyrights, trademarks, trade names and other forms of intellectual property related to our products and services throughout the world and the operation of our business, which we rely on to distinguish our services and solutions from those of our competitors. Patents have a limited life and, in some cases, have expired or will expire in the near future. We also have non-exclusive
 
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rights to intellectual property owned by others in certain of our markets. For example, some of our products may include components that are manufactured by our competitors. Our intellectual property may be challenged, invalidated, stolen, circumvented, infringed or otherwise violated upon by third parties or we may be unable to maintain, renew or enter into new license agreements with third-party owners of intellectual property on reasonable terms, or at all. In addition, the global nature of our business increases the risk that our intellectual property may be subject to infringement, theft or other unauthorized use or disclosure by others. Our ability to protect and enforce intellectual property rights, including through litigation or other legal proceedings, also varies across jurisdictions and in some cases, our ability to protect our intellectual property rights by legal recourse or otherwise may be limited, particularly in countries where laws or enforcement practices are less protective than those in the United States. Our inability to obtain sufficient protection for our intellectual property, or to effectively maintain or enforce our intellectual property rights, could lead to reputational harm and/or adversely impact our competitive position, business, financial condition or results of operations.
Competitors and others may also initiate litigation or other proceedings to challenge the scope, validity or enforceability of our intellectual property or allege that we infringed, misappropriated or otherwise violated their intellectual property. Any litigation or proceedings to defend ourselves against allegations of infringement, misappropriation, or other violations of intellectual property rights, regardless of merit, could be costly, divert attention of management and may not ultimately be resolved in our favor. If we are unable to successfully defend against claims that we have infringed the intellectual property rights of others, we may be prevented from using certain intellectual property or offering certain products, or may be liable for substantial damages, which in turn could materially adversely affect our business, financial condition or results of operations. We may also be required to develop an alternative, non-infringing product that could be costly, time-consuming or impossible, or seek a license from a third party, which may not be available on terms that are favorable to us, or at all. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
If we are unable to implement and maintain effective internal control over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock may be negatively affected and we may default on outstanding debt obligations.
As a public company, we will be required to maintain internal control over financial reporting and to report any material weaknesses in such internal control. In addition, beginning with our second annual report on Form 10-K, we expect we will be required to furnish a report by management on the effectiveness of our internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). Our independent registered public accounting firm will also be required to express an opinion as to the effectiveness of our internal control over financial reporting. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating.
The process of designing, implementing and testing the internal control over financial reporting required to comply with this obligation is time-consuming, costly and complicated. If we are unable to establish or maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations on a timely basis, result in material misstatements in our historical combined financial statements and harm our results of operations. If we identify material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could be negatively affected and we may default on outstanding debt obligations. We could also become subject to investigations by the NYSE, the Securities and Exchange Commission (the “SEC”), or other regulatory authorities, which could require additional financial and management resources.
 
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Risks Related to Legal and Regulatory Issues
Sales of counterfeit versions of our products, as well as unauthorized sales of our products, may adversely affect our reputation, business, financial condition, results of operations and cash flows.
Third parties may illegally make, distribute and sell counterfeit versions of our products that do not meet the standards of our design, development, manufacturing and distribution processes. Such counterfeit products divert sales from genuine products, often are of lower cost and quality and may pose safety risks. If illegal sales of counterfeit products result in adverse product liability or negative consumer experiences, we may be associated with negative publicity resulting from such incidents. Although we proactively monitor the existence of counterfeit products and initiate actions to seize, remove them from sale or destroy, we may not be able to prevent third parties from manufacturing, selling or purporting to sell counterfeit products competing with our products, which may negatively impact our sales, brand reputation, business, financial condition or results of operations.
Our products are subject to statutory and regulatory requirements that can significantly increase our costs and could have a material adverse impact on our results of operations, financial condition and cash flows.
Our products are subject to many laws and regulations in the jurisdictions in which we operate. We routinely incur costs in order to comply with these laws and regulations. We may be adversely impacted by new or changing laws and regulations that affect both our operations and our ability to develop and sell products that meet our customers’ requirements. The discovery of noncompliance issues could have a material adverse impact on our business, financial condition or results of operations.
Developing products to meet more stringent and changing regulatory requirements, with different implementation timelines and requirements, makes developing products efficiently for multiple markets complicated and could result in substantial additional costs that may be difficult to recover in certain markets. The successful development and introduction of new and enhanced products in order to comply with new regulatory requirements are subject to other risks, such as delays in product development, cost overruns and unanticipated technical and manufacturing difficulties.
In addition to these risks, the nature and timing of government implementation and enforcement of increasingly stringent regulatory standards in our worldwide markets are unpredictable and subject to change. Any delays in implementation or enforcement could result in a loss of our competitive advantage and could have a material adverse impact on our business, financial condition or results of operations.
We operate our business on a global basis and changes in international, national and regional trade laws, regulations, and policies affecting and/or restricting international trade, including sanctions resulting from Russia’s military operation in Ukraine, could adversely impact the demand for our products and our competitive position.
We manufacture, sell and service products globally and rely upon a global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture and service our products. Changes in laws, regulations and government policies on foreign trade and investment can affect the demand for our products and services, causing customers and end-users to shift preferences toward domestically manufactured or branded products and impact the competitive position of our products or prevent us from being able to sell products in certain countries. Our business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement, the U.S. trade relationships with China, Brazil and France and the Comprehensive Economic Partnership Agreement between India and South Korea. Efforts to withdraw from, or substantially modify such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs (including, but not limited to, additional tariffs on the import of steel or aluminum and imposition of new or retaliatory tariffs against certain countries, including based on developments in U.S. — China, U.S. — Russia and EU — Russia relations), import or export licensing requirements, and exchange controls or new barriers to entry, could limit our ability to capitalize on current and future growth opportunities in international markets, impair our ability to ship media from our plant in South Korea directly to our joint venture partners, impair our ability to expand the business by offering new
 
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technologies, products, and services, and could adversely impact our production costs, customer and end-user demand and our relationships with customers and suppliers. Any of these consequences could have a material adverse effect on our business, financial condition or results of operations.
Embargoes, sanctions and export controls imposed by the U.S. and other governments restricting or prohibiting transactions with certain persons or entities, including financial institutions, to certain countries or regions, or involving certain products, may limit the sales of our products. Embargoes, sanctions, and export control laws are changing rapidly for certain geographies, including with respect to China and Russia. In particular, changing U.S. and European export controls and sanctions on China, as well as other restrictions affecting transactions involving China and Chinese parties and Russia and Russian parties, could affect our ability to collect receivables, provide aftermarket and warranty support for our products, sell products, and otherwise impact our reputation and business, any of which could have a material adverse effect on our business, financial condition or results of operations. Moreover, the enforceability of contracts in China, especially with governmental entities, including state-owned enterprises, is relatively uncertain. If counterparties repudiated our contracts or defaulted on their obligations, we might not have adequate remedies. Such uncertainties or inability to enforce our contracts could materially and adversely affect our business, financial condition or results of operations.
Additionally, the ongoing crisis related to Russia’s military operation in Ukraine has resulted in the application of enhanced sanctions against Russia by a number of jurisdictions, including the United States, United Kingdom, and European Union. On March 17, 2022, the Cummins Board of Directors made the decision to suspend all commercial operations in Russia indefinitely. We took steps to wind down operations expeditiously, and this may expose us to customer claims and other inherent risks. Additionally, although we seek to comply with all applicable regulations, these laws and regulations are complex, frequently changing, and increasing in number and there is a risk that we will not be compliant with all relevant regulations at all times. Such potential violations could have material adverse effects on our reputation, brand, business, financial condition or results of operations.
Unanticipated changes in our effective tax rate, the adoption of new tax legislation or exposure to additional income tax liabilities could adversely affect our profitability and cash flow. In addition, audits by tax authorities could result in additional tax payments for prior periods.
We are subject to income taxes in the U.S. and numerous international jurisdictions. Our income tax provision and cash tax liability in the future could be adversely affected by the adoption of new tax legislation, changes in the amounts or composition of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities and the discovery of new information in the course of our tax return preparation process. Additionally, we may be subject to tax audits. These audits can involve complex issues, which may require an extended period of time to resolve and can be highly judgmental. Tax authorities may disagree with certain tax reporting positions taken by us and, as a result, assess additional taxes against us. We may have to engage in litigation to achieve the results reflected in our tax estimates, and such litigation may be time consuming and expensive. We regularly assess the likely outcomes of any audits in order to determine the appropriateness of our tax provision. The amounts ultimately paid upon resolution of these or subsequent tax audits could be materially different from the amounts previously included in our income tax provisions and accruals, which could materially and adversely affect our business, financial condition or results of operations.
Changes in tax law relating to multinational corporations could adversely affect our tax position.
The U.S. Congress, government agencies in non-U.S. jurisdictions where we and our affiliates do business, and the Organisation for Economic Co-operation and Development (“OECD”) have recently focused on issues related to the taxation of multinational corporations. One example is in the area of “base erosion and profit shifting,” where profits are claimed to be earned for tax purposes in low-tax jurisdictions, or payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. The OECD has released several components of its comprehensive plan to create an agreed set of international rules for addressing base erosion and profit shifting. As a result, the tax laws in the United States and other countries in which we do business could change on a prospective or retroactive basis, and any such changes could adversely affect our business, financial condition or results of operations.
 
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Our global operations are subject to laws and regulations that impose significant compliance costs and create reputational and legal risk.
Due to the international scope of our operations, we are subject to a complex system of commercial regulations around the world. Recent years have seen an increase in the development and enforcement of laws regarding trade compliance as well as new regulatory requirements regarding privacy and data protection, such as the European Union General Data Protection Regulation. Our foreign subsidiaries and affiliates are governed by laws, rules and business practices that differ from those of the U.S. The activities of these entities may not comply with U.S. laws or business practices or our Code of Business Conduct. Violations of these laws may result in severe criminal or civil sanctions, could disrupt our business and result in an adverse effect on our reputation, business and results of operations, financial condition and cash flows. We cannot predict the nature, scope or effect of future regulatory requirements to which our operations might be subject or the manner in which existing laws might be administered or interpreted.
We are subject to national and international anti-corruption laws and regulations laws, such as the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act (the “Bribery Act”) and export controls and economic sanctions programs, including those administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”), relating to our business and our employees. As part of our business, we deal with state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA’s prohibition on providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. In addition, the provisions of the Bribery Act extend beyond bribery of foreign public officials and also apply to transactions with individuals that a government does not employ. Some of the international locations in which we operate lack a developed legal system and have higher than normal levels of corruption. Our continued expansion outside the United States, including in China, India and developing countries, and our development of new partnerships worldwide, could increase the risk of FCPA, OFAC or Bribery Act violations in the future. Despite our policies, procedures and compliance programs, our internal control and compliance systems may not be able to protect us from prohibited acts willfully committed by our employees, agents or business partners that would violate such applicable laws and regulations. Additionally, there can be no assurance that our policies and procedures will effectively prevent us from violating these regulations in every transaction in which we may engage or provide a defense to any alleged violation. In particular, we may be held liable for the actions that our joint venture partners take inside or outside of the United States, even though our partners may not be subject to these laws. Any such improper acts could damage our reputation, subject us to civil or criminal judgments, fines or penalties, and could otherwise disrupt our business.
Our operations are also subject to certain antitrust and competition laws in the jurisdictions in which we conduct our business, in particular the United States and Europe. These laws prohibit, among other things, anticompetitive agreements and practices. If any of our commercial agreements or practices are found to violate or infringe such laws, we may be subject to civil and other penalties. We may also be subject to third-party claims for damages. Further, agreements that infringe antitrust and competition laws may be void and unenforceable, in whole or in part, or require modification in order to be lawful and enforceable. Accordingly, any violation of these laws could harm our reputation and could have a material adverse effect on our business, financial condition or results of operations.
From time to time, we are subject to litigation or other commercial disputes and other legal and regulatory proceedings relating to our business, including actual or perceived failure to comply with the laws and regulations mentioned above. Due to the inherent uncertainties of any litigation, commercial disputes or other legal or regulatory proceedings, we cannot accurately predict their ultimate outcome, including the outcome of any related appeals. An unfavorable outcome could materially adversely impact our business, financial condition and results of operations. Furthermore, as required by U.S. GAAP, we establish reserves based on our assessment of contingencies, including contingencies related to legal claims asserted against us. Subsequent developments in legal proceedings may affect our assessment and estimates of the loss contingency recorded as a reserve and require us to make payments in excess of our reserves, which could have an adverse effect on our business, financial condition or results of operations.
 
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We may be adversely impacted by the effects of climate change and may incur increased costs and experience other impacts due to climate change.
The scientific consensus indicates that emissions of GHG continue to alter the composition of Earth’s atmosphere in ways that are affecting, and are expected to continue to affect, the global climate. The potential impacts of climate change on our customers and end-users, product offerings, operations, facilities and suppliers are accelerating and uncertain, as they will be particular to local, customer-specific circumstances. These potential impacts may include, among other things, rising sea levels and the frequency and severity of weather events as well as customer and end-user product changes either through preference or regulation.
Concerns regarding climate change may lead to additional international, national, regional and local legislative and regulatory responses. For example, recent proposed SEC rulemaking to enhance disclosures regarding the effects of climate change could increase our reporting and compliance costs. Similarly, enhanced mandatory climate reporting requirements came into force in 2019 and again in 2022 in the United Kingdom and broader sustainability reporting requirements (including climate) will apply to certain European Union entities on a staged basis from 2024 and to their non-European Union parent undertakings from 2028. We believe these reporting requirements could increase our reporting and compliance costs. Various stakeholders, including legislators and regulators, shareholders and non-governmental organizations, are continuing to look for ways to reduce GHG emissions, including limits on GHG emissions and measures intended to incentivize GHG reduction such as fuel taxes, carbon taxes and subsidies. As the impact of any future GHG legislative or regulatory requirements on our global businesses and products is dependent on the timing, scope and design of the mandates or standards, we are currently unable to predict the potential impact. Moreover, as discussed in “— Risks Related to Our Business Operations — Evolving customer needs and developing technologies may threaten our existing business and growth”, certain consequences of climate change, such as shifts in customer and end-user preferences and the pace and extent to which customers and end-users adopt alternative power, including electrified vehicles, could impact demand for our products and could have a material adverse effect on our business, financial condition or results of operations.
Our operations are subject to increasingly stringent environmental laws and regulations, and we are also subject to laws requiring cleanup of contaminated property.
Our plants and operations are subject to increasingly stringent environmental laws and regulations in all of the countries in which we operate, including laws and regulations governing air emissions, wastewater and storm water discharges and the generation, handling, storage, transportation, treatment and disposal of waste materials. While we believe that we are in compliance in all material respects with these environmental laws and regulations, there can be no assurance that we will not be adversely impacted by costs, liabilities or claims with respect to existing or subsequently acquired operations, under either present laws and regulations or those that may be adopted or imposed in the future. We are also subject to laws requiring the cleanup of contaminated property, including laws that impose strict liability for contamination at owned property and for hazardous materials or wastes generated by our plants and operations or those of our predecessors. If a release of hazardous substances occurs at or from any of our (or our predecessors’) current or former properties or at a landfill or another location where we or our predecessors have disposed of (or arranged for the disposal of) hazardous materials, we may be held liable for the contamination and the amount of such liability could be material.
Risks Related to Cybersecurity and Information Technology Infrastructure
Our information technology environment and our products are exposed to potential security breaches or other disruptions, which may adversely impact our operations.
We rely on the capacity, reliability and security of our information technology environment and data security infrastructure in connection with various aspects of our business activities. We also rely on our ability to expand and continually update these technologies and related infrastructure in response to the changing needs of our business. As we implement new technologies, they may not perform as expected. We face the challenge of supporting our older technologies and implementing necessary
 
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upgrades. In addition, some of these technologies are managed by third-party service providers and are not under our direct control. If we experience a problem with an important technology, including during upgrades and/or new implementations of technologies, the resulting disruptions could have an adverse effect on our business and reputation. As customers and end-users adopt and rely on cloud-based digital technologies and services we offer, any disruption of the confidentiality, integrity or availability of those services could have an adverse effect on our business and reputation.
Our operations routinely involve collecting, receiving, storing, processing and transmitting personal, sensitive and other confidential information pertaining to our business, customers, end-users, dealers, suppliers, employees and other sensitive matters. The data handled by our technologies is vulnerable to security threats. In addition, our products contain interconnected and increasingly complex technologies that monitor and transmit data and these technologies are potentially subject to cyber-attacks and disruption. For example, we have developed the filtration intelligence technology (FIT) system, which embeds sensors and software within the filtration equipment system designed to optimize filtration maintenance and monitor equipment health. In addition, as a result of the COVID-19 pandemic a large percentage of our salaried employees continue to work remotely full or part-time. This remote working environment may pose a heightened risk for security breaches or other disruptions of our information technology environment. The impact of a significant information technology event on either our information technology environment or our products could negatively affect the performance of our products, our reputation, and competitive position.
While we continually work to safeguard our information technology environment and mitigate potential risks, there is no assurance that these actions will be sufficient to timely detect or prevent information technology security threats, such as security breaches, computer malware, ransomware attacks and other cyber-attacks, which are increasing in both frequency and sophistication, along with power outages or hardware failures. These threats could result in unauthorized access, use, modification, disclosure, loss or theft of information, including intellectual property, costly investigations, remediation efforts, notification requirements, privacy or data protection-related compliance obligations, legal claims or proceedings, government enforcement actions, civil or criminal penalties, fines, diversion of management attention, operational changes or other response measures, loss of customer confidence in our security measures, loss of business partners, and negative publicity that could adversely affect our brand, reputation, business, results of operations and financial condition. As of the date hereof, we are insured under Cummins’ general liability and cyber liability insurance policies. Pursuant to the separation agreement and certain other agreements with Cummins, we will continue to be insured under Cummins’ insurance policies until the split-off. Following the split-off, we will be responsible for obtaining and maintaining at our own cost our own insurance coverage. Prior to the split-off, Cummins’ existing insurance policies, and following the split-off, the insurance policies we expect to enter into, may not cover, or may cover only a portion of, any potential claims related to such events or may not be adequate to indemnify us for all or any portion of liabilities that may be imposed or defense costs incurred. We also cannot be certain that prior to the split-off Cummins’ existing insurance coverage will continue to be available, or that following the split-off we will be able to find insurance coverage, on acceptable terms or in amounts sufficient to cover the potentially significant losses that may result from a security incident or breach or that the insurer will not deny coverage of any future claim.
A number of our operations depend on sophisticated information technology and infrastructure, which may be disrupted by the separation.
Prior to the completion of this offering and in connection with the separation, we will substantially change a number of our business processes, including changes in our financial reporting and supply chain processes and with respect to where and from whom we obtain information technology systems. In order to support the new business processes under the terms of our transitional services agreement with Cummins, we will make significant configuration, process and data changes within many of the information technology systems we use. If our information technology systems and processes are not sufficient to support our business and financial reporting functions, or if we fail to properly implement our new business processes, manufacturing, shipping, invoicing or other critical operating activities may be interrupted or negatively affected, and our financial reporting may be delayed or inaccurate and, as a result, our business, financial condition and results of operations may be materially adversely
 
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affected. Even if we are able to successfully configure and change our systems, all technology systems, even with implementation of security measures, are vulnerable to disability, failures or unauthorized access. If our information technology systems were to fail or be breached, this could materially adversely affect our reputation and our ability to perform critical business functions, and sensitive and confidential data could be compromised.
Risks Related to Finance and Financial Market Conditions
We are subject to foreign currency exchange rate and other related risks.
We conduct operations in many areas of the world involving transactions denominated in a variety of currencies. We are subject to foreign currency exchange rate risk to the extent that our costs are denominated in currencies other than those in which we earn revenues. In addition, since our financial statements are denominated in U.S. dollars, changes in foreign currency exchange rates between the U.S. dollar and other currencies have had, and will continue to have, an impact on our results of operations, financial condition and cash flows. For example, 38% of our net sales in 2022 were denominated in a currency other than the U.S. dollar. Additionally, the appreciation of the U.S. dollar against foreign currencies has had and could continue to have a negative impact on our consolidated results of operations due to translation impacts, which we expect may continue to negatively impact our results of operations through the second half of 2023. Cummins has a hedging program to mitigate foreign currency exchange rate risk across its businesses, which included foreign currency exchange rate risk faced by the filtration business. Although Atmus has implemented certain aspects of its own hedging program, it is still evaluating other aspects, such as cash flow hedges, and there can be no assurances that we will be able to establish the same program as Cummins or at similar costs.
We have recorded goodwill as a result of prior acquisitions, and an economic downturn could cause these balances to become impaired, requiring write-downs that would reduce our operating income.
Goodwill amounted to approximately $84.7 million as of December 31, 2022. As required under current accounting rules, we assess goodwill for impairment at least annually and whenever changes in circumstances indicate that the carrying amount may not be recoverable from estimated future cash flows. As of December 31, 2022, management has deemed there is no impairment of our recorded goodwill. However, if future operating performance at one or more of our operating units were to fall significantly below forecast levels or if market conditions for one or more of our acquired businesses were to decline, we could be required to incur a non-cash charge to operating income for impairment. Management will continue to monitor our operating results, our market capitalization, and the impact of the economy to determine if there is an impairment of goodwill in future periods.
Risks Related to Macroeconomic and Geopolitical Conditions
Political, economic and social uncertainty in geographies where we have significant operations or large offerings of our products could significantly change the dynamics of our competition, customer and end-user base and product offerings and impact our growth opportunities globally.
Our business is subject to the political, economic and other risks that are inherent in operating in numerous countries, including:
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public health crises, including the spread of a contagious disease, such as COVID-19 and other catastrophic events;
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the difficulty of enforcing agreements and collecting receivables through foreign legal systems;
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trade protection measures and import or export licensing requirements;
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the imposition of taxes on foreign income and tax rates in certain foreign countries that exceed those in the U.S.;
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the imposition of tariffs, exchange controls, sanctions or other restrictions;
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difficulty in staffing and managing widespread operations and the application of foreign labor regulations;
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required compliance with a variety of foreign laws and regulations; and
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changes in general economic and political conditions, including changes in relationship with the U.S., in countries where we operate, particularly in China, Russia and other emerging markets.
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As we continue to operate and grow our business globally, our success will depend, in part, on our ability to anticipate and effectively manage these and other related risks. There can be no assurance that the consequences of these and other factors relating to our multinational operations will not have a material adverse effect upon us.
In addition, there continues to be significant uncertainty about the future relationships between the U.S. and China and the U.S. and Russia, including with respect to trade policies, treaties, government regulations and tariffs.
We currently have significant operations in China, including a joint venture and our wholly-owned subsidiary Cummins Filtration China. In 2022, total sales in China, including consolidated and non-consolidated sales from our joint venture, were approximately $233.0 million, a decrease of $97.0 million compared to approximately $330 million in 2021. In the first half of 2022, the resurgence of COVID-19 in China led to lockdowns in several cities that negatively impacted the economy and our end markets. Among the cities impacted by these lockdowns was Shanghai, which resulted in the shutdowns of our and our China JV’s Shanghai-based facilities, and the results from our China operations were adversely impacted for the year ended December 31, 2022 as a result of the shutdowns. Equity, royalty and interest income from our China JV for 2022 was $5.3 million, a decrease of $4.9 million compared to $10.2 million for 2021. To the extent lockdowns continue to be used to combat COVID-19, we expect they would contribute to further disruptions in the global supply chain, which may negatively impact both our net sales and profitability going forward. Given the unpredictable nature of COVID-19 and the response to it, we cannot predict the impact on future periods at this time. In addition, any increased trade barriers or restrictions on global trade, especially trade with China, could adversely impact our competitive position, results of operations, financial condition and cash flows.
In 2022, prior to Russia’s military operation in Ukraine, we had a retail presence in Russia, with less than 1.0% of our net sales being generated there in 2022, down from 2.5% in 2021. As a result of the sanctions announced to date against Russia by the U.S. and other countries, including restrictions on selling or importing goods, services or technology in or from affected regions and travel bans and asset freezes impacting connected individuals and political, military, business and financial organizations in Russia, we have suspended our activities in Russia. The U.S. and other countries could impose wider sanctions and take other actions should the conflict escalate further. It is not possible to predict the broader consequences of this conflict, which could impact our sales, cash flow, and results of operations. Following the Cummins Board of Directors’ decision on March 17, 2022 to suspend all commercial operations in Russia indefinitely, we have taken action to wind down our operations in Russia. As a result of this suspension, we incurred costs of approximately $2.3 million in 2022. See Note 3, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” to the combined financial statements for additional details. The aggregate impact of winding down our business and operations in Russia was not material to our overall business because we had no assets or capital in Russia at risk, and historically our operations have been limited to the distribution and sale of our products, for which Russia represented less than 1.0% of our net sales in 2022. However, such impact is not yet known and there is a risk that, despite our expectation, such winding-down could negatively impact our business, financial condition, cash flows and results of operations in this region.
Risks arising from uncertainty in worldwide and regional market and economic conditions may harm our business and make it difficult to project long-term performance.
Our business is sensitive to global macroeconomic conditions. Future macroeconomic downturns may have an adverse effect on our business, results of operations and financial condition, as well as on our distributors, customers, end-users and suppliers, and on activity in many of the industries and
 
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markets we serve. Among the economic factors which may have such an effect are: public health crises such as pandemics and epidemics, including the COVID-19 pandemic, currency exchange rates, difficulties entering new markets, tariffs and governmental trade and monetary policies, and general economic conditions such as inflation, deflation, interest rates and credit availability.
For example, as a result of the global economic downturn triggered by the COVID-19 pandemic, we experienced a 3.8% decline in net sales during 2020 compared to the previous year. Most economies across the world slowed and, although we saw a recovery in 2021 (16.7% growth in net sales in 2021 compared to 2020) and 2022 (8.6% growth in net sales in 2022 compared to 2021), there is still uncertainty as to whether the recovery will be sustained. If any or all of these major markets that we sell to were to endure a continued slowdown or recession due to the impacts of the COVID-19 pandemic, other public health crises, epidemics or pandemics or otherwise decline, it could have a material adverse effect on our results of operations, financial condition and cash flows. Additionally, in response to rising rates of inflation, the Federal Reserve Board increased the benchmark federal funds interest rates multiple times in 2022, and has signaled that there may be additional federal funds interest rate increases during 2023. This rising rate environment and the speed with which it has been occurring could have a material adverse effect on our business, financial condition or results of operations.
In addition, we face several risks associated with international business and are subject to global events beyond our control, including war, trade disputes, economic sanctions, trade wars and their collateral impacts and other international events. Any of these events could have a material adverse effect on our reputation, business, financial condition or results of operations. There may be changes to our business if there is instability, disruption or destruction in a significant geographic region, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest; and natural or man-made disasters, including famine, flood, fire, earthquake, storm or disease.
In February 2022, Russian military forces launched significant military action against Ukraine. The impact to Ukraine and Russia, as well as actions taken by other countries, including new and stricter sanctions by the U.S., Canada, the United Kingdom, the European Union and other countries and organizations against officials, individuals, regions, and industries in Russia, Ukraine and Belarus. Each country’s potential response to such sanctions, tensions, and military actions could have a material adverse effect on our business, financial condition and results of operations. It is not possible to predict the broader consequences of this conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as any counter measures or retaliatory actions by Russia or Belarus in response, including, for example, potential cyberattacks or the disruption of energy exports. These consequences are likely to cause regional instability, geopolitical shifts, and could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. Although we have increased our cybersecurity monitoring and taken other steps to manage contingency planning in response to the conflict, the situation remains uncertain. While it is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response to the conflict could impact our business, financial condition or results of operations.
The COVID-19 pandemic disrupted our operations and may have a material adverse effect on our business and financial condition if governments impose restrictive measures to prevent future outbreaks that affect our operations.
The outbreak of COVID-19 in early 2020, along with the response to the pandemic by governmental and other actors, disrupted our operations and may have negative impacts on our operations in the future, which impact may be material. The pandemic triggered a significant downturn in our markets globally, which negatively impacted our sales and results of operations during 2020. While the majority of the negative impacts to demand largely subsided in 2021, we still experienced supply chain disruptions and the related financial impacts reflected as increased cost of sales in 2022. As we head into 2023, cases of COVID-19 and other respiratory diseases could increase, the severity of which could provoke government lockdowns and impact our existing supply chain by delaying the delivery of materials used in our products. Additionally, we are unable to predict the impact of the ongoing governmental regulations that may be imposed in response to this or other pandemics.
 
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Further, our industry was, and to some extent, continues to be, impacted by supply chain constraints leading to shortages across multiple components categories and limiting our collective ability to meet end-user demand. Our customers also are experiencing other supply chain issues and slowing production. Should the supply chain issues continue for an extended period of time, or the improvement we are seeing reverse course, the impact on our production and supply chain could have a material adverse effect on our results of operations, financial condition and cash flows. Our management team continues to monitor and evaluate all of these factors and the related impacts on our business and operations. We worked diligently to minimize the supply chain impacts to our business and to our customers in response to the risks and negative impacts associated with the COVID-19 pandemic, and we are continuing to do so. However, the financial impact to us cannot be forecasted accurately at this time and there can be no assurance that these improvements that we are seeing will continue in the future.
Risks Related to the Separation, the Split-off and our Relationship with Cummins
The anticipated benefits of the separation may not be achieved and the separation may adversely affect our business.
The anticipated benefits of the separation may not be achieved due to inherent risks associated with the separation. If these risks materialize, they may prevent us from achieving the anticipated benefits of the separation and our results of operation, financial conditions, prospects and business could be materially and adversely affected. These risks include, among others:
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as a current part of Cummins, our businesses benefit from Cummins’ size and purchasing power in procuring certain goods, services and technologies. After the separation, as a separate entity, we may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those Cummins obtained prior to the separation;
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the actions required to separate our and Cummins’ respective businesses could disrupt our and Cummins’ operations and divert management’s attention away from operating and growing our business;
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certain costs and liabilities that were otherwise less significant to Cummins as a whole will be more significant for us as a separate company;
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we will incur one-time costs in connection with the transition to being a separate, publicly-traded company, and those costs may be higher than anticipated;
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we may also incur recurring costs for certain functions previously performed by Cummins, such as accounting, tax, legal, human resources and other general administrative functions that are higher than the amounts reflected in our historical financial statements;
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following the separation, we may be more susceptible to capital market fluctuations and other adverse events than if we were still a part of Cummins;
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following the separation, our business will be less diversified than Cummins’ business prior to the separation;
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to preserve the tax-free treatment of the separation and split-off for U.S. federal income tax purposes to Cummins, if pursued, under the tax matters agreement that we will enter into with Cummins, we will be restricted from taking any action that prevents such transactions from being tax-free for U.S. federal income tax purposes. These restrictions may limit our ability to pursue certain strategic transactions or engage in other transactions that might increase the value of our business; and
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the separation will require us to implement interim operational arrangements in certain markets, such as Mexico, due to regulatory requirements, the need to obtain consents from local governmental authorities, and other business reasons, which may introduce additional complexity to our business than if we were still part of Cummins.
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If we fail to achieve some or all of the benefits expected to result from the separation, or if such benefits are delayed, our business, financial condition or results of operations could be adversely affected.
 
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As a result of the separation, we will lose Cummins’ reputation, economies of scale, capital base and other resources and may experience difficulty operating as a standalone company.
Our association with Cummins has contributed to the relationships we have with certain significant customers and suppliers due to the relationship those customers and suppliers had with Cummins. Currently, Cummins cooperates in selling our products to its customers. After the separation, we may not be able to attract new customers of Cummins, or retain existing customers, without Cummins’ support. If this occurs, it could result in reduced sales of our products.
The loss of Cummins’ scale, capital base and financial strength may also prompt suppliers to reprice, modify or terminate their relationships with us, in particular if such suppliers had placed a premium on the Cummins brand or our relationship with Cummins. In addition, Cummins’ reduction of its ownership of our company could potentially cause some of our existing agreements and licenses to be terminated. We cannot predict with certainty the effect that this offering, the separation or the distribution will have on our business, our clients, vendors or other persons, or whether our Fleetguard brand will experience dilution in the marketplace.
Further, because we have no experience operating as a standalone company in the past, we may encounter difficulties doing so in the future. For example, if we do not accurately estimate the level of resources required to operate as a standalone company, we may need to acquire additional assets and resources, which could be costly, and in connection with the separation, may also face difficulty in separating certain aspects of our business from Cummins, including incurring accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring or reassigning our personnel, costs related to establishing a new brand identity in the marketplace and costs to separate information systems and creating standalone administrative units in our business post-separation. Our business, financial condition and results of operations could be materially adversely affected if we have difficulty operating as a standalone company, fail to acquire assets that prove to be important to our operations, or incur unexpected costs as we separate our assets from Cummins’ assets or integrate newly-acquired assets.
For so long as Cummins controls a majority of the voting power of our outstanding common stock, we will qualify for, and intend to rely on, certain exemptions from NYSE corporate governance requirements. Stockholders will not have the same protections afforded to stockholders of companies that are subject to all NYSE corporate governance requirements.
Upon completion of this offering, we will qualify as a “controlled company” within the meaning of the corporate governance standards of the NYSE because Cummins will control a majority of the voting power of our outstanding common stock entitled to vote in the election of directors. A “controlled company” may elect not to comply with certain corporate governance requirements of the NYSE. Consistent with this, the separation agreement will provide that, for so long as we are a “controlled company,” we will take advantage of available “controlled company” exemptions from compliance with certain corporate governance requirements under NYSE rules, including:
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the requirement that a majority of the board of directors consist of independent directors;
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the requirement that our governance and nominating committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities or if no such committee exists, that our director nominees be selected or recommended by independent directors constituting a majority of the Board’s independent directors in a vote in which only independent directors participate;
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the requirement that our talent management and compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and
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the requirement for an annual performance evaluation of our governance and nominating committee and talent management and compensation committee.
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Following this offering, we intend to utilize certain of these exemptions. While these exemptions are available to us as a controlled company, we recognize the value of independent directors as we
 
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establish a new company and intend to transition to a majority independent board, majority independent talent management and compensation committee and majority independent governance and nominating committee. We expect to have a majority independent audit committee upon this offering and will transition to a fully independent audit committee within the first twelve months after this offering.
Following the completion of the offering, Cummins will continue to have significant control over us for a period of time, which could continue indefinitely, preventing you and other stockholders from influencing significant decisions.
Immediately following the completion of this offering, Cummins will own approximately    % of our outstanding common stock (or     % if the underwriters exercise their option to purchase additional shares in full). Cummins has indicated that, following completion of the offering, it intends to divest its interest in us. However, Cummins is under no obligation to do so or to dispose of any of its shares of our common stock, whether pursuant to the split-off or otherwise. A determination whether to effect the split-off or other disposal of any of our shares of common stock, and the timing thereof, is within Cummins’ sole discretion. If the split-off does not occur, or if Cummins does not otherwise dispose of its shares of our common stock, the risks relating to Cummins’ control of us will continue to be relevant to our stockholders. These risks include reduced liquidity of our shares of common stock and extended control of our business by Cummins. The liquidity of shares of our common stock in the market would be more constrained than if the split-off had occurred, as up to    % of our common stock would continue to be held by Cummins, which would reduce liquidity and could depress the price of our common stock.
For so long as Cummins controls the majority of the voting power of our outstanding common stock, it will determine the outcome of all corporate actions requiring stockholder approval. Even if Cummins were to dispose of certain of its shares of our common stock such that it would control less than a majority of the voting power of our outstanding common stock, it would likely be able to influence the outcome of corporate actions so long as it retains a significant portion of our common stock. During the period of Cummins’ significant ownership, investors in this offering may not be able to affect the outcome of such corporate actions. For such time as Cummins owns a controlling interest in or a significant portion of our common stock, it generally will be able to control or significantly influence, directly or indirectly and subject to applicable law, all matters affecting us, including:
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the election of directors;
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determinations with respect to our business direction and policies, including the appointment and removal of officers;
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determinations with respect to corporate transactions, such as mergers, business combinations or the acquisition or the disposition of assets;
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our financing and dividend policy;
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termination of, changes to or determinations under our agreements with Cummins relating to the separation;
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changes to any other agreements that may adversely affect us;
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determinations with respect to our tax returns; and
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compensation and benefits programs and other human resources policy decisions.
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Because Cummins’ interests may differ from ours or from those of our other shareholders, actions that Cummins takes with respect to us, as our controlling shareholder, may not necessarily be in the best interest of our other shareholders.
We, or Cummins, may fail to perform under various transaction agreements that will be executed as part of the separation or we may fail to have necessary systems and services in place when certain of the transaction agreements expire.
The separation agreement and other agreements to be entered into in connection with the separation will determine the allocation of assets and liabilities between Cummins and us following the separation
 
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for those respective areas and will include any necessary indemnifications related to liabilities and obligations. The transition services agreement will provide for the performance of certain services by Cummins and us for the benefit of the other for a period of time after the separation. We will rely on Cummins after the separation to satisfy its performance and payment obligations under these agreements. If Cummins is unable to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties or losses. If we do not have in place our own systems and services, or if we do not have agreements with other providers of these services once certain transaction agreements expire, we may not be able to operate our businesses effectively and our profitability may decline. We are in the process of creating our own, or engaging third parties to provide, systems and services to replace many of the systems and services that Cummins currently provides to us. However, we may not be successful in implementing these systems and services or in transitioning data from Cummins’ systems to us. In addition, we have historically received certain informal support from Cummins, including customer relationship management, marketing, communications, technical support, market intelligence and market data, which may not be addressed in our transition services agreement. The level of this informal support may diminish following this offering and may be eliminated following the split-off.
In addition, we expect this process to be complex, time-consuming and costly. We also are establishing or expanding our own tax, treasury, internal audit, investor relations, corporate governance and listed company compliance and other corporate functions. We expect to incur one-time costs to replicate, or outsource from other providers, these corporate functions to replace the corporate services that Cummins historically provided us prior to the separation. Any failure or significant downtime in our own financial, administrative or other support systems or in the Cummins financial, administrative or other support systems during the transitional period during which Cummins provides us with support could negatively impact our results of operations or prevent us from paying our suppliers and employees, executing business combinations and foreign currency transactions or performing administrative or other services on a timely basis, which could negatively affect our results of operations.
In particular, our day-to-day business operations rely on our information technology systems. A significant portion of the communications among our personnel, customers and suppliers take place on our information technology platforms. We expect the separation of information technology systems from Cummins to be complex, time-consuming and costly. There is risk of data loss in the process of transferring information technology. As a result of our reliance on information technology systems, the cost of such information technology integration and transfer and any such loss of key data could have an adverse effect on our business, financial condition and results of operations.
In addition, our historical combined financial statements include the attribution of certain assets and liabilities that historically have been held at the Cummins corporate level but which are specifically identifiable or attributable to the businesses being transferred to us in connection with the separation. The value of the assets and liabilities we assume in connection with the separation could ultimately be materially different than such attributions, which could have a material adverse effect on our business, financial condition or results of operations.
After the separation, certain of our executive officers and directors may have actual or potential conflicts of interest because of their equity interest in Cummins. Also, certain of Cummins’ current executive officers also serve as directors of our company, which may create conflicts of interest, or the appearance of conflicts of interest.
Because of their current or former positions with Cummins, certain of our executive officers and directors own equity interests in Cummins. Continuing ownership of shares of Cummins common stock and equity awards could create, or appear to create, potential conflicts of interest if we and Cummins face decisions that could have implications for both Cummins and us, after the separation. In addition, certain of Cummins’ current executive officers also serve as directors of our company, and this could create, or appear to create, potential conflicts of interest when we and Cummins encounter opportunities or face decisions that could have implications for both companies following the separation or in connection with the allocation of such directors’ time between Cummins and us. These potential conflicts could arise, for example, over matters such as the desirability of changes in our business and operations, funding and capital matters, regulatory matters, matters arising with respect to the separation agreement
 
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and other agreements with Cummins relating to the separation or otherwise, employee retention or recruiting or our dividend policy.
Cummins and its directors and officers will have limited liability to us or you for breach of fiduciary duty.
Subject to any contractual provision to the contrary, Cummins will have no obligation to refrain from engaging in certain actions that may not be in our best interests.
Under our amended and restated certificate of incorporation, neither Cummins nor any officer or director of Cummins, including our directors who are also Cummins employees, except as provided therein, will be liable to us or to our stockholders for breach of any fiduciary duty by reason of any of these activities.
If Cummins completes the split-off, and there is later a determination that the separation, the debt-for-equity exchange and/or the split-off is taxable for U.S. federal income tax purposes because the facts, assumptions, representations or undertakings underlying the IRS private letter ruling and/or any tax opinion of a nationally recognized law or accounting firm are incorrect or for any other reason, then Cummins and its stockholders could incur significant U.S. federal income tax liabilities, and we could incur significant liabilities.
Cummins received a private letter ruling from the IRS substantially to the effect that, among other things, the separation and split-off will qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code (the “Code”). If the split-off is pursued, completion by Cummins of the split-off may be conditioned on, among other things, the receipt of an opinion of a nationally recognized law or accounting firm, to the effect that, among other things, the split-off will qualify as a transaction that is tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code. The private letter ruling Cummins received relies, and if the split-off is pursued the opinion of a nationally recognized law or accounting firm would rely, on certain facts, assumptions, representations and undertakings from Cummins and us regarding the past and future conduct of the companies’ respective businesses and other matters. If any of these facts, assumptions, representations or undertakings are incorrect or not otherwise satisfied, Cummins and its stockholders may not be able to rely on the private letter ruling or the opinion of a nationally recognized law or accounting firm and could be subject to significant tax liabilities. Notwithstanding the private letter ruling and opinion of a nationally recognized law or accounting firm, the IRS could determine on audit that the separation, the debt-for-equity exchange and/or the split-off is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinions that are not covered by the private letter ruling, or for other reasons, including as a result of certain significant changes in the stock ownership of Cummins or us after the split-off. If the separation, the debt-for-equity exchange and/or the split-off is determined to be taxable for U.S. federal income tax purposes, Cummins and/or its stockholders could incur significant U.S. federal income tax liabilities, and we could also incur significant liabilities.
We may be affected by significant restrictions in the tax matters agreement, including on our ability to engage in certain corporate transactions for a two-year period after the split-off in order to avoid triggering significant tax-related liabilities for Cummins.
To preserve the tax-free treatment for U.S. federal income tax purposes to Cummins of the separation, debt-for-equity exchange and split-off (if pursued), under the tax matters agreement that we will enter into with Cummins, we will be restricted from taking any action that prevents the separation, debt-for-equity exchange and split-off (if pursued) from being tax-free for U.S. federal income tax purposes. Under the tax matters agreement, for the two-year period following the split-off (if pursued), as described in the section entitled “Certain Relationships and Related Party Transactions — Relationship with Cummins — Tax Matters Agreement — Preservation of the Tax-Free Status of Certain Aspects of the Separation and Split-Off,” we will be subject to specific restrictions on our ability to discontinue the active conduct of our trade or business, issue or sell stock or other securities (including securities convertible into our stock but excluding certain compensatory arrangements), sell our assets outside the ordinary course of business and enter into any other corporate transaction which would cause us to undergo a 50% or greater change in our stock ownership (taking into account any change as a result
 
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of the debt-for-equity exchange). These restrictions may limit our ability to pursue certain strategic transactions or other transactions that we may believe to be in the best interests of our stockholders or that might increase the value of our business, and generally reduce our strategic and operating flexibility. These restrictions will not limit the acquisition of other businesses by us for cash consideration. We may be required to indemnify Cummins against tax liabilities arising as a result of a failure to comply with these restrictions under the tax matters agreement, even if such failure is outside of our control. For example, we may be required to indemnify Cummins under the tax matters agreement against tax liabilities arising as a result of the acquisition of our stock during the two-year period following the split-off (if pursued). For more information, please refer to the section entitled “Certain Relationships and Related Party Transactions — Relationship with Cummins — Tax Matters Agreement.”
Potential indemnification liabilities to Cummins pursuant to the separation agreement could materially and adversely affect our businesses, financial condition, results of operations and cash flows.
The separation agreement, among other things, provides for indemnification obligations designed to make us financially responsible for liabilities that may exist relating to our business activities, whether incurred prior to or after the separation. If we are required to indemnify Cummins under the circumstances set forth in the separation agreement, we may be subject to substantial liabilities. Please refer to the section entitled “Certain Relationships and Related Party Transactions — Relationship with Cummins — Separation Agreement.”
In connection with our separation and split-off from Cummins, Cummins will indemnify us for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure us against the full amount of such liabilities, or that Cummins’ ability to satisfy its indemnification obligation will not be impaired in the future.
Pursuant to the separation agreement and certain other agreements with Cummins, Cummins will agree to indemnify us for certain liabilities as discussed further in “Certain Relationships and Related Party Transactions — Relationship with Cummins — Separation Agreement — Release of Claims and Indemnification.” However, third parties could also seek to hold us responsible for any of the liabilities that Cummins has agreed to retain, and there can be no assurance that the indemnity from Cummins will be sufficient to protect us against the full amount of such liabilities, or that Cummins will be able to fully satisfy its indemnification obligations. In addition, Cummins’ insurance will not necessarily be available to us for liabilities associated with occurrences of indemnified liabilities prior to the split-off, and in any event Cummins’ insurers may deny coverage to us for liabilities associated with certain occurrences of indemnified liabilities prior to the split-off. Moreover, even if we ultimately succeed in recovering from Cummins or such insurance providers any amounts for which we are held liable, we may be temporarily required to bear these losses. Each of these risks could negatively affect our business, financial condition or results of operations.
We may have received better terms from unaffiliated third parties than the terms we will receive in our agreements with Cummins.
The agreements we will enter into with Cummins in connection with the separation, including the separation agreement, transition services agreement, employee matters agreement, tax matters agreement, intellectual property license agreement, first-fit supply agreement, aftermarket supply agreement, transitional trademark license agreement and the registration rights agreement were prepared in the context of our separation from Cummins while we were still a wholly-owned subsidiary of Cummins. Accordingly, during the period in which the terms of those agreements were prepared, we did not have a separate or independent board of directors or a management team that was separate from or independent of Cummins. As a result, the terms of those agreements may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties. Arm’s-length negotiations between Cummins and an unaffiliated third party in another form of transaction, such as a buyer in a sale of a business transaction, may have resulted in more favorable terms to the unaffiliated third party. For more information, please refer to the section entitled “Certain Relationships and Related Party Transactions — Relationship with Cummins — Separation Agreement.”
 
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Risks Related to Our Capital Structure
Changes in the capital and credit markets may negatively affect our ability to access financing to support strategic initiatives.
Disruption of the global financial and credit markets may have an effect on our long-term liquidity and financial condition. For example, the closures of Silicon Valley Bank and Signature Bank in March 2023 and their placement into receivership with the Federal Deposit Insurance Corporation has created financial institution liquidity risk and concerns. Our operations, investment opportunities, access to capital and ability to enforce the obligations of counterparties may be adversely affected by disruptions to the banking system and other financial market volatility. There can be no assurance that the cost or availability of future borrowings will not be impacted by future capital market disruptions. The term loan agreement and revolving credit facility each contain covenants to maintain certain financial ratios that, under certain circumstances, could restrict our ability to incur additional indebtedness, make investments and other restricted payments, create liens and sell assets.
Upon completion of this offering, we will have substantial indebtedness, consisting of the term loan and the revolving credit facility, and may incur substantial additional debt from time to time, which may impact our ability to service all our indebtedness and react to changes in our industry and limit our ability to seek further financing on favorable terms.
Upon completion of this offering, we will have approximately $650 million of outstanding indebtedness consisting of the term loan and amounts drawn under the revolving credit facility. See “Description of Material Indebtedness.”
Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness.
If our cash flows and capital resources are insufficient to fund our debt service obligations, we could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, alter our dividend policy, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations. The instruments that will govern our indebtedness may restrict our ability to dispose of assets and may restrict the use of proceeds from those dispositions and may also restrict our ability to raise debt or equity capital to be used to repay other indebtedness when it becomes due. We may not be able to consummate those dispositions or to obtain proceeds in an amount sufficient to meet any debt service obligations when due.
In addition, we conduct operations through our subsidiaries and joint ventures. Accordingly, repayment of our indebtedness will depend on the generation of cash flow by these entities, and their ability to make such cash available to us, by dividend, debt repayment or otherwise. These entities may not have any obligation to pay amounts due on our indebtedness or to make funds available for that purpose. These entities may not be able to, or may not be permitted to, make adequate distributions to enable us to make payments in respect of our indebtedness. Each of these entities is a distinct legal entity and, under certain circumstances, legal, tax and contractual restrictions may limit our ability to obtain cash from them. In the event that we do not receive distributions from these entities, we may be unable to make required principal and interest payments on our indebtedness.
Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, may materially adversely affect our business, financial condition and results of operations and our ability to satisfy our obligations under our indebtedness or pay dividends on our common stock.
We may incur substantial additional debt from time to time, including secured indebtedness, to finance working capital, capital expenditures, research and development, investments or acquisitions or
 
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for other purposes. If we do so, the risks related to our high level of debt could intensify. Specifically, our high level of debt could have important consequences, including:
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making it more difficult for us to satisfy our obligations with respect to our debt;
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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, business development or other general corporate requirements, including dividends;
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•
increasing our vulnerability to general adverse economic and industry conditions;
​
•
exposing us to the risk of increased interest rates as certain of our borrowings are and may in the future be at variable rates of interest;
​
•
limiting our flexibility in planning for and reacting to changes in our industry;
​
•
impacting our effective tax rate; and
​
•
increasing our cost of borrowing.
​
Risks Related to Our Initial Public Offering and Ownership of Our Common Stock
We have not yet determined whether or the extent to which we will pay any dividends on our common stock or the timing or amount of any such dividends.
We have not yet determined whether or the extent to which we will pay any dividends on our common stock after completion of this offering. The declaration, amount and payment of any future dividends will be at the discretion of our board of directors in accordance with applicable law. Our board of directors may take into account general economic and business conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications on the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our board of directors may deem relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if we commence paying dividends. For more information, please refer to the section entitled “Dividend Policy.”
Applicable laws and regulations, provisions of our amended and restated certificate of incorporation and our bylaws and certain contractual rights granted to Cummins may discourage takeover attempts and business combinations that stockholders might consider in their best interests.
Applicable laws, provisions of our amended and restated certificate of incorporation and our bylaws, as will be in effect upon the closing of this offering, will provide certain contractual rights that will be granted to Cummins under the separation agreement may delay, deter, prevent or render more difficult a takeover attempt that our stockholders might consider in their best interests. For example, they may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging takeover attempts in the future.
Our amended and restated certificate of incorporation and our bylaws, as will be in effect upon the closing of this offering, will provide provisions that are intended to encourage prospective acquirers to negotiate with our board of directors and management team, rather than to attempt a hostile takeover, which could deter coercive takeover practices and inadequate takeover bids. These provisions provide for:
•
a classified board of directors, with our board of directors divided into three classes and with each class serving a staggered three-year term;
​
•
advance notice requirements regarding how our stockholders may present proposals or nominate directors for election at stockholder meetings (except for Cummins’ designation of persons for nomination by the board of directors);
​
 
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•
the right of our board of directors to issue one or more series of preferred stock with such powers, rights and preferences as the board of directors shall determine;
​
•
after Cummins no longer owns a majority of the outstanding shares of our common stock, the inability of stockholders to call special meetings of stockholders and the requirement that all stockholder action be taken at a meeting rather than by written consent;
​
•
after Cummins no longer owns a majority of the outstanding shares of our common stock, directors to be removed only by a 75% stockholder vote; and
​
•
a 75% stockholder vote requirement to amend the section of our amended and restated certificate of incorporation and bylaws related to (i) our board of directors, including related to our classified board and the removal of directors only for cause; (ii) our stockholders, including related to the inability of stockholders to call special meetings of stockholders and the inability of stockholders to act by written consent; and (iii) the ability of our board of directors and our stockholders to amend or repeal our bylaws.
​
We are also subject to Section 203 of the Delaware General Corporation Law (the “DGCL”), an anti-takeover statute. In general, Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder.
These limitations may adversely affect the prevailing market price and market for our common stock if they are viewed as limiting the liquidity of our stock or discouraging takeover attempts in the future.
The provision of our amended and restated certificate of incorporation designating the Court of Chancery in the State of Delaware and the federal district courts for the District of Delaware as the exclusive forums for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.
Our amended and restated certificate of incorporation, as will be in effect upon the closing of this offering, will provide that, unless we consent in writing to the selection of an alternative forum, to the extent permitted by law, the Court of Chancery of the State of Delaware be the sole and exclusive forum for: (1) any derivative action or proceeding brought on behalf of our company, (2) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of our company to us or our stockholders, (3) any action arising pursuant to any provision of our amended and restated certificate of incorporation or our bylaws or (4) any action asserting a claim governed by the internal affairs doctrine. It will further provide that, unless we consent in writing to the selection of an alternative forum, to the extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended (the “Securities Act”). The exclusive forum clauses described above shall not apply to suits brought to enforce a duty or liability created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or any other claim for which the federal courts have exclusive jurisdiction. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of, and consented to, the exclusive forum provisions in our amended and restated certificate of incorporation.
Although we believe these provisions benefit us by providing increased consistency in the application of applicable law in the types of lawsuits to which they apply, the provisions may have the effect of discouraging lawsuits against our directors and officers and may limit a stockholder’s ability to bring a claim in a judicial forum it finds favorable for disputes with us or our directors, officers or employees. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings and there is uncertainty as to whether a court would enforce such provisions, in particular with respect to causes of action arising under the Securities Act. In addition, investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. It is possible that, in connection with any applicable action brought against us, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action. If so, we may incur additional costs associated with
 
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resolving such action in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
After the expiration of the lock-up period, there may be sales of a substantial amount of our common stock by our current stockholders and these sales could cause the price of our common stock to decline.
Cummins and our executive officers and directors will enter into lock-up agreements with the underwriters under which they will agree, subject to specific exceptions, not to sell, directly or indirectly, any shares of common stock without the consent of Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC for a period of 180 days following the date of this prospectus. We refer to such period as the “lock-up period”. When the lock-up period expires, we and our stockholders subject to a lock-up agreement will be able to sell shares of our common stock in the public market. In addition, Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC may release all or some portion of the shares subject to lock-up agreements at any time and for any reason. See “Shares Eligible for Future Sale.” Sales of a substantial number of such shares upon expiration of the lock-up agreements, the perception that such sales may occur, or early release of these agreements, could cause our market price to decline or make it more difficult for you to sell your common stock at a time and price that you deem appropriate.
An active trading market for our common stock may not develop and you may not be able to sell your common stock at or above the initial public offering price.
Prior to the completion of this offering, there has been no public market for our common stock. An active trading market for shares of our common stock may never develop or be sustained following this offering. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. The price for our common stock in this offering will be determined by negotiations among Cummins, us and the representatives of the underwriters and it may not be indicative of prices that will prevail in the open market following this offering. An inactive market may also impair our ability to raise capital by selling our common stock and it may impair our ability to attract and motivate our employees through equity incentive awards and our ability to acquire other companies, products or technologies by using our common stock as consideration.
The price of our common stock may fluctuate substantially.
You should consider an investment in our common stock to be risky and you should invest in our common stock only if you can withstand a significant loss and wide fluctuations in the market value of your investment. Some factors that may cause the market price of our common stock to fluctuate, in addition to the other risks mentioned in this section of the prospectus, are:
•
our announcements or our competitors’ announcements regarding new products, enhancements, significant contracts, acquisitions or strategic investments;
​
•
changes in earnings estimates or recommendations by securities analysts, if any, who cover our common stock;
​
•
failure to meet external expectations or management guidance;
​
•
fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
​
​
•
changes in our capital structure or dividend policy, including as a result of the split-off, future issuances of securities, sales of large blocks of common stock by our shareholders, including Cummins, or our incurrence of additional debt;
​
•
reputational issues;
​
•
changes in general economic and market conditions in or any of the regions in which we conduct our business;
​
•
changes in industry conditions or perceptions;
​
 
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•
changes in applicable laws, rules or regulations and other dynamics; and
​
•
announcements or actions taken by Cummins as our principal shareholder.
​
In addition, if the market for stocks in our industry or related industries, or the stock market in general, experiences a loss of investor confidence, the trading price of our common stock could significantly decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management and could also require us to make substantial payments to satisfy judgments or settle litigation.
You will incur immediate dilution as a result of this offering.
The initial public offering price per share of our common stock will be substantially higher than our pro forma net tangible book value per share immediately after this offering. As a result, you will pay a price per share of common stock that substantially exceeds the per share book value of our tangible assets after subtracting our liabilities. Assuming an offering price of $      per share of our common stock, which is the midpoint of the range on the cover page of this prospectus, you will incur immediate and substantial dilution in an amount of $      per share of common stock. See “Dilution”.
Our historical combined financial statements are not necessarily representative of the results we would have achieved as a standalone company and may not be a reliable indicator of our future results.
Our historical combined financial statements included in this prospectus do not reflect the financial condition, results of operations or cash flows we would have achieved as a standalone company during the periods presented or those we will achieve in the future. This is primarily the result of the following factors:
•
our historical combined financial statements do not reflect the separation;
​
•
our historical combined financial statements reflect expense allocations for certain support functions that are provided on a centralized basis within Cummins, such as expenses for executive oversight, treasury, legal, finance, human resources, tax, internal audit, financial reporting, information technology and investor relations that may be higher or lower than the comparable expenses we would have actually incurred, or will incur in the future, as a standalone company;
​
•
our cost of debt and our capital structure will be different from that reflected in our historical combined financial statements;
​
•
significant increases may occur in our cost structure as a result of this offering, including costs related to public company reporting, investor relations and compliance with the Sarbanes-Oxley Act; and
​
•
this offering may have a material effect on our customers and other business relationships, including supplier relationships, and may result in the loss of preferred pricing available by virtue of our reduced relationship with Cummins.
​
Our financial condition and future results of operations, after giving effect to the separation, will be materially different from amounts reflected in our historical combined financial statements included elsewhere in this prospectus. As a result of the separation, it may be difficult for investors to compare our future results to historical results or to evaluate our relative performance or trends in our business.
The pro forma and non-GAAP financial measures included in this prospectus are presented for informational purposes only and may not be an indication of our financial condition or results of operations in the future.
The unaudited pro forma combined financial statements included in this prospectus are presented for informational purposes only and are not necessarily indicative of what our actual financial condition or results of operations would have been had the transactions been completed on the date indicated. The
 
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assumptions used in preparing the pro forma financial information may not prove to be accurate and other factors may affect our financial condition or results of operations. Accordingly, our financial condition and results of operations in the future may not be consistent with, or evident from, such pro forma financial information. The non-GAAP financial measures included in this prospectus, consisting of EBITDA. EBITDA margin and Adjusted EBITDA, include information that we use to evaluate our past performance, but you should not consider such information in isolation or as an alternative to measures of our performance determined under U.S. GAAP. For further information regarding such limitations, see “Prospectus Summary — Summary Historical and Unaudited Pro Forma Combined Financial Data.”
As a standalone public company, we may expend additional time and resources to comply with rules and regulations that do not currently apply to us, and failure to comply with such rules may lead investors to lose confidence in our financial data.
As a standalone public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act and regulations of the NYSE. We have established all of the procedures and practices required as a subsidiary of Cummins, but we must implement others as a separate, standalone public company. Establishing such procedures and practices will increase our legal, accounting and financial compliance costs, will make some activities more difficult, time-consuming and costly and could be burdensome on our personnel, systems and resources. We will devote significant resources to address these public company requirements, including compliance programs and investor relations, as well as our financial reporting obligations. As a result, we have and will continue to incur significant legal, accounting and other expenses that we did not previously incur to comply with these rules and regulations. Furthermore, the need to establish the corporate infrastructure necessary for a standalone public company may divert some of management’s attention from operating our business and implementing our strategy. However, the measures we take may not be sufficient to satisfy our obligations as a public company. In addition, we cannot predict or estimate the amount of additional costs we may incur in order to comply with these requirements.
We have made, and will continue to make, changes to our internal control and procedures for financial reporting and accounting systems to meet our reporting obligations. In particular, as a public company, our management will be required to conduct an annual evaluation of our internal control over financial reporting and include a report of management on our internal control in our annual reports on Form 10-K. Under current rules, we will be subject to these requirements beginning with our annual report on Form 10-K for the year ending December 31, 2024. In addition, we will be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting pursuant to Auditing Standard No. 5 beginning with our annual report on Form 10-K for the year ending December 31, 2024. If we are unable to conclude that we have effective internal control over financial reporting, or if our registered public accounting firm is unable to provide us with an attestation and an unqualified report as to the effectiveness of our internal control over financial reporting, investors could lose confidence in the reliability of our financial statements, which could result in a decrease in the value of our common stock.
If Cummins sells a controlling interest in our company to a third party in a private transaction, you may not realize any change-of-control premium on shares of our common stock and we may become subject to the control of a presently unknown third party.
Following the completion of this offering, Cummins will continue to own approximately    % of our outstanding common stock (or     % if the underwriters exercise their option to purchase additional shares in full). Subject to the provisions of the lock-up agreement to be entered into in connection with this offering, Cummins will not be restricted from selling some or all of its shares of our common stock in a privately negotiated transaction or otherwise, and a sale of its shares, if sufficient in size, could result in a change of control of our company.
The ability of Cummins to privately sell its shares of our common stock, with no requirement for a concurrent offer to be made to acquire all of the shares of our common stock held by our other stockholders, could prevent you from realizing any change-of-control premium on your shares of our common stock that may otherwise accrue to Cummins on its private sale of our common stock.
 
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Additionally, if Cummins privately sells its controlling equity interest in our company, we may become subject to the control of a presently unknown third party. Such third party may have conflicts of interest with those of other stockholders. In addition, if Cummins sells a controlling interest in our company to a third party, our indebtedness may be subject to acceleration, and our other commercial agreements and relationships, including any remaining agreements with Cummins, could be impacted, all of which may adversely affect our ability to run our business as described herein and may have a material adverse effect on our business, financial condition or results of operations.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, including, without limitation, those that are based on current expectations, estimates and projections about the industries in which we operate and management’s beliefs and assumptions. Forward-looking statements are generally accompanied by words such as “anticipates,” “expects,” “forecasts,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “could,” “should,” “may” or words of similar meaning. Examples of forward-looking statements include, but are not limited to, statements we make regarding the outlook for our future business and financial performance, such as those contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which we refer to as “future factors,” which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some future factors that could cause our results to differ materially from the results discussed in such forward-looking statements are discussed below and stockholders, potential investors and other readers are urged to consider these future factors carefully in evaluating forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof.
See “Risk Factors” for a description of the factors that could impact the outcome of our forward-looking statements. Although we have attempted to identify important risk factors, there may be other risk factors not presently known to us or that we presently believe are not material that could cause actual results and developments to differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. If any of these risks materialize, or if any of the above assumptions underlying forward-looking statements prove incorrect, actual results and developments may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. For the reasons described above, we caution you against relying on any forward-looking statements, which should also be read in conjunction with the other cautionary statements that are included elsewhere in this prospectus. Any forward-looking statement made by us in this prospectus speaks only as of the date thereof. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or to revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should be viewed as historical data.
 
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USE OF PROCEEDS
We will not receive any proceeds from the sale of our common stock in this offering. All of the net proceeds from this offering will be received by the debt-for-equity exchange parties. Immediately prior to the settlement of the debt-for-equity exchange parties’ sale of the shares to the underwriters, the debt-for-equity exchange parties will acquire the common stock being sold in this offering from Cummins in exchange for outstanding Cummins indebtedness held by the debt-for-equity exchange parties. See “Summary — The Underwriting and the Debt-for-Equity Exchange,” “Underwriting (Conflicts of Interest) — The debt-for-equity exchange” and “Underwriting (Conflicts of Interest) — Conflicts of interest.”
As part of the separation and upon the completion of this offering, we intend to pay to Cummins, as partial consideration for the filtration business that Cummins is contributing to us in connection with the separation, the amount of existing cash, plus the net proceeds of the term loan that we will enter into prior to the closing of this offering, plus any amounts drawn under the revolving credit facility, less an amount of cash to be retained by us in an amount to be determined by Cummins. The determination of the amount of cash to be retained by us upon the completion of this offering will be made by Cummins in good faith and will be final and binding on us. See “Description of Material Indebtedness.”
 
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DIVIDEND POLICY
We have not yet determined the extent to which we will pay any dividends on our common stock after completion of this offering. The payment of any dividends in the future, and the timing and amount thereof, is within the discretion of the Board in accordance with applicable law. The Board’s decisions regarding the payment of dividends will depend on many factors, such as our financial condition, earnings, capital requirements, debt service obligations, restrictive covenants in our debt that we will enter into prior to the closing of this offering and in the future, industry practice, legal requirements and other factors that our Board deems relevant. Our ability to pay dividends will depend on our ongoing ability to generate cash from operations and on our access to the capital markets. We cannot guarantee that we will pay a dividend in the future or continue to pay any dividends if we commence paying dividends.
 
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and our capitalization as of December 31, 2022:
•
on an actual basis; and
​
•
on an unaudited pro forma basis to give effect to (i) the separation and (ii) the debt financing and the application of the net proceeds from the term loan as described under “Prospectus Summary — Debt Transactions” plus any amounts drawn under the revolving credit facility.
​
As the net proceeds of this offering are received by the debt-for-equity exchange parties, this offering has no impact on our capitalization.
The information below is not necessarily indicative of what our cash and cash equivalents and capitalization would have been had the separation been completed as of December 31, 2022. In addition, it is not indicative of our future cash and cash equivalents and capitalization. This table should be read in conjunction with “Unaudited Pro Forma Combined Financial Information,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical combined financial statements and notes thereto included elsewhere in this prospectus.
​ ​ ​
December 31, 2022
​
(amounts in millions, except for number of shares and per share data)
​ ​
Actual
​ ​
Pro Forma
​
Cash and cash equivalents
​ ​ ​ $  — ​ ​ ​ ​ $       ​ ​
Debt(1): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Term Loan
​ ​ ​ $ — ​ ​ ​ ​ $ ​ ​
Revolving Credit Facility
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​
Total debt
​ ​ ​ $ — ​ ​ ​ ​ $ ​ ​ ​
Equity: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net parent investment
​ ​ ​ $ 505.3 ​ ​ ​ ​ ​ ​ ​ ​
Common stock, par value $0.0001 per share, 2,000,000,000 shares authorized and 0 shares issued and outstanding on a historical basis;     shares issued and outstanding on a pro forma basis
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​
Additional paid-in capital
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​
Accumulated other comprehensive income (loss)
​ ​ ​ ​ (55.8) ​ ​ ​ ​ ​ ​ ​ ​
Total net parent investment/Total equity
​ ​ ​ $ 449.5 ​ ​ ​ ​ ​ ​ ​ ​
Total capitalization
​ ​ ​ $ 449.5 ​ ​ ​ ​ $     ​ ​
​
(1)
We expect to have $      available in undrawn capacity under our revolving credit facility following the separation, debt financing and this offering. For a description of the term loan and revolving credit facility, see “Description of Material Indebtedness.”
​
 
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DILUTION
If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of common stock and the pro forma net tangible book value per share of our common stock after giving effect to the separation. Net tangible book value per share represents:
•
total assets less goodwill and other intangible assets;
​
•
reduced by our total liabilities; and
​
•
divided by the number of shares of our common stock outstanding.
​
Dilution per share represents the difference between the amount per share paid by purchasers of our common stock in this offering and the pro forma net tangible book value per share after giving effect to the separation. As of December 31, 2022, after giving effect to the separation, our pro forma net tangible book value was approximately $      , or $      per share based on      shares of our common stock outstanding as of immediately prior to this offering. This represents an immediate dilution of $      per share to investors purchasing shares of our common stock in this offering. The following table illustrates this dilution per share assuming an initial public offering price per share at the midpoint of the price range on the cover of this prospectus.
​
Assumed initial public offering price per share of common stock
​ ​ ​ $        ​ ​
​ Pro forma net tangible book value per share after giving effect to the separation ​ ​
      
​
​
Dilution per share of common stock to new investors in this offering
​ ​ ​ $ ​ ​ ​
The following table summarizes, on a pro forma basis as of December 31, 2022, after giving effect to this offering, the difference between our existing stockholder and new investors with respect to the number of shares of common stock purchased, the total consideration paid, or to be paid, and the average price per share paid by our existing stockholder or to be paid by new investors purchasing shares in this offering, at the assumed initial public offering price of $      per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the estimated underwriting discounts and commissions:
​ ​ ​
Shares Purchased
​ ​
Total Consideration
​ ​
Average
Price
Per Share
​
​ ​ ​
Number
​ ​
Percent
​ ​
Amount
​ ​
Percent
​
​ ​ ​ ​ ​ ​
(in millions)
​ ​ ​
Existing stockholder(1)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​    % ​ ​ ​ ​ $     ​ ​ ​ ​ ​    % ​ ​ ​ ​ $     ​ ​
New investors ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total
​ ​ ​ ​        ​ ​ ​ ​ ​ 100.0% ​ ​ ​ ​ $ 100.0 ​ ​ ​ ​ ​ ​% ​ ​ ​ ​ $ ​ ​ ​
​
(1)
Total consideration represents the pro forma book value of the net assets being contributed to us by Cummins in connection with the separation.
​
If the underwriters exercise in full their option to purchase additional shares of our common stock, the pro forma net tangible book value per share of our common stock, after giving effect to this offering, would be $      per share, and the dilution in pro forma net tangible book value per share to new investors purchasing shares of common stock in this offering would be $      per share.
We have reserved        shares of our common stock for future issuance under our equity incentive plan, from which we expect to grant equity awards relating to up to         shares of our common stock at or shortly following this offering, as further described in “Executive and Director Compensation.”
The above discussion and tables are based on an assumed number of shares of our common stock outstanding immediately following this offering. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders.
 
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UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined financial information has been prepared in accordance with Article 11 of Regulation S-X and has been derived from our historical combined financial statements included in this prospectus. While the historical combined financial statements reflect the past financial results of the combined businesses operating within Cummins’ filtration division prior to the separation, the unaudited pro forma combined financial information gives effect to the separation of that business into an independent, publicly traded company.
Specifically, the pro forma adjustments to reflect the separation, split-off and related transactions from and with Cummins include autonomous entity adjustments and transaction accounting adjustments. Management adjustments are included in the footnotes to the pro forma financial information.
The pro forma adjustments, as described below, are based on the available information and assumptions our management believes are reasonable; however, such adjustments are subject to change as the costs of operating as a standalone company are determined. In addition, such adjustments are estimates and may not prove to be accurate. The unaudited pro forma combined financial information includes certain adjustments to give effect to events that are directly attributable to the separation, split-off and related transactions.
The unaudited pro forma combined statement of net income for the year ended December 31, 2022 presents the pro forma effect of the separation and the related adjustments described below as if they had been completed on January 1, 2022. The unaudited pro forma combined balance sheet as of December 31, 2022 presents the pro forma effect of the separation and related adjustments described below as if they had occurred on that date. The unaudited pro forma combined statement of net income does not purport to represent, and is not necessarily indicative of, what the actual results of operations of Atmus would have been had the transaction taken place on January 1, 2022, nor is it indicative of the results of operations of Atmus for any future period. The unaudited pro forma combined balance sheet does not purport to represent, and is not necessarily indicative of, what the actual financial condition of Atmus would have been had the transactions taken place on December 31, 2022, nor is it indicative of the financial condition of Atmus as of any future date.
In addition, for the periods presented in the unaudited pro forma combined financial information, the operations of Atmus were conducted and accounted for as part of Cummins. The historical combined financial statements and unaudited pro forma combined financial information of Atmus have been derived from Cummins’ historical accounting record and reflect certain allocations of expenses. All of the allocations and estimates in such financial statements are based on assumptions that management believes are reasonable.
Autonomous Entity Adjustments
As a standalone public company, we expect to incur incremental recurring costs that could be materially different from the allocations of Cummins costs included within the historical combined financial statements. We expect to incur recurring costs associated with being a standalone public company in the following areas:
•
costs to perform financial reporting and regulatory compliance and costs associated with accounting, auditing, tax, legal, information technology, human resources, investor relations, risk management, treasury and other general and administrative related functions;
​
•
compensation including equity-based awards, and benefits with respect to new and existing positions, including the board of directors;
​
•
insurance premiums for items such as property insurance and directors and officers insurance;
​
•
license fees and other expenses related to information technology investments; and
​
•
depreciation and amortization related to information technology infrastructure investments.
​
Certain of the above costs — specifically accounting activities, financial reporting activities, some legal services, some human resource functions, the use of Cummins’ established information technology
 
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systems, and other general and administrative related functions are covered by the transition services agreement (“TSA”) for a period of time. Other costs, such as our own board of directors, company specific compensation and insurance plans, and certain information technology systems, are not covered by the TSA. We are in the process of establishing all of these functions on a standalone basis.
We have made autonomous entity adjustments to reflect:
•
the estimated difference between the Corporate Allocation included in the historical financial statements and the expected costs of the TSA with Cummins that will be in place at the time of the separation, for the same activities (refer to Note 1(a) below), as well as the costs that have been formally agreed to, as of the date of this filing (refer to Note 1(b) below). Actual costs and expenses could be materially different from the TSA.
​
​
•
pro forma adjustments are not being made for agreements, other than the TSA, which will govern certain aspects of our relationship with Cummins following the separation, as described under “The Separation and Split-Off Transactions” and “Certain Relationships and Related Party Transactions” included elsewhere in this prospectus. These agreements detail how matters will be separated and addressed on a prospective basis but generally do not have operational impacts different than historical practices.
​
Transaction Accounting Adjustments
We currently expect we will acquire certain assets and assume liabilities and related expenses associated with the separation and in becoming a standalone public company. We have made pro forma adjustments for these items which have been formally agreed to, and such adjustments are included in the transaction accounting adjustments. Actual costs and expenses could differ from this estimate. These adjustments primarily relate to the following:
•
the transfer from Cummins to Atmus of the assets and liabilities that will comprise Atmus’s business going forward;
​
•
agreed to non-recurring costs to establish certain information technology systems;
​
​
•
the issuance of approximately       million shares of Atmus common stock; and
​
•
total cash liquidity of approximately $         million, which includes a net cash amount of $         million (as described below) and approximately $         expected to be available in undrawn capacity under our revolving credit facility. This net cash amount of $       million will be retained after we pay to Cummins upon the completion of this offering, as partial consideration for the filtration business that Cummins is contributing to us in connection with the separation:
​
•
the amount of existing cash; plus
​
•
the net proceeds from the term loan that we will enter into prior to the closing of this offering plus any amounts drawn under the revolving credit facility; less
​
•
an amount of cash to be retained by us in an amount to be determined by Cummins.
​
The net cash retained by Atmus will be an amount determined by Cummins shortly before pricing of this offering and is viewed as a capital contribution from Cummins that will be used for ongoing working capital requirements and capital expenditures and takes into account Atmus’s on-going investments in joint ventures.
See Note 2 below.
 
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Management Adjustments
Management adjustments reflect one-time expenses associated with becoming a standalone public company expected to be incurred over the next twelve to eighteen months after the separation, as well as costs that management expects to incur, on a recurring basis, to operate as a standalone public company. These costs have not been formally committed to at this time and represent management’s best estimate.
Estimated costs reflected below fall into the following categories:
•
personnel costs to fill positions needed to operate as a standalone public company;
​
•
costs to separate information technology systems and related application licensing costs;
​
•
insurance premiums for items such as property insurance and directors and officers insurance;
​
•
benefit plan adjustments to reflect moving to defined contribution plans where possible;
​
•
dis-synergy for losing access to Cummins’ warehousing facilities;
​
•
dis-synergy in purchasing contracts losing Cummins’ economies of scale;
​
•
facility separation and relocation costs;
​
•
accounting, tax and other professional services costs pertaining to the separation and our establishment as a standalone public company; and
​
•
legal and other fees associated with transitioning contracts.
​
Estimated dis-synergies we anticipate incurring as a standalone company could be materially different from our estimate.
To estimate these costs we have utilized benchmark data, quotes for the work to be performed, and if quotes were not available, management used estimated costs based on the best information that they had available to them (e.g., industry benchmarks, past similar work, and discussions through trade organizations).
See Note 3 below.
The unaudited pro forma combined financial information should be read in conjunction with our historical combined financial statements and the accompanying notes in the “Index to Combined Financial Statements,” “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The unaudited pro forma combined financial information constitutes forward-looking information and is subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included elsewhere in this prospectus.
 
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UNAUDITED PRO FORMA COMBINED STATEMENT OF NET INCOME
FOR THE YEAR ENDED DECEMBER 31, 2022
In millions, except per share amounts
​ ​
Actual
​ ​
Autonomous
Entity
Adjustments
​ ​
Note
​ ​
Transaction
Accounting
Adjustments
​ ​
Note
​ ​
Pro Forma
​
NET SALES
​ ​ ​ $ 1,562.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1,562.1 ​ ​
Cost of sales
​ ​ ​ ​ 1,203.2 ​ ​ ​ ​ ​ (2.5) ​ ​ ​
(a)
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,200.7 ​ ​
GROSS MARGIN
​ ​ ​ ​ 358.9 ​ ​ ​ ​ ​ 2.5 ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ 361.4 ​ ​
OPERATING EXPENSES AND INCOME
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Selling, general and administrative
expenses
​ ​ ​ ​ 139.7 ​ ​ ​ ​ ​ 5.8 ​ ​ ​
(a), (b)
​ ​ ​ ​ 9.0 ​ ​ ​
(c)
​ ​ ​ ​ 154.5 ​ ​
Research, development and engineering expenses
​ ​ ​ ​ 38.6 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 38.6 ​ ​
Equity, royalty and interest income
from investees
​ ​ ​ ​ 28.0 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 28.0 ​ ​
Other operating expenses, net
​ ​ ​ ​ 5.0 ​ ​ ​ ​ ​     ​ ​ ​ ​ ​ ​ ​ ​     ​ ​ ​ ​ ​ ​ ​ ​ 5.0 ​ ​
OPERATING INCOME
​ ​ ​ ​ 203.6 ​ ​ ​ ​ ​ (3.3) ​ ​ ​ ​ ​ ​ ​ ​ (9.0) ​ ​ ​ ​ ​ ​ ​ ​ 191.3 ​ ​
Interest expense
​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 38.5 ​ ​ ​
(d)
​ ​ ​ ​ 39.2 ​ ​
Other income, net
​ ​ ​ ​ 8.8 ​ ​ ​ ​ ​     ​ ​ ​ ​ ​ ​ ​ ​     ​ ​ ​ ​ ​ ​ ​ ​ 8.8 ​ ​
INCOME BEFORE INCOME TAXES
​ ​ ​ ​ 211.7 ​ ​ ​ ​ ​ (3.3) ​ ​ ​ ​ ​ ​ ​ ​ (47.5) ​ ​ ​ ​ ​ ​ ​ ​ 160.9 ​ ​
Income tax expense
​ ​ ​ ​ 41.6 ​ ​ ​ ​ ​ 0.7 ​ ​ ​
(e)
​ ​ ​ ​ (9.4) ​ ​ ​
(e)
​ ​ ​ ​ 32.9 ​ ​
NET INCOME
​ ​ ​ $ 170.1 ​ ​ ​ ​ $ (4.0) ​ ​ ​ ​ ​ ​ ​ $ (38.1) ​ ​ ​ ​ ​ ​ ​ $ 128.0 ​ ​
EARNINGS PER COMMON SHARE
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Basic and diluted
​ ​ ​ ​ n/a ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(f)
​ ​ ​ ​ ​ ​ ​
Weighted-average shares outstanding
​ ​ ​ ​ n/a ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
(f)
​ ​ ​ ​ ​ ​ ​
 
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UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2022
​ ​ ​
Actual
​ ​
Autonomous
Entity
Adjustments
​ ​
Transaction
Accounting
Adjustments
​ ​
Note
​ ​
Pro Forma
​
ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Current assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash and cash equivalents
​ ​ ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 110.0 ​ ​ ​
(g)
​ ​ ​ $ 110.0 ​ ​
Accounts and notes receivables, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​
Trade and other
​ ​ ​ ​ 174.2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 174.2 ​ ​
Related party receivables
​ ​ ​ ​ 67.0 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 67.0 ​ ​
Inventories
​ ​ ​ ​ 251.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 251.8 ​ ​
Prepaid expenses and other current assets
​ ​ ​ ​ 19.3 ​ ​ ​ ​ ​     ​ ​ ​ ​ ​     ​ ​ ​ ​ ​ ​ ​ ​ 19.3 ​ ​
Total current assets
​ ​ ​ ​ 512.3 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 110.0 ​ ​ ​ ​ ​ ​ ​ ​ 622.3 ​ ​
Long-term assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Property, plant and equipment, net
​ ​ ​ ​ 148.4 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 148.4 ​ ​
Investments and advances related to equity method investees
​ ​ ​ ​ 77.0 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 77.0 ​ ​
Goodwill
​ ​ ​ ​ 84.7 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 84.7 ​ ​
Other assets
​ ​ ​ ​ 57.0 ​ ​ ​ ​ ​     ​ ​ ​ ​ ​     ​ ​ ​ ​ ​ ​ ​ ​ 57.0 ​ ​
Total assets
​ ​ ​ $ 879.4 ​ ​ ​ ​ $  — ​ ​ ​ ​ $ 110.0 ​ ​ ​ ​ ​ ​ ​ $ 989.4 ​ ​
LIABILITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Accounts payable (principally trade)
​ ​ ​ $ 145.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 145.9 ​ ​
Related party payables
​ ​ ​ ​ 100.1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 100.1 ​ ​
Accrued compensation, benefits and retirement costs
​ ​ ​ ​ 18.2 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 18.2 ​ ​
Current portion of accrued product warranty
​ ​ ​ ​ 5.9 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 5.9 ​ ​
Other accrued expenses
​ ​ ​ ​ 79.0 ​ ​ ​ ​ ​     ​ ​ ​ ​ ​     ​ ​ ​ ​ ​ ​ ​ ​ 79.0 ​ ​
Total current liabilities
​ ​ ​ ​ 349.1 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ 349.1 ​ ​
Long-term liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Long-term debt
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 650.0 ​ ​ ​
(h)
​ ​ ​ ​ 650.0 ​ ​
Pensions and other postretirement benefits
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1.7 ​ ​ ​
(i)
​ ​ ​ ​ 1.7 ​ ​
Accrued product warranty
​ ​ ​ ​ 9.6 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 9.6 ​ ​
Other liabilities
​ ​ ​ ​ 71.2 ​ ​ ​ ​ ​     ​ ​ ​ ​ ​     ​ ​ ​ ​ ​ ​ ​ ​ 71.2 ​ ​
Total liabilities
​ ​ ​ $ 429.9 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 651.7 ​ ​ ​ ​ ​ ​ ​ $ 1,081.6 ​ ​
NET PARENT INVESTMENT ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Common stock (par value $0.0001)
​ ​ ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ — ​ ​ ​
(j)
​ ​ ​ $ — ​ ​
Additional paid-in capital
​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (37.9) ​ ​ ​
(j)
​ ​ ​ ​ (37.9) ​ ​
Net parent investment
​ ​ ​ ​ 505.3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (505.3) ​ ​ ​
(j)
​ ​ ​ ​ — ​ ​
Accumulated other comprehensive loss
​ ​ ​ ​ (55.8) ​ ​ ​ ​ ​     ​ ​ ​ ​ ​ 1.5 ​ ​ ​
(j)
​ ​ ​ ​ (54.3) ​ ​
Total net parent investment
​ ​ ​ ​ 449.5 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (541.7) ​ ​ ​ ​ ​ ​ ​ ​ (92.2) ​ ​
Total liabilities and net parent investment
​ ​ ​ $ 879.4 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 110.0 ​ ​ ​ ​ ​ ​ ​ $ 989.4 ​ ​
 
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NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Note 1: Autonomous Entity Adjustments
Adjustments included in the column under the heading “Autonomous Entity Adjustments” represent the following:
(a)
The unaudited pro forma combined financial statements have been adjusted to reflect Atmus as an autonomous entity. In connection with the separation, Atmus will enter into a TSA. Pursuant to the TSA, for a period of time after the separation, generally ranging from six to twenty-four months, services will be provided to Atmus, as described above, for pre-determined rates. A favorable adjustment of $12.9 million (of which $2.5 million is included in cost of sales and $10.4 million is included in selling, general, and administrative expenses) has been made to the unaudited pro forma combined statements of net income for the year ended December 31, 2022, to reflect the difference between specific costs expected to be incurred under the TSA and the corporate allocation from Cummins, related to similar services, that is included in the historical financial statements.
​
​
(b)
Atmus has also formally agreed to additional costs that are required to operate as a standalone public company. As of February 21, 2023, these formally agreed to costs of approximately $16.2 million are included in selling, general and administrative expenses, and are associated with internal and external audit, tax services, the board of directors and executive leadership compensation adjustments, some of which are outlined in the section entitled “Executive and Director Compensation”.
​
​
(e)
Reflects the tax effects of the pro forma adjustments at the applicable statutory income tax rates in the respective jurisdictions. The effective tax rate of Atmus could be different (either higher or lower) depending on activities subsequent to the split-off.
​
Note 2: Transaction Accounting Adjustments
Adjustments included in the column under the heading “Transaction Accounting Adjustments” represent the following:
​
(c)
Atmus has also formally agreed to additional, non-recurring costs that are required to operate as a standalone public company. At the time of this filing, these formally agreed to costs are included in selling, general and administrative expenses, and are associated with consulting fees in conjunction with the implementation of some information technology systems.
​
​
(d)
An adjustment to interest expense has been reflected within the unaudited pro forma combined statements of net income, assuming the new debt had been raised as of January 1, 2022. Interest is calculated as the Secured Overnight Financing Rate (SOFR) + a Credit Spread Adjustment plus 1.25%. A 0.125% change in SOFR would have a $0.8 million annual impact on interest expense.
​
​
(e)
Reflects the tax effects of the pro forma adjustments at the applicable statutory income tax rates in the respective jurisdictions. The effective tax rate of Atmus could be different (either higher or lower) depending on activities subsequent to the split-off.
​
​
(f)
The issuance of approximately           million shares of Atmus common stock (as initially estimated).
​
​
(g)
The net amount of cash retained by us after considering the following amounts which have been paid to Cummins:
​
​
a.
the $       net proceeds from the term loan that we will enter into prior to the closing of this offering, plus $       drawn under the revolving credit facility, plus
​
​
b.
$       of existing cash.
​
 
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​
(h)
The entry by Atmus into the term loan and the revolving credit facility.
​
(i)
In connection with the separation, a portion of certain defined benefit pension plan obligations in Mexico will be transferred to Atmus. The Cummins plans were accounted for on a multiemployer basis in Atmus’s historical combined financial statements. Accordingly, no pension assets or liabilities were recorded in Atmus’s historical combined balance sheet to recognize the funded status of these plans. However, benefit expenses related to these plans attributable to Atmus’s business, as applicable, were recorded in Atmus’s historical combined statements of net income.
​
The pro forma adjustment in the unaudited pro forma combined balance sheet as of December 31, 2022 reflects the underfunded status of the defined benefit plan obligations that are expected to be assumed by Atmus.
(j)
On the distribution date, Cummins’ net investment in Atmus will be re-designated as Atmus Shareholders’ Equity and will be allocated between shares of Atmus common stock (par value of $0.0001 per share) and additional paid in capital based on the number of shares of Atmus common stock outstanding at the distribution date. The adjustments to additional paid-in capital resulting from the pro forma adjustments are calculated as follows (in millions):
​
​ Net cash retained, see note (g) ​ ​ ​ ​ ​ ​ ​
​
Reclassification of Cummins net parent investment to additional paid in capital
​ ​ ​ $ 502.1 ​ ​
​
Distribution of net proceeds from the term loan and the revolving credit facility to Parent
​ ​ ​ ​ ​ ​ ​
​
Portion of shareholders’ equity from stock issuance over par value, see note (f)
​ ​ ​ ​ ​ ​ ​
​
Additional paid-in capital
​ ​ ​ $ ​ ​ ​
Note 3: Management Adjustments
Management adjustments reflect one-time expenses associated with becoming a standalone public company, expected to be incurred over the next twelve to eighteen months after the separation, as well as costs that management expects to incur, on a recurring basis, to operate as a standalone public company, and dis-synergies that management anticipates in connection with the separation from Cummins. These costs have not been formally committed to at this time and represent management’s best estimate.
Estimated costs reflected below fall into the following categories:
•
personnel costs to fill positions needed to operate as a standalone public company;
​
•
costs to separate information technology systems and related application licensing costs;
​
•
insurance premiums for items such as property insurance and directors and officers insurance;
​
•
benefit plan adjustments to reflect moving to defined contribution plans where possible;
​
•
dis-synergy for losing access to Cummins’ warehousing facilities;
​
•
dis-synergy in purchasing contracts losing the Cummins’ economies of scale;
​
•
facility separation and relocation costs;
​
•
accounting, tax and other professional services costs pertaining to the separation and our establishment as a standalone public company; and,
​
•
legal and other fees associated with transitioning contracts.
​
We have begun hiring new employees, but this process is continuing. Further, the work on the other costs is just beginning. To estimate the cost associated with new employees, we utilized both recently incurred costs to hire employees in similar roles and benchmark data. To estimate the cost associated with the other activities, we have obtained quotes for the work to be performed, and if quotes were not available, management used estimated costs based on the best information they had available to them (e.g., industry benchmarks, prior similar work, and discussions through trade organizations).
 
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UNAUDITED PRO FORMA NET INCOME
FOR THE YEAR ENDED DECEMBER 31, 2022
In millions, except per share amounts
​ ​
Net income
​ ​
Basic and diluted
Earnings per share
​ ​
Weighted Average
shares
​
Pro forma combined
​ ​ ​ $ 128.0 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $    — ​ ​
Management’s adjustments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total costs
​ ​ ​ ​ (29.3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ — ​ ​
Tax effect
​ ​ ​ ​ 5.8 ​ ​ ​ ​ ​                    ​ ​ ​ ​ ​ ​ ​ ​
Pro forma combined after management’s adjustments
​ ​ ​ $ 104.5 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ — ​ ​
 
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THE SEPARATION AND SPLIT-OFF TRANSACTIONS
The Separation
Prior to the completion of this offering, we will enter into a separation agreement with Cummins. The separation agreement will set forth our agreements with Cummins regarding the principal actions to be taken in connection with the separation. It will also set forth other agreements we and Cummins have entered or will enter into prior to completion of this offering that govern certain aspects of our relationship with Cummins following the separation.
The following are the principal steps of the separation:
•
Cummins formed FILT Red, Inc. on April 1, 2022. On December 5, 2022, we filed a Certificate of Amendment with the Delaware Secretary of State to change our name from ‘‘FILT Red, Inc.’’ to ‘‘Atmus Filtration Technologies Inc.’’
​
•
Pursuant to the separation agreement, Cummins will transfer to us substantially all of the assets and liabilities comprising its filtration business that will form our business going forward. In exchange for the assets to be transferred to us, we will, as consideration, issue to Cummins newly issued, fully paid and nonassessable shares of our common stock and pay Cummins upon the completion of this offering, as partial consideration for the filtration business that Cummins is contributing to us in connection with the separation, the amount of existing cash, plus the net proceeds of the term loan that we will enter into prior to the closing of this offering, plus any amounts drawn under the revolving credit facility, less an amount of cash to be retained by us in an amount to be determined by Cummins. The determination of the amount of cash to be retained by us upon the completion of this offering will be made by Cummins in good faith and will be final and binding on us. See “Description of Material Indebtedness”.
​
•
We and Cummins will enter into a transition services agreement that will be effective upon the separation and this offering, pursuant to which Cummins and its subsidiaries and we and our subsidiaries will provide to each other various services, which will include a sub-agreement between our respective subsidiaries in Mexico to provide maquiladora related services to our subsidiary in Mexico.
​
•
We and Cummins will enter into a tax matters agreement that will govern the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.
​
•
We and Cummins will enter into an employee matters agreement that will govern our and Cummins’ compensation and employee benefit obligations with respect to the employees and other service providers of each company and generally will allocate liabilities and responsibilities relating to employment matters and employee compensation and benefit plans and programs.
​
•
We and Cummins will enter into an intellectual property license agreement that will enable cross-licensing of intellectual property owned by Cummins and us.
​
•
We and Cummins will enter into a transitional trademark license agreement pursuant to which Cummins will grant to us a personal, non-exclusive, non-sublicensable (except in certain circumstances), non-assignable, royalty-free, fully paid-up license to use certain licensed trademarks for an initial period of 36 months after the date on which Cummins ceases to beneficially own a majority, in the aggregate, of the total voting power of our capital stock.
​
•
We and Cummins will enter into a registration rights agreement pursuant to which we will grant Cummins and its affiliates certain registration rights with respect to our common stock owned by them.
​
•
We and Cummins will enter into a mutually agreed upon non-compete agreement, consistent with historical practices, that will limit Cummins and its wholly-owned and controlled affiliates from designing, developing, manufacturing or selling competing products.
​
 
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•
We and Cummins expect to enter into a royalty sharing agreement at the time of separation and this offering that will provide that Cummins will pay Atmus a portion of royalty amounts due to Cummins pursuant to an existing trademark license and endorsement agreement with a third-party, under which Atmus has certain rights relating to trademarks licensed by Cummins, until the earlier of December 31, 2024 or termination of the trademark license and endorsement agreement.
​
​
•
We and Cummins expect to enter into a data sharing agreement after the separation, pursuant to which the parties will share certain telematics and other proprietary and non-proprietary data in order to evaluate the performance of the engine and filtration system associated with Cummins’ products, including engines and gensets.
​
For a description of these agreements, see “Certain Relationships and Related Party Transactions — Relationship with Cummins.”
We believe, and Cummins has advised us that it believes, that the separation, this offering and the split-off will provide a number of benefits to our business and to Cummins’ business. These intended benefits include improving the strategic and operational flexibility of both companies, enhancing the focus of the management teams on their respective business operations, allowing each company to tailor the capital structure and investment policy best suited to its financial profile and business needs and providing each company with its own equity to better incentivize employees and facilitate acquisitions. In addition, as we will be a standalone company, potential investors will be able to invest directly in our business. There can be no assurance that we will achieve the expected benefits of the separation and the distribution in a timely manner or at all. See “Risk Factors — Risks Related to the Separation and our Relationship with Cummins.”
The Split-off
Cummins has informed us that, as of the date of this prospectus, it intends, following this offering, to make a tax-free split-off, pursuant to which Cummins will offer its stockholders the option to exchange their shares of Cummins common stock for shares of our common stock in an exchange offer. If the exchange offer is undertaken and consummated and not fully subscribed because less than all shares of our common stock owned by Cummins are exchanged, the remaining shares of our common stock owned by Cummins may be offered in one or more subsequent exchange offers (together with the initial exchange offer, the “exchange offer(s)”) and/or distributed on a pro rata basis to Cummins stockholders whose shares of Cummins common stock remain outstanding after consummation of the exchange offer(s) (such distribution, together with the exchange offer(s), the “split-off”).
While, as of the date of this prospectus, Cummins intends to effect the split-off, Cummins has no obligation to pursue or consummate any further dispositions of its ownership interest in us, including through the split-off, by any specified date or at all. If pursued, the split-off may be subject to various conditions, including receipt of any necessary regulatory or other approvals, the existence of satisfactory market conditions, the receipt of a private letter ruling from the IRS, which has been received, and an opinion of a nationally recognized law or accounting firm to the effect that the separation and the debt-for-equity exchange, together with such split-off, will qualify as a transaction that is tax-free to Cummins and its stockholders for U.S. federal income tax purposes. The conditions to the split-off may not be satisfied, Cummins may decide not to consummate the split-off even if the conditions are satisfied or Cummins may decide to waive one or more of these conditions and consummate the split-off even if all of the conditions are not satisfied. The split-off is not being effected pursuant to this prospectus and the underwriters of this offering are not acting as underwriters for the split-off.
Change in Control Considerations
Cummins will lose control of us as a result of the transactions to implement this offering, the separation, and the split-off, which will cause a change in control under the governing documents of our joint venture in India (FFPL), resulting in the loss of rights to board representation. This would effectively result in the loss of the ability to prevent certain significant actions and may result in a reduction or elimination of dividends. See “Risk Factors — Risks Related to our Business Operations.”
 
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The discussion and analysis presented below refers to and should be read in conjunction with (i) the combined financial statements and the accompanying notes, and (ii) the unaudited pro forma combined financial information and the accompanying notes, each included elsewhere in this prospectus. To the extent that this discussion describes prior performance, the explanations only relate to the described periods, which may not be indicative of our future performance. This discussion and analysis contains forward-looking statements and the matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those made, projected or implied in the forward-looking statements. Please see “Risk Factors” and “Cautionary Statement Concerning Forward-looking Statements” for a discussion of certain of the uncertainties, risks and assumptions associated with these statements.
The following is the discussion and analysis of changes in the financial condition and results of operations for year ended December 31, 2022 compared to the fiscal year ended December 31, 2021 and the fiscal year ended December 31, 2021 compared to the fiscal year ended December 31, 2020.
General Overview
Company Overview
Atmus is one of the global leaders of filtration products for on-highway commercial vehicles and off-highway agriculture, construction, mining and power generation vehicles and equipment. We design and manufacture advanced filtration products, principally under the Fleetguard brand, that enable lower emissions and provide superior asset protection. We estimate that approximately 16% of our net sales in 2022 were generated through first-fit sales to OEMs, where our products are installed as components for new vehicles and equipment, and approximately 84% were generated in the aftermarket, where our products are installed as replacement or repair parts, leading to a strong recurring revenue base. Building on our 60-year history, we continue to grow and differentiate ourselves through our global footprint, comprehensive offering of premium products, technology leadership and multi-channel path to market.
Basis of Presentation
The discussion below relates to the financial position and results of operations of a combination of entities under common control that have been “carved out” of Cummins’ historical consolidated financial statements and accounting records. The preparation of the combined financial statements required considerable judgment of management of Cummins and Atmus and reflects significant assumptions and allocations that management of Cummins and Atmus believe are reasonable. The combined financial statements reflect our historical financial position, results of operations and cash flows, in conformity with U.S. GAAP. Refer to Note 2, “BASIS OF PRESENTATION”, to the combined financial statements included elsewhere in this prospectus for additional information.
Separation and Split-Off from Cummins Inc.
On August 3, 2021, Cummins publicly announced it was exploring strategic alternatives for its filtration business, including the potential separation of the filtration business from Cummins into a standalone company. We are conducting an initial public offering of our common stock. Prior to the closing of this offering, Cummins will transfer to us substantially all of the assets and liabilities comprising its filtration business that will form our business going forward.
Cummins has informed us that, as of the date of this prospectus, following this offering, it intends to make a tax-free split-off, pursuant to which Cummins will offer its stockholders the option to exchange their shares of Cummins common stock for shares of our common stock in an exchange offer. If the exchange offer is undertaken and consummated and not fully subscribed because less than all shares of our common stock owned by Cummins are exchanged, the remaining shares of our common stock owned by Cummins may be offered in one or more subsequent exchange offers (together with the
 
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initial exchange offer, the “exchange offer(s)”) and/or distributed on a pro rata basis to Cummins stockholders whose shares of Cummins common stock remain outstanding after consummation of the exchange offer(s) (such distribution, together with the exchange offer(s), the “split-off”’).
While, as of the date of this prospectus, Cummins intends to effect the split-off, Cummins has no obligation to pursue or consummate any further dispositions of its ownership interest in us, including through the split-off, by any specified date or at all. If pursued, the split-off may be subject to various conditions, including receipt of any necessary regulatory or other approvals, the existence of satisfactory market conditions and the receipt of a private letter ruling from the IRS and an opinion of a nationally recognized law or accounting firm to the effect that the separation, together with such split-off, will qualify as a transaction that is tax-free to Cummins and its stockholders for U.S. federal income tax purposes. The conditions to the split-off may not be satisfied; Cummins may decide not to consummate the split-off even if the conditions are satisfied; or Cummins may decide to waive one or more of these conditions and consummate the split-off even if all of the conditions are not satisfied. The split-off is not being effected pursuant to this prospectus, and the underwriters of this offering are not acting as underwriters for the split-off.
Change in Control Considerations
Transactions to implement this offering, the separation and the proposed subsequent split-off of Cummins’ equity interest in us will constitute a change in control under our joint venture in India (FFPL), resulting in the potential loss of board representation. This would effectively result in the loss of the ability to prevent certain significant actions and may result in a reduction or elimination of dividends. See “Risk Factors — Risks Related to our Business Operations”. Additionally, a significant reduction in the level of contribution by our joint venture in India (FFPL) to our net income would likely have a material adverse effect on our business, financial condition or results of operations. See “Equity, royalty and interest income from investees” below.
Factors Affecting Our Performance
Our financial performance depends, in large part, on varying conditions in the markets we serve. Demand in these markets tends to fluctuate in response to overall economic conditions. Our revenues may also be impacted by OEM inventory levels, production schedules, commodity prices, stoppages and supply chain challenges. Economic downturns in markets we serve generally result in reduced sales of our products and can result in price reductions in certain products and/or markets. As a worldwide business, our operations are also affected by currency, political, economic, public health crises, epidemics or pandemics and regulatory matters, including adoption and enforcement of environmental and emission standards, in the countries we serve. Some of the more important factors are briefly discussed below.
Impact of the COVID-19 pandemic
The outbreak of COVID-19 in early 2020, along with the response to the pandemic by governmental and other actors, disrupted our operations and may have negative impacts on our operations in the future, which impact may be material. The pandemic triggered a significant downturn in our markets globally, which negatively impacted our sales and results of operations during 2020. While the majority of the negative impacts to demand largely subsided in 2021, we still experienced supply chain disruptions and the related financial impacts reflected as increased cost of sales in 2022. In the first half of 2022, the resurgence of COVID-19 in China led to lockdowns in several cities that negatively impacted the economy and our end markets. Among the cities impacted by these lockdowns was Shanghai, which resulted in the shutdowns of our and our China JV’s Shanghai-based facilities, and the results from our China operations were adversely impacted for the year ended December 31, 2022 as a result of the shutdowns. As we head into 2023, cases of COVID-19 and other respiratory diseases could increase, the severity of which could provoke government lockdowns and impact our existing supply chain by delaying the delivery of materials used in our products. To the extent lockdowns continue to be used to combat COVID-19, we expect they would contribute to further disruptions in the global supply chain,
 
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which may negatively impact both our net sales and profitability going forward. Given the unpredictable nature of COVID-19 and the response to it, we cannot predict the impact on future periods at this time.
Market demand
Demand for our first-fit products remains strong across many of our markets driven by strong economic activity in on-highway markets due to increased demand for goods and services and in off-highway markets driven by increased construction and infrastructure spend. We have continued to increase prices as a result of significant increases in our cost base and to account for technology advancements in the products we provide our customers, which has contributed to higher net sales in 2021 and 2022.
Supply chain constraints
The COVID-19 pandemic triggered a significant downturn in our markets globally, which negatively impacted our sales and results of operations during 2020. While the negative impacts to demand largely subsided in 2021, we continued to experience supply chain disruptions in 2022, including longer lead times for materials used in manufacturing our products and increased commodity prices, and related financial impacts reflected as increased cost of sales. Throughout 2022, our industry continued to be unfavorably impacted by supply chain constraints leading to shortages across multiple components categories and limiting our collective ability to meet end-user demand. Our customers also experienced other supply chain issues and slowed production.
As we adjusted to the recovery from the COVID-19 pandemic and the rapid return of demand in many manufacturing industries in 2022, we continued to experience supply chain disruptions, incremental costs and related challenges throughout the supply chain. We continue to monitor the supply chain disruptions utilizing early detection monitoring complemented by structured supplier risk and resiliency assessments. We have increased the frequency of formal and informal supplier engagement to address potentially impactful supply base constraints and enhanced collaboration to develop specific countermeasures to mitigate risks. Our global team, located in different regions of the world, uses various approaches to identify and resolve threats to supply continuity. Should the supply chain issues continue for an extended period of time or worsen, the impact on our production and supply chain could have a material adverse effect on our results of operations, financial condition and cash flows. Our management team continues to monitor and evaluate all of these factors and the related impacts on our business and operations, and we are diligently working to minimize the supply chain impacts to our business and to our customers.
As a result of the recent supply chain constraints described above and an increased demand for our products by customers seeking to secure their supply, we experienced an increase in sales orders in 2021 compared to 2020, resulting in elevated backorders during 2022. When on backorder, an order is generally subject to cancellation on reasonable notice without cancellation charges, and therefore are not considered firm. We work closely with our customers to meet their demand and are working through our backorders as efficiently as possible. The backorder position continued to improve throughout 2022, and is expected to stabilize further in the first half of 2023.
Commodity prices, labor, inflation and foreign currency exchange rates
The economic environment in 2022 resulted, and may continue to result, in material price increases and inflation of many of our raw material, supply chain, transportation and other costs. Material cost pressures are driven largely by steel, resin and other petrochemical products. Supply chain costs have been largely driven by freight, with additional labor and overhead impact. Collectively, these pressures have driven an increase in cost of sales. To mitigate these pressures we instituted pricing actions, which we expect should, over time, offset these cost increases. However, there is a lag between when we incur cost increases for material inputs to our product, and when we are able to realize the benefits of our price increases, leading to an adverse impact on profit margins. We continue to look for alternate competitive supply sources, adjust the materials we use and improve our design and production
 
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methods to minimize the impact from cost increases, but these alternate strategies may not be sufficient to overcome such adverse impact.
Further, the labor market for skilled manufacturing remains tight as the global economy recovers after the COVID-19 pandemic shutdowns, and our labor costs have increased as a result. Material, transportation, labor and other cost inflation impacted, and could continue to impact, our results of operations, financial condition and cash flows. Retaining talent is critical to the success of our company. We strive to ensure we have the right culture for all our employees, and that starts with caring and inclusiveness of all people across all backgrounds and regions. We strive to retain employees by offering competitive wages and benefits and opportunities for growth and development, as well as promoting a safe place to work.
The appreciation of the U.S. dollar against foreign currencies has had a negative impact on our consolidated results of operations due to translation impacts, which may continue to negatively impact our results of operations through the second half of 2023.
Maintaining strong distribution relationships with our channel partners
We maintain strong distribution relationships with all of our channel partners, which include OEM dealers, independent distributors and retail outlets, including truck stops. The majority of our sales to first-fit, where filtration products are installed as components for new vehicles, are through OEMs with which we have strong relationships. Our relationships with OEMs also help drive our aftermarket business because they provide us with access to the dealer network of our OEM customers. In many markets the OEM dealers are the preferred source of service for the end-users. Replacement filters are sold through channels in the aftermarket, and typically shipped directly from our distribution centers to OEM dealers and channel partners which further enhances our direct connection with our broad customer and end-user base. End-users of our filters are able to acquire products through the various channels, usually preferring filters that meet or exceed OEM requirements. Our comprehensive distribution coverage is vital to maintaining our broad reach, global presence, and premium brand.
Maintaining strong relationships with our joint ventures
Maintaining strong relationships with our joint ventures is important for maintaining our global presence and achieving future growth initiatives. We have an established footprint and long-standing, successful relationships in developing and emerging markets, like China and India. The presence of joint ventures in China and India furthers our global reach and our ability to develop products for the local market.
Standalone costs
Following the separation, we expect to incur additional costs associated with becoming a standalone public company. During the second half of 2022, we incurred approximately $9 million of one-time expenses. We expect to incur one-time expenses of approximately $30 million to $50 million between now and December 31, 2024. In addition, we expect to incur capital expenditures in connection with our separation of approximately $20 million to $40 million between now and December 31, 2024. The actual amount of the one-time expenses and capital expenditures we will incur as a stand-alone public company and as part of our separation from Cummins may be higher, perhaps significantly, from our current estimates for a number of reasons, including, among others, the final terms we are able to negotiate with service providers, as well as additional costs we may incur that we have not currently anticipated. Additionally, the actual timing of when we incur these incremental expenses may be different, perhaps significantly, from our current estimates for a number of reasons, including, among others, unforeseen events that may cause delays or interruptions in our plans or our service providers’ ability to provide their services. See “Unaudited Pro Forma Combined Financial Information” for a description of the incremental recurring costs and the one-time expenses we expect to incur.
In addition, following this offering, we expect to have increased selling, general and administrative expenses due in part to higher compensation expenses relating to our employees as a result of the long-term incentive plan we are implementing in connection with this offering. See “Executive and Director
 
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Compensation — Compensation Discussion and Analysis — Long-Term Incentive Compensation” for a description of our incentive plan going forward.
Results of Operations
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Favorable/(Unfavorable)
​ ​
Favorable/(Unfavorable)
​
​ ​ ​
Years Ended December 31,
​ ​
2022 vs 2021
​ ​
2021 vs 2020
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​ ​
Amount
​ ​
%
​ ​
Amount
​ ​
%
​
NET SALES
​ ​ ​ $ 1,562.1 ​ ​ ​ ​ $ 1,438.8 ​ ​ ​ ​ $ 1,232.6 ​ ​ ​ ​ $ 123.3 ​ ​ ​ ​ ​ 8.6% ​ ​ ​ ​ $ 206.2 ​ ​ ​ ​ ​ 16.7% ​ ​
Cost of sales
​ ​ ​ ​ 1,203.2 ​ ​ ​ ​ ​ 1,088.3 ​ ​ ​ ​ ​ 923.2 ​ ​ ​ ​ ​ (114.9) ​ ​ ​ ​ ​ (10.6)% ​ ​ ​ ​ ​ (165.1) ​ ​ ​ ​ ​ (17.9)% ​ ​
GROSS MARGIN
​ ​ ​ $ 358.9 ​ ​ ​ ​ $ 350.5 ​ ​ ​ ​ $ 309.4 ​ ​ ​ ​ $ 8.4 ​ ​ ​ ​ ​ 2.4% ​ ​ ​ ​ $ 41.1 ​ ​ ​ ​ ​ 13.3% ​ ​
OPERATING EXPENSES AND
INCOME
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Selling, general and administrative expenses
​ ​ ​ ​ 139.7 ​ ​ ​ ​ ​ 126.2 ​ ​ ​ ​ ​ 112.1 ​ ​ ​ ​ ​ (13.5) ​ ​ ​ ​ ​ (10.7)% ​ ​ ​ ​ ​ (14.1) ​ ​ ​ ​ ​ (12.6)% ​ ​
Research, development and engineering expenses
​ ​ ​ ​ 38.6 ​ ​ ​ ​ ​ 42.0 ​ ​ ​ ​ ​ 39.0 ​ ​ ​ ​ ​ 3.4 ​ ​ ​ ​ ​ 8.1% ​ ​ ​ ​ ​ (3.0) ​ ​ ​ ​ ​ (7.7)% ​ ​
Equity, royalty and interest income from investees
​ ​ ​ ​ 28.0 ​ ​ ​ ​ ​ 32.4 ​ ​ ​ ​ ​ 40.7 ​ ​ ​ ​ ​ (4.4) ​ ​ ​ ​ ​ (13.6)% ​ ​ ​ ​ ​ (8.3) ​ ​ ​ ​ ​ (20.4)% ​ ​
Other Operating Expense, net
​ ​ ​ ​ 5.0 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (5.0) ​ ​ ​ ​ ​ N/A ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ N/A ​ ​
OPERATING INCOME
​ ​ ​ $ 203.6 ​ ​ ​ ​ $ 214.7 ​ ​ ​ ​ $ 199.0 ​ ​ ​ ​ $ (11.1) ​ ​ ​ ​ ​ (5.2)% ​ ​ ​ ​ $ 15.7 ​ ​ ​ ​ ​ 7.9% ​ ​
Interest expense
​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ 12.5% ​ ​ ​ ​ ​ (0.4) ​ ​ ​ ​ ​ (100.0)% ​ ​
Other income, net
​ ​ ​ ​ 8.8 ​ ​ ​ ​ ​ 3.9 ​ ​ ​ ​ ​ 2.0 ​ ​ ​ ​ ​ 4.9 ​ ​ ​ ​ ​ 125.6% ​ ​ ​ ​ ​ 1.9 ​ ​ ​ ​ ​ 95.0% ​ ​
INCOME BEFORE INCOME TAXES
​ ​ ​ $ 211.7 ​ ​ ​ ​ $ 217.8 ​ ​ ​ ​ $ 200.6 ​ ​ ​ ​ $ (6.1) ​ ​ ​ ​ ​ (2.8)% ​ ​ ​ ​ $ 17.2 ​ ​ ​ ​ ​ 8.6% ​ ​
Income tax expense
​ ​ ​ ​ 41.6 ​ ​ ​ ​ ​ 46.5 ​ ​ ​ ​ ​ 57.8 ​ ​ ​ ​ ​ 4.9 ​ ​ ​ ​ ​ 10.5% ​ ​ ​ ​ ​ 11.3 ​ ​ ​ ​ ​ 19.6% ​ ​
NET INCOME
​ ​ ​ $ 170.1 ​ ​ ​ ​ $ 171.3 ​ ​ ​ ​ $ 142.8 ​ ​ ​ ​ $ (1.2) ​ ​ ​ ​ ​ (0.7)% ​ ​ ​ ​ $ 28.5 ​ ​ ​ ​ ​ 20.0% ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Favorable/(Unfavorable)
Percentage Points
​
Percent of net sales
​ ​
2022
​ ​
2021
​ ​
2020
​ ​
2022 vs 2021
​ ​
2021 vs 2020
​
Gross margin
​ ​ ​ ​ 23.0% ​ ​ ​ ​ ​ 24.4% ​ ​ ​ ​ ​ 25.1% ​ ​ ​ ​ ​ (1.4) ​ ​ ​ ​ ​ (0.7) ​ ​
Selling, general and administrative expenses
​ ​ ​ ​ 8.9% ​ ​ ​ ​ ​ 8.8% ​ ​ ​ ​ ​ 9.1% ​ ​ ​ ​ ​ (0.1) ​ ​ ​ ​ ​ 0.3 ​ ​
Research, development and engineering expenses
​ ​ ​ ​ 2.5% ​ ​ ​ ​ ​ 2.9% ​ ​ ​ ​ ​ 3.2% ​ ​ ​ ​ ​ 0.4 ​ ​ ​ ​ ​ 0.3 ​ ​
2022 vs. 2021
Net Sales
Net sales were $1,562.1 million (which included related party sales of $344.9 million) for 2022, an increase of $123.3 million compared to $1,438.8 million (which included related party sales of $328.6 million) for 2021. Of the total net sales increase of $123.3 million, consisting of $107.0 million in increased external sales and $16.3 million in increased related party sales, approximately $115.0 million was due to increased pricing for OEM and aftermarket products across all major regions we serve due to higher inflationary costs. We saw higher volumes that more than offset the negative impacts of currency.
Gross Margin
Gross margin was $358.9 million for 2022, an increase of $8.4 million compared to $350.5 million for 2021. The increase in gross margin was mainly due to higher sales volumes and favorable pricing
 
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as described above (approximately $115.0 million), largely offset by increased material costs driven by higher commodities and freight costs. Gross margin as a percentage of net sales was approximately 23.0% for 2022, a decrease of 1.4 percentage points compared to 24.4% for 2021. The decrease in gross margin as a percentage of net sales was primarily due to the high inflationary costs impacting material costs and increased freight costs due to supply chain constraints, which increased at a faster rate than the increase in net sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $139.7 million for 2022, an increase of $13.5 million compared to $126.2 million for 2021, primarily due to increased costs related to separation, partially offset by lower variable compensation. Selling, general and administrative expenses as a percentage of net sales was 8.9% for 2022, an increase of 0.1 percentage points compared to 8.8% in 2021. The increase in selling, general and administrative expenses as a percentage of net sales is primarily driven by the costs related to separation being higher compared to the increase in net sales.
Research, Development and Engineering Expenses
Research, development and engineering expenses were $38.6 million for 2022, a decrease of $3.4 million compared to $42.0 million in 2021, primarily due to lower corporate allocations of $7.4 million in 2022 compared to $8.9 million in 2021. Research, development and engineering expenses as a percentage of net sales was 2.5% for 2022, a decrease of 0.4 percentage points compared to 2.9% for 2021. The decrease in research, development and engineering expenses was mainly due to net sales increasing at a higher rate than the increase in research, development and engineering expenses and lower corporate allocations.
Equity, Royalty and Interest Income From Investees
Equity, royalty and interest income from investees were $28.0 million, a decrease of $4.4 million compared to $32.4 million for 2021, primarily due to lower earnings from our joint venture in China as a result of the COVID-19 response and declining economic conditions, as well as reduced demand in China.
Other Operating Expense, Net
Other operating expense, net was $5.0 million for 2022, an increase of $5.0 million compared to zero for 2021. The increase was primarily due to asset write-offs, partially offset by gains on asset sales.
Other Income, Net
Other income, net was $8.8 million for 2022, an increase of $4.9 million compared to $3.9 million for 2021. The increase in other income, net was primarily due to an increase in the non-service benefit of our defined benefit pension plans as compared to 2021.
Income Tax Expense
Our effective tax rate for 2022 was 19.7%, a decrease of 1.6 percentage points compared to 21.3% for 2021.
The year ended December 31, 2022 contained unfavorable discrete tax items of $5.4 million, primarily due to $5.2 million of unfavorable changes in tax reserves.
The year ended December 31, 2021 contained unfavorable net discrete tax items of $2.6 million, primarily due to $3.5 million of unfavorable changes in tax reserves, partially offset by $0.9 million of favorable other discrete tax items.
2021 vs. 2020
Net Sales
Net sales were $1,438.8 million (which included related party sales of $328.6 million) for 2021, an increase of $206.2 million compared to $1,232.6 million (which included related party sales of
 
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$280.8 million) for 2020. Of the total net sales increase of $206.2 million, consisting of $158.4 million in increased external sales and $47.8 million in increased related party sales, $187.5 million was primarily associated with the sales volume increase resulting from the recovery of COVID-19, $18.7 million was attributable to price increases reflecting pass-through price increases due to inflation.
Gross Margin
Gross margin was $350.5 million for 2021, an increase of $41.1 million compared to $309.4 million for 2020. The increase in gross margin was mainly due to higher sales volumes and favorable pricing as described above (approximately $96.0 million), and lower quality costs of about $17.0 million, partially offset by higher compensation expenses (driven by lower variable compensation and temporary salary reductions in 2020), increased supply chain and freight costs of $19.0 million and higher material costs of $50.0 million, which are attributable to inflation. Gross margin as a percentage of net sales was approximately 24.4% for 2021, a decrease of 0.7 percentage points compared to 25.1% for 2020. The decrease in gross margin as a percentage of net sales was primarily due to higher compensation expenses and increased materials, supply chain and freight costs, which increased at a faster rate than the increase in net sales.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $126.2 million for 2021, an increase of $14.1 million compared to $112.1 million for 2020. The increase in selling, general and administrative expenses was primarily due to higher compensation expenses relating to our sales and corporate employees (driven by lower variable compensation and temporary salary reductions in 2020). Selling, general and administrative expenses as a percentage of net sales was 8.8% for 2021, a decrease of 0.3 percentage points compared to 9.1% for 2020. The decrease in selling, general and administrative expenses as a percentage of net sales was primarily due to net sales increasing at a faster rate than the increase in selling, general and administrative expenses.
Research, Development and Engineering Expenses
Research, development and engineering expenses were $42.0 million for 2021, an increase of $3.0 million compared to $39.0 million for 2020. The increase in research, development and engineering expenses was primarily due to higher compensation expenses relating to our technical and engineering employees (driven by lower variable compensation and temporary salary reductions in 2020). Research, development and engineering expenses as a percentage of net sales was 2.9% for 2021, a decrease of 0.3 percentage points compared to 3.2% for 2020. The decrease in research, development and engineering expenses as a percentage of net sales was primarily due to net sales increasing at a faster rate than the increase in research, development and engineering expenses.
Equity, Royalty and Interest Income From Investees
Equity, royalty and interest income from investees was $32.4 million for 2021, a decrease of $8.3 million compared to $40.7 million for 2020. The decrease in equity, royalty and interest income from investees was primarily due to the absence of a $14.0 million favorable adjustment recorded in 2020, as the result of tax changes within India’s 2020-2021 Union Budget of India (India Tax Law Changes) passed in March 2020. This decrease was partially offset by higher earnings at Fleetguard Filters Pvt. Ltd. See Note 6, “INCOME TAXES” to the combined financial statements for additional information on India Tax Law Changes.
Other Income, Net
Other income, net was $3.9 million for 2021, an increase of $1.9 million compared to $2.0 million for 2020. The increase in other income, net was primarily due to an increase in non-service benefit of our defined benefit pension plans as compared to 2020.
Income Tax Expense
Our effective tax rate for 2021 was 21.3% compared to 28.8% for 2020.
 
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The year ended December 31, 2021 contained unfavorable net discrete tax items of $2.6 million, primarily due to $3.5 million of unfavorable changes in tax reserves, partially offset by $0.9 million of favorable other discrete tax items.
The year ended December 31, 2020 contained $24.1 million of unfavorable net discrete tax items, primarily due to $18.2 million of unfavorable changes in tax reserves and $8.9 million of withholding tax adjustments, partially offset by $3.0 million of favorable other discrete tax items. The India Tax Law Changes eliminated the dividend distribution tax and replaced it with a lower rate withholding tax as the burden shifted from the dividend payor to the dividend recipient. See Note 6, “INCOME TAXES” to the combined financial statements for additional information on India Tax Law Changes.
Non-GAAP Measures
In addition to the results reported in accordance with U.S. GAAP, we have provided information regarding EBITDA, EBITDA margin and Adjusted EBITDA, which are non-GAAP financial measures and the key measures we use for determining how our business is performing. EBITDA is defined as earnings or losses before interest expense, income taxes, depreciation and amortization and EBITDA margin is defined as EBITDA as a percent of net sales. Adjusted EBITDA represents EBITDA after adding back certain one-time expenses associated with becoming a standalone public company. These standalone costs are reflected in cost of sales and selling, general and administrative expenses for 2022. We believe EBITDA and EBITDA margin are useful measures of our operating performance as they assist investors and debt holders in comparing our performance on a consistent basis without regard to financing methods, capital structure, income taxes or depreciation and amortization methods, which can vary significantly depending upon many factors. Additionally, we believe these metrics are widely used by investors, securities analysts, ratings agencies and others in our industry in evaluating performance. We believe Adjusted EBITDA is a useful measure of our operating performance as it allows investors and debt holders to compare our performance on a consistent basis without regard to one-time costs attributable to our becoming a standalone public company.
EBITDA, EBITDA margin and Adjusted EBITDA are not in accordance with, or alternatives for, U.S. GAAP financial measures and may not be consistent with measures used by other companies. It should be considered supplemental data; however, the amounts included in the EBITDA, EBITDA margin and Adjusted EBITDA calculations are derived from amounts included in the combined statements of net income. We do not consider our non-GAAP financial measures as superior to, or a substitute for, the equivalent measures calculated and presented in accordance with GAAP. Some of the limitations are:
•
such measures do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments;
​
•
such measures do not reflect changes in, or cash requirements for, our working capital needs;
​
•
such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
​
•
although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
​
•
other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.
​
To properly and prudently evaluate our business, we encourage you to review the combined financial statements included elsewhere in this prospectus, and not rely on a single financial measure to evaluate our business. A reconciliation of net income to EBITDA and Adjusted EBITDA is shown in the table below:
 
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​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
NET INCOME
​ ​ ​ $ 170.1 ​ ​ ​ ​ $ 171.3 ​ ​ ​ ​ $ 142.8 ​ ​
Plus: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Interest expense
​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.4 ​ ​
Income tax expense
​ ​ ​ ​ 41.6 ​ ​ ​ ​ ​ 46.5 ​ ​ ​ ​ ​ 57.8 ​ ​
Depreciation and amortization
​ ​ ​ ​ 21.6 ​ ​ ​ ​ ​ 21.6 ​ ​ ​ ​ ​ 21.1 ​ ​
EBITDA (non-GAAP)
​ ​ ​ $ 234.0 ​ ​ ​ ​ $ 240.2 ​ ​ ​ ​ $ 222.1 ​ ​
Plus: ​ ​ ​ ​
One-Time Separation Costs(a)
​ ​ ​ $ 9.0 ​ ​ ​ ​ ​ 0 ​ ​ ​ ​ ​ 0 ​ ​
Adjusted EBITDA (non-GAAP)
​ ​ ​ $ 243.0 ​ ​ ​ ​ $ 240.2 ​ ​ ​ ​ $ 222.1 ​ ​
Net sales
​ ​ ​ $ 1,562.1 ​ ​ ​ ​ $ 1,438.8 ​ ​ ​ ​ $ 1,232.6 ​ ​
Net income margin
​ ​ ​ ​ 10.9% ​ ​ ​ ​ ​ 11.9% ​ ​ ​ ​ ​ 11.6% ​ ​
EBITDA margin (non-GAAP)
​ ​ ​ ​ 15.0% ​ ​ ​ ​ ​ 16.7% ​ ​ ​ ​ ​ 18.0% ​ ​
​
​
(a)
Primarily comprised of one-time expenses for consulting services in connection with establishing Atmus as a stand-alone public company:
​
​
Information Technology
​ ​ ​ $ 5.0 ​ ​
​
Human Resources
​ ​ ​ ​ 2.3 ​ ​
​
All Other
​ ​ ​ ​ 1.7 ​ ​
​ ​ ​ ​ ​ $ 9.0 ​ ​
Liquidity and Capital Resources
Our principal sources of liquidity are expected to be operating cash flows, cash and cash equivalents and availability of undrawn capacity under our revolving credit facility, including committed credit facilities to be entered into prior to the completion of the separation. For a description of our revolving credit facility and the credit agreement, please see the section entitled “Description of Material Indebtedness.”
Upon completion of the separation and the debt financing, we expect to have a cash amount of approximately $110 million. This amount will be retained after we pay to Cummins upon the completion of this offering, as partial consideration for the filtration business that Cummins is contributing to us in connection with the separation:
•
The amount of existing cash, plus
​
•
The net proceeds from the term loan that we will enter into prior to the closing of this offering plus any amounts drawn under the revolving credit facility, less
​
•
An amount of cash to be retained by us in an amount to be determined by Cummins.
​
Our management reviews our liquidity needs in determining any and all indebtedness options. We will also have the ability to access the capital markets following the separation. Our cash needs are expected to include funding of ongoing operations, making anticipated capital investments and supporting any future acquisitions. We continue to generate substantial cash from operating activities and believe that our operating cash flow and other sources of liquidity will be sufficient following the separation to allow us to manage our business and capital structure over the next twelve months.
 
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Years ended December 31,
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In millions
​ ​
2022
​ ​
2021
​ ​
2020
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Net cash provided by operating activities
​ ​ ​ $ 177.0 ​ ​ ​ ​ $ 202.3 ​ ​ ​ ​ $ 213.1 ​ ​
Net cash used in investing activities
​ ​ ​ ​ (33.4) ​ ​ ​ ​ ​ (31.9) ​ ​ ​ ​ ​ (26.5) ​ ​
Net cash used in financing activities
​ ​ ​ ​ (143.6) ​ ​ ​ ​ ​ (170.4) ​ ​ ​ ​ ​ (186.6) ​ ​
Total increase/(decrease) in cash
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Cash at the beginning of the period
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
Cash at the end of the period
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
Operating Cash Flow
Net cash provided by operating activities was $177.0 million in 2022, a decrease of $25.3 million compared to $202.3 million in 2021. The overall decrease was driven primarily by higher working capital requirements of $21.5 million and an increase in deferred taxes of $10.0 million, partially offset by favorable changes in other liabilities including pensions of $1.6 million. The higher working capital requirements were driven by lower other accrued expenses, higher trade receivables and lower trade payables, partially offset by lower inventories.
Net cash provided by operating activities was $202.3 million in 2021, a decrease of $10.8 million compared to $213.1 million in 2020. The overall decrease was driven primarily by a reduction in other liabilities of $30.9 million, lower warranty accruals of $14.0 million and higher working capital requirements of $1.2 million, partially offset by net income after adjustments to reconcile net income to net cash provided by operating activities of $35.3 million. The higher working capital requirements were driven by higher inventories, partially offset by higher related party payables. Inventories were built in 2021 vs. 2020 in an effort to manage through the supply chain disruptions.
Dividends received from our unconsolidated equity investees were $23.1 million, $24.0 million and $19.3 million in 2022, 2021 and 2020, respectively. Dividends are typically paid in the second through the fourth quarters and are included in net cash provided by operating activities.
Investing Cash Flow
Net cash used in investing activities for each fiscal year presented was primarily used for capital expenditures. Our capital expenditures were $32.5 million, $30.8 million and $25.5 million in 2022, 2021 and 2020, respectively, corresponding to approximately 2.1% of net sales in 2022, 2021 and 2020. We also capitalized $0.9 million, $1.1 million, and $1.0 million in internal use software costs in 2022, 2021, and 2020, respectively.
Financing Cash Flow
Net cash used in financing activities was $143.6 million, $170.4 million, and $186.6 million, in 2022, 2021 and 2020, respectively.
Cummins uses a centralized approach to cash management and financing of its operations, including our operations. Accordingly, we have transferred all of our cash to Cummins to be utilized in the central cash management program and as a result do not have cash allocated to us in the combined financial statements.
Contractual Obligations
Our commitments consist of lease obligations for real estate and equipment. For more information regarding our lease obligations, see Note 9, “LEASES” of the combined financial statements which provides a summary of our future minimum lease payments.
Application of Critical Accounting Policies
A summary of our significant accounting policies is included in Note 3, “SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES”, of the combined financial statements which discusses accounting policies that we selected from acceptable alternatives.
 
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The combined financial statements are prepared in accordance with U.S. GAAP which often requires management to make judgments, estimates and assumptions regarding uncertainties that affect the reported amounts presented and disclosed in the financial statements. Management reviews these estimates and assumptions based on historical experience, changes in business conditions and other relevant factors they believe to be reasonable under the circumstances. In any given reporting period, our actual results may differ from the estimates and assumptions used in preparing the combined financial statements.
Critical accounting estimates are defined as follows: the estimate requires management to make assumptions about matters that were highly uncertain at the time the estimate was made; different estimates reasonably could have been used; or if changes in the estimate are reasonably likely to occur from period to period and the change would have a material impact on our financial condition or results of operations. Our critical accounting estimates include estimating variable consideration for revenue recognition and accounting for income taxes.
Revenue Recognition
We sell to customers either through long-term arrangements or standalone purchase orders. Our long-term arrangements generally do not include committed volumes until underlying purchase orders are issued. Typically, we recognize revenue on the products we sell at a point in time, in accordance with shipping terms or other contractual arrangements.
The transaction price of a contract could be reduced by variable consideration including aftermarket rebates, volume and growth rebates and sales returns. At the time of sale to a customer, we record an estimate of variable consideration as a reduction from gross sales. We primarily rely on historical experience and anticipated future performance to estimate the variable consideration. Revenue is recognized to the extent that it is probable that a significant reversal of revenue will not occur when the contingency is resolved.
For aftermarket rebates and volume and growth rebates, purchase rebates and discounts, management estimates are based on the terms of the arrangements with customers, historical payment experience, volume in quantity or mix of purchases of product during a specified time period and expectations for changes in relevant trends in the future. Adjustments to rebate accruals are made as actual usage becomes known in order to properly estimate the amounts necessary to generate consumer demand based on market conditions as of the balance sheet date.
For product returns, some aftermarket customers are permitted to return small amounts of parts and filters each year. An estimate of future returns is accounted for at the time of sale as a reduction in the overall sales revenue based on historical return rates.
Accounting for Income Taxes
We determine our income tax expense using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Future tax benefits of net operating loss and credit carryforwards are also recognized as deferred tax assets. We evaluate the recoverability of our deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize our net deferred tax assets. At December 31, 2022, we recorded net deferred tax assets of $7.0 million. The assets included $18.6 million for the value of net operating loss and credit carryforwards. A valuation allowance of $16.4 million was recorded to reduce the tax assets to the net value management believed was more likely than not to be realized. In the event our operating performance deteriorates, future assessments could conclude that a larger valuation allowance will be needed to further reduce the deferred tax assets.
In addition, we operate within multiple taxing jurisdictions and are subject to tax audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. We accrue for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions. We believe we made adequate provisions for income taxes for all years
 
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that are subject to audit based upon the latest information available. A more complete description of our income taxes and the future benefits of our net operating loss and credit carryforwards is disclosed in Note 6, “INCOME TAXES,” to the combined financial statements.
Market Risk Disclosure
Foreign Currency Exchange Risk
As a result of our international business presence, we are exposed to foreign currency exchange rate risks. We transact business in foreign currencies and, as a result, our income and financial condition are exposed to movements in foreign currency exchange rates. This risk is closely monitored and managed by Cummins through the use of financial derivative instruments. Financial derivatives are used by Cummins expressly for hedging purposes and under no circumstances are they used for speculative purposes. Substantially all of Cummins’ derivative contracts are subject to master netting arrangements, which provide the option to settle certain contracts on a net basis when they settle on the same day with the same currency. In addition, these arrangements provide for a net settlement of all contracts with a given counterparty in the event that the arrangement is terminated due to the occurrence of default or a termination event.
To help manage our exposure to exchange rate volatility, Cummins enters into foreign currency forward contracts on a regular basis to hedge forecasted intercompany and third-party sales and purchases denominated in non-functional currencies. Cummins’ foreign currency cash flow hedges generally mature within two years. These foreign currency forward contracts are designated and qualify as foreign currency cash flow hedges. For the years ended December 31, 2022, 2021 and 2020, there were no circumstances that resulted in the discontinuance of a foreign currency cash flow hedge.
To minimize the income volatility resulting from the remeasurement of net monetary assets and payables denominated in a currency other than the functional currency, Cummins enters into foreign currency forward contracts, which are considered economic hedges. The objective is to offset the gain or loss from remeasurement with the gain or loss from the fair market valuation of the forward contract. These derivative instruments are not designated as hedges.
The potential gain or loss in the fair value of our outstanding foreign currency contracts, assuming a hypothetical 10% fluctuation in the currencies of such contracts, would not have a material impact on our combined financial statements for the years ended December 31, 2022, 2021 and 2020. The sensitivity analysis of the effects of changes in foreign currency exchange rates assumes the notional value to remain constant for the next 12 months. The analysis ignores the impact of foreign exchange movements on our competitive position and potential changes in sales levels. Any change in the value of the contracts, real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged items.
 
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BUSINESS
Overview
Atmus is one of the global leaders of filtration products for on-highway commercial vehicles and off-highway agriculture, construction, mining and power generation vehicles and equipment. We design and manufacture advanced filtration products, principally under the Fleetguard brand, that enable lower emissions and provide superior asset protection. We estimate that approximately 16% of our net sales in 2022 were generated through first-fit sales to OEMs, where our products are installed as components for new vehicles and equipment, and approximately 84% were generated in the aftermarket, where our products are installed as replacement or repair parts, leading to a strong recurring revenue base. Building on our 60-year history, we continue to grow and differentiate ourselves through our global footprint, comprehensive offering of premium products, technology leadership and multi-channel path to market.
For the year ended December 31, 2022, we generated $1,562.1 million in net sales, $170.1 million in net income and $234.0 million in EBITDA. See “Summary Historical and Unaudited Pro Forma Combined Financial Data” for a description of EBITDA and a reconciliation of EBITDA to net income, the most directly comparable financial measure calculated in accordance with U.S. GAAP.
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2022 Net Sales By Product
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2022 Net Sales By Geography
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Our Global Footprint
Our global footprint serves end-users in approximately 150 countries, with approximately 49% of our net sales in 2022 from outside of the United States and Canada. We believe that we, together with our joint ventures in China and India, have a leading position in our core markets, based on net sales in 2022. We maintain strong global customer relationships, supported by an established salesforce with work locations in 25 countries as of December 31, 2022. Also, as of December 31, 2022, we operate through 12 distribution centers, nine manufacturing facilities and five technical facilities plus 10 manufacturing facilities and two technical facilities operated by our joint ventures, giving us presence on six continents.
Our Premium Products
We offer a full spectrum of filtration solutions that enable lower emissions and provide superior asset protection. Our filtration products provide comprehensive and differentiated solutions, which allow our end-users to extend service intervals, reduce maintenance costs and increase uptime. Our products include fuel filters, lube filters, air filters, crankcase ventilation, hydraulic filters and coolants and other chemicals. Our broad range of products in each of our core markets enables one-stop shopping, which we believe is a key competitive advantage.
 
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Our Markets
We believe the filtration product market is large and attractive, with estimated total product sales of approximately $74 billion in 2021, of which we believe the total engine products market — consisting of our core markets and the passenger car market — was approximately $30 billion. Within the total engine products market, we estimate that our core markets had a total addressable market of approximately $13 billion in 2021, having grown by approximately 2% CAGR over the last five-year period ending in 2021. We estimate that the passenger car market had a total addressable market of approximately $17 billion in 2021. The balance of the filtration product market is made up of industrial filtration markets, which we estimate had a total addressable market of approximately $44 billion in 2021. Our strategy includes a focus on expanding into industrial filtration markets in the future; these markets have grown by approximately 5% CAGR over the five year period ending 2021. Looking ahead, we expect the industrial filtration markets to grow by approximately 4% CAGR and our core markets by approximately 2% CAGR, in each case through the five-year period ending in 2025.
The engine filtration market is impacted by the following key drivers and trends:
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Growth in freight volumes (on-highway) and industrial activity (off-highway):    We believe broader economic growth is a strong indicator for our business. The U.S. Bureau of Transportation Statistics’ Freight Analysis Framework forecasted (as of December 2022) that between 2020 and 2050 U.S. freight activity will double in value, and expected that trucks will remain the predominant freight carrier in the future. Off-highway activity is correlated with the overall construction industry. Dodge Construction Network predicted (as of November 2022) that the U.S. construction industry will remain flat for 2023, and the Construction Industry Databook expected (as of October 2022) a 5.5% CAGR from 2022 to 2026.
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Growth in emerging markets:   Global growth in core markets is being driven by macro-economic expansion, including the build-out of infrastructure. Asian markets, including India, are currently positioned for high growth. According to the International Monetary Fund, from 2017 to 2022, gross domestic product in India has grown at a compounded annual growth rate of 5.5%. The growth in India is primarily driven by the increasing demand for transportation as well as emission regulations. Although growth in China was depressed in 2022 due to the COVID-19 response and declining economic conditions, China had experienced high growth in the prior years and we expect a partial recovery over the next few years. Gross domestic product in China has grown at a compounded annual growth rate of 8.3% from 2017 to 2022 according to the International Monetary Fund. The growth in China is primarily driven by investments in infrastructure and emission regulations.
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More stringent emissions standards:   Our core markets will need to comply with more stringent regulatory standards on emissions driving the requirement for higher quality, increased content and higher priced filtration systems.
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Technology transition:   There is broad based recognition that GHG emissions are driving climate change. Increasingly, our customers, governments, and investors are making commitments to reduce their GHG emissions, including pledges to achieve net zero GHG emissions by 2050. While the pace of adoption will vary by region, our core markets may be impacted by technology transitions, including transition to battery-electric vehicles, fuel cell electric vehicles and alternate power sources.
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History
Our business was founded in 1958, beginning with a single filter production line developed by Cummins Engine Company in Seymour, Indiana to meet the high performance requirements of Cummins diesel engines. As early as 1963, Cummins initiated the Fleetguard brand, which is a well-recognized brand in our core markets. In 1987, the India Fleetguard joint venture was established and in 1994 a joint venture in China was formed as Cummins continued to enter emerging markets. In 2006, our wholly owned subsidiary China Filtration was established, and in 2010, the Korea media facility was opened. In 2016, an India technology facility was opened and Atmus moved to a new corporate headquarters in Nashville.
Our Competitive Strengths
Technology leadership and deep industry knowledge enable us to deliver better customer solutions
We combine a culture of innovation with deep-seated experience in our industry to deliver superior filtration solutions for our customers. Our technical team develops a range of filtration technologies, including filtration media, filter element formation, filtration systems integration and service-related solutions such as remote digital diagnostic and prognostic platforms and analytics. Our technical team of approximately 350 engineers, scientists and technical specialists are located in five technical centers around the world, with approximately 25% holding advanced technical degrees. Our team draws on a 60-year history focused on filtration and media technologies. We have a broad IP portfolio with over 1,300 worldwide active or pending patents and patent applications and over 500 worldwide trademark registrations and applications as of December 31, 2022.
We have leveraged this expertise not only to develop our cutting-edge filters, filter systems and filtration media but also to manufacture a large portion of our proprietary filtration media. This allows us to move swiftly from development to application of filtration technologies that protect and enhance the operation of our customer’s equipment and machines. StrataPore, NanoNet, NanoForce, and most recently, NanoNet Plus product families have enabled engines and equipment to meet continually changing emissions and performance requirements.
Our technical team works closely with our customers to develop and apply filtration technologies that help them improve their operations. For example, we helped a key customer and partner in China to be one of the first to extend maintenance intervals on both lube and fuel filtration systems from 20,000 kilometers to 100,000 kilometers. Additionally, our NanoNet Plus fuel filtration and fluid control systems have delivered fuel system component protection meeting stringent European and North American requirements while still providing enhanced service intervals, and our eRCV product families continue to offer crankcase emissions performance control across European, North American, and China-based customers. Our technology allows us to deliver performance-enabling and customized filtration solutions for our end-users, which creates long-lasting partnerships with our customers.
Iconic Fleetguard brand with premium products
We believe that Fleetguard is a premium, leading brand that is strongly associated with reliability and strong performance. We offer a full suite of Fleetguard-branded filtration products. With its broad line of high-quality filtration products, our Fleetguard brand provides filters for nearly all makes of vehicles and equipment in our core markets, which further enhances our availability, visibility and brand recognition. Our Fleetguard brand is further supported by a competitive warranty that gives our customers and end-users high confidence in the performance and durability of our products.
Partnering with leading OEMs
We have a strong history as a supplier to leading OEMs, including CNH Industrial, Cummins, Daimler, Deere, Doosan, Foton, Komatsu, PACCAR/DAF, the Traton Group (Navistar/Scania/MAN) and Volvo. We sell both first-fit and aftermarket products to these customers and have been selling to each of them for at least 10 years. These customers in the aggregate accounted for approximately 68%
 
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of our net sales in 2022 and have consistently accounted for more than 66% of our net sales in each of the last 5 years. We have written agreements with most of our key customers that specify certain purchase parameters, but do not obligate them to specific volumes. We invest in our relationships and utilize our technical strengths to win first-fit business with these OEMs, which drives our installed base, yielding strong recurring revenue streams in the aftermarket. The OEMs also provide us with early insight into technological developments and evolving product requirements within the broader engine and industrial application industry, allowing us to be well positioned as the world shifts towards more complex modular filtration systems and filtration for other power sources.
Cummins is our largest customer and accounted for approximately 19% of our net sales in 2022. Following the offering, this relationship will be defined by the first-fit supply agreement and the aftermarket supply agreement. See “Certain Relationships and Related Party Transactions — Relationship with Cummins — First-Fit Supply Agreement” and “Certain Relationships and Related Party Transactions — Relationship with Cummins — Aftermarket Supply Agreement.” These supply agreements will help give us visibility and stability to our future sales within the terms of the agreements. In addition, for 65 years, our sales and technical teams have been embedded with Cummins, allowing us to have a deep understanding of their needs, which enables us to deliver high-quality, high-performance products that deliver value to Cummins. We partner with Cummins channels in all regions to win end-user accounts in the aftermarket and create a preference for the Fleetguard brand.
Multi-channel path to diverse global markets
Our global presence provides a diverse and stable customer base across truck, bus, agriculture, construction, mining and power generation vehicles and equipment markets. Our current core markets are on-highway and off-highway, representing approximately 59% and 41% of our net sales in 2022, respectively.
We estimate that approximately 84% of our net sales in 2022 were generated in the aftermarket. To drive these net sales, we have developed a multi-channel path to global markets that ensures broad product availability and provides end-users with choice and flexibility in purchasing. We distribute our products through a broad range of OEM dealers, independent distributors, and retail outlets, including truck stops.
The dealers of the OEMs are typically the channel preferred by customers in many markets. Our close relationships with the OEMs and strong first-fit installed base position us well with the OEM dealer network and large fleet customers. For example, the dealers of four of the largest North America on-highway OEMs carry a significant range of our products at their dealerships.
In addition, Cummins distributors, independent distributors and retailers enable us to reach a broader end-user market and create additional points of sale or service. We estimate that, as of December 31, 2020, our filters were available in over 45,000 independent aftermarket retail outlets globally, including approximately 5,800 locations in North America, approximately 33,000 retail outlets in India, and approximately 2,000 retail outlets in China. We also work directly with major customers of our channel partners (such as large fleets or mining companies), across our end markets, to create strong brand preference, which, in turn, leads to strong demand for our products and generates recurring revenue. We continue to increase geographic coverage within regions to better serve our customers by investing in distribution expansion.
We typically ship directly from our 12 distribution centers (as of December 31, 2022) worldwide to our channel partners, which provides direct connection and detailed understanding of our customer and end-user base. Our comprehensive distribution and market coverage is vital to maintaining our broad reach, global presence, and brand recognition.
 
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Comprehensive aftermarket coverage and large installed base
We have a large installed base driven by first-fit relationships with leading OEMs, leading to long product life cycles and a strong stable revenue base. In the last few years our business strategy has put increased focus on releasing first-fit OEM parts, which we believe will increase aftermarket retention. Our large installed base protects against cyclicality in truck sales and creates a long tail of revenue due to the long lifespans of commercial vehicles and equipment, together with the extensive aftermarket service they require throughout their useful lives. For example, the LF670 filter was first installed on trucks in the 1970s and continues to generate an aftermarket revenue stream approximately 50 years post launch. Aftermarket product sales tend to have a higher profit margin, relative to first-fit systems, driving higher operational cash flow and stability throughout the business cycle.
Our end-user relationships provide critical market intelligence that help drive up-sell and cross-sell opportunities, while providing us direct visibility to market opportunities. Additionally, these end-user relationships enable us to accelerate the launch of a broad range of products where we are not the first-fit.
Scalable global manufacturing operations
We maintain a global manufacturing footprint with highly capable manufacturing facilities in six continents. As of December 31, 2022, we had nine manufacturing sites for Atmus, and 10 for our joint ventures, allowing us to maintain proximity with our customers and global scale. All nine of our manufacturing facilities have obtained either ISO 9001 or ISO/TS 16949 quality management certifications. Additionally, our global warehousing footprint enhances this proximity with 12 distribution centers (as of December 31, 2022) strategically located around the world.
Our significant volumes allow us to take advantage of economies of scale. We have invested strategically in automation and optimization of core filtration manufacturing processes to deliver cost efficiencies.
Attractive margins and strong operating cash flow generation
Our business benefits from attractive margins and a track record of strong cash flow generation. Our high percentage of recurring revenue, relative to other industrial businesses, helps mitigate market cyclicality and revenue volatility. We realized a net income margin of 10.9% and an EBITDA margin of 15.0% in 2022. Our business is resilient, which is evidenced by the fact that despite the changes in economic conditions due to the COVID-19 pandemic, our net sales rebounded with a 16.7% increase in 2021 (as compared to 2020) and increased by 8.6% in 2022 (as compared to 2021). We generate strong operating cash flow from operations with high cash flow conversion, delivering $592.4 million from 2020 to 2022.
Experienced leadership team with a proven track record of driving growth
We are led by an energized and experienced senior leadership team with extensive industry experience with Cummins and other leading industrial companies. Our strategic vision and culture are
 
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directed by our executive leadership team under the leadership of our Chief Executive Officer, Steph Disher, our Chief Financial Officer, Jack Kienzler, our Chief Human Resources Officer, Mark Osowick, our Chief Legal Officer, Toni Y. Hickey and our Vice President, Engine Products, Charles Masters. Steph Disher joined Cummins in 2013 and has over 20 years of experience in leadership positions, including international assignments in Australia, Asia, and the United States. Most recently, Steph Disher served as Vice President of Cummins Filtration where she has demonstrated a continued track record of strong business performance, innovation, and operational excellence. Jack Kienzler joined Cummins in 2014 and has over 13 years of finance experience. He most recently served as the Executive Director of Investor Relations at Cummins, having formerly led the Corporate Development team. Mark Osowick joined Cummins in 2007 and has over 30 years of experience in human resource management and project management leadership roles. Toni Y. Hickey joined Cummins in 2012 and has over 24 years of experience as an intellectual property lawyer. Charles Masters joined Cummins in 2003 and has over 19 years of experience in global sales and operational leadership roles within Cummins. Our leadership team has the ability to develop and execute our strategic vision and aims to create long-term shareholder value. We benefit from our team’s industry knowledge and track record of successful product innovation and financial performance. Additionally, members of our senior leadership team have strong experience executing and integrating acquisitions and strategic partnerships to drive accelerated growth and improved profitability.
Our Business Strategy
Grow share in first-fit in core markets
Our organic first-fit growth opportunities are centered on four pillars:
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Grow market share with leading OEMs:   We benefit from deep relationships with leading OEMs. Our technology innovations, global footprint and preferred brand position us well to grow along with the leading OEMs. As our OEM partners continue to grow in share and through consolidation of their respective markets, we will partner with them to grow. This growth with OEMs in turn increases the installed base for our products, which drives recurring aftermarket revenue.
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Support technology transitions with leading OEMs:   We plan to further build on our relationship with OEMs as they transition to alternate fuel technologies, such as hydrogen-powered internal combustion engines, battery electric vehicles and fuel cell electric vehicles. Some of our current developments in the alternative fuel space include hydrogen water separators, air filtration products, coolants, water filters, and de-ionizers. We currently have a number of alternative fuel development programs underway with our existing customer base. We are well positioned for the broader transition of technology through our existing relationships with customers.
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Enhanced product content per vehicle:   We have a focus on offering system modules and highly integrated solutions as customers and end-users seek improved filtration performance and quality, which we believe will result in increased first-fit content per vehicle. We are also extending into smart filtration solutions, including embedded sensors, prediction algorithms, and data analytics tools.
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Accelerate new product development:   We are accelerating our new product development cycle by continued investment in advanced system level testing capabilities, leveraging in-house 3D printing capabilities, utilizing powerful simulation tools and applying machine learning tools throughout our product development cycle.
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Accelerate profitable growth in the aftermarket
We estimate that aftermarket net sales represented approximately 84% of our existing business in 2022, and has significant opportunity for further growth through these strategic initiatives:
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Expand our product portfolio:   Offering a comprehensive product portfolio provides a ‘one-stop shop’ for our customers. We offer a wide range of products to ensure product coverage
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and continue to release new products on a yearly basis. We launched approximately 400 new products annually, on average, over the last three years. We have a team dedicated to tracking new filter releases and launching new competitive products rapidly.
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Use analytics to target and capture growth opportunities:   We will continue to develop and enhance analytic tools, including using machine learning and artificial intelligence, to identify cross-sell or up-sell opportunities, and new or underserved customers, and precisely estimate the opportunity for additional sales of our Fleetguard-branded products. We work directly with end-users or through our channel partners to define, track and measure opportunities and conversion rates.
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Expand reach through multi-channel distribution:   It is important that we can reach end-users no matter where they are, or how they choose to purchase our products. We continue to expand our presence with OEM dealers, independent distributors, service centers and retail outlets.
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Invest in product technology advantage to enhance value and protect revenue:   Where Atmus is the first-fit, we increase customer retention on aftermarket opportunities by using advanced technologies and proprietary product designs that drive improved performance and create preference for our products. Where Atmus is not the first-fit, we continue to develop products that meet or exceed the first-fit product, supporting our brand position as premium quality and performance, and leading to high customer loyalty.
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Transform our supply chain
We are focused on transforming our supply chain to improve customer experience, which will drive growth and reduce overall cost, leading to margin enhancement. Our strategic initiatives have four pillars:
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Drive services and availability:   Synchronize global planning across the network to focus on on-shelf availability.
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Optimize network:   Invest in the physical footprint to provide superior availability while minimizing material and part movement.
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Transform cost structure:   Optimize supplier management and spend, increase throughput across our network of plants and increase automation.
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Invest in capabilities for the future:   Deploy robust processes across the organization from forecasting through customer orders to fulfillment, and invest in critical global systems infrastructure to provide best-in-class functionality.
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Expand our technology and diversify our distribution channels beyond our core markets
We are focused on building sustainable growth by expanding and diversifying into the industrial filtration market, which includes machinery and equipment, oil and gas, pharmaceuticals, food and beverage, and metals and mining. We believe we can leverage our global footprint and existing technical capabilities, including our proprietary filtration media technology, into these markets to open new opportunities for growth. We anticipate achieving this by expanding our focus to include non-engine products that we can sell to our current and new customers within our existing markets by utilizing our global footprint. We are working on developing capabilities, whether organically or through acquisitions or strategic partnerships, to enter new markets with long term growth prospects which will further diversify our revenue base. To the extent that we consider acquisitions, we will apply a disciplined financial framework in assessing these opportunities.
Supply
The performance of the end-to-end supply chain, extending through to our suppliers, is foundational to our ability to meet customers’ expectations and support long-term growth. We are committed to having a robust strategy for how we select and manage our suppliers to enable a market focused supply chain. This requires us to continuously evaluate and upgrade our supply base, as necessary, as we strive to ensure we are meeting the needs of our customers.
 
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We use a combination of proactive and reactive methodologies to enhance our understanding of supply base risks, which guide the development of risk monitoring and sourcing strategies. Our category strategy process (a process designed to create the most value for the company) supports the review of our long-term needs and guides decisions on what we make internally and what we purchase externally. For the items we decide to purchase externally, the strategies also identify the suppliers we should partner with long-term to provide the best technology, the lowest total cost and highest supply chain performance. Key suppliers are managed through long-term supply agreements that secure capacity, delivery, quality and ensure cost requirements are met over an extended period.
Other important elements of our sourcing strategy include:
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selecting and managing suppliers to comply with our Supplier Code of Conduct; and
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assuring our suppliers comply with our prohibited and restricted materials policy.
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As we adjust to the recovery from the COVID-19 pandemic and the rapid return of demand in many manufacturing industries in 2022, we continued to experience supply chain disruptions, incremental costs and related challenges throughout the supply chain. We continue to monitor the supply chain disruptions and conduct structured supplier risk and resiliency assessments. We increased the frequency of formal and informal supplier engagement to address potentially impactful supply base constraints and enhanced collaboration to develop specific countermeasures to mitigate risks. Our global team, located in different regions of the world, uses various approaches to identify and resolve threats to supply continuity.
These supply chain disruptions are impacting our business as well as our suppliers and customers resulting in longer lead times in some areas of our business. Orders are issued as rolling releases with a specific lead time. When these orders are on backlog they are often subject to cancellation on reasonable notice without cancellation charges, and therefore are not considered firm. We are working closely with our customers to meet the demand and work through backlogs as efficiently as possible.
Materials
The principal materials that we use directly in manufacturing our products are steel, filter media and petrochemical-based products including plastic, rubber and adhesives products. In 2022, material costs represented approximately 61% of our cost of sales.
Customer Concentration
We have thousands of customers around the world and have developed long-standing business relationships with many of them. Cummins is our largest customer, accounting for approximately 19% of our net sales in 2022 and 2021 and 18% in 2020. In connection with the separation, we will enter into a first-fit supply agreement and an aftermarket supply agreement with Cummins for our first-fit and aftermarket products. This agreement provides for continuation of our supply for all first-fit applications that we currently support, commitment to first-fit supply for certain upcoming product launches, and continued supply of the full line of aftermarket filtration needs. It does not commit a specific volume of filters or related products. The loss of this customer or a significant decline in the production level of Cummins engines that use our filters would have an adverse effect on our results of operations and financial condition.
In addition to the agreement we will enter into with Cummins, we have long-term agreements with many of our largest customers. Collectively, our net sales from our next four top customers, other than Cummins, was approximately 39% of our net sales in 2022, 37% in 2021 and 36% in 2020. Excluding Cummins, two other customers, PACCAR and the Traton Group, accounted for more than 10% of our net sales in 2022. Our customer agreements typically contain standard purchase and sale agreement terms covering filter pricing, quality and delivery commitments, as well as engineering product support obligations. The basic nature of our agreements with OEM customers is that they are long-term price and operations agreements that provide for the availability of our products to each customer through the duration of the respective agreements. Where we have such agreements in place, our customers typically place purchase orders with us pursuant to these agreements. Agreements with most OEMs contain
 
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bilateral termination provisions giving either party the right to terminate in the event of a material breach, change of control or insolvency or bankruptcy of the other party.
Intellectual Property
We own or control a broad range of intellectual property rights, including a significant number of patents, trademarks, copyrights, trade secrets and other forms of intellectual property rights in the United States and foreign countries. We have a broad IP portfolio with over 1,300 worldwide active or pending patents and patent applications and over 500 worldwide trademark registrations and applications as of December 31, 2022, which were granted and registered over a period of years. Our leading brand house trademark is Fleetguard. We protect our innovations that arise from research and development through patent filings, as well as through trade secrets. Although these patents, trademarks and trade secrets are generally considered beneficial to our operations, we do not believe any patent, group of patents, trademark or trade secret is solely responsible for protecting our products.
Research and Development
In 2022, we continued to invest in future critical technologies and products. We will continue to make investments to develop new technologies and improve our current products to meet increasing and changing emissions and engine performance requirements globally for diesel and hydrocarbon-powered equipment. In addition to building on our core technologies, we are making investments in filtration and separation technologies required and used by electric powered vehicles, hydrogen production, and other industrial systems.
Our research and development programs are focused on product improvements, product extensions, innovations, and cost reductions for our customers. Research and development expenditures include salaries, contractor fees, building costs, utilities, testing, technical IT, administrative expenses and allocation of corporate costs and are expensed when incurred. Research and development expenses were $38.5 million, $41.6 million and $37.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Seasonality
While individual product lines may experience modest seasonal variation in production, there is no material effect on the demand for the majority of our products on a quarterly basis.
Competition
Our company is a leading global participant in the filtration engine products markets. Our products include fuel filters, lube filters, air filters, crankcase ventilation, hydraulic filters and coolants and other chemicals. Key global participants in this market include MANN+HUMMEL, Donaldson, Parker, and MAHLE. The rest of the market is highly fragmented and occupied by various specialized and regional players. Most of the large global players serve both first-fit and aftermarket channels, while smaller, regional players tend to focus on the aftermarket. The filtration market offers a unique multi-channel path to market, and diversification across first-fit, OEM service, and aftermarket. The recurring revenue model and mission-critical role of filters drive consistent demand across regions and end markets.
Principal methods of competition in the filtration markets are product quality and performance, price, geographic and application coverage, availability, customer service, ease of doing business and brand reputation. We believe we are a market leader within many of our product lines, including filters in our on-highway and off-highway markets, and that our success in the market is due to our technology, our iconic Fleetguard brand, our global footprint, strong customer relationships, and the talent within our organization.
Human Capital Resources
As of December 31, 2022, we employed approximately 4,250 persons worldwide. Also as of December 31, 2022, approximately 55% of our employees worldwide were represented by various
 
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unions, particularly in Mexico, France and Tennessee, subject to collective bargaining agreements. These agreements are subject to expiration between 2023 and 2025.
Throughout our company’s 60-year history, we have always recognized that people are the strength of our business and drive our ability to effectively serve our customers and sustain our competitive position. We believe that the composition of our workforce gives us advantages relating to cost and capability when compared to our peers. The global COVID-19 pandemic redefined the way we have traditionally worked and created both new expectations by employees, as well as new ways to work flexibly and seamlessly on a global basis. We are embracing these opportunities as we simplify our organizational structures and processes, further empower managers and employees to make decisions and generate positive results, increase employee communication and interaction with senior-leadership and enhance a work environment that is inclusive, transparent, agile and team-oriented.
Purpose and Core Values
We are a purpose-driven company. Our purpose is ‘Creating a better future by protecting what is important.’ We create and innovate every day. With a forward focus, we never sit still. We realize the world is bigger than us, and we aspire for a better future for our shared humanity. Our products protect our customers equipment and their livelihoods. We protect what’s important to our people, our planet, and our customers.
Our culture is shaped by our core values:
•
Build Trust in every relationship every day.
​
•
Have Courage to speak up, take action and shape the future.
​
•
Be Inclusive by embracing our differences and building a community where everyone feels valued.
​
•
Show Caring by engaging with kindness and consideration for the wellbeing of others.
​
Leadership and Talent Management
The capability of our people and our ability to work effectively in agile teams will be a primary enabler of our success. We strive to create a leadership culture that is authentic, transparent and approachable. By minimizing organizational layers, simplifying our organizational structure and process, we empower our employees to have an increased impact on our results. Our leaders are tasked with providing their employees with the support, development and encouragement needed to be successful. Further, our leaders connect our people and their work to our purpose, values, brand promise and strategies. We will continue to invest in leadership development. We will maintain the emphasis that the primary role of leaders at all levels is to focus on people development, supporting the unique needs of each employee in reaching their greatest positive impact at work, in the community and at home.
Our talent management approach seeks to develop the skills and capabilities of a diverse, global workforce and utilize our talent to deliver excellent results. We will advance and invest in our people based on strong performance, demonstration of core values in how work is accomplished and the individual motivation to have a larger impact on organization results.
Competitive Pay and Benefits
To attract and retain the best employees, we maintain a positive work environment that is grounded in our core values, a leadership culture that supports the development of our people and competitive pay and benefits.
When designing our base pay compensation ranges, we complete market analyses to maintain pay ranges that are current and related to the work we perform. We also complete annual compensation studies to assess market movement for key skills as well as internal pay equity. We incorporate living wage assessment into our annual compensation reviews to ensure that current and new hires are not below this threshold. Collectively, our global wage assessments seek to ensure we are fair, equitable and
 
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competitive in our ability to attract and retain the best talent. Everywhere possible, individual performance is the primary path for our employees to advance their earning potential. In addition, all employees also participate in annual variable compensation plans that encourage collaboration in the achievement of overall business results.
Our benefit programs are aligned with our values, target market competitiveness and offer flexibility to meet individual needs. Medical benefits include tiered health care costs that are more affordable to junior employees. Also included in our offerings are employee assistance programs, vacation time, retirement and savings plans and a variety of paid and unpaid time-off options that seek to address personal needs and important life-events.
Employee Safety and Wellness
We are committed to being world-class in health and safety. We strive to ensure a workplace with zero incidents. We are committed to removing conditions that cause personal injury or occupational illness and we make decisions and promote behaviors that protect others from risk of injury.
Our response to the COVID-19 global pandemic illustrated our commitment to safety. To support both our customers and communities, we made keeping employees safe our top priority. Most of our employees who can work from home have been doing so since the outbreak of the pandemic and we have provided them with the tools and support to do so. This allowed us to focus resources and investments on our engineering and production facilities. In those facilities, we took many steps to protect the health and safety of our people, including:
•
Mandatory health screenings at our plants and facilities;
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•
Personal protective equipment for frontline employees;
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•
Masks required (based on risk level) inside open plants and facilities;
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•
Redesigned exits, entrances and production lines to encourage social distancing;
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•
Enhanced cleaning protocols before, during and after shifts;
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•
Expanded healthcare, wellness and leave programs to support employees and their families; and
​
•
Manufacturing our own face masks to provide to our employees free of charge.
​
We continue to monitor the risk associated with COVID-19 and adjust our requirements to ensure the health and well-being of our employees.
Diversity, Equity and Inclusion
Diversity, equity and inclusion at all levels of our company are critical to our ability to innovate, win in the marketplace and create sustainable success. Having diverse, equitable and inclusive workplaces allows us to attract and retain the best employees to deliver results for our shareholders. Building on a long history that has emphasized diversity, equity and inclusion, we will continue to seek opportunities and invest in processes that attract, develop and retain diverse talent, globally. We will measure outcomes and ensure that all employees can benefit from being a part of our organization. This starts by assuring that the leadership of our company is diverse. At this time, five out of our 11 directors are female and four out of our 11 directors are ethnically diverse. In addition, 33% of our executive team is female, including our Chief Executive Officer, and 22% is ethnically diverse. We disclose publicly the percentage of women in supervisory roles and the overall workforce.
Environmental Sustainability
We are committed to ‘Creating a better future by protecting what is important.’ We believe environmental sustainability is central to what we do and we are dedicated to serving as an environmental steward to proactively enable a cleaner and more sustainable world for our employees, our customers and our communities.
 
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Sustainability is a continuous journey. As part of our journey, we have embedded environmental initiatives across our organization through our policies and procedures. We establish annual goals that focus on protecting employees while continuously reducing environmental impacts through pollution prevention, energy efficiency improvements and conservation, and water minimization.
From our product portfolio choices to our production development processes, our focus is on enabling a cleaner and more sustainable world. For our customers and end-users, we continue to deliver technology solutions that enable the adoption of cleaner and more efficient energy sources in their operations. Further, our approach to product design enables customers and end-users to extend service intervals thereby reducing resource consumption and greenhouse gas emissions. In our product development processes, our intent is to select design and production strategies that enable energy conservation. This includes initiatives to reduce raw material and energy consumption, such as the selection of recycled materials in our media and the use of specialized media in some of our products to eliminate the need for curing ovens.
Our operations and facility management programs consistently look for opportunities to reduce our impact. We also voluntarily execute global environmental sustainability initiatives, including:
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Implementing green energy alternatives, including installing solar panels at manufacturing sites, including San Luis Potosi, Mexico.
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Monitoring water consumption at our sites, setting reduction goals, and implementing water sustainability alternatives, including a rainwater harvest program for our desert garden in San Luis Potosi plant to reduce water use.
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•
Implementing energy efficiency improvements at our facilities, including boilers in our Cookeville, TN plant and energy efficient air handling upgrades to our plant in Neillsville, WI.
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Properties
Our corporate headquarters are located in Nashville, Tennessee. We also have 12 distribution centers (as of December 31, 2022) that are shared with Cummins. We also have global administrative, engineering and research facilities around the world, including in the United States, China and India. Our manufacturing and distribution activities are located throughout the world and we consider our properties to be suitable for their present purposes, well-maintained and in good operating condition.
Our headquarters and principal facilities are as follows:
Facility Type
​ ​
U.S. Facilities
​ ​
Facilities Outside the U.S.
​
Headquarters
​ ​ Tennessee:   Nashville (30,500 square feet), leased. ​ ​ ​ ​
Manufacturing
​ ​ Wisconsin:   Neillsville (166,000 square feet), owned. ​ ​
Australia:   Kilsyth (129,000 square feet), leased.
Brazil:   São Paulo (76,000 square feet), leased.
China:   Shanghai (109,000 square feet), leased.
Mexico:   San Luis Potosi (472,000 square feet), leased.
South Africa:   Johannesburg (30,200 square feet), leased.
​
​ ​ ​ ​ ​ ​ South Korea:   Suwon (64,000 square feet), owned. ​
Technology
​ ​ Wisconsin:   Stoughton (76,000 square feet), leased. ​ ​ China:   Wuhan (4,000 square feet), leased. ​
 
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Facility Type
​ ​
U.S. Facilities
​ ​
Facilities Outside the U.S.
​
​ ​ ​ ​ ​ ​ India:   Pune (20,000 square feet), leased. ​
Manufacturing and technology
​ ​ Tennessee:   Cookeville (385,000 square feet), leased. ​ ​ France:   Quimper (98,000 square feet), owned. ​
Joint Ventures
We have entered into three joint ventures with business partners, two in India, and one in China. Our joint ventures operate either manufacturing facilities or manufacturing and technology centers.
Our manufacturing joint ventures are primarily intended to allow us to increase our market penetration in geographic regions, reduce capital spending, streamline our supply chain management and develop technologies. Our largest manufacturing joint ventures are based in China and India, and are included in the list below. The results and investments in our joint ventures in which we have 50% or less ownership interest that are discussed below are not consolidated in our financial results and are instead included in “Equity, royalty and interest income from investees” and “Investments and advances related to equity method investees” in our consolidated statements of net income and consolidated balance sheets, respectively.
•
Fleetguard Filters Private Ltd. (FFPL) is a joint venture with our partner, Perfect Sealing Systems Private Ltd., that manufactures and sells industrial filters and coolant for commercial vehicles and generators and operates seven manufacturing facilities throughout India. We directly held 49.491% of the economic interest and 50% of the voting interest during the three-year period ended December 31, 2022.
​
•
Filtrum Fibretechnologies Pvt. Ltd. (Filtrum) is a joint venture with our joint venture partner, FFPL, and four other individuals (who hold approximately 25% interest), that manufactures filter media for automotive and industrial applications, and is located in Pune, India. We held a 49.75% economic interest (25% directly and 24.75% indirectly through our proportionate ownership of FFPL’s 50% ownership interest) during the three-year period ended December 31, 2022.
​
•
Shanghai Fleetguard Filter Co, Ltd. (SFG) is a joint venture with our partner, Dongfeng Electronic Technology Co. Ltd., that manufactures and distributes various filter and filter spare parts, and operates three manufacturing facilities throughout China. We have a 50% indirect ownership share during the three-year period ended December 31, 2022.
​
Cummins will lose control of us as a result of the transactions to implement this offering, the separation, and the split-off, which will cause a change in control under the governing documents of our joint venture in India (FFPL), resulting in the loss of rights to board representation. This would effectively result in the loss of the ability to prevent certain significant actions and may result in a reduction or elimination of dividends. See “Risk Factors — Risks Related to our Business Operations.”
Our joint venture facilities are as follows:
​
Manufacturing
​
​
China:   Wuhan (206,000 square feet), owned
​
​
China:   Shiyan (47,000 square feet), owned
​
​
India:   Dharwad (157,000 square feet), owned
​
​
India:   Hosur (90,000 square feet), owned
​
​
India:   Jamshedpur (26,500 square feet), owned, (21,000 square feet), leased
​
​
India:   Sitarganj (87,500 square feet), owned
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​
India:   Loni (173,000 square feet), leased
​
​
India:   Wadki (63,000 square feet), leased
​
 
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​
Manufacturing and technology
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​
China:   Shanghai (148,000 square feet), leased
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​
India:   Nandur (97,000 square feet), owned, (33,000 square feet), leased
​
Financial information about our investments in joint ventures and alliances is incorporated by reference from Note 5, “Investments in Equity Investees,” to our historical combined financial statements.
We will continue to evaluate joint venture and partnership opportunities in order to penetrate new markets, develop new products and generate manufacturing and operational efficiencies.
Regulatory Matters
We face extensive government regulation both within and outside the United States relating to the development, manufacture, marketing, sale and distribution of our products, including regulations relating to data privacy, trade compliance, anti-corruption and anti-bribery. These are not the only regulations that our businesses must comply with. For a description of risks related to the regulations that our businesses are subject to, please refer to the section entitled “Risks Related to Government Regulation.”
Legal Proceedings
We are, from time to time, subject to a variety of litigation and other legal and regulatory proceedings and claims incidental to our business. Please refer to Note 13 to the combined financial statements appearing elsewhere in this prospectus for more information.
 
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MANAGEMENT
Executive Officers
The following table sets forth information, as of the date of this prospectus, regarding the individuals whom we expect to serve as our executive officers immediately prior to the completion of this offering, followed by a biography of each executive officer.
Name
​ ​
Age
​ ​
Position
​
Steph Disher
​ ​ ​ ​ 47 ​ ​ ​ Chief Executive Officer ​
Jack Kienzler
​ ​ ​ ​ 37 ​ ​ ​ Chief Financial Officer ​
Mark Osowick
​ ​ ​ ​ 56 ​ ​ ​ Chief Human Resources Officer ​
Toni Y. Hickey
​ ​ ​ ​ 49 ​ ​ ​
Chief Legal Officer and Corporate Secretary
​
Charles Masters
​ ​ ​ ​ 51 ​ ​ ​ Vice President, Engine Products ​
Steph Disher currently serves as our Chief Executive Officer. Ms. Disher previously served as Vice President of Cummins Filtration Inc. Prior to that role, Ms. Disher served in various leadership roles since joining Cummins in 2013, including as Operations Director and Managing Director for Cummins in the South Pacific region. Ms. Disher holds a bachelor’s degree in Commerce from the University of Western Sydney and a Master of Business Administration from the University of Melbourne.
Jack Kienzler currently serves as our Chief Financial Officer. Mr. Kienzler previously oversaw the financial activities of Cummins Filtration Inc. as its Chief Financial Officer. Mr. Kienzler served in various leadership roles since joining Cummins in 2014. Mr. Kienzler holds a Bachelor of Science in Finance and Accounting from Indiana University and a Master of Business Administration from the Indiana University Kelley School of Business.
Mark Osowick currently serves as our Chief Human Resources Officer. Mr. Osowick previously oversaw the human resources operational activities of Cummins Filtration Inc. as its Vice President, Human Resources. Prior to that role, Mr. Osowick served in various senior human resources leadership positions during his 30 year career with Cummins, including serving as Cummins Vice President of Human Resources Operations from 2014 – 2021 and as a member of the Cummins Leadership Team. Mr. Osowick holds a Master of Industrial and Labor Relations from Cornell University and a Bachelor of Arts in Economics from Franklin and Marshall College.
Toni Y. Hickey currently serves as our Chief Legal Officer and Corporate Secretary. Ms. Hickey previously served as General Counsel of Cummins Filtration Inc., after serving as Deputy General Counsel and Chief Intellectual Property Counsel for Cummins from May 2015 to August 2021. Ms. Hickey has a Bachelor of Science in Finance and Accounting from the University of Colorado — Boulder, and a Juris Doctorate from Southern Methodist University School of Law.
Charles Masters currently serves as our Vice President, Engine Products and previously served as Executive Director of Global Sales and Marketing of Cummins Filtration Inc. Prior to that role, Mr. Masters served in various leadership roles since joining Cummins in 2003, including as General Manager of Eaton Cummins Automated Transmission Technologies JV from 2018 to 2021 and as President of Cummins Western Canada from 2016 to 2018. Mr. Masters holds a Bachelor of Commerce from the University of Alberta and a Master of Business Administration from Harvard Business School.
Directors
The following table sets forth information, as of the date of this prospectus, regarding the individuals whom we expect to serve as directors immediately prior to the closing of this offering, followed by a biography of each such individual.
 
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Name
​ ​
Age
​ ​
Term
Expires
​ ​
Position
​
Stephen Macadam
​ ​ ​ ​ 62 ​ ​ ​ ​ ​ 2025 ​ ​ ​
Director and Non-Executive Chairman
​
Sharon Barner
​ ​ ​ ​ 65 ​ ​ ​ ​ ​ 2024 ​ ​ ​ Director ​
R. Edwin Bennett
​ ​ ​ ​ 61 ​ ​ ​ ​ ​ 2025 ​ ​ ​ Director ​
Cristina Burrola
​ ​ ​ ​ 49 ​ ​ ​ ​ ​ 2025 ​ ​ ​ Director ​
Steph Disher
​ ​ ​ ​ 47 ​ ​ ​ ​ ​ 2026 ​ ​ ​ Director ​
Gretchen Haggerty
​ ​ ​ ​ 67 ​ ​ ​ ​ ​ 2024 ​ ​ ​ Director ​
Jane Leipold
​ ​ ​ ​ 61 ​ ​ ​ ​ ​ 2024 ​ ​ ​ Director ​
Earl Newsome
​ ​ ​ ​ 60 ​ ​ ​ ​ ​ 2026 ​ ​ ​ Director ​
Tony Satterthwaite
​ ​ ​ ​ 62 ​ ​ ​ ​ ​ 2026 ​ ​ ​ Director ​
Mark Smith
​ ​ ​ ​ 54 ​ ​ ​ ​ ​ 2024 ​ ​ ​ Director ​
Nathan Stoner
​ ​ ​ ​ 45 ​ ​ ​ ​ ​ 2026 ​ ​ ​ Director ​
Stephen Macadam has served as our director since 2022 and became Non-Executive Chairman on July 15, 2022. Mr. Macadam served as Vice Chairman of EnPro Industries, Inc., a diversified manufacturer of industrial products, from August 2019 to February 2020. From April 2008 until his retirement in July 2019, he served as Chief Executive Officer and President of EnPro. From October 2005 to March 2008, he was Chief Executive Officer of BlueLinx Inc., the largest building products distribution company in North America at that time. From August 2001 to September 2005, he served as President and CEO of Consolidated Container Company, LLC. Prior to that position, Mr. Macadam held senior leadership positions at Georgia-Pacific Corporation and was a partner at McKinsey & Company. Mr. Macadam has served as a director of Louisiana-Pacific Corp. (NYSE: LPX) since February 2019, where he’s the chair of the compensation committee and a member of the governance and corporate responsibility committee, and Veritiv Corporation (NYSE: VRTV) since February 2020 and as Veritiv’s chairman of the board since September 2020. From 2016 until January 2023, Mr. Macadam served as a director of Valvoline Inc. (NYSE: VVV), where he was a member of the compensation committee and the governance and nominating committee. Previously, Mr. Macadam also served as a director of EnPro Industries (NYSE: NPO) from 2008 to February 2020. Mr. Macadam holds a Bachelor of Science in mechanical engineering from the University of Kentucky, a Master of Science in finance from Boston College and a Master of Business Administration from Harvard Business School, where he was a Baker Scholar.
We believe that Mr. Macadam’s significant experience and knowledge in the areas of executive leadership, international operations, mergers and acquisitions, business re-orientation, industrial products manufacturing, product distribution and procurement, and finance and accounting provide him with the qualifications and skills to serve as a director on our Board. He also brings significant experience gained from service on the board of directors of other publicly-traded companies.
Sharon Barner has served as our director since 2022. Ms. Barner is currently Vice President, Chief Administrative Officer and Corporate Secretary of Cummins. She previously served as Vice President, General Counsel and Corporate Secretary of Cummins from 2012 to March 2021. Prior to joining Cummins, from 2009 to 2011, Ms. Barner served as Deputy Under Secretary of Commerce for Intellectual Property and Deputy Director of the United States Patent and Trademark Office, where she was responsible for patent and trademark operations. Ms. Barner spent the majority of her career in private practice, having led the global intellectual property divisions of a global law firm. Ms. Barner holds a Bachelor of Science in Psychology from Syracuse University and a Juris Doctorate from the University of Michigan School of Law.
We believe that Ms. Barner’s extensive knowledge of our industry and business as well as her experience in the legal industry, and experience serving on another publicly listed company board, provide her with the qualifications and skills to serve as a member of our Board.
R. Edwin Bennett has served as our director since 2022. Mr. Bennett retired from Ernst & Young (“EY”) in September 2021 after a 38-year career as a professional services partner and senior business
 
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leader. Mr. Bennett served in many senior leadership roles at EY, most recently as the Vice Chair — Operations and Chief Operating Officer from 2015 through 2021. Prior to that role, Mr. Bennett served as EY’s Deputy Vice Chair and Chief Operating Officer — Consulting Services. Mr. Bennett serves as a strategic advisor to ServiceNow and is a member of its Americas Advisory Council, which is focused on enhancing customer experiences, driving business value and accelerating transformation. Mr. Bennett earned his Bachelor of Science in accounting from the University of Georgia and is a Certified Public Accountant. Mr. Bennett also completed the Executive Leadership Program at the Kellogg School of Management and the Global Executive Leadership Program at Harvard Business School.
We believe that Mr. Bennett’s track record of successfully leading global operations of one of the world’s largest consulting organizations, his deep accounting and cyber acumen and experience advising other public companies  qualify him to serve as a member of our Board.
Cristina Burrola has served as our director since 2022. Ms. Burrola is currently Vice President —  Latin America Area Business Office (ABO) of Cummins. She previously served as Supply Chain Executive Director for the Latin America ABO, where she managed a regional organization of more than 6,000 employees across 16 countries. Prior to this, Ms. Burrola served as Corporate Strategy Director for Cummins’ mergers and acquisitions group, where she led the full integration of Cummins in four acquisitions worth $1.2 billion of sales in the Distribution Business. In addition, Ms. Burrola served as Global Engineering Services Director and Global Cost Reduction Director for the Atmus business. Ms. Burrola earned her Master of Business Administration from the Kellogg School of Management at Northwestern University in 2010 and holds a Master of Science in Engineering from Tecnologico de Monterrey and a Bachelor of Science in Electronics and Industrial Engineering from Tecnologico de Chihuahua in Mexico.
We believe that Ms. Burrola’s extensive global business experience and knowledge of our industry provide her with the qualifications and skills to serve as a member of our Board.
Steph Disher has served as our director since 2022. Ms. Disher’s biography is set forth under the section entitled ‘‘Executive Officers.’’
We believe that Ms. Disher’s extensive knowledge of our industry and business as well as her leadership experience provide her with the qualifications and skills to serve as a member of our Board.
Gretchen Haggerty has served as our director since 2022. Ms. Haggerty retired in August 2013 after a 37-year career with United States Steel Corporation, and its predecessor, USX Corporation, which, in addition to steel production, also managed and supervised energy operations, principally through Marathon Oil Corporation. From March 2003 until her retirement, she served as Executive Vice President & Chief Financial Officer and also served as Chairman of the U.S. Steel & Carnegie Pension Fund and its Investment Committee. Earlier, she served in various financial executive positions at U.S. Steel Corporation and USX Corporation, beginning in November 1991 when she became Vice President and Treasurer. Ms. Haggerty has served as a director of Teleflex Incorporated (NYSE: TFX), a global provider of medical technology products, since 2016 and currently serves as a member of the audit committee. Ms. Haggerty has also served as a director of Johnson Controls International plc, since March 2018, where she serves as chair of the audit committee. She is a former director of USG Corporation, a leading manufacturer of building materials. Ms. Haggerty earned her Bachelor of Science in Accounting from Case Western Reserve University and her Juris Doctorate from Duquesne University School of Law.
We believe that Ms. Haggerty’s decades of senior leadership experience, deep financial acumen as a Chief Financial Officer, experience serving on the board of directors of multiple international companies, significant knowledge of the global marketplace gained from her business experience and background and experience leading global teams qualify her to serve as a member of our Board.
Jane Leipold has served as our director since 2022. Ms. Leipold is an accomplished global business executive and consultant, with a variety of experiences in engineering, operations and human resources. With over twenty years of human resources leadership experience, Ms. Leipold started a consulting business, JAL Executive HR Consulting, LLC, in 2017, where she provides a wide breadth of executive
 
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HR consulting services on an interim or project basis. From 2006 through 2016, Ms. Leipold served as Senior Vice President & Chief Human Resources Officer for TE Connectivity, a publicly traded manufacturer of connectors and sensors. Previously, she was Vice President of HR at Tyco Electronics, in addition to other roles in the human resources department. Ms. Leipold holds a Bachelor of Science in Quantitative Business Analysis and a Master of Business Administration from Pennsylvania State University. In 2013, Ms. Leipold was recognized for her outstanding professional accomplishments and named an Alumni Fellow, the highest award given by the Penn State Alumni Association.
We believe that Ms. Leipold’s extensive global human resources experience and knowledge of our industry provide her with the qualifications and skills to serve as a member of our Board.
Earl Newsome has served as our director since 2022. Mr. Newsome is Vice President and Chief Information Officer of Cummins. Mr. Newsome joined Cummins after five years at Linde, leading the organization as the Americas IT CIO. Mr. Newsome is a skilled strategic leader with over 30 years of global IT leadership experience and a strong vision for leading IT and digital transformations for global companies. Mr. Newsome began his career serving in the U.S. Army after graduating from the United States Military Academy in West Point, New York, with a bachelor’s degree in Computer Science. Following his military service, Mr. Newsome has dedicated his career to leading IT development and initiatives across several industries, including his time as Vice President of Global Shared Services and Chief Technology Officer at The Estée Lauder Companies Inc. Mr. Newsome also led IT transformations and digital innovation for core business growth at TE Connectivity as the Corporate Chief Information Officer and Vice President, Digital.
We believe that Mr. Newsome’s extensive knowledge of IT and cybersecurity, global business experience and knowledge of our industry, and experience serving on another publicly listed company board, provide him with the qualifications and skills to serve as a member of our Board.
Tony Satterthwaite has served as our director since 2022. Mr. Satterthwaite has been the Senior Vice President of Cummins since August 2022. Mr. Satterthwaite has held leadership positions within Cummins since 1988, including as President of Power Generation, President of the Distribution Business and most recently as Senior Vice President of Cummins. He has served as a director of IDEX Corporation (NYSE: IEX) since 2011, where he is a member of the compensation committee and the nominating and corporate governance committee. Mr. Satterthwaite holds a Bachelor of Science in Civil Engineering from Cornell University and a Master of Business Administration from Stanford University.
We believe that Mr. Satterthwaite’s extensive knowledge of our industry and business as well as his leadership experience, and experience serving on another publicly listed company board, provide him with the qualifications and skills to serve as a member of our Board.
Mark Smith has served as our director since 2022. Mr. Smith has been the Vice President and Chief Financial Officer of Cummins since 2019. He previously served in a variety of finance and business strategy roles within Cummins beginning in 1995, including Vice President, Financial Operations and Vice President, Investor Relations. Mr. Smith holds a Bachelor of Arts in Economics from the University of Kent and a Master of Business Administration from the Kellogg School of Management at Northwestern University.
We believe that Mr. Smith’s extensive knowledge of our industry and business as well as his experience as Chief Financial Officer of a publicy traded company, and broad experience in corporate finance provide him with the qualifications and skills to serve as a member of our Board.
Nathan Stoner has served as our director since 2022. Mr. Stoner is Vice President — China Area Business Officer of Cummins, with regional responsibility across Cummins’ business portfolio in China — including Engine, Components, Power Systems, Distribution, and New Power business units. Prior to his current role, Mr. Stoner served as General Manager of Engine JVs & Partnerships, General Manager of Power Systems China, Executive Director of Global Corporate Development and the Partnership Director of Dongfeng Motors at Cummins. Prior to working at Cummins, Mr. Stoner worked in a variety of entrepreneurial, general management, and User Experience design (i.e. UX/UI designer) roles. He was the founder and General Manager of Sino Universal Ltd., a design and manufacturing firm located in China, setting up and overseeing all aspects of the company’s production business and
 
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facilities. He currently serves on the Board of Directors of ten joint venture companies and is also the Chairman of the Board of Trustees for Education for Ethiopia, an EdTech not-for-profit organization. Mr. Stoner received his bachelor’s degrees in Architecture and Mechanical Engineering from Yale University and his Master of Business Administration from Yale School of Management.
We believe that Mr. Stoner’s extensive business experience and knowledge of corporate strategy, including global operations and markets, provide him with the qualifications and skills to serve as a member of our Board.
Board of Directors
The board of directors exercises oversight over our business and affairs. Our amended and restated certificate of incorporation and amended and restated bylaws provide that the number of directors shall be fixed by resolution of our board of directors from time to time. Currently, our board of directors comprises eleven directors.
Director Independence and Controlled Company Exemption
We intend to avail ourselves of the “controlled company” exemption under the corporate governance rules of the NYSE. Accordingly, we will not be required to have a majority of “independent directors” on our board of directors as defined under the rules of the NYSE, nor will we be required to have a talent management and compensation committee and corporate governance and nominating committee composed entirely of independent directors. The “controlled company” exemption does not modify the independence requirements for the audit committee, and we intend to comply with the requirements of the Sarbanes-Oxley Act and the NYSE, which require that our audit committee be composed of at least three members, one of whom will be independent upon the listing of our common stock, a majority of whom will be independent within 90 days of listing, and all of whom will be independent within one year of listing. The audit committee is currently majority independent.
At such time that we cease to be a “controlled company” under the rules of the NYSE, our board of directors will take all action necessary to comply with the NYSE corporate governance rules, including appointing a majority of independent directors to the board of directors and establishing certain committees composed entirely of independent directors, in each case subject to permitted “phase-in” periods.
Our board of directors has determined that R. Edwin Bennett, Gretchen Haggerty, Jane Leipold and Stephen Macadam are independent directors under the applicable rules of the NYSE. The board of directors will assess on a regular basis, and at least annually, the independence of our directors and, based on the recommendation of the governance and nominating committee, will make a determination as to which members are independent.
Board Composition
Our directors are divided into three classes serving staggered three-year terms. Upon expiration of the term of a class of directors, directors in that class will be eligible to be elected for a new three-year term at the annual meeting of stockholders in the year in which their term expires. As a result of this classification of directors, it generally takes at least two annual meetings of stockholders to effect a change in a majority of the members of our board of directors.
Sharon Barner, Gretchen Haggerty, Jane Leipold and Mark Smith currently serve as Class I directors and will serve until our annual meeting of stockholders in 2024. R. Edwin Bennett, Cristina Burrola, and Stephen Macadam currently serve as Class II directors and will serve until our annual meeting of stockholders in 2025. Steph Disher, Earl Newsome, Tony Satterthwaite, and Nathan Stoner currently serve as Class III directors and will serve until our annual meeting of stockholders in 2026.
Until the split-off (if pursued), Cummins may designate individuals for nomination to our board of directors up to a majority of the members of our board of directors, and Cummins may designate the chairperson of our board of directors. As long as Cummins owns shares of our common stock representing, in the aggregate, at least ten percent (10%) of the total voting power of the then outstanding
 
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shares of our common stock, Cummins may designate for nomination by our board of directors (or any nominating committee thereof) for election to our board of directors up to a proportionate number of designated individuals to our board of directors. From and after the split-off (if pursued), our board of directors may not include more than one director that concurrently serves on the Cummins board of directors or is also a member of Cummins’ senior management team, and such director may represent no more than a minority share of the overall composition of either the Cummins board of directors or our board of directors.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Board Leadership Structure
Our corporate governance principles describe in detail how our board of directors must conduct its oversight responsibilities in representing and protecting our company’s stakeholders. As stated in the principles, our board of directors has the freedom to decide who our chair and chief executive officer should be based solely on what it believes is in the best interests of our company and its stockholders. Currently, our board of directors believes it is in the best interests of our company for the roles of our chair and chief executive officer to be separate. The board of directors has elected Stephen Macadam to be the Non-Executive Chairman of the board.
Our board of directors evaluates its policy on whether the roles of our chairperson and chief executive officer should be combined on an annual basis. In doing so, our board of directors considers the skills, experiences and qualifications of our then-serving directors (including any newly-elected directors), the evolving needs of our company, how well our leadership structure is functioning, and the views of our stockholders.
Board Committees
Our board of directors has a standing audit committee, talent management and compensation committee and nominating and governance committee. Members serve on these committees until their resignations or until otherwise determined by our board of directors. Each committee operates under a charter.
The committee charters are described below and will be available on our website upon completion of this offering.
Audit Committee.   The primary purposes of our audit committee are to assist our board of directors’ oversight of:
•
the integrity of our financial statements and any other financial information which will be provided to the stockholders and others;
​
•
hiring, monitoring and replacing our independent auditor;
​
•
the independent auditor’s qualifications and independence;
​
•
the systems of internal control and disclosure controls which management has established;
​
•
the performance of internal and independent audit functions; and
​
•
our compliance with legal and regulatory requirements.
​
The members of the audit committee are R. Edwin Bennett, Gretchen Haggerty and Mark Smith. Gretchen Haggerty currently serves as chair of the audit committee. Gretchen Haggerty qualifies as an “audit committee financial expert” as such term has been defined by the SEC in Item 407(d) of Regulation S-K. Our board of directors has affirmatively determined that Gretchen Haggerty and R. Edwin Bennett meet the definition of an “independent director” for the purposes of serving on the audit committee under applicable NYSE rules and Rule 10A-3 under the Exchange Act. We intend to comply with these independence requirements for all members of the audit committee within the time periods specified under SEC rules. The audit committee is governed by a charter that complies with the rules of the NYSE.
 
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Talent Management and Compensation Committee (the “TMCC”).   The primary purposes of our TMCC will be to assist our board of directors in overseeing our management compensation policies and practices, including:
•
determining and approving the compensation of our executive officers, including our CEO;
​
•
oversight of our compensation plans, including by reviewing and approving incentive compensation and equity compensation policies and programs;
​
•
review and oversight of the company’s strategies for talent management; and
​
•
assessing talent management policies, programs and processes, including leadership, culture, diversity and inclusion and succession.
​
The members of the TMCC are Sharon Barner, Jane Leipold, Stephen Macadam and Tony Satterthwaite. Jane Leipold currently serves as chair. Our board of directors has affirmatively determined that each of Jane Leipold and Stephen Macadam qualify as a “non-employee director” under Rule 16b-3 of the Exchange Act.
We intend to avail ourselves of the “controlled company” exemption under the rules of the NYSE, which exempts us from the requirement that we have a compensation committee composed entirely of independent directors. The TMCC is governed by a charter that complies with the rules of the NYSE.
Governance and Nominating Committee.   The primary purposes of our governance and nominating committee will be to assist our board of directors by:
•
identifying qualified individuals to become a member of the board of directors;
​
•
determining the composition of the board of directors and its committees;
​
•
assessing the annual performance of our CEO;
​
•
monitoring a process to assess effectiveness of the board of directors; and
​
•
developing and implementing our corporate governance principles.
​
The members of the governance and nominating committee are Sharon Barner, R. Edwin Bennett, Cristina Burrola, Gretchen Haggerty, Jane Leipold, Stephen Macadam, Earl Newsome, Tony Satterthwaite, Mark Smith and Nathan Stoner. Stephen Macadam currently serves as chair of the governance and nominating committee. Our board of directors has affirmatively determined that each of R. Edwin Bennett, Gretchen Haggerty, Jane Leipold and Stephen Macadam qualify as “independent” under the rules of the NYSE. We intend to avail ourselves of the “controlled company” exemption under the rules of the NYSE, which exempts us from the requirement that we have a governance and nominating committee composed entirely of independent directors. The governance and nominating committee is governed by a charter that complies with the rules of the NYSE.
Risk Oversight
Our board of directors and its committees are currently involved on an ongoing basis in the oversight of our material enterprise-related risks and, in the future, will have oversight of our risk management processes. We have established an enterprise risk management program that is intended to identify, categorize and analyze the relative severity and likelihood of the various types of material enterprise-related risks to which we are or may be subject. It is anticipated that we will establish an executive risk council to review and update our material enterprise-related risks and their mitigation plans. We assign ownership of our most significant enterprise risks to a member of our leadership team. The risk oversight process includes receiving regular reports from board committees and members of senior management to enable our board of directors to understand our risk identification, risk management, and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, cybersecurity, strategic, and reputational risk.
Our board of directors, audit committee, TMCC, and/or governance and nominating committee receive periodic reports and information directly from our senior leaders who have functional
 
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responsibility over our enterprise risks. Our board of directors and/or its appropriate committees then review such information, including management’s proposed mitigation strategies and plans, to monitor our progress on mitigating the risks.
Board Diversity
One of our core values is ‘be inclusive.’ In evaluating candidates for our board of directors, our governance and nominating committee considers only potential directors who share this value, as well as our other core values. We believe that directors with different backgrounds and experiences make our boardroom and our company stronger. Although our board of directors does not have a formal written diversity policy with respect to the evaluation of director candidates, in its evaluation of director candidates, our governance and nominating committee will consider factors including, without limitation, issues of character, integrity, judgment, potential conflicts of interest, other commitments, and diversity, and with respect to diversity, such factors as gender, race, ethnicity, experience, and area of expertise, as well as other individual qualities and attributes that contribute to the total diversity of viewpoints and experience represented on the board of directors. Additionally, as reflected in our corporate governance principles, we are committed to equal employment opportunities in assembling our board of directors. Our governance and nominating committee is responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. We believe our board of directors has been effective in assembling a highly-qualified, diverse group of directors, consisting of five female directors and four ethnically diverse directors. We will continue to identify opportunities to enhance our board diversity as we consider future candidates.
Limitations on Liability, Indemnification of Directors and Officers and Insurance
The DGCL authorizes corporations to limit or eliminate the personal liability of directors and officers to corporations and their stockholders for monetary damages for breaches of fiduciary duties as directors or officers, as applicable, and our amended and restated certificate of incorporation include such an exculpation provision. Our amended and restated certificate of incorporation and bylaws include provisions that indemnify, to the fullest extent allowable under the DGCL, the personal liability of directors or officers for monetary damages for actions taken as our director or officer, or for serving at our request as a director or officer or another position at another corporation or enterprise, as the case may be. Our amended and restated certificate of incorporation and bylaws also provide that we must indemnify and advance reasonable expenses to our directors and officers.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and bylaws 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 or officer’s duty of care. The provisions will not alter the liability of directors or officers 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 us or any of our directors, officers or employees for which indemnification is sought.
Code of Business Conduct
Our code of business conduct is applicable to all of our directors, and officers (including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions). A copy of the code will be available on our website located at Atmus.com upon completion of this offering. Any amendments to or waivers from our code of business conduct will be disclosed on our website promptly following the date of such amendment or waiver.
 
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Corporate Governance Principles
Our corporate governance principles, adopted by our board of directors in accordance with the corporate governance rules of the NYSE, serve as a flexible framework within which our board of directors and its committees will operate. These principles cover a number of areas, including the role of the board of directors, board composition, director independence, director selection, qualification and election, director compensation, executive sessions, key board responsibilities, CEO evaluation, succession planning, risk management, board leadership and operations, conflicts of interest, annual board assessments, board committees, director orientation and continuing education, board agenda, materials, information and presentations, director access to management and independent advisers and board communication with stockholders and others. A copy of our corporate governance principles will be available on our website upon completion of this offering.
Compensation Committee Interlocks and Insider Participation
We do not have any interlocking relationships between any member of our talent management and compensation committee and any of our executive officers that would require disclosure under the applicable rules promulgated under the federal securities laws.
 
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EXECUTIVE AND DIRECTOR COMPENSATION
Compensation Discussion and Analysis
Immediately prior to this offering, we will be a wholly-owned subsidiary of Cummins. For purposes of this prospectus, our executive officers whose compensation is discussed in this Compensation Discussion and Analysis and to whom we refer as our Named Executive Officers, or “NEOs,” are:
•
Steph Disher, Chief Executive Officer and a member of our Board of Directors
​
•
Jack Kienzler, Chief Financial Officer
​
•
Mark Osowick, Chief Human Resources Officer
​
•
Toni Y. Hickey, Chief Legal Officer and Corporate Secretary
​
•
Charles Masters, Vice President, Engine Products
​
Decisions regarding past compensation of our NEOs have been made by their managers and according to compensation governance processes within Cummins.
This Compensation Discussion and Analysis reviews Cummins’ 2022 compensation programs, objectives and design framework, the process for determining 2022 compensation for our NEOs and how our future compensation programs, objectives and design framework are expected to operate within the new company. Although this Compensation Discussion and Analysis focuses on 2022 as the most recently completed fiscal year, as required by the SEC’s regulations, it also discusses 2023 compensation decisions for our NEOs to the extent material to an understanding of our executive compensation philosophy and programs.
The Talent Management and Compensation Committee of Cummins’ Board of Directors is responsible for determining and approving the compensation of Cummins’ executive officers and accordingly, it approved the 2022 compensation for Steph Disher and Mark Osowick, both of whom are Cummins executive officers. The 2022 compensation for our other NEOs was determined and approved by Cummins management. Our Board of Directors has formed its own TMCC and it will be responsible for our compensation programs, objectives and framework following the completion of this offering.
Cummins’ Practice
Cummins’ long-term success depends on its ability to attract, motivate, focus, and retain highly talented individuals committed to Cummins’ vision, strategy and corporate culture. To that end, Cummins’ executive compensation program is designed to link executives’ pay to their individual performance, to Cummins’ annual and long-term performance and to the successful execution of Cummins’ business strategies. Cummins’ salary levels and incentive targets are intended to recognize individual performance and market pay levels. The Cummins’ compensation philosophy rewards executives for achieving financial objectives and building long-term value for shareholders and other stakeholders.
Going Forward
The design of our compensation programs that will be in effect immediately following the completion of this offering has been approved by our TMCC. The new programs for Atmus have been designed to support the specific needs of our company. These programs, therefore, differ from Cummins’ programs in certain respects.
Compensation Elements to Support Pay for Performance Philosophy
The Cummins’ compensation program is designed to support its pay-for-performance philosophy, which aligned the interests of executives with the interests of shareholders and other stakeholders. The key elements of its executive compensation program in 2022 were:
 
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​
Compensation Element
​ ​
Form of Payment
​ ​
Performance Metrics
​ ​
Rationale
​
​
Base salary
​ ​ Cash ​ ​
Individual Performance
​ ​ Market-based to attract and retain skilled executives. Designed to recognize scope of responsibility, individual performance and experience. ​
​
Annual bonus
​ ​ Cash ​ ​ Return on Average Net Assets (ROANA) equal to EBITDA divided by average net assets for the 5 quarters preceding the fiscal year ​ ​ Rewards operational performance. ROANA balances growth, profitability and asset management. ​
​
Long-term incentive compensation
​ ​ Performance shares (70%) and Performance cash (30%) ​ ​ Return on Invested Capital (ROIC), weighted at 80% and Cumulative EBITDA, weighted at 20% over a three-year period ​ ​ ROIC and EBITDA provide an incentive for profitable growth and generally tend to correlate well with shareholder value. ​
Cummins believes the compensation of its leaders should be based on Cummins’ overall financial performance and a significant portion of their pay should be incentive-based and therefore at risk.
Going Forward
Following this offering, the key elements of our executive compensation program will continue to be salary, an annual bonus program, and long-term incentive compensation. However, we expect our incentive programs to differ from those of Cummins in certain respects. Our annual bonuses for 2023 will be earned based 100% on our EBITDA performance (rather than ROANA for Cummins), and our long-term incentive compensation program for 2023 will be composed of 70% performance stock units (PSUs) and 30% restricted stock units (RSUs) (rather than performance shares and performance cash for Cummins). We have adopted PSUs granted in 2023 that will be earned based 50% on our cumulative 3-year EBITDA and 50% on our 3-year average ROIC.
Target Executive Compensation Aligned with the Market
Cummins’ TMCC reviews its executive compensation levels and programs on a regular basis. For pay levels, it generally targets the median of the market for total direct compensation and for each component of total direct compensation, including salary, annual bonus target values, and long-term incentive target values. Cummins considers target compensation to be market competitive if it is within +/- 10% of the median level indicated by the benchmarking data.
For making 2022 pay decisions, Cummins’ primary compensation benchmarking sources were manufacturing companies in the Aon Hewitt Total Compensation Management Executive Survey and the Mercer Benchmark Database Survey. Cummins also considered data from its Custom Peer Group (described below) regarding pay levels for the CEO and pay program design, dilution and performance. Cummins believes this approach provides an appropriate representation of the market, and using multiple sources dampens the impact of fluctuations in market data over time.
Cummins’ Custom Peer Group, identified in 2021 for making 2022 pay decisions, was made up of the 15 public companies listed below. All companies fell into at least one of the following categories: (i) customers with a strong presence in one or more of Cummins’ major markets; (ii) companies that compete directly or indirectly with one or more of Cummins’ businesses; (iii) key suppliers of related products; and (iv) diversified industrial companies that compete for investor capital within the industrial market.
 
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The Custom Peer Group companies are also similar to Cummins in size and investor profile and compete with Cummins for customers and talent.
​ Borg Warner Incorporated
(BWA) 		​ ​ Caterpillar Inc. (CAT) ​ ​ Mercedes-Benz Group AG
(BMG)(1) 		​ ​ Deere & Company
(DE) 		​
​ Donaldson Company Inc.
(DCI) 		​ ​ Eaton Corporation plc
(ETN) 		​ ​
Emerson Electric Co. (EMR)
​ ​ Fortive Corporation
(FTV) 		​
​ Honeywell International
Inc. (HON) 		​ ​ Illinois Tool Works Inc.
(ITW) 		​ ​ PACCAR Inc. (PCAR) ​ ​ Parker-Hannifin Corporation
(PH) 		​
​ Textron Inc. (TXT) ​ ​ Volvo AB (VLVLY) ​ ​
W.W. Grainger, Inc.
(GWW)
​ ​ ​ ​
​
(1)
Mercedes-Benz subsequently split into two companies: Daimler Truck Holding AG and Mercedes-Benz Group AG.
​
Going Forward
Cummins’ TMCC, with assistance from its outside independent compensation consultant Farient Advisors (“Farient”), adopted an Atmus peer group to help inform decision-making with respect to our executive compensation program and ensure that such program supports our recruitment and retention needs and is fair and efficient. Cummins’ TMCC selected companies for inclusion in this peer group considering (1) companies that trade on the major U.S. stock exchanges; (2) companies with an industrial focus; (3) companies with annual revenues of between $400 million and $4 billion; (4) companies with similar global sales exposure; and (5) companies with a similar customer type mix. Our compensation peer group going forward is initially comprised of the following companies:
​
A.O. Smith Corporation
(AOS)
​ ​
Chart Industries, Inc.
(GTLS)
​ ​
CIRCOR International, Inc.
(CIR)
​ ​
Donaldson Company
Inc. (DCI)
​
​ Enerflex Ltd. (EFXT) ​ ​ EnPro Industries, Inc.
(NPO) 		​ ​ ESCO Technologies Inc.
(ESE) 		​ ​ Evoqua Water
Technologies Corp.
(AQUA) 		​
​ Flowserve Corporation
(FLS) 		​ ​ Franklin Electric Co., Inc.
(FELE) 		​ ​ Gates Industrial Corporation
plc (GTES) 		​ ​ Graco Inc. (GGG) ​
​
IDEX Corporation (IEX)
Watts Water Technologies, Inc.
(WTS)
​ ​ Meritor, Inc.(1) ​ ​ Pentair plc (PNR) ​ ​
SPX Technologies,
Inc. (SPX)
​
​
(1)
Meritor, Inc. was acquired by Cummins in 2022 and, accordingly, will not be included going forward.
​
Following the completion of this offering, our TMCC will review the Atmus peer group on a periodic basis and determine whether changes are appropriate based on its view of the competitive environment in which we operate.
How Performance Measures and Goals Are Determined
Cummins’ TMCC regularly reviews all elements of Cummins’ executive compensation program and makes changes as it deems appropriate. Each review includes general comparisons against market data and analysis prepared by Farient, including information on market practices in the following areas: (i) pay strategy and positioning; (ii) annual bonus plan design, including performance measures and goals and plan leverage; (iii) long-term incentive plan strategy and design, including the mix of elements, as well as performance measures and goals and plan leverage; (iv) stock ownership guidelines; (v) executive perquisites, including personal use of company aircraft; and (vi) executive benefits and protection policies, including severance practices for officers, supplemental retirement plans, deferred compensation plans and change-in-control arrangements.
Cummins’ TMCC establishes performance measures and goals each year for the annual and long-term incentive plans that are designed to help achieve its business strategy and objectives.
 
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Cummins’ TMCC also benchmarks against the historical performance of the Cummins’ Custom Peer Group and considers whether Cummins’ goals are sufficiently demanding relative to its peers. Additionally, Cummins’ TMCC solicits Farient’s assessment regarding the degree of difficulty associated with the incentive plan performance targets relative to both external analyst expectations for performance and peer performance expectations. Cummins’ TMCC believes this process leads to appropriate performance targets and incentive awards that reflect the creation of shareholder value.
Cummins’ TMCC has the discretion to adjust performance results that reflect significant transactions (such as acquisitions, divestitures or newly-formed joint ventures) or other unusual items (such as pension plan contributions above required levels, restructuring or significant tax legislation) if such events were not anticipated at the time performance targets were initially established.
Going Forward
Cummins’ TMCC adopted an Atmus-exclusive performance metric and goal range for the 2023 Annual Bonus program for our participants based on actual achievement this year against our EBITDA goal as our sole performance measure, which would continue to apply for the full year upon the completion of this offering. EBITDA was selected as the metric because it is believed to be a significant driver of the value of our business, appropriately balances growth and profitability, and is well-understood by plan participants.
Further, upon completion of this offering, Cummins’ TMCC will freeze the payout factors for our participants both under the Cummins’ 2021-2023 and 2022-2024 long-term incentive compensation plan cycles based on Cummins’ actual achievement of its ROIC and EBITDA goals from the beginning of the respective plan cycle to the time of the completion of this offering. Our TMCC intends to adopt two new long-term incentive stub cycles, running from the completion of this offering to the end of 2023 and 2024, respectively. Both of the new long-term incentive stub cycles are expected to consist of PSUs, weighted 70%, and RSUs, weighted 30%. The performance measure used for the stub cycle PSUs is expected to be our Cumulative EBITDA. Atmus’s TMCC expects to use Cumulative EBITDA because it is believed to be a significant driver of value, appropriately balancing growth and profitability, and is well-understood by those participating in our long-term incentive plan. Atmus TMCC intends to approve the goal ranges associated with this measure for both of the 2021-2023 and 2022-2024 stub cycles.
Compensation Programs
Cummins’ executive compensation program consists of three principal elements: salary, annual bonus, and long-term incentive compensation. Together, these elements constitute total direct compensation.
Salary
Cummins targets salary, on average, at the median of the market for similar executive positions. Some officers’ salaries may vary from the median due to factors such as experience, tenure, potential, performance and internal equity. The 2022 salaries of our NEOs were initially determined by their managers, using their prior year’s salary as the initial basis of consideration and taking into account personal performance in the prior year. The Cummins TMCC approved the salary for Steph Disher and Mark Osowick who are executive officers of Cummins, also considering the market value of their roles.
Going Forward
Atmus’s TMCC has approved new 2023 annual base salaries for our NEOs in their new roles at Atmus. These salaries will become effective upon the completion of the offering. These salaries are within a competitive range for public industrial companies of our size. Mr. Kienzler, Ms. Hickey and Mr. Masters received supplemental payments for 2022 representing a portion of the difference between their salaries as in effect during 2022 and their anticipated higher salaries in connection with this offering. The payments were made to recognize the executives’ enhanced scope of responsibilities and contributions during the latter part of 2022.
 
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Our NEOs’ current salaries for 2022 (and through the offering) and their salaries following the completion of the offering are indicated below:
​ ​ ​
Annual Salary
​
Officer
​ ​
Current
​ ​
Upon Offering
​
Steph Disher
​ ​ ​ $ 500,000 ​ ​ ​ ​ $ 800,000 ​ ​
Jack Kienzler
​ ​ ​ $ 300,000 ​ ​ ​ ​ $ 480,000 ​ ​
Mark Osowick
​ ​ ​ $ 370,000 ​ ​ ​ ​ $ 370,000 ​ ​
Toni Y. Hickey
​ ​ ​ $ 338,541 ​ ​ ​ ​ $ 416,000 ​ ​
Charles Masters
​ ​ ​ $ 320,159 ​ ​ ​ ​ $ 417,000 ​ ​
Annual Bonus
Cummins’ annual bonus for 2022 was designed to link participants’ pay to its annual financial performance. The payout for each participant, including our NEOs, was calculated using the following formula: annual bonus was equal to each NEO’s salary and other eligible earnings multiplied by each NEO’s target annual bonus award as a percentage of salary multiplied by a corporate payout factor. Target awards as a percentage of salary are set such that performance at the target goal level would generate an annual bonus aligned with the median range of the market. The “payout factor” is determined based on Cummins’ actual financial performance against its annual goals. Cummins used a similar design for its 2023 annual bonuses.
Going Forward
Atmus’s TMCC has approved new target bonus opportunities for our NEOs in their new roles at Atmus upon the completion of the offering. These target bonus opportunities are within a competitive range for public industrial companies of Atmus’s size.
The table below indicates our NEOs’ target bonus as a percentage of salary currently and following the completion of the offering:
​ ​ ​
Target Bonus as % of Salary
​
Officer
​ ​
Current
​ ​
Upon Offering
​
Steph Disher
​ ​ ​ ​ 60% ​ ​ ​ ​ ​ 100% ​ ​
Jack Kienzler
​ ​ ​ ​ 30% ​ ​ ​ ​ ​ 60% ​ ​
Mark Osowick
​ ​ ​ ​ 50% ​ ​ ​ ​ ​ 50% ​ ​
Toni Y. Hickey
​ ​ ​ ​ 30% ​ ​ ​ ​ ​ 50% ​ ​
Charles Masters
​ ​ ​ ​ 30% ​ ​ ​ ​ ​ 50% ​ ​
2022 Annual Bonus Performance Measure
Cummins’ ROANA was the sole performance measure for Cummins’ 2022 annual bonus plan because Cummins believes that ROANA appropriately balances growth, profitability and the management of Cummins’ assets, all of which combine to drive share value.
Cummins’ ROANA for compensation purposes equals earnings before interest, taxes, depreciation, and amortization (or EBITDA), divided by average net assets, where average net assets is the average of the net assets ending in the five quarters preceding Cummins’ year. Net assets is derived from Cummins’ consolidated balance sheet and excludes debt and related financing accounts, deferred tax amounts, and certain pension and post-retirement liability accounts.
ROANA Performance Targets For 2022
Setting the target with the appropriate level of difficulty underscores the importance of achieving or exceeding Cummins’ annual operating plan (AOP) performance commitment. This approach requires
 
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increasingly difficult targets during economic upturns and realistic goals during cyclical downturns. Cummins’ TMCC seeks to set a challenging yet realistic goal, incorporating previous performance as well as the forecasted opportunities and economic conditions in Cummins’ markets. The 2022 ROANA goals were set with this philosophy in mind.
Cummins’ target ROANA increased from 25.56% in 2021 to 32.35% in 2022. This increase was due to the AOP projections for 2022. Target ROANA was established by Cummins’ TMCC after reviewing the AOP and considering input from Farient.
Cummins’ target ROANA (a 100% payout factor) was the amount required to achieve Cummins’ AOP. As shown below, the possible payout factors for 2022 ranged from 10% for threshold performance (70% of target ROANA) to a maximum of 200% for superior performance (115% of target ROANA or better).The payout factor changed in increments of 10% for results that fell between threshold and target, or between target and maximum.
​ ​ ​
Cummins
ROANA
Goal
​ ​
Goal as
% of Target
​ ​
Payout as
% of Target(1)
​
>Maximum
​ ​ ​ ​ 37.20% ​ ​ ​ ​ ​ 115% ​ ​ ​ ​ ​ 200% ​ ​
Target
​ ​ ​ ​ 32.35% ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​
Threshold
​ ​ ​ ​ 22.65% ​ ​ ​ ​ ​ 70% ​ ​ ​ ​ ​ 10% ​ ​
<Threshold
​ ​ ​ ​ <22.65% ​ ​ ​ ​ ​ <70% ​ ​ ​ ​ ​ 0% ​ ​
EBITDA at target: $4.130 billion ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
(1)
Interpolate for performance between discrete points, rounded to the nearest 10% increment
​
The actual bonus amounts payable to our NEOs for 2022 are set forth in the “2022 Summary Compensation Table”.
Long-Term Incentive Compensation
Form of Long-Term Incentive Awards For 2022
Cummins’ long-term incentive compensation program for 2022 consisted of performance shares and performance cash. The combination of these two long-term incentive vehicles supports Cummins’ pay-for-performance philosophy, provides appropriate incentives for participants to achieve financial targets, and provides strong linkage between the economic interests of participants, including our NEOs, and shareholders.
Target Grant Values
Cummins’ TMCC generally sets the target long-term incentive values for officers on average at the median of the market. Grant values are set using a market-based economic valuation methodology which converts the targeted value of the grants into a number of performance shares and a targeted dollar amount of performance cash. The number of performance shares granted is based on a three-month average daily trading day stock price in the final quarter of Cummins’ prior year to mitigate the impact of temporary stock price spikes or drops on the number of shares to be granted.
The target long-term incentive values for 2022 for our NEOs were as follows:
Officer
​ ​
2022 Target
Long-Term
Incentive Value
​
Steph Disher
​ ​ ​ $ 350,000 ​ ​
Jack Kienzler
​ ​ ​ $ 50,000 ​ ​
Mark Osowick
​ ​ ​ $ 275,000 ​ ​
Toni Y. Hickey
​ ​ ​ $ 50,000 ​ ​
Charles Masters
​ ​ ​ $ 70,000 ​ ​
 
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Performance Plan Measures
Since the 2019-2021 long-term performance cycle, Cummins has used two metrics for long-term performance shares and performance cash: ROIC, which has an 80% weighting, and EBITDA, which has a 20% weighting. Cummins’ TMCC reaffirmed these metrics were appropriate for the 2022-2024 award cycle as Cummins continued to focus on both growth and delivering strong returns on the capital it invests. Cummins’ TMCC believes that, together, these metrics generally tend to strongly correlate with total shareholder return.
ROIC and EBITDA Performance Targets for the 2020-2022 Award Cycle
For the 2020-2022 performance cycle, Cummins set a stable ROIC target of 15%, which represented a target that was both above the median of its peer group as well as a challenging goal across the 3-year performance period. Cummins endeavors to maintain a stable target as long as its strategy remains the same in delivering competitive long-term returns. Cummins also established a cumulative 3-year EBITDA goal that Cummins’ TMCC deemed to be challenging, yet realistic, and consistent with its long-term strategy and financial plans.
ROIC for compensation purposes equals: average earnings before interest expense and non-controlling interests after taxes for the 3-year performance period ÷ average invested capital for the 3-year performance period. EBITDA for compensation purposes equals cumulative earnings before interest expense, income taxes, non-controlling Interests, depreciation and amortization for the 3-year performance period.
The table below summarizes the ROIC and EBITDA targets for the 2020-2022 award cycle.
​ ​ ​
ROIC Goal
(80% Weighting)
​ ​
ROIC Goal
as% of
Target
​ ​
EBITDA Goal
($ million)
(20% Weighting)
​ ​
EBITDA Goal
as % of Target
​ ​
ROIC and
EBITDA
Payouts as %
of Target(1)
​
>Maximum
​ ​ ​ ​ 19.50% ​ ​ ​ ​ ​ 130% ​ ​ ​ ​ $ 12,422 ​ ​ ​ ​ ​ 115% ​ ​ ​ ​ ​ 200% ​ ​
Target
​ ​ ​ ​ 15.00% ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ $ 10,802 ​ ​ ​ ​ ​ 100% ​ ​ ​ ​ ​ 100% ​ ​
Threshold
​ ​ ​ ​ 10.50% ​ ​ ​ ​ ​ 70% ​ ​ ​ ​ $ 9,182 ​ ​ ​ ​ ​ 85% ​ ​ ​ ​ ​ 10% ​ ​
<Threshold(2) ​ ​ ​ ​ 10.50% ​ ​ ​ ​ ​ <70% ​ ​ ​ ​ <$ 9,182 ​ ​ ​ ​ ​ <85% ​ ​ ​ ​ ​ 0% ​ ​
​
(1)
Interpolate for performance between discrete points
​
(2)
Plan does not require that both measures are above threshold for a payout to occur
​
2020-2022 Long-Term Performance Shares and Performance Cash Payouts
The 2020-2022 long-term performance cash payouts for our NEOs are set forth in the “Summary Compensation Table.”
Going Forward
Cummins’ stock options held by our employees, including our NEOs, at the time of the completion of this offering, will remain outstanding; unvested stock options will accelerate and vest. For the performance awards in the 2021-2023 and 2022-2024 award cycles, Cummins’ TMCC will freeze the pay-out factors mid-cycle for Atmus employees based on actual Cummins performance (ROIC and EBITDA) to date through the completion of this offering and prorate the awards. The prorated performance cash will be paid out at the normal time after the end of the original performance cycle. The prorated performance shares for the portion of the performance period prior to the completion of this offering will be converted to time-vesting RSUs relating to Atmus common stock that will vest at the completion of the original performance cycle. The remaining value of the long-term incentives will be converted into Atmus stub cycle plans as discussed above.
Cummins’ TMCC has approved the program with the objective of making sure it is effective with respect to retaining and motivating skilled executives and aligning the interests of management and our
 
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shareholders. The type of awards used for our program have been determined to be 70% PSUs and 30% RSUs. For a discussion of awards for stub cycles 2021-2023 and 2022-2024, see “— How Performance Measures and Goals are Determined — Going Forward.” Other than for those stub cycles, the performance stock units will have a three-year performance period. The restricted stock units will have three-year ratable vesting. The performance metrics for the performance stock units will be 50% Cumulative EBITDA and 50% ROIC. The shares awarded at threshold performance will be 10% of target shares and the shares awarded at maximum performance will be 200% of target shares.
The target long-term incentive values for our NEOs for 2023 are as follows:
Officer
​ ​
2023 Target
Long-Term
Incentive Value
​
Steph Disher
​ ​ ​ $ 2,800,000 ​ ​
Jack Kienzler
​ ​ ​ $ 680,000 ​ ​
Mark Osowick
​ ​ ​ $ 275,000 ​ ​
Toni Y. Hickey
​ ​ ​ $ 350,000 ​ ​
Charles Masters
​ ​ ​ $ 350,000 ​ ​
Atmus expects to make one-time “launch grants” in the form of RSUs to our leaders primarily at the director and above levels following the completion of the offering. Consistent with our compensation philosophy, the purpose of these grants will be to reinforce an ownership stake and retain critical leadership in our business. Specific grant amounts and provisions have not yet been determined or approved by our TMCC.
The Compensation Decision Process
Role of Cummins’ Chief Executive Officer
For other officers below the level of Cummins’ CEO, including our NEOs, Cummins’ CEO considers performance and makes individual recommendations to Cummins’ TMCC on salary, annual incentive targets, and long-term incentive targets. This review occurs annually at the February Cummins’ TMCC meeting, which is the first meeting of the year and provides the earliest opportunity to review and assess individual and corporate performance for the previous year.
Cummins’ TMCC evaluates each officer’s compensation relative to the market median for similar positions and considers internal equity and the experience, tenure, potential and performance of each officer and modifies and approves, as appropriate, these recommendations.
Role and Independence of Cummins’ Compensation Consultant
For 2022, Cummins’ TMCC engaged Farient as its independent compensation consultant to provide input and advice to Cummins’ TMCC. Farient also advises the Cummins’ TMCC on non- employee director compensation. Other than the services provided to Cummins’ TMCC, Farient does not provide any other services to Cummins. Cummins’ TMCC maintains a formal process to ensure the independence of any executive compensation advisor engaged by our TMCC, including consideration of all factors relevant to the advisor’s independence from management, including those factors specified by the NYSE listing rules. Cummins’ TMCC assessed the independence of Farient in light of those factors and concluded that Farient is an independent compensation advisor and that its work for our TMCC did not raise any conflict of interest.
Cummins’ TMCC oversees the work of the consultant and has final authority to hire or terminate any consultant. Our TMCC also annually reviews structural safeguards to assure the independence of the consultant.
Going Forward
Cummins’ TMCC engaged Farient to advise on our compensation programs while planning for this offering. In late 2022, our TMCC engaged Farient as its independent compensation consultant. We
 
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anticipate that, following the completion of this offering, the roles of Farient and our management in connection with the executive compensation process will be similar to Cummins’ approach.
Annual Compensation Risk Assessment
In 2022, Cummins’ TMCC conducted its annual risk assessment of Cummins’ compensation policies and practices. Cummins’ TMCC evaluated the levels of risk-taking encouraged by Cummins’ compensation arrangements to determine whether they were appropriate in the context of its strategic plan and annual budget, its compensation objectives, and Cummins’ overall risk profile. Cummins’ TMCC also reviewed the robust risk-mitigation features of Cummins’ compensation program, the most significant of which are outlined below.
​
Pay Mix
​ ​ The three primary elements of Cummins’ executive compensation program are salary, annual bonus, and long-term incentive compensation. Cummins targets the median of the market for its total compensation package. This approach mitigates the need for executives to take significant risks to earn average competitive compensation and also ensures that the interests of Cummins’ executives are closely aligned with those of its shareholders. ​
​
Performance- Based Measurement
​ ​ The performance goals set forth in Cummins’ annual bonus and long-term incentive plans are based upon budgeted levels that are reviewed and approved by Cummins’ TMCC. Cummins believes these goals are challenging yet attainable at their targeted levels without the need to take inappropriate risks, take actions that would violate the Cummins’ Code of Business Conduct, or make material changes to Cummins’ long-term business strategy or operations. Payouts under both incentive plans are capped at 200% of target to make it less likely that executives would pursue outsized short-term achievements at the expense of the long term. ​
​
Time Horizon
​ ​ Cummins’ long-term incentive plan awards are based on a three-year performance period, which encourages employees to focus on the sustained growth of Cummins rather than seeking potentially unsustainable short-term gains. ​
​
Clawback Policy
​ ​ Amounts paid to any officer under Cummins’ annual bonus or long-term incentive compensation plans are subject to recovery in accordance with the Cummins’ recoupment policy, as described below. ​
​
Other Risk Mitigators
​ ​ Cummins pays incentive compensation only after its audited financial results are complete and Cummins’ TMCC has certified performance results and the associated incentive awards. Additionally, Cummins has stock ownership requirements for all officers that ensure the interests of Cummins’ leaders and shareholders are aligned. Cummins also prohibits officers from engaging in forms of hedging or monetization transactions involving the establishment of a short position in its securities and from entering into any arrangement that, directly or indirectly, involves the use of its securities as collateral for a loan. ​
 
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​
Exclusion of Unusual Items
​ ​ In measuring financial performance under Cummins’ annual short- and long-term bonus plans, Cummins’ TMCC has discretion to adjust performance results that reflect significant transactions or other unusual items if such events were not anticipated at the time performance targets were initially established. Cummins believes allowing these exclusions ensures its executives will focus on the merits of proposed transactions for Cummins rather than the effect a proposed action may have on incentive compensation. ​
As a result of its review, Cummins’ TMCC concluded that Cummins had a balanced executive compensation program for 2022 that did not drive excessive financial risk-taking. Cummins believes that risks arising from its compensation policies and practices are not reasonably likely to have a material adverse effect on Cummins.
Going Forward
We anticipate the risk assessment and mitigation approach we use for our compensation programs will initially be similar to Cummins. Following the completion of this offering, our TMCC will review the compensation program and design and may make changes to align them to our compensation philosophy and business needs, taking into account risk and risk mitigation strategies.
Benefits
Cummins’ officers, including our NEOs, participate in a full range of health, welfare and retirement benefits and are covered by the same plans as other exempt employees. Cummins targets its total benefit package to be at the median of the market.
In addition to these benefits, Cummins’ U.S. officers, which include our CEO and CHRO, participate in a supplemental life insurance and deferred income program that is designed to attract and retain key leadership talent in senior positions. This program provides additional life insurance equal to three times salary while the officer is an active employee, and supplemental retirement payments, which are offset by and coordinated with payments from Cummins’ regular retirement plans.
The supplemental retirement provision “tops up” the pension available from Cummins’ regular pension plans to provide a total benefit based on a percentage of the officer’s highest average consecutive 60-month salary and annual bonus received during the last 10 years of employment. The total replacement formula is 2% for each of the first 20 years and 1% for each of the next 10 years, with a maximum 50% total benefit for most participants. Our CEO and CHRO participate in the current Cummins supplemental retirement plan.
A majority of Cummins’ employees, including our NEOs, are eligible to participate in Cummins’ employee stock purchase plan. Under the employee stock purchase plan, each eligible employee may authorize the withholding of 1-15% of base pay each pay period to be used to purchase shares of Cummins’ common stock for the employee’s account on the open market. Cummins makes a matching contribution in cash in an amount sufficient to give employees a 15% discount on the purchase price of these shares.
Going Forward
Atmus’s TMCC is reviewing our retirement, savings and benefit programs and may make changes from programs that Cummins maintained immediately prior to the conclusion of this offering to align our programs with our strategic priorities.
Perquisites
Perquisites do not constitute a major element of Cummins’ executive compensation program.
 
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Cummins’ officers, including our CEO and CHRO, are entitled to the services of a financial counselor for estate- and tax-planning advice and tax return preparation. Cummins pays the fees for these services, which are detailed in the Summary Compensation Table.
Cummins’ officers, including our CEO and CHRO, are eligible to use Cummins’ aircraft for reasonable personal use, following a prescribed approval process. Cummins’ TMCC reviews the level of usage annually. Cummins believes that allowing officers to use a Cummins-owned plane for limited personal use saves time and provides additional security for them, which ultimately benefits Cummins. In 2022, none of our NEOs made personal use of Cummins’ aircraft.
Executive physical examinations are available for all officers, which includes our CEO and CHRO. Cummins’ TMCC considers this practice to be good corporate governance and a direct benefit to Cummins’ shareholders.
Going Forward
Our TMCC will evaluate the use of perquisites as part of our overall compensation strategy and seek to provide a level of perquisites appropriate to our company. We will provide company-paid financial counseling services for estate- and tax-planning advice and tax return preparation, supplemental disability coverage, and executive physical examinations.
Executive Compensation Policies
Compensation Recoupment
Cummins’ incentive compensation awards are subject to its compensation recoupment, or “clawback” policy. This policy provides that, if any of its financial statements are required to be materially restated due to the fraudulent actions of any officer, Cummins’ TMCC may direct that Cummins recover all or a portion of any award or any past or future compensation other than salary from the responsible officer with respect to any year for which its financial results are adversely affected by such restatement.
Effective January 1, 2021, Cummins adopted a modified clawback policy under which Cummins is also authorized to recover incentive-based compensation erroneously awarded to an officer on the basis of a financial reporting measure that is subject to an accounting restatement. The modified clawback policy also authorizes Cummins to recover incentive compensation paid or awarded to an officer if the officer engages in certain types of misconduct specified in the policy and that misconduct has caused, or might reasonably be expected to cause, significant reputational or financial harm to Cummins.
Going Forward
We have adopted a formal clawback policy that will go into effect following this offering. The clawback policy is similar to Cummins’ policy. We expect to amend our policy in a timely manner to the extent necessary to ensure compliance with the final SEC and NYSE rules on clawbacks.
Post-Employment Compensation (other than in connection with a change in control)
Cummins does not have formal severance agreements with any of its NEOs or with any of our NEOs, and we do not anticipate entering into severance or employment agreements with any of our NEOs in connection with this offering. However, Cummins has a policy of paying severance under certain circumstances to officers and other employees whose employment is terminated, and certain of Cummins’ plans provide for other benefits upon certain change-in-control events and terminations of employment. These arrangements are described in detail under “Potential Payments Upon Termination or Change in Control.” The purposes of these benefits are to encourage our key executives to concentrate on taking actions that are in the best interests of our shareholders without regard to whether such actions may ultimately have an adverse impact on their job security, and to enable key executives to provide objective advice on any potential change in control without undue concern for their personal financial situations. Cummins’ TMCC periodically reviews and modifies these benefits to ensure they continue to meet these objectives.
 
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Cummins’ severance policy provides the following benefits to our NEOs upon termination of employment without “cause”:
​
For Our Chief Executive Officer and Chief
Human Resources Officer
​ ​
For Our Other Named Executive Officers
​
​
•
Severance equal to one year’s salary plus pro-rated annual bonus, calculated at the actual payout factor and paid at the normal time
​
 ​ ​
•
Severance equal to nine months’ salary plus pro-rated annual bonus, calculated at the actual payout factor and paid at the normal time
​
 ​
​
•
Health Insurance and out placement services benefits paid during the continuation severance period
​
 ​ ​
•
Health Insurance and out placement services benefits paid during the continuation severance period
​
 ​
Going Forward
Atmus TMCC has adopted a tailored severance policy for implementation following the completion of this offering. This policy is designed to be consistent with prevailing market practice and good governance guidelines. The policy covers our leadership officers and will provide for the following benefits upon termination of employment without “cause.”
​
For Our Chief Executive Officer
​ ​
For Other Leadership Officers, including NEOs
​
​
•
Severance equal to two years’ salary, paid monthly over two years, plus a pro-rated annual bonus for the year in which termination occurs, calculated at the actual payout factor and paid at the normal time
​
 ​ ​
•
Severance equal to one year’s salary, paid monthly over one year, plus a pro-rated actual bonus for the year in which termination occurs, calculated at the actual payout factor and paid at the normal time
​
 ​
​
•
Health insurance, outplacement service and financial counseling benefits paid during the continuation severance period
​
 ​ ​
•
Health insurance, outplacement service and financial counseling benefits paid during the continuation severance period
​
 ​
Unvested equity awards are treated in accordance with the governing plan documents and grant agreements. Under the current agreements, unvested equity awards are forfeited in the event of termination without “cause.”
Post-Employment Compensation (in connection with a change in control)
Cummins has a policy of paying severance under certain circumstances to officers whose employment is terminated in connection with a change in control. However, our other NEOs (except our CEO and our Chief Human Resources Officer) are not covered by this policy, except as otherwise provided in any specific share or bonus plan, so they may not receive any enhanced severance in connection with a change in control as compared to a non-change-in-control context.
Awards under Cummins’ long-term compensation plans provide for accelerated vesting upon a change in control only if the awards are not assumed or replaced or if the award holder’s employment is also terminated by Cummins (or the surviving entity) without cause or by the award holder with good reason within two years after the change in control.
The purposes of these benefits are to encourage Cummins’ key executives to concentrate on taking actions that are in the best interests of Cummins’ shareholders without regard to whether such actions may ultimately have an adverse impact on their job security, and to enable key executives to provide objective advice on any potential change in control without undue concern for their personal financial situations.
Under Cummins’ change in control compensation protection arrangements, benefits would be provided following a qualified change in control and termination without “cause” by Cummins or termination by the officer for “good reason” within two years of the change in control.
 
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Upon the occurrence of both triggering events, the following benefits would be provided to our NEOs:
​
For Our Chief Executive Officer
and our Chief Human Resources Officer
​ ​
For Our Other NEOs
​
​
•
Severance equal to the sum of one year’s salary plus annual target bonus
​
•
Full vesting of unvested stock options
​
•
Payout of performance shares and performance cash at target level
​
•
Continuation for a one-year severance period of certain retirement benefits or an equivalent cash payment
​
•
Continuation for a one-year severance period of certain insurance benefits
​
 ​ ​
•
Severance equal to the sum of nine months’ salary plus pro-rated annual bonus, calculated at the actual payout factor and paid at the normal time (assumes normal severance treatment)
​
•
Full vesting of unvested stock options
​
•
Payout of performance shares and performance cash at target level
​
 ​
The Cummins change-in-control compensation protection arrangements do not provide for tax gross- ups for excise taxes imposed under the “golden parachute” excise tax provisions of Code Sections 280G and 4999. Instead, the arrangements provide that, if excise taxes are imposed because of the “golden parachute” excise tax provisions of Code Sections 280G and 4999, change-in-control compensation protections will either be cut back to below the level that would trigger the imposition of the excise taxes, or paid in full and subjected to the excise taxes, whichever results in the better after-tax outcome to the affected person.
Going Forward
Cummins’ TMCC has adopted a tailored change in control severance policy for our implementation following the completion of this offering. This policy is designed to be consistent with prevailing market practice and good governance guidelines. Our change in control policy will cover our leadership officers and will provide for the following benefits upon termination of employment without “cause” or for “good reason” within the 60 days preceding, or the two years following, the change-in-control.
​
For Our Chief Executive Officer
​ ​
For Our NEOs Other Than Our CEO
​
​
•
Severance equal to three times the sum of annual salary plus the annual target bonus
​
 ​ ​
•
Severance equal to two times the sum of annual salary plus the annual target bonus
​
 ​
​
•
Health insurance, outplacement service and financial counseling benefits
​
 ​ ​
•
Health insurance, outplacement service and financial counseling benefits
​
 ​
Unvested equity and performance cash awards would be treated in accordance with the governing plan documents and grant agreements. Under the current plan document, if the awards would not remain in effect following the change in control, then all unvested awards would become vested (at the target level of achievement, for performance awards) at the time of the change in control. If the awards do continue in effect after the change in control, then the awards would vest in full (at the target level of achievement, for performance awards) if the award holder is terminated without “cause” or for “good reason” within the two years following the change in control.
Like Cummins, we will not provide tax gross-ups for excise taxes imposed because of the “golden parachute” excise tax provisions of Code Sections 280G and 4999. Also like Cummins, we will instead provide that, if excise taxes are imposed because of the golden parachute excise tax provisions of Code Sections 280G and 4999, our change-in-control compensation will either be cut back to below the level that would trigger the imposition of the excise taxes, or paid in full and be subject to the excise taxes, whichever results in the better after-tax outcome to the affected person.
Confidentiality and Non-Compete Agreements
Each of Cummins’ officers, including our CEO, has signed an agreement not to disclose Cummins’ confidential information or to accept employment with certain competitors during, and for 12 months after, the time the officer is employed by Cummins.
 
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Employment Transition and Release Agreement with Mark Osowick
On August 26, 2022, Cummins and Atmus entered into an employment transition and release agreement with Mark Osowick (the “employment agreement”). A summary of the material terms of this agreement is set forth below and is qualified in its entirety by reference to the text of the employment agreement, filed herewith. Mr. Osowick is currently a Cummins employee serving as Atmus’s Chief Human Resources Officer.
Pursuant to the employment agreement and upon the completion of this offering, Mr. Osowick will retire from Cummins and will immediately begin serving as Atmus’s Chief Human Resources Officer to assist with the transition until the appointment of a longer-term Chief Human Resources Officer. His employment will be on an at-will basis for an initial six-month term, with an option to extend for an additional six months. Mr. Osowick is entitled to the following compensation:
•
a salary at an annual rate of $370,000;
​
•
a variable compensation bonus based on his salary provided that the Chief Executive Officer, in her sole discretion, determines that Mr. Osowick is meeting performance expectations, applying a target equal to the target applied to Mr. Osowick’s 2022 Cummins Variable Compensation targets, pro-rated; and
​
•
a cash replacement bonus based on an assumed target value of grants that Mr. Osowick may have received in 2023 had he been eligible, pro-rated for any partial year of service or expected retirement date.
​
Pursuant to the employment agreement, in consideration for Mr. Osowick’s changing retirement plans, Atmus will also pay Mr. Osowick:
•
a lump sum cash bonus to account for the difference between the value of compensation Mr. Osowick is expected to realize from his performance shares and performance cash awards related to Cummins’ 2020 – 2022, 2021 – 2023, and 2022 – 2024 grant cycles, and the value he would have been expected to realize from such grants had he retired from Cummins in June 2023; and
​
•
a lump sum cash bonus to account for (1) the difference in the present value of Cummins’ Supplemental Life Insurance and Deferred Income Plan (“SERP”) annuity payments that Mr. Osowick would have received had he retired from Cummins in June 2023, compared to the present value of SERP annuity payments that he will receive upon his separation from service, and (2) the pro rata portion of a target grant level for 2023 of $275,000 and any launch grant, assuming a separation from service in 2023.
​
In connection with the execution of the employment agreement, Mr. Osowick also accepted and executed a release agreement.
Stock Ownership Requirements
Cummins’ TMCC believes Cummins’ officers should own a significant amount of Cummins’ stock to further link their economic interests to those of Cummins’ shareholders. Our CEO, as an officer of Cummins, is required to own a number of shares of Cummins’ common stock having a total value equal to one times her salary.
An officer’s direct and indirect ownership of Cummins’ common stock counts toward the ownership requirements whereas unexercised stock options and unearned performance shares do not.
Because Cummins’ stock value may vary, ownership requirements are expressed as a set number of shares for defined salary bands. The number of required shares is reviewed annually and established by Cummins’ TMCC based on an average stock price over a three-year period.
Cummins’ officers have five years from the date of initial appointment to meet their ownership requirement. An officer whose salary increases to a new band (and higher stock ownership requirement) has three years from the date of the increase to achieve the higher level. Subject to limited exceptions,
 
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officers may not sell any shares until they reach their stock ownership guideline, and then they may only sell Cummins’ shares to the extent their stock ownership would not drop below their required level.
Going Forward
Atmus TMCC has adopted ownership guidelines for our officers that will be implemented upon the completion of this offering. These guidelines are:
​
Position
​ ​
Required Value of Company Stock Ownership
​
​ Chief Executive Officer ​ ​ 5 times salary ​
​ Chief Financial Officer ​ ​ 3 times salary ​
​ Chief Human Resources Officer ​ ​ 2 times salary ​
​ Chief Legal Officer & Corporate Secretary ​ ​ 2 times salary ​
​ VP Engine Products and VP Supply Chain ​ ​ 2 times salary ​
Shares counting toward the guideline will include shares owned outright, regardless of how they are acquired, plus 50% of the value of unvested RSUs. Those subject to a guideline will be required to hold the after-tax value of shares earned through our compensation programs until the guidelines are met. Compliance with the guidelines will be evaluated using the current stock price at the time of evaluation multiplied by the number of shares held, divided by the executive’s salary at the time of the evaluation.
Pledging and Hedging Policy
Cummins maintains a policy under which its officers and directors are prohibited from engaging in forms of hedging or monetization transactions involving the establishment of a short position in Cummins’ common stock, such as zero-cost collars and forward sale contracts. They are also prohibited from entering into any arrangement that, directly or indirectly, involves the pledge of Cummins’ securities or other use of Cummins’ securities as collateral for a loan. Cummins’ anti-pledging and anti-hedging policy does not apply to employees who are not officers or directors.
Going Forward
Cummins’ TMCC has adopted the same pledging and hedging polices for Atmus. These policies will be implemented following the completion of this offering. Following the completion of this offering, our TMCC is expected to review and evaluate these policies periodically.
 
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2022 Summary Compensation Table
The Summary Compensation Table and notes show all compensation paid to or earned by our NEOs for 2022 under Cummins’ compensation programs and plans. Following the completion of this offering, our NEOs will receive compensation and benefits under our compensation programs and plans.
Name and Principal Position
​ ​
Year
​ ​
Salary
​ ​
Bonus(1)
​ ​
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
​
Steph Disher...........................
Chief Executive Officer
​ ​ ​ ​ 2022 ​ ​ ​ ​ $ 392,045 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 195,012 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 189,894 ​ ​ ​ ​ $          — ​ ​ ​ ​ $ 129,942 ​ ​ ​ ​ $ 906,893 ​ ​
Jack Kienzler .........................
Chief Financial Officer
​ ​ ​ ​ 2022 ​ ​ ​ ​ $ 272,541 ​ ​ ​ ​ $ 63,750 ​ ​ ​ ​ $ 27,260 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 86,039 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 33,077 ​ ​ ​ ​ $ 482,667 ​ ​
Mark Osowick.........................
Chief Human Resources Officer
​ ​ ​ ​ 2022 ​ ​ ​ ​ $ 370,000 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 153,562 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 231,200 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 20,821 ​ ​ ​ ​ $ 775,583 ​ ​
Toni Y. Hickey........................
Chief Legal Officer and Corporate Secretary
​ ​ ​ ​ 2022 ​ ​ ​ ​ $ 332,031 ​ ​ ​ ​ $ 50,610 ​ ​ ​ ​ $ 27,260 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 93,104 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 30,680 ​ ​ ​ ​ $ 533,685 ​ ​
Charles Masters.....................
Vice President, Engine Products
​ ​ ​ ​ 2022 ​ ​ ​ ​ $ 311,098 ​ ​ ​ ​ $ 30,350 ​ ​ ​ ​ $ 39,981 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 96,904 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 11,885 ​ ​ ​ ​ $ 490,218 ​ ​
​
(1)
Jack Kienzler, Toni Hickey and Charles Masters received supplemental payments from August 1 through December 31, 2022 totaling $63,750, $25,610 and $30,350, respectively, representing a portion of the difference between their salaries as in effect as of August 1, 2022 and their anticipated higher salaries in connection with this offering. The payments were made to recognize the executives’ enhanced scope of responsibilities and contributions during the latter part of 2022. These supplemental payments are included as eligible earnings for computing the 2022 annual bonuses paid in March 2023. Toni Hickey also received a one-time bonus of $25,000 in recognition of her leadership in Cummins diversity initiatives.
​
(2)
The Stock Awards column represents the fair value on the grant date, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, which we refer to as ASC Topic 718, for stock awards, which were made pursuant to the Cummins 2012 Omnibus Incentive Plan, based upon the probable outcome of the performance conditions, consistent with the estimate of aggregate compensation cost to be recognized over the service period determined as of the grant date under ASC Topic 718. Pursuant to SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. The values shown relate entirely to performance shares for each of the NEOs. Performance shares are earned based on Cummins’ financial performance over a three-year period, and the shares earned are not restricted after the performance period. The maximum values of the 2022 awards at the grant date assuming the highest level of performance conditions are attained are as follows: Steph Disher — $390,024; Jack Kienzler — $54,519; Mark Osowick — $307,124 Toni Hickey — $54,519; Charles Masters — $79,961.
​
(3)
As described above under the heading “Long-Term Incentive Compensation,” for Cummins’ 2022 long-term incentive program, the TMCC eliminated stock options from the pay mix and weighted performance shares 70% and performance cash 30%. Accordingly, no stock option awards were granted to our NEOs in 2022.
​
(4)
Cummins’ annual bonuses are performance based, not discretionary, and are therefore included as Non-Equity Incentive Plan Compensation. The amounts shown in this column for 2022 consist of (i) payments to be made in March 2023 under the Annual Bonus Plan for 2022 performance and (ii) payments for the performance cash component of Cummins’ long term incentive compensation program, which will be paid in March 2023 based on Cummins’ 2020-2022 performance. The payments for each Named Executive Officer from these sources were:
​
Name of Officer
​ ​
Annual Bonus Plan
​ ​
Performance Cash
​ ​
Total
​
Steph Disher
​ ​ ​ $ 164,694 ​ ​ ​ ​ $ 25,200 ​ ​ ​ ​ $ 189,894 ​ ​
Jack Kienzler
​ ​ ​ $ 68,039 ​ ​ ​ ​ $ 18,000 ​ ​ ​ ​ $ 86,039 ​ ​
Mark Osowick
​ ​ ​ $ 129,500 ​ ​ ​ ​ $ 101,700 ​ ​ ​ ​ $ 231,200 ​ ​
Toni Y. Hickey
​ ​ ​ $ 75,104 ​ ​ ​ ​ $ 18,000 ​ ​ ​ ​ $ 93,104 ​ ​
Charles Masters
​ ​ ​ $ 71,704 ​ ​ ​ ​ $ 25,200 ​ ​ ​ ​ $ 96,904 ​ ​
 
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(5)
The 2022 aggregate changes in the actuarial present value of each NEO’s pension plans and the above market earnings on non-qualified deferred compensation are as follows:
​
​ ​ ​
Steph
Disher
​ ​
Jack
Kienzler
​ ​
Mark
Osowick
​ ​
Toni Y.
Hickey
​ ​
Charles
Masters
​
Cummins Pension Plan A (Qualified)
​ ​ ​ $ 16,780 ​ ​ ​ ​ $ (21,455) ​ ​ ​ ​ $ (9,960) ​ ​ ​ ​ $ (18,773) ​ ​ ​ ​ $ (39,591) ​ ​
Cummins Excess Benefit Plan (Non-qualified)
​ ​ ​ $ 17,211 ​ ​ ​ ​ $ 1,618 ​ ​ ​ ​ $ 7,551 ​ ​ ​ ​ $ (3,385) ​ ​ ​ ​ $ 3,982 ​ ​
Supplemental Life Insurance and Deferred Income Program (Non-qualified)
​ ​ ​ $ (86,031) ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (1,062,462) ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
Sub-total
​ ​ ​ $ (52,040) ​ ​ ​ ​ $ (19,837) ​ ​ ​ ​ $ (1,064,871) ​ ​ ​ ​ $ (22,158) ​ ​ ​ ​ $ (35,609) ​ ​
Above-market earnings on non-qualified deferred compensation
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
TOTAL
​ ​ ​ $ (52,040) ​ ​ ​ ​ $ (19,837) ​ ​ ​ ​ $ (1,064,871) ​ ​ ​ ​ $ (22,158) ​ ​ ​ ​ $ (35,609) ​ ​
The amounts shown in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column and in the table immediately above reflect our NEOs’ years of credited service under Cummins’ pension plans. “Above market” is defined as the amount of earnings that exceeded 120% of the applicable federal long term rate. The present value of the benefits depends in part on the interest rate used to discount the future benefits under the pension plan to their present value.
(6)
The amounts in this column represent the cost of all other compensation provided to the NEOs as set forth in the following tables:
​
2022 All Other Compensation Table
Name of Officer
​ ​
Company
Contributions
under the
Retirement and
Savings Plan
​ ​
Expat
Allowance(1)
​ ​
Other(2)
​ ​
Total
​
Steph Disher
​ ​ ​ $ 11,175 ​ ​ ​ ​ $ 57,106 ​ ​ ​ ​ $ 61,661 ​ ​ ​ ​ $ 129,942 ​ ​
Jack Kienzler
​ ​ ​ $ 11,175 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 21,902 ​ ​ ​ ​ $ 33,077 ​ ​
Mark Osowick
​ ​ ​ $ 11,175 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 9,646 ​ ​ ​ ​ $ 20,821 ​ ​
Toni Y. Hickey
​ ​ ​ $ 11,175 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 19,505 ​ ​ ​ ​ $ 30,680 ​ ​
Charles Masters
​ ​ ​ $ 11,175 ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 710 ​ ​ ​ ​ $ 11,885 ​ ​
​
(1)
The amounts disclosed in this column consist of expatriate allowances and related expenses and benefits provided for our NEOs who attain expatriate status by relocating outside of their home country, which include the following:
​
Name of Officer
​ ​
Host Country
Housing
Expenses
​ ​
Dependent
Education
Allowance
​ ​
Lump Sum
Transition
Allowance
​ ​
Localization/​
Preview Trip
​ ​
Other(a)
​ ​
Total
​
Steph Disher
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 12,324 ​ ​ ​ ​ $ 24,741 ​ ​ ​ ​ $ 20,041 ​ ​ ​ ​ $ 57,106 ​ ​
​
(a)
The amounts disclosed in this column include host country transportation costs, family allowance, home country household goods storage costs, home leave airfare costs, tax payment/preparation costs, other expenses, VAT/ GST, administrative fees, goods and services cost differential and miscellaneous relocation allowance.
​
The amounts above reflect payments made in 2022 with respect to Steph Disher’s expatriate status, which ended in 2021.
(2)
The amounts disclosed in this column represent the costs of financial counseling, tax assistance, life insurance, relocation and other cash allowances provided as a benefit to the NEOs.
​
 
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Grants of Plan-Based Awards for Fiscal 2022
Name
​ ​
Grant
Date
​ ​
Date of
Committee
Action
​ ​
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
​ ​
Estimated Future Payouts Under
Equity Incentive Plan Awards
​ ​
Stock Awards:
Number of
Shares or
Units
(#)
​ ​
Awards:
Number of
Securities
Underlying
Options
(#)
​ ​
Exercise
or Base
Price of
Option
Awards
(#)
​ ​
Grant
Date Fair
Value of
Stock and
Option
Awards
(#)(1)
​
​
Threshold
($)
​ ​
Target
($)
​ ​
Maximum
($)
​ ​
Threshold
(#)
​ ​
Target
(#)
​ ​
Maximum
(#)
​
Steph Disher...........
​ ​ ​ ​ N/A ​ ​ ​ ​ ​ N/A (1) ​ ​ ​ ​ $ 23,523 ​ ​ ​ ​ $ 235,227 ​ ​ ​ ​ $ 470,455 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ N/A ​ ​ ​ ​ ​ N/A(2) ​ ​ ​ ​ $ 10,500 ​ ​ ​ ​ $ 105,000 ​ ​ ​ ​ $ 210,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 4/4/22 ​ ​ ​ ​ ​ 2/3/22(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 77 ​ ​ ​ ​ ​ 770 ​ ​ ​ ​ ​ 1,540 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 139,932 ​ ​
​ ​ ​ ​ ​ 7/1/22 ​ ​ ​ ​ ​ 7/15/22(4) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 31 ​ ​ ​ ​ ​ 305 ​ ​ ​ ​ ​ 610 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 55,080 ​ ​
Jack Kienzler...........
​ ​ ​ ​ N/A ​ ​ ​ ​ ​ N/A (1) ​ ​ ​ ​ $ 7,722 ​ ​ ​ ​ $ 77,220 ​ ​ ​ ​ $ 154,440 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ N/A ​ ​ ​ ​ ​ N/A(2) ​ ​ ​ ​ $ 1,500 ​ ​ ​ ​ $ 15,000 ​ ​ ​ ​ $ 30,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 4/4/22 ​ ​ ​ ​ ​ 2/3/22(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 150 ​ ​ ​ ​ ​ 300 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 27,260 ​ ​
​ ​ ​ ​ ​ 10/3/22(5) ​ ​ ​ ​ ​ N/A(5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 25 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 5,240 ​ ​
Mark Osowick.........
​ ​ ​ ​ N/A ​ ​ ​ ​ ​ N/A(1) ​ ​ ​ ​ $ 18,500 ​ ​ ​ ​ $ 185,000 ​ ​ ​ ​ $ 370,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ N/A ​ ​ ​ ​ ​ N/A(2) ​ ​ ​ ​ $ 8,300 ​ ​ ​ ​ $ 83,000 ​ ​ ​ ​ $ 166,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 4/4/22 ​ ​ ​ ​ ​ 2/3/22(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 85 ​ ​ ​ ​ ​ 845 ​ ​ ​ ​ ​ 1,690 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 153,562 ​ ​
Toni Y. Hickey.........
​ ​ ​ ​ N/A ​ ​ ​ ​ ​ N/A(1) ​ ​ ​ ​ $ 9,961 ​ ​ ​ ​ $ 99,609 ​ ​ ​ ​ $ 199,218 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ N/A ​ ​ ​ ​ ​ N/A(2) ​ ​ ​ ​ $ 1,500 ​ ​ ​ ​ $ 15,000 ​ ​ ​ ​ $ 30,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 4/4/22 ​ ​ ​ ​ ​ 2/3/22(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 15 ​ ​ ​ ​ ​ 150 ​ ​ ​ ​ ​ 300 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 27,260 ​ ​
​ ​ ​ ​ ​ 10/3/22(5) ​ ​ ​ ​ ​ N/A(5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 25 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 5,240 ​ ​
Charles Masters......
​ ​ ​ ​ N/A ​ ​ ​ ​ ​ N/A(1) ​ ​ ​ ​ $ 9,333 ​ ​ ​ ​ $ 93,329 ​ ​ ​ ​ $ 186,659 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ N/A ​ ​ ​ ​ ​ N/A(2) ​ ​ ​ ​ $ 2,100 ​ ​ ​ ​ $ 21,000 ​ ​ ​ ​ $ 42,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 4/4/22 ​ ​ ​ ​ ​ 2/3/22(3) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 22 ​ ​ ​ ​ ​ 220 ​ ​ ​ ​ ​ 440 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 39,981 ​ ​
​ ​ ​ ​ ​ 10/3/22(5) ​ ​ ​ ​ ​ N/A(5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 25 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ $ 5,240 ​ ​
​
(1)
NEOs participate in Cummins’ annual bonus plan, as described in the Compensation Discussion and Analysis. The payout is calculated based on a formula approved by the Cummins’ TMCC annually. Each participant is assigned a participation rate as a percent of salary. For purposes of this plan, Cummins’ performance is measured by ROANA as defined by the annual plan. The annual bonus is calculated as follows:
​
(annual bonus) equals (annual base salary paid for calendar year) times (participation percentage assigned to each NEO) times (payout factor).
The payout factor could range from zero to 2.0, in increments of 0.1.
(2)
In 2022 Cummins made target performance cash awards, expressed as dollar amounts, as part of the Cummins’ long term incentive compensation program under its 2012 Omnibus Incentive Plan. A multiple of the target award is earned based on Cummins’ 2022-2024 performance for Return on Invested Capital (ROIC), weighted at 80%, and EBITDA, weighted at 20%. The amount earned and paid under the three-year target award can range from zero to 200% of the target award amount. The target award will be earned if Cummins’ ROIC and EBITDA levels for 2022-2024 are equal to the targeted ROIC and EBITDA levels established for that period as described in the Compensation Discussion and Analysis. The threshold payment (10% of the target award) will be earned if Cummins’ ROIC is 70% of the targeted ROIC for the period and EBITDA is 85% of the targeted EBITDA for the period. The maximum payment (200% of the target award) will be earned if Cummins’ ROIC is 30% above the targeted ROIC for the period and EBITDA is 15% above the targeted EBITDA for the period. To the extent earned, payments will be made in March 2025. In addition, for Steph Disher, the information includes the off-cycle grant of performance shares in connection with her promotion under substantially the same terms and conditions summarized above.
​
(3)
In 2022, Cummins made target awards of performance shares under its 2012 Omnibus Incentive Plan. The awards are expressed as a target number of shares of Cummins’ common stock. Shares are earned based on Cummins’ ROIC and EBITDA performance during 2022-2024, based on the same measures as established for the target performance cash awards. The number of shares earned can range from zero to 200% of the target award number of shares. The target award number of shares will be earned if Cummins’ ROIC and EBITDA for 2022-2024 are equal to the targeted ROIC and EBITDA levels established for the period as described in the Compensation Discussion and Analysis. Dividends are payable only at the conclusion of the performance period on the shares that become earned.
​
(4)
Off-cycle grant of performance shares in connection with promotion of Steph Disher under substantially the same terms and conditions summarized in note 2 above.
​
(5)
Off-cycle grant of restricted share units in connection with a Cummins broad-based retention award offered to employees in select job grades (excluding Cummins officers) with restricted share units ratably vesting on the first, second, and third anniversary of grant date.
​
 
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TABLE OF CONTENTS
 
Outstanding Equity Awards at 2022 Fiscal Year-End
​ ​ ​
OUTSTANDING EQUITY AWARDS AT 2022 YEAR-END
​
Name
​ ​
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
​ ​
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
​ ​
Option
Exercise
Price ($)
​ ​
Option
Expiration
Date
​ ​
Number of
Shares of
Units of
Stock that
Have Not
Vested (#)
​ ​
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
​ ​
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested (#)(3)
​ ​
Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units,
or Other
Rights That
Have Not
Vested
($)(4)
​
Steph Disher....................................
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 750(1) ​ ​ ​ ​ $ 142.12 ​ ​ ​
4/6/2030
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,025 ​ ​ ​ ​ $ 490,637 ​ ​
​ ​ ​ ​ ​ 860(2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 163.43 ​ ​ ​
4/4/2029
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 610(5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 160.10 ​ ​ ​
4/3/2028
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Jack Kienzler....................................
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 530(1) ​ ​ ​ ​ $ 142.12 ​ ​ ​
4/6/2030
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 420 ​ ​ ​ ​ $ 101,762 ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 25(12) ​ ​ ​ ​ $ 6,057(4) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Mark Osowick...................................
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,930(1) ​ ​ ​ ​ $ 142.12 ​ ​ ​
4/6/2030
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,330 ​ ​ ​ ​ $ 564,536 ​ ​
​ ​ ​ ​ ​ 3,390(2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 163.43 ​ ​ ​
4/4/2029
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 2,390(5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 160.10 ​ ​ ​
4/3/2028
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 3,125(6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 149.72 ​ ​ ​
4/3/2027
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 4,360(7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 109.09 ​ ​ ​
4/4/2026
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 2,010(8) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 136.82 ​ ​ ​
4/2/2025
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Toni Y. Hickey..................................
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 530(1) ​ ​ ​ ​ $ 142.12 ​ ​ ​
4/6/2030
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 420 ​ ​ ​ ​ $ 101,762 ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 25(12) ​ ​ ​ ​ $ 6,057 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Charles Masters...............................
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 750(1) ​ ​ ​ ​ $ 142.12 ​ ​ ​
4/6/2030
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 600 ​ ​ ​ ​ $ 145,374 ​ ​
​ ​ ​ ​ ​ 860(2) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 163.43 ​ ​ ​
4/4/2029
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 610(5) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 160.10 ​ ​ ​
4/3/2028
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 815(6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 149.72 ​ ​ ​
4/3/2027
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 1,550(7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 109.09 ​ ​ ​
4/4/2026
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 720(8) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 136.82 ​ ​ ​
4/2/2025
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 100 (10) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 134.96 ​ ​ ​
2/10/2025
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ 350 (11) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 149.34 ​ ​ ​
4/2/2024
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 25(12) ​ ​ ​ ​ $ 6,057 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
(1)
These stock options were granted on April 6, 2020 and will vest and become exercisable with respect to all of the underlying shares of Cummins’ common stock on the third anniversary of the grant date, or upon the recipient’s earlier retirement, death, or disability, so long as the recipient is continuously employed by us or a subsidiary until such a date or event.
​
(2)
These stock options were granted on April 4, 2019 and will vest and become exercisable with respect to all of the underlying shares of Cummins’ common stock on the third anniversary of the grant date, or upon the recipient’s earlier retirement, death, or disability, so long as the recipient is continuously employed by us or a subsidiary until such a date or event.
​
(3)
Target awards of performance shares were granted in April 2020, April 2021 (and an off cycle award in November 2021 for Steph Disher), and April 2022 (and an off cycle award in July 2022 for Steph Disher) to be earned in a multiple ranging from zero to two times the target awards, based on Cummins’ performance during 2020-2022, 2021-2023 and 2022-2024, respectively. The performance period of the April 2020 grant ended December 31, 2022 and the shares earned from the April 2020 grant will be awarded in March 2023. The performance shares earned from the April 2021 grant will be awarded in March 2024, and the performance shares earned from the April 2022 grant will be awarded in March 2025. The number of shares outstanding represents the target number of performance shares granted in 2020, 2021 and 2022.
​
(4)
The price per share used to calculate the market value was $242.29, the unadjusted closing price of Cummins’ common stock on the NYSE on December 30, 2022, the last trading day of the year.
​
(5)
These stock options were granted on April 3, 2018 and vested and became exercisable with respect to all of the underlying shares of Cummins’ common stock on the third anniversary of the grant date.
​
(6)
These stock options were granted on April 3, 2017 and vested and became exercisable with respect to all of the underlying shares of Cummins’ common stock on the third anniversary of the grant date.
​
(7)
These stock options were granted on April 4, 2016 and vested and became exercisable with respect to all of the underlying shares of Cummins’ common stock on the third anniversary of the grant date.
​
(8)
These stock options were granted on April 2, 2015 and vested and became exercisable with respect to all of the underlying shares of Cummins’ common stock on the third anniversary of the grant date.
​
(9)
These stock options were granted on July 16, 2014 and vested and became exercisable with respect to all of the underlying shares of Cummins’ common stock on the third anniversary of the grant date.
​
 
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TABLE OF CONTENTS
 
(10)
These stock options were granted on February 10, 2014 and were fully vested upon grant.
​
(11)
These stock options were granted on April 2, 2014 and vested and became exercisable with respect to all of the underlying shares of Cummins’ Common Stock on the third anniversary of the grant date.
​
(12)
These restricted share units were granted on October 3, 2022 as part of a Cummins broad-based retention grant for employees in select job grades (excluding Cummins officers) and will ratably vest on the first, second, and third anniversary of grant.
​
Option Exercises and Stock Vested During Fiscal 2022
Name
​ ​
Number
of Shares
Acquired on
Exercise
(#)(1)
​ ​
Value
Realized on
Exercise
($)(2)
​ ​
Number
of Shares
Acquired on
Vesting
(#)(3)
​ ​
Value
Realized on
Vesting
($)(4)
​
Steph Disher
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 171 ​ ​ ​ ​ $ 33,528 ​ ​
Jack Kienzler
​ ​ ​ ​ 370 ​ ​ ​ ​ $ 28,419 ​ ​ ​ ​ ​ 72 ​ ​ ​ ​ $ 14,117 ​ ​
Mark Osowick
​ ​ ​ ​ 2,270 ​ ​ ​ ​ $ 182,013 ​ ​ ​ ​ ​ 670 ​ ​ ​ ​ $ 131,367 ​ ​
Toni Y. Hickey
​ ​ ​ ​ 1,290 ​ ​ ​ ​ $ 114,087 ​ ​ ​ ​ ​ 171 ​ ​ ​ ​ $ 33,528 ​ ​
Charles Masters
​ ​ ​ ​ 385 ​ ​ ​ ​ $ 49,111 ​ ​ ​ ​ ​ 171 ​ ​ ​ ​ $ 33,528 ​ ​
​
(1)
Represents the gross number of shares acquired upon exercise of vested options without taking into account any shares that may be withheld to cover option exercise price or applicable tax obligations.
​
(2)
Represents the value of exercised options calculated by multiplying (i) the number of shares of Cummins’ common stock to which the exercise of the option related, by (ii) the difference between the per share unadjusted closing price of Cummins’ common stock on the NYSE on the date of exercise and the exercise price of the options.
​
(3)
Target awards of performance shares were granted in April 2019 to be earned in a multiple ranging from zero to two times the target award, based on Cummins’ performance during 2019-2021. These performance shares were earned and became vested on March 1, 2022. The number of shares disclosed represents the gross number of shares acquired upon vesting without taking into account any shares that may be withheld to cover applicable tax obligations.
​
(4)
The value realized on vesting for the performance shares was calculated using the unadjusted closing price of Cummins’ common stock on March 1, 2022 ($196.07).
​
Pension Benefits for 2022
​ ​ ​ ​ ​ ​
Credited Accumulated During Last
​
Name
​ ​
Plan Name
​ ​
Number of
Years
Service
(#)
​ ​
Present
Value
of
($)
​ ​
Payments
Fiscal
Year
($)
​
Steph Disher
​ ​ Cummins Pension Plan (Qualified) ​ ​ ​ ​ 9 ​ ​ ​ ​ $ 18,116 ​ ​ ​ ​ $ — ​ ​
​ ​ ​ Excess Benefit Retirement Plan (Non-qualified) ​ ​ ​ ​ 9 ​ ​ ​ ​ $ 17,211 ​ ​ ​ ​ $ — ​ ​
​ ​ ​
Supplemental Life Insurance and Deferred Income Plan (Non-qualified)
​ ​ ​ ​ 9 ​ ​ ​ ​ $ 356,083 ​ ​ ​ ​ $ — ​ ​
Jack Kienzler
​ ​ Cummins Pension Plan (Qualified) ​ ​ ​ ​ 9 ​ ​ ​ ​ $ 76,831 ​ ​ ​ ​ $ — ​ ​
​ ​ ​ Excess Benefit Retirement Plan (Non-qualified) ​ ​ ​ ​ 9 ​ ​ ​ ​ $ 1,618 ​ ​ ​ ​ $ — ​ ​
​ ​ ​
Supplemental Life Insurance and Deferred Income Plan (Non-qualified)
​ ​ ​ ​ 9 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
Mark Osowick
​ ​ Cummins Pension Plan (Qualified) ​ ​ ​ ​ 29 ​ ​ ​ ​ $ 538,664 ​ ​ ​ ​ $ — ​ ​
​ ​ ​ Excess Benefit Retirement Plan (Non-qualified) ​ ​ ​ ​ 29 ​ ​ ​ ​ $ 142,417 ​ ​ ​ ​ $ — ​ ​
​ ​ ​
Supplemental Life Insurance and Deferred Income Plan (Non-qualified)
​ ​ ​ ​ 29 ​ ​ ​ ​ $ 2,651,121 ​ ​ ​ ​ $ — ​ ​
Toni Y. Hickey
​ ​ Cummins Pension Plan (Qualified) ​ ​ ​ ​ 10 ​ ​ ​ ​ $ 143,463 ​ ​ ​ ​ $ — ​ ​
​ ​ ​ Excess Benefit Retirement Plan (Non-qualified) ​ ​ ​ ​ 10 ​ ​ ​ ​ $ 45,445 ​ ​ ​ ​ $ — ​ ​
​ ​ ​
Supplemental Life Insurance and Deferred Income Plan (Non-qualified)
​ ​ ​ ​ 10 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
Charles Masters
​ ​ Cummins Pension Plan (Qualified) ​ ​ ​ ​ 19 ​ ​ ​ ​ $ 235,954 ​ ​ ​ ​ $ — ​ ​
​ ​ ​ Excess Benefit Retirement Plan (Non-qualified) ​ ​ ​ ​ 19 ​ ​ ​ ​ $ 13,457 ​ ​ ​ ​ $ — ​ ​
​ ​ ​
Supplemental Life Insurance and Deferred Income Plan (Non-qualified)
​ ​ ​ ​ 19 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
 
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2022 Nonqualified Deferred Compensation
None of our NEOs have participated in any non-qualified deferred compensation plans prior to December 31, 2022.
Potential Payments Upon Termination or Change of Control as of 2022 Year-End
The following table sets forth the payments that would have been paid to our NEOs in the event their employment was terminated on December 31, 2022, in connection with a change of control:
Payments
​ ​
Steph
Disher
​ ​
Jack
Kienzler
​ ​
Mark
Osowick
​ ​
Toni Y.
Hickey
​ ​
Charles
Masters
​
Severance(1) ​ ​ ​ $ 800,000 ​ ​ ​ ​ $ 293,039 ​ ​ ​ ​ $ 555,000 ​ ​ ​ ​ $ 329,010 ​ ​ ​ ​ $ 311,823 ​ ​
Unvested Stock Option Spread(2)
​ ​ ​ $ 75,128 ​ ​ ​ ​ $ 53,090 ​ ​ ​ ​ $ 293,498 ​ ​ ​ ​ $ 53,090 ​ ​ ​ ​ $ 75,128 ​ ​
Unvested Performance Cash(3)
​ ​ ​ $ 208,000 ​ ​ ​ ​ $ 50,000 ​ ​ ​ ​ $ 279,000 ​ ​ ​ ​ $ 50,000 ​ ​ ​ ​ $ 70,000 ​ ​
Unvested Performance Shares(4)
​ ​ ​ $ 490,637 ​ ​ ​ ​ $ 101,762 ​ ​ ​ ​ $ 564,536 ​ ​ ​ ​ $ 101,762 ​ ​ ​ ​ $ 145,374 ​ ​
Unvested Restricted Shares(5)
​ ​ ​ $ — ​ ​ ​ ​ $ 6,057 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 6,057 ​ ​ ​ ​ $ 6,057 ​ ​
Retirement Benefit Payment(6)
​ ​ ​ $ 356,083 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 2,651,121 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
Welfare Benefit Values(7)
​ ​ ​ $ 13,046 ​ ​ ​ ​ $ 9,785 ​ ​ ​ ​ $ 13,046 ​ ​ ​ ​ $ 9,785 ​ ​ ​ ​ $ 9,785 ​ ​
Financial Advisory and 401(k) Benefit(8)
​ ​ ​ $ 24,260 ​ ​ ​ ​ $ 11,175 ​ ​ ​ ​ $ 24,260 ​ ​ ​ ​ $ 11,175 ​ ​ ​ ​ $ 11,175 ​ ​
Reduction due to Best Net of Taxes Provision(9)
​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
Aggregate Payments
​ ​ ​ $ 1,967,154 ​ ​ ​ ​ $ 524,908 ​ ​ ​ ​ $ 4,380,461 ​ ​ ​ ​ $ 560,879 ​ ​ ​ ​ $ 629,342 ​ ​
​
(1)
For Steph Disher and Mark Osowick, severance payment is equal to one times their annual base salary at the time of the termination, plus one annual bonus payments at a 1.0 payout factor. For the other NEOs, regardless of whether the termination is in connection with a change in control, severance amounts are equal to 9 months of base salary plus a pro-rated annual bonus, calculated at the actual payout factor and paid at the normal time under the program. For purposes of this table, the actual bonus amounts received for 2022 was combined with 9 months of base salary as of December 31, 2022.
​
​
(2)
Total value of unvested stock options that would become vested upon a change in control, assuming a Cummins share price of $242.29 and a change in control date of December 31, 2022.
​
(3)
Payouts of all of the performance cash awards for the 2020-2022, 2021-2023, and 2022-2024 award cycles at the target level.
​
​
(4)
Payouts of all of the performance share awards for the 2020-2022. 2021-2023 and 2022-2024 award cycles at the target level assuming a $242.29 share price for all performance shares.
​
​
(5)
Payout of 25 restricted share units granted on October 3, 2022 that would become vested upon a change in control, assuming a Cummins share price of $242.29 and a change in control date of December 31, 2022.
​
(6)
Incremental actuarial value attributable to retirement for two years of additional service for Steph Disher and Mark Osowick. The other NEOs are not entitled to additional retirement benefits upon a change in control.
​
(7)
Estimated value associated with the continuation of life insurance, medical, dental, and disability benefits for one year for Steph Disher and 9 months for the other NEOs.
​
(8)
The calculation of the “Financial Advisory and 401(k) Benefit” is equal to one times the maximum annual financial advisory benefit, plus one times the annual Company Contribution under the Retirement and Savings Plan for Steph Disher and Mark Osowick.
​
(9)
The calculation of the “Reduction due to Best Net of Taxes Provision” is based upon a Code Section 280G excise tax rate of 20% and the highest marginal income tax rates for 2022. Furthermore, it was assumed that no value will be attributed to reasonable compensation. At the time of any change in control, a value may be so attributed, which would affect whether a reduction would be triggered and the amount of any such reduction.
​
The following table sets forth the payments that would have been paid to our NEOs in the event that their employment was terminated on December 31, 2022, otherwise than in connection with a change of control.
Payments
​ ​
Steph
Disher
​ ​
Jack Kienzler
​ ​
Mark
Osowick
​ ​
Toni Y. Hickey
​ ​
Charles Masters
​
Severance(1) ​ ​ ​ $ 664,694 ​ ​ ​ ​ $ 293,039 ​ ​ ​ ​ $ 499,500 ​ ​ ​ ​ $ 329,010 ​ ​ ​ ​ $ 311,823 ​ ​
 
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​
(1)
Under Cummins’ severance policies otherwise than in connection with a change in control, Steph Disher and Mark Osowick would receive one year’s base salary plus the pro-rated annual bonus, calculated at the actual payout factor and paid at the normal time under the program. For purposes of this table, the actual bonus amount received for 2022 was combined with their salary as of December 31, 2022. Under Cummins’ severance policies otherwise than in connection with a change in control, our other NEOs would receive 9 months of base salary plus the pro-rated annual bonus, calculated at the actual payout factor and paid at the normal time. For purposes of this table, the actual bonus amounts received for 2022 was combined with the 9 months of base salary as of December 31, 2022.
​
Equity Compensation Plan
2022 Omnibus Incentive Plan
In connection with this offering, our board of directors and our stockholder have adopted the Atmus Filtration Technologies Inc. 2022 Omnibus Incentive Plan (the “Plan”). The following is a summary of certain terms and conditions of the Plan. This summary is qualified in its entirety by reference to the Plan attached as an exhibit to the registration statement of which this prospectus forms a part. You are encouraged to read the full Plan.
Administration and Eligibility for Participation
The Plan will be administered by the compensation committee (the “Compensation Committee”) of our board of directors (our “Board”), the Board or another committee (we refer to the applicable committee or the Board, as the case may be, as the “administrator”). The administrator may designate any of the following as a participant under the Plan to the extent consistent with its authority: any of our or our affiliates’ officers or other employees or individuals engaged to become such an officer or employee, consultants who provide services to us or our affiliates and our non-employee directors. The selection of participants will be based upon the administrator’s opinion that the participant is in a position to contribute materially to our continued growth and development and to our long-term financial success.
The administrator has full discretionary authority to administer the Plan, including but not limited to the authority to: (1) interpret the provisions of the Plan; (2) prescribe, amend and rescind rules and regulations relating to the Plan; (3) correct any defect, supply any omission, or reconcile any inconsistency in any award or award agreement in the manner and to the extent it deems desirable to carry this Plan into effect; and (4) make all other determinations necessary or advisable for the administration of the Plan. All administrator determinations will be made in the sole discretion of the administrator and are final and binding on all interested parties.
Our Board may delegate some or all of its authority under the Plan to a committee of the board, and the Compensation Committee may delegate some or all of its authority under the Plan to a sub-committee or one or more of our officers, subject in each case to limitations specified in the Plan.
Types of Awards
Awards under the Plan may consist of stock options, stock appreciation rights, performance shares, performance units, restricted stock, restricted stock units, shares of our common stock (our “Common Stock”), dividend equivalent units, incentive cash awards or other awards based on our Common Stock. The administrator may grant any type of award to any participant it selects, but only our and our subsidiaries’ employees may receive grants of incentive stock options. Awards may be granted alone or in addition to, in tandem with, or (subject to the Plan’s prohibitions on repricing) in substitution for any other award (or any other award granted under another plan of ours or of any of our affiliates). We are also authorized to issue replacement awards (“Replacement Awards”) to current employees of ours or one of our affiliates as of the date immediately preceding the consummation of this offering who holds an awards under the Cummins Inc. 2012 Omnibus Incentive Plan as of a date immediately prior to the consummation of this offering (“Cummins Participants”) in connection with the adjustment and replacement of certain equity-based awards previously granted by Cummins. Notwithstanding any other provision of the Plan to the contrary, the number of shares to be subject to a Replacement Award and the other terms and conditions of each Replacement Award will be determined by the administrator, all in accordance with the terms of the employee matters agreement.
 
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Shares Reserved under the Plan
An aggregate of nine percent (9%) of the outstanding shares of our Common Stock immediately following the consummation of this offering will be reserved for issuance under the Plan. All of such shares may be issued pursuant to the exercise of incentive stock options.
The number of shares reserved for issuance under the Plan is reduced by the maximum number of shares, if any, that may be payable under an award as determined on the date of the grant of the award. An award that may be settled only in cash will not reduce the share reserved under the Plan.
In general, if (i) an award granted under the Plan lapses, expires, terminates or is cancelled without the issuance of shares, or the payment of other compensation with respect to shares covered by, the award (whether due currently or on a deferred basis); (ii) it is determined during or at the conclusion of the term of an award granted under the Plan that all or some portion of the shares with respect to which the award was granted will not be issuable, or that other compensation with respect to shares covered by the award will not be payable on the basis that the conditions for such issuance will not be satisfied; (iii) shares are forfeited under an award; or (iv) shares are issued under any award and we reacquire them pursuant to rights we reserved upon the issuance of the shares, then in each and every case such shares will again be available for issuance under the Plan. However, in no event shall the following shares be recredited to the Plan’s reserve: (1) shares purchased by us using proceeds from option exercises; (2) shares tendered or withheld in payment of the exercise price of an option or as a result of the net settlement of an outstanding stock appreciation right; or (3) shares tendered or withheld to satisfy federal, state or local tax withholding obligations.
The aggregate grant date fair value of equity-based awards granted to a non-employee director, when added to the cash fees earned by the non-employee director (without regard to any deferral elections), in any fiscal year will not exceed $750,000.
Options and Stock Appreciation Rights
Options
The administrator has the authority to grant stock options and to determine all terms and conditions of each stock option. A stock option gives the participant the right to purchase shares of our Common Stock at a fixed price, called the “option price,” after the vesting conditions of the option are met and prior to the date the option expires or terminates. The administrator fixes the option price per share of Common Stock, which may not be less than the fair market value of the Common Stock on the date of grant. Fair market value is defined as the last sales price of a share of our Common Stock for the date in question, or if no sales of our Common Stock occur on such date, on the last preceding date on which there was such a sale. The administrator determines the expiration date of each option, but the expiration date cannot be later than 10 years after the grant date. Options are exercisable at such times and are subject to such restrictions and conditions as the administrator deems necessary or advisable. The stock option exercise price is payable to us in full upon exercise.
The specific terms and conditions of a participant’s option will be set forth in an award agreement delivered to the participant.
Stock Appreciation Rights
The administrator has the authority to grant stock appreciation rights. A stock appreciation right is the right of a participant to receive cash in an amount, and/or Common Stock with a fair market value, equal to the appreciation of the fair market value of a share of Common Stock (called the “grant price”) during a specified period of time. The Plan provides that the administrator determines all terms and conditions of each stock appreciation right, including, among other things: whether (i) the stock appreciation right is granted independently of a stock option or relates to a stock option; (ii) a grant price that is not less than the fair market value of the Common Stock subject to the stock appreciation right on the date of grant; (iii) a term that must be no later than 10 years after the date of grant; and (iv) whether the stock appreciation right will settle in cash, Common Stock or a combination of the two.
 
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The specific terms and conditions of a participant’s stock appreciation right will be set forth in an award agreement delivered to the participant.
Repricing Prohibited
Neither the administrator nor any other person may (i) amend the terms of outstanding stock options or stock appreciation rights to reduce the exercise price of such outstanding stock options or stock appreciation rights; (ii) cancel outstanding stock options or stock appreciation rights in exchange for stock options or stock appreciation rights with an exercise price that is less than the exercise price of the original options or stock appreciation rights; or (iii) cancel outstanding stock options or stock appreciation rights with an exercise price above the current per share price of the Common Stock in exchange for cash or other securities.
Backdating and Reload Prohibited
The administrator may not grant a stock option or stock appreciation right with a grant date that is effective prior to the date the administrator takes action to approve such award or that provides a “reload” feature.
Performance and Stock Awards
The administrator has the authority to grant awards of restricted stock, restricted stock units, performance shares or performance units. Restricted stock means shares of Common Stock that are subject to a risk of forfeiture, restrictions on transfer or both a risk of forfeiture and restrictions on transfer. Restricted stock unit means the right to receive a payout in shares equal to the fair market value of one share of Common Stock. Performance shares means the right to receive shares of Common Stock to the extent performance goals are achieved. Performance unit means the right to receive a payout in shares valued in relation to a unit that has a designated dollar value or the value of which is equal to the fair market value of one or more shares of Common Stock, to the extent performance goals are achieved.
The administrator determines all terms and conditions of these types of awards, including, among other things: (i) whether performance goals need to be achieved for the participant to realize any portion of the benefit provided under the award; (ii) whether the restrictions imposed on restricted stock or restricted stock units will lapse, and any portion of the performance goals subject to an award will be deemed achieved, upon a participant’s death, disability or retirement, or such other circumstances as the administrator may specify; (iii) the length of the vesting and/or performance period and, if different, the date on which payment of the benefit provided under the award is made; (iv) with respect to performance units, whether to measure the value of each unit in relation to a designated dollar value or the fair market value of one or more shares of Common Stock; and (v) with respect to restricted stock units and performance units, whether the awards settle in cash, in shares of Common Stock, or in a combination of the two and whether an award will include the right to receive dividends or dividend equivalents.
The specific terms and conditions of a participant’s award of restricted stock, restricted stock units, performance shares or performance units will be set forth in an award agreement delivered to the participant.
Incentive Awards
The administrator has the authority to grant annual and long-term incentive awards. An incentive award is the right to receive a cash payment to the extent that one or more performance goals are achieved. The administrator determines all terms and conditions of an annual or long-term incentive award, including the performance goals, performance period, the potential amount payable and the timing of payment. The administrator must require that payment of all or any portion of the amount subject to the incentive award is contingent on the achievement of one or more performance goals during the period the administrator specifies. The administrator may deem that performance goals subject to an award are achieved upon a participant’s death, disability or retirement, or such other circumstances as
 
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the administrator may specify. The performance period for an annual incentive award generally must relate to a period of one fiscal year (subject to exceptions for new-hire and promotion awards), and the performance period for a long-term incentive award generally must relate to a period of more than twelve months.
The specific terms and conditions of a participant’s incentive award will be set forth in an award agreement or another document delivered to the participant.
Dividends and Dividend Equivalent Units
Prohibitions.   In no event may dividends or dividend equivalents be awarded with respect to options, stock appreciation rights or any other stock-based award that is not a full-value award. Notwithstanding anything to the contrary in the Plan, and for the avoidance of doubt, the Plan expressly prohibits the payment of dividends or dividend equivalent units on unvested awards for all equity award types.
Dividends.   If cash dividends are paid while restricted stock is unvested, then such dividends will either, at the discretion of the administrator, be (1) automatically reinvested as additional shares of restricted stock that are subject to the same terms and conditions, including the risk of forfeiture, as the original grant of restricted stock, or (2) paid in cash at the same time and the same extent that the restricted stock vests. For clarity, in no event will dividends be distributed to a Participant unless, until and to the same extent as the underlying restricted stock vests.
Dividend Equivalent Units.   The administrator may grant dividend equivalent units only in tandem with restricted stock units, performance shares or performance share units (the value of which is measured in relation to a share). Dividend equivalent units will either, at the discretion of the administrator, be (1) accumulated and paid, in cash or shares in the administrator’s discretion, at the same time and to the same extent that the tandem award vests or is earned or (2) reinvested in additional units that are subject to the same terms and conditions (including vesting and forfeiture) as the tandem award. For clarity, in no event will a participant receive payment with respect to a dividend equivalent units unless, until and to the same extent as the tandem award vests and is paid.
The specific terms and conditions of a participant’s rights to dividends or dividend equivalent units will be set forth in an award agreement delivered to the participant.
Other Awards
The administrator has the authority to grant other types of awards, which may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, shares of Common Stock, either alone or in addition to or in conjunction with other awards, and payable in shares of Common Stock or cash. Such awards may include shares of unrestricted Common Stock, which may be awarded, without limitation (except as provided in the Plan), as a bonus, in payment of director fees, in lieu of cash compensation, in exchange for cancellation of a compensation right, or upon the attainment of performance goals or otherwise, or rights to acquire shares of our Common Stock from us. The administrator determines all terms and conditions of the award, including the time or times at which such award is made and the number of shares of Common Stock to be granted pursuant to such award or to which such award relates. Any award that provides for purchase rights must be priced at 100% of the fair market value of our Common Stock on the date of the award.
The specific terms and conditions of a participant’s award will be set forth in an award agreement or another document delivered to the participant.
Transferability
Awards are not transferable other than by will or the laws of descent and distribution, unless the administrator allows a participant to designate in writing a beneficiary to exercise an award or receive payment under an award after the participant’s death, to transfer an award to the former spouse of the participant as required by a domestic relations order incident to a divorce or to transfer an award for no consideration.
 
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Adjustments to the Plan and Awards
If:
​
•
we are involved in a merger or other transaction in which our Common Stock is changed or exchanged;
​
​
•
we subdivide or combine our Common Stock or we declare a dividend payable in our Common Stock, other securities (other than stock purchase rights issued pursuant to a shareholder rights agreement) or other property;
​
​
•
we effect a cash dividend, the amount of which, on a per share basis, exceeds 10% of the fair market value of a share of Common Stock at the time the dividend is declared, or we effect any other dividend or other distribution on our Common Stock in the form of cash, or a repurchase of shares of Common Stock, that our Board determines is special or extraordinary in nature or that is in connection with a transaction that we characterize publicly as a recapitalization or reorganization involving our Common Stock; or
​
​
•
any other event occurs, which, in the judgment of the administrator necessitates an adjustment to prevent an increase or decrease in the benefits or potential benefits intended to be made available under the Plan;
​
​
•
then the administrator will, in a manner it deems equitable to prevent an increase or decrease in the benefits or potential benefits intended to be made available under the Plan and subject to certain provisions of the Code, adjust the number and type of shares of Common Stock subject to the Plan and which may, after the event, be made the subject of awards; the number and type of shares of Common Stock subject to outstanding awards; the grant, purchase or exercise price with respect to any award; and the performance goals of an award.
​
In any such case, the administrator may also provide for a cash payment to the holder of an outstanding award in exchange for the cancellation of all or a portion of the award. However, if the transaction or event constitutes a change in control, as defined in the Plan, then the payment must be at least as favorable to the holder as the greatest amount the holder could have received for such award under the change in control provisions of the Plan. The administrator may, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, and without affecting the number of shares of Common Stock otherwise reserved or available under the Plan, authorize the issuance or assumption of awards upon terms it deems appropriate.
Change in Control
The following describes what happens to a participant’s Plan awards upon a change in control unless (i) the participant has in effect an employment, retention, change of control, severance or similar agreement with us or an affiliate, or is subject to a policy that discusses the effect of a change in control on the participant’s awards (in which case such agreement or policy will control), or (ii) the participant’s award agreement or the Compensation Committee provides otherwise:
If the purchaser, successor or surviving corporation (or parent thereof), which we refer to as the “Successor,” agrees, then some or all outstanding awards will be continued, assumed, or replaced with the same type of award with similar terms and conditions, by the Successor in the transaction. If the participant’s employment with the Successor terminates in connection with or within twenty-four (24) months following the change in control for any reason other than an involuntary termination for cause or a voluntary termination by the participant without good reason, then all of the participant’s time-vesting awards that are in effect will be vested in full or deemed earned in full effective on the date of such termination; all of the participant’s performance-vesting awards for which the performance period has expired shall be paid or settled in full as of the date of such termination, based on actual performance; and all of the participant’s performance-vesting awards for which the performance period has not expired shall be paid or settled in full as of the date of such termination, calculated at the target performance level.
 
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If the provisions in the preceding paragraph does not apply, then, unless provided otherwise in an award agreement or by the Compensation Committee, immediately prior to the date of the change in control all awards that are then held by participants will be cancelled in exchange for the right to receive the following:
​
•
For each stock option or stock appreciation right, a cash payment equal to the excess of the change in control price (as determined by the administrator) of the shares of Common Stock covered by the stock option or stock appreciation right over the option price or grant price of such shares of Common Stock under the award;
​
​
•
For each share of restricted stock and each restricted stock unit, the change in control price;
​
​
•
For each performance share and/or performance unit that has been earned but not yet paid, a cash payment equal to the value of the performance share and/or performance unit that has been earned;
​
​
•
For each performance share and/or performance unit for which the performance period has not expired, a cash payment equal to the value of the performance share and/or performance unit calculated at the target performance level;
​
​
•
For all incentive awards that are earned but not yet paid, a cash payment equal to the value of the award that has been earned;
​
​
•
For all incentive awards for which the performance period has not expired, a cash payment equal to the amount payable under such awards, calculated at the target performance level;
​
​
•
For a dividend equivalent unit, a cash payment equal to the value of such unit; and
​
​
•
For all other awards, a cash payment based on the value of the award as of the date of the change in control.
​
The payments in respect of cancelled awards will be made as follows:
​
•
To the extent the payments are attributable (1) to awards that were fully vested and earned as of the date of the change in control, or (2) to stock options or stock appreciation rights (regardless of whether they were vested or earned), the payments will be made on the date of the change in control; and
​
​
•
To the extent the payments are attributable to awards (other than stock options and stock appreciation rights) that were unvested or unearned as of the date of the change in control, the payments will be made on the earlier of (1) 30 days after the termination of the participant’s employment with the Successor in connection with or within 24 months following the change in control for any reason other than an involuntary termination for cause or a voluntary termination by the participant without good reason or (2) the date the awards would have become vested or earned.
​
Any payment in respect of cancelled awards (other than stock options or stock appreciation rights) that were unvested or unearned as of the date of the change in control will be forfeited if the participant’s employment with the Successor is terminated involuntarily by the Successor for cause or voluntarily by the participant without good reason prior to the payment date.
A “change in control” is generally defined in the Plan as any of the following (after the consummation of this offering):
​
•
The occurrence of certain mergers, consolidations, statutory share exchanges or similar forms of corporation transactions, or certain dispositions of all or substantially all of our assets to an unaffiliated entity (if the transactions or dispositions require the approval of shareholders);
​
​
•
The approval by the shareholders of a plan or proposal for our dissolution;
​
 
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​
•
The acquisition by a person unaffiliated with our company of 25% or more of our outstanding voting securities as a result of specified types of transactions (excluding an exchange offer by Cummins following the consummation of this offering);
​
​
•
A change in the composition of a majority of our Board over a period of two years (if the new directors are not approved by the incumbent Board); or
​
​
•
Another event constituting a “change in control” within the meaning of the Securities and Exchange Commission’s proxy rules.
​
The Plan does not provide for tax gross-ups for excise taxes imposed because of the “golden parachute” excise tax provisions of the Code, i.e., Sections 280G and 4999, in connection with a change in control. Instead, the Plan provides that, if excise taxes would be imposed because of Sections 280G and 4999 of the Code, the payments or benefits to be received in connection with a change in control will either be cut back to below the level that would trigger the imposition of the excise taxes, or paid in full and be subject to the excise taxes, whichever results in the better after-tax outcome to the participant.
Duration of Plan
Unless earlier terminated by our Board, the Plan will remain in effect until the earlier of the tenth (10th) anniversary of the consummation of this offering or the date on which all Common Stock reserved for issuance under the Plan has been issued.
Termination and Amendment of Plan and Awards
Our Board or the administrator may amend or alter the Plan at any time, except:
​
•
our Board must approve any amendment to the Plan if we determine such approval is required by prior action of the Board, applicable corporate law or any other applicable law;
​
​
•
shareholders must approve any amendment to the Plan if we determine that such approval is required by Section 16 of the Securities Exchange Act of 1934, the listing requirements of any principal securities exchange or market on which our Common Stock is then traded, or any other applicable law; and
​
​
•
shareholders must approve any amendment to the Plan that materially increases the number of shares of Common Stock reserved under the Plan or that diminishes the protections provided by the Plan’s provisions on repricing or backdating stock options and stock appreciation rights.
​
Our Board or the administrator also may suspend, discontinue or terminate the Plan at any time, but the termination of the Plan will not affect the rights of participants with respect to awards previously granted to them, and all unexpired awards will continue in force after termination of the Plan except as they may lapse or be terminated by their own terms and conditions.
The administrator may modify, amend or cancel any award or waive any restrictions or conditions applicable to any award or the exercise of the award. Except as otherwise provided in the Plan or any award agreement, any modification or amendment that materially diminishes the rights of the participant or any other person that may have an interest in the award, will be effective only if agreed to by that participant or other person. The administrator does not need to obtain participant or other interested party consent, however, for the modification, amendment or cancellation of an award pursuant to the adjustment provisions of the Plan or to the extent the administrator deems such action necessary to comply with any applicable law, the listing requirements of any principal securities exchange or market on which our Common Stock is then traded, to preserve favorable accounting or tax treatment of any award for us or to the extent the administrator determines that such action does not materially and adversely affect the value of an award or that such action is in the best interest of the affected participant or any other person(s) as may then have an interest in the award. The termination of the Plan will not affect the rights of participants with respect to awards previously granted to them, and all unexpired
 
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awards will continue in force after termination of the Plan except as they may lapse or be terminated by their own terms and conditions.
Cancellation; Disgorgement and Clawback
The administrator may terminate or cause a participant to forfeit an award, and require a participant to disgorge to us any gains attributable to an award, if the participant engages in any action constituting, as determined by the administrator in its discretion, a breach of any agreement between the participant and us or one of our affiliates concerning noncompetition, nonsolicitation, confidentiality, trade secrets, intellectual property, nondisparagement or similar obligations.
Any awards granted under the Plan, and any shares issued or cash paid pursuant to an award, will be subject to any recoupment or clawback policy that we adopt from time to time, or any recoupment or similar requirement otherwise made applicable by law, regulation or listing standards.
Unless an award agreement specifies otherwise, the administrator may cancel any award at any time if the participant is not in compliance with all applicable provisions of the award agreement and the Plan.
Foreign Participation
To assure the viability of awards granted to participants employed or residing in foreign countries, the administrator may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the administrator may approve such supplements to, or amendments, restatements or alternative versions of, the Plan as it determines is necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that the administrator approves for purposes of using the Plan in a foreign country will not affect the terms of the Plan for any other country.
Director Compensation
Directors who are employed by us or Cummins (or any of their respective affiliates) are not eligible to receive compensation for their service on our board of directors. We anticipate that all independent members of our board of directors will receive an annual retention fee of $90,000 in cash and an annual equity award of restricted stock units having a grant date fair value equal to $120,000, vesting in equal quarterly installments until the earlier of the first anniversary of the grant date or the date of our next annual meeting of stockholders, that the chair of our board of directors also will receive an additional annual retainer of $100,000 in cash, that a non-employee lead director, if one is appointed, also will receive an additional annual retainer of $25,000 in cash, the chair of our audit committee and the chair of our TMCC will receive an additional annual retainer of $15,000 in cash and the chair of our governance and nominating committee also will receive an additional annual retainer of $10,000 in cash.
The following table provides information about the compensation of our non-employee directors for 2022.
Name
​ ​
Fees
Earned
or Paid
in Cash
($)(1)
​ ​
Stock
Awards
($)(2)
​ ​
Total
​
Steve Macadam
​ ​ ​ $ 158,750 ​ ​ ​ ​ $ 65,378 ​ ​ ​ ​ $ 224,128 ​ ​
R. Edwin Bennett
​ ​ ​ $ 30,000 ​ ​ ​ ​ $ 39,885 ​ ​ ​ ​ $ 69,885 ​ ​
Gretchen Haggerty
​ ​ ​ $ 63,750 ​ ​ ​ ​ $ 65,378 ​ ​ ​ ​ $ 129,128 ​ ​
Jane Leipold
​ ​ ​ $ 63,750 ​ ​ ​ ​ $ 65,378 ​ ​ ​ ​ $ 129,128 ​ ​
​
(1)
Fees Earned or Paid in 2022 were as follows:
​
 
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Director
​ ​
Board
Retainer
​ ​
Board Chair
Director Fee
​ ​
Committee
Chaired
​ ​
Committee
Chair Fees
​ ​
Total
​
Steve Macadam
​ ​ ​ $ 48,750 ​ ​ ​ ​ $ 100,000 ​ ​ ​
Nominating &
Corporate Governance
​ ​ ​ $ 10,000 ​ ​ ​ ​ $ 158,750 ​ ​
R. Edwin Bennett
​ ​ ​ $ 30,000 ​ ​ ​ ​ $ — ​ ​ ​ ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 30,000 ​ ​
Gretchen Haggerty
​ ​ ​ $ 48,750 ​ ​ ​ ​ $ — ​ ​ ​
Audit Committee
​ ​ ​ $ 15,000 ​ ​ ​ ​ $ 63,750 ​ ​
Jane Leipold
​ ​ ​ $ 48,750 ​ ​ ​ ​ $ — ​ ​ ​
TMCC Committee
​ ​ ​ $ 15,000 ​ ​ ​ ​ $ 63,750 ​ ​
​
(2)
The stock awards column represents the aggregate grant date fair value of restricted stock units granted to the directors for their service in 2022, computed in accordance with ASC Topic 718. The grant date fair value differs from the $10,000 per month target value of the awards because the number of restricted stock units granted was determined using a 20-day average of the closing price of Cummins common stock.
​
 
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares and percentage of our common stock beneficially owned (i) immediately prior to the completion of this offering and (ii) as adjusted to give effect to this offering, by:
•
each person or group known by us to beneficially own more than 5% of our common stock;
​
•
each person whom we anticipate will serve on our Board of Directors as of immediately following the completion of this offering and each of our named executive officers; and
​
•
all persons whom we anticipate will serve on our Board of Directors or as our executive officers as of immediately following the completion of this offering as a group.
​
For U.S. securities law purposes, Cummins, in its capacity as selling stockholder, is offering shares of our common stock. Instead of selling shares of common stock directly to the underwriters for cash, Cummins will first exchange the shares of our common stock to be sold in this offering with J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC, which we refer to, in such role, as the “debt-for-equity exchange parties,” for short term indebtedness in the form of commercial paper to be issued by, or a loan made to, Cummins shortly prior to the pricing of this offering. The indebtedness will be held 50% and 50% by J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC, respectively. The debt-for-equity exchange parties will then sell the shares to the underwriters for cash. The debt-for-equity exchange between Cummins and the debt-for-equity exchange parties is expected to occur on or before the settlement date of this offering, and the consummation of the debt-for-equity exchange is a condition to the settlement of the debt-for-equity exchange parties’ sale of the shares to the underwriters. If the underwriters exercise their option to purchase additional shares of common stock from the debt-for-equity exchange parties, Cummins will exchange such additional shares of common stock with the debt-for-equity exchange parties. The debt-for-equity exchange parties will then sell such additional shares of common stock for outstanding indebtedness of Cummins held by the debt-for-equity exchange parties to the underwriters for cash. See “Underwriting (Conflicts of Interest) — The debt-for-equity exchange.” Prior to completion of this offering, we will be a wholly-owned subsidiary of Cummins.
Except as otherwise indicated, each person or entity included in the table above has sole voting and investment power with respect to the shares beneficially owned by that person or entity. Percentage of beneficial ownership is based on       shares of common stock outstanding immediately prior to the completion of this offering. Unless otherwise indicated, the address for each holder listed below is c/o Atmus Filtration Technologies Inc., 26 Century Boulevard Nashville, Tennessee 37214.
 
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​ ​ ​
Common stock
beneficially owned
before this offering
​ ​
Shares of common stock
beneficially owned after this
offering (assuming no exercise
of the underwriters’ option to
purchase additional shares)
​ ​
Shares of common stock
beneficially owned after this
offering (assuming full exercise
of the underwriters’ option to
purchase additional shares)
​
Name and address of
Beneficial Owner 		​ ​
Number
​ ​
%
​ ​
Number
​ ​
%
​ ​
Number
​ ​
%
​
5% stockholder ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cummins ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 100.0% ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Named executive officers and
directors
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Steph Disher
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Jack Kienzler
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Mark Osowick
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Toni Y. Hickey
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Charles Masters
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Stephen Macadam
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Sharon Barner
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
R. Edwin Bennett
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cristina Burrola
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Gretchen Haggerty
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Jane Leipold
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Earl Newsome
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Tony Satterthwaite
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Mark Smith
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Nathan Stoner
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
All Directors and Executive Officers as a Group (15 persons)
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
 
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Relationship with Cummins
Following the separation and this offering, we and Cummins will operate separately, each as a public company. We will enter into a separation agreement with Cummins. In connection with the separation, we will also enter into various other agreements to effect the separation and provide a framework for our relationship with Cummins after the separation, including an employee matters agreement, an intellectual property license agreement, a registration rights agreement, a first-fit supply agreement, an aftermarket supply agreement, a tax matters agreement, a data sharing agreement, a royalty sharing agreement, a transition services agreement and a transitional trademark license agreement. These agreements will provide for the allocation between us and Cummins of Cummins’ assets, employees, liabilities and obligations (including its investments, property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after our separation from Cummins and will govern certain relationships between us and Cummins after the separation.
The following summaries of each of the agreements listed above are qualified in their entireties by reference to the full text of the applicable agreements which are filed as exhibits to the registration statement (other than the data sharing agreement and royalty sharing agreement, each of which is not material in amount or significance) of which this prospectus forms a part.
Our related party sales to Cummins were $302.2 million, $266.8 million and $225.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. For further information regarding our historical related party transactions with Cummins, see Note 15, “RELATIONSHIP WITH PARENT AND RELATED PARTIES” to the historical combined financial statements included elsewhere in this prospectus.
Separation Agreement
We intend to enter into a separation agreement with Cummins prior to the consummation of this offering. The separation agreement will set forth our agreements with Cummins regarding the principal actions to be taken in connection with the separation. It will also set forth other agreements that govern certain aspects of our relationship with Cummins following the separation and this offering.
Transfer of Assets and Assumption of Liabilities
The separation agreement will identify assets to be transferred, liabilities to be assumed and contracts to be assigned to each of Cummins and us as part of the separation, and will describe when and how these transfers, assumptions and assignments will occur, though many of the transfers, assumptions and assignments will have already occurred prior to the parties’ entering into the separation agreement. The separation agreement will provide for those transfers of assets and assumptions of liabilities that are necessary in connection with the separation so that we and Cummins retain the assets necessary to operate our respective businesses and retain or assume the liabilities allocated in accordance with the separation. The separation agreement will also provide for the settlement or extinguishment of certain liabilities and other obligations between us and Cummins. In particular, the separation agreement will provide that, subject to the terms and conditions contained in the separation agreement:
•
“Atmus Assets” ​(as defined in the separation agreement), including, but not limited to, the equity interests of our subsidiaries, assets reflected on our balance sheet and assets exclusively relating to our business, will be retained by or transferred to us or one of our subsidiaries, except for certain exceptions in the separation agreement or one of the other agreements described below;
​
•
“Atmus Liabilities” ​(as defined in the separation agreement), including, but not limited to, the following will be retained by or transferred to us or one of our subsidiaries:
​
•
all of the liabilities (whether accrued, contingent or otherwise, and subject to certain exceptions) to the extent related to, arising out of or resulting from our business;
​
 
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•
any and all “Atmus Environmental Liabilities” ​(as defined in the separation agreement);
​
•
liabilities (whether accrued, contingent or otherwise) reflected on our balance sheet;
​
•
liabilities (whether accrued, contingent or otherwise) relating to, arising out of, or resulting from, whether prior to, at or after our separation from Cummins, any infringement, misappropriation or other violation of any intellectual property of any other person related to the conduct of our business;
​
•
any product liability claims or other claims of third parties to the extent relating to, arising out of or resulting from any product developed, manufactured, marketed, distributed, leased or sold by our business;
​
•
liabilities relating to, arising out of, or resulting from any indebtedness of any subsidiary of ours or any indebtedness secured exclusively by any of our assets;
​
•
liabilities (whether accrued, contingent or otherwise) relating to, arising out of or resulting from any form, registration statement, schedule or similar disclosure document filed or furnished with the SEC, to the extent relating to this offering or filed or furnished by us from and after the closing of this offering; and
​
•
all assets and liabilities (whether accrued, contingent or otherwise) of Cummins will be retained by or transferred to Cummins or one of its subsidiaries (other than us or one of our subsidiaries), except as set forth in the separation agreement or one of the other agreements described below and except for certain exceptions in the separation agreement or one of the other agreements described below that will result in us retaining or assuming certain other specified liabilities.
​
Except to the extent expressly addressed in the separation agreement or an ancillary agreement, the allocation of liabilities with respect to taxes is solely covered by the tax matters agreement described below.
Except as expressly set forth in the separation agreement or any other transaction agreement, all assets will be transferred on an “as-is, where-is” basis, and the respective transferees will bear the economic and legal risks that any conveyance will prove to be insufficient to vest in the transferee good title, free and clear of any security interest, that any necessary consents or governmental approvals are not obtained and that any requirements of laws or judgments are not complied with.
Information in this prospectus with respect to the assets and liabilities of the parties following the separation is presented based on the allocation of such assets and liabilities pursuant to the separation agreement, unless the context otherwise requires. Certain of the liabilities and obligations to be assumed by one party or for which one party will have an indemnification obligation under the separation agreement and the other agreements relating to the separation are, and following the separation may continue to be, the legal or contractual liabilities or obligations of another party. Each such party that continues to be subject to such legal or contractual liability or obligation will rely on the applicable party that assumed the liability or obligation or the applicable party that undertook an indemnification obligation with respect to the liability or obligation, as applicable, under the separation agreement, to satisfy the performance and payment obligations or indemnification obligations with respect to such legal or contractual liability or obligation.
Non-Compete
We and Cummins will agree to certain non-compete terms, consistent with historical practices, that will limit Cummins and its wholly-owned and controlled affiliates from designing, developing, manufacturing or selling competing products for a period ending at the earlier of five years from separation, the expiration or termination of either the first-fit supply agreement or aftermarket supply agreement, or a change of control event. However, Cummins will be able to re-sell the products it purchases from us. Notwithstanding Cummins’ non-compete obligations under the separation agreement, Cummins will have the ability to engage in certain sourcing activities permitted under the first-fit and aftermarket supply agreements. For a discussion of those activities, see “— First-Fit Supply Agreement” and “— Aftermarket Supply Agreement”.
 
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Cash Adjustments
As consideration for the filtration business Cummins is contributing to us in connection with the separation, Cummins will receive shares of our common stock, and the net proceeds of the term loan debt financing that we will enter into prior to the closing of this offering. See “Description of Material Indebtedness.”
Further Assurances; Separation of Guarantees
To the extent that any transfers of assets or assumptions of liabilities contemplated by the separation agreement have not been consummated on or prior to the date of this offering, the parties will agree to cooperate with each other to effect such transfers or assumptions while holding such assets or liabilities for the benefit of the appropriate party so that all the benefits and burdens relating to such asset or liability inure to the party entitled to receive or assume such asset or liability. Each party will agree to use commercially reasonable efforts to take or to cause to be taken all actions, and to do, or to cause to be done, all things reasonably necessary under applicable law or contractual obligations to consummate and make effective the transactions contemplated by the separation agreement and other transaction agreements. Additionally, we and Cummins will use commercially reasonable efforts to remove us and our subsidiaries as a guarantor of liabilities (including surety bonds) retained by Cummins and its subsidiaries and to remove Cummins and its subsidiaries as a guarantor of liabilities (including surety bonds) to be assumed by us.
Shared Contracts
Certain shared contracts are to be assigned or amended to facilitate the separation. If such contracts may not be assigned or amended, the parties are required to take reasonable actions to cause the appropriate party to receive the benefit of the contract for a specified period of time after the separation is complete.
Release of Claims and Indemnification
Except as otherwise provided in the separation agreement or any ancillary agreement, each party will release and forever discharge the other party and its subsidiaries and affiliates from all liabilities 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 separation. The releases will not extend to obligations or liabilities under any agreements between the parties that remain in effect following the separation pursuant to the separation agreement or any other transaction agreement. These releases will be subject to certain exceptions set forth in the separation agreement.
The separation agreement will provide for cross-indemnities that, except as otherwise provided in the separation agreement, are principally designed to place financial responsibility for the obligations and liabilities allocated to us under the separation agreement with us and financial responsibility for the obligations and liabilities allocated to Cummins under the separation agreement with Cummins. Specifically, each party will indemnify, defend and hold harmless the other party, its affiliates and subsidiaries and each of its officers, directors, employees and agents for any losses arising out of or due to:
•
the liabilities or alleged liabilities the indemnifying party assumed or retained pursuant to the separation agreement, including liabilities for the operation of the indemnifying party's business, whether prior to, at, or after this offering;
​
•
the assets the indemnifying party assumed or retained pursuant to the separation agreement;
​
•
any breach by the indemnifying party of any provision of the separation agreement or any other transaction agreement unless such other agreement expressly provides for separate indemnification therein; and
​
•
any untrue statement or alleged untrue statement of a material fact contained in any document filed with the SEC, or any omission or alleged omission to state a material fact required to be
​
 
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stated in any document filed with the SEC after this offering and to the extent such statement or omission was made based on information provided by the indemnifying party.
Each party’s aforementioned indemnification obligations will be subject to reduction by any insurance proceeds (net of premium increases) received by the party being indemnified. The separation agreement will also specify procedures with respect to claims subject to indemnification and related matters. Indemnification with respect to taxes will be governed by the tax matters agreement except to the extent expressly addressed in the separation agreement or an ancillary agreement. Generally speaking, except as otherwise set forth in any other transaction agreement, absent fraud or willful misconduct by an indemnifying party, these indemnification provisions will be the sole and exclusive remedy of an indemnitee for any monetary or compensatory damages or losses resulting from any breach of the separation agreement or any transaction agreement.
Legal Matters
Except as otherwise set forth in the separation agreement or any other transaction agreement (or as otherwise described above), each party to the separation agreement will assume the liability for, and control of, all pending, threatened and future legal matters related to its own business or its assumed or retained liabilities and will indemnify the other party for any liability arising out of or resulting from such legal matters.
Insurance
Following the split-off, we will be responsible for obtaining and maintaining at our distribution cost our own insurance coverage. Additionally, with respect to certain claims arising prior to the separation, we may, at the sole discretion of Cummins, seek coverage under Cummins third-party insurance policies to the extent that coverage may be available thereunder.
Subsequent Distribution or Dispositions
Cummins has sole discretion in effecting any subsequent distribution of our shares through a spin-off or split-off or effecting any further dispositions of our shares after this offering through one or more public offerings or private sales. We are required to cooperate with Cummins to effect any subsequent distribution or dispositions.
Board and Committee Representation
For so long as Cummins beneficially owns a majority of the total combined voting power of our outstanding shares with respect to the election of directors, Cummins is entitled to designate a majority of the directors (including the chairman of the board of directors), and we are required to use reasonable best efforts to take advantage of any “controlled company” exemption (including related to director independence) under applicable stock exchange rules. For so long as Cummins beneficially owns less than a majority but at least 10% of the total combined voting power of our outstanding shares with respect to the election of directors, Cummins is entitled to designate a number of directors in proportion to the percentage of total voting power beneficially owned by Cummins. Each Cummins designee will be required to undertake in writing to submit his or her resignation from the board, on the date when Cummins beneficially owns less than 10% of the total combined voting power of our outstanding shares with respect to the election of directors, with such resignations taking effect on the date that the board accepts such resignations. We and Cummins may agree that notwithstanding the foregoing, one Cummins designee may be exempt from such resignation obligation provided that she or he is not otherwise an impermissible “overlapping director” as described further below. Further, for so long as Cummins beneficially owns less than a majority but at least 10% of the total combined voting power of our outstanding shares with respect to the election of directors, Cummins will be obligated to instruct the number of designees that constitute “excess directors” relative to Cummins’ then proportional entitlement to designate directors to resign or else cooperate with us to expand the size of the board to align the number of Cummins designees with such proportional entitlement if an excess Cummins designee otherwise does not comply with such instruction.
 
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For so long as Cummins beneficially owns a majority of the total combined voting power of our outstanding shares with respect to the election of directors, any committee of the board of directors must be comprised of directors at least a majority of which are Cummins designees. For so long as Cummins beneficially owns less than a majority but at least 10% of the total combined voting power of our outstanding shares with respect to the election of directors, any committee of the board of directors must include at least one Cummins designee. The Cummins designees on any committee of the board of directors must comply with the applicable director independence requirements under applicable law, after taking into account any “controlled company” exemption under the stock exchange rules to the extent applicable.
From and after the date that Cummins beneficially owns less than a majority of the total combined voting power of our outstanding shares, (i) in no event will our board of directors include more than one so-called overlapping director, and (ii) to the extent there is such a director, such director will represent no more than a minority share of the overall composition of either the Cummins board of directors or our board of directors. An "overlapping director" is any director that (i) concurrently serves on our board of directors and the Cummins board of directors or (ii) concurrently serves on our board of directors and is a member of the senior management team of Cummins.
Financial Reporting Covenants
We have agreed to comply with certain covenants relating to our financial reporting for so long as Cummins is required to consolidate our results of operations and financial position or to account for its investment in us under the equity method of accounting. These covenants include:
•
delivery or supply of monthly, quarterly and annual financial information and annual budgets and financial projections to Cummins;
​
•
conformity with Cummins’ financial presentation and accounting policies;
​
•
disclosure of information about our financial controls to Cummins;
​
•
provision to Cummins of access to our auditors and certain books and records related to internal accounting controls or operations; and
​
•
cooperation with Cummins to the extent requested by Cummins in the preparation of Cummins’ public filings and press releases.
​
Additional Covenants
We have agreed to comply with the following additional covenants, among others, for so long as Cummins beneficially owns a majority of the total combined voting power of our outstanding shares with respect to the election of directors:
•
without Cummins’ prior written consent, we may not take any action that would restrict Cummins’ ability to transfer its shares of our common stock or limit the rights of Cummins as a stockholder of ours in a manner not applicable to our stockholders generally;
​
​
•
without Cummins’ prior written consent, we may not issue any of our shares (but may issue up to           shares of our common stock in connection with equity awards granted pursuant to our 2022 Omnibus Incentive Plan) provided that no issuance of our shares may result in Cummins beneficially owning less than a majority of our outstanding shares of common stock or less than 80% of the total combined voting power of our outstanding shares;
​
•
to the extent that Cummins is a party to any contracts that provide that certain actions or inactions of Cummins’ affiliates may result in Cummins being in breach of such contracts, we may not take any actions that reasonably could result in Cummins being in breach of such contracts; and
​
•
we are required to take certain actions to comply with anti-corruption law (including to maintain an appropriate compliance and ethics program).
​
 
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In addition, prior to the date on which Cummins ceases to beneficially own a majority of our outstanding shares of common stock, we are required to consistently implement and maintain Cummins’ business practices and standards in accordance with Cummins’ policies and procedures (but may apply materiality thresholds lower than those contained in Cummins’ policies and procedures). In such period, we are also prohibited from incurring debt other than the financing contemplated in connection with the closing of this offering and such other unsecured and uncommitted lines of credit made available to us at such time.
No Hire and No Solicitation
Subject to customary exceptions, neither we nor Cummins will, without the consent of the other party, hire or retain an employee of the other party or its subsidiaries during the period from and after the completion of this offering until 12 months after the date on which Cummins no longer beneficially owns a majority of our outstanding shares of common stock, and neither we nor Cummins will, without the consent of the other party, recruit or solicit an employee of the other party or its subsidiaries for such period.
Dispute Resolution
If a dispute arises between us and Cummins under the separation agreement, the general counsels of the parties and such other representatives as the parties may designate will negotiate for a reasonable period of time (not to exceed 60 days from the time of a written notice of such dispute is delivered) to resolve disputes. If the parties are unable to resolve the dispute in this manner, then, unless otherwise agreed by the parties, the dispute will be resolved through confidential mediation in a forum agreed upon by the general counsels of the parties. If the parties are unable to resolve the dispute within 60 days following selection of a mediator, then either party will be entitled to pursue such remedies as may be available to it at law or equity otherwise in accordance with the separation agreement.
Term/Termination
Following completion of the offering, the separation agreement will continue unless terminated by the mutual consent of us and Cummins, although certain rights and obligations may terminate upon a reduction in Cummins’ ownership of our outstanding common stock.
Treatment of Intercompany Loans and Advances
Upon completion of the separation, all loans and advances between Cummins or any subsidiary of Cummins (other than us and our subsidiaries), on the one hand, and us or any of our subsidiaries, on the other hand, will be terminated other than certain loans and advances that are scheduled to the separation agreement to remain outstanding following the separation. All such loans or advances would be settled, terminated or otherwise canceled prior to the split-off.
Other Matters Governed by the Separation Agreement
Other matters governed by the separation agreement include, confidentiality, privilege, witness services, access to and provision of records, treatment of outstanding guarantees and similar credit support, environmental matters and data privacy and security.
Transition Services Agreement
We and Cummins will enter into a transition services agreement that will be effective upon the separation and this offering, pursuant to which Cummins and its subsidiaries and we and our subsidiaries will provide to each other various services. The charges for the transition services generally are expected to allow the providing company to fully recover all out-of-pocket costs and expenses it actually incurs in connection with providing the service, plus, in some cases, the allocated indirect costs of providing the services, generally without profit.
The transition services agreement will terminate on the expiration of the term of the last service provided under it, unless earlier terminated by the parties, provided that no service term will extend
 
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beyond the earlier of 24 months after Cummins ceases to beneficially own at least a majority of the voting power of our common stock or 30 months after the closing of this offering. If no term period is provided for a specified service, then such service is to terminate on the 24-month anniversary of the closing of this offering, otherwise subject to the terms therein. The recipient for a particular service generally can terminate that service prior to the scheduled expiration date, subject to a minimum notice period equal to 30 days.
We do not expect the net costs associated with the transition services agreement to be materially different than the historical costs that have been allocated to us related to these same services.
Tax Matters Agreement
Allocation of taxes
In connection with the separation and this offering, we and Cummins will enter into a tax matters agreement that will govern the parties’ respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes. In general, except with respect to certain transaction taxes triggered by the separation which will be borne by Cummins, under the agreement, we will be responsible for any U.S. federal, state, local or foreign taxes (and any related interest, penalties or audit adjustments) (i) imposed with respect to tax returns that include only us and/or any of our subsidiaries for any periods or portions thereof and (ii) imposed with respect to tax returns filed on a consolidated, combined, unitary or similar basis that include both us and/or any of our subsidiaries, on the one hand, and Cummins or any of its subsidiaries, on the other hand, to the extent such taxes are attributable to our businesses for any periods or portions thereof after the closing of this offering. Neither party’s obligations under the agreement will be limited in amount or subject to any cap. The agreement will also assign responsibilities for administrative matters, such as the filing of returns, payment of taxes due, retention of records and conduct of audits, examinations or similar proceedings. In addition, the agreement will provide for cooperation and information sharing with respect to tax matters.
If the split-off is effected, Cummins will generally be responsible for preparing and filing any tax return that includes Cummins or any of its subsidiaries, including those that also include us and/or any of our subsidiaries. We will generally be responsible for preparing and filing any tax returns that include only us and/or any of our subsidiaries.
The party responsible for preparing and filing any tax return will generally have primary authority to control tax contests related to any such tax return. We will generally have exclusive authority to control tax contests with respect to tax returns that include only us and/or any of our subsidiaries. It is expected that following this offering, we and our subsidiaries will be included in the U.S. federal consolidated tax returns of which Cummins is the parent until the split-off or additional sale of our shares, if any.
Preservation of the Tax-Free Status of Certain Aspects of the Separation and Split-off
We and Cummins intend for the split-off, if pursued, together with certain related transactions, to qualify as transaction that is tax-free to Cummins and Cummins’ shareholders under Section 368(a)(1)(D) and 355 of the Code.
Cummins (i) received a private letter ruling from the IRS to the effect that the separation and the split-off will qualify as a “reorganization” for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code, and (ii) if the split-off is pursued, expects to obtain an opinion from a nationally recognized law or accounting firm to the effect that the separation, the split-off, together with certain related transactions, will qualify as a transaction that is tax-free to Cummins and its shareholders for U.S. federal income tax purposes. In connection with the private letter ruling and, if the split-off is pursued, the opinion from a nationally recognized law or accounting firm, we and Cummins have made and will make certain representations regarding the past and future conduct of their respective businesses and certain other matters.
 
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Pursuant to the tax matters agreement, we will also agree to certain covenants that contain restrictions intended to preserve the tax-free status of the separation, the debt-for-equity exchange and the split-off, if pursued. We may take certain actions prohibited by these covenants only if we obtain and provide to Cummins an opinion from a U.S. tax counsel or accountant of recognized national standing, in either case reasonably satisfactory to Cummins, to the effect that such action would not jeopardize the tax-free status of these transactions, or if we obtain prior written consent of Cummins, in its sole and absolute discretion, waiving such requirement. We will be barred from taking any action, or failing to take any action, where such action or failure to act adversely affects or could reasonably be expected to adversely affect the tax-free status of these transactions, for all relevant time periods.
Employee Matters Agreement
We and Cummins will enter into an employee matters agreement that will govern our and Cummins’ compensation and employee benefit obligations with respect to our employees and other service providers of each company, and generally will allocate liabilities and responsibilities relating to employment matters and employee compensation and benefit plans and programs. The employee matters agreement will provide for the treatment of outstanding Cummins equity awards and long-term cash awards held by our employees upon completion of the split-off (if pursued), as described in further detail in the section entitled “Executive and Director Compensation-Compensation Discussion and Analysis,” and will also provide for certain other incentive arrangements.
The employee matters agreement will provide that, following the separation (or a designated plan transition date following the separation, as applicable), our employees generally will no longer “actively” participate in benefit plans sponsored or maintained by Cummins and will commence participation in our benefit plans, which are expected to be generally similar to the existing Cummins benefit plans.
The employee matters agreement also will set forth the general principles relating to employee matters, including with respect to the assignment and transfer of employees, the assumption and retention of liabilities and related assets, workers’ compensation, payroll taxes, regulatory filings, leaves of absence, the provision of comparable benefits, employee service credit, the sharing of employee information and the duplication or acceleration of benefits.
First-Fit Supply Agreement
Historically, Cummins has purchased our products to incorporate into its engines for first-fit production.
We and Cummins intend to enter into a first-fit supply agreement pursuant to which Cummins will continue to purchase all first-fit filtration products that it currently purchases from us for a term of five-years, and new products currently under development for a term of five-years beginning from the start of production of such products, provided production begins within the initial five-year term of the agreement. As part of Cummins’ retained business after the closing of this offering, Cummins and its affiliates will have the right to use, market, distribute or sell the first-fit products it purchases from us or, to the extent first-fit products are awarded to alternative suppliers after the offering, such alternative suppliers, to its customers.
Cummins will be limited from designing, developing, manufacturing or selling competing products in accordance with the non-compete terms under the separation agreement and the exclusivity provisions of the first-fit supply agreement. Nevertheless, Cummins may engage in limited activities necessary and incidental to facilitating the sourcing or purchase of products from alternative suppliers, including without limitation, providing specifications, related drawings, and other documentation, exchanging and testing prototypes, performing product validation and quality testing, participating in design sessions and tooling discussions, requesting quotes to understand associated costs, and negotiating contractual arrangements necessary to source non-awarded products. Further, subject to, and to the extent permitted by, the terms of the non-compete provision in the separation agreement, during the initial 5-year term of the first-fit agreement, Cummins will not otherwise be permitted to engage in the design, development or manufacturing of non-awarded programs or products without reliance on us or alternative suppliers for the manufacturing, development or design of such products.
 
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Cummins may terminate exclusivity with respect to a particular product if losses during the immediate twenty-four months period preceding the date of a product claim reach the liability limit under the first-fit supply agreement. Upon termination of exclusivity for a particular product, our supply of such product, and only such product, would become non-exclusive and Cummins would be able to procure such product from an alternative supplier. All other terms and conditions of the first-fit supply agreement may remain in place, and we would be able to continue to offer to Cummins such products through the same pricing and terms of the agreement on a non-exclusive basis.
Under the terms of the first-fit supply agreement, we will also be a Cummins preferred supplier and have a strategic partner relationship with Cummins that will allows us to receive significant benefits, including but not limited to: assigned executive sponsors from Cummins that will support our transition as an independent external supplier, joint collaboration sessions among engineering, procurement and commercial teams to assess opportunities associated with future programs, and inclusion in quote requests for new product offerings.
Aftermarket Supply Agreement
Cummins has also purchased our products from us for re-sale in the aftermarket, where it may sell our products to our direct or indirect customers.
We and Cummins intend to enter into an aftermarket supply agreement pursuant to which Cummins will continue to purchase all aftermarket filtration products that it currently purchases from us for a term of five-years. This aftermarket supply agreement will provide for continuation of our supply of aftermarket filtration products.
We will be the exclusive supplier of aftermarket products used in connection with the awarded first-fit programs under the first-fit supply agreements. If a program is not awarded to us under the first-fit supply agreement, then Cummins would be permitted to engage in corresponding aftermarket sourcing from alternative suppliers. Cummins will be limited from designing, developing, manufacturing or selling competing products in accordance with the non-compete terms of the separation agreement and the exclusivity provisions of the aftermarket supply agreement. Specifically, Cummins may procure aftermarket products from alternative suppliers for a limited time if we fail to meet certain delivery performance requirements or if we do not offer a product or similar product for sale. To the extent Cummins is permitted to obtain supply of aftermarket products from suppliers other than us under the aftermarket supply agreement, Cummins will be permitted to engage in alternative sourcing conduct comparable to what would be permitted under the first-fit supply agreement for alternative sourcing. As part of Cummins’ retained business after this offering, Cummins and its affiliates will have the right to use, market, distribute or sell the aftermarket products it purchases from us or, to the extent permitted to be purchased from alternative suppliers after the offering, such alternative suppliers, to its customers.
Cummins may terminate exclusivity with respect to a particular product if losses during the immediate twenty-four months period preceding the date of a product claim reach the liability limit under the aftermarket supply agreement. Upon termination of exclusivity for a particular product, our supply of such product, and only such product, would become non-exclusive and Cummins would be able to procure such product from an alternative supplier. All other terms and conditions of the aftermarket supply agreement may remain in place, and we would be able to continue to offer to Cummins such products through the same pricing and terms of the agreement on a non-exclusive basis.
Intellectual Property License Agreement
We and Cummins will enter into an intellectual property license agreement that will enable worldwide, non-exclusive, non-transferable (except in certain circumstances), non-sublicensable (except in certain circumstances), royalty-free, fully paid-up, perpetual (for as long as enforceable rights in the applicable intellectual property exist) and irrevocable cross-licensing of intellectual property owned by Cummins and us.
Data Sharing Agreement
Cummins and Atmus expect to enter into a data sharing agreement after the separation, pursuant to which the parties will share certain telematics and other proprietary and non-proprietary data in order
 
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to evaluate the performance of the engine and filtration system associated with Cummins’ products, including engines and gensets. The data sharing agreement is expected to establish each party’s use of shared telematics data for the purpose of measuring, evaluating and improving product and service quality. Fees under this agreement are expected to be consistent with industry practices.
Transitional Trademark License Agreement
The transitional trademark license agreement will provide that Cummins will grant to us a personal, non-exclusive, non-sublicensable (except in certain circumstances), non-assignable, royalty-free, fully paid-up license to use certain licensed trademarks for an initial period of 36 months after the date on which Cummins ceases to beneficially own a majority, in the aggregate, of the total voting power of our capital stock.
Registration Rights Agreement
We intend to enter into a registration rights agreement with Cummins immediately prior to the completion of this offering, pursuant to which we will agree that, upon the request of Cummins, we will use our reasonable best efforts to effect the registration under applicable federal and state securities laws of any shares of our common stock retained by Cummins following this offering.
Demand registration
Cummins will be able to request registration under the Securities Act of all or any portion of our shares covered by the agreement, and we will be obligated to register such shares as requested by Cummins, subject to limitations on minimum offering size and certain other limited exceptions. We are not required to honor any of these demand registrations if we have effected a registration within the preceding 60 days, other than a shelf registration. Cummins will be able to designate the terms of each offering effected pursuant to a demand registration, which may take any form, including a shelf registration. Cummins is entitled to an unlimited number of demand registrations provided that we are not obligated to conduct more than three demand registrations or underwritten offerings in a twelve-month period.
Piggyback registration
If we at any time intend to file on our behalf or on behalf of any of our other security holders a registration statement in connection with a public offering of any of our securities on a form and in a manner that would permit the registration for offer and sale of our common stock held by Cummins, Cummins will have the right to include its shares of our common stock in that offering.
Registration expenses
Cummins or any other holder under the registration rights agreement will be generally responsible for all reasonable, documented and out-of-pocket expenses incurred and paid by us in connection with the performance of our obligations under the registration rights provisions in the registration rights agreement. Cummins or any other holder, as applicable, will be responsible for any applicable underwriting discounts or commissions and any stock transfer taxes. We are responsible for our own internal fees and expenses in connection with the performance of our obligations under the registration rights agreement.
Indemnification
Generally, the agreement will contain indemnification and contribution provisions by us for the benefit of Cummins and, in limited situations, by Cummins for the benefit of us with respect to the information provided by Cummins included in any registration statement, prospectus or related document.
Transfer
If Cummins transfers shares covered by the agreement, it will be able to transfer the benefits of the registration rights agreement to transferees of at least 20% of the number of our common stock beneficially owned by Cummins, provided that each transferee agrees to be bound by the terms of the registration rights agreement.
 
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Term
The registration rights will remain in effect with respect to any shares covered by the agreement until:
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such shares have been sold pursuant to an effective registration statement under the Securities Act;
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such shares have been sold to the public pursuant to Rule 144 under the Securities Act;
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such shares may be sold to the public pursuant to Rule 144 under the Securities Act without being subject to the volume restrictions in such rule; or
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such shares have been sold in a transaction in which the transferee is not entitled to the benefits of the registration rights agreement.
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Royalty Sharing Agreement
We and Cummins expect to enter into a royalty sharing agreement at the time of separation and this offering that will provide that Cummins will pay Atmus a portion of royalty amounts due to Cummins pursuant to an existing trademark license and endorsement agreement with a third-party, under which Atmus has certain rights relating to trademarks licensed by Cummins, until the earlier of December 31, 2024 or termination of the trademark license and endorsement agreement.
Procedures for Approval of Related Party Transactions
We have adopted a written policy on related party transactions. This policy was not in effect when we entered into the transactions described above. Each of the agreements between us and Cummins and its subsidiaries that have been entered into prior to the completion of this offering, and any transactions contemplated thereby, will be deemed to be approved and not subject to the terms of such policy. Under this written related party transactions policy, the governance and nominating committee of the Board is required to review and if appropriate approve all related party transactions, prior to consummation whenever practicable. If advance approval of a related party transaction is not practicable under the circumstances or if our management becomes aware of a related party transaction that has not been previously approved or ratified, the transaction is submitted to the governance and nominating committee at the governance and nominating committee’s next meeting. The governance and nominating committee is required to review and consider all relevant information available to it about each related party transaction, and a transaction is considered approved or ratified under the policy if the governance and nominating committee authorizes it according to the terms of the policy after full disclosure of the related party’s interests in the transaction. Related party transactions of an ongoing nature are reviewed annually by the governance and nominating committee. The definition of “related party transactions” for purposes of the policy covers the transactions that are required to be disclosed under Item 404(a) of Regulation S-K promulgated under the Exchange Act.
A copy of our related party transaction approval policy will be available on our website upon completion of this offering.
 
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DESCRIPTION OF MATERIAL INDEBTEDNESS
On September 30, 2022, we entered into a credit agreement with Cummins and a syndicate of banks, providing for a five-year $400 million revolving credit facility and a $600 million term loan facility. The credit agreement also allows us to request the incremental commitments on either the revolving credit facility or the term loan of up to $250 million, subject to certain conditions and adjustments. The revolving credit facility and term loan will mature on September 30, 2027. The parties entered into an amendment to the credit agreement on February 15, 2023 to, among other matters, amend certain fee arrangements. The following summary of the credit agreement, as amended, is qualified in its entirety by reference to the full text of the credit agreement and Amendment No. 1 which are filed as exhibits to the registration statement of which this prospectus forms a part.
Cummins will initially guarantee all borrowings and other obligations under the credit agreement. Upon the satisfaction of certain collateral and guarantee requirements under the credit agreement on or prior to the date of the split-off, Cummins’ guarantee will terminate automatically and immediately unless Cummins elects otherwise. We, Cummins Filtration, Inc. and certain U.S. subsidiaries are required on or prior to the split-off to pledge all of our assets, subject to certain exceptions, as collateral for and provide guarantees of the obligations under the credit agreement.
Borrowings under the credit agreement will bear interest at varying rates. For all borrowings under the credit agreement, we may choose among the following interest rates: (i) solely in the case of U.S. dollar-denominated loans, an interest rate equal to the highest of (1) the prime rate in effect from time to time, (2) the federal funds effective rate in effect from time to time plus 0.5%, (3) adjusted term Secured Overnight Financing Rate (“SOFR”) for a one-month interest period plus 1.00%, and (4) 1.00%, in each case plus a rate ranging from 0.125% to 0.750% depending on our net leverage ratio; (ii) an interest rate equal to (1) solely in the case of U.S. dollar-denominated loans, adjusted term SOFR or (2) solely in the case of euro-denominated loans, EURIBOR, as applicable, in each case for the applicable interest period plus a rate ranging from 1.125% to 1.750% depending on our net leverage ratio (the “Applicable Rate”); or (iii) an interest rate equal to (1) solely in the case of U.S. dollar-denominated loans, adjusted daily SOFR or (2) solely in the case of pound sterling-denominated loans, adjusted SONIA, as applicable, in each case plus the Applicable Rate.
Additionally, we will pay (x) a quarterly commitment fee based on the actual daily amount of the available revolving credit facility commitment and (y) a ticking fee (the “ticking fee”) based on the commitments under the credit agreement, which shall accrue from September 30, 2022 to but excluding the earliest of (i) the date the conditions to the initial extension of credit under the credit agreement are satisfied or waived (such date, the “credit agreement closing date”), (ii) the date the split-off is consummated, and (iii) the date the commitments with respect to the facilities terminate (such earliest date, the “Ticking Fee Date”). The ticking fee will be payable on (a) February 15, 2023 (the “First Amendment Effective Date”), (b) the last day of each fiscal quarter ending after the First Amendment Effective Date and prior to the Ticking Fee Date, and (c) the Ticking Fee Date). We will also pay an upfront fee on the credit agreement closing date on the aggregate principal amount of the revolving credit facility commitments outstanding on the credit agreement closing date and the term loans funded on the credit agreement closing date.
The term loan is subject to amortization payments, payable by the applicable borrowers in quarterly installments after the credit agreement closing date as follows: 0.0% at the end of each of the first four full fiscal quarters, 2.5% at the end of each of the fifth through eighth full fiscal quarters, and 5.0% at the end of the ninth fiscal quarters and each fiscal quarter occurring thereafter.
We may voluntarily prepay loans and/or reduce the revolving credit facility commitments under the credit agreement, in whole or in part, without premium or penalty, subject to certain minimum amounts and increments and the payment of customary breakage costs. Mandatory prepayments are required under the credit agreement for certain dispositions and casualty events, the net proceeds of which in each case exceed $15 million in the applicable fiscal year, subject to a customary reinvestment exception.
The credit agreement contains customary covenants concerning, among other things, investments, dispositions of assets, indebtedness, liens on assets, and dividends and other distributions. The credit
 
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agreement also contains financial covenants requiring (i) our net leverage ratio, determined as of the end of each fiscal quarter, not to exceed 4.00 to 1.00 (or, at our election and subject to certain conditions, 4.50 to 1.00 for the period in which such election is made and the next succeeding three testing periods) and (ii) our interest coverage ratio, determined as of the end of each fiscal quarter, to be at least 3.00 to 1.00.
The credit agreement also contains customary events of default. If an event of default occurs and is continuing, the lenders may, among other things, terminate their obligations under the credit agreement and require us to repay all amounts thereunder. In addition, in the case of an event of default arising from certain events of bankruptcy, insolvency or reorganization, the lenders’ obligations under the credit agreement will automatically terminate and all amounts outstanding under the credit agreement will automatically become due and payable.
 
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DESCRIPTION OF CAPITAL STOCK
In connection with this offering, we have amended and restated our certificate of incorporation and bylaws. Copies of the forms of our amended and restated certificate of incorporation and bylaws are filed as exhibits to the registration statement of which this prospectus forms a part. The provisions of our amended and restated certificate of incorporation and bylaws and relevant sections of the DGCL are summarized below. The following summary is qualified in its entirety by the provisions of our amended and restated certificate of incorporation and bylaws and is subject to the applicable provisions of the DGCL.
Authorized Capitalization
Our authorized capital stock consists of 2,000,000,000 shares of common stock, par value $0.0001 per share, and 100,000,000 shares of preferred stock, no par value. Following the completion of this offering,       shares of common stock and no shares of preferred stock will be issued and outstanding. We have reserved        shares of common stock for issuance under equity incentive plans. See “Executive and Director Compensation — Compensation Discussion and Analysis — Long-Term Incentive Compensation.”
Common Stock
Holders of our common stock are entitled to the rights set forth below.
Voting Rights
Each outstanding share of our common stock is entitled to one vote on all matters submitted to a vote of our stockholders. Directors will be elected by a plurality of the votes entitled to be cast. Our stockholders do not have cumulative voting rights. The affirmative vote of holders of at least seventy- five percent (75%) of the total voting power of the outstanding shares of all classes of our capital stock is required to amend the sections of our amended and restated certificate of incorporation and bylaws related to (i) our board of directors, including related to our classified board and the removal of directors only for cause; (ii) our stockholders, including related to the inability of stockholders to call special meetings of stockholders and the inability of stockholders to act by written consent; (iii) the ability our board of directors and our stockholders to amend or repeal our bylaws.
Except as otherwise provided in our amended and restated certificate of incorporation or as required by law, all matters to be voted on by our stockholders (other than matters relating to the election of directors and the matters referenced above) will be approved if votes cast in favor of the matter exceed the votes cast opposing the matter at a meeting at which a majority of the outstanding shares entitled to vote on such matter is represented in person or by proxy.
Dividend Rights
Holders of our common stock will share equally in any dividend declared by our board of directors, subject to the rights of the holders of any outstanding preferred stock.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our common stock will be entitled to share ratably in our assets that are legally available for distribution to stockholders. If we have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences. In either such case, we must pay the applicable distribution to the holders of our preferred stock before we may pay distributions to the holders of our common stock.
Registration Rights
Cummins is entitled to certain rights relating to the registration of our shares of common stock pursuant to a registration rights agreement. See “Certain Relationships and Related Party Transactions — Relationship with Cummins — Registration Rights Agreement.”
 
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Other Rights
Our stockholders have no preemptive or other rights to subscribe for additional shares. All outstanding shares are, and all shares offered by this prospectus will be, when sold, validly issued, fully paid and nonassessable.
Preferred Stock
Our board of directors is authorized to provide for one or more series of preferred stock and to fix the terms of such preferred stock, including the preferences, powers and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including the dividend rate, conversion rights, voting rights, redemption rights and liquidation preferences and to fix the number of shares to be included in any such series without any further vote or action by our stockholders. Any preferred stock so issued may rank senior to our common stock with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up, or both. In addition, any such shares of preferred stock may have class or series voting rights. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders and may adversely affect the voting and other rights of the holders of our common stock. Our board of directors has not authorized the issuance of any shares of preferred stock, and we have no agreements or plans for the issuance of any shares of preferred stock.
Anti-Takeover Effects of Various Provisions of Delaware Law and Our Amended and Restated Certificate of Incorporation and our Bylaws
Provisions of the DGCL and our amended and restated certificate of incorporation and bylaws could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, are expected to discourage certain types of coercive takeover practices and takeover bids that board of directors may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with board of directors. We believe that the benefits of increased protection of its ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure it outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.
Delaware Anti-Takeover Statute
We are subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 of the DGCL prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, unless (i) prior to such time, the board of directors of such corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of such corporation at the time the transaction commenced (excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) the voting stock owned by directors who are also officers or held in employee benefit plans in which the employees do not have a confidential right to tender or vote stock held by the plan); or (iii) on or subsequent to such time the business combination is approved by the board of directors of such corporation and authorized at a meeting of stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock of such corporation not owned by the interested stockholder. Generally, a “business combination” includes a merger, asset or stock sale or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years prior to the determination of interested stockholder status did own) 15% or more of a corporation’s voting stock. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of our common stock held by our stockholders.
 
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A Delaware corporation may “opt out” of Section 203 with an express provision in its original certificate of incorporation or an express provision in its certificate of incorporation or by-laws resulting from amendments approved by holders of at least a majority of the corporation’s outstanding voting shares. We have not elected to “opt out” of Section 203. However, Cummins and its affiliates have been approved by our board of directors as an interested stockholder (as defined in Section 203 of the DGCL) and therefore are not subject to Section 203. For so long as Cummins beneficially owns a majority of the total combined voting power of our outstanding shares, and therefore has the ability to designate a majority of our board of directors, directors designated by Cummins to serve on our board of directors would have the ability to pre-approve other parties, including potential transferees of Cummins’ shares of our common stock, so that Section 203 would not apply to such other parties.
Classified Board
Our amended and restated certificate of incorporation and bylaws provide that our board of directors is divided into three classes. The directors designated as Class I directors have terms expiring at the first annual meeting of stockholders following this offering, which we expect will be held in 2024. The directors designated as Class II directors have terms expiring at the following year’s annual meeting of stockholders, which we expect will be held in 2025, and the directors designated as Class III directors have terms expiring at the following year’s annual meeting of stockholders, which we expect will be held in 2026. Commencing with the first annual meeting of stockholders following the offering, directors for each class will be elected at the annual meeting of stockholders held in the year in which the term for that class expires and thereafter will serve for a term of three years. Under these classified board provisions, it would take at least two elections of directors for any individual or group to gain control of our board of directors. Accordingly, these provisions could discourage a third party from initiating a proxy contest, making a tender offer or otherwise attempting to gain control of us.
Removal of Directors
Our amended and restated certificate of incorporation and bylaws provide that our stockholders may remove our directors only for cause, by an affirmative vote of at least seventy- five percent (75%) of the total voting power of outstanding shares of all classes of our capital stock entitled to vote thereon, after Cummins no longer owns a majority of the outstanding shares of our common stock. Until such time as Cummins ceases to beneficially own a majority of the total voting power of the outstanding shares, any director or our entire board of directors may be removed from office at any time, with or without cause, by an affirmative vote of a majority of the total voting power of the outstanding shares of all classes of our capital stock.
Amendments to Amended and Restated Certificate of Incorporation and Bylaws
Our amended and restated certificate of incorporation and bylaws provide that, from and after such time as Cummins ceases to beneficially own a majority of our outstanding common stock, the sections of our amended and restated certificate of incorporation and bylaws that relate to (i) our board of directors, including related to our classified board and the removal of directors only for cause; (ii) our stockholders, including related to the inability of stockholders to call special meetings of stockholders and the inability of stockholders to act by written consent; and (iii) the ability our board of directors and our stockholders to amend or repeal our bylaws may only be amended by the affirmative vote of holders of at least seventy-five percent (75%) of the total voting power of the outstanding shares of all classes of our capital stock then entitled to vote thereon.
Size of Board and Vacancies
Our bylaws provide that the size of our board of directors will be fixed by resolution of our board of directors from time to time. Currently, our board of directors has fixed its size at eleven directors. Until such time as Cummins ceases to beneficially own a majority of the total voting power of the outstanding shares, a majority of stockholders or a majority of directors then in office who are employees of Cummins can fill newly-created directorships or vacancies on our board of directors. Thereafter, any vacancies created in our board of directors resulting from any increase in the authorized number of
 
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directors or the death, resignation, retirement, disqualification, removal from office or other cause will be filled by a majority of the directors then in office, even if less than a quorum is present, or by a sole remaining director. Any director appointed to fill a vacancy on our board of directors will hold office until the earlier of the expiration of the term of office of the director whom he or she has replaced, a successor is duly elected and qualified or the earlier of such director’s death, resignation or removal.
Special Stockholder Meetings
Our amended and restated certificate of incorporation and bylaws provide that special meetings of the stockholders may be called at any time by our board of directors or the chair of our board of directors.
Our amended and restated certificate of incorporation and bylaws also provide that, until such time as Cummins ceases to beneficially own a majority of the total voting power of the outstanding shares of all classes of our capital stock entitled to vote in elections of directors, our stockholders holding a majority of the voting power of our outstanding shares may call a special meeting. Our amended and restated certificate of incorporation and bylaws further provide that, from and after such time as Cummins ceases to beneficially own a majority of the total voting power of the outstanding shares of all classes of our capital stock entitled to vote in elections of directors, the ability of the stockholders to call a special meeting is denied.
Stockholder Action by Written Consent
Our amended and restated certificate of incorporation provides that, until such time as Cummins ceases to beneficially own a majority of the total voting power of the outstanding shares of all classes of our capital stock entitled to vote in elections of directors, our stockholders holding the minimum number of votes that would be necessary to take action at a meeting may act by written consent. Our amended and restated certificate of incorporation, from and after such time as Cummins ceases to beneficially own a majority of the total voting power of the outstanding shares of all classes of our capital stock entitled to vote in elections of directors, expressly eliminates the right of our stockholders to act by written consent. From and after such time, stockholder action must take place at the annual or a special meeting of our stockholders.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our bylaws establish advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors as well as minimum qualification requirements for stockholders making the proposals or nominations. Additionally, our bylaws require that candidates for election as director disclose their qualifications and make certain representations.
No Cumulative Voting
The DGCL provides that stockholders are denied the right to cumulate votes in the election of directors unless our company’s certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation does not provide for cumulative voting.
Undesignated Preferred Stock.
The authority that our board of directors possesses to issue preferred stock could potentially be used to discourage attempts by third parties to obtain control of us through a merger, tender offer, proxy contest or otherwise by making such attempts more difficult or more costly. Our board of directors may be able to issue preferred stock with voting rights or conversion rights that, if exercised, could adversely affect the voting power of the holders of common stock.
Conflicts of Interest
In order to address potential conflicts of interest between us and Cummins, our amended and restated certificate of incorporation contains certain provisions regulating and defining the conduct of our affairs to the extent that they may involve Cummins and its directors, officers and/or employees and
 
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our rights, powers, duties and liabilities and those of our directors, officers, employees and stockholders in connection with our relationship with Cummins. In general, these provisions recognize that we and Cummins may engage in the same or similar business activities and lines of business or have an interest in the same areas of corporate opportunities and that we and Cummins will continue to have contractual and business relations with each other, including directors, officers and/or employees of Cummins serving as our directors, officers and/or employees.
Limitations on Liability, Indemnification of Officers and Directors and Insurance
The DGCL authorizes corporations to limit or eliminate the personal liability of directors and certain officers to corporations and their stockholders for monetary damages for breaches of their respective fiduciary duties as directors or officers, and our amended and restated certificate of incorporation and bylaws include such an exculpation provision. Our amended and restated certificate of incorporation and bylaws include provisions that indemnify, to the fullest extent allowable under the DGCL, the personal liability of directors or officers for monetary damages for actions taken as our director or officer, or for serving at our request as a director or officer or another position at another corporation or enterprise, as the case may be. Our amended and restated certificate of incorporation and bylaws also provide that we must indemnify and advance reasonable expenses to our directors and officers.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and bylaws 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 or officer’s duty of care. The provisions will not alter the liability of directors or officers 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 us or any of our directors, officers or employees for which indemnification is sought.
Exclusive Forum
Unless we otherwise consent in writing, to the extent permitted by law, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors, officers, employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or bylaws or (iv) 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, the federal district court for the District of Delaware. In addition, to the extent permitted by law, the federal district courts of the U.S. shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Notwithstanding the foregoing, the exclusive forum provision shall not apply to claims seeking to enforce any liability or duty created by the Exchange Act.
Authorized but Unissued Shares
Our authorized but unissued shares of common stock and preferred stock will be available for future issuance without stockholders approval. We may use additional shares for a variety of purposes, including future public offerings to raise additional capital, to fund acquisitions and as employee compensation. As noted above, the existence of authorized but unissued shares of common stock and preferred stock could also render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Listing
We have applied to have our common stock listed on the NYSE under the symbol “ATMU.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Broadridge Financial Solutions, Lake Success, New York.
 
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SHARES ELIGIBLE FOR FUTURE SALE
We cannot predict with certainty the effect, if any, that market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price prevailing from time to time. We also cannot predict with certainty whether or when the split-off will occur or Cummins will otherwise sell its remaining shares of our common stock. The sale or other availability of substantial amounts of our common stock in the public market or the perception that such sales could occur could adversely affect the prevailing market price of the common stock and our ability to raise equity capital in the future.
Upon completion of this offering, we will have           shares of common stock outstanding. Subject to any restrictions under the lock-up agreements, other contractual restrictions on resale and the provisions of Rule 144 described below, all of the shares of our common stock to be sold in this offering will be freely tradable without restriction or further registration under the Securities Act.
Lock-Up Arrangements and Registration Rights
In connection with this offering, we, each of our directors and executive officers and Cummins will enter into lock-up agreements that restrict the sale of our securities for up to 180 days after the date of this prospectus, subject to certain exceptions or an extension in certain circumstances.
In addition, following the expiration of the lock-up period, Cummins will have the right, subject to certain conditions, to require us to register the sale of its shares of our common stock under federal securities laws. See “Certain Relationships and Related Party Transactions — Registration Rights Agreement.”
Following the lock-up periods described above, all of the shares of our common stock that are restricted securities or are held by Cummins as of the date of this prospectus will be eligible for sale in the public market in compliance with Rules 144 or 701 under the Securities Act.
Rule 144
The shares of our common stock sold in this offering will generally be freely transferable without restriction or further registration under the Securities Act, except that any shares of our common stock held by an “affiliate” of ours may not be resold publicly except in compliance with the registration requirements of the Securities Act or under an exemption under Rule 144 or otherwise. Rule 144 permits our common stock that has been acquired by a person who is an affiliate of ours, or has been an affiliate of ours within the past three months, to be sold into the market in an amount that does not exceed, during any three-month period, the greater of:
•
one percent of the total number of shares of our common stock outstanding; or
​
•
the average weekly reported trading volume of our common stock for the four calendar weeks prior to the sale.
​
Such sales are also subject to specific manner of sale provisions, a six-month holding period requirement (or a one-year holding period if the sale occurs within 90 days of the date of this prospectus), notice requirements and the availability of current public information about us.
Rule 144 also provides that a person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has for at least six months (or one year if the sale occurs within 90 days of the date of this prospectus) beneficially owned shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock subject only to the availability of current public information regarding us. A person who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned for at least one year shares of our common stock that are restricted securities, will be entitled to freely sell such shares of our common stock under Rule 144 without regard to the current public information requirements of Rule 144.
 
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Additional Registration Statements
We intend to file a registration statement on Form S-8 under the Securities Act to register an aggregate of      shares of our common stock to be issued or reserved for issuance under our equity incentive plans. Such registration statement is expected to be filed soon after the date of this prospectus and will automatically become effective upon filing with the SEC. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or the lock-up restrictions described above.
 
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MATERIAL UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS
FOR NON-U.S. HOLDERS
The following are the material U.S. federal income and estate tax consequences of the ownership and disposition of our common stock acquired in this offering by a “Non-U.S. Holder” that holds such common stock as a “capital asset” within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”) and that does not own, and has not owned, actually or constructively, more than 5% of our common stock. You are a Non-U.S. Holder if for U.S. federal income tax purposes you are a beneficial owner of our common stock that is:
•
a nonresident alien individual;
​
•
a foreign corporation; or
​
•
a foreign estate or trust.
​
You are not a Non-U.S. Holder if you are a nonresident alien individual present in the United States for 183 days or more in the taxable year of disposition, or if you are a former citizen or former resident of the United States for U.S. federal income tax purposes. If you are such a person, you should consult your tax advisor regarding the U.S. federal income tax consequences of the ownership and disposition of our common stock.
If you are a partnership for U.S. federal income tax purposes, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and your activities.
This discussion is based on the Code, final, temporary and proposed Treasury regulations promulgated thereunder, administrative pronouncements, judicial decisions and interpretations of the foregoing, all as of the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion is for general purposes only and does not describe all of the tax consequences that may be relevant to you in light of your particular circumstances, including alternative minimum tax and Medicare contribution tax consequences and does not address all of the tax consequences that may be relevant to you in light of your particular circumstances, nor does it discuss special tax provisions, which may apply to you if you are subject to special treatment under U.S. federal income tax laws, such as for certain financial institutions or financial services entities, insurance companies, tax-exempt entities, tax-qualified retirement plans, “qualified foreign pension funds” ​(and entities all of the interests of which are held by qualified foreign pension funds), dealers in securities or currencies, traders in securities that elect mark-to-market treatment, entities that are treated as partnerships or other pass-through entities for U.S. federal income tax purposes (and partners or beneficial owners therein), “controlled foreign corporations,” “passive foreign investment companies,” persons that have a “functional currency” other than the U.S. dollar, corporations that accumulate earnings to avoid U.S. federal income tax, accrual method taxpayers who are required to recognize income for U.S. federal income tax purposes no later than when such income is taken into account in applicable financial statements, persons deemed to sell common stock under the constructive sale provisions of the Code, and persons that hold common stock as part of a straddle, hedge, conversion transaction, or other integrated investment. In addition, this summary does not address any aspect of any state, local or foreign taxes or any U.S. federal tax laws other than U.S. federal income and estate tax laws.
You are urged to consult your own tax advisor concerning the application of U.S. federal income tax laws to your particular situation, as well as the application of any state, local, foreign income and other tax laws and tax treaties.
INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AND THE CONSEQUENCES OF OTHER FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS, AND APPLICABLE TAX TREATIES.
Distributions on Common Stock
The payment of any dividends in the future, and the timing and amount thereof, is within the discretion of the Board (as discussed in the section entitled “Dividend Policy”). If we pay distributions
 
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on shares of our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Distributions in excess of our current and accumulated earnings and profits will constitute a return of capital, which will first reduce your basis in our common stock, but not below zero, and then will be treated as gain realized on the sale or other disposition of our common stock. See “— Dispositions of Common Stock,” below.
Dividends paid to you will generally be subject to U.S. federal withholding tax at a 30% rate. The withholding tax might not apply, however, or might apply at a reduced rate, under the terms of an applicable income tax treaty. You are urged to consult your own tax advisors regarding your entitlement to benefits under a relevant income tax treaty. In order to obtain a reduced rate of withholding (subject to the discussion below under “— Other Withholding Taxes”), you will be required to provide us or our agent a properly executed applicable Internal Revenue Service (“IRS”) Form W-8BEN-E (or other applicable form or documentation) certifying your entitlement to such a reduced rate under a treaty. If you hold the stock through a financial institution or other agent acting on your behalf, you will be required to provide appropriate documentation to the agent. Even if our current or accumulated earnings or profits are less than the amount of the distribution, the applicable withholding agent may elect to treat the entire distribution as a dividend for U.S. federal withholding tax purposes. A non-U.S. holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
If dividends paid to you are effectively connected with the conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base maintained in the United States), you will generally be taxed on the dividends at the same graduated tax rates applicable to U.S. persons after taking into account certain deductions and credits. In addition, such effectively connected dividends received by corporate non-U.S. holders may also be subject to the branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. Dividends that are effectively connected with a U.S. trade or business are exempt from the withholding tax discussed in the preceding paragraph, although you will be required to provide us or the agent with a valid IRS Form W-8ECI properly certifying such exemption.
The foregoing discussion is subject to the discussion below under “— Backup Withholding and Information Reporting” and “— Other Withholding Taxes.”
Dispositions of Common Stock
Subject to the discussion below under “— Backup Withholding and Information Reporting” and “— Other Withholding Taxes” you generally will not be subject to U.S. federal income or withholding tax on gain realized on a sale or other taxable disposition of our common stock, unless:
•
the gain is effectively connected with your conduct of a trade or business in the United States (and if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by you in the United States (in which case the special rules described below apply); or
​
•
we are or have been a “United States real property holding corporation” ​(a “USRPHC”), for U.S. federal income tax purposes at any time during the five-year period ending on the date of disposition of our common stock and the non-U.S. holder’s holding period for our common stock, whichever is shorter.
​
Generally, a corporation is a USRPHC if the fair market value of its “United States real property interests” equals 50% or more of the sum of the fair market value of (a) its worldwide real property interests and (b) its other assets used or held for use in a trade or business. The tax relating to stock in a USRPHC does not apply to a Non-U.S. Holder whose holdings, actual and constructive, amount to 5% or less of our common stock at all times during the applicable period, provided that our common stock is regularly traded on an established securities market. No assurance can be provided that our common stock will be regularly traded on an established securities market at all times for purposes of the rules described above. Although there can be no assurances in this regard, we believe we have not been and
 
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are not currently a USRPHC, and do not anticipate being a USRPHC in the future. You are urged to consult your own tax advisor about the consequences that could result if we are, or become, a USRPHC.
If you recognize gain on a sale or other disposition of our common stock that is effectively connected with your conduct of a trade or business in the United States (and if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by you in the United States), you will generally be taxed on such gain in the same manner as a U.S. person. You should consult your tax adviser with respect to other U.S. tax consequences of the ownership and disposition of our common stock, including the possible imposition of a branch profits tax at a rate of 30% (or a lower treaty rate) if you are a corporation.
Backup Withholding and Information Reporting
Information returns are required to be filed with the IRS in connection with payments of dividends on our common stock. Unless you comply with certification procedures to establish that you are not a U.S. person, information returns may also be filed with the IRS in connection with the proceeds from a sale or other disposition of our common stock. Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.
You may be subject to backup withholding on payments on our common stock or on the proceeds from a sale or other disposition of our common stock unless you comply with certification procedures to establish that you are not a U.S. person or otherwise establish an exemption. Your provision of a properly executed applicable IRS Form W-8 certifying your non-U.S. status will permit you to avoid backup withholding. Amounts withheld under the backup withholding rules are not additional taxes and may be refunded or credited against your U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Other Withholding Taxes
Provisions of the Code commonly referred to as “FATCA” require withholding (separate and apart from, but without duplication of, the withholding tax described above) of 30% on payments of dividends on our common stock paid to “foreign financial institutions” ​(which is broadly defined for this purpose and in general includes investment vehicles) and certain other non-U.S. entities unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied, or an exemption applies. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. If FATCA withholding is imposed, a beneficial owner that is not a foreign financial institution generally will be entitled to a refund of any amounts withheld by filing a U.S. federal income tax return containing the required information (which may entail significant administrative burden). While rules requiring FATCA withholding with respect to gross proceeds of certain dispositions of our common stock were scheduled to become effective before this offering, in 2018 the U.S. Treasury released proposed regulations which, if finalized in their present form, would eliminate this gross proceeds federal withholding tax. In its preamble to the proposed regulations, the U.S. Treasury stated that taxpayers may generally rely on the proposed regulations until final regulations are issued. You should consult your tax advisor regarding the effects of FATCA on your investment in our common stock.
U.S. Federal Estate Tax
Individual Non-U.S. Holders and entities the property of which is potentially includible in such an individual’s gross estate for U.S. federal estate tax purposes (for example, a trust funded by such an individual and with respect to which the individual has retained certain interests or powers), should note that, absent an applicable treaty exemption, our common stock will be treated as U.S.-situs property subject to U.S. federal estate tax.
 
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THE PRECEDING DISCUSSION OF U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF OWNING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAWS AND TREATIES.
 
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UNDERWRITING (CONFLICTS OF INTEREST)
The debt-for-equity exchange parties are offering the shares of common stock described in this prospectus through a number of underwriters. Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are the representatives of the underwriters. We, Cummins, and the debt-for-equity exchange parties expect to enter into an underwriting agreement with the underwriters named below with respect to the shares being offered. Subject to certain conditions, the debt-for-equity exchange parties have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, the number of shares indicated in the following table.
Underwriters
​ ​
Total Number of
Firm Shares
to be Purchased
​ ​
Number of
Optional
Shares to be
Purchased if
Maximum Option
Exercised
​
Goldman Sachs & Co. LLC
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
J.P. Morgan Securities LLC
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Robert W. Baird & Co. Incorporated
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
BofA Securities, Inc.
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Wells Fargo Securities, LLC
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Total
​ ​ ​ ​               ​ ​ ​ ​ ​               ​ ​
The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.
The underwriters have an option to buy up to an additional        shares from the debt-for-equity exchange parties to cover sales by the underwriters of a greater number of shares than the total number set forth in the table above. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and commissions to be paid by the debt-for-equity exchange parties to the underwriters. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.
Paid by the debt-for-equity exchange parties(1)
​ ​
No Exercise
​ ​
Full Exercise
​
Per Share
​ ​ ​ $        ​ ​ ​ ​ $        ​ ​
Total
​ ​ ​ $        ​ ​ ​ ​ $        ​ ​
​
(1)
The debt-for-equity exchange parties will acquire the total number of shares being sold in this offering, including any shares sold pursuant to the underwriters’ option to purchase additional shares, in the debt-for-equity exchange. For purposes of determining the amount of Cummins indebtedness that Cummins will receive from the debt-for-equity exchange parties in exchange for such shares, Cummins expects that the debt obligations will be valued at the fair market value on the date of this prospectus, and the aggregate fair market value of the debt obligations to be exchanged will equal the aggregate initial public offering price of such shares less the aggregate underwriting discounts and commissions for such shares, each as shown on the cover page of this prospectus. Cummins may be deemed to have paid such underwriting discounts and commissions for U.S. securities law purposes.
​
Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $      per share from the initial public offering price. After the initial offering of the shares, Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.
We, our executive officers and directors and Cummins have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any shares of our common stock or securities convertible
 
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into or exchangeable for shares of our common stock during the period from the date of this prospectus continuing through the date that is 180 days after the date of this prospectus, except with the prior written consent of Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC. See “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions.
Prior to the offering, there has been no public market for the shares. The initial public offering price will be negotiated between us, the debt-for-equity exchange parties and Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be our historical performance, estimates of our business potential and earnings prospects, an assessment of management and the consideration of the above factors in relation to market valuation of companies in related businesses.
We have applied to list our common stock on the NYSE under the symbol “ATMU.”
In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering, and a short position represents the amount of such sales that have not been covered by subsequent purchases. A “covered short position” is a short position that is not greater than the amount of additional shares for which the underwriters’ option described above may be exercised. The underwriters may cover any covered short position by either exercising their option to purchase additional shares from the debt-for-equity exchange parties or purchasing shares in the open market. In determining the source of shares to cover the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option described above. “Naked” short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriters must cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of these activities at any time. These transactions may be effected on the NYSE, in the over-the-counter market or otherwise.
We estimate that our share of the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $      million. We have agreed to reimburse the underwriters for certain expenses related to this offering in the amount up to $      .
We, Cummins, and the debt-for-equity exchange parties have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect of those liabilities.
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their
 
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respective affiliates have provided, and may in the future provide, a variety of these services to Cummins and its subsidiaries, including us, and to persons and entities with relationships with Cummins and its subsidiaries, including us, for which they received or will receive customary fees and expenses. Certain underwriters (not in their capacity as such) or their affiliates have separately been engaged to advise Cummins in connection with a strategic review of its filtration business, including the split-off.
In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively traded securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to our assets, securities and/or instruments (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with us. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future. Certain of the underwriters or their affiliates are lenders under the term loan and revolving credit facility. In addition, Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC will be the debt-for-equity exchange parties described below.
The debt-for-equity exchange
It is expected that Cummins and the debt-for-equity exchange parties will enter into a debt-for-equity exchange agreement. Under the debt-for-equity exchange agreement, subject to certain conditions, the debt-for-equity exchange parties, as principals for their own account, will exchange debt obligations of Cummins held by the debt-for-equity exchange parties for the shares of our common stock to be sold in this offering. The debt-for-equity exchange parties will then sell the shares to the underwriters for cash. The debt-for-equity exchange between Cummins and the debt-for-equity exchange parties is expected to occur on or before the settlement date of this offering, and the consummation of the debt-for-equity exchange is a condition to the settlement of the debt-for-equity exchange parties’ sale of the shares to the underwriters. If the underwriters exercise their option to purchase additional shares of common stock from the debt-for-equity exchange parties, Cummins will exchange such additional shares of common stock for additional outstanding indebtedness of Cummins held by the debt-for-equity exchange parties. The debt-for-equity exchange parties will then sell such additional shares of common stock to the underwriters for cash.
We expect that the indebtedness of Cummins held by the debt-for-equity exchange parties will have an aggregate principal amount of at least $      based on a maximum assumed initial public offering price of $      per share, which is the high point of the price range set forth on the cover of this prospectus. The amount of indebtedness of Cummins held by the debt-for-equity exchange parties is expected to be sufficient to acquire all of the shares of our common stock to be sold in this offering, inclusive of the shares that may be sold pursuant to the underwriters’ option to purchase additional shares. In the debt-for-equity exchange, the debt-for-equity exchange parties will acquire the total number of shares being sold in this offering. For purposes of determining the amount of Cummins indebtedness that Cummins will receive from the debt-for-equity exchange parties in exchange for such shares, Cummins expects that the debt obligations will be valued at the fair market value on the date of this prospectus, and the aggregate fair market value of the debt obligations to be exchanged will equal the aggregate initial public offering price less the aggregate underwriting discounts and commissions for such shares, each as shown on the cover page of this prospectus. If the underwriters exercise their
 
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option to purchase additional shares as described above, the debt-for-equity exchange parties will also acquire the additional shares in exchange for debt obligations of Cummins held by the debt-for-equity exchange parties. For purposes of determining the amount of Cummins indebtedness that Cummins will receive from the debt-for-equity exchange parties in exchange for the additional shares, the debt obligations will be valued at the fair market value on the date of this prospectus, and the aggregate fair market value of the debt obligations to be exchanged will equal the aggregate initial public offering price less the aggregate underwriting discounts and commissions for such shares, each as shown on the cover page of this prospectus multiplied by the number of the additional shares acquired, less underwriting discounts and commissions. The debt-for-equity exchange parties will acquire and sell the shares as principals for their own account, rather than on Cummins’ behalf. If Cummins and the debt-for-equity exchange parties enter into the debt-for-equity exchange agreement, as described above, the debt-for-equity exchange parties will become the owner of our shares of common stock they acquire in the debt-for-equity exchange, regardless of whether this offering is completed. The debt-for-equity exchange parties, and not Cummins, will receive the net proceeds from the sale of the shares in this offering.
For purposes of the U.S. securities laws, each of Cummins and the debt-for-equity exchange parties will be deemed to be an underwriter of the shares of our common stock sold in this offering; however, references to the underwriters in this prospectus refer only to the underwriters listed in the first paragraph of this “Underwriting (Conflicts of Interest)” section.
Conflicts of interest
The offering is being conducted in accordance with the applicable provisions of Rule 5121 of the Conduct Rules of the Financial Industry Regulatory Authority, Inc., or FINRA, because Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC, who are acting as underwriters in this offering, will have a “conflict of interest” pursuant to Rule 5121(f)(5)(C)(ii) by virtue of their role as debt-for-equity exchange parties, since all of the net proceeds of this offering will be received by the debt-for-equity exchange parties. As such, Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC will not confirm sales to accounts in which they exercise discretionary authority without the prior written consent of the customer. Rule 5121 requires that a “qualified independent underwriter” as defined in Rule 5121 must participate in the preparation of the prospectus and perform its usual standard of diligence with respect to the registration statement and this prospectus. Accordingly, BofA Securities, Inc. is assuming the responsibilities of acting as the qualified independent underwriter in the offering. BofA Securities, Inc. will not receive any additional fees for serving as qualified independent underwriter in connection with this offering. We have agreed to indemnify BofA Securities, Inc. against liabilities incurred in connection with acting as qualified independent underwriter, including liabilities under the Securities Act.
European Economic Area
In relation to each Member State of the European Economic Area (each, a “Relevant State”), no shares have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of shares may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation:
(a)
to any legal entity which is a qualified investor as defined in the Prospectus Regulation;
​
(b)
to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriters; or
​
(c)
in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
​
provided that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation and each person who initially acquires any shares or to whom any offer is
 
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made will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and us that it is a “qualified investor” within the meaning of Article 2(e) of the Prospectus Regulation. In the case of any shares being offered to a financial intermediary as that term is used in the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters has been obtained to each such proposed offer or resale.
For the purposes of this provision, the expression an “offer to the public” in relation to shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
United Kingdom
An offer to the public of any shares may not be made in the United Kingdom, except that an offer to the public in the United Kingdom of any shares may be made at any time under the following exemptions under the UK Prospectus Regulation:
(a)
to any legal entity which is a qualified investor as defined under the UK Prospectus Regulation;
​
(b)
to fewer than 150 natural or legal persons (other than qualified investors as defined under the UK Prospectus Regulation), subject to obtaining the prior consent of the underwriters; or
​
(c)
in any other circumstances falling within section 86 of the Financial Services and Markets Act 2000, or as amended, FSMA,
​
provided that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant to section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and us that it is a “qualified investor” within the meaning of Article 2 of the UK Prospectus Regulation. In the case of any shares being offered to a financial intermediary as that term is used in Article 1(4) of the UK Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in the United Kingdom to qualified investors as so defined or in circumstances in which the prior consent of the underwriters has been obtained to each such proposed offer or resale.
For the purposes of this provision, the expression an “offer to the public” in relation to shares in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “UK Prospectus Regulation” means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
Canada
The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
 
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Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
Hong Kong
The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (“Companies (Winding Up and Miscellaneous Provisions) Ordinance”) or which do not constitute an invitation to the public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (“Securities and Futures Ordinance”), or (ii) to “professional investors” as defined in the Securities and Futures Ordinance and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined under Section 4A of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”)) under Section 274 of the SFA, (ii) to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set forth in the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor, the securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for six months after that corporation has acquired the shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation’s securities pursuant to Section 275(1A) of the SFA, (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore (“Regulation 32”).
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA))
 
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whose sole purpose is to hold investments and each beneficiary of the trust is an accredited investor, the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for six months after that trust has acquired the shares under Section 275 of the SFA except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.
Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended) (the “FIEA”). The securities may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan (including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant to an exemption from the registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.
Australia
No prospectus or other disclosure document (as defined in the Corporations Act 2001 (Cth) of Australia, or the Corporations Act) in relation to the ordinary shares has been or will be lodged with the Australian Securities & Investments Commission, or ASIC. This document has not been lodged with ASIC and is only directed to certain categories of exempt persons. Accordingly, if you receive this document in Australia:
(a)
you confirm and warrant that you are either:
​
(i)
a “sophisticated investor” under section 708(8)(a) or (b) of the Corporations Act;
​
(ii)
a “sophisticated investor” under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant’s certificate to us which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made;
​
(iii)
a person associated with the company under section 708(12) of the Corporations Act; or
​
(iv)
a “professional investor” within the meaning of section 708(11)(a) or (b) of the Corporations Act, and to the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act any offer made to you under this document is void and incapable of acceptance; and
​
(b)
you warrant and agree that you will not offer any of the ordinary shares for resale in Australia within 12 months of that ordinary shares being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.
​
Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this
 
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document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, the company or the shares has been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (“FINMA”), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.
United Arab Emirates
The shares have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale of securities. Further, this prospectus does not constitute a public offer of securities in the United Arab Emirates (including the Dubai International Financial Centre) and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority or the Dubai Financial Services Authority.
 
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LEGAL MATTERS
Certain legal matters, including the legality of the shares being offered herein, will be passed upon by Baker & McKenzie LLP, New York, New York. The legality of the shares being offered herein will be passed upon for the underwriters by Simpson Thacher & Bartlett LLP, New York, New York.
EXPERTS
The financial statements of Atmus, a business of Cummins Inc. as of December 31, 2022 and 2021, and for each of the three years in the period ended December 31, 2022 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of our common stock offered by this prospectus. For purposes of this section, the term registration statement means the original registration statement and any and all amendments including the schedules and exhibits to the original registration statement or any amendment. This prospectus, filed as part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules thereto as permitted by the rules and regulations of the SEC. For further information about us and our common stock, you should refer to the registration statement, including the exhibits filed as part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov. You may also request copies of those documents, at no cost to you, by contacting us at the following address:
Atmus Filtration Technologies Inc.
26 Century Boulevard
Nashville, Tennessee 37214
(615) 514 7339
Upon completion of this offering, we will become subject to the informational requirements of the Exchange Act and will be required to file reports and other information with the SEC. You will be able to inspect the materials we file with the SEC without charge at the SEC’s website provided above. We intend to make available to our common stockholders annual reports containing consolidated financial statements audited by an independent registered public accounting firm.
We have not authorized anyone to give you any information or to make any representations about us or the transactions we discuss in this prospectus other than those contained in this prospectus or in any free writing prospectus we have prepared. If you are given any information or representations about these matters that is not discussed in this prospectus or in any free writing prospectus we have prepared, you must not rely on that information. This prospectus is not an offer to sell or a solicitation of an offer to buy securities anywhere or to anyone where or to whom we are not permitted to offer or sell securities under applicable law.
 
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INDEX TO FINANCIAL STATEMENTS
Audited Financial Statements of Atmus
​ ​ ​ ​ ​ F-2 ​ ​
​ ​ ​ ​ ​ F-4 ​ ​
​ ​ ​ ​ ​ F-5 ​ ​
​ Combined Balance Sheets as of December 31, 2022 and 2021 ​ ​ ​ ​ F-6 ​ ​
​ ​ ​ ​ ​ F-7 ​ ​
​ ​ ​ ​ ​ F-8 ​ ​
​ Notes to the Combined Financial Statements ​ ​ ​ ​ F-9 ​ ​
 
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Report of Independent Registered Public Accounting Firm
To the Board of Directors of Cummins Inc. and Shareholder of Atmus Filtration Technologies Inc.
Opinion on the Financial Statements
We have audited the accompanying combined balance sheets of Atmus, a business of Cummins Inc., (the “Company”) as of December 31, 2022 and 2021, and the related combined statements of net income, comprehensive income, changes in net parent investment and cash flows for each of the three years in the period ended December 31, 2022, including the related notes (collectively referred to as the “combined financial statements”). In our opinion, the combined financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s combined financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these combined financial statements in accordance with the standards of the PCAOB and in accordance with auditing 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 combined financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the combined financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the combined financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the combined financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the combined financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the combined financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition
As described in Note 3 to the combined financial statements, the Company sells to customers either through long-term arrangements or standalone purchase orders. The Company’s long-term arrangements generally do not include committed volumes until underlying purchase orders are issued. Typically, revenue is recognized on the products the Company sells at a point in time, in accordance with shipping terms or other contractual arrangements. For the year ended December 31, 2022, the Company’s net sales were $1,562.1 million.
 
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The principal consideration for our determination that performing procedures related to revenue recognition is a critical audit matter is the high degree of auditor effort in performing procedures related to the Company’s revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the combined financial statements. These procedures included, among others (i) evaluating revenue recognized during the year for a sample of revenue transactions by obtaining and inspecting source documents, including purchase orders, invoices, shipping documentation, and subsequent cash receipts, where applicable and (ii) confirming a sample of outstanding customer invoice balances as of year-end and obtaining and inspecting source documents, including subsequent cash receipts or shipping documentation, for confirmations not returned.
/s/ PricewaterhouseCoopers LLP
Indianapolis, Indiana
February 21, 2023
We have served as the Company’s auditor since 2021.
 
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ATMUS
COMBINED STATEMENTS OF NET INCOME
For the years ended December 31, 2022, 2021 and 2020
​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
NET SALES(a)
​ ​ ​
$
1,562.1
 ​ ​ ​ ​ $ 1,438.8 ​ ​ ​ ​ $ 1,232.6 ​ ​
Cost of sales
​ ​ ​
​
1,203.2
 ​ ​ ​ ​ ​ 1,088.3 ​ ​ ​ ​ ​ 923.2 ​ ​
GROSS MARGIN
​ ​ ​
​
358.9
 ​ ​ ​ ​ ​ 350.5 ​ ​ ​ ​ ​ 309.4 ​ ​
OPERATING EXPENSES AND INCOME ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Selling, general and administrative expenses
​ ​ ​
​
139.7
 ​ ​ ​ ​ ​ 126.2 ​ ​ ​ ​ ​ 112.1 ​ ​
Research, development and engineering expenses
​ ​ ​
​
38.6
 ​ ​ ​ ​ ​ 42.0 ​ ​ ​ ​ ​ 39.0 ​ ​
Equity, royalty and interest income from investees
​ ​ ​
​
28.0
 ​ ​ ​ ​ ​ 32.4 ​ ​ ​ ​ ​ 40.7 ​ ​
Other Operating Expense, Net
​ ​ ​
​
5.0
 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
OPERATING INCOME
​ ​ ​
​
203.6
 ​ ​ ​ ​ ​ 214.7 ​ ​ ​ ​ ​ 199.0 ​ ​
Interest expense
​ ​ ​
​
0.7
 ​ ​ ​ ​ ​ 0.8 ​ ​ ​ ​ ​ 0.4 ​ ​
Other income, net
​ ​ ​
​
8.8
 ​ ​ ​ ​ ​ 3.9 ​ ​ ​ ​ ​ 2.0 ​ ​
INCOME BEFORE INCOME TAXES
​ ​ ​
​
211.7
 ​ ​ ​ ​ ​ 217.8 ​ ​ ​ ​ ​ 200.6 ​ ​
Income tax expense
​ ​ ​
​
41.6
 ​ ​ ​ ​ ​ 46.5 ​ ​ ​ ​ ​ 57.8 ​ ​
NET INCOME
​ ​ ​
$
170.1
 ​ ​ ​ ​ $ 171.3 ​ ​ ​ ​ $ 142.8 ​ ​
​
(a)
Includes sales to related parties of $344.9 million, $328.6 million and $280.8 million, respectively.
​
The accompanying notes are an integral part of these combined financial statements.
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ATMUS
COMBINED STATEMENTS OF COMPREHENSIVE INCOME
For the years ended December 31, 2022, 2021 and 2020
​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
NET INCOME
​ ​ ​
$
170.1
 ​ ​ ​ ​ $ 171.3 ​ ​ ​ ​ $ 142.8 ​ ​
Other comprehensive (loss) income, net of tax ​ ​ ​ ​
Change in pension and other postretirement defined benefit plans
​ ​ ​
​
2.4
 ​ ​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ — ​ ​
Foreign currency translation adjustments
​ ​ ​
​
(16.6)
 ​ ​ ​ ​ ​ (12.0) ​ ​ ​ ​ ​ 11.7 ​ ​
Total other comprehensive (loss) income, net of tax
​ ​ ​
​
(14.2)
 ​ ​ ​ ​ ​ (11.3) ​ ​ ​ ​ ​ 11.7 ​ ​
COMPREHENSIVE INCOME
​ ​ ​
$
155.9
 ​ ​ ​ ​ $ 160.0 ​ ​ ​ ​ $ 154.5 ​ ​
The accompanying notes are an integral part of these combined financial statements.
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ATMUS
COMBINED BALANCE SHEETS
As of December 31, 2022 and 2021
​ ​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​
ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Current assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Cash and cash equivalents
​ ​ ​
$
—
 ​ ​ ​ ​ $ — ​ ​
Accounts and notes receivables, net
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Trade and other
​ ​ ​
​
174.2
 ​ ​ ​ ​ ​ 161.9 ​ ​
Related party receivables
​ ​ ​
​
67.0
 ​ ​ ​ ​ ​ 60.8 ​ ​
Inventories
​ ​ ​
​
251.8
 ​ ​ ​ ​ ​ 245.8 ​ ​
Prepaid expenses and other current assets
​ ​ ​
​
19.3
 ​ ​ ​ ​ ​ 13.6 ​ ​
Total current assets
​ ​ ​
​
512.3
 ​ ​ ​ ​ ​ 482.1 ​ ​
Long-term assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Property, plant and equipment, net
​ ​ ​
​
148.4
 ​ ​ ​ ​ ​ 141.1 ​ ​
Investments and advances related to equity method investees
​ ​ ​
​
77.0
 ​ ​ ​ ​ ​ 87.0 ​ ​
Goodwill
​ ​ ​
​
84.7
 ​ ​ ​ ​ ​ 84.7 ​ ​
Other assets
​ ​ ​
​
57.0
 ​ ​ ​ ​ ​ 53.4 ​ ​
Total assets
​ ​ ​
$
879.4
 ​ ​ ​ ​ $ 848.3 ​ ​
LIABILITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Current liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Accounts payable (principally trade)
​ ​ ​
$
145.9
 ​ ​ ​ ​ $ 140.1 ​ ​
Related party payables
​ ​ ​
​
100.1
 ​ ​ ​ ​ ​ 78.0 ​ ​
Accrued compensation, benefits and retirement costs
​ ​ ​
​
18.2
 ​ ​ ​ ​ ​ 28.8 ​ ​
Current portion of accrued product warranty
​ ​ ​
​
5.9
 ​ ​ ​ ​ ​ 11.7 ​ ​
Other accrued expenses
​ ​ ​
​
79.0
 ​ ​ ​ ​ ​ 61.3 ​ ​
Total current liabilities
​ ​ ​
​
349.1
 ​ ​ ​ ​ ​ 319.9 ​ ​
Long-term liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Accrued product warranty
​ ​ ​
​
9.6
 ​ ​ ​ ​ ​ 12.2 ​ ​
Other liabilities
​ ​ ​
​
71.2
 ​ ​ ​ ​ ​ 79.0 ​ ​
Total liabilities
​ ​ ​
$
429.9
 ​ ​ ​ ​ $ 411.1 ​ ​
NET PARENT INVESTMENT ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net parent investment
​ ​ ​
$
505.3
 ​ ​ ​ ​ $ 478.8 ​ ​
Accumulated other comprehensive loss
​ ​ ​
​
(55.8)
 ​ ​ ​ ​ ​ (41.6) ​ ​
Total net parent investment
​ ​ ​
​
449.5
 ​ ​ ​ ​ ​ 437.2 ​ ​
Total liabilities and net parent investment
​ ​ ​
$
879.4
 ​ ​ ​ ​ $ 848.3 ​ ​
The accompanying notes are an integral part of these combined financial statements.
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ATMUS
COMBINED STATEMENTS OF CASH FLOWS
For the years ended December 31, 2022, 2021 and 2020
​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
CASH FLOWS FROM OPERATING ACTIVITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net income
​ ​ ​
$
170.1
 ​ ​ ​ ​ $ 171.3 ​ ​ ​ ​ $ 142.8 ​ ​
Adjustments to reconcile net income to net cash provided by operating activities
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Depreciation and amortization
​ ​ ​
​
21.6
 ​ ​ ​ ​ ​ 21.6 ​ ​ ​ ​ ​ 21.1 ​ ​
Deferred income taxes
​ ​ ​
​
(12.7)
 ​ ​ ​ ​ ​ (2.7) ​ ​ ​ ​ ​ 3.4 ​ ​
Equity in income of investees, net of dividends
​ ​ ​
​
0.4
 ​ ​ ​ ​ ​ (2.8) ​ ​ ​ ​ ​ (16.9) ​ ​
Restructuring actions, net of cash payments
​ ​ ​
​
—
 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (3.6) ​ ​
Foreign currency remeasurement and transaction exposure
​ ​ ​
​
(1.9)
 ​ ​ ​ ​ ​ (5.8) ​ ​ ​ ​ ​ (0.5) ​ ​
Changes in current assets and liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Trade and other receivables
​ ​ ​
​
(15.6)
 ​ ​ ​ ​ ​ 0.2 ​ ​ ​ ​ ​ (6.8) ​ ​
Related party receivables
​ ​ ​
​
(7.9)
 ​ ​ ​ ​ ​ (8.0) ​ ​ ​ ​ ​ (5.1) ​ ​
Inventories
​ ​ ​
​
(9.4)
 ​ ​ ​ ​ ​ (50.6) ​ ​ ​ ​ ​ 6.1 ​ ​
Prepaid expenses and other current assets
​ ​ ​
​
(6.1)
 ​ ​ ​ ​ ​ 10.2 ​ ​ ​ ​ ​ (4.1) ​ ​
Accounts payable
​ ​ ​
​
8.5
 ​ ​ ​ ​ ​ 19.0 ​ ​ ​ ​ ​ 21.5 ​ ​
Related party payables
​ ​ ​
​
24.0
 ​ ​ ​ ​ ​ 28.3 ​ ​ ​ ​ ​ 6.2 ​ ​
Other accrued expenses
​ ​ ​
​
3.3
 ​ ​ ​ ​ ​ 19.2 ​ ​ ​ ​ ​ 1.7 ​ ​
Changes in other liabilities
​ ​ ​
​
(5.7)
 ​ ​ ​ ​ ​ 3.4 ​ ​ ​ ​ ​ 36.9 ​ ​
Other, net
​ ​ ​
​
8.4
 ​ ​ ​ ​ ​ (1.0) ​ ​ ​ ​ ​ 10.4 ​ ​
Net cash provided by operating activities
​ ​ ​
​
177.0
 ​ ​ ​ ​ ​ 202.3 ​ ​ ​ ​ ​ 213.1 ​ ​
CASH FLOWS FROM INVESTING ACTIVITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Capital expenditures
​ ​ ​
​
(32.5)
 ​ ​ ​ ​ ​ (30.8) ​ ​ ​ ​ ​ (25.5) ​ ​
Investments in internal use software
​ ​ ​
​
(0.9)
 ​ ​ ​ ​ ​ (1.1) ​ ​ ​ ​ ​ (1.0) ​ ​
Net cash used in investing activities
​ ​ ​
​
(33.4)
 ​ ​ ​ ​ ​ (31.9) ​ ​ ​ ​ ​ (26.5) ​ ​
CASH FLOWS FROM FINANCING ACTIVITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Net transfers to Parent
​ ​ ​
​
(143.6)
 ​ ​ ​ ​ ​ (170.4) ​ ​ ​ ​ ​ (186.6) ​ ​
Net cash used in financing activities
​ ​ ​
​
(143.6)
 ​ ​ ​ ​ ​ (170.4) ​ ​ ​ ​ ​ (186.6) ​ ​
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
​ ​ ​ ​ — ​ ​ ​ ​
​
—
 ​ ​ ​ ​
​
—
 ​ ​
Net increase/(decrease) in cash and cash equivalents
​ ​ ​
​
—
 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
Cash and cash equivalents at beginning of year
​ ​ ​
​
—
 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
CASH AND CASH EQUIVALENTS AT END OF PERIOD
​ ​ ​
$
—
 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ — ​ ​
The accompanying notes are an integral part of these combined financial statements.
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ATMUS
COMBINED STATEMENTS OF CHANGES IN NET PARENT INVESTMENT
For the years ended December 31, 2022, 2021 and 2020
In millions
​ ​
Net Parent
Investment
​ ​
Accumulated
Other
Comprehensive
Loss
​ ​
Total
​
BALANCE AT DECEMBER 31, 2019
​ ​ ​ $ 521.7 ​ ​ ​ ​ $ (42.0) ​ ​ ​ ​ $ 479.7 ​ ​
Net income
​ ​ ​ ​ 142.8 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 142.8 ​ ​
Other comprehensive income, net of tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 11.7 ​ ​ ​ ​ ​ 11.7 ​ ​
Net transfers to Parent
​ ​ ​ ​ (186.6) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (186.6) ​ ​
BALANCE AT DECEMBER 31, 2020
​ ​ ​ $ 477.9 ​ ​ ​ ​ $ (30.3) ​ ​ ​ ​ $ 447.6 ​ ​
Net income
​ ​ ​ ​ 171.3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 171.3 ​ ​
Other comprehensive loss, net of tax
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (11.3) ​ ​ ​ ​ ​ (11.3) ​ ​
Net transfers to Parent
​ ​ ​ ​ (170.4) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (170.4) ​ ​
BALANCE AT DECEMBER 31, 2021
​ ​ ​ $ 478.8 ​ ​ ​ ​ $ (41.6) ​ ​ ​ ​ $ 437.2 ​ ​
Net income
​ ​ ​
​
170.1
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
170.1
 ​ ​
Other comprehensive loss, net of tax
​ ​ ​ ​ ​ ​ ​ ​ ​
​
(14.2)
 ​ ​ ​ ​
​
(14.2)
 ​ ​
Net transfers to Parent
​ ​ ​
​
(143.6)
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
(143.6)
 ​ ​
BALANCE AT DECEMBER 31, 2022
​ ​ ​ $ 505.3 ​ ​ ​ ​ $ (55.8) ​ ​ ​ ​ $ 449.5 ​ ​
The accompanying notes are an integral part of these combined financial statements.
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ATMUS
NOTES TO THE COMBINED FINANCIAL STATEMENTS
All quantitative disclosures will be noted in U.S. Dollars in the following footnotes unless otherwise stated.
NOTE 1: DESCRIPTION OF THE BUSINESS
Separation
The accompanying Combined Financial Statements of Atmus, a business of Cummins Inc. (“Atmus”, the “Company”, “we”, “us” or “our”), include the historical accounts of the filtration business of Cummins Inc. (the “Parent” or “Cummins”), a publicly traded company incorporated in Indiana (United States). On August 3, 2021, Cummins publicly announced it was exploring strategic alternatives for its filtration business, including the potential separation of the filtration business from Cummins into a standalone company. We are conducting an initial public offering of our common stock. Prior to the closing of this offering, Cummins will transfer to us substantially all of the assets and liabilities comprising its filtration business that will form our business going forward.
Cummins has informed us that, as of the date of this prospectus, following this offering, it intends to make a tax-free split-off, pursuant to which Cummins will offer its stockholders the option to exchange their shares of Cummins common stock for shares of our common stock in an exchange offer. If the exchange offer is undertaken and consummated and not fully subscribed because less than all shares of our common stock owned by Cummins are exchanged, the remaining shares of our common stock owned by Cummins may be offered in one or more subsequent exchange offers (together with the initial exchange offer, the “exchange offer(s)”) and/or distributed on a pro rata basis to Cummins stockholders whose shares of Cummins common stock remain outstanding after consummation of the exchange offer(s) (such distribution, together with the exchange offer(s), the “split-off).
While Cummins intends to effect the split-off, Cummins has no obligation to pursue or consummate any further dispositions of its ownership interest in us, including through the split-off, by any specified date or at all. If pursued, the split-off may be subject to various conditions, including receipt of any necessary regulatory or other approvals, the existence of satisfactory market conditions and the receipt of a private letter ruling from the IRS, which has been received, and an opinion of a nationally recognized law or accounting firm to the effect that the separation and the debt-for-equity exchange, together with such split-off, will qualify as a transaction that is tax-free to Cummins and its stockholders for U.S. federal income tax purposes. The conditions to the split-off may not be satisfied; Cummins may decide not to consummate the split-off even if the conditions are satisfied; or Cummins may decide to waive one or more of these conditions and consummate the split-off even if all of the conditions are not satisfied.
Nature of Operations
The Atmus business operates, designs, manufactures and sells filters, coolant and chemical products. Atmus offers products for first fit and aftermarket applications including air filters, fuel filters, fuel water separators, lube filters, hydraulic filters, coolants, fuel additives and other filtration systems to original equipment manufacturers, dealers/distributors and end-users. Atmus supports a wide customer base in a diverse range of markets including on-highway, off-highway segments such as oil and gas, agriculture, mining, construction, power generation, marine and industrial markets. The Company produces and sells globally recognized Fleetguard branded products in over 150 countries including countries in North America, Europe, South America, Asia, Australia and Africa. Fleetguard products are available through thousands of distribution centers worldwide.
Atmus Contingent Debt Agreement
On September 30, 2022, we entered into a $1.0 billion credit agreement (“Credit Agreement”), consisting of a $400 million revolving credit facility and a $600 million term loan facility (“Facilities”), in anticipation of our separation from Cummins. Borrowings under the Credit Agreement will not become
 
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available under the Credit Agreement unless and until, among other things, there is a sale to the public of our shares. The Credit Agreement will automatically terminate if no such public sale of our shares occurs on or prior to June 30, 2023. If borrowings become available under the Credit Agreement, the Facilities would mature on September 30, 2027.
Borrowings under the Credit Agreement would bear interest at varying rates, depending on the type of loan and, in some cases, the rates of designated benchmarks and the applicable election made by us. Generally, U.S. dollar-denominated loans would bear interest at an adjusted term Secured Overnight Financing Rate (SOFR) (which includes a 0.10 percent credit spread adjustment to SOFR) for the applicable interest period plus a rate ranging from 1.125 percent to 1.75 percent depending on our net leverage ratio.
NOTE 2: BASIS OF PRESENTATION
Beginning in 2022, we transitioned to a Gregorian calendar with our reporting period ending on the last day of the quarterly calendar period. In 2021 and prior, our reporting period ended on the Sunday closest to the last day of the quarterly calendar period. Our fiscal year ended on December 31, regardless of the day of the week on which December 31 falls.
The accompanying Combined Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States, on a standalone basis and reflect a combination of entities under common control that have been “carved out” of and derived from Cummins’ historical Consolidated Financial Statements and accounting records. Accordingly, Cummins’ net investment in this business (“Net Parent Investment”) is presented in lieu of a controlling interest’s equity in the Combined Financial Statements. Therefore, the Combined Financial Statements reflect Atmus’s combined financial position, results of operations and cash flows as if the business was a standalone company prior to the separation. The preparation of the Combined Financial Statements required considerable judgment of management and reflects significant assumptions and allocations that management believes are reasonable. As a result, Atmus’s Combined Financial Statements may not be indicative of Atmus’s future performance and do not necessarily reflect what Atmus’s combined results of operations, financial condition and cash flows would have been had Atmus operated as a separate, publicly traded company during the periods presented.
During the periods presented, Atmus functioned as part of the larger group of businesses controlled by Cummins and accordingly, utilized centralized functions, such as facilities and information technology, of Cummins to support its operations. A portion of the shared service costs were historically allocated to Atmus. Cummins also performed certain corporate functions for Atmus. The corporate expenses related to Atmus have been allocated from the Parent. These allocated costs are primarily related to certain governance and corporate functions such as finance, treasury, tax, human resources, legal, investor relations and certain other costs. Where it is possible to specifically attribute such expenses to activities of Atmus, these amounts have been charged or credited directly to Atmus without allocation or apportionment. Allocation of other such expenses is based on a reasonable reflection of the utilization of the service provided or benefits received by Atmus during the periods presented on a consistent basis, such as a relative percentage of headcount and third-party sales. The aggregate costs allocated for these functions to Atmus are included within the Combined Statements of Net Income.
Historically, Atmus’s cash was transferred to the Parent on a daily basis. This arrangement is not reflective of the manner in which Atmus would have been able to finance its operations had it been a standalone business separate from the Parent during the periods presented.
Our Parent’s debt and related interest expense have not been allocated to us for any of the periods presented since we are not the legal obligor of the debt and our Parent’s borrowings were not directly attributable to us.
NOTE 3: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Russian Operations
On March 17, 2022, Cummins’ Board of Directors decided to indefinitely suspend its operations in Russia due to the ongoing conflict in Ukraine. As a result of the suspension of operations, we evaluated
 
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the recoverability of assets in Russia and assessed other liabilities that may have been incurred. We have experienced, and expect to continue to experience, an inability to collect customer receivables. We also determined that we have some inventory items that were designated specifically for Russia which will not be able to be used elsewhere.
As a result of this suspension, approximately $1.7 million of accounts receivable were reserved for and $0.6 million of inventory was written off in 2022. The associated expense is recorded within Other operating expense, net and Cost of sales, respectively in the Combined Statements of Net Income. As of December 31, 2022, approximately $0.2 million of the written off accounts receivables was collected.
COVID-19
The outbreak of COVID-19 in early 2020 became a global pandemic with the resultant economic impacts evolving into a worldwide recession. The pandemic triggered a significant downturn in our markets globally, which negatively impacted our sales and results of operations during 2020. While the majority of the negative impacts to demand largely subsided in 2021, we continued to experience supply chain disruptions in 2022, which limited our ability to meet end-user demands and the related financial impacts are reflected as increased cost of sales.
Investments in Equity Investees
We use the equity method to account for our investments in joint ventures, affiliated companies and alliances in which we have the ability to exercise significant influence, generally represented by equity ownership or partnership equity of at least 20 percent but not more than 50 percent. Generally, under the equity method, original investments in these entities are recorded at cost and subsequently adjusted by our share of equity in income or losses after the date of acquisition. Equity in income or losses of each investee is recorded according to our level of ownership; if losses accumulate, we record our share of losses until our investment has been fully depleted. If our investment has been fully depleted, we recognize additional losses only when we are the primary funding source. We eliminate (to the extent of our ownership percentage) in our Combined Financial Statements the profit in inventory held by our equity method investees that has not yet been sold to a third-party. Dividends received from equity method investees reduce the amount of our investment when received and do not impact our earnings. Our investments are classified as “Investments and advances related to equity method investees” in our Combined Balance Sheets. Our share of the results from joint ventures, affiliated companies and alliances is reported in our Combined Statements of Net Income as “Equity, royalty and interest income from investees” and is reported net of all applicable income taxes. Our foreign equity investees are presented net of applicable foreign income taxes in our Combined Statements of Net Income. See Note 5, “INVESTMENTS IN EQUITY INVESTEES,” for additional information.
Use of Estimates in the Preparation of the Combined Financial Statements
Preparation of financial statements requires management to make estimates and assumptions that affect reported amounts presented and disclosed in our Combined Financial Statements. Significant estimates and assumptions in these Combined Financial Statements require the exercise of judgement and are used for, but not limited to, estimates of future cash flows and other assumptions associated with goodwill and long-lived asset impairment tests, useful lives for depreciation and amortization, warranty programs, restructuring costs, income taxes, deferred tax valuation allowances, contingencies and allowances for doubtful accounts. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be different from these estimates.
The effect of a recovering supply chain, and potential associated disruptions, on related future financial impacts cannot be estimated at this time. This uncertainty could have a future impact on certain estimates used in the preparation of our 2022 financial results.
Revenue From Contracts with Customers
Revenue Recognition Sales of Products
We sell to customers either through long-term arrangements or standalone purchase orders. Our long-term arrangements generally do not include committed volumes until underlying purchase orders
 
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are issued. Typically, we recognize revenue on the products we sell at a point in time, in accordance with shipping terms or other contractual arrangements. All related shipping and handling costs are accrued at the time the related performance obligation has been satisfied.
Our sales arrangements may include the collection of sales and other similar taxes that are then remitted to the related taxing authority. We have elected to present the amounts collected for these taxes net of the related tax expense rather than presenting them as additional revenue.
We grant credit limits and terms to customers based upon traditional practices and competitive conditions. Typical terms vary by market, but payments are generally due in 60 days or less from invoicing for most of our product sales.
Sales Incentives
We provide various sales incentives to both our distribution network and OEM customers. These programs are designed to promote the sale of our products or encourage the usage of our products by OEM customers. When there is uncertainty surrounding these sales incentives, we may reduce the amount of revenue we recognize under a contract through an incentive accrual. When the uncertainty has been resolved the accrual will be adjusted accordingly. Sales incentives primarily fall into three categories:
•
Aftermarket rebates;
​
•
Volume and growth rebates; and
​
•
Marketing Development Fund (“MDF”).
​
For aftermarket rebates, we provide incentives to promote sales to certain dealers and end- markets. These rebates are typically paid on a quarterly, or more frequent basis. At the time of the sale, we consider the expected amount of these rebates when determining the overall transaction price. Estimates are adjusted at the end of each month or quarter based on the amounts yet to be paid. Aftermarket rebates are estimated based on sales and historical experience.
For volume and growth rebates, we provide certain customers with rebate opportunities for attaining specified volumes during a particular quarter or year. We consider the expected amount of these rebates at the time of the original sale as we determine the sales revenue. We update our assessment of the amount of rebates that will be earned on a monthly or quarterly basis based on our best estimate of the volume levels the customer will reach during the measurement period.
For MDF’s, these are funds to support our customers primarily for business development, marketing and advertising programs, promotional items jointly developed, dealer incentives and partnering programs. Depending on the agreement the funds are accrued for and paid on a quarterly basis, annual basis, or as agreed with those customers receiving these funds.
Sales Returns
The initial determination of the sales revenue may also be impacted by product returns. Rights of return do not exist for the majority of our sales other than for quality issues. We do offer certain return rights in our aftermarket business, where some aftermarket customers are permitted to return a small amount of filters each year. An estimate of future returns is accounted for at the time of sale as a reduction in the overall sales revenue based on historical return rates.
Foreign Currency Transactions and Translation
We translate assets and liabilities of foreign entities to U.S. dollars, where the local currency is the functional currency, at month-end exchange rates. We translate income and expenses to U.S. dollars using weighted-average exchange rates. We record adjustments resulting from translation in a separate component of accumulated other comprehensive loss and include the adjustments in net income only upon sale, loss of controlling financial interest or liquidation of the underlying foreign investment.
 
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Foreign currency transaction gains and losses are included in net income. For foreign entities where the U.S. dollar is the functional currency, including those operating in highly inflationary economies when applicable, we remeasure non-monetary balances and the related income statement amounts using historical exchange rates. We include the resulting gains and losses in net income, including the effect of derivatives in our Combined Statements of Net Income, which combined with transaction gains (losses) amounted to $0.3 million, $0.4 million and $(0.5) million for the years ended December 31, 2022, 2021 and 2020, respectively.
Income Tax Accounting
We determine our income tax expense using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Future tax benefits of net operating loss and credit carryforwards are also recognized as deferred tax assets. We evaluate the recoverability of our deferred tax assets each quarter by assessing the likelihood of future profitability and available tax planning strategies that could be implemented to realize our net deferred tax assets. A valuation allowance is recorded to reduce the tax assets to the net value management believes is more likely than not to be realized. In the event our operating performance deteriorates, future assessments could conclude that a larger valuation allowance will be needed to further reduce the deferred tax assets. In addition, we operate within multiple taxing jurisdictions and are subject to tax audits in these jurisdictions. These audits can involve complex issues, which may require an extended period of time to resolve. We accrue for the estimated additional tax and interest that may result from tax authorities disputing uncertain tax positions. We believe we made adequate provisions for income taxes for all years that are subject to audit based upon the latest information available.
Our income tax provision was prepared following the separate return method, which applies Accounting Standards Codification (“ASC”) 740 to the standalone financial statements of each member of the combined group as if the group member were a separate and standalone enterprise. Due to this treatment, tax transactions included in the Consolidated Financial Statements of the Parent may not be included in the separated Combined Financial Statements of the Company. Similarly, there may be certain tax attributes within the Combined Financial Statements of the Company which would not be found in the Consolidated Financial Statements and tax returns of the Parent. Examples of such items include net operating losses, tax credits carry forwards and valuation allowances, which may exist in the standalone financial statements but not in the Parent’s Consolidated Financial Statements.
Furthermore, the Combined Financial Statements do not reflect any amounts due to or due from the Parent for income tax related matters as these matters are settled at the end of each year.
A more complete description of our income taxes and the future benefits of our net operating loss and credit carryforwards is disclosed in Note 6, “INCOME TAXES.”
Accounts Receivable and Allowance for Doubtful Accounts
Trade accounts receivable represent amounts billed to customers and not yet collected or amounts that have been earned but may not be billed until the passage of time and are recorded when the right to consideration becomes unconditional. Trade accounts receivable are recorded at the invoiced amount, which approximates net realizable value and generally do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of expected credit losses in our existing accounts receivable. We determine the allowance based on our historical collection experience and by performing an analysis of our accounts receivable in light of the current economic environment. This estimate of expected losses reflects those losses expected to occur over the contractual life of the receivable. We review our allowance for doubtful accounts on a regular basis. In addition, when necessary, we provide an allowance for the full amount of specific accounts deemed to be uncollectible. Account balances are charged off against the allowance in the period in which we determine that it is probable the receivable will not be recovered. The allowance for doubtful accounts balances were $2.4 million and
 
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$0.8 million at December 31, 2022 and 2021, respectively; the increase was principally driven by Russia as described above. Bad debt write-offs were not material during the three years ended December 31, 2022.
Inventories
Our inventories are stated at the lower of cost or net realizable value. As of December 31, 2022 and 2021, approximately 34.4% and 32.3%, respectively, of our inventories were valued using the last- in, first-out (LIFO) cost method. The cost of other inventories is generally valued using the first-in, first-out (FIFO) cost method. Our inventories include estimates for adjustments related to annual physical inventory results and for inventory cost changes under the LIFO cost method. Due to significant movements of partially-manufactured components and parts between manufacturing plants, we do not internally measure, nor do our accounting systems provide, a meaningful segregation between raw materials and work-in-process. See Note 7, “INVENTORIES,” for additional information.
Property, Plant and Equipment
We record property, plant and equipment at cost, inclusive of finance lease assets, with the adoption of ASC 842. We depreciate the cost of the majority of our property, plant and equipment using the straight-line method with depreciable lives ranging from 20 to 40 years for buildings and 3 to 15 years for machinery, equipment and fixtures. Finance lease asset amortization is recorded in depreciation expense. We expense normal maintenance and repair costs as incurred. Depreciation expense totaled $20.7 million, $21.0 million and $20.7 million for the years ended December 31, 2022, 2021 and 2020, respectively. See Note 8, “PROPERTY, PLANT AND EQUIPMENT” and Note 9, “LEASES,” for additional information.
Impairment of Long-Lived Assets
We review our long-lived assets for possible impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable. We assess the recoverability of the carrying value of the long-lived assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. An impairment of a long-lived asset or asset group exists when the expected future pre-tax cash flows (undiscounted and without interest charges) estimated to be generated by the asset or asset group is less than its carrying value. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss is measured based on the difference between the estimated fair value and carrying value of the asset or asset group. Assumptions and estimates used to estimate cash flows in the evaluation of impairment and the fair values used to determine the impairment are subject to a degree of judgment and complexity. Any changes to the assumptions and estimates resulting from changes in actual results or market conditions from those anticipated may affect the carrying value of long-lived assets and could result in a future impairment charge.
Leases
We determine if an arrangement contains a lease in whole or in part at the inception of the contract. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term while lease liabilities represent our obligation to make lease payments arising from the lease. All leases greater than 12 months result in the recognition of a ROU asset and a liability at the lease commencement date based on the present value of the lease payments over the lease term. As most of our leases do not provide the information required to determine the implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This rate is determined considering factors such as the lease term, our credit standing and the economic environment of the location of the lease. We use the implicit rate when readily determinable.
Our lease terms include all non-cancelable periods and may include options to extend (or to not terminate) the lease when it is reasonably certain that we will exercise that option. Leases that have a
 
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term of 12 months or less at the commencement date are expensed on a straight-line basis over the lease term and do not result in the recognition of an asset or a liability.
Lease expense for operating leases is recognized on a straight-line basis over the lease term. Lease expense for finance leases is generally front-loaded as the finance lease ROU asset is depreciated on a straight-line basis, but interest expense on the liability is recognized utilizing the interest method that results in more expense during the early years of the lease. We have lease agreements with lease and non-lease components, primarily related to real estate, vehicle and information technology (“IT”) assets. For vehicle and real estate leases, we account for the lease and non-lease components as a single lease component. For IT leases, we allocate the payment between the lease and non-lease components based on the relative value of each component. See Note 9, “LEASES,” for additional information.
Goodwill
We have the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying value as a basis for determining whether it is necessary to perform an annual quantitative goodwill impairment test. We have elected this option for our reporting unit. In addition, the carrying value of goodwill must be tested for impairment on an interim basis in certain circumstances where impairment may be indicated.
When we are required or opt to perform the quantitative impairment test, the fair value of our reporting unit is estimated with either the market approach or the income approach using a discounted cash flow model. Our income approach method uses a discounted cash flow model in which cash flows anticipated over several periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate rate of return.
The discounted cash flow model requires us to make projections of revenue, gross margin, operating expenses, working capital investment and fixed asset additions for our reporting unit over a multi-year period. Additionally, management must estimate a weighted-average cost of capital, which reflects a market rate, for our reporting unit for use as a discount rate. The discounted cash flows are compared to the carrying value of the reporting unit and, if less than the carrying value, the difference is recorded as a goodwill impairment loss. In addition, we also perform a sensitivity analysis to determine how much our forecasts can fluctuate before the fair value of a reporting unit would be lower than its carrying amount.
We perform the required procedures as of the end of our fiscal third quarter.
Changes in our projections or estimates, a deterioration of our operating results and the related cash flow effect or a significant increase in the discount rate could decrease the estimated fair value of our reporting unit and result in a future impairment of goodwill. See Note 10, “GOODWILL,” for additional information.
Warranty
We estimate and record a liability for standard warranty programs at the time our products are sold. Our estimates are based on historical experience and reflect management’s best estimates of expected costs at the time products are sold and subsequent adjustment to those expected costs when actual costs differ. As a result of the uncertainty surrounding the nature and frequency of product campaigns, the liability for such campaigns is recorded when we commit to a recall action or when a recall becomes probable and estimable, which generally occurs when it is announced. We review and assess the liability for these programs on a quarterly basis. See Note 11, “PRODUCT WARRANTY LIABILITY,” for additional information.
Research and Development
Our research and development programs are focused on product improvements, product extensions, innovations and cost reductions for our customers. Research and development expenditures include salaries, contractor fees, building costs, utilities, testing, technical IT, administrative expenses
 
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and allocation of corporate costs and are expensed, net of contract reimbursements, when incurred. Research and development expenses were $38.5 million, $41.6 million and $37.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Related Party Transactions
In accordance with the provisions of various joint venture agreements, we may purchase products and components from our joint ventures, sell products and components to our joint ventures and our joint ventures may sell products and components to unrelated parties. Joint venture transfer prices may differ from normal selling prices. Certain joint venture agreements transfer product at cost, some transfer product on a cost-plus basis, and others transfer product at market value. We also may purchase products and components from other Cummins’ owned entities and sell products to other Cummins’ owned entities. These purchases and sales take place on terms resulting in margins within a reasonable range of market rates. See Note 15, “RELATIONSHIP WITH PARENT AND RELATED PARTIES,” for additional information.
Segment Information
We operate our business as one operating segment and also one reportable segment based on the manner in which we review and evaluate operating performance. The operating results are regularly reviewed by Atmus’s chief operating decision maker on a combined basis. The chief operating decision maker is our Chief Executive Officer.
Stock-Based Compensation
Our Parent maintains stock-based compensation plans under which it receives services from employees as consideration for equity instruments of the Parent. These Combined Financial Statements include both the expense of employees within the Company as well as expenses of the Parent that were allocated to the Company for stock-based compensation. These stock based compensation costs are measured at fair value. Expense is generally recognized on a straight line basis over the service period during which awards are expected to vest. We present stock based compensation expense within the Combined Statements of Net Income based on the classification of the respective employees’ cash compensation.
Pensions and other Postretirement Benefits
Cummins provides a range of benefits, including pensions, postretirement and post-employment benefits to eligible current and former employees, of which certain of our employees participate. For purposes of Atmus’s Combined Financial Statements, participation in these Cummins plans is being treated as a multiemployer plan. Accordingly, the benefit obligations, plan assets and accumulated other comprehensive income (loss) amounts are not shown in the Combined Balance Sheets. However, due to jurisdictional requirements, some plans will be transferring as part of the transaction and will be treated as single-employer plans. See Note 12, “PENSIONS AND OTHER POSTRETIREMENT BENEFITS,” for more information.
Net Parent Investment
Net Parent Investment represents our Parent’s historical investment in us, our accumulated net earnings after taxes and the net effect of transactions with and allocations from our Parent.
Net Parent Investment in the Combined Balance Sheets represents Cummins’ net investment in Atmus and is presented in lieu of stockholders’ equity. The Combined Statements of Changes in Net Parent Investment include net cash transfers between Cummins and Atmus pursuant to the centralized cash management and other treasury-related functions performed by Cummins. The Net Parent Investment account includes the settlement and net effect of transactions with and corporate allocations from Cummins including administrative expenses such as corporate finance, accounting and field shared services, information services, human resources, marketing, corporate office and other services.
 
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The net effect of other assets and liabilities and related income and expenses recorded at the corporate level and pushed down to Atmus are also included in Net Parent Investment.
All transactions reflected in Net Parent Investment in the accompanying Combined Balance Sheets have been considered cash receipts and payments for purposes of the Combined Statements of Cash Flows and are reflected in financing activities in the accompanying Combined Statements of Cash Flows.
NOTE 4: REVENUE FROM CONTRACTS WITH CUSTOMERS
Disaggregation of Revenue
Revenue by Geographic Area
The table below presents our combined sales by geographic area. Net sales attributed to geographic areas were based on the location of the customer.
​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
United States
​ ​ ​
$
720.5
 ​ ​ ​ ​ $ 619.6 ​ ​ ​ ​ $ 539.8 ​ ​
China
​ ​ ​
​
99.7
 ​ ​ ​ ​ ​ 141.9 ​ ​ ​ ​ ​ 135.2 ​ ​
Other international
​ ​ ​
​
741.9
 ​ ​ ​ ​ ​ 677.3 ​ ​ ​ ​ ​ 557.6 ​ ​
Total net sales
​ ​ ​
$
1,562.1
 ​ ​ ​ ​ $ 1,438.8 ​ ​ ​ ​ $ 1,232.6 ​ ​
Revenue by Product Category
The table below presents our combined sales by product category.
​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
Fuel
​ ​ ​
$
674.7
 ​ ​ ​ ​ $ 612.6 ​ ​ ​ ​ $ 513.2 ​ ​
Lube
​ ​ ​
​
306.9
 ​ ​ ​ ​ ​ 278.7 ​ ​ ​ ​ ​ 238.9 ​ ​
Air
​ ​ ​
​
267.8
 ​ ​ ​ ​ ​ 242.9 ​ ​ ​ ​ ​ 222.2 ​ ​
Other
​ ​ ​
​
312.7
 ​ ​ ​ ​ ​ 304.6 ​ ​ ​ ​ ​ 258.3 ​ ​
Total net sales
​ ​ ​
$
1,562.1
 ​ ​ ​ ​ $ 1,438.8 ​ ​ ​ ​ $ 1,232.6 ​ ​
Revenue by Major Customer
Related party sales to Cummins represented 19.3% of net sales in 2022 ($302.2 million), 18.5% of net sales in 2021 ($266.8 million) and 18.3% of net sales in 2020 ($225.5 million). For the years ended December 31, 2022, 2021 and 2020, two external customers, PACCAR and the Traton Group, represented greater than 10% of our annual net sales. These customers represented 16.2% and 12.0% of net sales in 2022, 15.1% and 11.7% of net sales in 2021 and 14.2% and 11.9% of net sales in 2020. No other customers exceeded 10% of net sales in the three years presented.
NOTE 5: INVESTMENTS IN EQUITY INVESTEES
Investments and advances related to equity method investees and our ownership percentages were as follows:
​ ​ ​
Ownership
Percentage
​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​
Shanghai Fleetguard Filter Co. Ltd.
​ ​ ​ ​ 50.0 ​ ​ ​ ​
$
23.9
 ​ ​ ​ ​ $ 30.7 ​ ​
Fleetguard Filters Pvt. Ltd.
​ ​ ​ ​ 49.5 ​ ​ ​ ​
​
51.4
 ​ ​ ​ ​ ​ 54.7 ​ ​
Filtrum Fibertechnologies Pvt. Ltd.
​ ​ ​ ​ 49.7 ​ ​ ​ ​
​
1.7
 ​ ​ ​ ​ ​ 1.6 ​ ​
Investments and advances related to equity method investees
​ ​ ​ ​ ​ ​ ​ ​ ​
$
77.0
 ​ ​ ​ ​ $ 87.0 ​ ​
 
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Dividends received from our unconsolidated equity investees were $23.1 million, $24.0 million and $19.3 million in 2022, 2021 and 2020, respectively.
Equity, royalty and interest income from investees, net of applicable taxes, was as follows:
​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
Shanghai Fleetguard Filter Co. Ltd.
​ ​ ​
$
5.3
 ​ ​ ​ ​ $ 10.2 ​ ​ ​ ​ $ 10.8 ​ ​
Fleetguard Filters Pvt. Ltd.(1)
​ ​ ​
​
17.1
 ​ ​ ​ ​ ​ 16.4 ​ ​ ​ ​ ​ 24.9 ​ ​
Filtrum Fibertechnologies Pvt. Ltd.
​ ​ ​
​
0.3
 ​ ​ ​ ​ ​ 0.2 ​ ​ ​ ​ ​ 0.5 ​ ​
Atmus share of net income
​ ​ ​
​
22.7
 ​ ​ ​ ​ ​ 26.8 ​ ​ ​ ​ ​ 36.2 ​ ​
Royalty and interest income
​ ​ ​
​
5.3
 ​ ​ ​ ​ ​ 5.6 ​ ​ ​ ​ ​ 4.5 ​ ​
Equity, royalty and interest income from investees
​ ​ ​
$
28.0
 ​ ​ ​ ​ $ 32.4 ​ ​ ​ ​ $ 40.7 ​ ​
​
(1)
2020 includes $14.0 million in favorable adjustments related to tax changes within India’s 2020-2021 Union Budget of India (India Tax Law Change) passed in March 2020. See Note 6, “INCOME TAXES,” for additional information in India Tax Law Change.
​
Our joint ventures are primarily intended to allow us to increase our market penetration in geographic regions, reduce capital spending, streamline our supply chain management and develop technologies. The results and investments in our joint ventures in which we have 50 percent or less ownership are included in “Equity, royalty and interest income from investees” and “Investments and advances related to equity method investees” in our Combined Statements of Net Income and Combined Balance Sheets, respectively.
•
Shanghai Fleetguard Filter Co. Ltd. — Shanghai Fleetguard Filter Co. Ltd. is a limited liability company (Sinoforeign joint venture) incorporated in Shanghai of the People’s Republic of China on April 27, 1994 by Dongfeng Motor Parts and Components Group Co., Ltd. and Cummins (China) Investment Co. with 50% partnership. Shanghai Fleetguard Filter Co. Ltd.’s approved scope of business operations includes the manufacture and sales of various filters and filter spare parts for diesel engines, trucks, buses, mining, excavators and other construction equipment to customers in China and exports to Atmus. Shanghai Fleetguard Filter Co. Ltd. has three manufacturing sites, Shanghai, Wuhan and Shiyan, with Shanghai being the primary location.
​
•
Fleetguard Filters Pvt. Ltd. — Fleetguard Filters Pvt. Ltd. is a limited company incorporated in 1987 by Perfect Sealing Systems Private Limited (India) and Cummins Filtration Inc. (USA) which set a benchmark by providing premium filtration solutions for both on and off-highway applications from Air, Lube, Fuel, Hydraulic and Water Filtration to Coolants & Chemicals. They focus on supplies to first fit and aftermarket customers in India and exports to Atmus. The Head Office of Fleetguard Filters Pvt. Ltd. is located at Baner, in Pune, Maharashtra, India and has seven manufacturing plants in different states of India — Dharwad in Karnataka, Hosur in Tamil Nadu, Jamshedpur in Jharkhand, Nandur, Wadki and Loni Khalbhor in Maharashtra, and Sitarganj in Uttarakhand.
​
 
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Equity Investee Financial Summary
Summary financial information for our equity investees was as follows:
​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
Net sales
​ ​ ​
$
392.5
 ​ ​ ​ ​ $ 429.7 ​ ​ ​ ​ $ 338.6 ​ ​
Gross margin
​ ​ ​
​
136.3
 ​ ​ ​ ​ ​ 98.8 ​ ​ ​ ​ ​ 126.9 ​ ​
Net income
​ ​ ​
​
38.4
 ​ ​ ​ ​ ​ 53.9 ​ ​ ​ ​ ​ 48.2 ​ ​
Atmus share of net income
​ ​ ​
$
22.7
 ​ ​ ​ ​ $ 26.8 ​ ​ ​ ​ $ 36.2 ​ ​
Royalty and interest income
​ ​ ​
​
5.3
 ​ ​ ​ ​ ​ 5.6 ​ ​ ​ ​ ​ 4.5 ​ ​
Total equity, royalty and interest income from investees
​ ​ ​
$
28.0
​ ​ ​ ​ $ 32.4 ​ ​ ​ ​ $ 40.7 ​ ​
Current assets
​ ​ ​
​
157.9
 ​ ​ ​ ​ ​ 186.0 ​ ​ ​ ​ ​ 174.3 ​ ​
Non-current assets
​ ​ ​
​
82.0
 ​ ​ ​ ​ ​ 84.1 ​ ​ ​ ​ ​ 87.9 ​ ​
Current liabilities
​ ​ ​
​
(75.9)
 ​ ​ ​ ​ ​ (88.0) ​ ​ ​ ​ ​ (83.9) ​ ​
Non-current liabilities
​ ​ ​
​
(7.3)
 ​ ​ ​ ​ ​ (5.3) ​ ​ ​ ​ ​ (4.9) ​ ​
Net assets
​ ​ ​
$
156.7
​ ​ ​ ​ $ 176.8 ​ ​ ​ ​ $ 173.4 ​ ​
Atmus share of net assets
​ ​ ​
$
78.9
 ​ ​ ​ ​ $ 88.1 ​ ​ ​ ​ $ 86.4 ​ ​
NOTE 6: INCOME TAXES
The following table summarizes income before income taxes:
​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
U.S. income
​ ​ ​
$
68.8
 ​ ​ ​ ​ $ 73.1 ​ ​ ​ ​ $ 62.4 ​ ​
Foreign income
​ ​ ​
$
142.9
 ​ ​ ​ ​ $ 144.7 ​ ​ ​ ​ $ 138.2 ​ ​
Income before income taxes
​ ​ ​
$
   211.7
 ​ ​ ​ ​ $ 217.8 ​ ​ ​ ​ $ 200.6 ​ ​
Income tax expense (benefit) consisted of the following:
​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
Current ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
U.S. federal and state
​ ​ ​
$
28.6
 ​ ​ ​ ​ $ 15.5 ​ ​ ​ ​ $ 29.0 ​ ​
Foreign
​ ​ ​
​
25.7
 ​ ​ ​ ​ ​ 33.7 ​ ​ ​ ​ ​ 25.4 ​ ​
Total current income tax expense
​ ​ ​
​
54.3
​ ​ ​ ​ ​ 49.2 ​ ​ ​ ​ ​ 54.4 ​ ​
Deferred ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
U.S. federal and state
​ ​ ​
​
(11.4)
 ​ ​ ​ ​ ​ 1.6 ​ ​ ​ ​ ​ 4.0 ​ ​
Foreign
​ ​ ​
​
(1.3)
 ​ ​ ​ ​ ​ (4.3) ​ ​ ​ ​ ​ (9.5) ​ ​
Impact of India tax law changes
​ ​ ​
​
—
 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 8.9 ​ ​
Total deferred income tax expense (benefit)
​ ​ ​
​
(12.7)
​ ​ ​ ​ ​ (2.7) ​ ​ ​ ​ ​ 3.4 ​ ​
Income tax expense
​ ​ ​
$
   41.6
​ ​ ​ ​ $ 46.5 ​ ​ ​ ​ $ 57.8 ​ ​
 
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A reconciliation of the statutory U.S. federal income tax rate to the effective tax rate was as follows:​
​ ​ ​
Years ended December 31,
​
​ ​ ​
2022
​ ​
2021
​ ​
2020
​
Statutory U.S. federal income tax rate
​ ​ ​
​
21.0%
 ​ ​ ​ ​ ​ 21.0% ​ ​ ​ ​ ​ 21.0% ​ ​
State income tax, net of federal effect
​ ​ ​
​
0.9%
 ​ ​ ​ ​ ​ 1.0% ​ ​ ​ ​ ​ 0.6% ​ ​
Differences in rates and taxability of foreign subsidiaries and joint ventures
​ ​ ​
​
(2.6)%
 ​ ​ ​ ​ ​ (1.2)% ​ ​ ​ ​ ​ (1.5)% ​ ​
Research tax credits
​ ​ ​
​
(0.6)%
 ​ ​ ​ ​ ​ (1.1)% ​ ​ ​ ​ ​ (0.9)% ​ ​
Foreign derived intangible income
​ ​ ​
​
(1.3)%
 ​ ​ ​ ​ ​ (1.2)% ​ ​ ​ ​ ​ (1.0)% ​ ​
Valuation allowance
​ ​ ​
​
(0.4)%
 ​ ​ ​ ​ ​ 0.7% ​ ​ ​ ​ ​ 1.3% ​ ​
Uncertain tax positions
​ ​ ​
​
2.5%
 ​ ​ ​ ​ ​ 1.6% ​ ​ ​ ​ ​ 9.1% ​ ​
Other, net
​ ​ ​
​
0.2%
 ​ ​ ​ ​ ​ 0.5% ​ ​ ​ ​ ​ 0.2% ​ ​
Effective tax rate
​ ​ ​
​
19.7%
 ​ ​ ​ ​ ​ 21.3% ​ ​ ​ ​ ​ 28.8% ​ ​
Our effective tax rate for 2022 was 19.7 percent compared to 21.3 percent for 2021 and 28.8 percent for 2020. The decrease in our effective tax rate was primarily due to changes in the mix of our income before income taxes between the U.S. and foreign countries. The year ended December 31, 2022, contained unfavorable discrete tax items of $5.4 million, primarily due to $5.2 million of unfavorable changes in tax reserves.
The year ended December 31, 2021, contained unfavorable net discrete tax items of $2.6 million, primarily due to $3.5 million of unfavorable changes in tax reserves, partially offset by $0.9 million of favorable other discrete tax items.
The year ended December 31, 2020, contained $24.1 million of unfavorable net discrete tax items, primarily due to $18.2 million of unfavorable changes in tax reserves, $8.9 million of withholding tax adjustments, partially offset by $3.0 million of favorable other discrete tax items. The India Tax Law Change eliminated the dividend distribution tax and replaced it with a lower rate withholding tax as the burden shifted from the dividend payor to the dividend recipient.
The India Tax Law Change resulted in the following adjustments to the Combined Statements of Net Income for the year ended December 31, 2020:
​ ​ ​
Favorable
(Unfavorable)
​
In millions
​ ​
2020
​
Equity, royalty and interest income from investees
​ ​ ​ $ 14.0 ​ ​
Income tax expense
​ ​ ​ $ (8.9) ​ ​
Net income statement impact
​ ​ ​ $ 5.1 ​ ​
At December 31, 2022, $208.9 million of non-U.S. earnings are considered indefinitely reinvested in operations outside the U.S. for which deferred taxes have not been provided. Determination of the related deferred tax liability, if any, is not practicable because of the complexities associated with the hypothetical calculation.
 
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Carryforward tax benefits and the tax effect of temporary differences between financial and tax reporting that give rise to net deferred tax assets (liabilities) were as follows:
​ ​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​
Deferred tax assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Foreign carryforward benefits
​ ​ ​
$
18.6
 ​ ​ ​ ​ $ 17.6 ​ ​
Accrued expenses
​ ​ ​
​
15.5
 ​ ​ ​ ​ ​ 14.0 ​ ​
Warranty expenses
​ ​ ​
​
3.5
 ​ ​ ​ ​ ​ 4.2 ​ ​
Lease liabilities
​ ​ ​
​
4.1
 ​ ​ ​ ​ ​ 4.9 ​ ​
Other
​ ​ ​
​
12.3
 ​ ​ ​ ​ ​ 7.0 ​ ​
Gross deferred tax assets
​ ​ ​
​
54.0
 ​ ​ ​ ​ ​ 47.7 ​ ​
Valuation allowance
​ ​ ​
​
(16.4)
 ​ ​ ​ ​ ​ (17.6) ​ ​
Total deferred tax assets
​ ​ ​
​
37.6
 ​ ​ ​ ​ ​ 30.1 ​ ​
Deferred tax liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Property, plant and equipment
​ ​ ​
​
8.0
 ​ ​ ​ ​ ​ 10.2 ​ ​
Unremitted income of foreign subsidiaries and joint ventures
​ ​ ​
​
12.4
 ​ ​ ​ ​ ​ 13.0 ​ ​
Employee benefit plans
​ ​ ​
​
1.2
 ​ ​ ​ ​ ​ 1.5 ​ ​
Lease assets
​ ​ ​
​
4.0
 ​ ​ ​ ​ ​ 4.6 ​ ​
Other
​ ​ ​
​
5.0
 ​ ​ ​ ​ ​ 6.5 ​ ​
Total deferred tax liabilities
​ ​ ​
​
30.6
 ​ ​ ​ ​ ​ 35.8 ​ ​
Net deferred tax assets (liabilities)
​ ​ ​
$
7.0
 ​ ​ ​ ​ $ (5.7) ​ ​
Our foreign carryforward benefits as of December 31, 2022 begin to expire in 2023. A valuation allowance is recorded to reduce the gross deferred tax assets to an amount we believe is more likely than not to be realized. The valuation allowance is $16.4 million and decreased in 2022 by a net $1.2 million. The valuation allowance is primarily attributable to the uncertainty regarding the realization of foreign net operating loss carryforward benefits.
Our Combined Balance Sheets contain the following tax related items:
​ ​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​
Prepaid expenses and other current assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Refundable income taxes
​ ​ ​
$
0.8
 ​ ​ ​ ​ $ 0.3 ​ ​
Other assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Deferred income tax assets
​ ​ ​
​
14.3
 ​ ​ ​ ​ ​ 13.4 ​ ​
Other accrued expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Income tax payable
​ ​ ​
​
6.0
 ​ ​ ​ ​ ​ 6.6 ​ ​
Other liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
One-time transition tax
​ ​ ​
​
0.7
 ​ ​ ​ ​ ​ 0.7 ​ ​
Deferred income tax liabilities
​ ​ ​
​
7.3
 ​ ​ ​ ​ ​ 19.1 ​ ​
 
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A reconciliation of unrecognized tax benefits for the years ended December 31, 2022, 2021 and 2020 was as follows:
​ ​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
Balance at beginning of year
​ ​ ​
$
19.0
​ ​ ​ ​ $ 16.6 ​ ​ ​ ​ $ 1.8 ​ ​
Additions to current year tax positions
​ ​ ​
$
3.2
 ​ ​ ​ ​ $ 2.4 ​ ​ ​ ​ $ 2.7 ​ ​
Additions to prior years’ tax positions
​ ​ ​
$
—
 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ 12.3 ​ ​
Reductions to prior years’ tax positions
​ ​ ​
$
—
 ​ ​ ​ ​ $ — ​ ​ ​ ​ $ (0.2) ​ ​
Balance at end of year
​ ​ ​
$
22.2
​ ​ ​ ​ $ 19.0 ​ ​ ​ ​ $ 16.6 ​ ​
The total amount of unrecognized tax benefits in 2022, 2021 and 2020, if recognized, would favorably impact the effective tax rate in future periods.
We have accrued interest expense related to the unrecognized tax benefits of $7.0 million, $5.0 million and $3.9 million as of December 31, 2022, 2021 and 2020, respectively. We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
Audit outcomes and the timing of audit settlements are subject to significant uncertainty. Although we believe that adequate provision has been made for such issues, there is the possibility that the ultimate resolution of such issues could have an adverse effect on our earnings. Conversely, if these issues are resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings.
As a result of our global operations, we file income tax returns in various jurisdictions including U.S. federal, state and foreign jurisdictions. We are routinely subject to examination by taxing authorities throughout the world, including Australia, Belgium, Brazil, Canada, China, France, India, Mexico, the U.K. and the U.S. With few exceptions, our U.S. federal, major state and foreign jurisdictions are no longer subject to income tax assessments for years before 2018.
NOTE 7: INVENTORIES
Inventories are stated at the lower of cost or net realizable value. Inventories included the following:
​ ​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​
Finished products
​ ​ ​
$
195.9
 ​ ​ ​ ​ $ 183.6 ​ ​
Work-in-process and raw materials
​ ​ ​
​
92.4
 ​ ​ ​ ​ ​ 85.0 ​ ​
Inventories at FIFO cost
​ ​ ​
​
288.3
 ​ ​ ​ ​ ​ 268.6 ​ ​
Excess of FIFO over LIFO
​ ​ ​
​
(36.5)
 ​ ​ ​ ​ ​ (22.8) ​ ​
Total inventories
​ ​ ​
$
251.8
 ​ ​ ​ ​ $ 245.8 ​ ​
NOTE 8: PROPERTY, PLANT AND EQUIPMENT
Details of our property, plant and equipment balance were as follows:
​ ​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​
Land and buildings
​ ​ ​
$
68.7
 ​ ​ ​ ​ $ 67.1 ​ ​
Machinery, equipment and fixtures
​ ​ ​
​
304.1
 ​ ​ ​ ​ ​ 301.7 ​ ​
Construction in process
​ ​ ​
​
35.4
 ​ ​ ​ ​ ​ 25.6 ​ ​
Property, plant and equipment, gross
​ ​ ​
​
408.2
 ​ ​ ​ ​ ​ 394.4 ​ ​
Less: Accumulated depreciation
​ ​ ​
​
(259.8)
 ​ ​ ​ ​ ​ (253.3) ​ ​
Property, plant and equipment, net
​ ​ ​
$
148.4
 ​ ​ ​ ​ $ 141.1 ​ ​
 
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NOTE 9: LEASES
Our lease portfolio consists primarily of real estate and equipment leases. Our real estate leases primarily consist of land, office, distribution, warehousing and manufacturing facilities. These leases typically range in term from 2 to 50 years and may contain renewal options for periods up to 10 years at our discretion. Our equipment lease portfolio consists primarily of vehicles, fork trucks and IT equipment. These leases typically range in term from two years to three years and may contain renewal options. Our leases generally do not contain variable lease payments other than (1) certain foreign real estate leases which have payments indexed to inflation and (2) certain real estate executory costs (such as taxes, insurance and maintenance), which are paid based on actual expenses incurred by the lessor during the year. Our leases generally do not include residual value guarantees.
Our operating lease cost was $10.7 million, $10.6 million, and $9.8 million for the years ended December 31, 2022, 2021 and 2020, respectively. Our finance lease cost, short-term lease cost and variable lease cost were immaterial for the years ended December 31, 2022, 2021 and 2020.
Supplemental balance sheet information related to leases:
​ ​ ​
December 31,
​ ​ ​ ​
In millions
​ ​
2022
​ ​
2021
​ ​
Balance Sheet Location
​
Assets ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating
​ ​ ​
$
32.4
 ​ ​ ​ ​ $ 32.7 ​ ​ ​ Other assets ​
Finance(1) ​ ​ ​
$
0.6
 ​ ​ ​ ​ $ 2.1 ​ ​ ​
Property, plant and equipment, net
​
Total lease assets
​ ​ ​
$
33.0
 ​ ​ ​ ​ $ 34.8 ​ ​ ​ ​ ​
Liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Current ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating
​ ​ ​
$
9.0
 ​ ​ ​ ​ $ 9.1 ​ ​ ​ Other accrued expenses ​
Finance
​ ​ ​
$
0.4
 ​ ​ ​ ​ $ 0.7 ​ ​ ​ Other accrued expenses ​
Long-term ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating
​ ​ ​
$
23.2
 ​ ​ ​ ​ $ 23.9 ​ ​ ​ Other liabilities ​
Finance
​ ​ ​
$
0.7
 ​ ​ ​ ​ $ 1.4 ​ ​ ​ Other liabilities ​
Total lease liabilities
​ ​ ​
$
33.3
 ​ ​ ​ ​ $ 35.1 ​ ​ ​ ​ ​
​
(1)
Finance lease assets were recorded net of accumulated amortization of $1.3 million and $1.2 million at December 31, 2022 and 2021.
​
Supplemental cash flow and other information related to leases:
​ ​ ​
Years ended December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
Cash paid for amounts included in the measurement of lease liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating cash flows from operating leases
​ ​ ​
$
9.4
 ​ ​ ​ ​ $ 9.4 ​ ​ ​ ​ $ 8.5 ​ ​
Right-of-use assets obtained in exchange for lease obligations ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating leases
​ ​ ​
$
7.4
 ​ ​ ​ ​ $ 14.7 ​ ​ ​ ​ $ 18.4 ​ ​
Finance leases
​ ​ ​
$
0.8
 ​ ​ ​ ​ $ 1.0 ​ ​ ​ ​ $ 2.4 ​ ​
 
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Additional information related to leases:
​ ​ ​
December 31,
​
​ ​ ​
2022
​ ​
2021
​
Weighted-average remaining lease term (in years) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating leases
​ ​ ​
​
3.8
 ​ ​ ​ ​ ​ 4.3 ​ ​
Finance leases
​ ​ ​
​
3.6
 ​ ​ ​ ​ ​ 3.6 ​ ​
Weighted-average discount rate ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Operating leases
​ ​ ​
​
3.4%
 ​ ​ ​ ​ ​ 2.5% ​ ​
Finance leases
​ ​ ​
​
1.5%
 ​ ​ ​ ​ ​ 2.0% ​ ​
Following is a summary of the future minimum lease payments due to finance and operating leases with terms of more than one year at lease commencement at December 31, 2022, together with the net present value of the minimum payments:
In millions
​ ​
Finance
Leases
​ ​
Operating
Leases
​
2023
​ ​ ​ $ 0.4 ​ ​ ​ ​ $ 10.0 ​ ​
2024
​ ​ ​ ​ 0.3 ​ ​ ​ ​ ​ 8.4 ​ ​
2025
​ ​ ​ ​ 0.2 ​ ​ ​ ​ ​ 7.6 ​ ​
2026
​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ 6.3 ​ ​
2027
​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ 1.8 ​ ​
After 2027
​ ​ ​ ​ 0.1 ​ ​ ​ ​ ​ 0.2 ​ ​
Total minimum lease payments
​ ​ ​ ​ 1.2 ​ ​ ​ ​ ​ 34.3 ​ ​
Interest
​ ​ ​ ​ (0.1) ​ ​ ​ ​ ​ (2.1) ​ ​
Present value of net minimum lease payments
​ ​ ​ $ 1.1 ​ ​ ​ ​ $ 32.2 ​ ​
NOTE 10: GOODWILL
Goodwill is not amortized but it is subject to impairment testing at the reporting unit on an annual basis, or more often if events or circumstances indicate there may be impairment. We perform a goodwill impairment evaluation for our reporting unit annually. There was no impairment of goodwill during the periods covered by these Combined Financial Statements.
NOTE 11: PRODUCT WARRANTY LIABILITY
A tabular reconciliation of the product warranty liability, including accrued product campaigns, was as follows:
​ ​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​ ​
2020
​
Balance, beginning of year
​ ​ ​
$
23.9
 ​ ​ ​ ​ $ 23.2 ​ ​ ​ ​ $ 8.5 ​ ​
Provision for base warranties issued
​ ​ ​
​
1.6
 ​ ​ ​ ​ ​ 5.9 ​ ​ ​ ​ ​ 5.8 ​ ​
Provision for product campaigns issued
​ ​ ​
​
—
 ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ 18.5 ​ ​
Payments made during period
​ ​ ​
​
(7.0)
 ​ ​ ​ ​ ​ (7.6) ​ ​ ​ ​ ​ (9.9) ​ ​
Changes in estimates for pre-existing product warranties
​ ​ ​
​
(2.6)
 ​ ​ ​ ​ ​ 2.2 ​ ​ ​ ​ ​ — ​ ​
Foreign currency translation and other
​ ​ ​
​
(0.4)
 ​ ​ ​ ​ ​ 0.2 ​ ​ ​ ​ ​ 0.3 ​ ​
Balance, end of year
​ ​ ​
$
15.5
 ​ ​ ​ ​ $ 23.9 ​ ​ ​ ​ $ 23.2 ​ ​
 
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Warranty liabilities on our Combined Balance Sheets were as follows:
​ ​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​
Current portion
​ ​ ​
$
5.9
 ​ ​ ​ ​ $ 11.7 ​ ​
Long-term portion
​ ​ ​
​
9.6
 ​ ​ ​ ​ ​ 12.2 ​ ​
Total
​ ​ ​
$
15.5
 ​ ​ ​ ​ $ 23.9 ​ ​
Fuel Heater Campaign Accrual
Quality issues were identified with a particular application of a fuel heater which primarily impacted one customer, resulting in a recall campaign. A total of $24.2 million was accrued for this campaign during the years ended December 31, 2020 and 2019. The remaining accrual balance at December 31, 2022 was $9.7 million.
NOTE 12: PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Pension Plans
Multiemployer Plans with Cummins
Cummins offers various retirement benefits (“Cummins Plans”) to its eligible employees which includes eligible employees of Atmus, both in the U.S. and foreign countries. Since Cummins provides these benefits to eligible employees and retirees of Atmus, the costs to participating employees of Atmus in these plans are reflected in the Combined Financial Statements, while the related assets and liabilities are retained by Cummins.
The total Cummins defined benefit pension plan service costs allocated to Atmus were $5.8 million, $6.8 million and $5.8 million in 2022, 2021 and 2020, respectively. These costs are reflected in the Combined Financial Statements as a component of Cost of sales, Research, development and engineering expenses and Selling, general and administrative expenses. The non-service benefit allocated to Atmus was $3.4 million, $2.7 million and $1.9 million in 2022, 2021 and 2020, respectively. The non-service benefit is reflected as a component of Other income, net.
The following is a listing of significant defined benefit pension plans sponsored by Cummins in which eligible Atmus employees and retirees participate:
Country
​ ​
Name of Defined Benefit Plan(s)
​
Mexico ​ ​ Pension Plan, Seniority Premium, Termination Indemnity(a) ​
United Kingdom ​ ​ Cummins UK Pension Plan ​
United States ​ ​ The Cummins Pension Plan ​
​ ​ ​ Cummins Inc. Excess Benefit Retirement Plan ​
​ ​ ​ Cummins Inc. Postretirement Health Care and Life Insurance Plans ​
Atmus Plans
Atmus has defined benefit pension plans that will be transferring with the business which provide retirement benefits to eligible participants and are collectively referred to as the “Atmus Plans.” The plans’ benefits are primarily based on employee earnings and credited service.
Plans in two countries, Belgium and Mexico, were newly established in 2022. Prior to the establishment of the plans in Belgium and Mexico, Filtration employees’ participated in the Cummins' plans.
 
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The total Atmus Plans’ defined benefit pension plan expenses were $2.0 million in 2022 and $0.8 million in 2021 and 2020. Service costs allocated to Atmus were $1.5 million in 2022 and $0.6 million in 2021 and 2020. These costs are reflected in the Combined Financial Statements as a component of Cost of sales, Research, development and engineering expenses and Selling, general and administrative expenses. The non-service costs allocated to Atmus were immaterial for each of the years ended December 31, 2022, 2021 and 2020. These non-service costs are reflected as a component of Other income, net.
The total Atmus Plans’ defined benefit pension plan liabilities were $7.3 million (including $0.9 million attributable to the plans in Belgium and Mexico) and $9.7 million as of December 31, 2022 and 2021, respectively. These liabilities are reflected in the Combined Financial Statements as a component of Other liabilities.
The following is a listing of significant Atmus Plans:
Country
​ ​
Name of Defined Benefit Plan(s)
​
Belgium ​ ​ Reglement Plannen Leven en Overligden ​
France ​ ​ Indemnité de Départ en Retraite ​
Germany ​ ​ ersorgungsordnung von October 1979 ​
Japan ​ ​ Employee Retirement Allowance Plan ​
Mexico ​ ​ Pension Plan, Seniority Premium, Termination Indemnity(a) ​
​
(a)
New plans have been established in Mexico, but for a period of time, certain Filtration employees will continue to participate in the Cummins' plans until they are transferred into the new Filtration plans.
​
NOTE 13: COMMITMENTS AND CONTINGENCIES
Legal Proceedings
We are subject to several lawsuits and claims arising out of the ordinary course of our business, including actions related to product liability; the use and performance of our products; warranty matters; product recalls; patent, trademark or other intellectual property infringement; contractual liability; the conduct of our business; tax reporting in foreign jurisdictions; distributor termination; workplace safety; and environmental matters. We have denied liability with respect to many of these lawsuits, claims and proceedings and are vigorously defending such lawsuits, claims and proceedings. We carry various forms of commercial, property and casualty, product liability and other forms of insurance; however, such insurance may not be applicable or adequate to cover the costs associated with a judgment against us with respect to these lawsuits, claims and proceedings. We do not believe that these lawsuits are material individually or in the aggregate. While we believe we have also established adequate accruals for our expected future liability with respect to pending lawsuits, claims and proceedings, where the nature and extent of any such liability can be reasonably estimated based upon then presently available information, there can be no assurance that the final resolution of any existing or future lawsuits, claims or proceedings will not have a material adverse effect on our business, results of operations, financial condition or cash flows.
Indemnifications
Periodically, we enter into various contractual arrangements where we agree to indemnify a third-party against certain types of losses. Common types of indemnities include:
•
product liability and license, patent or trademark indemnifications;
​
•
asset sale agreements where we agree to indemnify the purchaser against future environmental exposures related to the asset sold; and
​
•
any contractual agreement where we agree to indemnify the counterparty for losses suffered as a result of a misrepresentation in the contract.
​
 
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We regularly evaluate the probability of having to incur costs associated with these indemnities and accrue for expected losses that are probable. Because the indemnifications are not related to specified known liabilities and due to their uncertain nature, we are unable to estimate the maximum amount of the potential loss associated with these indemnifications.
NOTE 14: ACCUMULATED OTHER COMPREHENSIVE LOSS
Following are the changes in accumulated other comprehensive income (loss) by component:
In millions
​ ​
Change in pensions and
other postretirement
defined benefit plans
​ ​
Foreign currency
translation adjustments
​ ​
Total
​
Balance at December 31, 2019
​ ​ ​ $ (2.2) ​ ​ ​ ​ $ (39.8) ​ ​ ​ ​ $ (42.0) ​ ​
Other comprehensive income before reclassifications
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Before-tax amount
​ ​ ​ ​ — ​ ​ ​ ​ ​ 11.7 ​ ​ ​ ​ ​ 11.7 ​ ​
Tax benefit
​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ — ​ ​
After-tax Amount
​ ​ ​ ​ — ​ ​ ​ ​ ​ 11.7 ​ ​ ​ ​ ​ 11.7 ​ ​
Net current period other comprehensive loss
​ ​ ​ ​ — ​ ​ ​ ​ ​ 11.7 ​ ​ ​ ​ ​ 11.7 ​ ​
Balance at December 31, 2020
​ ​ ​ $ (2.2) ​ ​ ​ ​ $ (28.1) ​ ​ ​ ​ $ (30.3) ​ ​
Other comprehensive income before reclassifications
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Before-tax amount
​ ​ ​ ​ 1.0 ​ ​ ​ ​ ​ (12.0) ​ ​ ​ ​ ​ (11.0) ​ ​
Tax expense
​ ​ ​ ​ (0.3) ​ ​ ​ ​ ​ — ​ ​ ​ ​ ​ (0.3) ​ ​
After-tax Amount
​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ (12.0) ​ ​ ​ ​ ​ (11.3) ​ ​
Net current period other comprehensive loss
​ ​ ​ ​ 0.7 ​ ​ ​ ​ ​ (12.0) ​ ​ ​ ​ ​ (11.3) ​ ​
Balance at December 31, 2021
​ ​ ​ $ (1.5) ​ ​ ​ ​ $ (40.1) ​ ​ ​ ​ $ (41.6) ​ ​
Other comprehensive income before reclassifications
​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
Before-tax amount
​ ​ ​ ​ 3.1 ​ ​ ​ ​ ​ (16.6) ​ ​ ​ ​ ​ (13.5) ​ ​
Tax expense
​ ​ ​
​
(0.7)
 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​
​
(0.7)
 ​ ​
After-tax Amount
​ ​ ​
​
2.4
 ​ ​ ​ ​
​
(16.6)
 ​ ​ ​ ​
​
(14.2)
 ​ ​
Net current period other comprehensive loss
​ ​ ​
​
2.4
 ​ ​ ​ ​
​
(16.6)
 ​ ​ ​ ​
​
(14.2)
 ​ ​
Balance at December 31, 2022
​ ​ ​ $ 0.9 ​ ​ ​ ​ $ (56.7) ​ ​ ​ ​ $ (55.8) ​ ​
NOTE 15: RELATIONSHIP WITH PARENT AND RELATED PARTIES
Historically, Atmus has been managed and operated in the normal course of business with other affiliates of Cummins. Accordingly, certain shared costs have been allocated to Atmus and reflected as expenses in the Combined Financial Statements. Management of Cummins and Atmus consider the allocation methodologies used to be reasonable and appropriate reflections of historical expenses of Cummins attributable to Atmus for purposes of the Combined Financial Statements; however, the expenses reflected in the Combined Financial Statements may not be indicative of the actual expenses that would have been incurred during the periods presented if Atmus historically operated as a separate, standalone entity. In addition, the expenses reflected in the Combined Financial Statements may not be indicative of expenses that will be incurred in the future by Atmus.
 
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Corporate Costs/Allocations
The Combined Financial Statements include corporate costs incurred by Cummins for services that are provided to or on behalf of Atmus. Such costs represent shared services and infrastructure provided by Cummins, including information technology, administrative, finance, human resources, legal and other corporate and infrastructure services.
The corporate costs reflected in the Combined Financial Statements consist of direct charges to the business and indirect allocations to Atmus. The costs that are directly charged to Atmus, such as Cummins Business Services, are primarily determined based on actual usage.
Indirect allocations are related to shared services and infrastructure provided by Cummins that would benefit Atmus but have not been directly charged to the business in a manner discussed above. These corporate costs are allocated to Atmus using methods management believes are consistent and reasonable. The primary allocation factor is third-party revenue; however, other relevant metrics are also utilized based on the nature of the underlying activities. For example, headcount is used as the allocation driver to allocate the human resource departmental costs.
The expenses reflected in the Combined Financial Statements may not be indicative of the actual expenses that would have been incurred during the periods presented if Atmus historically operated as a separate, standalone entity. The expenses allocated and directly charged reflect all expenses that the Parent incurred on behalf of the Company. All corporate charges and allocations have been deemed paid by Atmus to Cummins in the period in which the cost was recognized in the Combined Statements of Net Income.
Total corporate costs allocated to Atmus were $45.0 million, $54.3 million and $48.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. Allocated corporate costs are included in Net sales, Cost of sales, Selling, general and administrative expenses, Research, development and engineering expenses and Other income, net.
Cash Management and Financing
Cummins uses a centralized approach to cash management and financing its operations, including the operations of Atmus. Accordingly, no cash and cash equivalents have been allocated to Atmus in the Combined Financial Statements. Cash receipts from Atmus that are swept to Cummins’ accounts are offset with amounts drawn by Atmus from the Cummins’ accounts and are reflected in the amount of zero and $7.6 million as Related Party Payables in the Combined Balance Sheets as of December 31, 2022 and 2021, respectively. All debt is financed by Cummins and financing decisions for wholly and majority owned subsidiaries are determined by Cummins’ corporate treasury operations.
Related Party Balances
Atmus had trade receivables of $57.2 million and $45.2 million for products sold and accounts payable of $75.7 million and $65.0 million for products purchased in the ordinary course with Cummins as of December 31, 2022 and December 31, 2021, respectively. Our sales to Cummins were $302.2 million, $266.8 million and $225.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.
NOTE 16: STOCK-BASED COMPENSATION
Cummins offers multiple programs for awarding shares of equity awards to executives, employees and non-employee directors, including dedicated Atmus employees. Awards available for grant to eligible Atmus employees are stock options and performance shares. Shares issued under the Plan may be newly issued shares or reissued treasury shares.
Stock Options Plan
Stock options are generally granted with a strike price equal to the fair market value of the stock on the date of grant and a life of 10 years. Stock options granted have a three-year vesting period. The
 
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strike price may be higher than the fair value of the stock on the date of the grant but cannot be lower. Compensation expense is recorded on a straight-line basis over the vesting period beginning on the grant date.
The compensation expense is based on the fair value of each option grant using the Black- Scholes option pricing model. Options granted to employees eligible for retirement under our retirement plan are fully expensed at the grant date.
Stock option expense was immaterial for each of the years ended December 31, 2022, 2021 and 2020.
Performance Shares
Performance shares are granted as target awards and are earned based on certain measures of our operating performance. A payout factor has been established ranging from 0 to 200 percent of the target award based on Cummins’ actual performance during the three-year performance period. The fair value of the award is equal to the average market price, adjusted for the present value of dividends over the vesting period, of Cummins’ stock on the grant date. Compensation expense is recorded ratably over the period beginning on the grant date until the shares become unrestricted and is based on the amount of the award that is expected to be earned under the plan formula, adjusted each reporting period based on current information.
Performance shares expense was immaterial for each of the years ended December 31, 2022, 2021 and 2020.
NOTE 17: SUPPLEMENTAL BALANCE SHEET DATA
Other accrued expenses included the following:
​ ​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​
Other taxes payable
​ ​ ​
$
7.5
 ​ ​ ​ ​ $ 7.5 ​ ​
Marketing accruals
​ ​ ​
​
47.3
 ​ ​ ​ ​ ​ 34.3 ​ ​
Current portion of operating lease liabilities
​ ​ ​
​
9.0
 ​ ​ ​ ​ ​ 9.1 ​ ​
Current portion of finance lease liabilities
​ ​ ​
​
0.4
 ​ ​ ​ ​ ​ 0.7 ​ ​
Income taxes payable
​ ​ ​
​
6.0
 ​ ​ ​ ​ ​ 6.6 ​ ​
Other
​ ​ ​
​
8.8
 ​ ​ ​ ​ ​ 3.1 ​ ​
Other accrued expenses
​ ​ ​
$
79.0
 ​ ​ ​ ​ $ 61.3 ​ ​
Long-lived assets include property, plant and equipment, net of depreciation, investments and advances to equity investees and other assets, excluding deferred tax assets. Long-lived assets by geographic area were as follows:
​ ​ ​
December 31,
​
In millions
​ ​
2022
​ ​
2021
​
United States
​ ​ ​
$
145.3
 ​ ​ ​ ​ $ 137.1 ​ ​
China
​ ​ ​
​
32.4
 ​ ​ ​ ​ ​ 39.9 ​ ​
Mexico
​ ​ ​
​
34.0
 ​ ​ ​ ​ ​ 38.2 ​ ​
Other international
​ ​ ​
​
53.4
 ​ ​ ​ ​ ​ 49.7 ​ ​
Total long-lived assets
​ ​ ​
$
265.1
 ​ ​ ​ ​ $ 264.9 ​ ​
NOTE 18: Subsequent Events
Management has evaluated subsequent events through the date the Combined Financial Statements were issued on February 21, 2023. No subsequent events were identified.
 
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​
​
                 Shares
Atmus Filtration Technologies Inc.
Common Stock
​
​
PROSPECTUS
​
Joint Lead Book-Running Managers
​ Goldman Sachs & Co. LLC ​ ​
J.P. Morgan
​
Joint Book-Running Managers
​ Baird ​ ​
BofA Securities
​ ​
Wells Fargo Securities
​
Through and including                 , 2023 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
​
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PART II — INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the expenses payable by the Registrant expected to be incurred in connection with the issuance and distribution of the shares of common stock being registered hereby (other than underwriting discounts and commissions). All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the listing fee for the NYSE.
​ ​ ​
Amount Paid
or to be Paid
​
SEC registration fee
​ ​ ​ $      * ​ ​
FINRA filing fee
​ ​ ​ ​    * ​ ​
NYSE listing fee
​ ​ ​ ​    * ​ ​
Blue sky qualification fees and expenses
​ ​ ​ ​    * ​ ​
Printing expenses
​ ​ ​ ​    * ​ ​
Legal fees and expenses
​ ​ ​ ​    * ​ ​
Accounting fees and expenses
​ ​ ​ ​    * ​ ​
Transfer agent and registrar fees and expenses
​ ​ ​ ​    * ​ ​
Miscellaneous expenses
​ ​ ​ ​    * ​ ​
Total
​ ​ ​ $      * ​ ​
​
*
To be provided by amendment
​
Item 14. Indemnification of Officers and Directors.
Section 102(b)(7) of the Delaware General Corporation Law, or DGCL, allows a corporation to provide in its certificate of incorporation that a director or certain officers of the corporation will not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director or officer, as applicable, except where the director or officer breached the duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase or redemption in violation of Delaware corporate law or obtained an improper personal benefit. Our amended and restated certificate of incorporation provides for this limitation of liability.
Section 145 of the DGCL, or Section 145, provides, among other things, that a Delaware corporation may indemnify any person who was, is or is threatened to be made, party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who were or are a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or agent of another corporation or enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation’s best interests, provided further that no indemnification is permitted without judicial approval if the officer, director, employee or agent is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the
 
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corporation must indemnify him or her against the expenses which such officer or director has actually and reasonably incurred.
Section 145 also provides that the expenses incurred by a director, officer, employee or agent of the corporation or a person serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise in defending any action, suit or proceeding may be paid in advance of the final disposition of the action, suit or proceeding, subject, in the case of current officers and directors, to the corporation’s receipt of an undertaking by or on behalf of such officer or director to repay the amount so advanced if it shall be ultimately determined that such person is not entitled to be indemnified.
Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who 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 or enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would otherwise have the power to indemnify him or her under Section 145.
Our amended and restated bylaws provides that we must indemnify our directors and officers to the fullest extent authorized by the DGCL and must also pay expenses incurred in defending any such proceeding in advance of its final disposition upon delivery of an undertaking, by or on behalf of an indemnified person, to repay all amounts so advanced if it should be determined ultimately that such person is not entitled to be indemnified under our amended and restated bylaws or otherwise.
The indemnification rights set forth above shall not be exclusive of any other right which an indemnified person may have or hereafter acquire under any statute, provision of our amended and restated certificate of incorporation, our amended and restated bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
We expect to maintain standard policies of insurance that provide coverage (1) to our directors and officers against loss arising from claims made by reason of breach of duty or other wrongful act and (2) to us with respect to indemnification payments that we may make to such directors and officers.
We intend to enter into indemnification agreements with our directors and executive officers. These agreements will require us to indemnify these individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expenses incurred as a result of any proceeding against them as to which they could be indemnified. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), may be permitted to directors or executive officers, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy and is therefore unenforceable.
The proposed form of Underwriting Agreement to be filed as Exhibit 1.1 to this registration statement provides for indemnification to our directors and officers by the underwriters against certain liabilities.
Item 15. Recent Sales of Unregistered Securities
We have not sold any securities, registered or otherwise, within the past three years, except for the shares issued upon our formation and in connection with the separation to our sole stockholder, Cummins.
Item 16. Exhibits and Financial Statement Schedules
(a)   Exhibits.   See the Exhibit Index immediately preceding the signature page hereto, which is incorporated by reference as if fully set forth herein.
(b)   Financial Statement Schedules.   All schedules are omitted because the required information is (i) not applicable, (ii) not present in amounts sufficient to require submission of the schedule and/or
 
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(iii) included in the financial statements and accompanying notes thereto included in the prospectus filed as part of this registration statement.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
​
(2)
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
​
 
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EXHIBIT INDEX
Exhibit No.
​ ​
Description
​
1.1* ​ ​ Form of Underwriting Agreement between Atmus Filtration Technologies Inc., Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC as representatives of the several underwriters named in Schedule II thereto. ​
1.2* ​ ​ Form of Debt-for-Equity Exchange Agreement by and among Cummins Inc., Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC. ​
3.1 ​ ​ ​
3.2 ​ ​ ​
5.1* ​ ​ Opinion of Baker & McKenzie LLP ​
10.1**# ​ ​ ​
10.2**# ​ ​ ​
10.3**# ​ ​ ​
10.4**# ​ ​ ​
10.5**# ​ ​ ​
10.6**# ​ ​ ​
10.7**# ​ ​ ​
10.8**# ​ ​ ​
10.9**# ​ ​ ​
10.11+ ​ ​ ​
10.12+ ​ ​ ​
10.13 ​ ​ Credit Agreement, dated as of September 30, 2022, among FILT Red, Inc., Cummins Filtration Inc., the lenders party thereto, and Bank of America, N.A., as administrative agent. ​
10.14 ​ ​ Amendment No. 1 to Credit Agreement, dated as of February 15, 2023, among Atmus Filtration Technologies Inc., Cummins Filtration Inc., the lenders party thereto, and Bank of America N.A., as administrative agent. ​
21.1 ​ ​ ​
23.1 ​ ​ ​
23.2* ​ ​ Consent of Baker & McKenzie LLP (included in Exhibit 5.1) ​
 24.1** ​ ​ ​
  107** ​ ​ ​
​
*
To be filed by amendment.
​
**
Previously filed.
​
+
Denotes management contract or compensatory plan or arrangement.
​
#
Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule upon request by the Securities and Exchange Commission.
​
 
II-4
TABLE OF CONTENTS​
 
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Nashville, State of Tennessee, on March 31, 2023.
ATMUS FILTRATION TECHNOLOGIES INC.
By: /s/ Steph Disher
​
 Name: Steph Disher
 Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
​
SIGNATURE
​ ​
TITLE
​ ​
DATE
​
​
/s/ Steph Disher
​
Steph Disher
​ ​
Chief Executive Officer and Director
(Principal Executive Officer)
​ ​
March 31, 2023
​
​
*
​
Jack M. Kienzler
​ ​
Chief Financial Officer
(Principal Financial and Accounting Officer)
​ ​
March 31, 2023
​
​
*
​
Stephen Macadam
​ ​
Director and Non-Executive Chairman
​ ​
March 31, 2023
​
​
*
​
Sharon Barner
​ ​
Director
​ ​
March 31, 2023
​
​
*
​
R. Edwin Bennett
​ ​
Director
​ ​
March 31, 2023
​
​
*
​
Cristina Burrola
​ ​
Director
​ ​
March 31, 2023
​
​
*
​
Gretchen Haggerty
​ ​
Director
​ ​
March 31, 2023
​
​
*
​
Jane Leipold
​ ​
Director
​ ​
March 31, 2023
​
​
*
​
Earl Newsome
​ ​
Director
​ ​
March 31, 2023
​
​
*
​
Tony Satterthwaite
​ ​
Director
​ ​
March 31, 2023
​
​
*
​
Mark Smith
​ ​
Director
​ ​
March 31, 2023
​
​
*
​
Nathan Stoner
​ ​
Director
​ ​
March 31, 2023
​
​ *By: ​ ​
/s/ Steph Disher
​
Steph Disher
​ ​ ​ ​ ​ ​ ​
​ ​ ​ ​ Attorney-in-Fact ​ ​ ​ ​ ​ ​ ​
 
II-5
Exhibit 3.1

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State of Delaware Secretary of State Division of Corporations Delivered 11:06 AM 02/22/2023 FILED 11:06 AM 02/22/2023 AMENDED AND RESTATED SR 20230630123 - FileNumber 6691967 CERTIFICATE OF INCORPORATION OF ATMUS FILTRATION TECHNOLOGIES INC. Atmus Filtration Technologies Inc. (the “Corporation”), existing pursuant to the General Corporation Law of the State of Delaware, as amended (the “Corporation Law’), hereby certifies as follows: 1. The original Certificate of Incorporation of the Corporation was filed with the office of the Secretary of State of the State of Delaware on April 1, 2022, under the name “FILT Red, Inc.” The original Certificate of Incorporation was amended on December 5, 2022 in accordance with Section 242 of the General Corporation Law of the State of Delaware to reflect the name change to “Atmus Filtration Technologies Inc.” (as amended, the “Original Certificate of Incorporation”). 2. This Amended and Restated Certificate of Incorporation, which restates and amends the Original Certificate of Incorporation of the Corporation, has been duly adopted in accordance with the provisions of Sections 242 and 245 of the Corporation Law by the board of directors and sole stockholder of the Corporation, acting by written consent in lieu of a meeting in accordance with Section 228 of the Corporation Law. 3. This Amended and Restated Certificate of Incorporation (as amended and restated, the “Certificate of Incorporation”) shall become effective when filed with the Secretary of State of the State of Delaware. 4, The Original Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety to read as follows: ARTICLE I Name and Registered Agent Section 1.1. Name. The name of the Corporation is ATMUS FILTRATION TECHNOLOGIES INC, Section 1.2. Registered Agent. The address of the Corporation’s registered office in the State of Delaware is 251 Little Falls Drive, Wilmington, New Castle County, Delaware 19808. The name of its registered agent at such address is Corporation Service Company. ARTICLE Hf Purposes and Powers Section 2.1. Purposes of the Corporation. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the Corporation Law. Section 2.2, Powers of the Corporation. The Corporation shall have (a) all powers now or hereafter authorized by or vested in corporations pursuant to the provisions of the Corporation Law; 4884-8310-0939.10

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(b) all powers now or hereafter vested in corporations by common law or any other statute or act; and (c) all powers authorized by or vested in the Corporation by the provisions of this Certificate of Incorporation or by the provisions of its By-Laws as from time to time in effect. ARTICLE Hil Term of Existence Section 3.1. | The period during which the Corporation shall continue is perpetual. ARTICLE IV Capital Stock Section 4.1. Authorized Classes and Number of Shares. The total number of shares of stock which the Corporation has authority to issue shall be 2,100,000,000 shares, consisting of 2,000,000,000 shares of common stock (“Common Stock”) and 100,000,000 shares of preferred stock (“Preferred Stock”). The shares of Common Stock have a par value of $0.0001 per share. The shares of Preferred Stock do not have any par or stated value, except that, solely for the purpose of any statute or regulation imposing any tax or fee based upon the capitalization of the Corporation, the Corporation’s shares of Preferred Stock shall be deemed to have a par value of $0.0001 per share. Section 4.2. General Terms of All Shares. (a) Fully Paid and Nonassessable Shares. When the Corporation receives the consideration for which the Board of Directors of the Corporation (the “Board”) authorized the issuance of shares, the shares issued therefor shall be fully paid and nonassessable. (b) Dividends and Other Distributions. Subject to the rights of the holders of any Preferred Stock, holders of shares of Common Stock shall be entitled to receive such dividends and distributions and other distributions in cash, stock or property of the Corporation when, as and if declared thereon by the Board from time to time out of assets or funds of the Corporation legally available therefor. Section 4.3. Common Stock. (a) Subordination of Classes. The shares of the Common Stock are and shall be subject to the relative rights, preferences, qualifications, limitations or restrictions of any class or series of any Preferred Stock now or hereafter issued by the Corporation. (b) Voting Rights, Each outstanding share of Common Stock shall, when validly issued by the Corporation, entitle the record holder thereof to one vote at all stockholders’ meetings on all matters submitted to a vote of the stockholders of the Corporation. Except as otherwise provided by the Corporation Law or by the resolution or resolutions providing for the issue of any series of Preferred Stock, the holders of outstanding shares of Common Stock shall have the exclusive right to vote for the election and removal of directors and for all other purposes. Notwithstanding any other provision of this Certificate of Incorporation to the contrary, the holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation 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 as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation or the Corporation Law. 2

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(c) Other Terms of Common Stock. The shares of Common Stock shall be equal in every other respect insofar as their relationship to the Corporation is concerned, but such equality of rights shall not imply equality of treatment as to redemption or other acquisition of shares by the Corporation. Subject to the rights of the holders of any outstanding shares of Preferred Stock, the holders of shares of Common Stock shall be entitled to share ratably in such dividends or other distributions (other than purchases, redemptions or other acquisitions of shares by the Corporation), if any, as are declared and paid from time to time on shares of the Common Stock at the discretion of the Board. In the event of any liquidation, dissolution or winding up of the Corporation, either voluntary or involuntary, after payment shall have been made to the holders of the shares of Preferred Stock of the full amount to which they shall be entitled under this Certificate of Incorporation, the holders of shares of Common Stock shall be entitled, to the exclusion of the holders of the shares of Preferred Stock of any and all series, to share, ratably according to the number of shares of Common Stock held by them, in all remaining assets of the Corporation available for distribution to its stockholders. Section 4.4, Preferred Stock. (a) Creation of Series. The shares of the Preferred Stock may be issued in one or more series. The designations, relative rights, preferences, qualifications, limitations and restrictions of the Preferred Stock of each series shall be such as are stated and expressed in this Certificate of Incorporation. Subject to the requirements of the Corporation Law and subject to all other provisions of this Certificate of Incorporation, the Board is hereby authorized to provide by resolution or resolutions from time to time for the issuance, out of the unissued shares of Preferred Stock, of one or more series of Preferred Stock, without stockholder approval by filing a certificate pursuant to the applicable law of the State of Delaware (the “Preferred Stock Designation”), setting forth such resolution and, with respect to each such series, establishing the number of shares to be included in such series, and fixing the voting powers, full or limited, or no voting power of the shares of such series, par or stated value, if any, of such series of Preferred Stock and the designation, preferences and relative, participating, optional or other special rights, if any, of the shares of each such series and any qualification, limitations or restrictions thereof. The powers, designation, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations and restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. The authority of the Board with respect to each series of Preferred Stock shall include, but not be limited to, the determination of the following: () the designation of the series, which may be by distinguishing number, letter or title; (if) the number of shares of the series, which number the Board may thereafter (except where otherwise provided in the Preferred Stock Designation) increase or decrease (but not below the number of shares thereof then outstanding); (il) the amounts or rates at which dividends will be payable on, and the preferences, if any, of shares of the series in respect of dividends, and whether such dividends, if any, shall be cumulative or noncumulative; (IV) _ the dates on which dividends, if any, shall be payable; (V) _ the redemption rights and price or prices, if any, for shares of the series;

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(VI) _ the terms and amount of any sinking fund, if any, provided for the purchase or redemption of shares of the series; (VIT) the amounts payable on, and the preferences, if any, of shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation; (VIII) whether the shares of the series shall be convertible into or exchangeable for, shares of any other class or series, or any other security, of the Corporation or any other corporation, and, if so, the specification of such other class or series or such other security, the conversion or exchange price or prices or rate or rates, any adjustments thereof, the date or dates at which such shares shall be convertible or exchangeable and all other terms and conditions upon which such conversion or exchange may be made; (IX) _ restrictions on the issuance of shares of the same series or any other class or series; {X) the voting rights, ifany, of the holders of shares of the series generally or upon specified events; and (XI) any other powers, preferences and relative, participating, optional or other special rights of each series of Preferred Stock, and any qualifications, limitations or restrictions of such shares. all as may be determined from time to time by the Board and stated in the resolution or resolutions providing for the issuance of such Preferred Stock. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall be superior or rank equally or be junior to any other series of Preferred Stock to the extent permitted by the Corporation Law. ARTICLE V Board of Directors Section 5.1. Election of Directors. Election of directors need not be by written ballot unless the By-Laws shall so require. Section 5.2. Annual Meeting. The annual meeting of the stockholders for the election of directors and for the transaction of such business as may properly come before the meeting shall be held at such date, time and place, if any, as shall be determined solely by the resolution of the Board in its sole and absolute discretion. Section 5.3. . Number. Subject to the rights of holders of any series of Preferred Stock to elect directors, the number of directors of the Corporation shall be fixed from time to time solely by resolution of the majority of the Whole Board. For purposes of this Certificate of Incorporation, the term “Whole Board” will mean the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships. No decrease in the number of directors constituting the Board shall shorten the term of any incumbent director.

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Section 5.4. Classes of Directors, Subject to the rights of holders of any series of Preferred Stock to elect directors, the Board shall be and is 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. The Board is authorized to assign members of the Board already in office to Class I, Class II or Class III at the time such classification becomes effective. Section 5.5. Terms of Office. Subject to the rights of holders of any series of Preferred Stock to elect directors, each director shall serve for a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected; provided that each director initially assigned to Class I shall serve for a term expiring at the Corporation’s first annual meeting of stockholders held after the effectiveness of this Certificate of Incorporation; each director initially assigned to Class II shall serve for a term expiring at the Corporation’s second annual meeting of stockholders held after the effectiveness of this Certificate of Incorporation; and each director initially assigned to Class III shall serve for a term expiring at the Corporation’s third annual meeting of stockholders held after the effectiveness of this Certificate of Incorporation; provided further, that the term of each director shall continue until the election and qualification of his or her successor and be subject to his or her earlier death, disqualification, resignation or removal. Section 5.6. Vacancies. For so long as Cummins (as defined below) Beneficially Owns shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote in elections of directors, vacancies occurring on the Board, including those arising from any newly created directorships, may only be filled by (a) an affirmative vote of any stockholders holding shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation, whether such vote is of Cummins as a voting stockholder or Cummins as a voting stockholder together with any other voting stockholders, or (b) a majority of the directors then in office who are employees of Cummins (although less than a quorum). From and after the first date on which Cummins ceases to Beneficially Own shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote in elections of directors, (a) vacancies, including those arising from any newly created directorships, occurring in the Board shall be filled in the manner provided in the By-Laws or, if the By-Laws do not provide for the filling of vacancies, in the manner provided by the Corporation Law, and (b) the By-Laws may also provide that in certain circumstances specified therein, vacancies occurring in the Board may be filled by vote of the stockholders at a special meeting called for that purpose or at the next annual meeting of stockholders. Section 5.7. Removal of Directors. For so long as Cummins Beneficially Owns shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote in elections of directors, any director or the entire Board may be removed from office at any time, with or without cause, by an affirmative vote of any stockholders holding shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation, whether such vote is of Cummins as a voting stockholder or Cummins as a voting stockholder together with any other voting stockholders. From and after the first date on which Cummins ceases to Beneficially Own shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote in elections of directors, any director or the entire Board may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least seventy-five 5

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percent (75%) of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote thereon. Section 5.8. Election of Directors by Holders of Preferred Stock. The holders of one or more series of Preferred Stock may be entitled to elect all or a specified number of directors, but only to the extent and subject to limitations as set forth in Section 4.4 of this Certificate of Incorporation. ARTICLE VI Stockholders Section 6.1. Special Meetings of Stockholders. Except as otherwise required by the Corporation Law and subject to the rights of the holders of any series of Preferred Stock, special meetings of the stockholders of the Corporation shall be called only by: (a) the Board; (b); the Chair of the Board; or (c) for so long as Cummins Beneficially Owns shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote in elections of directors, the Secretary of the Corporation, following the receipt of one or more written demands from stockholders of record who own, in the aggregate, at least a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation then entitled to vote on the matter or matters to be brought before the proposed special meeting. From and after the first date on which Cummins ceases to Beneficially Own shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote in elections of directors, the ability of the stockholders to call a special meeting of stockholders is hereby specifically denied. At a special meeting of stockholders, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement thereto). Section 6.2. Stockholder Action. Subject to the terms of any series of Preferred Stock, until the first date on which Cummins ceases to Beneficially Own shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote in elections of directors, any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding capital stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of capital stock entitled to vote thereon were present and voted. From and after the first date on which Cummins ceases to Beneficially Own shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote in elections of directors, 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 the stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. ARTICLE VI Certain Relationships and Transactions Section 7.1. General. In recognition and anticipation that (a) the Corporation will not be a wholly-owned subsidiary of Cummins and that Cummins will be a controlling stockholder of the 6

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Corporation, (b) directors, officers and/or employees of Cummins may serve as directors, officers and/or employees of the Corporation, (c) Cummins may engage in the same, similar or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, (d) Cummins may have an interest in the same areas of corporate opportunity as the Corporation and Affiliated Companies, and (e) as a consequence of the foregoing, it is in the best interests of the Corporation that the respective rights and obligations of the Corporation and of Cummins, and the duties of any directors, officers and/or employees of the Corporation who are also directors, officers and/or employees of Cummins, be determined and delineated in respect of any transactions between, or corporate opportunities that may be suitable for both, the Corporation and Affiliated Companies, on the one hand, and Cummins, on the other hand, the sections of this ARTICLE VII shall to the fullest extent permitted by the Corporation Law regulate and define the conduct of certain of the business and affairs of the Corporation in relation to Cummins and the conduct of certain affairs of the Corporation as they may involve Cummins and its directors, officers and/or employees, and the power, rights, duties and liabilities of the Corporation and its director, officers, employees and stockholders in connection therewith. For purposes of this ARTICLE VII, “corporate opportunities” shall include, but not be limited to, business opportunities which the Corporation or Affiliated Companies are financially able to undertake, which are, from their nature, in the line of the Corporation’s or Affiliated Companies’ business, are of practical advantage to it and are ones in which the Corporation or Affiliated Companies would have an interest or a reasonable expectancy, and in which, by embracing the opportunities or allowing such opportunities to be embraced by Cummins, the self-interest of Cammins or its directors, officers and/or employees will be brought into conflict with that of the Corporation or Affiliated Companies. Nothing in this ARTICLE VII creates or is intended to create any fiduciary duty on the part of Cummins, the Corporation, any Affiliated Company, or any stockholder, director, officer or employee of any of them that does not otherwise exist under the Corporation Law and nothing in this ARTICLE VII expands any such duty of any such person that may now or hereafter exist under Delaware law. Section 7.2. Certain Agreements and Transactions Permitted. The Corporation may from time to time enter into and perform, and cause or permit any Affiliated Company to enter into and perform, one or more agreements (or modifications or supplements to pre-existing agreements) with Cummins pursuant to which the Corporation or an Affiliated Company, on the one hand, and Cummins, on the other hand, agree to engage in transactions of any kind or nature with each other and/or agree to compete, or to refrain from competing or to limit or restrict their competition, with each other, including to allocate, and to cause their respective directors, officers and/or employees (including any who are directors, officers and/or employees of both) to allocate corporate opportunities between them or to refer corporate opportunities to each other. No such agreement, or the performance thereof by the Corporation or any Affiliated Company, or Cummins, shall, to the fullest extent permitted by the Corporation Law, be considered contrary to any fiduciary duty that any director, officer or employee of the Corporation or any Affiliated Company who is also a director, officer or employee of Cummins, may owe or be alleged to owe to the Corporation or any such Affiliated Company, or to any stockholder thereof, or any legal duty or obligation Cummins may be alleged to owe on any basis, notwithstanding the provisions of this Certificate of Incorporation stipulating to the contrary. To the fullest extent permitted by the Corporation Law, no director, officer or employee of the Corporation who is also a director, officer or employee of Cummins shall have or be under any fiduciary duty to the Corporation or any Affiliated Company to refer any corporate opportunity to the Corporation or any Affiliated 7

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Company or to refrain from acting on behalf of the Corporation or any Affiliated Company or of Cummins in respect of any such agreement or transaction or performing any such agreement in accordance with its terms. Section 7.3. | Authorized Business Activities. Without limiting the other provisions of this ARTICLE VII, neither Cummins nor any of its directors, officers or employees shall have any duty to communicate information regarding a corporate opportunity to the Corporation or to refrain from (a) engaging in the same or similar activities or lines of business as the Corporation, (b) doing business with any client, customer or vendor of the Corporation or (c) employing or otherwise engaging any director, officer or employee of the Corporation. To the fullest extent permitted by the Corporation Law, no officer, director or employee of the Corporation who is also a director, officer or employee of Cummins shall be deemed to have breached his or her fiduciary duties, if any, to the Corporation solely by reason of Cummins or any such director, officer or employee engaging in any such activity. Section 7.4. Corporate Opportunities. Except as otherwise agreed in writing between the Corporation and Cummins, for so long as Cummins (a) Beneficially Owns shares of capital stock representing, in the aggregate, at least ten percent (10%) of the total voting power of the outstanding shares of all classes of capital stock of the Corporation or (b) otherwise has one or more directors, officers or employees serving as a director, officer or employee of the Corporation, in the event that a director, officer or employee of the Corporation who is also a director, officer or employee of Cummins acquires knowledge of a potential transaction or matter that may be a corporate opportunity for both the Corporation and Cummins, such director, officer or employee shall to the fullest extent permitted by the Corporation Law have fully satisfied and fulfilled his or her fiduciary duty, if any, with respect to such corporate opportunity regardless of whether such opportunity is presented to the Corporation, and the Corporation to the fullest extent permitted by the Corporation Law renounces any interest or expectancy in such corporate opportunity and waives any claim that such corporate opportunity should have been presented to the Corporation or any Affiliated Company. The foregoing policy, and the action of any director, officer or employee of Cummins, the Corporation or any Affiliated Company taken in accordance with, or in reliance upon, the foregoing policy or in entering into or performing any agreement, transaction or arrangement is deemed and presumed to be fair to the Corporation. Except as otherwise agreed in writing between the Corporation and Cummins, if a director, officer or employee of the Corporation, who also serves as a director, officer or employee of Cummins, acquires knowledge of a potential corporate opportunity for both the Corporation and Cummins in any manner not addressed by this ARTICLE VII, such director, officer or employee shall have no duty to communicate or present such corporate opportunity to the Corporation and shall to the fullest extent permitted by the Corporation Law not be liable to the Corporation or its stockholders for breach of fiduciary duty as a director, officer or employee of the Corporation by reason of the fact that Cummins or such director, officer or employee pursues or acquires such corporate opportunity for itself, directs such corporate opportunity to another person or does not present such corporate opportunity to the Corporation, and the Corporation to the fullest extent permitted by the Corporation Law renounces any interest or expectancy in such corporate opportunity and waives any claim that such corporate opportunity should have been presented to the Corporation. Section 7.5. Delineation of Indirect Interests. To the fullest extent permitted by the Corporation Law, no director, officer or employee of the Corporation or any Affiliated Company shall be deemed to have an indirect interest in any matter, transaction or corporate opportunity that may be received or exploited by, or allocated to, Cummins, merely by virtue of being a director, officer or employee of Cummins, unless (a) such director, officer or employee’s role with Cummins involves 8

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direct responsibility for such matter, (b) in his or her role with Cummins, such director, officer or employee exercises supervision over such matter, or (c) the compensation of such director, officer or employee is materially affected by such matter. Such director, officer or employee’s compensation shall not be deemed to be materially affected by such matter if it is only affected by virtue of its effect on the value of Cummins’ capital stock generally or on Cummins’s results or performance on an enterprise-wide basis. Section 7.6. Special Approval Procedures. If, notwithstanding the provisions of this ARTICLE VIL, it is deemed desirable by Cummins, the Corporation or an Affiliated Company or any other party that the Corporation take action with specific regard to a particular transaction, corporate opportunity or a type or series of transactions or corporate opportunities to ensure, out of an abundance of caution, that such transaction or transactions or corporate opportunities are not voidable, or that such a corporate opportunity or opportunities are effectively disclaimed, the Corporation may employ any of the following procedures: (a) the material facts of the transaction or corporate opportunity and the director’s, officer’s or employee’s interest therein are disclosed or known to the Board or a duly appointed committee of the Board and the Board or such committee authorizes, approves, or ratifies the transaction or corporate opportunity by the affirmative vote or consent of a majority of the directors (or committee members) who have no direct or indirect interest in the transaction or corporate opportunity and, in any event, of at least two directors (or committee members); or (b) the material facts of the transaction or corporate opportunity and the director’s interest therein are disclosed or known to the stockholders entitled to vote and they authorize, approve or ratify such transaction, The interested director or directors may be counted in determining the presence of a quorum at such meeting. The presence of, or a vote cast by, a director with a direct or indirect interest in the transaction does not affect the validity of any actions taken under clause (a) above. One or more matters, transactions or corporate opportunities approved pursuant to any of the foregoing procedures are not void or voidable and shall not give rise to any equitable relief or damages or other sanctions against any director, officer, employee or stockholder (including Cummins) of the Corporation on the ground that the matter, transaction or corporate opportunity should have first been offered to the Corporation. Nothing in this ARTICLE VII requires any matter to be considered by the Board or the stockholders of the Corporation and, in all cases, directors, officers and employees of the Corporation are authorized to refrain from bringing a matter otherwise addressed in this ARTICLE VII before the Board or the stockholders for consideration unless such matter is required to be considered by the Board or stockholders, as applicable, under the Corporation Law. This ARTICLE VII shall not be construed to invalidate any contract or other transaction which would otherwise be valid under the common, equitable or statutory law applicable thereto. ARTICLE VI By-Laws of the Corporation Section 8.1. By-Laws. For so long as Cummins Beneficially Owns shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote in elections of directors, the By-Laws of the Corporation may be amended or repealed by a majority of the entire number of directors, without any action on the part of the stockholders, From and after the first date on which Cummins ceases to Beneficially Own shares of capital stock representing, in the aggregate, a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote in 9

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elections of directors, (a) the By-Laws of the Corporation may be amended or repealed by the Board by the affirmative vote of a majority of the entire number of directors without any action on the part of the stockholders, and (b) the stockholders shall also have power to adopt, amend or repeal the By-Laws of the Corporation, with the affirmative vote of stockholders possessing at least seventy-five percent (75%) of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote thereon. ARTICLE IX Other Provisions Section9.1. Severability. If any provision or provisions of this Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be 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 Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service or for the benefit of the Corporation to the fullest extent permitted by the Corporation Law, Section 9.2. _ Amendment or Repeal. The Corporation reserves the right to amend, alter, or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the Corporation Law, and all rights conferred herein are granted subject to this reservation. Notwithstanding any other provisions of this Certificate of Incorporation (and notwithstanding the fact that a lesser affirmative vote may be specified by law), beginning on the first date on which Cummins ceases to Beneficially Own a majority of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote thereon, the affirmative vote of stockholders possessing at least seventy-five percent (75%) of the total voting power of the outstanding shares of all classes of capital stock of the Corporation entitled to vote thereon, considered for this purpose as one class, shall be required to amend, alter, change or repeal, or adopt any provision inconsistent with, ARTICLE V, ARTICLE VI, ARTICLE VIII and this Section 9.2. Section 9.3. Forum Selection. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by the Corporation Law, be 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 of the Corporation to the Corporation or the Corporation’s stockholders; (c) any action arising pursuant to any provision of the Corporation Law or this Certificate of Incorporation or the By-Laws (as either may be amended from time to time); or (d) any action asserting a claim governed by the internal affairs doctrine. Unless the Corporation consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Any person or entity purchasing or 10

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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 Section 9.3. Section 9.4. Personal Jurisdiction. If any action the subject matter of which is within the scope of Section 7.3 is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (a) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce Section 7.3 (an “FSC Enforcement Action”) and (b) having service of process made upon such stockholder in any such FSC Enforcement Action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder. Section 9.5. Captions. The captions of the Articles and Sections of this Certificate of Incorporation have been inserted for convenience of reference only and do not in any way define, limit, construe or describe the scope or intent of any Article or Section hereof. Section 9.6. Nonliability of Stockholders. Stockholders of the Corporation are not personally liable for the acts or debts of the Corporation, nor is private property of stockholders subject to the payment of corporate debts. Section 9.7. Certain Definitions. As used in this Certificate of Incorporation, (a) “Cummins” shall mean Cummins Inc., an Indiana corporation, any and all successors to Cummins by way of merger, consolidation or sale of all or substantially all of its assets, and any and all corporations, partnerships, joint ventures, limited liability companies, associations and other entities (1) in which Cummins owns, directly or indirectly, more than fifty percent (50%) of the outstanding voting stock, voting power, partnership interests or similar ownership interests, (II) of which Cummins otherwise directly or indirectly controls or directs the policies or operations or (II) that would be considered subsidiaries of Cummins within the meaning of Regulation S-K or Regulation S-X of the general rules and regulations under the Securities Act of 1933, as amended, now or hereafter existing; provided, however, that the term “Cummins” shall not include the Corporation or any entities (X) in which the Corporation owns, directly or indirectly, more than fifty percent (50%) of the outstanding voting stock, voting power, partnership interests or similar ownership interests, (Y) of which the Corporation otherwise directly or indirectly controls or directs the policies or operations or (Z) that would be considered subsidiaries of the Corporation within the meaning of Regulation S-K or Regulation S-X of the general rules and regulations under the Securities Act of 1933, as amended, now or hereafter existing (such entities under (X), (Y) and/or (Z), “Affiliated Companies”); and (b) the term “Beneficially Own” shall have the meaning set forth in Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder. ARTICLE X Limitation of Liability; Indemnification Section 10.1. Limitation of Liability. To the fullest extent permitted by the Corporation Law as it presently exists or may hereafter be amended, a director or officer of the Corporation shall not be personally liable to the Corporation or to its stockholders for monetary damages for any breach of fiduciary duty as a director or officer, provided that this provision shall not eliminate or limit the liability of an officer (a) in any action by or in the right of the Corporation, (b) for any breach of their ll

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duty of loyalty to the Corporation or its stockholders, (c) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law or (d) for any transaction from which they have derived an improper personal benefit. No amendment to, modification of, or repeal of this Section 10.1 shall apply to or have any effect on the liability or alleged liability of any director or officer of the Corporation for or with respect to any acts or omissions of such director or officer occurring prior to such amendment. All references in this Section 10.1 to an officer shall mean only a person who is defined as such pursuant to Section 102(b)(7) of the Corporation Law. Section 10.2. Indemnification. The Corporation shall indemnify to the fullest extent permitted by the Corporation Law as it presently exists or may hereafter be amended any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative, or investigative, by reason of the fact that he, his testator, or intestate is or was a director or officer of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as a director or officer at the request of the Corporation or any predecessor to the Corporation. Any amendment, repeal, or modification of this Section 10.2 shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. [Signature page to follow.] 12

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IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated Certificate of Incorporation to be signed by its duly authorized officer this 5 day of February 2023. DacuSigned by: \ asesozsnsscadt 8... Name: Toni Hickey Title: | Corporate Secretary [Signature Page to the Amended and Restated Certificate of Incorporation]

 

Exhibit 3.2

 

FILT RED, INC.

 

(Delaware)

BYLAWS

 

Article I

 

Offices

 

Section 1.1               Registered Office. The corporation shall maintain a registered office and registered agent in the State of Delaware. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors.

 

Section 1.2               Other Offices. The corporation may also have offices at such other places either within or outside the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require.

 

Section 1.3                Books and Records. Books and records of the corporation may be kept at the corporation’s headquarters or such other location or locations, within or outside the State of Delaware, as may from time to time be designated by the board of directors.

 

Article II

 

Stockholders

 

Section 2.1               Action by Consent Without Meeting. Any action required or permitted to be taken at any annual or special meeting of stockholders of the corporation may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its principal place of business or to an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

 

Section 2.2                Annual Elections. An annual election of directors shall be held either by written consent of stockholders without a meeting, under Section 2.1 of these bylaws, or at a meeting at such time as shall be determined by resolution of the board of directors, and duly called to be held at such hour and place either within or without the State of Delaware as may be stated in the call and notice. If the consent is less than unanimous, it will constitute a consent in lieu of the annual meeting only if all of the directorships to which directors could be elected at an annual meeting held at the effective time of the consent were (i) vacant at the effective time and (ii) filled by action of the consent.

 

Section 2.3               Special Meetings. Special meetings of stockholders may be held upon call of the president or a majority of the board of directors (and shall be called by the secretary upon written request, stating the purpose of the meeting, of stockholders who together own of record 25% of the outstanding stock of any class entitled to vote at such meeting), at such time and place either within or without the State of Delaware as may be stated in the call and notice.

 

 

 

 

Section 2.4               Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date, time and means of remote communication, if any, of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail, postage prepaid, directed to the stockholder at their address as it appears on the records of the corporation.

 

Section 2.5               Adjournments. Any meeting of stockholders may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meetings. If the adjournment is for more than thirty days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for stockholders entitled to vote is fixed for the adjourned meeting, the board of directors shall fix a new record date for notice of such adjourned meeting in accordance with Section 2.9 of these bylaws, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date fixed for notice of such adjourned meeting.

 

Section 2.6               Quorum. At each meeting of stockholders, except where otherwise provided by law or the certificate of incorporation or these bylaws, the holders present in person or by proxy of a majority of the outstanding shares of each class of stock entitled to vote at the meeting shall constitute a quorum. For purposes of the foregoing, two or more classes or series of stock shall be considered a single class if entitled to vote together as a single class upon a particular election or question. In the absence of a quorum, the stockholders so present may, by majority vote, adjourn the meeting from time to time in the manner provided by Section 2.5 of these bylaws until a quorum shall attend.

 

Section 2.7               Organization. Meetings of stockholders shall be presided over by the president, or in their absence by a vice president, or in the absence of the foregoing persons by a chairperson chosen at the meeting. The secretary shall act as secretary of the meeting, but in their absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

 

Section 2.8               Voting; Proxies. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders, or to express consent or dissent to corporate action in writing without a meeting, shall be entitled to one vote for each share of stock held by him which has voting power upon the matter in question. Each such stockholder may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. All elections of directors shall be by written ballot, unless otherwise provided in the certificate of incorporation; but voting on other questions by stockholders need not be by ballot and need not be conducted by inspectors. A plurality of the votes cast shall be sufficient for election of directors by stockholders. Unless otherwise provided by law, the certificate of incorporation or these bylaws, or a resolution of the board of directors, all other questions shall be decided by the vote of the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at a meeting, or by written consent without a meeting of the number of votes required by Section 2.1 of these bylaws.

 

Section 2.9               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 stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any 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 of directors may fix in advance a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held and (2) the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by law, shall be the first date on which a signed written consent is delivered to the corporation. If no record date has been fixed by the board of directors and prior action by the board of directors is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. The record date for determining stockholders for any purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.

 

2

 

 

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.

 

Article III

 

Board of Directors

 

Section 3.1                Management of Affairs of Corporation. The property and business of the corporation shall be managed by or under the direction of its board of directors. The board of directors may exercise all such powers of the corporation and do all such lawful acts and things as are not reserved exclusively to the stockholders by law, the certificate of incorporation or these bylaws.

 

Section 3.2                Number; Qualifications. The board of directors shall consist of one or more members. The number of directors shall be such as may be fixed from time to time either by stockholder action or by resolution of the board of directors. Directors need not be stockholders. The initial board of directors shall consist of four directors.

 

Section 3.3               Election; Resignation; Vacancies. Any director may resign at any time upon written notice to the corporation. Any vacancy occurring in the board of directors for any cause may be filled by a majority of the remaining members of the board of directors, although less than a quorum, or by a sole remaining director; or by a plurality of the votes cast at a meeting of stockholders; or by consent in writing signed by the holders of outstanding stock having not less than a majority of the votes of such stock. Whether elected at an annual election of directors or to fill an interim vacancy, each director shall hold office until the next succeeding annual election or until their successor is elected and qualified or until their earlier resignation or removal. Any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.

 

Section 3.4               Regular Meetings. Regular meetings of the board of directors may be held at such places within or without the State of Delaware and at such times as the board of directors may from time to time determine, and if so determined, notices thereof need not be given.

 

Section 3.5               Special Meetings. Special meetings of the board of directors may be held at any time or place within or without the State of Delaware whenever called by a quorum of the board of directors. At least two days' notice thereof shall be given by the person or persons calling the meeting.

 

3

 

 

Section 3.6               Telephonic Meetings Permitted. Members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of such board of directors or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this bylaw shall constitute presence in person at such meeting.

 

Section 3.7               Quorum. At all meetings of the board of directors a majority of the entire board of directors shall constitute a quorum for the transaction of business. Except in cases in which the certificate of incorporation or these bylaws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors.

 

Section 3.8                Organization. Meeting of the board of directors shall be presided over by the president, or in their absence by a chairperson chosen at the meeting. The secretary shall act as secretary of the meeting, but in the secretary’s absence the chairperson of the meeting may appoint any person to act as secretary of the meeting.

 

Section 3.9               Informal Action by Directors. Any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting, if all members of the board of directors or of such committee, as the case may be, consent to the action in writing or by electronic transmission, and the writing or electronic transmission is filed with the minutes of proceedings of the board of directors or committee. 

 

Article IV

 

Officers

 

Section 4.1                Executive Officers; Election; Qualifications; Term of Office; Resignations; Vacancies. The board of directors, as soon as practicable after the annual election of directors in each year, shall elect a president, a secretary, and it may, if it so determines, elect a chairperson of the board of directors who need not be a member, one or more vice presidents, a treasurer and such other officers as the board of directors shall determine. The board of directors may also choose one or more assistant officers. Any offices may be held, and the duties performed, by one and the same person. Each such officer shall hold office until the first meeting, or action by consent without a meeting, of the board of directors after the annual election of directors next succeeding their election, or until their successor is elected and qualified or until their earlier resignation or removal. Any officer may resign at any time upon written notice to the corporation. Any officer may be removed from office at any time by the affirmative vote of a majority of the members of the board of directors then in office. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the board of directors at any regular or special meeting, or by unanimous written consent without a meeting. The initial officers of the corporation shall be:

 

Stephanie Disher President and Chief Executive Officer
Jack Kienzler Chief Financial Officer and Treasurer
Toni Hickey Secretary

 

Section 4.2                Powers and Duties of Executive Officers. The officers of the corporation shall have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time shall be conferred by these bylaws or the board of directors. The president shall, subject to the board of directors, have general direction and supervision of the business operations and affairs of the corporation. The chairperson of the board of directors shall have only such powers and authority as may be specifically delegated to him by the board of directors.

 

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Article V

 

Stock

 

Section 5.1               Certificates. Every holder of stock shall be entitled to have a certificate signed by or in the name of the corporation by any two authorized officers of the corporation, certifying the number of shares owned by him in the corporation. Any of or all the signatures on the certificate may be facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if they were such officer, transfer agent, or registrar at the date of issue.

 

Section 5.2                Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or their legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

 

Section 5.3                Transfer of Stock. Transfers of shares of stock shall be made only on the books of the corporation by the registered holder thereof or by its attorney or successor duly authorized as evidenced by documents filed with the secretary or transfer agent of the corporation. In the case of certificated shares, upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, and in compliance with any restrictions on transfer of which the corporation has notice applicable to the certificate or shares represented thereby, the corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. The board of directors may adopt such additional rules and regulations as it deems advisable concerning the transfer and registration of certificates of stock of the corporation.

 

Article VI

 

Indemnification of Officers and Directors

 

Section 6.1               Mandatory. The Corporation shall, to the fullest extent permitted by the Delaware General Corporation Law, (a) indemnify any person who is or was a director or officer of the Corporation (and the heirs and legal representatives thereof) against expenses (including attorneys’ fees), judgments, fines, and penalties and amounts paid in settlement resulting from any action, suit or proceeding threatened or brought against such person by reason of such person’s serving in such position or serving another enterprise in any capacity at the request of the Corporation and (b) pay for or reimburse the reasonable expenses incurred by such person in advance of the final disposition of the action, suit or proceeding.

 

Section 6.2              Discretionary. Separate and apart from, and in addition to, the mandatory indemnification required under this Article VI, the Corporation may, in its sole discretion, provide for indemnification of any person in accordance with the Delaware General Corporation Law.

 

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Section 6.3               Other Capacity Service. Any director or officer of the Corporation serving in any capacity (a) another corporation, of which a majority of the shares entitled to vote in the election of its directors is held, directly or indirectly, by the Corporation, or (b) any employee benefit plan of the Corporation or of another corporation described in Subsection (a) of this Section, shall be deemed to be doing so at the request of the Corporation.

 

Section 6.4                Applicable Law. Any person entitled to be indemnified as a matter of right pursuant to this Article VI may elect to have the right to indemnification interpreted on the basis of the Delaware General Corporation Law in effect at the time of the occurrence of the event or events giving rise to the action, suit or proceeding, to the extent permitted by the Delaware General Corporation Law, or on the basis of the Delaware General Corporation Law in effect at the time indemnification is sought.

 

Section 6.5              Rights. The right to be indemnified pursuant to this Article VI (a) shall be a contract right of each individual entitled to be indemnified hereunder; (b) is intended to be retroactive and shall be available with respect to events occurring prior to the adoption hereof; and (c) shall continue to exist with respect to events occurring prior to any rescission or restrictive modification of this this Article VI.

 

Article VII

 

Miscellaneous

 

Section 7.1               Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of the board of directors. In the absence of such a resolution, the fiscal year of the corporation shall be the calendar year.

 

Section 7.2               Seal. The corporate seal shall have the name of the corporation inscribed thereon and shall be in such form as may be approved from time to time by the board of directors.

 

Section 7.3               Waiver of Notice of Meetings of Stockholders, Directors and Committees. Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. The presence of a person at a meeting, or their participation in a telephonic meeting, shall constitute a waiver of notice, except when a person attends a meeting or participates in a telephonic meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called, convened or initiated. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors or members of a committee of directors need be specified in any written waiver of notice.

 

Section 7.4               Amendment of Bylaws. These bylaws may be altered, amended or repealed (a) by the affirmative vote of a majority of the stock having voting power present in person or by proxy at any annual meeting of stockholders at which a quorum is present, or at any special meeting of stockholders at which a quorum is present, if notice of the proposed alteration, amendment or repeal is contained in the notice of such special meeting, or (b) by the affirmative vote of a majority of the directors then qualified and acting at any regular or special meeting of the board, if the certificate of incorporation confers such power upon the board; provided, however, that the stockholders may provide specifically for limitations on the power of directors to amend particular bylaws and, in such event, the directors’ power of amendment shall be so limited; and further provided that no reduction in the number of directors shall have the effect of removing any director prior to the expiration of such director’s term of office.

 

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Exhibit 10.11 

 

Atmus Filtration Technologies Inc.
2022 OMNIBuS INCENTIVE PLAN

 

1.             Purpose and Effective Date.

 

(a)           Purpose. The Atmus Filtration Technologies Inc. 2022 Omnibus Incentive Plan is designed to attract, retain, focus and motivate executives, other selected employees, directors and consultants and to link the interests of these individuals with the interests of the Company’s shareholders over the longer term. The Plan will accomplish these objectives by offering the opportunity to acquire shares of the Company’s common stock, receive monetary payments based on the value of such common stock or receive other incentive compensation on the terms that this Plan provides. In addition, this Plan permits the issuance of awards in replacement for certain awards relating to shares of common stock of Cummins Inc. (“Cummins”) that are outstanding immediately prior to the initial public offering of the Company’s Shares by Cummins (the “IPO”), in accordance with the terms of an Employee Matters Agreement entered into by Cummins and the Company in connection with the IPO (the “Employee Matters Agreement”).

 

(b)           Effective Date. This Plan shall become effective on [_____________], 2023, the date of the IPO (the “Effective Date”).

 

2.             Definitions. Capitalized terms used in this Plan have the following meanings:

 

(a)           “Administrator” means the Committee; provided that, to the extent the Board has retained authority and responsibility as an Administrator of the Plan or delegated it to another committee of the Board as permitted by Section 3(b), the term “Administrator” shall also mean the Board or such other committee or, to the extent the Committee has delegated authority and responsibility as an Administrator of the Plan to one or more officers of the Company as permitted by Section 3(b), the term “Administrator” shall also mean such officer or officers.

 

(b)           “Affiliate” and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Exchange Act. Notwithstanding the foregoing, for purposes of Options or Stock Appreciation Rights, the term “Affiliate” means any entity that, directly or through one or more intermediaries, is controlled by, controls, or is under common control with, the Company within the meaning of Code Sections 414(b) or (c); provided that, in applying such provisions, the phrase “at least 20 percent” shall be used in place of “at least 80 percent” each place it appears therein.

 

(c)           “Applicable Exchange” means the national securities exchange or automated trading system on which the Stock is principally traded at the applicable time.

 

(d)           “Award” means a grant of Options, Stock Appreciation Rights, Performance Shares, Performance Units, Restricted Stock, Restricted Stock Units, Shares, an Annual Incentive Award, a Long-Term Incentive Award, Dividend Equivalent Units or any other type of award permitted under the Plan.

 

(e)            “Board” means the Board of Directors of the Company.

 

 

 

 

(f)            “Cause” means, except as otherwise determined by the Administrator and set forth in an Award agreement: (i) if a Participant is subject to an employment, retention or similar agreement with the Company or an Affiliate that includes a definition of “Cause”, such definition, and (ii) for all other Participants, (A) the willful and continued failure of the Participant to perform substantially the Participant’s duties with the Company or one of its Affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Participant by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Participant has not substantially performed the Participant’s duties, or (B) the Participant’s conviction of (or plea of nolo contendere to) a felony.

 

(g)           “Change of Control” means the occurrence of any of the following after the Effective Date:

 

(i)            there shall be consummated (A) any merger, consolidation, statutory share exchange or similar form of corporate transaction involving (x) the Company or (y) any of its Subsidiaries, but in the case of this clause (y) only if Company Voting Securities (as defined below) are issued or issuable (each of the events referred to in this clause (A) being hereinafter referred to as a “Reorganization”) or (B) the sale or other disposition of all or substantially all the assets of the Company to an entity that is not an Affiliate (a “Sale”) if such Reorganization or Sale requires the approval of the Company’s shareholders under the law of the Company’s jurisdiction of organization (whether such approval is required for such Reorganization or Sale or for the issuance of securities of the Company in such Reorganization or Sale), unless, immediately following such Reorganization or Sale, all or substantially all the individuals and entities who were the “beneficial owners” (as such term is defined in Rule 13d-3 under the Exchange Act (or a successor rule thereto)) of the Company’s shares or other securities eligible to vote for the election of the Board (“Company Voting Securities”) outstanding immediately prior to the consummation of such Reorganization or Sale beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities of the corporation resulting from such Reorganization or Sale (including, without limitation, a corporation that as a result of such transaction owns the Company or all or substantially all the Company’s assets either directly or through one or more subsidiaries) (the “Continuing Corporation”) in substantially the same proportions as their ownership, immediately prior to the consummation of such Reorganization or Sale, of the outstanding Company Voting Securities (excluding any outstanding voting securities of the Continuing Corporation that such beneficial owners hold immediately following the consummation of the Reorganization or Sale as a result of their ownership prior to such consummation of voting securities of any company or other entity involved in or forming part of such Reorganization or Sale other than the Company);

 

(ii)           the shareholders of the Company shall approve any plan or proposal for the complete liquidation or dissolution of the Company;

 

(iii)          any “person” (as such term is used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) (each a “Person”), other than (A) the Company, (B) a Subsidiary, (C) any employee benefit plan sponsored by the Company or an Affiliate or (D) a company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, shall become the beneficial owners (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 25% or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apart from rights accruing in special circumstances) having the right to vote in the election of directors, as a result of a tender or exchange offer (excluding the exchange offer that Cummins intends to conduct following the IPO), open market purchases, privately negotiated purchases or otherwise;

 

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(iv)          at any time during a period of two (2) consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (the “Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof; provided, however, that any individual becoming a director subsequent to the first day of such period whose election, or nomination for election, by the Company’s shareholders was approved by a vote of at least a majority of the Incumbent Directors shall be considered as though such individual were an Incumbent Director, but excluding, for purposes of this proviso, any such individual whose initial assumption of office occurs as a result of an actual or threatened proxy contest with respect to election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person, in each case other than the management of the Company or the Board; or

 

(v)           any other event shall occur that would be required to be reported in response to Item 6(e) (or any successor provision) of Schedule 14A of Regulation 14A promulgated under the Exchange Act.

 

Notwithstanding the foregoing, no “Change of Control” shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the holders of the Stock immediately prior to such transaction or series of transactions continue to own, directly or indirectly, in the same proportions as their ownership in the Company, an entity that owns all or substantially all of the assets or voting securities of the Company immediately following such transaction or series of transactions.

 

If an Award is considered deferred compensation subject to the provisions of Code Section 409A, then the Administrator may include an amended definition of “Change of Control” in the Award agreement issued with respect to such Award as necessary to comply with Code Section 409A.

 

(h)           “Code” means the Internal Revenue Code of 1986, as amended. Any reference to a specific provision of the Code includes any successor provision and the regulations promulgated under such provision.

 

(i)            “Committee” means the Compensation Committee of the Board, or such other committee of the Board that is designated by the Board with the same or similar authority. The Committee shall consist only of Non-Employee Directors who qualify as “non-employee directors” within the meaning of Rule 16b-3 of the Exchange Act to the extent necessary for the Plan or an Award to comply with Rule 16b-3 .

 

(j)            “Company” means Atmus Filtration Technologies Inc., a Delaware corporation, or any successor thereto.

 

(k)           “Cummins Participant” means a current employee of the Company or one of its Affiliates on the date immediately preceding the Effective Date who holds an award under the Cummins Plan as of the date immediately prior the Effective Date.

 

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(l)            “Cummins Plan” means the Cummins Inc. 2012 Omnibus Incentive Plan, as in effect immediately prior to the Effective Date.

 

(m)          “Director” means a member of the Board; “Non-Employee Director” means a Director who is not also an employee of the Company or its Subsidiaries.

 

(n)           “Disability” has the meaning given in Code Section 22(e)(3), except as otherwise determined by the Administrator and set forth in an Award agreement. The Administrator shall make the determination of Disability and may request such evidence of disability as it reasonably determines.

 

(o)           “Dividend Equivalent Unit” means the right to receive a payment, in cash or Shares, equal to the cash dividends or other distributions paid with respect to a Share as described in Section 12.

 

(p)           “Exchange Act” means the Securities Exchange Act of 1934, as amended. Any reference to a specific provision of the Exchange Act includes any successor provision and the regulations and rules promulgated under such provision.

 

(q)           “Fair Market Value” means, per Share on a particular date: (i) the last sales price on such date on the Applicable Exchange, or if no sales of Stock occur on the date in question, on the last preceding date on which there was a sale on that exchange; (ii) if the Shares are not listed on the Applicable Exchange, but are traded on another national securities exchange or in an over-the-counter market, the last sales price (or, if there is no last sales price reported, the average of the closing bid and asked prices) for the Shares on the particular date, or on the last preceding date on which there was a sale of Shares on that exchange or market; or (iii) if the Shares are neither listed on a national securities exchange nor traded in an over-the-counter market, the price determined by the Administrator.

 

(r)            “Incentive Award” means the right to receive a cash payment to the extent Performance Goals are achieved (or other requirements are met), and shall include “Annual Incentive Awards” as described in Section 10 and “Long-Term Incentive Awards” as described in Section 11.

 

(s)           “Incentive Stock Option” means an Option that meets the requirements of Code Section 422.

 

(t)            “Option” means the right to purchase Shares at a stated price for a specified period of time.

 

(u)           “Participant” means an individual selected by the Administrator to receive an Award.

 

(v)           “Performance Goals” means any objective or subjective goals the Administrator establishes with respect to an Award. Performance Goals may include, but are not limited to, goals the Administrator establishes that relate to one or more of the following with respect to the Company or any one or more of its Subsidiaries, Affiliates or other business units: net sales; cost of sales; revenue; gross margin; gross income; net income; operating income; income from continuing operations; earnings (including before taxes, and/or interest and/or depreciation and amortization); earnings per share (including diluted earnings per share); price per share; cash flow; free cash flow; net cash provided by operating activities; net cash provided by operating activities less net cash used in investing activities; net operating profit; ratio of debt to debt plus equity; return on shareholder equity; return on equity; return on sales; return on capital; return on assets; return on average net assets; operating working capital; average accounts receivable; economic value added; customer satisfaction; operating margin; profit margin; sales performance; sales growth; sales quota attainment; new sales; cross/integrated sales; client engagement; client acquisition; internal revenue growth; client retention; total shareholder return metrics; or a combination of the foregoing.

 

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As to each Performance Goal, the relevant measurement of performance shall be computed in accordance with generally accepted accounting principles to the extent applicable, but, unless otherwise determined by the Administrator, will exclude the effects of the following: (i) charges for reorganizing and restructuring; (ii) discontinued operations; (iii) asset write-downs; (iv) gains or losses on the disposition of a business; (v) changes in tax or accounting principles, regulations or laws; (vi) mergers, acquisitions or dispositions; (vii) impacts on interest expense, preferred dividends and share dilution as a result of debt and capital transactions; and (viii) extraordinary, unusual and/or non-recurring items of income, expense, gain or loss, that, in case of each of the foregoing, the Company identifies in its publicly filed periodic or current reports, its audited financial statements, including notes to the financial statements, or the Management’s Discussion and Analysis section of the Company’s annual report. The Administrator may provide for other adjustments to Performance Goals in the Award agreement or plan document evidencing any Award at the time the Award is granted. In addition, the Administrator may appropriately adjust any evaluation of performance under a Performance Goal to exclude any of the following events that occurs during a performance period: (x) litigation, claims, judgments or settlements; (y) the effects of changes in other laws or regulations affecting reported results; and (z) accruals of any amounts for payment under this Plan or any other compensation arrangements maintained by the Company. The inclusion in an Award agreement of specific adjustments or modifications shall not be deemed to preclude the Administrator from making other adjustments or modifications, in its discretion, as described herein, unless the Award agreement provides that the adjustments or modifications described in such agreement shall be the sole adjustments or modifications.

 

Where applicable, the Performance Goals may be expressed, without limitation, in terms of attaining a specified level of the particular criterion or the attainment of an increase or decrease (expressed as absolute numbers, averages and/or percentages) in the particular criterion or achievement in relation to a peer group or other index. The Performance Goals may include a threshold level of performance below which no payment will be made (or no vesting will occur), levels of performance at which specified payments will be paid (or specified vesting will occur), and a maximum level of performance above which no additional payment will be made (or at which full vesting will occur).

 

(w)          “Performance Shares” means the right to receive Shares to the extent Performance Goals are achieved (or other requirements are met) as described in Section 9.

 

(x)            “Performance Unit” means the right to receive a payment and/or Shares valued in relation to a unit that has a designated dollar value or the value of which is equal to the Fair Market Value of one or more Shares, to the extent Performance Goals are achieved (or other requirements are met) as described in Section 9.

 

(y)           “Person” has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, or any group of Persons acting in concert that would be considered “persons acting as a group” within the meaning of Treas. Reg. § 1.409A-3(i)(5).

 

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(z)            “Plan” means this Atmus Filtration Technologies Inc. 2022 Omnibus Incentive Plan, as amended from time to time.

 

(aa)         “Replacement Award” means an Award that is issued under the Plan in accordance with the terms of the Employee Matters Agreement in substitution of an award that was granted under the Cummins Plan and is held by a Cummins Participant.

 

(bb)         “Restricted Stock” means a Share that is subject to a risk of forfeiture or restrictions on transfer, or both a risk of forfeiture and restrictions on transfer, as described in Section 9.

 

(cc)         “Restricted Stock Unit” means the right to receive a payment and/or Shares equal to the Fair Market Value of one Share that is subject to a risk of forfeiture or restrictions on transfer, or both a risk of forfeiture and restrictions on transfer, as described in Section 9.

 

(dd)         “Retirement” means with respect to a Participant, (i) a termination of employment or service with the Company and its Affiliates that entitles a Participant to early or normal retirement benefits in accordance with the terms of a retirement plan maintained by the Company or its Affiliates , or (ii) if a Participant is not participating in such a retirement plan or the plan does not include a definition of early or normal retirement, a termination of employment or service with the Company and its Affiliates on or after (A) attaining age fifty-five (55) and completing 5 years of service, (B) completing thirty (30) years of service, or (C) attaining age sixty-five (65).

 

(ee)         “Section 16 Participants” means Participants who are subject to the provisions of Section 16 of the Exchange Act.

 

(ff)           “Share” means a share of Stock.

 

(gg)         “Stock” means the Common Stock of the Company, par value of $0.0001 per share.

 

(hh)         “Stock Appreciation Right” or “SAR” means the right to receive cash, and/or Shares with a Fair Market Value, equal to the appreciation of the Fair Market Value of a Share during a specified period of time.

 

(ii)           “Subsidiary” means any corporation, limited liability company or other limited liability entity in an unbroken chain of entities beginning with the Company if each of the entities (other than the last entities in the chain) owns the stock or equity interest possessing more than fifty percent (50%) of the total combined voting power of all classes of stock or other equity interests in one of the other entities in the chain.

 

3.             Administration.

 

(a)           Administration. In addition to the authority specifically granted to the Administrator in this Plan, the Administrator has full discretionary authority to administer this Plan, including but not limited to the authority to: (i) interpret the provisions of this Plan; (ii) prescribe, amend and rescind rules and regulations relating to this Plan; (iii) correct any defect, supply any omission, or reconcile any inconsistency in any Award or agreement covering an Award in the manner and to the extent it deems desirable to carry this Plan into effect; and (iv) make all other determinations necessary or advisable for the administration of this Plan. All Administrator determinations shall be made in the sole discretion of the Administrator and are final and binding on all interested parties.

 

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(b)           Delegation to Other Committees or Officers. To the extent applicable law permits, the Board may delegate to another committee of the Board, or the Committee may delegate to one or more officers of the Company, any or all of their respective authority and responsibility as an Administrator of the Plan; provided that no such delegation is permitted with respect to Stock-based Awards made to Section 16 Participants at the time any such delegated authority or responsibility is exercised unless the delegation is to another committee of the Board consisting entirely of Non-Employee Directors. If the Board or the Committee has made such a delegation, then all references to the Administrator in this Plan include such other committee or one or more officers to the extent of such delegation.

 

(c)           Indemnification. The Company will indemnify and hold harmless each member of the Board and the Committee, and each officer or member of any other committee to whom a delegation under Section 3(b) has been made, as to any acts or omissions, or determinations made, with respect to this Plan or any Award to the maximum extent that the law and the Company’s by-laws permit.

 

4.             Eligibility. The Administrator may designate any of the following as a Participant from time to time, to the extent of the Administrator’s authority: any officer or other employee of the Company or its Affiliates; an individual that the Company or an Affiliate has engaged to become an officer or employee; a consultant who provides services to the Company or its Affiliates; or a Director, including a Non-Employee Director. The Administrator’s granting of an Award to a Participant will not require the Administrator to grant an Award to such individual at any future time. The Administrator’s granting of a particular type of Award to a Participant will not require the Administrator to grant any other type of Award to such individual.

 

5.             Types of Awards.

 

(a)           Subject to the terms of this Plan, the Administrator may grant any type of Award to any Participant it selects, but only employees of the Company or a Subsidiary (that qualifies under Code Section 422) may receive grants of Incentive Stock Options. Awards may be granted alone or in addition to, in tandem with, or (subject to the prohibitions set forth in Section  16(e)) in substitution for any other Award (or any other award granted under another plan of the Company or any Affiliate, including the plan of an acquired entity).

 

(b)           The Company is authorized to issue Replacement Awards to Cummins Participants in connection with the adjustment and replacement of certain equity-based awards previously granted by Cummins. Notwithstanding any other provision of this Plan to the contrary, the number of Shares to be subject to a Replacement Award and the other terms and conditions of each Replacement Award shall be determined by the Administrator, all in accordance with the terms of the Employee Matters Agreement.

 

6.             Shares Reserved under this Plan.

 

(a)           Plan Reserve. Subject to adjustment as provided in Section 18, an aggregate of [●]1 Shares are reserved for issuance under this Plan. All of such Shares may be issued pursuant to the exercise of Incentive Stock Options. The Shares reserved for issuance may be either authorized and unissued Shares or shares reacquired at any time and now or hereafter held as treasury stock. For purposes of determining the aggregate number of Shares reserved for issuance under this Plan, any fractional Share shall be rounded to the next highest full Share.

 

 

1 Number of shares equal to 9% of the outstanding shares immediately after the IPO.

 

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(b)           Depletion of Reserve. The aggregate number of Shares reserved under Section 6(a) shall be depleted by the maximum number of Shares, if any, that may be granted under an Award as determined at the time of grant. For clarity, an Award that may be settled only in cash shall not deplete the Shares reserved under Section 6(a).

 

(c)           Replenishment of Reserve. To the extent (i) an Award lapses, expires, terminates or is cancelled without the issuance of Shares under, or the payment of other compensation with respect to Shares covered by, the Award (whether due currently or on a deferred basis), (ii) it is determined during or at the conclusion of the term of an Award that all or some portion of the Shares with respect to which the Award was granted will not be issuable, or that other compensation with respect to the Shares covered by the Award will not be payable, on the basis that the conditions for such issuance will not be satisfied, (iii) Shares are forfeited under an Award or (iv) Shares are issued under any Award and the Company subsequently reacquires them pursuant to rights reserved upon the issuance of the Shares, then such Shares shall be recredited to the Plan’s reserve and may again be used for new Awards under this Plan, but Shares recredited to the Plan’s reserve pursuant to clause (iv) may not be issued pursuant to Incentive Stock Options. Notwithstanding the foregoing, in no event shall the following Shares be recredited to the Plan’s reserve: (A) Shares purchased by the Company using proceeds from Option exercises; (B) Shares tendered or withheld in payment of the exercise price of an Option or as a result of the net settlement of an outstanding Stock Appreciation Right; or (C) Shares tendered or withheld to satisfy federal, state or local tax withholding obligations.

 

(d)            Director Compensation Limitation. The aggregate grant date fair value of equity-based Awards granted to a Non-Employee Director, when added to the cash fees earned by the Non-Employee Director (without regard to any deferral elections), in any fiscal year of the Company shall not exceed seven hundred and fifty thousand dollars ($750,000).

 

7.             Options. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each Option, including but not limited to: (a) whether the Option is an Incentive Stock Option or a “nonqualified stock option” which does not meet the requirements of Code Section 422; (b) the grant date, which may not be any day prior to the date that the Administrator approves the grant; (c) the number of Shares subject to the Option; (d) the exercise price, which may not be less than the Fair Market Value of the Shares subject to the Option as determined on the date of grant; (e) the terms and conditions of vesting and exercise; and (f) the term, except that an Option must terminate no later than ten (10) years after the date of grant. In all other respects, the terms of any Incentive Stock Option should comply with the provisions of Code Section 422 except to the extent the Administrator determines otherwise. Except to the extent the Administrator determines otherwise, a Participant may exercise an Option in whole or part after the right to exercise the Option has accrued, provided that any partial exercise must be for one hundred (100) Shares or multiples thereof. If an Option that is intended to be an Incentive Stock Option fails to meet the requirements thereof, the Option shall automatically be treated as a nonqualified stock option to the extent of such failure.

 

8.             Stock Appreciation Rights. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each SAR, including but not limited to: (a) whether the SAR is granted independently of an Option or relates to an Option; (b) the grant date, which may not be any day prior to the date that the Administrator approves the grant; (c) the number of Shares to which the SAR relates; (d) the grant price, provided that the grant price shall not be less than the Fair Market Value of the Shares subject to the SAR as determined on the date of grant; (e) the terms and conditions of exercise or maturity, including vesting; (f) the term, provided that an SAR must terminate no later than ten (10) years after the date of grant; and (g) whether the SAR will be settled in cash, Shares or a combination thereof. If an SAR is granted in relation to an Option, then unless otherwise determined by the Administrator, the SAR shall be exercisable or shall mature at the same time or times, on the same conditions and to the extent and in the proportion, that the related Option is exercisable and may be exercised or mature for all or part of the Shares subject to the related Option. Upon exercise of any number of SARs, the number of Shares subject to the related Option shall be reduced accordingly and such Option may not be exercised with respect to that number of Shares. The exercise of any number of Options that relate to an SAR shall likewise result in an equivalent reduction in the number of Shares covered by the related SAR.

 

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9.             Performance and Stock Awards. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of each award of Shares, Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units, including but not limited to: (a) the number of Shares and/or units to which such Award relates; (b) whether, as a condition for the Participant to realize all or a portion of the benefit provided under the Award, one or more Performance Goals must be achieved during such period as the Administrator specifies; (c) whether the restrictions imposed on Restricted Stock or Restricted Stock Units shall lapse, and all or a portion of the Performance Goals subject to an Award shall be deemed achieved, upon a Participant’s death, Disability or Retirement, or such other circumstances as the Administrator may specify; (d) the length of the vesting and/or performance period and, if different, the date on which payment of the benefit provided under the Award will be made; (e) with respect to Performance Units, whether to measure the value of each unit in relation to a designated dollar value or the Fair Market Value of one or more Shares;(f) with respect to Restricted Stock Units and Performance Units, whether to settle such Awards in cash, in Shares (including Restricted Stock), or a combination thereof; and (g) whether an Award shall include the right to receive dividends or Dividend Equivalent Units.

 

10.          Annual Incentive Awards. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of an Annual Incentive Award, including but not limited to the Performance Goals, performance period, the potential amount payable, and the timing of payment, subject to the following: (a) the Administrator must require that payment of all or any portion of the amount subject to the Annual Incentive Award is contingent on the achievement of one or more Performance Goals during the period the Administrator specifies, although the Administrator may specify that all or a portion of the Performance Goals subject to an Award are deemed achieved upon a Participant’s death, Disability or Retirement, or such other circumstances as the Administrator may specify; and (b) the performance period must relate to a period of one fiscal year of the Company except that, if the Award is made in the year this Plan becomes effective, at the time of commencement of employment with the Company or on the occasion of a promotion, then the Award may relate to a period shorter than one fiscal year.

 

11.          Long-Term Incentive Awards. Subject to the terms of this Plan, the Administrator will determine all terms and conditions of a Long-Term Incentive Award, including but not limited to the Performance Goals, performance period, the potential amount payable, and the timing of payment, subject to the following: (a) the Administrator must require that payment of all or any portion of the amount subject to the Long-Term Incentive Award is contingent on the achievement of one or more Performance Goals during the period the Administrator specifies, although the Administrator may specify that all or a portion of the Performance Goals subject to an Award are deemed achieved upon a Participant’s death, Disability or Retirement, or such other circumstances as the Administrator may specify; and (b) the performance period must relate to a period of more than twelve months.

 

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12.           Dividends and Dividend Equivalent Units.

 

(a)           Prohibitions. In no event may dividends or Dividend Equivalent Units be awarded with respect to Options, SARs or any other stock-based award that is not a grant of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Share Units (the value of which is measured in relation to a Share). Notwithstanding anything to the contrary in this Plan, and for the avoidance of doubt, this Plan expressly prohibits the payment of dividends or Dividend Equivalent Units on unvested Awards for all equity Award types.

 

(b)           Dividends. If cash dividends are paid while Restricted Stock is unvested, then such dividends will either, at the discretion of the Administrator, be (i) automatically reinvested as additional shares of Restricted Stock that are subject to the same terms and conditions, including the risk of forfeiture, as the original grant of Restricted Stock, or (ii) paid in cash at the same time and the same extent that the Restricted Stock vests. For clarity, in no event will dividends be distributed to a Participant unless, until and to the same extent as the underlying Restricted Stock vests.

 

(c)           Dividend Equivalent Units. The Administrator may grant Dividend Equivalent Units only in tandem with Restricted Stock Units, Performance Shares or Performance Share Units (the value of which is measured in relation to a Share). Dividend Equivalent Units will either, at the discretion of the Administrator, be (i) accumulated and paid, in cash or Shares in the Administrator’s discretion, at the same time and to the same extent that the tandem Award vests or is earned or (ii) reinvested in additional units that are subject to the same terms and conditions (including vesting and forfeiture) as the tandem Award. For clarity, in no event will a Participant receive payment with respect to a Dividend Equivalent Unit unless, until and to the same extent as the tandem Award vests and is paid.

 

13.          Other Stock-Based Awards. Subject to the terms of this Plan, the Administrator may grant to Participants other types of Awards, which may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, Shares, either alone or in addition to or in conjunction with other Awards, and payable in Stock or cash. Without limitation except as provided herein, such Award may include the issuance of shares of unrestricted Stock, which may be awarded in payment of director fees, in lieu of cash compensation, in exchange for cancellation of a compensation right, as a bonus, or upon the attainment of Performance Goals or otherwise, or rights to acquire Stock from the Company. The Administrator shall determine all terms and conditions of the Award, including but not limited to, the time or times at which such Awards shall be made, and the number of Shares to be granted pursuant to such Awards or to which such Award shall relate; provided that any Award that provides for purchase rights shall be priced at 100% of Fair Market Value on the date of the Award.

 

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14.          Termination of Employment or Service.

 

(a)           Unvested Awards Canceled Upon Termination. Except as otherwise provided in an Award agreement, if the employment or service of a Participant terminates other than pursuant to subparagraphs (i) or (ii) below, all unvested Awards shall be canceled immediately.

 

(i)            When a Participant’s employment or service terminates as a result of the Participant’s Retirement at a time when the Participant’s employment or service could not have been terminated for Cause, the Administrator may permit Awards to continue in effect beyond the date of Retirement in accordance with the applicable Award agreement, and the exercisability and vesting of any Award may be accelerated.

 

(ii)           When a Participant resigns and, in the judgment of the Administrator, the acceleration and/or continuation of outstanding Awards would be in the best interests of the Company, the Administrator may (A) authorize, where appropriate, the acceleration and/or continuation of all or any part of Awards granted prior to such resignation and (B) permit the exercise, vesting and payment of such Awards for such period as may be set forth in the applicable Award agreement, subject to earlier cancellation pursuant to Section 16 or at such time as the Administrator shall deem the continuation of all or any part of the Participant’s Awards to be not in the Company’s best interests.

 

(b)           Termination for Cause. If, after a Participant’s employment or service terminates for a reason other than Cause, the Company determines that the Participant’s employment or service could have been terminated for Cause had all facts been known at such time, then on the date of such determination any outstanding Awards shall terminate immediately and the Participant shall be required to disgorge to the Company any gains attributable to Awards that were outstanding at the time of the Participant’s termination of employment or service.

 

(c)           Death or Disability of a Participant. Except as otherwise provided in an Award agreement:

 

(i)            In the event of a Participant’s termination due to death or Disability at a time when the Participant’s employment or service could not have been terminated for Cause:

 

(A)          all of the Participant’s time-vesting Awards that are in effect as of the date of such termination shall be vested in full as of the date of such termination, and each Option shall remain exercisable until the earlier of (1) the first anniversary of the date of such termination or (2) the expiration of the original term of such Option;

 

(B)           all of the Participant’s performance-vesting Awards for which the performance period has expired shall be paid or settled in full as of the date of such termination (or as soon as practicable thereafter), based on actual performance; and

 

(C)           all of the Participant’s performance-vesting Awards for which the performance period has not expired shall be paid or settled on a pro-rated basis (based on the complete number of months of the Participant’s employment or service during the relevant performance period), calculated as follows:

 

(a)         if such termination occurs in the first year (or sole year) of the performance period, calculated at the target performance level, with payment or settlement to occur as soon as practicable following the date of termination;

 

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(b)         if such termination occurs in the second year of the performance period, calculated based on actual performance results for the first year of the period and calculated at the target performance level for any remaining years, with payment or settlement to occur as soon as practicable following the date of termination; or

 

(c)         if such termination occurs in the third (or later) year of the performance period, calculated based on actual performance results for the period, with payment or settlement to occur following the end of the performance period at the same time as other similar awards are paid or settled.

 

(ii)           In the event of the Participant’s death, the Participant’s estate shall have the period specified in the Award agreement within which to receive or exercise any rights under outstanding Awards held by the Participant. In the event of the Participant’s Disability, Awards and rights to any Awards may be paid to or exercised by the Participant, if legally competent, or a committee or other legally designated guardian or representative if the Participant is legally incompetent by virtue of such disability.

 

15.          Transferability. Awards are not transferable other than by will or the laws of descent and distribution, unless and to the extent the Administrator allows a Participant to: (a) designate in writing a beneficiary to exercise an Award or receive payment under an Award after the Participant’s death; (b) transfer an Award to the former spouse of the Participant as required by a domestic relations order incident to a divorce; or (c) transfer an Award; provided that, with respect to this clause (c), the Participant may not receive consideration for such a transfer of an Award.

 

16.          Termination and Amendment of Plan; Amendment, Modification or Cancellation of Awards.

 

(a)           Term of Plan. Unless the Board earlier terminates this Plan pursuant to Section 16(b), this Plan will terminate upon the earlier of (i) the tenth anniversary of the Effective Date or (ii) when all Shares reserved for issuance have been issued.

 

(b)           Termination and Amendment. The Board or the Administrator may amend, alter, suspend, discontinue or terminate this Plan at any time, subject to the following limitations:

 

(i)            the Board must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) action of the Board, (B) applicable corporate law, or (C) any other applicable law;

 

(ii)           shareholders must approve any amendment of this Plan to the extent the Company determines such approval is required by: (A) Section 16 of the Exchange Act, (B) the Code, (C) the listing requirements of any principal securities exchange or market on which the Shares are then traded, or (D) any other applicable law; and

 

(iii)          shareholders must approve any of the following Plan amendments: (A) an amendment to materially increase any number of Shares specified in Section 6(a), or (B) an amendment that would diminish the protections afforded by Section 16(e).

 

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(c)           Amendment, Modification, Cancellation and Disgorgement of Awards.

 

(i)            Except as provided in Section 16(e) and subject to the requirements of this Plan, the Administrator may modify, amend or cancel any Award, or waive any restrictions or conditions applicable to any Award or the exercise of the Award; provided that, except as otherwise permitted in the Plan or the Award agreement, any modification or amendment that materially diminishes the rights of the Participant, or the cancellation of the Award, shall be effective only if agreed to by the Participant or any other person(s) as may then have an interest in the Award. Notwithstanding the foregoing, the Administrator need not obtain Participant (or other interested party) consent for the modification, amendment or cancellation of an Award pursuant to the provisions of subsection (ii) or Section 18 or as follows: (A) to the extent the Administrator deems such action necessary to comply with any applicable law, the listing requirements of any principal securities exchange or market on which the Shares are then traded; (B) to the extent the Administrator deems necessary to preserve favorable accounting or tax treatment of any Award for the Company; or (C) to the extent the Administrator determines that such action does not materially and adversely affect the value of an Award or that such action is in the best interest of the affected Participant or any other person(s) as may then have an interest in the Award. Notwithstanding the foregoing, unless determined otherwise by the Administrator, any such amendment shall be made in a manner that will enable an Award intended to be exempt from Code Section 409A to continue to be so exempt, or to enable an Award intended to comply with Code Section 409A to continue to so comply.

 

(ii)           Notwithstanding anything to the contrary in an Award agreement, the Administrator shall have full power and authority to terminate or cause the Participant to forfeit the Award, and require the Participant to disgorge to the Company any gains attributable to the Award, if the Participant engages in any action constituting, as determined by the Administrator in its discretion, a breach of any agreement between the Participant and the Company or an Affiliate concerning noncompetition, non-solicitation, confidentiality, trade secrets, intellectual property, non-disparagement or similar obligations.

 

(iii)          Any Awards granted pursuant to this Plan, and any Stock issued or cash paid pursuant to an Award, shall be subject to any recoupment or clawback policy that is adopted by, or any recoupment or similar requirement otherwise made applicable by law, regulation or listing standards to, the Company from time to time.

 

(iv)          Unless the Award agreement specifies otherwise, the Administrator may cancel any Award at any time if the Participant is not in compliance with all applicable provisions of the Award agreement and the Plan.

 

(d)           Survival of Authority and Awards. Notwithstanding the foregoing, the authority of the Board and the Administrator under this Section 16 and to otherwise administer the Plan and Awards will extend beyond the date of this Plan’s termination. In addition, termination of this Plan will not affect the rights of Participants with respect to Awards previously granted to them, and all unexpired Awards will continue in force and effect after termination of this Plan except as they may lapse or be terminated by their own terms and conditions.

 

(e)           Repricing, Backdating and Reload Prohibited. Notwithstanding anything in this Plan to the contrary, and except for the adjustments provided for in Section 18, neither the Administrator nor any other person may (i) amend the terms of outstanding Options or SARs to reduce the exercise price of such outstanding Options or SARs; (ii) cancel outstanding Options or SARs in exchange for Options or SARs with an exercise price that is less than the exercise price of the original Options or SARs; or (iii) cancel outstanding Options or SARs with an exercise price above the current Share price in exchange for cash or other securities. In addition, the Administrator may not make a grant of an Option or SAR (x) with a grant date that is effective prior to the date the Administrator takes action to approve such Award, or (y) that provides a “reload” feature which entitles the Participant to an automatic grant of an Option or SAR in connection with the exercise of the original Award.

 

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(f)            Foreign Participation. To assure the viability of Awards granted to Participants employed or residing in foreign countries, the Administrator may provide for such special terms as it may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Administrator may approve such supplements to, or amendments, restatements or alternative versions of, this Plan as it determines is necessary or appropriate for such purposes. Any such amendment, restatement or alternative versions that the Administrator approves for purposes of using this Plan in a foreign country will not affect the terms of this Plan for any other country. In addition, all such supplements, amendments, restatements or alternative versions must comply with the provisions of Section 16(b)(ii).

 

(g)           Code Section 409A. The provisions of Code Section 409A are incorporated herein by reference to the extent necessary for any Award that is subject to Code Section 409A to comply therewith.

 

17.          Taxes.

 

(a)           Withholding. In the event the Company or an Affiliate of the Company is required to withhold any Federal, state or local taxes or other amounts in respect of any income recognized by a Participant as a result of the grant, vesting, payment or settlement of an Award or disposition of any Shares acquired under an Award, the Company may satisfy such tax obligations by:

 

(i)            deducting (or require an Affiliate to deduct) the aggregate amount of taxes or such other amounts from any cash payments due hereunder or from any other cash payment due the Participant;

 

(ii)           requiring the Participant to pay to the Company, in cash, promptly on demand, or make other arrangements satisfactory to the Company regarding the payment to the Company of the aggregate amount of any such taxes and other amounts; or

 

(iii)          if Shares are deliverable upon exercise or payment of an Award, requiring that Shares be withheld or permitting a Participant to elect to satisfy all or a portion of the Federal, state and local withholding tax obligations arising in connection with such Award by (A) having the Company withhold Shares otherwise issuable under the Award, (B) tendering back Shares received in connection with such Award or (C) delivering other previously owned Shares; provided that the amount to be withheld in Shares may not exceed the total maximum statutory tax rates associated with the transaction to the extent needed for the Company to avoid an accounting charge. If an election is provided, the election must be made on or before the date as of which the amount of tax to be withheld is determined and otherwise as the Administrator requires.

 

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In any case, the Company may defer making payment or delivery under any Award if any such tax may be pending unless and until indemnified to its satisfaction.

 

(b)           No Guarantee of Tax Treatment. Notwithstanding any provisions of the Plan, the Company does not guarantee to any Participant or any other Person with an interest in an Award that (i) any Award intended to be exempt from Code Section 409A shall be so exempt, (ii) any Award intended to comply with Code Section 409A or Code Section 422 shall so comply, or (iii) any Award shall otherwise receive a specific tax treatment under any other applicable tax law, nor in any such case will the Company or any Affiliate be required to indemnify, defend or hold harmless any individual with respect to the tax consequences of any Award.

 

18.          Adjustment Provisions; Change of Control.

 

(a)           Adjustment of Shares. If: (i) the Company shall at any time be involved in a merger or other transaction in which the Shares are changed or exchanged; (ii) the Company shall subdivide or combine the Shares or the Company shall declare a dividend payable in Shares, other securities (other than stock purchase rights issued pursuant to a shareholder rights agreement) or other property; (iii) the Company shall effect a cash dividend the amount of which, on a per Share basis, exceeds ten percent (10%) of the Fair Market Value of a Share at the time the dividend is declared, or the Company shall effect any other dividend or other distribution on the Shares in the form of cash, or a repurchase of Shares, that the Board determines by resolution is special or extraordinary in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving the Shares; or (iv) any other event shall occur, which, in the case of this clause (iv), in the judgment of the Administrator necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, then the Administrator shall, in such manner as it may deem equitable to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, adjust as applicable: (A) the number and type of Shares subject to this Plan (including the number and type of Shares described in Sections 6(a)) and which may after the event be made the subject of Awards; (B) the number and type of Shares subject to outstanding Awards; (C) the grant, purchase, or exercise price with respect to any Award; and (D) the Performance Goals of an Award. In any such case, the Administrator may also (or in lieu of the foregoing) make provision for a cash payment to the holder of an outstanding Award in exchange for the cancellation of all or a portion of the Award (without the consent of the holder of an Award) in an amount determined by the Administrator effective at such time as the Administrator specifies (which may be the time such transaction or event is effective). However, in each case, with respect to Incentive Stock Options, no such adjustment may be authorized to the extent that such authority would cause this Plan to violate Code Section 422(b). Further, the number of Shares subject to any Award payable or denominated in Shares must always be a whole number. In any event, previously granted Options or SARs are subject to only such adjustments as are necessary to maintain the relative proportionate interest the Options and SARs represented immediately prior to any such event and to preserve, without exceeding, the value of such Options or SARs.

 

Without limitation, in the event of any reorganization, merger, consolidation, combination or other similar corporate transaction or event, whether or not constituting a Change of Control (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Stock is not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Administrator may substitute, on an equitable basis as the Administrator determines, for each Share then subject to an Award and the Shares subject to this Plan (if the Plan will continue in effect), the number and kind of shares of stock, other securities, cash or other property to which holders of Stock are or will be entitled in respect of each Share pursuant to the transaction.

 

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Notwithstanding the foregoing, in the case of a stock dividend (other than a stock dividend declared in lieu of an ordinary cash dividend) or subdivision or combination of the Shares (including a reverse stock split), if no action is taken by the Administrator, adjustments contemplated by this subsection that are proportionate shall nevertheless automatically be made as of the date of such stock dividend or subdivision or combination of the Shares.

 

(b)           Issuance or Assumption. Notwithstanding any other provision of this Plan, and without affecting the number of Shares otherwise reserved or available under this Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, the Administrator may authorize the issuance or assumption of awards under this Plan upon such terms and conditions as it may deem appropriate.

 

(c)           Change of Control. If the Participant has in effect an employment, retention, change of control, severance or similar agreement with the Company or any Affiliate or is subject to a policy that discusses the effect of a Change of Control on the Participant’s Awards, then such agreement or policy shall control. In all other cases, unless provided otherwise in an Award agreement or by the Committee prior to the date of the Change of Control, in the event of a Change of Control:

 

(i)            If the purchaser, successor or surviving corporation (or parent thereof) (each, a “Successor”) so agrees, some or all outstanding Awards shall be continued, assumed, or replaced with the same type of award with similar terms and conditions, by the Successor in the Change of Control transaction. If applicable, each Award which is continued, assumed or replaced by the Successor shall be appropriately adjusted, immediately after such Change of Control, to apply to the number and class of securities which would have been issuable to the Participant upon the consummation of such Change of Control had the Award been exercised, vested or earned immediately prior to such Change of Control, and other appropriate adjustments in the terms and conditions of the Award shall be made. In addition, each such Award shall provide that upon the termination of the Participant’s employment with the Successor in connection with or within twenty-four (24) months following the Change of Control for any reason other than an involuntary termination by the Successor for cause or a voluntary termination by the Participant without good reason (as defined by the policies generally applicable to employees of the Successor):

 

(A)          all of the Participant’s time-vesting Awards that are in effect as of the date of such termination shall be vested in full or deemed earned in full as of the date of such termination;

 

(B)           all of the Participant’s performance-vesting Awards for which the performance period has expired shall be paid or settled in full as of the date of such termination, based on actual performance; and

 

(C)           all of the Participant’s performance-vesting Awards for which the performance period has not expired shall be paid or settled in full as of the date of such termination, calculated at the target performance level.

 

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(ii)           To the extent the provisions in clause (i) do not apply, then, unless provided otherwise in an Award agreement or by the Committee, immediately prior to the date of the Change of Control all Awards that are then held by Participants shall be cancelled in exchange for the right to receive the following:

 

(A)          For each Option or SAR, a cash payment equal to the excess of the Change of Control price of the Shares covered by the Option or SAR that is so cancelled over the purchase or grant price of such Shares under the Award;

 

(B)           For each Share of Restricted Stock and each Restricted Stock Unit, the Change of Control price per Share in cash or such other consideration as the Company or the shareholders of the Company receive in such Change of Control;

 

(C)           For all Performance Shares and/or Performance Units that are earned but not yet paid, a cash payment equal to the value of the Performance Share and/or Performance Unit so earned;

 

(D)          For all Performance Shares and Performance Units for which the performance period has not expired, a cash payment equal to the value of the full number of Performance Shares and/or Performance Units earned, calculated at the target performance level;

 

(E)           For all Annual and Long-Term Incentive Awards that are earned but not yet paid, a cash payment equal to the value of the Annual or Long-Term Incentive Award;

 

(F)           For all Annual and Long-Term Incentive Awards for which the performance period has not expired, a cash payment equal to the full amount that payable under such Awards, calculated at the target performance level;

 

(G)           For all Dividend Equivalent Units, a cash payment equal to the value of the Dividend Equivalent Units as of the date of the Change of Control; and

 

(H)           For all other Awards, a cash payment based on the value of the Award as of the date of the Change of Control.

 

If the value of an Award is based on the Fair Market Value of a Share, Fair Market Value shall be deemed to mean the per share Change of Control price. The Administrator shall determine the per share Change of Control price paid or deemed paid in the Change of Control transaction.

 

(iii)          The payments in respect of cancelled Awards described in Section 18(c)(ii) shall be made as follows:

 

(A)          To the extent the payments are attributable (1) to Awards that were fully vested and earned as of the date of the Change of Control, or (2) to Options or SARs (regardless of whether they were vested or earned), the payments shall be made on the date of the Change of Control; and

 

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(B)           To the extent the payments are attributable to Awards (other than Options or SARs) that were unvested or unearned as of the date of the Change of Control, the payments shall be made on the earlier of (1) thirty (30) days following the termination of the Participant’s employment with the Successor in connection with or within twenty-four (24) months following the Change of Control for any reason other than an involuntary termination by the Successor for cause or a voluntary termination by the Participant without good reason (as defined by the policies generally applicable to employees of the Successor) or (2) the date the Awards would have become vested had they continued in effect or the last day of the performance period, as applicable.

 

(iv)          Notwithstanding anything to the contrary in this Section 18(c), (A) any payment in respect of cancelled Awards (other than Options or SARs) that were unvested or unearned as of the date of the Change of Control shall be forfeited if the Participant’s employment with the Successor is terminated involuntarily by the Successor for cause or voluntarily by the Participant without good reason (as defined by the policies generally applicable to employees of the Successor) prior to the payment date; and (B) the terms of any Awards that are subject to Code Section 409A shall govern the treatment of such Awards upon a Change of Control, and the terms of this Section 18(c) shall not apply, to the extent required for such Awards to remain compliant with Code Section 409A, as applicable.

 

(d)           Application of Limits on Payments.

 

(i)            Determination of Cap or Payment. Notwithstanding any other provision of this Plan to the contrary, if any payments or benefits paid by the Company pursuant to this Plan, including any accelerated vesting or similar provisions (“Plan Payments”), would cause some or all of the Plan Payments or any other payments made to or benefits received by a Participant in connection with a Change of Control (such payments or benefits, together with the Plan Payments, the “Total Payments”) to be subject to the tax (“Excise Tax”) imposed by Code Section 4999 but for this Section 18(d), then the Total Payments shall be delivered either (A) in full or (B) in an amount such that the value of the aggregate Total Payments that the Participant is entitled to receive shall be One Dollar ($1.00) less than the maximum amount that the Participant may receive without being subject to the Excise Tax, whichever of (A) or (B) results in the receipt by the Participant of the greatest benefit on an after-tax basis (taking into account applicable federal, state and local income taxes and the Excise Tax).

 

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(ii)           Procedures.

 

(A)          If a Participant or the Company believes that a payment or benefit due the Participant will result in some or all of the Total Payments being subject to the Excise Tax, then the Company, at its expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel (“National Tax Counsel”) selected by the Company (which may be regular outside counsel to the Company), which opinion sets forth (1) the amount of the Base Period Income (as defined below), (2) the amount and present value of the Total Payments, (3) the amount and present value of any excess parachute payments determined without regard to any reduction of Total Payments pursuant to Section 6(a)(ii), and (4) the net after-tax proceeds to the Participant, taking into account applicable federal, state and local income taxes and the Excise Tax if (x) the Total Payments were delivered in accordance with Section 18(d)(i)(A) or (y) the Total Payments were delivered in accordance with Section 18(d)(i)(B). The opinion of National Tax Counsel shall be addressed to the Company and the Participant and shall be binding upon the Company and the Participant. If such National Tax Counsel opinion determines that Section 18(d)(i)(B) applies, then the Plan Payments or any other payment or benefit determined by such counsel to be includable in the Total Payments shall be reduced or eliminated so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. In such event, payments or benefits included in the Total Payments shall be reduced or eliminated by applying the following principles, in order: (1) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Code Section 409A, then the reduction shall be made pro rata among the payments or benefits included in the Total Payments (on the basis of the relative present value of the parachute payments).

 

(B)           For purposes of this Section 18: (1) the terms “excess parachute payment” and “parachute payments” shall have the meanings given in Code Section 280G and such “parachute payments” shall be valued as provided therein; (2) present value shall be calculated in accordance with Code Section 280G(d)(4); (3) the term “Base Period Income” means an amount equal to the Participant’s “annualized includible compensation for the base period” as defined in Code Section 280G(d)(1); (4) for purposes of the opinion of National Tax Counsel, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4); and (5) the Participant shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and employment taxation, and state and local income taxes at the highest marginal rate of taxation in the state or locality of the Participant’s domicile, net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

 

(C)           If National Tax Counsel so requests in connection with the opinion required by this Section 18(d)(ii), the Company shall obtain, at the Company’s expense, and the National Tax Counsel may rely on, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Participant solely with respect to its status under Code Section 280G.

 

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(D)          The Company agrees to bear all costs associated with, and to indemnify and hold harmless the National Tax Counsel from, any and all claims, damages and expenses resulting from or relating to its determinations pursuant to this Section 18, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of such firm.

 

(E)           This Section 18 shall be amended to comply with any amendment or successor provision to Code Section 280G or Code Section 4999. If such provisions are repealed without successor, then this Section 18 shall be cancelled without further effect.

 

19.          Miscellaneous.

 

(a)           Other Terms and Conditions.

 

(i)            The grant of any Award may also be subject to other provisions (whether or not applicable to the Award granted to any other Participant) as the Administrator determines appropriate, including, without limitation, provisions for:

 

(A)          one or more means to enable Participants to defer the delivery of Shares or recognition of taxable income relating to Awards or cash payments derived from the Awards on such terms and conditions as the Administrator determines, including, by way of example, the form and manner of the deferral election, the treatment of dividends paid on the Shares during the deferral period or a means for providing a return to a Participant on amounts deferred, and the permitted distribution dates or events (provided that no such deferral means may result in an increase in the number of Shares issuable under this Plan);

 

(B)           the payment of the purchase price of Options by (1) delivery of cash or other Shares or other securities of the Company (including by attestation) having a then Fair Market Value equal to the purchase price of such Shares, (2) by delivery (including by fax) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions to a broker-dealer to sell or margin a sufficient portion of the Shares and deliver the sale or margin loan proceeds directly to the Company to pay for the exercise price, (3) by surrendering the right to receive Shares otherwise deliverable to the Participant upon exercise of the Award having a Fair Market Value at the time of exercise equal to the total exercise price, or (4) by any combination of (1), (2) and/or (3);

 

(C)           restrictions on resale or other disposition of Shares; and

 

(D)          compliance with federal or state securities laws and stock exchange requirements.

 

20

 

 

(ii)           Notwithstanding any provision of this Plan that requires a minimum vesting and/or performance period for an Award, the Administrator may, at the time an Award is granted or any later date, subject an Award to a shorter vesting and/or performance period to take into account a Participant’s hire or promotion.

 

(iii)          For purposes of the Plan, references to an “Award agreement” includes (but is not limited to) a formal agreement, any written notice of an Award, any summary document that contains the terms and conditions of an Award, or other documentation of an Award approved by the Administrator.

 

(b)           Employment and Service. The issuance of an Award shall not confer upon a Participant any right with respect to continued employment or service with the Company or any Affiliate, or the right to continue as a Director. Unless determined otherwise by the Administrator, for purposes of the Plan and all Awards, the following rules shall apply:

 

(i)            a Participant who transfers employment between the Company and its Affiliates, or between Affiliates, will not be considered to have terminated employment;

 

(ii)           a Participant who ceases to be a Non-Employee Director because he or she becomes an employee of the Company or an Affiliate shall not be considered to have ceased service as a Director with respect to any Award until such Participant’s termination of employment with the Company and its Affiliates;

 

(iii)          a Participant who ceases to be employed by the Company or an Affiliate and immediately thereafter becomes a Non-Employee Director, a non-employee director of an Affiliate, or a consultant to the Company or any Affiliate shall not be considered to have terminated employment until such Participant’s service as a director of, or consultant to, the Company and its Affiliates has ceased; and

 

(iv)          a Participant employed by an Affiliate will be considered to have terminated employment when such entity ceases to be an Affiliate.

 

Notwithstanding the foregoing, for purposes of an Award that is subject to Code Section 409A, if a Participant’s termination of employment or service triggers the payment of compensation under such Award, then the Participant will be deemed to have terminated employment or service upon his or her “separation from service” within the meaning of Code Section 409A.

 

Notwithstanding any other provision in this Plan or an Award to the contrary, if any Participant is a “specified employee” within the meaning of Code Section 409A as of the date of his or her “separation from service” within the meaning of Code Section 409A, then, to the extent required by Code Section 409A, any payment made to the Participant on account of such separation from service shall not be made before a date that is six months after the date of the separation from service.

 

(c)           No Fractional Shares. No fractional Shares or other securities may be issued or delivered pursuant to this Plan, and the Administrator may determine whether cash, other securities or other property will be paid or transferred in lieu of any fractional Shares or other securities, or whether such fractional Shares or other securities or any rights to fractional Shares or other securities will be canceled, terminated or otherwise eliminated.

 

21

 

 

(d)           Unfunded Plan; Awards Not Includable for Benefits Purposes. This Plan is unfunded and does not create, and should not be construed to create, a trust or separate fund with respect to this Plan’s benefits. This Plan does not establish any fiduciary relationship between the Company and any Participant or other person. To the extent any person holds any rights by virtue of an Award granted under this Plan, such rights are no greater than the rights of the Company’s general unsecured creditors. Income recognized by a Participant pursuant to an Award shall not be included in the determination of benefits under any employee pension benefit plan (as such term is defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended) or group insurance or other benefit plans applicable to the Participant which are maintained by the Company or any Affiliate, except as may be provided under the terms of such plans or determined by resolution of the Board.

 

(e)           Requirements of Law and Securities Exchange. The granting of Awards and the issuance of Shares in connection with an Award are subject to all applicable laws, rules and regulations and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision of this Plan or any award agreement, the Company has no liability to deliver any Shares under this Plan or make any payment unless such delivery or payment would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity, and unless and until the Participant has taken all actions required by the Company in connection therewith. The Company may impose such restrictions on any Shares issued under the Plan as the Company determines necessary or desirable to comply with all applicable laws, rules and regulations or the requirements of any national securities exchanges.

 

(f)            Governing Law. This Plan, and all agreements under this Plan, will be construed in accordance with and governed by the laws of the State of Delaware, without reference to any conflict of law principles. Any legal action or proceeding with respect to this Plan, any Award or any award agreement, or for recognition and enforcement of any judgment in respect of this Plan, any Award or any award agreement, may only be heard in a “bench” trial, and any party to such action or proceeding shall agree to waive its right to a jury trial.

 

(g)           Limitations on Actions. Any legal action or proceeding with respect to this Plan, any Award or any award agreement, must be brought within one year (365 days) after the day the complaining party first knew or should have known of the events giving rise to the complaint.

 

(h)           Construction. Whenever any words are used herein in the masculine, they shall be construed as though they were used in the feminine in all cases where they would so apply; and wherever any words are used in the singular or plural, they shall be construed as though they were used in the plural or singular, as the case may be, in all cases where they would so apply. Title of sections are for general information only, and this Plan is not to be construed with reference to such titles.

 

(i)            Severability. If any provision of this Plan or any award agreement or any Award (i) is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any person or Award, or (ii) would disqualify this Plan, any award agreement or any Award under any law the Administrator deems applicable, then such provision should be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Administrator, materially altering the intent of this Plan, award agreement or Award, then such provision should be stricken as to such jurisdiction, person or Award, and the remainder of this Plan, such award agreement and such Award will remain in full force and effect.

 

22

 

Exhibit 10.12

 

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

Employee Name: Mark J. Osowick

 

Employee WWID: AU126

 

Date Given to Employee: July 11, 2022

 

EMPLOYMENT TRANSITION AND RELEASE AGREEMENT

 

This Confidential Employment Transition and Release Agreement (“Agreement”) is entered into between Mark J. Osowick (“Osowick”), Cummins Inc. (“Cummins” or the “Company”) and Cummins Filtration Inc. (“Filtration”), effective as of August 26, 2022. For the purpose of this Agreement, references to Cummins or the Company refer to Cummins Inc.; its past and present officers, directors, employees, agents, shareholders, representatives, attorneys, fiduciaries, plan administrators, employee benefit plans, and subsidiaries including but not limited to Filtration in its current and anticipated future state as a publicly traded company; as well as all affiliates, distributorships, successors, assigns, and other persons, firms, corporations, or entities who might be claimed liable, none of whom admit liability.

 

Recitals

 

A.Filtration is a wholly owned Cummins business. Osowick is a Cummins employee serving as Filtration’s Chief Human Resources Officer (“CHRO”).

 

B.In April 2022, Cummins confidentially filed a Form S-1 Registration Statement for an initial public offering (“IPO”) of the Filtration business with the U.S. Securities and Exchange Commission (“SEC”).

 

C.Filtration’s IPO date (the “IPO Effectiveness Date”) will be determined by Cummins after the SEC approves Filtration’s registration statement, and on the IPO Effectiveness Date Filtration will become a publicly traded company (“Public Filtration”).

 

D.Osowick originally planned to retire from Cummins in 2023. In the interest of helping Public Filtration appoint a longer-term CHRO, Osowick has agreed to retire from Cummins on the IPO Effectiveness Date. Osowick’s retirement date will coincide with the IPO Effectiveness Date (“Retirement Date”) and Osowick will then transition from Cummins employment to employment with Public Filtration as its CHRO.

 

E.As Public Filtration’s CHRO, Osowick will, among other duties, assist with transition, recruiting, onboarding, and potentially new CHRO transition activities.

 

F.Osowick, Cummins and Filtration acknowledge and agree to the sufficiency of consideration represented by the mutual promises and provisions of this Agreement and the release attached as Exhibit A (the “Release”), which is hereby incorporated by reference.

 

G.The terms of the Agreement follow.

 

1

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

Agreement

 

1.Retirement from Cummins. Osowick shall retire from Cummins, effective the Retirement Date, after which he shall immediately begin employment with Public Filtration as a regular employee.

 

2.Compensation and Benefits. Certain components of Osowick’s Cummins compensation and benefits are listed and shall be treated as described in Sections 2(a)-2(d). All other compensation and benefits shall be administered according to the terms of applicable policies, practices, agreements and plans to the extent they do not conflict with this Agreement. If such terms conflict with this Agreement, relevant provisions of this Agreement shall supersede and control interpretation and administration of Osowick’s Cummins compensation and benefits. Bonuses and other Cummins compensation and benefits under this Agreement shall not be applied to the calculation of any Cummins compensation and benefits to which Osowick is not otherwise entitled by applicable law, policies, plans, agreements, or practices as of the date on which this Agreement is executed.

 

a.Stock Option Grants: Stock option grants under Cummins’ 2012 Omnibus Incentive Plan held by Osowick as of the Retirement Date shall be deemed fully vested on the Retirement Date and shall continue to relate to Cummins’ common stock. The expiration date for such grants shall be adjusted to the sooner of 5 years (i.e., 60 months) after the Retirement Date or the grants’ original expiration date.

 

b.Performance Cash and Performance Share Grants: Performance cash and performance share grants under Cummins’ 2012 Omnibus Incentive Plan held by Osowick as of the Retirement Date shall be pro-rated as of the Retirement Date based on Osowick’s number of months of active service prior to the Retirement Date during the applicable performance period in which the IPO Effectiveness Date occurs. Payout of these grants shall be processed by Cummins according to the payout factors, payout schedules and other terms and conditions of applicable policies, plans, and practices. Notwithstanding anything to the contrary in the Employee Matters Agreement between Cummins and Filtration, the grants held by Osowick shall not be converted into awards relating to Filtration performance or Filtration common stock.

 

c.SERP: Osowick’s accrual of additional benefits under Cummins’ Supplemental Life Insurance and Deferred Income Plan (“SERP”) shall cease as of the Retirement Date. Osowick’s benefits under the SERP shall otherwise be determined and paid in accordance with the terms and conditions of the SERP and applicable law.

 

d.2022 Annual Bonus (Cummins): Cummins shall pro-rate through the Retirement Date and pay Osowick a variable compensation bonus based on eligible 2022 Cummins service and compensation (“CMI Variable Compensation”), subject to the terms and conditions of applicable policies, plans, and practices. Cummins shall pay out earned CMI Variable Compensation following the end of 2022 at the same time as payouts are made to other participants in the 2022 Cummins variable compensation program.

 

2

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

3.Public Filtration Employment.

 

a.Duration of Employment:

 

i.Initial Term: On the IPO Effectiveness Date, after retiring from Cummins, Osowick will become a regular employee of Public Filtration serving as its CHRO. Osowick’s initial term of employment (the “Initial Term”) shall be no longer in duration than six (6) months from the IPO Effectiveness Date during which Osowick shall remain a regular employee in at-will status. Exhibit B summarizes the components of Osowick’s target direct compensation from Cummins for 2022, which shall be relevant to the determination of his compensation for services provided to Public Filtration as set forth below in Section 3(b) and Section 4.

 

ii.First Extension of Initial Term: Upon expiration or early termination of the Initial Term, Public Filtration and Osowick may mutually agree to extend his employment as a regular employee in at-will status for no longer than six (6) months (the “First Extension”) from the date of expiration or early termination. An agreed First Extension must be in writing and signed by Public Filtration’s Chief Executive Officer (the “CEO”) and Osowick.

 

iii.New CHRO Contingencies: If Public Filtration designates a new CHRO during the Initial Term or a First Extension it will attempt to provide Osowick four (4) weeks’ notice of termination and the end of his employment as a Public Filtration employee. Upon termination or expiration of the Initial Term or a First Extension, Public Filtration may choose to engage Osowick as an independent contractor consultant. The duration of such consultancy (the “Consultancy Period”) shall be no longer than three (3) months beyond the earlier of the expiration or early termination of the Initial Term or a First Extension concerning which notice of termination is provided. During the Consultancy Period Osowick will not continue as CHRO; rather, he will advise Public Filtration regarding the new CHRO’s transition and development. Osowick shall not be entitled to Public Filtration benefits during the Consultancy Period, and days within the Consultancy Period shall not be applied to the calculation of any Cummins or Public Filtration benefits. An agreed Consultancy Period, payment terms and conditions of consultancy must be documented in writing and signed by Public Filtration’s CEO and Osowick.

 

b.Compensation and Benefits: Certain components of Osowick’s Public Filtration compensation and benefits are listed and shall be treated as described in Sections 3(b)(i) – 3(b)(iii). All other compensation and benefits shall be administered according to the terms of applicable policies, practices, agreements and plans to the extent they do not conflict with this Agreement. If such terms contradict this Agreement, relevant provisions of this Agreement shall supersede and control interpretation and administration of Osowick’s Public Filtration compensation and benefits. Bonuses and all other Public Filtration compensation and benefits in this Agreement shall not be applied to the calculation of any other Public Filtration compensation and benefits to which Osowick is not otherwise entitled by applicable law, policies, plans, agreements, or practices as of the date on which this Agreement is executed.

 

3

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

i.Base Salary: During the Initial Term and any First Extension, Public Filtration shall pay Osowick a base salary at an annual rate equal to his annual base salary at Cummins when he retired. Compensation applicable to the Consultancy Period shall be determined by Public Filtration.

 

ii.Variable Compensation: To the extent Osowick earns at least one full month’s base salary from Public Filtration during 2022, he shall be eligible to earn a variable compensation bonus based on such base salary (“2022 Public Filtration Variable Compensation”), provided that the CEO in her or his sole discretion determines Osowick is meeting performance expectations. Public Filtration will apply a variable compensation target equal to the target applied to Osowick’s 2022 CMI Variable Compensation, pro-rated for the partial year of service. Calculation of 2022 Public Filtration Variable Compensation shall otherwise be subject to the terms and conditions of applicable Public Filtration policies, plans, agreements and practices. If Osowick remains in Public Filtration’s employ in 2023 and accrues eligible earnings under its variable compensation plan, the bonus shall be pro-rated for any partial year of service and shall be subject to applicable policies, plans, agreements, and practices, including payout in 2024.

 

iii.Grant Replacement Bonus: Osowick will not be eligible to receive grants of equity-based or other long-term incentive awards from Public Filtration at any time or in any employment term or status. In lieu of such grants, to the extent Osowick continues in employment with Public Filtration, Public Filtration in its sole discretion will determine an assumed target value of grants Osowick may have received in 2023 had he been eligible, pro-rated for any partial year of service or expected retirement date, and will pay an equivalent amount in cash (the “Replacement Bonus”). Filtration will pay Osowick the Replacement Bonus as a one-time, lump sum cash amount, less applicable taxes and withholdings, when the final amount of the Replacement Bonus is determined (but in no event later than 2 ½ months following the end of 2023).

 

4.Additional Public Filtration Bonuses. In consideration for Osowick changing retirement plans as previously mentioned, in addition to compensation and benefits previously referenced in this Agreement, Public Filtration shall pay Osowick two separate bonuses listed and described in Sections 4(a) and 4(b).

 

a.Additional Grant Replacement Bonus. Public Filtration shall pay Osowick a lump sum cash bonus to account for the difference, as determined by Public Filtration in its sole discretion, between the value of compensation Osowick is expected to realize from his performance shares and performance cash awards related to Cummins’ 2020 – 2022, 2021 – 2023, and 2022 – 2024 grant cycles and the value he would have been expected to realize from such grants had he retired from Cummins as originally planned in June 2023 (the “Grant Cycle Replacement Bonus”). Public Filtration shall determine in its sole discretion the amount of the Grant Cycle Replacement Bonus and pay it, less applicable taxes and withholdings, to Osowick promptly following the determination of his expected date of termination as a regular Public Filtration employee (but in no event later than 2 ½ months following the end of 2023).

 

4

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

b.Additional Replacement Bonus. In addition to the bonus referenced in Section 4(a), Public Filtration shall pay Osowick a lump sum cash bonus to account for (1) the difference in the present value of SERP annuity payments Osowick would have received had he retired from Cummins in June 2023 as originally planned compared to the present value of SERP annuity payments Osowick will receive upon his separation from service (the “SERP Annuity Replacement Bonus”), (2) the pro rata portion of a target grant level for 2023 of $275,000 and any launch grant, assuming a separation from service in 2023 (the “2023 Pro Rata LTI Grant Bonus”). Public Filtration shall determine in its sole discretion the amounts of the SERP Annuity Replacement Bonus and the 2023 Pro Rata LTI Grant Bonus and pay such amounts, less applicable taxes and withholdings, to Osowick promptly following his separation from service from Public Filtration; provided that, if Osowick’s employment is terminated for cause, as determined by Public Filtration in its sole discretion, he shall not be entitled to receive any SERP Annuity Replacement Bonus or any 2023 Pro Rata LTI Grant Bonus.

 

5.Releases. The Release must be accepted and executed along with this Agreement on or before expiration of applicable consideration and rescission periods referenced in the Release. Cummins or Public Filtration in their sole discretion may require Osowick to execute additional releases containing the same or similarly scoped waivers of liability and other terms (the “Subsequent Releases”) along with and as condition precedents to their payment of bonuses and other compensation and benefits under this Agreement concerning which Osowick is not otherwise entitled by applicable law, policies, plans, agreements, or practices as of the date on which this Agreement is executed. The Agreement shall not be interpreted or construed to limit the Release or Subsequent Releases in any manner. The existence of a dispute respecting the interpretation or alleged breach of this Agreement shall not nullify or otherwise affect the validity or enforceability of the Release or Subsequent Releases.

 

6.Continuing Obligations. Osowick acknowledges and agrees that he shall continue to have obligations to Cummins, Filtration, and Public Filtration under any agreements he has entered into or will enter into regarding, among other covered topics, confidentiality, inventions, non-competition, and non-solicitation in addition to obligations under statutory and common law.

 

7.Confidentiality. The terms of this Agreement are confidential, provided that Cummins or Public Filtration may disclose such terms and this Agreement to the extent required for compliance with applicable SEC regulations or other legal requirements. Osowick shall not disclose or discuss its terms with any third party except his attorney and tax advisor without express consent of Cummins or Public Filtration unless required by law. Osowick shall instruct all third parties to keep information disclosed confidential.

 

8.Entire Agreement. This Agreement, the Release, and Subsequent Releases supersede all prior oral and written agreements, representations, and promises between Osowick, Cummins and Filtration except that any Confidentiality Agreements or any other post-employment obligations Osowick has to Cummins or Filtration shall continue in full force and effect according to their terms so long as they are not inconsistent with this Agreement, in which event relevant portions of this Agreement supersede conflicting provisions.

 

9.Assignment. The rights and obligations of Cummins and Filtration under this Agreement shall inure to the benefit of and shall be binding upon their respective agents, employees, successors, assigns, heirs, attorneys, trustees, estates and representatives. Osowick agrees that he cannot transfer or assign his rights and obligations under this Agreement without the written consent of the Company and Filtration.

 

5

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

10.Governing Law. All matters relating to the interpretation, construction, application, validity and enforcement of this Agreement shall be governed by the laws of the State of Indiana without giving effect to any choice or conflict of law provision or rule, whether of the State of Indiana or any other jurisdiction, that would cause the application of laws of any jurisdiction other than the State of Indiana.

 

11.Jurisdiction and Venue. Osowick acknowledges and consents to the jurisdiction of the courts of the State of Indiana in Bartholomew County, or the United States District Court for the Southern District of Indiana for the purpose of resolving all issues of law, equity, or fact, arising out of or in connection with this Agreement. Any action involving claims of a breach of this Agreement shall be brought in such courts. Each party consents to personal jurisdiction and venue in the state and federal courts identified above.

 

12.Language Construction. The language of this Agreement shall in all cases be construed as a whole according to its fair meaning and not for or against any party.

 

13.Severability. Should any clause, portion, or paragraph of this Agreement or attached Release be declared by any court of competent jurisdiction to be unenforceable, invalid, or illegal for any reason, it shall not affect the enforceability, validity, or legality of the remainder of the Agreement or Release, so long as the economic or legal substance contemplated by the Agreement and Release is not affected in any manner materially adverse to any party.

 

14.Taxes. Osowick acknowledges and agrees that neither Cummins, Filtration nor anyone acting on their behalf has made representations concerning the tax consequences of entering into this Agreement or Release and receiving the consideration specified in them and that he has not relied on any tax advice from Cummins or Filtration or anyone acting on their behalf. Osowick further understands and agrees that he shall be solely responsible for payment of taxes, interest and penalties attributable to him related to consideration under this Agreement.

 

15.Non-Admission. Nothing in this agreement shall be construed as an admission of any kind on the part of Cummins or Filtration that either has violated any law or committed any wrongful act.

 

16.Employment at Will. Notwithstanding the foregoing, this Agreement does not affect Osowick’s status as an at-will employee or otherwise guarantee employment of any duration in any employment status.

 

I have read the terms and conditions of this Agreement and attached Release completely, have been given the opportunity to review them and enlist the assistance of an attorney or other appropriate advisor and voluntarily accept the terms in exchange for the consideration described above.

 

[Signature Page Follows]

 

6

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

    August 26, 2022
Mark Osowick   Date
     
CUMMINS INC.    
     
By:                        
  Cummins Representative   Date
     
     
Name    
     
     
Title    
     
CUMMINS FILTRATION INC.    
     
By:        
  Cummins Filtration Representative   Date
     
     
Name    
     
     
Title    

 

Send signed Agreement by mail or email

 

Mail Attn: Toni Y. Hickey
  General Counsel
  Cummins Filtration Inc.
  26 Century Blvd, Nashville, TN 37214
  toni.hickey@cummins.com

 

7

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

Exhibit A

Release

 

Employee Name: Mark J. Osowick

 

Date Given to Employee: August 26, 2022

 

RELEASE AGREEMENT

 

This Release Agreement (“Release”) is entered into between Mark J. Osowick (“Osowick”), Cummins Inc. (“Cummins” or the “Company”) and Cummins Filtration Inc. (“Filtration”), effective August 26, 2022. For the purpose of this Release, references to Cummins or the Company refer to Cummins Inc.; its past and present officers, directors, employees, agents, shareholders, representatives, attorneys, fiduciaries, plan administrators, employee benefit plans, and subsidiaries including but not limited to Filtration in its current and anticipated future state as a publicly traded company; as well as all affiliates, distributorships, successors, assigns, and other persons, firms, corporations, or entities who might be claimed liable, none of whom admit liability. For the purpose of this Release, references to Filtration refer to Cummins Filtration Inc.; its past and present officers, directors, employees, agents, shareholders, representatives, attorneys, fiduciaries, plan administrators, employee benefit plans, parents and subsidiaries; as well as all affiliates, distributorships, successors, assigns, and other persons, firms, corporations, or entities who might be claimed liable, none of whom admit liability.

 

“I”, “me”, and “my” include me (Mark J. Osowick) and anyone who claims or may later claim to have obtained legal rights or through me. I understand my employment ended/ends, effective the “Separation Date” pursuant to the terms and conditions of the Confidential Employment Transition and Release Agreement by and between Cummins, Filtration, and me, signed by me on August 26, 2022 (the “Agreement”).

 

If I sign and do not rescind this Release and comply with all my obligations herein and the Agreement, I will receive the consideration set forth in the Agreement (the “Consideration”). I acknowledge and agree that the Consideration is in addition to anything of value I would be entitled to receive if I did not sign this Release or if I rescind this Release, and I agree the Consideration is full and fair payment for the promises, releases, and other relinquishments of rights I make herein and in the Agreement. In exchange for the Consideration, I unconditionally:

 

a)promise not to sue or otherwise initiate any legal action against Cummins or Filtration with respect to any claims or liabilities released by this Release;

 

b)release Cummins and Filtration from all liabilities existing as of the date I sign this Release;

 

c)release and waive all claims, causes of action and legal theories of relief against Cummins and Filtration existing as of the date I sign this Release, including claims arising out of or related to my employment with the Cummins or Filtration or the termination of that employment; and

 

d)promise to withdraw (with prejudice) any charges of discrimination or retaliation or any other legal actions pending with any local, state or federal government agencies, including but not limited to the Indiana Civil Rights Commission and the Equal Employment Opportunity Commission.

 

8

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

I understand that this Release applies, to the fullest extent permitted by law, to any alleged violation of any federal, state, or local law and all common law and other theories of recovery, including without limitation all claims based on wrongful discharge, constructive discharge, breach of contract, breach of a covenant of good faith and fair dealing, breach of fiduciary duty, estoppel, harassment, retaliation or reprisal, discrimination, failure to accommodate, my activities, if any, as a “whistleblower,” defamation, all claims for compensation of any kind, all claims for reinstatement, back pay, front pay, compensatory damages, damages for alleged personal injury, liquidated damages, or punitive damages, all claims that a past unlawful decision has or has had a continuing effect on my compensation, all claims for attorneys’ fees, costs or interest, or other alleged unlawful practices arising under the laws of the United States or of any state, municipality, or other unit of government, including without limitation, claims under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment Act (29 U.S.C. §621 et seq.) (“ADEA”), the Older Workers Benefit Protection Act, the Americans with Disabilities Act and the ADA Amendments Act, the Family and Medical Leave Act, 42 U.S.C. §§ 1981, 1983 and 1985, the Employee Retirement Income Security Act, the Equal Pay Act, the Lilly Ledbetter Fair Pay Act of 2009, the Genetic Information Nondiscrimination Act, and the Worker Adjustment and Retraining Notification Act (“WARN”). I further understand and agree that, except for money provided to me by a governmental agency as an award for providing information, I am not entitled to receive any money or other relief in connection with any claims I am releasing through this Release, regardless of who initiated or filed the claim, charge or other proceeding.

 

Even though the Company and Filtration are providing the Consideration in connection with this Release, neither this Release nor the Agreement will be construed to be an admission that the Company or Filtration engaged in any unlawful or improper conduct with respect to me, or that the Company or Filtration have any liability to me whatsoever, which the Company and Filtration expressly deny.

 

I understand that this Release is confidential and agree not to disclose or discuss its existence or terms with any third party, except my spouse, my attorneys, my accountants or tax advisors, or my financial planners, without express consent of the Company or Filtration or unless required to do so by law. I further understand that nothing in this Release prohibits me from reporting possible violations of law to any governmental agency or entity or making other disclosures that are protected under whistleblower provisions of any applicable federal, state or other law or regulation. I understand that I do not need the prior authorization of the Company’s or Filtration’s Legal Department or any other person or body within the Company or Filtration to make any such reports or disclosures and am not required to notify the Company or Filtration that I have made such reports or disclosures. Notwithstanding this Release, the Agreement or any confidentiality/non-disclosure agreement I may have signed in connection my employment, I will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (a) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney if such disclosure is made solely for the purpose of reporting or investigating a suspected violation of law or for pursuing an anti-retaliation lawsuit or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal and I do not disclose the trade secret except pursuant to a court order. 

 

I understand that I am not releasing: a) any claims that the law does not allow to be released or waived; b) any claims that may arise after the date on which I sign this Release; c) any claim I may have to vested benefits under the Company's retirement plans, under the terms and conditions set forth in such plan or plans as of the date of my termination; d) any claim for continuation coverage under COBRA; or e) any claims for indemnification coverage I have under any applicable Company or Filtration policy or practice as a former officer or employee of the Company or Filtration. I understand that nothing in this Release prohibits me from filing or participating in the investigation of a Charge with the Equal Employment Opportunity Commission or its state or local counterparts. However, by signing this Release, I am waiving the right to recover any damages or other relief arising from any Charge or complaint filed with or pursued by any court or agency arising out of or related to my employment with the Company or Filtration and/or the termination of that employment. I also agree that this Release should be interpreted as broadly as possible to achieve my intention to release all the claims I am releasing pursuant to this Release. If this Release is held by a court to be inadequate to release a particular claim encompassed within the scope of claims I am releasing pursuant to this Release, this Release will remain in full force and effect with respect to all the rest of the claims I am releasing pursuant to this Release.

 

9

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

I agree I will not seek re-employment with the Company or Filtration.

 

I understand by this Release that my employment with the Company and Filtration is covered by the ADEA and that I have been advised to consult with an attorney of my choice before signing this Release. I understand that I have up to twenty-one (21) full days after the date I receive this Release to consider whether to sign it, and if I sign this Release before the end of the 21-day period, it will be my voluntary decision to do so because I have decided that I do not need any additional time to decide whether to sign this Release. I also agree that any changes made to this Release before I sign it, whether material or immaterial, will not restart the 21-day period. I understand that I will be given a period of seven (7) full days to revoke this Release after I sign this Release and that this Release will not become effective or enforceable until the end of the applicable revocation period. Should I wish to revoke this Release during the revocation period, I understand that I must send a written notice of revocation postmarked within the timeframe stated above and addressed to:

 

Toni Y. Hickey

General Counsel

Cummins Filtration Inc.

26 Century Blvd, Nashville, TN 37214

 

The Company, Filtration and I agree that this Release is governed by, and will be construed and enforced in accordance with, the laws of the State of Indiana without giving effect to any choice or conflicts of law doctrine which otherwise might be applicable. Any legal action related to or arising out of this Release shall be commenced exclusively in a state or federal court in Indiana. The Company, Filtration and I hereby consent to jurisdiction in the state or federal courts located in Indiana and waive any defense based on lack of jurisdiction or inconvenient forum. To the full extent permitted under applicable law, the Company, Filtration and I waive any right to a jury trial with respect to any dispute related to this this Release.

 

In signing this Release, I have not relied on any statement or explanations made by the Company or Filtration except as specifically set forth in this Release and the Agreement. I have read the terms of this Release completely, have been given the opportunity to review its terms and I have been given the opportunity to consult with any attorney of my choice before signing this Release. I understand all the terms of this Release, I voluntarily accept the terms of this Release in exchange for the Consideration, and I intend the terms of this Release to be legally binding.

 

  August 26, 2022
Signature of Employee   Date
   
     
Printed Name of Employee    
 
     
Company Representative   Date
   
     
Title    

 

Send the signed Release Agreement by mail to the address above OR you may 1) scan and email it to: Toni Y. Hickey (toni.hickey@cummins.com) and 2) send an original, signed copy to Ms. Hickey’s attention at the mailing address above.

 

10

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

11

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

12

ATTORNEY-CLIENT PRIVILEGED

(NON-EXECUTABLE DRAFT)

 

Exhibit B

Summary of Target Total Direct Compensation

 

Annual Base Salary:  $370,000 
Annual Bonus Target (as % of Base Salary):   50%
Long-Term Incentive Target Grant Date Fair Value (2022):  $275,000 

 

13

 

 

Exhibit 10.13

 

EXECUTION VERSION

 

 

Published Deal CUSIP: 31729XAA0

Published Revolver CUSIP: 31729XAB8

Published Term Loan CUSIP: 31729XAC6

 

CREDIT AGREEMENT


dated as of

 

September 30, 2022

 

among

 

FILT RED, INC.

 

CUMMINS FILTRATION INC

 

The Other Loan Parties Party Hereto

 

The Lenders Party Hereto

 

BANK OF AMERICA, N.A.
as Administrative Agent,

a Swingline Lender and an L/C Issuer

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Syndication Agent

 

CITY NATIONAL BANK and

GOLDMAN SACHS BANK USA

as Co-Documentation Agents

 

     
     

BofA SECURITIES, INC.

WELLS FARGO SECURITIES, LLC and

PNC BANK, NATIONAL ASSOCIATION

as Joint Bookrunners and Joint Lead Arrangers

 

JPMORGAN CHASE BANK, N.A.

ING CAPITAL LLC

KEYBANK NATIONAL ASSOCIATION

HSBC BANK USA, NATIONAL ASSOCIATION and

U.S. BANK NATIONAL ASSOCIATION

as Joint Lead Arrangers

 

 

 

 

 

Table of Contents

 

Page

 

ARTICLE I Definitions 1
SECTION 1.01. Defined Terms 1
SECTION 1.02. Classification of Loans and Borrowings 48
SECTION 1.03. Terms Generally 49
SECTION 1.04. Accounting Terms; GAAP; Pro Forma Calculations; Limited Condition Transactions; Certain Calculations and Tests 49
SECTION 1.05. Exchange Rates; Currency Equivalents 51
SECTION 1.06. Additional Alternative Currencies 52
SECTION 1.07. Change of Currency 53
SECTION 1.08. Letter of Credit Amounts 53
SECTION 1.09. Interest Rates 53
SECTION 1.10. Timing of Payment or Performance 54
     
ARTICLE II The Credits 54
SECTION 2.01. Commitments 54
SECTION 2.02. Loans and Borrowings 54
SECTION 2.03. Requests for Borrowings 55
SECTION 2.04. Determination of Dollar Amounts 56
SECTION 2.05. Swingline Loans 56
SECTION 2.06. Letters of Credit 58
SECTION 2.07. Funding of Borrowings 66
SECTION 2.08. Interest Elections 67
SECTION 2.09. Termination and Reduction of Commitments 68
SECTION 2.10. Repayment and Amortization of Loans; Evidence of Debt 69
SECTION 2.11. Prepayment of Loans 71
SECTION 2.12. Fees 73
SECTION 2.13. Interest 74
SECTION 2.14. Alternate Rate of Interest 75
SECTION 2.15. Increased Costs 78
SECTION 2.16. Break Funding Payments 79
SECTION 2.17. Taxes 80
SECTION 2.18. Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Setoffs 83
SECTION 2.19. Mitigation Obligations; Replacement of Lenders 85
SECTION 2.20. Incremental Facilities 86
SECTION 2.21. Judgment Currency 88
SECTION 2.22. Defaulting Lenders 88
SECTION 2.23. Extension of Maturity Date 91
SECTION 2.24. Designated Subsidiary Borrowers 93
SECTION 2.25. Designated Lenders 94
SECTION 2.26. Sustainability Adjustments; Successor Sustainability Structuring Agent 95
SECTION 2.27. Illegality 96
     
ARTICLE III Representations and Warranties 96
SECTION 3.01. Existence, Qualification and Power 96
SECTION 3.02. Authorization; No Contravention 97
SECTION 3.03. Governmental Authorization; Other Consents 97

 

 

 

 

Table of Contents

(continued)

 

Page

 

SECTION 3.04. Binding Effect 97
SECTION 3.05. Litigation 97
SECTION 3.06. Financial Statements; No Material Adverse Effect 97
SECTION 3.07. Disclosure 98
SECTION 3.08. Margin Regulations 98
SECTION 3.09. Investment Company Act 98
SECTION 3.10. Solvency 98
SECTION 3.11. ERISA Compliance 98
SECTION 3.12. Environmental Compliance 99
SECTION 3.13. Taxes 99
SECTION 3.14. Use of Proceeds 99
SECTION 3.15. Anti-Corruption Laws; Anti-Terrorism Laws; OFAC 99
SECTION 3.16. Affected Financial Institutions 100
SECTION 3.17. Security Interest in Collateral 100
     
ARTICLE IV Conditions 100
SECTION 4.01. Effective Date 100
SECTION 4.02. Closing Date 101
SECTION 4.03. Each Borrowing 102
     
ARTICLE V Affirmative Covenants 102
SECTION 5.01. Compliance with Laws 102
SECTION 5.02. Payment of Obligations 103
SECTION 5.03. Compliance with Environmental Laws 103
SECTION 5.04. Maintenance of Insurance 103
SECTION 5.05. Preservation of Existence, Etc. 103
SECTION 5.06. Inspection Rights 103
SECTION 5.07. Books and Records 104
SECTION 5.08. Maintenance of Properties 104
SECTION 5.09. Transactions with Affiliates 104
SECTION 5.10. Covenant to Guarantee Obligations and Provide Security 105
SECTION 5.11. Use of Proceeds 107
SECTION 5.12. Reporting Requirements 107
     
ARTICLE VI Negative Covenants 109
SECTION 6.01. Liens 109
SECTION 6.02. Debt 111
SECTION 6.03. Change in Nature of Business 114
SECTION 6.04. Fundamental Changes 114
SECTION 6.05. Dispositions 115
SECTION 6.06. Investments 117
SECTION 6.07. Restricted Payments 119
SECTION 6.08. Accounting Changes 122
SECTION 6.09. Speculative Transactions 122
SECTION 6.10. Anti-Corruption; Sanctions Laws and Regulations 122
SECTION 6.11. Financial Covenants 123
     
ARTICLE VII Events of Default 123
SECTION 7.01. Events of Default 123

 

ii

 

 

Table of Contents

(continued)

 

Page

 

SECTION 7.02. Remedies Upon an Event of Default 126
SECTION 7.03. Application of Payments 127
     
ARTICLE VIII The Administrative Agent 128
SECTION 8.01. Authorization and Action 128
SECTION 8.02. Administrative Agent’s Reliance, Indemnification, Etc. 131
SECTION 8.03. Posting of Communications 132
SECTION 8.04. The Administrative Agent Individually 133
SECTION 8.05. Successor Administrative Agent 134
SECTION 8.06. Acknowledgements of Lenders and L/C Issuers 135
SECTION 8.07. Recovery of Erroneous Payment 135
SECTION 8.08. Collateral and Guaranty Matters 135
SECTION 8.09. Certain ERISA Matters 136
SECTION 8.10. Withholding Taxes 137
SECTION 8.11. Credit Bidding 138
SECTION 8.12. Swap Obligations and Banking Services Obligations 138
     
ARTICLE IX Miscellaneous 139
SECTION 9.01. Notices 139
SECTION 9.02. Waivers; Amendments 142
SECTION 9.03. Expenses; Indemnity; Damage Waiver 145
SECTION 9.04. Successors and Assigns 146
SECTION 9.05. Survival 151
SECTION 9.06. Electronic Execution; Electronic Records; Counterparts; Effectiveness 151
SECTION 9.07. Severability 152
SECTION 9.08. Right of Setoff 152
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process 153
SECTION 9.10. WAIVER OF JURY TRIAL 154
SECTION 9.11. Headings 154
SECTION 9.12. Confidentiality 154
SECTION 9.13. USA PATRIOT Act 155
SECTION 9.14. Releases of Subsidiary Guarantors and Collateral 155
SECTION 9.15. Appointment for Perfection 156
SECTION 9.16. Interest Rate Limitation 156
SECTION 9.17. No Fiduciary Duty, etc. 157
SECTION 9.18. Acknowledgement and Consent to Bail-In of Affected Financial Institutions 157
SECTION 9.19. Acknowledgement Regarding Any Supported QFCs 158
SECTION 9.20. Investment Grade Fallaway Provision; Release of Company Guaranty 159
     
ARTICLE X Guaranty 159
SECTION 10.01. Guaranty, Limitation of Liability 159
SECTION 10.02. Guaranty Absolute 160
SECTION 10.03. Waivers and Acknowledgments 161
SECTION 10.04. Subrogation 162
SECTION 10.05. Guaranty Supplements 162
SECTION 10.06. Subordination 162
SECTION 10.07. Continuing Guaranty; Assignments 163
SECTION 10.08. Keepwell 163

 

iii

 

 

SCHEDULES:
 
Schedule 2.01 – Commitments
Schedule 5.09 – Affiliate Transactions
Schedule 6.01 – Liens
Schedule 6.02 – Debt

Schedule 6.06 – Investments 

 
EXHIBITS:
 
Exhibit A – Form of Assignment and Assumption
Exhibit B – List of Closing Documents
Exhibit C – Form of Solvency Certificate
Exhibit D-1 – Form of U.S. Tax Certificate (Foreign Lenders That Are Not Partnerships)
Exhibit D-2 – Form of U.S. Tax Certificate (Foreign Participants That Are Not Partnerships)
Exhibit D-3 – Form of U.S. Tax Certificate (Foreign Participants That Are Partnerships)
Exhibit D-4 – Form of U.S. Tax Certificate (Foreign Lenders That Are Partnerships)
Exhibit E-1 – Form of Borrowing Request
Exhibit E-2 – Form of Interest Election Request
Exhibit F – Form of Guaranty Supplement
Exhibit G – Form of Compliance Certificate
Exhibit H – Form of Designated Subsidiary Borrower Request and Assumption Agreement
Exhibit I – Form of Designated Subsidiary Borrower Notice
Exhibit J – Form of Election to Terminate
Exhibit K – Form of Letter of Credit Report

 

 

 

 

CREDIT AGREEMENT (this “Agreement”) dated as of September 30, 2022 among FILT RED, INC., a Delaware corporation (the “Parent Borrower”), CUMMINS FILTRATION INC, an Indiana corporation (the “Opco Borrower”), certain Subsidiaries of the Parent Borrower party hereto from time to time pursuant to Section 2.24 (each, a “Designated Subsidiary Borrower” and, together with the Parent Borrower and the Opco Borrower, the “Borrowers” and each a “Borrower”), the other LOAN PARTIES from time to time party hereto, the LENDERS from time to time party hereto, BANK OF AMERICA, N.A., as Administrative Agent, a Swingline Lender and an L/C Issuer, and the other SWINGLINE LENDERS and L/C ISSUERS from time to time party hereto.

 

WHEREAS, Cummins Inc., an Indiana corporation and the parent company of the Parent Borrower (the “Company”), and its subsidiaries intend to complete a series of internal reorganization transactions, pursuant to which the Parent Borrower will directly own the Opco Borrower and the Opco Borrower will hold, directly and/or through its subsidiaries, the Company’s filtration business;

 

WHEREAS, the Borrowers (y) have requested that the Lenders provide the Term Loans, the Revolving Commitments, the L/C Commitments and commitments in respect of the Swingline Loans, with the proceeds from the initial borrowings hereunder to be used on the Closing Date to fund a special payment to the Company (the “Special Payment”) and to pay fees and expenses related to the Effective Date Transactions and the Closing Date Transactions and (z) will use the proceeds from Revolving Loans and Swingline Loans borrowed after the Closing Date, and Letters of Credit, for general corporate purposes of the Parent Borrower and its Subsidiaries;

 

WHEREAS, (i) on the Closing Date, the Company will cause the Parent Borrower’s common stock to be traded on the New York Stock Exchange (the “IPO”) and, upon the closing of the IPO, the Company will continue to own greater than 80% of the Parent Borrower’s common stock (the “Post-Closing Ownership”) and (ii) after the Closing Date, the Company will make a distribution to the Company’s shareholders, after the expiration of the lock-up period associated with the IPO, of all or a portion of the Parent Borrower’s common stock owned by the Company, which may include one or more distributions effected as a dividend to all of the Company’s shareholders, one or more distributions in exchange for the Company’s shares or other securities, or any combination thereof, the effect of which will be that the Parent Borrower will no longer constitute a subsidiary of the Company (the “Post-Closing Distribution” and the transactions described in the foregoing clauses (i) and (ii), collectively, the “Spin-Off”); and

 

WHEREAS, the Lenders have indicated their willingness to lend on the terms and subject to the conditions and for the purposes set forth herein.

 

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

 

ARTICLE I

 

Definitions

 

SECTION 1.01.      Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

 

“ABR” when used in reference to any Loan or Borrowing, refers to such Loan, or the Loans comprising such Borrowing, bearing interest at a rate determined by reference to the Alternate Base Rate.

 

 

 

“Acquisition Debt” means any Debt of the Parent Borrower or any of its Subsidiaries that has been incurred or issued for the purpose of financing, in whole or in part, a Material Acquisition and any related transactions or series of related transactions (including for the purpose of refinancing or replacing all or a portion of any pre-existing Debt of the Parent Borrower, any of its Subsidiaries or the person(s) or assets to be acquired); provided that (a) the release of the proceeds thereof to the Parent Borrower and its Subsidiaries is contingent upon the consummation of such Material Acquisition and, pending such release, such proceeds are held in escrow (and, if the definitive agreement (or, in the case of a tender offer or similar transaction, the definitive offer document) for such acquisition is terminated prior to the consummation of such Material Acquisition or if such Material Acquisition is otherwise not consummated by the date specified in the definitive documentation relating to such Debt, such proceeds shall be promptly applied to satisfy and discharge all obligations of the Parent Borrower and its Subsidiaries in respect of such Debt) or (b) such Debt contains a “special mandatory redemption” provision (or other similar provision) or otherwise permits or requires such Debt to be redeemed or prepaid if such Material Acquisition is not consummated by the date specified in the definitive documentation relating to such Debt (and if the definitive agreement (or, in the case of a tender offer or similar transaction, the definitive offer document) for such Material Acquisition is terminated in accordance with its terms prior to the consummation of such Material Acquisition or such Material Acquisition is otherwise not consummated by the date specified in the definitive documentation relating to such Debt, such Debt is so redeemed or prepaid within 90 days of such termination or such specified date, as the case may be).

 

“Acquisition Holiday Period” has the meaning assigned to it in Section 6.11(a).

 

“Additional Commitment Lender” has the meaning assigned to it in Section 2.23(d).

 

“Additional Guarantor” has the meaning assigned to it in Section 10.05(b).

 

“Additional Lender” has the meaning assigned to it in Section 2.20(c).

 

“Administrative Agent” means Bank of America (or any of its designated branch offices or affiliates), in its capacity as administrative agent for the Lenders hereunder.

 

“Administrative Agent’s Office” means, with respect to any currency, the Administrative Agent’s address and, as appropriate, account as set forth in Section 9.01 with respect to such currency, or such other address or account with respect to such currency as the Administrative Agent may from time to time notify the Opco Borrower and the Lenders.

 

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

 

“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.

 

“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For purposes of this definition, the term “control” (including the terms “controlling,” “controlled by” and “under common control with”) of a Person means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of Voting Interests, by contract or otherwise (but, for the avoidance of doubt, no individual shall be deemed to be an Affiliate of a Person solely because such individual is a director (or the equivalent thereof) or officer of such Person).

 

2

 

 

“Aggregate Revolving Commitment” means the aggregate of the Revolving Commitments of all of the Revolving Lenders, as reduced or increased from time to time pursuant to the terms and conditions hereof.

 

“Agreed Currency” means Dollars and any Alternative Currency, as applicable.

 

“Agreement” has the meaning assigned to such term in the introductory paragraph.

 

“Agreement Value” means, for each Hedge Agreement, on any date of determination, an amount equal to the mark-to-market value of such Hedge Agreement, which will be the unrealized loss on such Hedge Agreement to the Loan Party or Subsidiary of a Loan Party party to such Hedge Agreement determined as the amount, if any, by which (a) the present value of the future cash flows (determined in accordance with the Master Agreement (Multicurrency Cross Border) published by the International Swap and Derivatives Association, Inc. with respect to such Hedge Agreement) to be paid by such Loan Party or Subsidiary exceeds (b) the present value of the future cash flows (as so determined) to be received by such Loan Party or Subsidiary pursuant to such Hedge Agreement.

 

“Alternate Base Rate” means for any day a fluctuating rate of interest per annum equal to the highest of (a) the Federal Funds Effective Rate plus 1/2 of 1%, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its “prime rate,” (c) Term SOFR plus 1.00% and (d) 1.00%. The “prime rate” is a rate set by Bank of America based upon various factors including Bank of America’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. Any change in such prime rate announced by Bank of America shall take effect at the opening of business on the day specified in the public announcement of such change. If the Alternate Base Rate is being used as an alternate rate of interest pursuant to Section 2.14 hereof, then the Alternate Base Rate shall be the greatest of clauses (a), (b) and (d) above and shall be determined without reference to clause (c) above.

 

“Alternative Currency” means each of the following currencies: Euros and Pounds Sterling, together with each other currency (other than Dollars) that is approved in accordance with Section 1.06; provided that, for each Alternative Currency, such requested currency is an Eligible Currency.

 

“Alternative Currency Daily Rate” means, for any day, with respect to any Borrowing:

 

(a)            denominated in Sterling, the rate per annum equal to SONIA determined pursuant to the definition thereof plus the SONIA Adjustment; and

 

(b)            denominated in any other Alternative Currency (to the extent such Loans denominated in such currency will bear interest at a daily rate), the daily rate per annum as designated with respect to such Alternative Currency at the time such Alternative Currency is approved by the Administrative Agent and the relevant Lenders pursuant to Section 1.06(a) plus (or minus, as the case may be) the adjustment (if any) reasonably determined by the Administrative Agent and the relevant Lenders pursuant to Section 1.06(a);

 

provided that, if any Alternative Currency Daily Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement. Any change in an Alternative Currency Daily Rate shall be effective from and including the date of such change without further notice.

 

3

 

 

“Alternative Currency Daily Rate Loan” means a Loan that bears interest at a rate based on the definition of “Alternative Currency Daily Rate.” All Alternative Currency Daily Rate Loans must be denominated in an Alternative Currency.

 

“Alternative Currency Equivalent” means, at any time, with respect to any amount denominated in Dollars, the equivalent amount thereof in the applicable Alternative Currency as determined reasonably in good faith by the Administrative Agent by reference to Bloomberg (or such other commercially recognized, publicly available service for displaying currency exchange rates), to be the exchange rate for the purchase of such Alternative Currency with Dollars at approximately 11:00 a.m. on the date two (2) Business Days prior to the date as of which the foreign exchange computation is made; provided, however, that, if no such rate is available, the “Alternative Currency Equivalent” shall be reasonably determined in good faith by the Administrative Agent using any reasonable method of determination it reasonably deems appropriate.

 

“Alternative Currency Loan” means an Alternative Currency Daily Rate Loan or an Alternative Currency Term Rate Loan, as applicable.

 

“Alternative Currency Term Rate” means, for any Interest Period, with respect to any Borrowing:

 

(a)            denominated in Euros, the rate per annum equal to the Euro Interbank Offered Rate (“EURIBOR”), as published on the applicable Reuters screen page (or such other commercially available source providing such quotations as may reasonably be designated by the Administrative Agent from time to time) on the day that is two TARGET Days preceding the first day of such Interest Period with a term equivalent to such Interest Period; or

 

(b)            denominated in any other Alternative Currency (to the extent such Loans denominated in such currency will bear interest at a term rate), the term rate per annum as designated with respect to such Alternative Currency at the time such Alternative Currency is approved by the Administrative Agent and the relevant Lenders pursuant to Section 1.06(a) plus (or minus, as the case may be) the adjustment (if any) reasonably determined by the Administrative Agent and the relevant Lenders pursuant to Section 1.06(a);

 

provided that, if any Alternative Currency Term Rate shall be less than zero, such rate shall be deemed zero for purposes of this Agreement.

 

“Alternative Currency Term Rate Loan” means a Loan that bears interest at a rate based on the definition of “Alternative Currency Term Rate.” All Alternative Currency Term Rate Loans must be denominated in an Alternative Currency.

 

“Ancillary Document” means this Agreement, any Loan Document and any document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to any Loan Document.

 

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Parent Borrower or any of its Subsidiaries from time to time concerning or relating to bribery or corruption, including but not limited to, the United Kingdom Bribery Act 2010 and the U.S. Foreign Corrupt Practices Act of 1977.

 

“Applicable Authority” means (a) with respect to Daily SOFR, the Daily SOFR Administrator or any Governmental Authority having jurisdiction over the Administrative Agent or the Daily SOFR Administrator, (b) with respect to Term SOFR, CME or any successor administrator of the Term SOFR Screen Rate or a Governmental Authority having jurisdiction over the Administrative Agent or such administrator with respect to its publication of Term SOFR and (c) with respect to any Alternative Currency, the applicable administrator for the Relevant Rate for such Alternative Currency or any Governmental Authority having jurisdiction over the Administrative Agent or such administrator with respect to its publication of the applicable Relevant Rate, in each case acting in such capacity.

 

4

 

 

“Applicable Maturity Date” has the meaning assigned to it in Section 2.23(a).

 

“Applicable Party” has the meaning assigned to it in Section 8.03(c).

 

“Applicable Percentage” means, with respect to any Lender, (a) with respect to Revolving Loans or Swingline Loans, the percentage equal to a fraction the numerator of which is such Lender’s Revolving Commitment and the denominator of which is the Aggregate Revolving Commitments of all Revolving Lenders (if the Revolving Commitments have terminated or expired, the Applicable Percentages shall be determined based upon the Revolving Commitments most recently in effect, giving effect to any assignments); and (b) with respect to the Term Loans, a percentage equal to a fraction the numerator of which is such Lender’s outstanding principal amount of the Term Loans and the denominator of which is the aggregate outstanding principal amount of the Term Loans of all Term Lenders; provided that, in the case of each of the foregoing clauses (a) and (b), in the case of Section 2.22 when a Defaulting Lender shall exist, any such Defaulting Lender’s Revolving Commitment and/or outstanding Term Loans shall be disregarded in the calculation.

 

“Applicable Rate” means, for any day, in the case of any Daily SOFR Loan, any Term SOFR Loan, any Alternative Currency Term Rate Loan, any Alternative Currency Daily Rate Loan, any ABR Loan, any Letter of Credit, or with respect to the commitment fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption “Daily SOFR Spread”, “Term SOFR Spread”, “Alternative Currency Term Rate Spread”, “Alternative Currency Daily Rate Spread”, “ABR Spread”, “Letter of Credit Fee” or “Commitment Fee Rate”, as the case may be:

 

       Applicable Rate      
Pricing
Level		  Total Net Leverage
Ratio:		   Daily SOFR Spread /
Term SOFR Spread /
Alternative Currency
Term Rate Spread /
Alternative Currency
Daily Rate Spread		    ABR
Spread		    Letter of
Credit Fee		    Commitment
Fee Rate		 
1  > 3.50 to 1.00   1.750%   0.750%   1.750%   0.250%
2 

<3.50 to 1.00 but > 2.50 to 1.00

   1.500%   0.500%   1.500%   0.225%
3 

<2.50 to 1.00 but > 1.50 to 1.00

   1.250%   0.250%   1.250%   0.200%
4  < 1.50 to 1.00   1.125%   0.125%   1.125%   0.175%

 

For purposes of this definition, until the date on which the Administrative Agent receives a Compliance Certificate pursuant to Section 5.12(c) for the Parent Borrower’s first full Fiscal Quarter ending after the Closing Date (or, if such first full Fiscal Quarter is also the end of a Fiscal Year, pursuant to Section 5.12(b)), the Applicable Rate will be based on Pricing Level 3 in respect of the table above. Thereafter, the Applicable Rate will be based on the Pricing Level, as determined by reference to the Total Net Leverage Ratio (as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 5.12(b) or 5.12(c)).

 

5

 

 

Any increase or decrease in the Applicable Rate resulting from a change in the Total Net Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 5.12(b) or 5.12(c), as applicable; provided, however, that, if a Compliance Certificate is not delivered when due in accordance with such Section 5.12, then Pricing Level 1 shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered and shall remain in effect until the date on which such Compliance Certificate is delivered.

 

“Applicant Borrower” has the meaning specified in Section 2.24(a).

 

“Appropriate Lender” means, at any time, (a) with respect to any of the Revolving Loans and/or Revolving Commitments or Term Loans, a Lender that has a Revolving Commitment and/or holds a Revolving Loan or a Term Loan, respectively, at such time, and (b) with respect to the Swingline Sublimit, (i) a Swingline Lender and (ii) if any Swingline Loans are outstanding pursuant to Section 2.05(a), the Revolving Lenders.

 

“Approved Electronic Platform” has the meaning assigned to such term in Section 8.03(a).

 

“Approved Fund” has the meaning assigned to such term in Section 9.04(b).

 

“Arranger” means each of BofA Securities, Inc., Wells Fargo Securities, LLC, PNC Bank, JPMorgan Chase Bank, N.A., ING Capital LLC, KeyBank National Association, HSBC Bank USA, National Association and U.S. Bank National Association, in its capacity as a joint lead arranger hereunder.

 

“Assignment and Assumption” means an assignment and assumption agreement entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form (including electronic records generated by the use of an electronic platform) approved by the Administrative Agent.

 

“Audited Financial Statements” shall have the meaning assigned thereto in Section 4.01(d).

 

“Auto-Extension Letter of Credit” has the meaning assigned to it in Section 2.06(b).

 

“Auto-Reinstatement Letter of Credit” has the meaning assigned to it in Section 2.06(b).

 

“Availability Period” means the period from and including the Closing Date to but excluding the earlier of the Revolving Credit Maturity Date and the date of termination of the Revolving Commitments.

 

“Available Revolving Commitment” means, at any time with respect to any Lender, the Revolving Commitment of such Lender then in effect minus the Revolving Credit Exposure of such Lender at such time; it being understood and agreed that any Lender’s Swingline Exposure shall not be deemed to be a component of the Revolving Credit Exposure for purposes of calculating the commitment fee under Section 2.12(a).

 

 

“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any liability of an Affected Financial Institution.

6

 

 

“Bail-In Legislation” means, (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through liquidation, administration or other insolvency proceedings).

 

“Bank Guarantee” means a guarantee issued by a bank or other financial institution, for the account of the Parent Borrower or any of its Subsidiaries, to support obligations of such Person incurred in the ordinary course of such Person’s business.

 

“Bank of America” means Bank of America, N.A. and its successors.

 

“Banking Services” means each and any of the following services provided to the Parent Borrower or any of its Subsidiaries by any Lender or any of its Affiliates: (a) credit cards for commercial customers (including, without limitation, commercial credit cards and purchasing cards), (b) stored value cards, (c) merchant processing services and (d) treasury management services (including, without limitation, controlled disbursement, zero balance arrangements, cash sweeps, automated clearinghouse transactions, return items, any direct debit scheme or arrangement, overdrafts, interstate depository network services, supply chain finance programs and cash pooling services).

 

“Banking Services Agreement” means any agreement entered into by the Parent Borrower or any of its Subsidiaries in connection with Banking Services.

 

“Banking Services Obligations” means (a) any and all obligations of the Parent Borrower or any of its Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) arising in respect of Banking Services that (i) are owed pursuant to a Banking Services Agreement in effect on the Effective Date, entered into with a party that was a Lender as of the Effective Date or an Affiliate thereof and (ii) are owed pursuant to a Banking Services Agreement entered into after the Effective Date with a party that was a Lender or an Affiliate thereof, in each case at the time such Banking Services Agreement was entered into and (b) any Supplemental Banking Services Obligations. For the avoidance of doubt, the parties agree that any Banking Services Obligation that was permitted to be entered into or designated as a Banking Services Obligation under this Agreement at the time such obligation was entered into or so designated shall continue to be secured by the Collateral even though a limitation under this Agreement may be exceeded solely as a result of a change in the currency exchange rates from the currency exchange rates applicable at the time such Banking Services Obligation was entered into or designated.

 

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now and hereafter in effect, or any successor statute.

 

“Bankruptcy Event” means, with respect to any Person, such Person becomes the subject of a voluntary or involuntary bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment or has had any order for relief in such proceeding entered in respect thereof; provided that a Bankruptcy Event shall not result solely by virtue of any ownership interest, or the acquisition of any ownership interest, in such Person by a Governmental Authority or instrumentality thereof, unless such ownership interest results in or provides such Person with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permits such Person (or such Governmental Authority or instrumentality) to reject, repudiate, disavow or disaffirm any contracts or agreements made by such Person.

 

7

 

 

“Beneficial Ownership Certification” means a certification regarding beneficial ownership or control as required by the Beneficial Ownership Regulation.

 

“Beneficial Ownership Regulation” means 31 C.F.R. § 1010.230.

 

“Benefit Plan” means any of (a) an “employee benefit plan” (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code to which Section 4975 of the Code applies, and (c) any Person whose assets include (for purposes of the Plan Asset Regulations or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.

 

“BHC Act Affiliate” of a party means an “affiliate” (as such term is defined under, and interpreted in accordance with, 12 U.S.C. 1841(k)) of such party.

 

“Blocking Law” has the meaning assigned to such term in Section 6.10.

 

“Bloomberg” means Bloomberg Index Services Limited.

 

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

 

“Bookrunner” means each of BofA Securities, Inc., Wells Fargo Securities, LLC and PNC Bank, in its capacity as joint bookrunner for the credit facilities evidenced by this Agreement.

 

“Borrower” and “Borrowers” each has the meaning specified in the introductory paragraph hereto.

 

“Borrower Materials” has the meaning assigned to such term in Section 5.12.

 

“Borrowing” means (a) Revolving Loans of the same Type, made, converted or continued on the same date and, in the case of Term SOFR Loans and Alternative Currency Term Rate Loans, as to which a single Interest Period is in effect, (b) a Term Loan of the same Type and Class, made, converted or continued on the same date and, in the case of Term SOFR Loans and Alternative Currency Term Rate Loans, as to which a single Interest Period is in effect or (c) a Swingline Loan.

 

“Borrowing Request” means a request for a Borrowing in accordance with Section 2.03, which shall be substantially in the form attached hereto as Exhibit E-1 or any other form approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the applicable Borrower.

 

8

 

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks are authorized to close under the Laws of, or are in fact closed in, the state of New York; provided that:

 

(a)            if such day relates to any interest rate settings as to an Alternative Currency Loan denominated in Euros, any fundings, disbursements, settlements and payments in Euro in respect of any such Alternative Currency Loan, or any other dealings in euro to be carried out pursuant to this Agreement in respect of any such Alternative Currency Loan, means a Business Day that is also a TARGET Day;

 

(b)            if such day relates to any interest rate settings as to an Alternative Currency Loan denominated in Pounds Sterling, means a day other than a day banks are closed for general business in London because such day is a Saturday, Sunday or a legal holiday under the laws of the United Kingdom;

 

(c)            if such day relates to any interest rate settings as to an Alternative Currency Loan denominated in a currency other than Euros or Pounds Sterling, means any such day on which dealings in deposits in the relevant currency are conducted by and between banks in the applicable offshore interbank market for such currency; and

 

(d)            if such day relates to any fundings, disbursements, settlements and payments in a currency other than Euros in respect of an Alternative Currency Loan denominated in a currency other than Euros, or any other dealings in any currency other than Euros to be carried out pursuant to this Agreement in respect of any such Alternative Currency Loan (other than any interest rate settings), means any such day on which banks are open for foreign exchange business in the principal financial center of the country of such currency.

 

“Capitalized Leases” means all leases that have been or should be, in accordance with GAAP, recorded as finance leases (excluding, for the avoidance of doubt, operating leases).

 

“Cash Collateralize” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of one or more of the L/C Issuers or the Lenders, as collateral for L/C Obligations or obligations of the Lenders to fund participations in respect of L/C Obligations, cash or deposit account balances or, if the Administrative Agent and the L/C Issuers shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent and the L/C Issuers (which documents are hereby consented to by the applicable Lenders). “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such Cash Collateral and other credit support.

 

“Cash Equivalents” means any of the following, to the extent owned by the Parent Borrower or any of its Subsidiaries: (a) readily marketable direct obligations of the government of the United States or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the federal government of the United States, (b) insured certificates of deposit of or time deposits having a maturity date not greater than 180 days from the date of acquisition thereof with any commercial bank that is a Lender or a member of the Federal Reserve System, issues (or the parent of which issues) commercial paper rated as described in clause (c) below, is organized under the laws of the United States or any State thereof and has combined capital and surplus of at least $1,000,000,000 and time deposits (or any equivalent thereof) with a Lender or other financial institution in the United Kingdom and South Africa or other jurisdiction as approved by the Administrative Agent in its reasonable discretion, (c) commercial paper in an aggregate amount of no more than $1,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of the United States or any State thereof and rated at least “Prime 1” (or the then equivalent grade) by Moody’s or “A 1” (or the then equivalent grade) by S&P and having a maturity date not greater than 270 days from the date of acquisition thereof, (d) Investments, classified in accordance with GAAP as Current Assets of the Parent Borrower or any of its Subsidiaries, in money market investment programs registered under the Investment Company Act of 1940, as amended, which are administered by financial institutions that have the highest rating obtainable from either Moody’s or S&P, and the portfolios of which are limited solely to Investments of the character, quality and maturity described in clauses (a), (b) and (c) of this definition, or (e) in the case of any Foreign Subsidiary only, direct obligations of the sovereign nation (or any agency thereof) in which such Foreign Subsidiary is organized and is conducting business or in obligations fully and unconditionally guaranteed by such sovereign nation (or any agency thereof); provided that such sovereign nation or agency thereof has a rating by Moody’s and S&P equal to, or better than, the federal government of the United States.

 

9

 

 

“CFC” means a Subsidiary that is a “controlled foreign corporation” within the meaning of Section 957(a) of the Code.

 

“CFC Holding Company” means any Person that owns no material assets other than the Equity Interests, or Equity Interests and Debt, of one or more direct or indirect CFCs; provided, for the avoidance of doubt, that an entity shall not cease to be a CFC Holding Company by virtue of temporarily holding cash as long as it promptly distributes such cash to its owners or contributes such cash to one or more of the CFCs that it owns.

 

“Change in Law” means the occurrence after the date of this Agreement or, with respect to any Lender, such later date on which such Lender becomes a party to this Agreement of (a) the adoption of or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (c) compliance by any Lender or L/C Issuer (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s or L/C Issuer’s holding company, if any) with any request, rule, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided that, notwithstanding anything herein to the contrary and except to the extent merely proposed and not in effect, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith or in the implementation thereof and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall, in each case, be deemed to be a “Change in Law,” regardless of the date enacted, adopted, issued or implemented.

 

“Change of Control” means the occurrence of any of the following: (a) any Person or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934), directly or indirectly, of Voting Interests of the Parent Borrower (or other securities convertible into such Voting Interests) representing 40% or more of the combined voting power of all Voting Interests of the Parent Borrower, (b) the Parent Borrower shall cease to directly own and control 100% of the outstanding Equity Interests of the Opco Borrower or (c) during any period of up to twelve consecutive months, the majority of seats (other than vacant seats) on the board of directors of the Parent Borrower cease to be occupied by persons who either (i) were members of the board of directors of the Parent Borrower at the beginning of the twelve consecutive month period or (ii) were nominated for election by the board of directors of the Parent Borrower, a majority of whom are directors at the beginning of such period or whose election or nomination for election was previously approved by a majority of such directors; provided that no Change of Control shall be deemed to occur as a result of the IPO, the Spin-Off or the Post-Closing Distribution or as a result of any changes in the board of directors of the Parent Borrower in connection with, or occurring as a result of, the IPO, the Spin-Off or the Post-Closing Distribution.

 

10

 

 

“Charges” has the meaning assigned to such term in Section 9.16.

 

“Class”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Term Loans or Swingline Loans.

 

“Closing Date” means the date on which the conditions specified in Section 4.02 are satisfied (or waived in accordance with Section 9.02).

 

“Closing Date Transactions” means (a) the execution, delivery and performance by the Loan Parties of each Loan Document to be executed, delivered and performed by such Loan Parties on the Closing Date, (b) the borrowing of Loans and other credit extensions under this Agreement on the Closing Date and the use of the proceeds thereof, (c) the IPO, (d) the Special Payment, (e) the consummation on the Closing Date of any other transactions in connection with the foregoing and (f) the payment of the fees and expenses incurred in connection with any of the foregoing on the Closing Date.

 

“CME” means CME Group Benchmark Administration Limited.

 

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

 

“Co-Documentation Agent” means each of City National Bank and Goldman Sachs Bank USA, in its capacity as a co-documentation agent for the credit facilities evidenced by this Agreement.

 

“Collateral” means, on and after the Security Date, any and all property owned by a Person covered by the Collateral Documents and any and all other property of any Loan Party, now existing or hereafter acquired, that may at any time be or become subject to a security interest or Lien in favor of the Administrative Agent, on behalf of itself and the Secured Parties, to secure the Secured Obligations as required by the Loan Documents; provided that the Collateral shall exclude Excluded Assets.

 

“Collateral Account” has the meaning specified in Section 2.06(o).

 

“Collateral Documents” means, on and after the Security Date, collectively, when executed and delivered by the applicable parties thereto, the Security Agreement and all other agreements, instruments and documents executed in connection with this Agreement that purport to create, perfect or evidence Liens to secure the Secured Obligations.

 

“Combination” has the meaning assigned to such term in Section 2.09(c).

 

“Combined Lender” has the meaning assigned to such term in Section 2.09(c).

 

“Commitment” means, (a) the Revolving Commitments and the Term Loan Commitments and (b) with respect to each Lender, the sum of such Lender’s Revolving Commitment and Term Loan Commitment. The amount of each Lender’s Revolving Commitment and Term Loan Commitment as of the Effective Date is set forth on Schedule 2.01 or in the Assignment and Assumption or other documentation contemplated hereby pursuant to which such Lender shall have assumed its Revolving Commitment and/or Term Loan Commitment pursuant to the terms hereof, as applicable.

 

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

 

11

 

 

“Communications” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed by the Administrative Agent, any Lender or any L/C Issuer by means of electronic communications pursuant to Section 8.03(c), including through an Approved Electronic Platform.

 

“Company” has the meaning assigned to such term in the introductory paragraph.

 

“Company Guaranty” means that certain Guaranty, dated as of the Effective Date, between the Company and the Administrative Agent, as amended, restated, supplemented or otherwise modified from time to time.

 

“Compliance Certificate” means a certificate substantially in the form of Exhibit G.

 

“Computation Date” has the meaning assigned to such term in Section 2.04.

 

“Conforming Changes” means, with respect to the use of, administration of or any conventions associated with SOFR, SONIA or any proposed Successor Rate for an Agreed Currency or Term SOFR, as applicable, any conforming changes to the definitions of “Alternate Base Rate”, “SOFR”, “Daily SOFR”, “Term SOFR”, “SONIA” and “Interest Period”, timing and frequency of determining rates and making payments of interest and other technical, administrative or operational matters (including, for the avoidance of doubt, the definitions of “Business Day” and “U.S. Government Securities Business Day”, timing of borrowing requests or prepayment, conversion or continuation notices and length of lookback periods) as may be appropriate, in the reasonable good faith discretion of the Administrative Agent, to reflect the adoption and implementation of such applicable rate(s) and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice for such Agreed Currency (or, if the Administrative Agent reasonably determines in good faith that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such rate for such Agreed Currency exists, in such other manner of administration as the Administrative Agent reasonably determines is reasonably necessary in connection with the administration of this Agreement and any other Loan Document).

 

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

“Consolidated” means the consolidation of accounts in accordance with GAAP.

 

“Consolidated Intangible Assets” means, on any date, the consolidated intangible assets of the Parent Borrower and its Subsidiaries, as such amounts would appear on a consolidated balance sheet of the Parent Borrower prepared in accordance with GAAP. As used herein, “intangible assets” means the value (net of any applicable reserves) as shown on such balance sheet of (i) all patents, patent rights, trademarks, trademark registrations, servicemarks, trade names, business names, brand names, copyrights, designs (and all reissues, divisions, continuations and extensions thereof), or any right to any of the foregoing, (ii) goodwill and (iii) all other intangible assets.

 

“Consolidated Interest Charges” means, for any Measurement Period, for the Parent Borrower and its Subsidiaries on a Consolidated basis, the sum (without duplication) of (a) all interest, premium payments, debt discount, fees, charges and related expenses in connection with borrowed money (including capitalized interest), in each case to the extent treated as interest in accordance with GAAP and paid in cash, net of interest income, plus (b) the portion of rent expense under Capitalized Leases that is treated as interest in accordance with GAAP and paid in cash, minus (c)(i) annual administrative agent fees, (ii) costs associated with obtaining Hedge Agreements and any interest expense attributable to the movement of the mark-to-market valuation of obligations under Hedge Agreements or other derivative instruments and any one-time costs associated with breakage in respect of Hedge Agreements for interest rates and (iii) costs associated with the issuance or incurrence of Debt, including financing fees, debt issuance costs, commissions, fees and expenses.

 

12

 

 

“Consolidated Net Income” means, for any period, the net income (or net loss) of the Parent Borrower and its Subsidiaries (calculated on a Consolidated basis) for such period, determined in accordance with GAAP.

 

“Consolidated Net Tangible Assets” means, on any date of determination, the excess of Consolidated Total Assets over Consolidated Intangible Assets.

 

“Consolidated Total Assets” means, as of any date of determination, the total assets of the Parent Borrower and its Subsidiaries, determined in accordance with GAAP, as set forth on the consolidated balance sheet of the Parent Borrower as of such date.

 

“Consolidated Total Net Debt” means, as of any date of determination, (a) the sum (without duplication) of the outstanding principal amount of all Debt (excluding, without duplication, (i) Off Balance Sheet Obligations and (ii) except with respect to any determinations being made in connection with a Limited Condition Transaction for which the LCT Determination Date occurs between such execution and consummation, at any time after the definitive documentation for any Material Acquisition shall have been executed and prior to the consummation of such Material Acquisition (or termination of the definitive documentation in respect thereof) (or such later date as such Debt ceases to constitute Acquisition Debt), any Acquisition Debt with respect to such Material Acquisition) of the Parent Borrower and its Subsidiaries determined on a Consolidated basis as of such date minus (b) an amount equal to the aggregate amount of unrestricted and unencumbered (other than Liens permitted under Section 6.01(a)) cash and Cash Equivalents of the Parent Borrower and its Subsidiaries as of such date (which, for the avoidance of doubt, shall not include the proceeds of any Acquisition Debt).

 

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. The terms “Controlling” and “Controlled” have meanings correlative thereto.

 

“Covered Entity” means any of the following:

 

(i)            a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);

 

(ii)            a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or

 

(iii)            a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

 

“Covered Party” has the meaning assigned to it in Section 9.19.

 

“Credit Exposure” means, as to any Lender at any time, the sum of (a) such Lender’s Revolving Credit Exposure at such time, plus (b) an amount equal to the aggregate principal amount of its Term Loans outstanding at such time.

 

13

 

 

“Credit Party” means the Administrative Agent, the L/C Issuers, the Swingline Lenders or any other Lender.

 

“Cross-Default Reference Obligation” has the meaning assigned to such term in the definition of “Permitted Convertible Indebtedness”.

 

“Current Assets” of any Person means all assets of such Person that would, in accordance with GAAP, be classified as current assets of such Person.

 

“Daily SOFR” means the rate per annum equal to SOFR determined for any day pursuant to the definition thereof plus the SOFR Adjustment. Any change in Daily SOFR shall be effective from and including the date of such change without further notice. If the rate as so determined would be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

 

“Daily SOFR Administrator” means the Federal Reserve Bank of New York, as the administrator of SOFR, or any successor administrator of SOFR designated by the Federal Reserve Bank of New York or other Person acting as the Daily SOFR Administrator at such time that is satisfactory to the Administrative Agent.

 

“Daily SOFR Loan” means a Loan that bears interest at a rate based on Daily SOFR.

 

“Debt” of any Person means, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than (i) trade and similar accounts payable and accrued expenses, in each case arising in the ordinary course of business, and (ii) accrued pension costs and other employee benefit and compensation obligations arising in the ordinary course of business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all obligations of such Person as lessee under Capitalized Leases to the extent reflected on the balance sheet of such Person in accordance with GAAP, (f) all non-contingent reimbursement obligations of such Person under acceptance, letter of credit or similar facilities, or in respect of any Bank Guarantee, (g) all obligations of such Person in respect of Hedge Agreements, valued at the Agreement Value thereof, (h) all Guarantees of such Person with respect to the Debt of others, (i) Off Balance Sheet Obligations of such Person and (j) all indebtedness and other payment obligations referred to in clauses (a) through (i) above of another Person secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property (including, without limitation, accounts and contract rights) owned by such Person, even though such Person has not assumed or become liable for the payment of such indebtedness or other payment obligations; provided that the following items shall not be considered “Debt”: (i) Guarantees with respect to obligations that do not themselves constitute Debt, (ii) any Permitted Bond Hedge Transaction, any Permitted Warrant Transaction, and any obligations thereunder, (iii) Debt owing to the Parent Borrower or, while the Company Guaranty remains in effect, the Company by any Subsidiary or Debt owing to any Subsidiary by the Parent Borrower, another Subsidiary or, while the Company Guaranty remains in effect, the Company, (iv) any customary purchase price adjustments, earnouts, holdbacks, or deferred payments of a similar nature incurred in connection with any Permitted Acquisition or other Investment (including deferred compensation representing consideration or other contingent obligations incurred in connection with any Permitted Acquisition or other Investment), (v) any obligations of the Parent Borrower or its Subsidiaries in respect of customer advances received and held in the ordinary course of business, (vi) performance bonds or performance guaranties (or any Bank Guarantee or letter of credit in lieu thereof) entered into in the ordinary course of business, (vii) any indebtedness that has been defeased, redeemed and/or discharged in accordance with its terms by the deposit of cash and/or cash equivalents, or (viii) interest, fees, premium or expenses, if any, relating to the principal amount of Debt. If any of the foregoing Debt is limited to recourse against a particular asset or assets of such Person, the amount of the corresponding Debt shall be equal to the lesser of the amount of such Debt and the fair market value of such asset or assets at the date for determination of the amount of such Debt.

 

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“Debtor Relief Laws” means the Bankruptcy Code of the United States, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

 

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

 

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

 

“Defaulting Lender” means any Lender that (a) has failed, within two (2) Business Days of the date required to be funded or paid, to (i) fund any portion of its Loans, (ii) fund any portion of its participations in Swingline Loans or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies the Administrative Agent and the Opco Borrower in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including the particular default, if any) has not been satisfied, (b) has notified the Opco Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including the particular default, if any) to funding a Loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three (3) Business Days after request by a Credit Party or the Opco Borrower, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations as of the date of certification) to fund prospective Loans and participations in then outstanding Swingline Loans under this Agreement; provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such Credit Party’s or the Opco Borrower’s receipt of such certification in form and substance satisfactory to it and the Administrative Agent, or (d) has, or has a Lender Parent that has, become the subject of (i) a Bankruptcy Event or (ii) a Bail-In Action.

 

“Designated Person” means a person or entity that is the target of Sanctions Laws and Regulations and:

 

(a)            listed on the “Specially Designated National and Blocked Person” list maintained by OFAC or any similar list maintained by the United States, the United Nations, the EU, any EU member state, the United Kingdom, or any other relevant governmental entity, except to the extent inconsistent with U.S. law; or

 

(b)            domiciled, organized or resident in, or the government or any agency or instrumentality of the government of, any Sanctioned Country or the Government of Venezuela; or

 

(c)            with which any Loan Party is prohibited from dealing or otherwise engaging in any transaction by any Sanctions Laws and Regulations; or

 

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(d)            50% or more owned or controlled, directly or indirectly, by any such Person or Persons described in the foregoing clauses (a), (b), or (c).

 

“Designated Lender” shall have the meaning set forth in Section 2.25.

 

“Designated Subsidiary Borrower” has the meaning specified in the introductory paragraph hereto, but shall exclude any such Person with respect to which an Election to Terminate has been delivered to the Administrative Agent (it being understood that the delivery of an Election to Terminate shall not affect any obligation of a Designated Subsidiary Borrower theretofore incurred or the guarantee thereof under Article X).

 

“Designated Subsidiary Borrower Notice” means the notice substantially in the form of Exhibit I attached hereto.

 

“Designated Subsidiary Borrower Request and Assumption Agreement” means the notice substantially in the form of Exhibit H attached hereto.

 

“Disclosure Exceptions” has the meaning assigned to it in Section 5.06.

 

“Disposition” or “Dispose” means the sale, transfer, license, lease or other disposition (including any Sale and Leaseback Transaction and whether effected pursuant to a Division or otherwise) of any property by any Person, including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith, but excluding (a) any transfer of cash or Cash Equivalents in the ordinary course of business, (b) any issuance by a Person of its own Equity Interests and (c) the granting, existence or creation of any Liens permitted pursuant to Section 6.01.

 

“Disqualifying Event” has the meaning assigned to it in the definition of “Eligible Currency”.

 

“Disqualified Institution” means, on any date, (a) any Person designated by the Opco Borrower as a “Disqualified Institution” by written notice delivered to the Administrative Agent on or prior to the Effective Date, (b) any other Person reasonably determined by the Opco Borrower to be a competitor of the Parent Borrower or any of its Subsidiaries, which Person has been designated by the Opco Borrower as a “Disqualified Institution” by written notice to the Administrative Agent and the Lenders (by posting such notice to the Approved Electronic Platform) not less than one Business Day prior to such date and (c) any Person that is obviously (based solely on the similarity of the name of such Person to the name of a Person previously identified in writing to the Administrative Agent pursuant to clause (a) above or clause (b) above) an Affiliate of any Person previously identified in writing to the Administrative Agent pursuant to clause (a) above or clause (b) above; provided that “Disqualified Institutions” shall exclude any Person that the Opco Borrower has designated as no longer being a “Disqualified Institution” by written notice delivered to the Administrative Agent and the Lenders from time to time.

 

“Dividing Person” has the meaning assigned to it in the definition of “Division”.

 

“Division” means the division of the assets, liabilities and/or obligations of a Person (the “Dividing Person”) among two or more Persons (whether pursuant to a “plan of division” or similar arrangement), which may or may not include the Dividing Person and pursuant to which the Dividing Person may or may not survive.

 

“Division Successor” means any Person that, upon the consummation of a Division of a Dividing Person, holds all or any portion of the assets, liabilities and/or obligations previously held by such Dividing Person immediately prior to the consummation of such Division. A Dividing Person which retains any of its assets, liabilities and/or obligations after a Division shall be deemed a Division Successor upon the occurrence of such Division.

 

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“Dollar Amount” means, for any amount, at the time of determination thereof, (a) if such amount is expressed in Dollars, such amount, (b) if such amount is expressed in an Alternative Currency, the equivalent of such amount in Dollars determined by using the rate of exchange for the purchase of dollars with the Alternative Currency last provided (either by publication or otherwise provided to the Administrative Agent) by the applicable Bloomberg source (or such other commercially recognized, publicly available source for displaying currency exchange rates) on the date that is two (2) Business Days immediately preceding the date of determination (or if such service ceases to be available or ceases to provide such rate of exchange, the equivalent of such amount in Dollars as reasonably determined in good faith by the Administrative Agent using any reasonable method of determination it reasonably deems appropriate) and (c) if such amount is denominated in any other currency, the equivalent of such amount in Dollars as reasonably determined in good faith by the Administrative Agent using any reasonable method of determination it reasonably deems appropriate. Any determination by the Administrative Agent pursuant to clause (b) or (c) above shall be conclusive absent demonstrable error.

 

“Dollars” or “$” refers to lawful money of the United States of America.

 

“Domestic Loan Party” means the Parent Borrower, the Opco Borrower and each other Loan Party that is a Domestic Subsidiary.

 

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United States of America, any state thereof or the District of Columbia.

 

“DQ List” has the meaning assigned to it in Section 9.04(e)(iv).

 

“EBITDA” means, for any period, (a) the sum, determined on a Consolidated basis for the most recently completed Measurement Period, of (i) Consolidated Net Income, and, to the extent reflected in the calculation of such net income (or net loss), (ii) interest expense, (iii) income tax expense, (iv) depreciation expense, (v) amortization expense, (vi) noncash impairment charges, (vii) losses, charges, costs and expenses incurred in connection with discontinued operations (but if such operations are classified as discontinued due to the fact that they are subject to an agreement to dispose of such operations, such losses shall be added back in the calculation of EBITDA only when and to the extent such operations are actually disposed of), restructurings, casualty and condemnation events, and dispositions consummated outside the ordinary course of business (provided that the aggregate amount added back pursuant to this clause (vii) for such period, together with the aggregate amount added back pursuant to clause (x) for such period, shall not exceed 20% of EBITDA (calculated prior to giving effect to such addback) for such period), (viii) other noncash losses, charges, costs and expenses, (ix) noncash equity compensation expenses, (x) other non-recurring or unusual cash expenses, charges, losses and deductions for such period (provided that the aggregate amount added back pursuant to this clause (x) for such period, together with the aggregate amount added back pursuant to clause (vii) for such period, shall not exceed 20% of EBITDA (calculated prior to giving effect to such addback) for such period), (xi) fees, costs, expenses, premiums, make-whole amounts, penalty payments and other similar items and, in the case of clause (E) below, awards, settlement payments and similar amounts, in each case, incurred after the date hereof arising out of or in connection with (A) Permitted Acquisitions, (B) Investments and Dispositions not prohibited hereunder, (C) any incurrence, issuance, repayment or refinancing of Debt permitted hereunder, (D) any issuance or redemption of equity interests and (E) litigation, arbitration and/or other resolutions of legal disputes, (xii)(A) losses or discounts in connection with any Receivables Facility or otherwise in connection with factoring arrangements or the sale of Receivables Assets, in each case permitted hereunder, and (B) amortization of (x) capitalized fees, (y) loan origination costs and (z) portfolio discounts, in each case in connection with any Receivables Facility, (xiii) fees, expenses and other costs incurred in connection with the Spin-Off (provided that the aggregate amount added back pursuant to this clause (xiii) shall not exceed $60,000,000 in any period) and (xiv) the amount of cost savings and other operating improvements and cost synergies projected by the Parent Borrower in good faith to be realized as a result of any acquisition, merger, other business combination, investment, disposition, divestiture, restructuring, cost savings initiative, discontinued operation, operational change, business expansion, restructuring or other transaction or initiative (any of the foregoing, a “Specified Transaction”) taken or committed to be taken during such period (in each case calculated on a pro forma basis as though such cost savings and other operating improvements and cost synergies had been realized on the first day of such period), net of the amount of actual benefits realized during such period from such actions to the extent already included in the Consolidated Net Income for such period; provided that such cost savings, operating improvements and cost synergies are reasonably anticipated to be realized within 18 months following any such Specified Transaction; provided further that the aggregate amount of adjustments in respect of cost synergies, cost savings and other operating improvements, when aggregated with the aggregate amount of adjustments in respect of pro forma cost synergies, cost savings and other operating improvements pursuant to the proviso to this definition, shall not exceed 20% of EBITDA for such period prior to giving effect to such cost synergies, cost savings and other operating improvements for such period); minus (b) to the extent reflected in the calculation of Consolidated Net Income for such period, gains from discontinued operations (but if such operations are classified as discontinued due to the fact that they are subject to an agreement to dispose of such operations, such gains shall be deducted in the calculation of EBITDA only when and to the extent such operations are actually disposed of), restructurings, casualty and condemnation events and dispositions consummated outside the ordinary course of business, in each case of the Parent Borrower and its Subsidiaries, in each case determined (except as otherwise provided herein) in accordance with GAAP for the most recently completed Measurement Period, it being understood that “EBITDA” shall be (1) increased for any Measurement Period in which the purchase or other acquisition of all of the Equity Interests in, or all or substantially all of the property and assets of, any Person, has occurred, by the EBITDA of the Person or assets being acquired using the historical financial statements (including audited financial statements, to the extent available) for such Person and (2) decreased for any Measurement Period in which the sale, transfer or other disposition of all of the Equity Interests in, or all or substantially all of the property and assets of, any Person, has occurred, by, in each case, the EBITDA of the Person or assets being acquired or sold, as applicable, using the historical financial statements (including audited financial statements, to the extent available) for such Person, and all such adjustments to the EBITDA of the Parent Borrower and its Subsidiaries as specified in the foregoing clauses (1) and (2) shall be accompanied by a certification of a Responsible Officer of the Parent Borrower stating that such adjustments have been prepared in accordance with GAAP.

 

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“ECP” means an “eligible contract participant” as defined in Section 1(a)(18) of the Commodity Exchange Act or any regulations promulgated thereunder and the applicable rules issued by the Commodity Futures Trading Commission and/or the SEC.

 

“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clause (a) or (b) of this definition and is subject to consolidated supervision with its parent.

 

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

 

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“EEA Resolution Authority” means any public administrative authority or any Person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

 

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

 

“Effective Date Transactions” means (a) the execution, delivery and performance by the Loan Parties of this Agreement and the other Loan Documents to be executed, delivered and performed by such Loan Parties on the Effective Date and (b) the payment of the fees and expenses incurred in connection with the foregoing on the Effective Date.

 

“Election to Terminate” means an Election to Terminate substantially in the form of Exhibit J.

 

“Electronic Copy” has the meaning assigned to it in Section 9.06.

 

“Electronic Record” and “Electronic Signature” shall have the meanings assigned to them, respectively, by 15 USC §7006, as it may be amended from time to time.

 

“Eligible Currency” means any lawful currency other than Dollars that is readily available, freely transferable and convertible into Dollars in the international interbank market available to the Lenders or the L/C Issuer, as applicable, in such market and as to which a Dollar Amount may be readily calculated. If, after the designation by the Lenders or the L/C Issuer, as applicable, of any currency as an Alternative Currency (or if, with respect to any currency that constitutes an Alternative Currency on the Closing Date, after the Closing Date), any change in currency controls or exchange regulations or any change in the national or international financial, political or economic conditions are imposed in the country in which such currency is issued, result in, in the reasonable opinion of the Required Lenders (in the case of any Loans to be denominated in an Alternative Currency) or the applicable L/C Issuer (in the case of any Letter of Credit to be denominated in an Alternative Currency), (a) such currency no longer being readily available, freely transferable and convertible into Dollars, (b) a Dollar Amount is no longer readily calculable with respect to such currency, (c) providing such currency is impracticable for the Lenders or the L/C Issuer, as applicable, or (d) such currency no longer being a currency in which the Required Lenders are willing to make such Borrowings (each of clauses (a), (b), (c), and (d), a “Disqualifying Event”), then the Administrative Agent shall promptly notify the Lenders and the Opco Borrower, and such country’s currency shall no longer be an Alternative Currency until such time as the Disqualifying Event(s) no longer exist(s) as determined by the Administrative Agent. Within five (5) Business Days after receipt of such notice from the Administrative Agent, the applicable Borrower shall repay all Loans in such currency to which the Disqualifying Event applies or convert such Loans into the Dollar Amount of Loans in Dollars, subject to the other terms contained herein.

 

“Environment” shall mean ambient air, indoor air, surface water, groundwater, drinking water, land surface, sediments, and subsurface strata & natural resources such as wetlands, flora and fauna.

 

“Environmental Law” means any applicable federal, state, local or foreign statute, law, ordinance, rule, regulation, code, order, writ, judgment, injunction, decree or judicial or agency interpretation, policy or guidance relating to pollution or protection of the Environment, human health and safety (only as it relates to exposure to Hazardous Materials), or natural resources, including, without limitation, those relating to the use, handling, transportation, treatment, storage, Release or threat-of, Release of, or exposure to, Hazardous Materials.

 

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“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Parent Borrower or any of its Subsidiaries directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials into the Environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

 

“Environmental Permit” means any permit, approval, identification number, license or other authorization required under any Environmental Law.

 

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing (excluding (i) any agreement for the purchase of the Equity Interests of a Subsidiary and (ii) any Permitted Convertible Indebtedness until such Permitted Convertible Indebtedness has been converted pursuant to the terms thereof).

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder.

 

“ERISA Affiliate” means any Person that for purposes of Title IV of ERISA is a member of the controlled group of any Loan Party, or under common control with any Loan Party, within the meaning of Section 414 of the Code.

 

“ERISA Event” means (a) (i) the occurrence of a Reportable Event, or (ii) the requirements of Section 4043(b) of ERISA apply with respect to a contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur with respect to such Plan within the following 30 days; (b) the failure to satisfy the minimum funding standard under Section 412 of the Code or Section 302 of ERISA, whether or not waived, with respect to a Plan; (c) the application for a minimum funding waiver with respect to a Plan; (d) the provision by the administrator of any Plan that has Unfunded Pension Liabilities of a notice of intent to terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan amendment referred to in Section 4041(e) of ERISA); (e) the cessation of operations at a facility of any Loan Party or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA; (f) the withdrawal by any Loan Party or any ERISA Affiliate from a Multiple Employer Plan during a plan year for which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (g) the conditions for imposition of a lien under Section 303(k) of ERISA shall have been met with respect to any Plan; (h) a determination that any Plan is in “at risk” status (within the meaning of Section 303 of ERISA); or (i) the institution by the PBGC of proceedings to terminate a Plan pursuant to Section 4042 of ERISA, or the occurrence of any event or condition described in Section 4042 of ERISA that constitutes grounds for the termination of, or the appointment of a trustee to administer, such Plan.

 

“ESG” has the meaning assigned to it in Section 2.26(a).

 

“ESG Amendment” has the meaning assigned to it in Section 2.26(a).

 

“ESG Pricing Provisions” has the meaning assigned to it in Section 2.26(a).

 

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor Person), as in effect from time to time.

 

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“Euro” and/or “€” means the single currency of the Participating Member States.

 

“Event of Default” has the meaning assigned to such term in Section 7.01.

 

“Excluded Assets” means, collectively: (1) all fee-owned real property and all leasehold interests in real property (including that, notwithstanding any provision of any Loan Document to the contrary, there shall be no requirements to deliver landlord lien waivers, estoppels or collateral access letters), (2) any “intent-to-use” application for registration of a trademark filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, prior to the filing of a “Statement of Use” pursuant to Section 1(d) of the Lanham Act of an “Amendment to Allege Use” pursuant to Section 1(c) of the Lanham Act with respect thereto, solely to the extent, if any, that and solely during the period, if any, in which, the grant of a security interest therein would impair the validity or enforceability of any registration that issues from such intent-to-use application under applicable federal law, (3) assets in respect of which pledges and security interests (i) are prohibited or restricted by (A) any law or regulation or (B) any contractual obligation (including any requirement to obtain the consent of any third party (other than the Parent Borrower or any of its Subsidiaries)) that, in the case of this clause (B), exists on the Effective Date or at the time the relevant Domestic Loan Party becomes a Domestic Loan Party and was not incurred in contemplation of its becoming a Domestic Loan Party (including pursuant to assumed indebtedness so long as such indebtedness is permitted to be assumed under the Loan Documents) (other than to the extent that such prohibition or restriction would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408, 9-409 or other applicable provisions of the UCC of any relevant jurisdiction or any other applicable Law); provided that, immediately upon the ineffectiveness, lapse or termination of any such prohibitions, or restrictions such assets shall automatically cease to constitute Excluded Assets (unless constituting an Excluded Asset under one or more of the other clauses of this definition) or (ii) would require a governmental (including regulatory) consent, approval, license or authorization in order to provide the lien that is required on the Effective Date or at the time the relevant Domestic Loan Party becomes a Domestic Loan Party, (4) Equity Interests in any Person other than Wholly-Owned Subsidiaries to the extent pledges thereof are not permitted by such entity’s organizational or joint venture documents (unless any such restriction would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408, 9-409 or other applicable provisions of the UCC of any relevant jurisdiction or any other applicable Law), (5) assets subject to certificates of title (other than motor vehicles subject to certificates of title; provided that perfection of security interests in such motor vehicles shall be limited to the filing of UCC financing statements), letter of credit rights (other than to the extent the security interest in such letter of credit right may be perfected by the filing of UCC financing statements) with a value of less than $10,000,000 and commercial tort claims with a value of less than $10,000,000, (6) any lease, license or other agreement or any property subject to a purchase money security interest, capital lease or similar arrangement to the extent that a grant of a security interest therein would violate or invalidate such lease, license or agreement or purchase money arrangement or create a right of termination in favor of any other party thereto (other than a Borrower, a Guarantor or the Company) (other than (x) proceeds and receivables thereof, the assignment of which is expressly deemed effective under the UCC notwithstanding such prohibition, (y) to the extent that any such term has been waived or (z) to the extent that any such term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408, 9-409 or other applicable provisions of the UCC of any relevant jurisdiction or any other applicable Law); provided that, immediately upon the ineffectiveness, lapse or termination of any such term, such assets shall automatically cease to constitute Excluded Assets (unless constituting an Excluded Asset under one or more of the other clauses of this definition), (7) trust accounts, payroll accounts, custodial accounts, escrow accounts and other similar deposit or securities accounts, (8) voting Equity Interests in CFC Holding Companies and first-tier Foreign Subsidiaries that are CFCs, in each case, in excess of 65% of the issued and outstanding voting Equity Interests of such CFC Holding Companies or CFCs, (9) Receivables Assets (but excluding Equity Interests of Receivables Subsidiaries) transferred to Receivables Subsidiaries in connection with a permitted Receivables Facility, (10) cash, cash equivalents and/or securities held by a trustee, escrow agent or other representative under any indenture or other debt agreement pursuant to customary discharge, redemption or defeasance provisions and (11) those assets as to which the Administrative Agent and the Opco Borrower reasonably agree that the cost, burden, difficulty or consequence of obtaining such a security interest or perfection thereof outweighs, or are excessive in relation to, the practical benefit to the Lenders of the security to be afforded thereby; provided that “Excluded Assets” shall not include any proceeds, products, substitutions or replacements of Excluded Assets (unless such proceeds, products, substitutions or replacements would otherwise constitute Excluded Assets).

 

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“Excluded Subsidiary” means (a) any Immaterial Subsidiary, (b) any Receivables Subsidiary, not-for-profit Subsidiary, captive insurance company or other Special Purpose Entity, (c) any CFC Holding Company, (d) any (i) Foreign Subsidiary or (ii) Domestic Subsidiary of a Foreign Subsidiary that is a CFC, (e) any Subsidiary that is not a Wholly-Owned Subsidiary, (f) any Subsidiary that is prohibited from providing a Guarantee in respect of the Obligations by (i) any provision of any agreement, instrument or other undertaking to which such Subsidiary is a party or by which it or any of its assets or property is bound existing on the date such Person became a Subsidiary; provided that such provision is not entered into for the purpose of qualifying as an “Excluded Subsidiary” under this Agreement or (ii) applicable Law, (g) any Subsidiary that would require the consent, approval, license or authorization of any third party (other than the Parent Borrower or any of its Subsidiaries) in order to provide a Guarantee in respect of the Obligations pursuant to any agreement, instrument or other undertaking referred to in clause (f)(i) above or applicable Law (in each case, to the extent such consent, approval, license or authorization has not been received), (h) prior to the consummation of such merger transaction, any Subsidiary that is newly formed for the purpose of consummating a merger transaction pursuant to an acquisition permitted by this Agreement, which Subsidiary at no time holds any assets or liabilities other than any merger consideration contributed to it substantially contemporaneously with the closing of such merger transaction, (i) any Subsidiary to the extent the provision of a Guarantee by such Subsidiary in respect of the Obligations would reasonably be expected to result in material adverse tax consequences to the Parent Borrower or any of its Subsidiaries as mutually agreed by the Opco Borrower and the Administrative Agent and (j) any Subsidiary with respect to which, as reasonably determined by the Administrative Agent and the Opco Borrower, the burden or cost or other consequences (including material adverse tax consequences) of providing a Guarantee outweighs the benefits to the Secured Parties. For the avoidance of doubt, in no event shall a Designated Subsidiary Borrower constitute an Excluded Subsidiary.

 

“Excluded Swap Obligation” means, with respect to any Loan Party, any Specified Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Specified Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason to constitute an ECP at the time the Guarantee of such Loan Party or the grant of such security interest becomes or would become effective with respect to such Specified Swap Obligation. If a Specified Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Specified Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.

 

“Excluded Taxes” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan, Letter of Credit or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the applicable Commitment or, if such Lender did not fund the applicable Loan pursuant to a prior Commitment, the date on which such Lender acquires the applicable interest in such Loan or a Letter of Credit (in each case, other than pursuant to an assignment request by the Opco Borrower under Section 2.19(b)) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.17, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan, Letter of Credit or Commitment or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 2.17(f) and (d) any withholding Taxes imposed under FATCA.

 

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“Executive Order” means Executive Order No. 13224 of September 23, 2001, entitled Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)).

 

“Extended Maturity Date” has the meaning assigned to it in Section 2.23(a).

 

“Extending Lender” has the meaning assigned to it in Section 2.23(b).

 

“Extension Date” has the meaning assigned to it in Section 2.23(a).

 

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations thereunder or official interpretations thereof, any agreement entered into pursuant to current Section 1471(b)(1) of the Code (or any amended or successor version described above) and any intergovernmental agreement, treaty or convention among Governmental Authorities (or any related Laws) implementing the foregoing.

 

“Federal Funds Effective Rate” means, for any day, the rate per annum calculated by the Federal Reserve Bank of New York based on such day’s federal funds transactions by depository institutions (as determined in such manner as the Federal Reserve Bank of New York shall set forth on its public website from time to time) and published on the next succeeding Business Day by the Federal Reserve Bank of New York as the federal funds effective rate; provided that, if the Federal Funds Effective Rate as so determined would be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement.

 

“Financial Officer” means the chief financial officer, principal accounting officer, treasurer or controller of the Parent Borrower.

 

“First Tier Foreign Subsidiary” means each Foreign Subsidiary with respect to which any Loan Party directly owns or Controls more than 50% of such Foreign Subsidiary’s issued and outstanding Equity Interests.

 

“Fiscal Quarter” means a fiscal quarter of the Parent Borrower and its Subsidiaries.

 

“Fiscal Year” means a fiscal year of the Parent Borrower and its Subsidiaries ending on December 31 in any calendar year.

 

“Fitch” means Fitch Ratings Inc. and any successor thereto.

 

“Foreign Currencies” means Agreed Currencies other than Dollars.

 

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“Foreign Currency Sublimit” means $200,000,000. The Foreign Currency Sublimit is part of, and not in addition to, the Aggregate Revolving Commitments.

 

“Foreign Lender” means (a) with respect to the Parent Borrower or any other Borrower that is a U.S. Person, a Lender that is not a U.S. Person and (b) if a Borrower is not a U.S. Person, a Lender, with respect to such Borrower, that is resident or organized under the laws of a jurisdiction other than that in which such Borrower is resident for tax purposes.

 

“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.

 

“Foreign Subsidiary Asset Sale Recovery Event” has the meaning assigned to it in Section 2.11(g).

 

“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to any L/C Issuer, such Defaulting Lender’s Applicable Percentage of the outstanding L/C Obligations other than L/C Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to any Swingline Lender, such Defaulting Lender’s Applicable Percentage of Swingline Loans other than Swingline Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders in accordance with the terms hereof.

 

“GAAP” means, subject to Section 1.04, generally accepted accounting principles in the United States of America.

 

“Governmental Authority” means the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including, without limitation, the Financial Conduct Authority, the Prudential Regulation Authority and any supra-national bodies such as the European Union or the European Central Bank).

 

“Governmental Authorization” means any authorization, approval, consent, franchise, license, covenant, order, ruling, permit, certification, exemption, notice, declaration or similar right, undertaking or other action of, to or by, or any filing, qualification or registration with, any Governmental Authority.

 

“Guarantee” of or by any Person (the “guarantor”) means, without duplication, any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Debt or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Debt or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Debt or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Debt or obligation; provided that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made (or, if less, the maximum amount of such primary obligation for which such Person may be liable pursuant to the terms of the instrument evidencing such Guarantee) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder), as determined by such Person in good faith.

 

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“Guaranteed Obligations” has the meaning assigned to such term in Section 10.01(a).

 

“Guarantors” means the Opco Borrower (solely with respect to the obligations of the Parent Borrower and its Subsidiaries (including any Designated Subsidiary Borrower)), the Parent Borrower (solely with respect to the obligations of the Opco Borrower and its Subsidiaries (including any Designated Subsidiary Borrower)), each Designated Subsidiary Borrower (solely with respect to the obligations of the other Loan Parties) and, from and after the Security Date, each Wholly-Owned Domestic Subsidiary (other than any Excluded Subsidiary) that executes and delivers to the Administrative Agent a Guaranty Supplement as required by Section 5.10(b). For the avoidance of doubt, notwithstanding anything to the contrary herein or in any other Loan Document, no Foreign Subsidiary (other than any Foreign Subsidiary that is a Borrower) shall constitute a Guarantor and no such Person shall at any time guarantee any Secured Obligations.

 

“Guaranty” means the guaranty set forth in Article X, together with each other guaranty and guaranty supplement, in each case, in form and substance reasonably satisfactory to the Administrative Agent in its reasonable discretion, delivered pursuant to Section 5.10, in each case as amended, amended and restated, modified or otherwise supplemented, guaranteeing the Guaranteed Obligations.

 

“Guaranty Supplement” means the guaranty supplement in substantially the form of Exhibit F hereto.

 

“Hazardous Materials” means (a) petroleum or petroleum products, by products or breakdown products, radioactive materials, asbestos or asbestos containing materials, polyfluoroalkyl and perfluoroalklyl substances, polychlorinated biphenyls, toxic mold, and radon gas and (b) any other chemicals, materials or substances subject to regulation, or which can give rise to liability, under any Environmental Law.

 

“Hedge Agreements” means interest rate swap, cap or collar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts and other hedging agreements, and any guaranty thereof; provided that, for the avoidance of doubt, no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Parent Borrower or any of the Subsidiaries shall constitute a Hedge Agreement.

 

“Immaterial Subsidiary” means a Subsidiary of the Parent Borrower that does not own or hold assets (after the elimination of intercompany items) in excess of an amount equal to (i) individually, 5.0% of the Consolidated Net Tangible Assets and (ii) together with all such Subsidiaries, 15.0% of the Consolidated Net Tangible Assets.

 

“Incremental Amendment” has the meaning assigned to such term in Section 2.20(c).

 

“Incremental Facilities” has the meaning assigned to such term in Section 2.20(a).

 

“Incremental Revolving Commitments” has the meaning assigned to such term in Section 2.20(a).

 

“Incremental Term Loan” has the meaning assigned to such term in Section 2.20(a).

 

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“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a) hereof, Other Taxes.

  

“Indemnitee” has the meaning assigned to such term in Section 9.03(b).

 

“Ineligible Institution” has the meaning assigned to such term in Section 9.04(b).

 

“Information” has the meaning assigned to such term in Section 9.12.

 

“Interest Coverage Ratio” means, as of any date of determination, the ratio of (a) EBITDA to (b) Consolidated Interest Charges for the most recently completed Measurement Period.

 

“Interest Election Request” means a request by the Opco Borrower to convert or continue a Borrowing in accordance with Section 2.08, which shall be substantially in the form attached hereto as Exhibit E-2 or any other form approved by the Administrative Agent (including any form on an electronic platform or electronic transmission system as shall be approved by the Administrative Agent), appropriately completed and signed by a Responsible Officer of the Opco Borrower.

 

“Interest Payment Date” means (a) with respect to any ABR Loan or Swingline Loan, the last Business Day of each March, June, September and December and the applicable Maturity Date, (b) with respect to any Term SOFR Loan or Alternative Currency Term Rate Loan, the last day of each Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period and the applicable Maturity Date, (c) with respect to any Daily SOFR Loan, the last Business Day of each March, June, September and December and the applicable Maturity Date and (d) with respect to any Alternative Currency Daily Rate Loan, the last Business Day of each month and the applicable Maturity Date.

 

“Interest Period” means, as to each Term SOFR Loan and Alternative Currency Term Rate Loan, the period commencing on the date such Loan is disbursed or converted to or continued as a Term SOFR Loan or an Alternative Currency Term Rate Loan, as applicable, and ending on the date one, three or six months thereafter, as selected by the applicable Borrower in its Borrowing Request (in the case of each requested Interest Period, subject to availability) (or, as contemplated by Section 2.03, any other period acceptable to all of the Appropriate Lenders and the Administrative Agent); provided that:

 

(i)            any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day;

 

(ii)            any Interest Period pertaining to a Term SOFR Loan or an Alternative Currency Term Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period; and

 

(iii)            no Interest Period shall extend beyond the applicable Maturity Date.

 

“Investment” in any Person means any loan or advance to such Person, any purchase or other acquisition of any Equity Interests or Debt or the assets comprising a division or business unit or a substantial part or all of the business of such Person, any capital contribution to such Person, any other direct or indirect investment in such Person, including, without limitation, any acquisition by way of a merger or consolidation (or similar transaction), and any arrangement pursuant to which the investor incurs Debt of the types referred to in clause (h) or (j) of the definition of “Debt” in respect of such Person.

 

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“Investment Grade Period” has the meaning assigned to such term in Section 9.20.

 

“IPO” has the meaning assigned to such term in the introductory paragraph.

 

“IRS” means the United States Internal Revenue Service.

 

“ISP” means the International Standby Practices, International Chamber of Commerce Publication No. 590 (or such later version thereof as may be in effect at the applicable time).

 

“Issuer Documents” means with respect to any Letter of Credit, the Letter of Credit Application, and any other document, agreement and instrument entered into by any L/C Issuer and a Borrower (or any Subsidiary) or in favor of such L/C Issuer and relating to such Letter of Credit.

 

“KPIs” has the meaning assigned to it in Section 2.26(a).

 

“Latest Maturity Date” means, at any date of determination, the latest Maturity Date applicable to any Loan or Commitment hereunder at such time, in each case as extended in accordance with this Agreement from time to time.

 

“Laws” or “Law” means, collectively, all international, foreign, federal, state and local statutes, treaties, rules, guidelines, regulations, ordinances, codes and administrative or judicial precedents or authorities, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, and all applicable administrative orders, directed duties, requests, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case, whether or not having the force of law.

 

“L/C Borrowing” means an extension of credit resulting from a drawing under any Letter of Credit which has not been reimbursed on the date when made or refinanced as a Borrowing.

 

“L/C Commitment” means, with respect to each L/C Issuer, the commitment of such L/C Issuer to issue Letters of Credit hereunder. The initial amount of each L/C Issuer’s L/C Commitment is set forth on Schedule 2.01, or if an L/C Issuer has entered into an Assignment and Assumption or has otherwise assumed an L/C Commitment after the Effective Date, the amount set forth for such L/C Issuer as its L/C Commitment in the Register maintained by the Administrative Agent. The L/C Commitment of an L/C Issuer may be modified from time to time by agreement between such L/C Issuer and the Opco Borrower, and notified to the Administrative Agent.

 

“L/C Credit Extension” means, with respect to any Letter of Credit, the issuance thereof or extension of the expiry date thereof, or the increase of the amount thereof.

 

“L/C Disbursement” means a payment made by an L/C Issuer pursuant to a Letter of Credit.

 

“L/C Issuer” means initially each of Bank of America, Wells Fargo Bank and PNC Bank, in its capacity as an issuer of Letters of Credit hereunder. Subject to the prior written approval of the Administrative Agent (not to be unreasonably withheld, conditioned or delayed), the total number of L/C Issuers issuing Letters of Credit in Dollars may be increased after the Closing Date to up to seven L/C Issuers (including Bank of America, Wells Fargo Bank and PNC Bank) selected by the Opco Borrower and consented to by such additional L/C Issuer. Any L/C Issuer may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such L/C Issuer, in which case the term “L/C Issuer” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. Each reference herein to the “L/C Issuer” in connection with a Letter of Credit or other matter shall be deemed to be a reference to the relevant L/C Issuer with respect thereto.

 

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“L/C Obligations” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time, including giving effect to any automatic or scheduled increases provided for by the terms of such Letters of Credit, determined without regard to whether any conditions to drawing could be met at that time, plus (b) the aggregate amount of all Unreimbursed Amounts, including all L/C Borrowings. The L/C Obligations of any Lender at any time shall be its Applicable Percentage of the total L/C Obligations at such time. For all purposes of this Agreement, if on any date of determination a Letter of Credit has expired by its terms but any amount may still be drawn thereunder by reason of the operation of Article 29(a) of the UCP or Rule 3.13 or Rule 3.14 of the ISP or similar terms of the Letter of Credit itself, or if compliant documents have been presented but not yet honored, such Letter of Credit shall be deemed to be “outstanding” and “undrawn” in the amount so remaining available to be paid, and the obligations of each Borrower and each Lender shall remain in full force and effect until the L/C Issuers and the Lenders shall have no further obligations to make any payments or disbursements under any circumstances with respect to any Letter of Credit.

 

“L/C Sublimit” means an amount equal to $50,000,000. The L/C Sublimit is part of, and not in addition to, the Aggregate Revolving Commitments.

 

“Lender Notice Date” has the meaning assigned to it in Section 2.23(b).

 

“Lender Parent” means, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a subsidiary.

 

“Lender Party” and “Lender Recipient Party” means any Lender, any L/C Issuer or any Swingline Lender.

 

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a Lender hereunder pursuant to Section 2.20 or pursuant to an Assignment and Assumption or otherwise, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption or otherwise. Unless the context otherwise requires, the term “Lenders” includes the Swingline Lenders and the L/C Issuers. The term “Lenders” shall include any Designated Lender who has funded any Borrowing.

 

“Letter of Credit” means any letter of credit issued hereunder providing for the payment of cash upon the honoring of a presentation thereunder. A Letter of Credit may be a commercial letter of credit or a standby letter of credit.

 

“Letter of Credit Application” means an application and agreement for the issuance or amendment of a Letter of Credit in the form from time to time in use by the applicable L/C Issuer.

 

“Letter of Credit Fee” has the meaning specified in Section 2.06(j).

 

“Letter of Credit Report” means a certificate substantially in the form of Exhibit K or any other form approved by the Administrative Agent.

 

“Liabilities” means any losses, claims (including intraparty claims), demands, damages or liabilities of any kind.

 

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“Lien” means any lien, security interest or other similar charge or encumbrance of any kind, or any other type of preferential arrangement that has the practical effect of creating a security interest in respect of an asset, including, without limitation, the lien or retained security title of a conditional vendor, but excluding any operating lease or agreement to sell.

 

“Limited Condition Transaction” means any (a) acquisition, including by way of merger, amalgamation, consolidation or other business combination or the acquisition of Equity Interests or otherwise, of any assets, business or Person, or any other Investment by one or more of the Parent Borrower and its Subsidiaries permitted by this Agreement (and including the incurrence or assumption of Debt in connection therewith), in each case, whose consummation is not conditioned on the availability of, or on obtaining, third-party financing and (b) redemption, repurchase, defeasance, satisfaction and discharge or repayment of Debt requiring the giving of advance irrevocable notice of such redemption, repurchase, defeasance, satisfaction and discharge or repayment.

 

“LLC” means any Person that is a limited liability company under the laws of its jurisdiction of formation.

 

“Loan Documents” means this Agreement (including schedules and exhibits hereto), any promissory notes issued pursuant to Section 2.10(f), each Issuer Document, the Collateral Documents (when executed and delivered), the Company Guaranty (until it ceases to be in effect in accordance with its terms), each Designated Subsidiary Borrower Request and Assumption Agreement and all other agreements, instruments, documents and certificates executed and delivered to, or in favor of, the Administrative Agent or any Lenders and including all powers of attorney, consents, assignments, other contracts, notices and all other written matter whether heretofore, now or hereafter executed by or on behalf of any Loan Party, or any employee of any Loan Party, and delivered to the Administrative Agent or any Lender in connection with this Agreement or the transactions contemplated hereby. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to this Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.

 

“Loan Parties” means, collectively, the Parent Borrower, the Opco Borrower, each Designated Subsidiary Borrower and the Guarantors.

 

“Loans” means the loans made by the Lenders to the Borrowers pursuant to this Agreement.

 

“Margin Stock” has the meaning specified in Regulation U of the Board, as in effect from time to time.

 

“Material Acquisition” means any acquisition if the aggregate consideration paid or to be paid (including liabilities to be assumed as part of the purchase consideration) by the Parent Borrower or a Subsidiary in respect of such acquisition is equal to or greater than $100,000,000.

 

“Material Adverse Effect” means (a) a material adverse effect on the operations, business, assets, properties, or financial condition of the Parent Borrower and its Subsidiaries, taken as a whole; or (b) a material impairment of (i) the material rights and remedies, taken as a whole, of the Administrative Agent and the Lenders under the Loan Documents, taken as a whole, against the Loan Parties or (ii) the ability of the Loan Parties, taken as a whole, to perform their respective payment obligations under the Loan Documents, taken as a whole; provided that, for the avoidance of doubt, no aspect of the IPO, the Spin-Off, the Post-Closing Distribution, the Special Payment and/or the termination of the Company Guaranty in accordance with its terms, either individually or taken together, shall be deemed to have a Material Adverse Effect.

 

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“Material Foreign Subsidiary” means each Foreign Subsidiary that owns or holds assets (after the elimination of intercompany items) in excess of an amount equal to 5.0% of the Consolidated Net Tangible Assets.

 

“Maturity Date” means the Revolving Credit Maturity Date or the Term Loan Maturity Date, as the context requires.

 

“Maximum Rate” has the meaning assigned to such term in Section 9.16.

 

“Measurement Period” means each period of four consecutive Fiscal Quarters ending on the last day of a Fiscal Quarter for which financial statements have been or are required to be delivered pursuant to Section 5.12(b) or 5.12(c) (or, prior to the delivery of any such financial statements, the most recently completed four consecutive Fiscal Quarters covered in the financial statements referred to in Section 4.01(d)).

 

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

 

“Multiemployer Plan” means a multiemployer plan, as defined in Section 4001(a)(3) of ERISA, to which any Loan Party or any ERISA Affiliate is making or accruing an obligation to make contributions, or has within any of the preceding five plan years made or accrued an obligation to make contributions.

 

“Multiple Employer Plan” means an “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA) that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and at least one Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.

 

“Net Proceeds” means:

 

(a)            the cash (which term, for purposes of this definition, shall include cash equivalents) proceeds actually received by the Parent Borrower or any Subsidiary from any Prepayment Event, including any cash received in respect of any non-cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or otherwise, as and when received, but excluding any interest payments), net of (i) attorneys’ fees, accountants’ fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, other customary costs and expenses and brokerage, consultant and other customary fees paid or payable to third parties (other than Affiliates) in connection therewith, (ii) required payments of indebtedness (other than indebtedness incurred under the Loan Documents) and required payments of other obligations relating to the applicable asset to the extent such indebtedness or other obligations are secured by a Lien permitted hereunder (other than pursuant to the Loan Documents), (iii) taxes paid or payable (in the good faith determination of the Parent Borrower) as a result thereof, and (iv) the amount of any reasonable reserve established in accordance with GAAP against any adjustment to the sale price or any liabilities (other than any taxes deducted pursuant to clause (i) or (iii) above) (x) related to any of the applicable assets and (y) retained by the Parent Borrower or any of the Subsidiaries including, without limitation, pension and other post-employment benefit liabilities and liabilities related to environmental matters or against any indemnification obligations; and

 

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(b)            the cash proceeds actually received by the Parent Borrower or any Subsidiary from any incurrence of any Debt for borrowed money by the Parent Borrower or any Subsidiary (other than any Debt permitted by Section 6.02), net of all fees, commissions, costs, taxes and other expenses, in each case paid or payable to third parties (other than Affiliates) in connection with the incurrence of any such Debt.

 

“Non-Consenting Lender” has the meaning assigned to such term in Section 9.02(e).

 

“Non-Extending Lender” has the meaning assigned to it in Section 2.23(b).

 

“Non-Extension Notice Date” has the meaning assigned to it in Section 2.06(b).

 

“Non-Reinstatement Deadline” has the meaning assigned to it in Section 2.06(b).

 

“Non-SOFR Successor Rate” has the meaning specified in Section 2.14(c).

 

“Obligations” means all advances to, and debts, liabilities, obligations, covenants and duties of, any Loan Party arising under any Loan Document or otherwise with respect to any Loan or Letter of Credit, in each case whether direct or indirect (including those acquired by assumption), absolute or contingent, due or to become due, now existing or hereafter arising and including interest and fees that accrue after the commencement by or against any Loan Party or any Affiliate thereof of any proceeding under any Debtor Relief Laws naming such Person as the debtor in such proceeding, regardless of whether such interest and fees are allowed claims in such proceeding; provided that, without limiting the foregoing, the Obligations include (a) the obligation to pay principal, interest, Letter of Credit commissions, charges, expenses, fees, indemnities and other amounts payable by any Loan Party under any Loan Document and (b) the obligation of the Loan Parties to reimburse any amount in respect of any of the foregoing that the Administrative Agent or any Lender, in each case in its sole discretion, may elect to pay or advance on behalf of the Loan Parties.

 

“OFAC” means the Office of Foreign Assets Control of the U.S. Department of the Treasury.

 

“Off Balance Sheet Obligation” means, with respect to any Person, any (a) repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (b) liability of such Person under any Sale and Leaseback Transactions that do not create a liability on the balance sheet of such Person, or (c) obligation under a Synthetic Lease.

 

“Opco Borrower” has the meaning assigned to such term in the introductory paragraph.

 

“Organization Documents” means, (a) with respect to any corporation, the certificate or articles of incorporation and the bylaws (or equivalent or comparable constitutive documents with respect to any foreign jurisdiction); (b) with respect to any limited liability company, the certificate or articles of formation or organization and operating agreement; and (c) with respect to any partnership, joint venture, trust, unlimited liability company or other form of business entity, the partnership, joint venture or other applicable agreement of formation or organization and any agreement, instrument, filing or notice with respect thereto filed in connection with its formation or organization with the applicable Governmental Authority in the jurisdiction of its formation or organization and, if applicable, any certificate or articles of formation or organization (or equivalent or comparable constitutive documents with respect to any foreign jurisdiction) of such entity.

 

“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

 

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“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19).

 

“Outstanding Amount” means (a) with respect to Term Loans, Revolving Loans and Swingline Loans on any date, the aggregate outstanding principal amount thereof upon giving effect to any borrowings and prepayments or repayments of Term Loans, Revolving Loans and Swingline Loans, as the case may be, occurring on such date; and (b) with respect to any L/C Obligations on any date, the amount of such L/C Obligations on such date upon giving effect to any L/C Credit Extension occurring on such date and any other changes in the aggregate amount of the L/C Obligations as of such date, including as a result of any reimbursements by any Borrower of Unreimbursed Amounts.

 

“Overnight Rate” means, for any day, (a) with respect to any amount denominated in Dollars, the greater of (i) the Federal Funds Effective Rate and (ii) an overnight rate determined by the Administrative Agent, an L/C Issuer or a Swingline Lender, as the case may be, in accordance with banking industry rules on interbank compensation, and (b) with respect to any amount denominated in an Alternative Currency, an overnight rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

 

“Parent Borrower” has the meaning assigned to such term in the introductory paragraph.

 

“Participant” has the meaning assigned to such term in Section 9.04(c).

 

“Participant Register” has the meaning assigned to such term in Section 9.04(c).

 

“Participating Member State” means any member state of the European Union that adopts or has adopted the Euro as its lawful currency in accordance with legislation of the European Union relating to economic and monetary union.

 

“Patriot Act” means the USA PATRIOT Act of 2001.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

 

“Pension Funding Rules” means the rules of the Code and ERISA regarding minimum required contributions (including any installment payment thereof) to a Plan and set forth in Sections 412 and 430 of the Code and Sections 302 and 303 of ERISA.

 

“Permitted Acquisition” means an Investment permitted under Section 6.06(k) or (l).

 

“Permitted Bond Hedge Transaction” means any call or capped call option (or substantively equivalent derivative transaction) relating to the Parent Borrower’s common stock (or other securities or property following a merger event or other change of the common stock of the Parent Borrower) purchased by the Parent Borrower in connection with the issuance of any Permitted Convertible Indebtedness; provided that, the purchase price for such Permitted Bond Hedge Transaction, less the proceeds received by the Parent Borrower from the sale of any related Permitted Warrant Transaction, does not exceed the net proceeds received by the Parent Borrower from the issuance of such Permitted Convertible Indebtedness in connection with such Permitted Bond Hedge Transaction.

 

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“Permitted Convertible Indebtedness” means any unsecured notes issued by the Parent Borrower that are convertible into a fixed number (subject to customary anti-dilution adjustments, “make-whole” increases and other customary changes thereto) of shares of common stock of the Parent Borrower (or other securities or property following a merger event or other change of the common stock of the Parent Borrower), cash or any combination thereof (with the amount of such cash or such combination determined by reference to the market price of such common stock or such other securities); provided that, the Debt thereunder must satisfy each of the following conditions: (i) both immediately prior to and upon giving effect (including pro forma effect) thereto, no Default or Event of Default shall exist or result therefrom, (ii) such Debt is not guaranteed by any Subsidiary of the Parent Borrower, (iii) any cross-default or cross-acceleration event of default (each howsoever defined) provision contained therein that relates to indebtedness or other payment obligations of the Parent Borrower or any other Borrower (such indebtedness or other payment obligations, a “Cross-Default Reference Obligation”) contains a cure period of at least thirty (30) calendar days (after written notice to the issuer of such Debt by the trustee or to such issuer and such trustee by holders of at least 25% in aggregate principal amount of such Debt then outstanding) before a default, event of default, acceleration or other event or condition under such Cross-Default Reference Obligation results in an event of default under such cross-default or cross-acceleration provision and (iv) the terms, conditions and covenants of such Debt must be customary for convertible Debt of such type (as determined by the board of directors of the Parent Borrower, or a committee thereof, in good faith).

 

“Permitted Encumbrances” means:

 

(a)            Liens for taxes, assessments and governmental charges or levies to the extent (i) the same shall not at the time be delinquent by more than 30 days or thereafter can be paid without penalty, (ii) are being contested in good faith by appropriate action and for which adequate reserves with respect thereto are maintained on the books of the Parent Borrower or applicable Subsidiary in accordance with GAAP, or (iii) the amount owed is immaterial;

 

(b)            Liens imposed by law, such as materialmen’s, mechanics’, carriers’, warehousemen’s, landlords’, workmen’s and repairmen’s Liens and other similar Liens arising in the ordinary course of business securing obligations (i) that are not overdue for a period of more than 60 days or that are being contested in good faith by appropriate action and for which adequate reserves with respect thereto are maintained on the books of the Parent Borrower or applicable Subsidiary in accordance with GAAP or (ii) with respect to which the amount owed is immaterial;

 

(c)            pledges or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security or retirement benefits laws, to secure liability to insurance carriers under insurance of self-insurance arrangements or regulations or employment laws or to secure other public, statutory or regulatory regulations;

 

(d)            judgment Liens arising solely as a result of the existence of judgments, orders, or awards that do not constitute an Event of Default under Article VII of this Agreement;

 

(e)            Liens arising out of conditional sale, title retention or similar arrangements in the ordinary course of business;

 

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(f)            easements, zoning restrictions, licenses, rights-of-way, site plan agreements, development agreements, cross easement or reciprocal agreements, and other non-monetary encumbrances on real property that do not interfere in any material respect with the normal conduct of business of the Parent Borrower or any Subsidiary or the operation of such real property for its intended purpose;

 

(g)            leases, licenses, subleases or sublicenses granted (i) to others not adversely interfering in any material respect with the business of the Parent Borrower and its Subsidiaries as conducted at the time granted, taken as a whole, (ii) between or among any of the Company (while the Company Guaranty remains in effect), Loan Parties or any of their Subsidiaries or (iii) granted to other Persons and permitted under this Agreement;

 

(h)            Liens that are contractual rights of set-off or similar rights (i) relating to the establishment of depository relations with banks and other financial institutions not given in connection with the issuance of Debt, (ii) relating to pooled deposits, sweep accounts, reserve accounts or similar accounts of the Parent Borrower or any Subsidiary to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Parent Borrower or any Subsidiary, including, without limitation, with respect to credit card charge-backs and similar obligations, or (iii) relating to purchase orders and other agreements entered into with customers, suppliers or service providers of the Parent Borrower or any Subsidiary in the ordinary course of business;

 

(i)            Liens on specific items of inventory or other goods (other than fixed or capital assets) and proceeds thereof of any Person securing such Person’s obligations in respect of bankers’ acceptances or letters of credit issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods in the ordinary course of business;

 

(j)            Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the ordinary course of business so long as such Liens only cover the related goods;

 

(k)            Liens (i) arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights, (ii) attaching to commodity trading accounts or other commodity brokerage accounts incurred in the ordinary course of business, (iii) encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to brokerage accounts incurred in the ordinary course of business and not for speculative purposes, (iv) in respect of funds received by the Parent Borrower or any Subsidiary as agent on behalf of third parties in accordance with a written agreement that imposes a duty upon the Parent Borrower or one or more Subsidiaries to collect and remit those funds to such third parties, or (v) in favor of credit card companies pursuant to agreements therewith;

 

(l)            pledges and deposits to secure the performance of bids, trade contracts, government contracts, leases, statutory obligations, customer deposit and advances, company credit cards, travel cards and other employee credit card programs, surety, customs and appeal bonds, performance and completion bonds and other obligations of a like nature, in each case in the ordinary course of business, and Liens to secure letters of credit or bank guarantees supporting any of the foregoing;

 

(m)            any interest or title of a landlord, lessor or sublessor under any lease of real estate or any Lien affecting solely the interest of the landlord, lessor or sublessor;

 

(n)            purported Liens evidenced by the filing of precautionary UCC financing statements or similar filings;

 

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(o)            any interest or title of a licensor or sublicensor under any license or sublicense entered into by the Parent Borrower or any of its Subsidiaries as a licensee or sublicensee (i) existing on the Effective Date or (ii) in the ordinary course of business; and

 

(p)            with respect to any real property, immaterial title defects or irregularities that do not, individually or in the aggregate, materially impair the use of such real property.

 

“Permitted Liens” has the meaning assigned to such term in Section 6.01.

 

“Permitted Refinancing” means any Debt issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”), other Debt (including previous refinancings that constituted a Permitted Refinancing), to the extent that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing does not exceed the principal amount (or accreted value, if applicable) of the Debt so refinanced (plus unpaid accrued interest and premium (including tender premium and any make-whole amount) thereon, any committed or undrawn amounts associated with, original issue discount on, and underwriting discounts, defeasance costs, fees (including, without limitation, legal fees and expenses), commissions and expenses incurred in connection with, such Permitted Refinancing), (b) the final maturity date of such Permitted Refinancing is no earlier than the earlier of the final maturity date of the Debt being Refinanced (it being understood that, in each case, any provision requiring an offer to purchase such Debt as a result of a change of control, fundamental change, delisting, asset sale or similar provision shall not violate the foregoing restriction), (c) if the Debt (including any guarantee thereof) being Refinanced is by its terms subordinated in right of payment to the Secured Obligations, such Permitted Refinancing (including any guarantee thereof) shall be subordinated in right of payment to the Secured Obligations on subordination terms, taken as a whole, at least as favorable to the Lenders as those contained in the documentation governing the Debt being Refinanced, taken as a whole (as determined in good faith by the board of directors of the Parent Borrower), (d) no Permitted Refinancing shall have direct obligors or contingent obligors that were not the direct obligors or contingent obligors (or that would not have been required to become direct obligors or contingent obligors) in respect of the Debt being Refinanced, except that Loan Parties may be added as additional obligors, and (e) if the Debt being Refinanced is secured, such Permitted Refinancing may only be secured by the same collateral (or a subset thereof) as the collateral granted in the documentation (including any intercreditor agreement) governing the Debt being Refinanced (and (i) any after-acquired property that is affixed or incorporated into such collateral and/or that otherwise constitutes after-acquired property that would be required to be collateral pursuant to the collateral grant clause and/or other terms of the Debt being Refinanced immediately prior to such refinancing and (ii) proceeds and products thereof), as determined in good faith by the board of directors of the Parent Borrower.

 

“Permitted Warrant Transaction” means any call option, warrant or right to purchase (or substantively equivalent derivative transaction) relating to the Parent Borrower’s common stock (or other securities or property following a merger event or other change of the common stock of the Parent Borrower) and/or cash (in an amount determined by reference to the price of such common stock) sold by the Parent Borrower substantially concurrently with any purchase by the Parent Borrower of a related Permitted Bond Hedge Transaction.

 

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

 

“Plan” means a Single Employer Plan or Multiple Employer Plan.

 

“Plan Asset Regulations” means 29 CFR § 2510.3-101 et seq., as modified by Section 3(42) of ERISA, as amended from time to time.

 

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“Plan of Reorganization” has the meaning assigned to it in Section 9.04(e)(iii).

 

“Pledge Subsidiary” means (i) each Domestic Subsidiary that is directly owned by a Loan Party and (ii) each First Tier Foreign Subsidiary which is a Material Foreign Subsidiary.

 

“PNC Bank” means PNC Bank, National Association.

 

“Post-Closing Distribution” has the meaning assigned to such term in the introductory paragraph.

 

“Post-Closing Ownership” has the meaning assigned to such term in the introductory paragraph.

 

“Post-Petition Interest” has the meaning assigned to such term in Section 10.06(b).

 

“Pounds Sterling”, “Sterling” and “£” means the lawful currency of the United Kingdom.

 

“Prepayment Event” means:

 

(a)            any sale, transfer or other disposition (including pursuant to a Sale and Leaseback Transaction) of any property or asset of the Parent Borrower or any of its Subsidiaries pursuant Sections 6.05(d) or (h) with a fair market value (as determined in good faith by the Parent Borrower) immediately prior to such event, together with all such sales, transfers or other dispositions in the applicable Fiscal Year, equal to or greater than $15,000,000 (excluding any Net Proceeds not subject to prepayment as a result of the reinvestment exception in Section 2.11(d) unless and until such Net Proceeds are required to be prepaid by Section 2.11); or

 

(b)            any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of, any property or asset of the Parent Borrower or any of its Subsidiaries with a fair market value (as determined in good faith by the Parent Borrower) immediately prior to such event, together with all such events in the applicable Fiscal Year, equal to or greater than $15,000,000 (excluding any Net Proceeds not subject to prepayment as a result of the reinvestment exception in Section 2.11(d) unless and until such Net Proceeds are required to be prepaid by Section 2.11).

 

“PTE” means a prohibited transaction class exemption issued by the U.S. Department of Labor, as any such exemption may be amended from time to time.

 

“Public Lender” has the meaning assigned to such term in Section 5.12.

 

“QFC” has the meaning assigned to the term “qualified financial contract” in, and shall

 

be interpreted in accordance with, 12 U.S.C. 5390(c)(8)(D).

 

“QFC Credit Support” has the meaning assigned to it in Section 9.19.

 

“Qualified ECP Guarantor” means, in respect of any Specified Swap Obligation, each Loan Party that has total assets exceeding $10,000,000 at the time the relevant Guarantee or grant of the relevant security interest becomes effective with respect to such Specified Swap Obligation or such other person as constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder and can cause another person to qualify as an “eligible contract participant” at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

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“Receivables Assets” means any receivables, royalty, patent or other revenue streams and other rights to payment and related assets (whether now existing or arising or acquired in the future), all collateral securing such receivables, revenue streams or other rights of payment, all contracts and contract rights and all guarantees or other obligations in respect of such receivables, revenue streams or other rights of payment, all proceeds of such receivables, revenue streams or other rights of payment and other assets (including contract rights) which are of the type customarily transferred or in respect of which security interests are customarily granted in connection with Receivables Facilities and which, in each case, are sold, conveyed, assigned or otherwise transferred or in which a security interest is granted by the Parent Borrower or any of its Subsidiaries to either a Person that is not a Subsidiary of the Parent Borrower or a Receivables Subsidiary that in turn sells, conveys, assigns, grants a security interest in or otherwise transfers such Receivables Assets to a Person that is not a Subsidiary of the Parent Borrower.

 

“Receivables Facility” means any securitization or other similar financing (including any factoring or receivables program or sale transaction) of Receivables Assets, in each case as amended, supplemented, modified, extended, renewed, restated or refunded from time to time, all obligations in respect of which are non-recourse (except for customary representations, warranties, covenants, indemnities and recourse obligations consistent with true sale treatment made in connection with such transactions) to the Parent Borrower or any of its Subsidiaries (other than a Receivables Subsidiary) pursuant to which the Parent Borrower or any of its Subsidiaries sells, conveys, assigns, grants an interest in or otherwise transfers Receivables Assets to either (a) a Person that is not a Subsidiary of the Parent Borrower or (b) a Receivables Subsidiary that in turn sells, conveys, assigns, grants a security interest in or otherwise transfers such Receivables Assets to a Person that is not a Subsidiary of the Parent Borrower.

 

“Receivables Facility Documents” means each of the documents and agreements entered into in connection with any Receivables Facility, in each case as such documents and agreements may be amended, modified, supplemented, refinanced or replaced from time to time.

 

“Receivables Sellers” means the Parent Borrower and those Subsidiaries that are from time to time party to the Receivables Facility Documents (other than any Receivables Subsidiary).

 

“Receivables Subsidiary” means a special-purpose Wholly-Owned Subsidiary of the Parent Borrower whose primary purpose is to purchase Receivables Assets from the Parent Borrower or any of its Subsidiaries (other than a Receivables Subsidiary) and to resell, convey, assign, grant a security interest in or otherwise transfer such Receivables Assets, or a portion thereof, to a Person that is not a Subsidiary of the Parent Borrower pursuant to a Receivables Facility and which engages in no other activities other than the foregoing and other activities reasonably related thereto.

 

“Recipient” means (a) the Administrative Agent, (b) any Lender and (c) any L/C Issuer, as applicable.

 

“Refinance” has the meaning assigned to such term in the definition of Permitted Refinancing.

 

“Refinancing Convertible Notes” has the meaning assigned to such term in Section 6.07.

 

“Register” has the meaning assigned to such term in Section 9.04(b).

 

“Registration Statement” means the report on Form S-1 filed by the Parent Borrower with the SEC on June 6, 2022 with respect to the IPO (as amended, supplemented and/or otherwise modified from time to time).

 

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“Regulation D” means Regulation D of the Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

 

“Regulation U” means Regulation U of the Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

 

“Regulation X” means Regulation X of the Board, as in effect from time to time and all official rulings and interpretations thereunder or thereof.

 

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

 

“Release” means any release, spill, emission, leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the Environment or within, from or into any building, structure, facility or fixture.

 

“Relevant Jurisdiction” means, in respect of any Person, the jurisdiction of the country in which such Person is incorporated and, if different, where it is resident and has its principal place of business, and each jurisdiction or state in which it owns or leases property or otherwise conducts its business.

 

“Relevant Rate” means with respect to any Borrowing denominated in (a) Dollars, Term SOFR or Daily SOFR, (b) Pounds Sterling, SONIA, and (c) Euros, EURIBOR, as applicable.

 

“Replacement Lender” has the meaning assigned to such term in Section 2.09(c).

 

“Reportable Event” means any of the events set forth in Section 4043(c) of ERISA or the regulations issued thereunder with respect to a Plan, other than events for which the 30-day notice period has been waived.

 

“Required Lenders” means, subject to Section 2.22, at any time, Lenders having Credit Exposures (provided that, as to any Lender, clause (a) of the definition of “Swingline Exposure” shall only be applicable in calculating a Lender’s Revolving Credit Exposure to the extent such Lender shall have funded its respective participations in the outstanding Swingline Loans) and Unfunded Commitments representing more than 50% of the sum of the total Credit Exposures and Unfunded Commitments at such time; provided that for purposes of declaring the Loans to be due and payable pursuant to Section 7.02, and for all purposes after the Loans become due and payable pursuant to Section 7.02 or the Revolving Commitments expire or terminate, then, as to each Lender, the Unfunded Commitment of each Lender shall be deemed to be zero.

 

“Required Revolving Lenders” means, subject to Section 2.22, at any time, Lenders having Revolving Credit Exposures (provided that, as to any Lender, clause (a) of the definition of “Swingline Exposure” shall only be applicable in calculating a Lender’s Revolving Credit Exposure to the extent such Lender shall have funded its respective participations in the outstanding Swingline Loans) and Unfunded Commitments representing more than 50% of the sum of the Total Revolving Credit Exposure and Unfunded Commitments at such time; provided that for purposes of declaring the Loans to be due and payable pursuant to Section 7.02, and for all purposes after the Loans become due and payable pursuant to Section 7.02 or the Commitments expire or terminate, then, as to each Lender, the Unfunded Commitment of each Lender shall be deemed to be zero.

 

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“Required Term Lenders” means, subject to Section 2.22, at any time, Term Lenders having Term Loans and unused Term Loan Commitments representing more than 50% of the sum of the total outstanding principal amount of Term Loans and unused Term Loan Commitments at such time.

 

“Rescindable Amount” has the meaning as defined in Section 2.18(f).

 

“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.

 

“Responsible Officer” means the chief executive officer, president, chief financial officer, vice president of taxes, treasury manager, treasurer, assistant treasurer or controller of a Loan Party, any other duly authorized officer, agent or representative of the applicable Loan Party so designated by any of the foregoing officers or by the applicable Loan Party in a notice to the Administrative Agent and, solely for purposes of notices given pursuant to Article II, any other officer or employee of the applicable Loan Party so designated by any of the foregoing officers in a notice to the Administrative Agent or any other officer or employee of the applicable Loan Party designated in or pursuant to an agreement between the applicable Loan Party and the Administrative Agent. Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

 

“Restricted Payment” has the meaning assigned to it in Section 6.07.

 

“Retired Commitments” has the meaning assigned to such term in Section 2.09(c).

 

“Revaluation Date” means (a) with respect to any Loan, each of the following: (i) each date of a Borrowing of an Alternative Currency Term Rate Loan, (ii) with respect to an Alternative Currency Daily Rate Loan, each Interest Payment Date, (iii) each date of a continuation of an Alternative Currency Term Rate Loan pursuant to Section 2.02 and (iv) such additional dates as the Administrative Agent shall determine or the Required Lenders shall require; and (b) with respect to any Letter of Credit, each of the following: (i) each date of issuance, increase and/or extension of a Letter of Credit denominated in an Alternative Currency, (ii) each date of any payment by the applicable L/C Issuer under any Letter of Credit denominated in an Alternative Currency and (iii) such additional dates as the Administrative Agent or the applicable L/C Issuer shall determine or the Required Lenders shall require.

 

“Reversion Date” has the meaning assigned to such term in Section 9.20.

 

“Revolving Commitment” means, with respect to each Lender, as of the Effective Date, the amount set forth on Schedule 2.01 opposite such Lender’s name under the heading “Revolving Commitment”, or in the Assignment and Assumption or other documentation or record (as such term is defined in Section 9-102(a)(70) of the New York Uniform Commercial Code) contemplated hereby pursuant to which such Lender shall have assumed its Revolving Commitment, as applicable, and after giving effect to (a) any reduction in such amount from time to time pursuant to Section 2.09, (b) any increase from time to time pursuant to Section 2.20 and (c) any reduction or increase in such amount from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04; provided that at no time shall the Revolving Credit Exposure of any Lender exceed its Revolving Commitment.

 

“Revolving Credit Exposure” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Revolving Loans and its Swingline Exposure at such time.

 

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“Revolving Credit Maturity Date” means the date that occurs on September 30, 2027, as extended (in the case of each Revolving Lender consenting thereto) pursuant to Section 2.23; provided, however, if such date is not a Business Day, the Revolving Credit Maturity Date shall be the next preceding Business Day.

 

“Revolving Lender” means, as of any date of determination, each Lender that has a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Credit Exposure.

 

“Revolving Loan” means a Loan made by a Revolving Lender pursuant to Section 2.01(a).

 

“S&P” means Standard & Poor’s Rating Services, a Standard & Poor’s Financial Services LLC business, and any successor thereto.

 

“Sale and Leaseback Transaction” means any sale or other transfer of any property or asset by any Person with the intent to lease such property or asset as lessee.

 

“Same Day Funds” means (a) with respect to disbursements and payments in Dollars, immediately available funds, and (b) with respect to disbursements and payments in an Alternative Currency, same day or other funds as may be determined by the Administrative Agent, as the case may be, to be customary in the place of disbursement or payment for the settlement of international banking transactions in the relevant Alternative Currency.

 

“Sanctioned Country” means, at any time, a country, region or territory which is itself the target of any country-wide, region-wide or territory-wide Sanctions Laws and Regulations (at the Effective Date, the so-called People’s Republic of Luhansk, the so-called People’s Republic of Donetsk, the Crimea region of Ukraine, Cuba, Iran, North Korea and Syria).

 

“Sanctions Laws and Regulations” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including as administered by OFAC, as based upon the obligations or authorities set forth in, the Executive Order, the Patriot Act, the U.S. International Emergency Economic Powers Act (50 U.S.C. §§ 1701 et seq.), the U.S. Trading with the Enemy Act (50 U.S.C. App. §§ 1 et seq.), the U.S. United Nations Participation Act, the U.S. Syria Accountability and Lebanese Sovereignty Act, the U.S. Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 or the Iran Sanctions Act, Section 1245 of the National Defense Authorization Act of 2012, all as amended, or any of the foreign assets control regulations (including but not limited to 31 C.F.R., Subtitle B, Chapter V, as amended) or any other law or executive order relating thereto, or as administered by the U.S. Department of State, (b) the United Nations Security Council, (c) the European Union or any European Union member state and (d) the United Kingdom, including His Majesty’s Treasury.

 

“Scheduled Unavailability Date” has the meaning specified in Section 2.14(c)(ii).

 

“SEC” means the Securities and Exchange Commission of the United States of America.

 

“Secured Net Leverage Ratio” means, at any date of determination, the ratio of Consolidated Total Net Debt that is secured, in whole or in part, by Liens on the assets and property of the Parent Borrower and its Subsidiaries on such date to EBITDA of the Parent Borrower and its Subsidiaries for the most recently completed Measurement Period.

 

“Secured Obligations” means all Obligations, together with all Swap Obligations and Banking Services Obligations owing to one or more Lenders or their respective Affiliates; provided that the definition of “Secured Obligations” shall not create or include any guarantee by any Loan Party of (or grant of security interest by any Loan Party to support, as applicable) any Excluded Swap Obligations of such Loan Party for purposes of determining any obligations of any Loan Party.

 

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“Secured Parties” means, collectively, the Administrative Agent, the Lenders, the L/C Issuers and the other Persons the Secured Obligations owing to which are or are purported to be secured by the Collateral under the terms of the Collateral Documents.

 

“Securities Act” means the United States Securities Act of 1933.

 

“Security Agreement” means that certain Pledge and Security Agreement (including any and all supplements thereto), dated as of the Security Date, between the Domestic Loan Parties and the Administrative Agent, for the benefit of the Administrative Agent and the other Secured Parties, as the same may be amended, restated, supplemented or otherwise modified from time to time.

 

“Security Date” means the date on which (i) each Wholly-Owned Domestic Subsidiary (other than any Excluded Subsidiary) in existence as of such date shall have executed and delivered to the Administrative Agent a Guaranty Supplement, (ii) the Parent Borrower, the Opco Borrower and each Wholly-Owned Domestic Subsidiary (other than an Excluded Subsidiary) in existence as of such date shall have executed and delivered the Security Agreement (or a joinder thereto) and each other Collateral Document reasonably requested by the Administrative Agent and (iii) the Parent Borrower, the Opco Borrower and each applicable Wholly-Owned Domestic Subsidiary in existence as of such date shall have delivered to the Administrative Agent appropriate corporate resolutions, other corporate documentation and legal opinions reasonably requested by the Administrative Agent, in each case of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and its counsel. The Security Date shall occur on or prior to the date of the Post-Closing Distribution. The Administrative Agent shall notify the Opco Borrower and the Lenders of the Security Date, and such notice shall be conclusive and binding.

 

“Single Employer Plan” means any employee pension benefit plan subject to the provisions of Title IV of ERISA that (a) is maintained for employees of any Loan Party or any ERISA Affiliate and no Person other than the Loan Parties and the ERISA Affiliates or (b) was so maintained and in respect of which any Loan Party or any ERISA Affiliate could have liability under Section 4069 of ERISA in the event such plan has been or were to be terminated.

 

“SOFR” means, with respect to any applicable determination date, the Secured Overnight Financing Rate published on the fifth U.S. Government Securities Business Day preceding such date by the Daily SOFR Administrator on the Federal Reserve Bank of New York’s website (or any successor source); provided, however, that, if such determination date is not a U.S. Government Securities Business Day, then SOFR means such rate that applied on the first U.S. Government Securities Business Day immediately prior thereto.

 

“SOFR Adjustment” means, with respect to Daily SOFR or Term SOFR, 0.10% (10 basis points).

 

“SOFR Scheduled Unavailability Date” has the meaning specified in Section 2.14(b)(ii).

 

“SOFR Successor Rate” has the meaning specified in Section 2.14(b).

 

“Solvent” and “Solvency” mean, with respect to any Person on a particular date, that on such date (a) the sum of the fair value of the assets, at a fair valuation, of such Person and its subsidiaries (taken as a whole) will exceed the probable liability on existing debts of such Person and its subsidiaries (taken as a whole) as they become absolute and mature, (b) the sum of the present fair salable value of the assets of such Person and its subsidiaries (taken as a whole) will exceed the probable liability on existing debts of such Person and its subsidiaries (taken as a whole) as they become absolute and mature, (c) such Person and its subsidiaries (taken as a whole) have not incurred and do not intend to incur, and do not believe that they will incur, debts beyond their ability to pay such debts as such debts mature and (d) such Person and its subsidiaries (taken as a whole) will have sufficient capital with which to conduct their business. For purposes of this definition, “debt” means any liability on a claim, and “claim” means (a) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured or (b) right to an equitable remedy for breach of performance if such breach gives rise to a payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual and matured liability.

 

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“SONIA” means, with respect to any applicable determination date, the Sterling Overnight Index Average Reference Rate published on the fifth Business Day preceding such date on the applicable Reuters screen page (or such other commercially available source providing such quotations as may be reasonably designated by the Administrative Agent from time to time); provided, however, that, if such determination date is not a Business Day, SONIA means such rate that applied on the first Business Day immediately prior thereto.

 

“SONIA Adjustment” means, with respect to SONIA, 0.0326% per annum.

 

“Special Payment” has the meaning assigned to such term in the introductory paragraph.

 

“Special Purpose Entity” means any Subsidiary whose Organization Documents contain restrictions on its purpose and activities intended to preserve its separateness from the Parent Borrower and/or one or more other Subsidiaries of the Parent Borrower.

 

“Specified Default” means an Event of Default arising under either or both of Sections 7.01(a) and/or 7.01(f).

 

“Specified Swap Obligation” means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of Section 1a(47) of the Commodity Exchange Act or any rules or regulations promulgated thereunder. Notwithstanding anything to the contrary in the foregoing, any Permitted Bond Hedge Transaction, any Permitted Warrant Transaction, and any obligations thereunder, in each case, shall not constitute Specified Swap Obligations.

 

“Spin-Off” has the meaning assigned to such term in the introductory paragraph.

 

“Spin-Off Transactions” means the IPO, the Spin-Off, the Post-Closing Ownership, the Post-Closing Distribution, the Company Guaranty (and release thereof in accordance with its terms) and any transactions incidental to or reasonably necessary to effectuate any of the foregoing, in each case to the extent (i) described herein or in the Registration Statement, (ii) otherwise disclosed in writing by the Parent Borrower to the Administrative Agent and the Lenders prior to the Effective Date and (x) filed by the Parent Borrower with the SEC and/or (y) obtained by the Company or the Parent Borrower from the IRS and/or (iii) between and among the Parent Borrower and/or its Subsidiaries entered into in connection with, and in furtherance of, any of the foregoing clauses (i) and (ii), so long as each such transaction under this clause (iii) is not materially adverse to the Administrative Agent and the Lenders.

 

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“Subordinated Debt” of a Person means any Debt of such Person the payment of which is subordinated to payment of the Secured Obligations to the written satisfaction of the Administrative Agent and which is on terms (including without limitation maturities, covenants and defaults) reasonably satisfactory to the Administrative Agent.

 

“Subordinated Obligations” has the meaning assigned to it in Section 10.06.

 

“subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, Controlled or held, or (b) that is, as of such date, otherwise Controlled by the parent and/or one or more subsidiaries of the parent.

 

“Subsidiary” means any subsidiary of the Parent Borrower, which, unless otherwise provided herein, includes the Opco Borrower.

 

“Subsidiary Guarantor” mean any Subsidiary of the Parent Borrower that constitutes a Guarantor.

 

“Successor Rate” has the meaning specified in Section 2.14(c).

 

“Supplemental Banking Services Obligations” means obligations of the Parent Borrower and its Subsidiaries in respect of working capital and long term credit agreements, bank issued guarantees, credit facilities supporting letters of credit and/or bank issued guarantees, any arrangements relating to bilateral letters of credit (including standby and documentary letters of credit) and bank guarantees, demand deposit and trust or operating account relationships, in each case provided by any Lender (or any Affiliate of a Lender) in an aggregate outstanding principal amount of up to $50,000,000 at any time (subject to the last sentence of the definition of Banking Services Obligations). Notwithstanding the foregoing, an obligation shall constitute a Supplemental Banking Services Obligation only if the Parent Borrower has designated such obligation as a Supplemental Banking Services Obligation in writing to the Administrative Agent (a copy of which the Administrative Agent shall promptly provide to the Lenders) and the Administrative Agent has acknowledged such designation in writing to the Parent Borrower or has not objected to such designation in writing to the Parent Borrower within ten (10) Business Days of receipt of such designation from the Parent Borrower.

 

“Supported QFC” has the meaning assigned to it in Section 9.19.

 

“Surviving Commitment” has the meaning assigned to such term in Section 2.09(c).

 

“Surviving Lender” has the meaning assigned to such term in Section 2.09(c).

 

“Sustainability Structuring Agent” has the meaning assigned to it in Section 2.26(a).

 

“Swap Agreement” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Parent Borrower or any of its Subsidiaries shall be a Swap Agreement; provided further that no Permitted Bond Hedge Transaction or Permitted Warrant Transaction shall constitute a Swap Agreement.

 

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“Swap Obligations” means any and all obligations of the Parent Borrower or any of its Subsidiaries, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) each Swap Agreement permitted hereunder with a Lender or an Affiliate of a Lender that (i) was in effect on the Effective Date with a counterparty that was a Lender as of the Effective Date or an Affiliate thereof or (ii) is entered into after the Effective Date with a counterparty that was a Lender or an Affiliate thereof, in each case at the time such Swap Agreement was entered into and (b) any and all cancellations, buy backs, reversals, terminations or assignments of any such Swap Agreement transaction referred to in clause (a).

 

“Swingline Exposure” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Lender at any time shall be the sum of (a) its Applicable Percentage of the total Swingline Exposure at such time, other than with respect to any Swingline Loans made by such Lender in its capacity as a Swingline Lender, and (b) the aggregate principal amount of all Swingline Loans made by such Lender as a Swingline Lender outstanding at such time (less the amount of participations funded by the other Revolving Lenders in such Swingline Loans).

 

“Swingline Lender” means each of Bank of America, through itself or through one of its designated Affiliates or branch offices, Wells Fargo Bank and PNC Bank, each in its capacity as a lender of Swingline Loans hereunder.

 

“Swingline Loan” means a Loan made pursuant to Section 2.05.

 

“Swingline Sublimit” means $50,000,000. The Swingline Sublimit is part of, and not in addition to, the Aggregate Revolving Commitments.

 

“Syndication Agent” means Wells Fargo Bank, in its capacity as the syndication agent for the credit facilities evidenced by this Agreement.

 

“Synthetic Lease” means a lease transaction under which the parties intend that (i) the lease will be treated as an “operating lease” by the lessee and (ii) the lessee will be entitled to various tax and other benefits ordinarily available to owners (as opposed to lessees) of like property.

 

“TARGET2” means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilizes a single shared platform and which was launched on November 19, 2007.

 

“TARGET Day” means any day on which TARGET2 (or, if such payment system ceases to be operative, such other payment system, if any, determined by the Administrative Agent to be a suitable replacement) is open for the settlement of payments in Euros.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), value added taxes, or any other goods and services, use or sales taxes, assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

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“Term Lender” means, as of any date of determination, each Lender having a Term Loan Commitment or that holds Term Loans.

 

“Term Loan Commitment” means (a) with respect to any Term Lender, as of the Effective Date, the amount that was set forth on Schedule 2.01 opposite such Lender’s name under the heading “Term Loan Commitment”, or in the Assignment and Assumption or other documentation or record (as such term is defined in Section 9-102(a)(70) of the New York Uniform Commercial Code) contemplated hereby pursuant to which such Lender shall have assumed its Term Loan Commitment, as applicable, and after giving effect to (i) any reduction in such amount from time to time pursuant to Section 2.09 and (ii) any reduction or increase in such amount from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04 and (b) as to all Term Lenders, the aggregate commitments of all Term Lenders to make Term Loans. After advancing the Term Loan, each reference to a Term Lender’s Term Loan Commitment shall refer to that Term Lender’s Applicable Percentage of the Term Loans.

 

“Term Loan Maturity Date” means the date that occurs on September 30, 2027, as extended (in the case of each Term Lender consenting thereto) pursuant to Section 2.23; provided, however, if such date is not a Business Day, the Term Loan Maturity Date shall be the next preceding Business Day.

 

“Term Loans” means the term loans made by the Term Lenders to the Parent Borrower and/or the Opco Borrower pursuant to Section 2.01(b).

 

“Term SOFR” means:

 

(a)            for any Interest Period with respect to a Term SOFR Loan, the rate per annum equal to the Term SOFR Screen Rate two U.S. Government Securities Business Days prior to the commencement of such Interest Period with a term equivalent to such Interest Period; provided that, if the rate is not published prior to 11:00 a.m. on such determination date then Term SOFR means the Term SOFR Screen Rate on the first U.S. Government Securities Business Day immediately prior thereto, in each case, plus the SOFR Adjustment for such Interest Period; and

 

(b)            for any interest calculation with respect to an ABR Loan on any date, the rate per annum equal to the Term SOFR Screen Rate with a term of one month commencing that day;

 

provided that, if Term SOFR determined in accordance with either of the foregoing provisions (a) or (b) of this definition would otherwise be less than zero, Term SOFR shall be deemed zero for purposes of this Agreement.

 

“Term SOFR Loan” means a Loan that bears interest at a rate based on clause (a) of the definition of Term SOFR.

 

“Term SOFR Screen Rate” means the forward-looking SOFR term rate administered by CME (or any successor administrator satisfactory to the Administrative Agent) and published on the applicable Reuters screen page (or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time).

 

“Termination Date Conditions” means the termination of all the Commitments, the payment and satisfaction in full in cash of all Secured Obligations (other than Swap Obligations, Banking Services Obligations and Unliquidated Obligations, in each case, not then due and payable) and the expiration or termination of all Letters of Credit (other than Letters of Credit as to which other arrangements satisfactory to the Administrative Agent and each applicable L/C Issuer shall have been made).

 

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“Ticking Fee Date” has the meaning assigned to it in Section 2.12(b).

 

“Total Net Leverage Ratio” means, at any date of determination, the ratio of Consolidated Total Net Debt on such date to EBITDA of the Parent Borrower and its Subsidiaries for the most recently completed Measurement Period.

 

“Total Revolving Credit Exposure” means, at any time, the sum of the outstanding principal amount of all Revolving Lenders’ Revolving Loans and their Swingline Exposure at such time; provided that clause (a) of the definition of “Swingline Exposure” shall only be applicable to the extent Revolving Lenders shall have funded their respective participations in the outstanding Swingline Loans.

 

“Trade Date” has the meaning assigned to it in Section 9.04(e)(i).

 

“Transfer Date” means the date specified in the Assignment and Assumption Agreement on which an assignee becomes a party to this Agreement as Lender.

 

“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Alternate Base Rate, an Alternative Currency Daily Rate, an Alternative Currency Term Rate, Term SOFR or Daily SOFR.

 

“UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York or any other state the laws of which are required to be applied in connection with the issue of perfection of security interests.

 

“UCP” means the Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce Publication No. 600 (or such later version thereof as may be in effect at the applicable time).

 

“UK” and “United Kingdom” means the United Kingdom of Great Britain and Northern Ireland.

 

“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended from time to time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and investment firms, and certain affiliates of such credit institutions or investment firms.

 

“UK Insolvency Event” means:

 

(a)            a UK Loan Party is unable or admits inability to pay its debts (as defined in section 123 of the Insolvency Act 1986 of the United Kingdom) as they fall due, suspends making payments on any of its debts or, by reason of actual or anticipated financial difficulties, commences negotiations with one or more of its creditors (excluding any party acting in its capacity as a Lender Party, the Administrative Agent, the Syndication Agent, any Co-Documentation Agent, the Sustainability Structuring Agent, any Bookrunner or any Arranger) with a view to rescheduling any of its indebtedness;

 

(b)            a moratorium is declared in respect of any indebtedness of any UK Loan Party; provided that, if a moratorium occurs, the ending of the moratorium will not remedy any Event of Default caused by such moratorium;

 

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(c)            any corporate action, legal proceedings or other formal procedure or formal step is taken to authorize or seek:

 

(i)            the suspension of payments, a moratorium of any indebtedness, winding up, dissolution, administration or reorganization (by way of voluntary arrangement, scheme of arrangement or otherwise) of any UK Loan Party;

 

(ii)           a composition, compromise, general assignment or arrangement with any creditor of any UK Loan Party (including but without limitation to a restructuring plan under Part 26A of the Companies Act 2006);

 

(iii)          the appointment of a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any UK Loan Party, or any of its assets; or

 

(iv)          enforcement of any Lien securing Debt in an outstanding principal amount in excess of $50,000,000 over any assets of any UK Loan Party,

 

or any analogous formal procedure or formal step is taken in any jurisdiction, save that this paragraph (c) shall not apply to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement; or

 

(d)            any expropriation, attachment, sequestration, distress or execution or any analogous process in any jurisdiction affects any asset or assets of a UK Loan Party, in each such case, where any such actions or process described in this paragraph (d) would reasonably be expected to result in a Material Adverse Effect.

 

“UK Loan Party” means any Loan Party incorporated under the laws of England and Wales.

 

“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the resolution of any UK Financial Institution.

 

“Unfunded Commitment” means, with respect to each Revolving Lender, the Revolving Commitment of such Revolving Lender less its Revolving Credit Exposure; provided that, as to any Revolving Lender, clause (a) of the definition of “Swingline Exposure” shall only be applicable in calculating a Revolving Lender’s Revolving Credit Exposure to the extent such Lender shall have funded its respective participations in the outstanding Swingline Loans.

 

“Unfunded Pension Liability” means the excess of a Plan’s benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Plan’s assets, determined in accordance with the assumptions used for funding the Plan pursuant to the Pension Funding Rules for the applicable plan year.

 

“United States” or “U.S.” mean the United States of America.

 

“Unliquidated Obligations” means, at any time, any Secured Obligations (or portion thereof) that are contingent in nature or unliquidated at such time, including any Secured Obligation that is (i) an obligation to reimburse a bank for drawings not yet made under a letter of credit issued by it; (ii) any other obligation (including any guarantee) that is contingent in nature at such time; or (iii) an obligation to provide collateral to secure any of the foregoing types of obligations.

 

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“Unreimbursed Amount” has the meaning specified in Section 2.06(f).

 

“U.S. Government Securities Business Day” means any Business Day, except any Business Day on which any of the Securities Industry and Financial Markets Association, the New York Stock Exchange or the Federal Reserve Bank of New York is not open for business because such day is a legal holiday under the federal laws of the United States or the laws of the State of New York, as applicable.

 

“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.

 

“U.S. Special Resolution Regime” has the meaning assigned to it in Section 9.19.

 

“U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.17(f)(ii)(B)(3).

 

“Voting Interests” means shares of capital stock issued by a corporation, or equivalent Equity Interests in any other Person, the holders of which are ordinarily, in the absence of contingencies, entitled to vote for the election of directors (or persons performing similar functions) of such Person, even if the right so to vote has been suspended by the happening of such a contingency.

 

“Wells Fargo Bank” means Wells Fargo Bank, National Association.

 

“Wholly-Owned” means, with respect to any Subsidiary, that all of the Equity Interests (except for directors’, foreign national qualifying and other nominal shares required to be held by such person under applicable Law) in such Subsidiary are owned by the Parent Borrower and/or one or more Subsidiaries thereof (or by the Subsidiary thereof to which reference is made in the applicable provision hereof).

 

“Withdrawal Liability” has the meaning specified in Part I of Subtitle E of Title IV of ERISA.

 

“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.

 

SECTION 1.02.      Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Daily SOFR Loan” or a “Term SOFR Loan”) or by Class and Type (e.g., a “Daily SOFR Revolving Loan” or a “Term SOFR Revolving Loan”). Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing”) or by Type (e.g., a “Daily SOFR Borrowing” or a “Term SOFR Borrowing”) or by Class and Type (e.g., a “Daily SOFR Revolving Borrowing” or a “Term SOFR Revolving Borrowing”).

 

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SECTION 1.03.      Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. The word “law” shall be construed as referring to all statutes, rules, regulations, codes and other laws (including official rulings and interpretations thereunder having the force of law or with which affected Persons customarily comply), and all judgments, orders and decrees, of all Governmental Authorities. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein or in any other Loan Document shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein or in any other Loan Document), (b) any definition of or reference to any statute, rule or regulation herein or in any other Loan Document shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), (c) any reference herein or in any other Loan Document to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignment set forth herein or in any other Loan Document) and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all functions thereof, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (f) any reference to any law, rule or regulation herein or in any other Loan Document shall, unless otherwise specified, refer to such law, rule or regulation as amended, modified or supplemented from time to time and (g) the words “asset” and “property” herein or in any other Loan Document shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

  

SECTION 1.04.      Accounting Terms; GAAP; Pro Forma Calculations; Limited Condition Transactions; Certain Calculations and Tests.

 

(a)            Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Opco Borrower notifies the Administrative Agent that the Opco Borrower requests an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Opco Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Notwithstanding any other provision contained herein, (i) all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein (including computations in respect of compliance with Section 6.11) shall be made, without giving effect to (x) any election under Accounting Standards Codification 825-10-25 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any Debt or other liabilities of the Parent Borrower or any of its Subsidiaries at “fair value”, as defined therein, and (y) any treatment of Debt in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Debt in a reduced or bifurcated manner as described therein, and such Debt shall at all times be valued at the full stated principal amount thereof; and (ii) except for the purpose of preparing financial statements in accordance with GAAP, the determination of whether a lease constitutes a capital or finance lease, on the one hand, or an operating lease, on the other hand, and whether obligations arising under a lease are required to be capitalized on the balance sheet of the lessee thereunder and/or recognized as interest expense, shall be determined by reference to GAAP without giving effect to FASB Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842). For the avoidance of doubt, and without limitation of the foregoing, Permitted Convertible Indebtedness shall at all times be valued at the full stated principal amount thereof and shall not include any reduction or appreciation in value of the shares deliverable upon conversion thereof.

 

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(b)            All pro forma computations required to be made hereunder giving effect to any acquisition or disposition, or issuance, incurrence or assumption of Debt, or Specified Transaction or other transaction shall in each case be calculated giving pro forma effect thereto (and, in the case of any pro forma computation made hereunder to determine whether such acquisition or disposition, or issuance, incurrence or assumption of Debt, or Specified Transaction or other transaction is permitted to be consummated hereunder, to any other such transaction consummated since the first day of the most recent Measurement Period and on or prior to the date of such computation) as if such acquisition or disposition, or issuance, incurrence or assumption of Debt, or Specified Transaction or other transaction had occurred on the first day of the most recent Measurement Period, and, to the extent applicable, to the historical earnings and cash flows associated with the assets acquired or disposed of (but without giving effect to any cost synergies or cost savings except to extent expressly provided herein) and any related incurrence or reduction of Debt, all in accordance with Article 11 of Regulation S-X under the Securities Act. If any Debt bears a floating rate of interest and is being given pro forma effect, the interest on such Debt shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Swap Agreement applicable to such Debt).

 

(c)            In connection with any Limited Condition Transaction and any related transactions (including any financing thereof), at the Opco Borrower’s election, (i) determining the accuracy of representations and warranties and/or compliance with any requirement relating to the absence of a Default or an Event of Default may be determined as of the date (the “LCT Determination Date”) a definitive agreement for such Limited Condition Transaction is entered into, in the case of a Limited Condition Transaction described in clause (a) of the definition thereof, or the date on which irrevocable notice of the applicable redemption, repurchase, defeasance, satisfaction and discharge or repayment of Debt is delivered, in the case of a Limited Condition Transaction described in clause (b) of the definition thereof, and (ii) any calculation of the Interest Coverage Ratio, the Total Net Leverage Ratio, the Secured Net Leverage Ratio or any other financial measure, or any amount based on Consolidated Total Assets, Consolidated Net Tangible Assets, EBITDA or a percentage of Consolidated Total Assets or EBITDA, or any other determination under any basket or ratio under this Agreement, or any other determination as to whether any such Limited Condition Transaction and any related transactions (including any financing thereof) complies with the covenants or agreements contained in this Agreement, may be made as of the LCT Determination Date and, to the extent so made, will not be required to be made at any later date as would otherwise be required under this Agreement; provided that (1) the determinations in clauses (i) and (ii) above shall give pro forma effect to such Limited Condition Transaction and any related transactions (including any incurrence or discharge of Debt and Liens and the use of proceeds thereof) and (2) compliance with such ratios, baskets or amounts (and any related requirements and conditions) shall not be determined or tested at any time after the LCT Determination Date for such Limited Condition Transaction and any actions or transactions related thereto (including any incurrence or discharge of Debt and Liens and the use of proceeds thereof). For purposes of determining compliance with any ratio, basket or amount on the LCT Determination Date, Consolidated Interest Charges for purposes of the Interest Coverage Ratio will be calculated using an assumed interest rate based on the indicative interest margin contained in any financing commitment documentation with respect to such Debt or, if no such indicative interest margin exists, as determined by the Opco Borrower in good faith, which determination shall be conclusive. For the avoidance of doubt, if the Opco Borrower makes such an election and any of the ratios, baskets or amounts for which compliance was determined or tested as of the LCT Determination Date are exceeded as a result of fluctuations in any such ratio, basket or amount, including due to fluctuations in exchange rates, in EBITDA of the Parent Borrower or the Person subject to such Limited Condition Transaction or any applicable currency exchange rate, at or prior to the consummation of the relevant transaction or action, such ratios, baskets or amounts will not be deemed to have been exceeded as a result of such fluctuations. If the Opco Borrower makes such an election, any subsequent calculation of any such ratio, basket or amount (unless the definitive agreement for, or firm offer in respect of, such Limited Condition Transaction (in the case of an acquisition or Investment) is terminated or expires without its consummation or such notice of redemption, repurchase, defeasance, satisfaction and discharge or repayment is revoked or expires without consummation) shall be calculated both (1) giving pro forma effect to such Limited Condition Transaction and any related transactions (including any incurrence or discharge of Debt and Liens and the use of proceeds thereof) and (2) assuming such Limited Condition Transaction and any related transactions (including any incurrence of Debt and Liens and the use of proceeds thereof) have not been consummated.

 

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(d)            Notwithstanding anything to the contrary herein, for purposes of the covenants described in Articles V and VI, if any transaction or action would be permitted pursuant to one or more provisions described therein, the Opco Borrower may divide and classify such transaction or action within any covenant in any manner that complies with the covenants set forth therein, and may later divide and reclassify any such transaction or action so long as the transaction or action (as so divided and/or reclassified) would be permitted to be made in reliance on the applicable exception as of the date of such reclassification; provided that, if any financial ratio or test governing any applicable amounts incurred or transactions entered into (or consummated) in reliance on a provision of this Agreement that requires compliance with a financial ratio or test would be satisfied in any subsequent period following the utilization of any amounts incurred or transactions entered into (or consummated) in reliance on a provision of this Agreement that does not require compliance with a financial ratio or test, such reclassification shall be deemed to have automatically occurred if not elected by the Opco Borrower. It is understood and agreed that any Affiliate transaction, Lien, Debt, Disposition, Investment, and/or Restricted Payment need not be permitted solely by reference to one category of permitted Affiliate transaction, Lien, Debt, Disposition, Investment, and/or Restricted Payment within the same covenant, but may instead be permitted in part under any combination thereof or under any other available exception solely within the same covenant (and not another covenant).

 

SECTION 1.05.      Exchange Rates; Currency Equivalents.

 

(a)            The Administrative Agent or an L/C Issuer, as applicable, shall determine the Dollar Amount of Borrowings and Outstanding Amounts denominated in Alternative Currencies. Such Dollar Amount shall become effective as of such Revaluation Date and shall be the Dollar Amount of such amounts until the next Revaluation Date to occur. Except for purposes of (i) any financial statements and Compliance Certificates delivered by the Loan Parties hereunder, any determination under Article V or VI hereof, or calculating any financial ratio or test hereunder, which shall, in each case, be as reasonably determined by the Opco Borrower, or (ii) except as otherwise provided herein, the applicable amount of any currency (other than Dollars) for purposes of the Loan Documents shall be such Dollar Amount as so determined reasonably and in good faith by the Administrative Agent or such L/C Issuer, as applicable.

 

(b)            Wherever in this Agreement in connection with a Borrowing, conversion, continuation or prepayment of an Alternative Currency Loan, an amount, such as a required minimum or multiple amount, is expressed in Dollars, but such Borrowing, Alternative Currency Loan is denominated in an Alternative Currency, such amount shall be the relevant Alternative Currency Equivalent of such Dollar amount (rounded to the nearest unit of such Alternative Currency, with 0.5 of a unit being rounded upward), as determined reasonably and in good faith by the Administrative Agent or an L/C Issuer, as applicable.

 

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(c)            No Default or Event of Default shall arise as a result of any limitation or threshold set forth in Dollars in ‎Articles V through VII under this Agreement being exceeded solely as a result of changes in currency exchange rates from those rates applicable on the last day of the fiscal quarter of the Parent Borrower immediately preceding the fiscal quarter of the Parent Borrower in which the applicable transaction or occurrence requiring a determination occurs.

 

SECTION 1.06.      Additional Alternative Currencies.

 

(a)            The Opco Borrower may from time to time request that Alternative Currency Loans be made and/or Letters of Credit be issued in a currency other than those specifically listed in the definition of “Alternative Currency”; provided that such requested currency is an Eligible Currency. In the case of any such request (i) with respect to the making of Alternative Currency Loans, such request shall be subject to the approval of the Administrative Agent and each Lender with a Commitment under which such currency is requested to be made available, and (ii) with respect to the issuance of Letters of Credit, such request shall be subject to the approval of the Administrative Agent and the applicable L/C Issuer.

 

(b)            Any such request shall be made to the Administrative Agent not later than 11:00 a.m., fifteen (15) Business Days prior to the date of the desired Borrowing (or such other time or date as may be agreed by the Administrative Agent and, in the case of any such request pertaining to Letters of Credit, the applicable L/C Issuer). In the case of any such request pertaining to Alternative Currency Loans, the Administrative Agent shall promptly notify each Appropriate Lender thereof; and in the case of any such request pertaining to Letters of Credit, the Administrative Agent shall promptly notify the applicable L/C Issuer thereof. Each Appropriate Lender (in the case of any such request pertaining to Alternative Currency Loans) or the L/C Issuer (in the case of a request pertaining to Letters of Credit) shall notify the Administrative Agent, not later than 11:00 a.m., five (5) Business Days after receipt of such request whether it consents, in its sole discretion, to the making of Alternative Currency Loans or the issuance of Letters of Credit, as the case may be, in such requested currency.

 

(c)            Any failure by a Lender or an L/C Issuer, as the case may be, to respond to such request within the time period specified in the preceding sentence shall be deemed to be a refusal by such Lender or L/C Issuer, as the case may be, to permit Alternative Currency Loans to be made or Letters of Credit to be issued in such requested currency. If the Administrative Agent and all the Appropriate Lenders consent to making Alternative Currency Loans in such requested currency and the Administrative Agent and such Lenders reasonably determine that an appropriate interest rate is available to be used for such requested currency, the Administrative Agent shall so notify the Opco Borrower and (i) the Administrative Agent and such Lenders, in consultation with the Opco Borrower, may amend the definition of “Alternative Currency Daily Rate” or “Alternative Currency Term Rate” to the extent necessary to add the applicable rate for such currency and any applicable adjustment for such rate, and (ii) to the extent the definition of “Alternative Currency Daily Rate” or “Alternative Currency Term Rate”, as applicable, has been amended to reflect the appropriate rate for such currency, such currency shall thereupon be deemed for all purposes to be an Alternative Currency for purposes of any Borrowings of Alternative Currency Loans. If the Administrative Agent and the applicable L/C Issuer consent to the issuance of Letters of Credit in such requested currency, the Administrative Agent shall so notify the Opco Borrower and (1) the Opco Borrower and the L/C Issuers may amend this Agreement to add such currency and (2) to the extent this Agreement has been amended to reflect such currency, such currency shall thereupon be deemed for all purposes to be an Alternative Currency hereunder for purposes of any such Letter of Credit issuances. If the Administrative Agent shall fail to obtain consent to any request for an additional currency under this Section 1.06, the Administrative Agent shall promptly so notify the Opco Borrower.

 

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SECTION 1.07.      Change of Currency.

 

(a)            Each obligation of a Borrower to make a payment denominated in the national currency unit of any member state of the European Union that adopts the Euro as its lawful currency after the date hereof shall be redenominated into Euros at the time of such adoption. If, in relation to the currency of any such member state, the basis of accrual of interest expressed in this Agreement in respect of that currency shall be inconsistent with any convention or practice in the interbank market for the basis of accrual of interest in respect of the Euro, such expressed basis shall be replaced by such convention or practice with effect from the date on which such member state adopts the Euro as its lawful currency; provided that, if any Borrowing in the currency of such member state is outstanding immediately prior to such date, such replacement shall take effect, with respect to such Borrowing, at the end of the then current Interest Period.

 

(b)            Each provision of this Agreement shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be appropriate to reflect the adoption of the Euro by any member state of the European Union and any relevant market conventions or practices relating to the Euro.

 

(c)            Each provision of this Agreement also shall be subject to such reasonable changes of construction as the Administrative Agent may from time to time specify to be appropriate to reflect a change in currency of any other country and any relevant market conventions or practices relating to the change in currency.

 

SECTION 1.08.      Letter of Credit Amounts. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount (after giving effect to all drawn and unreimbursed amounts thereon) of such Letter of Credit in effect at such time; provided, however, that, with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

 

SECTION 1.09.      Interest Rates. The Administrative Agent does not warrant, nor accept responsibility, nor shall the Administrative Agent have any liability with respect to the administration, submission or any other matter related to any reference rate referred to herein or with respect to any rate (including, for the avoidance of doubt, the selection of such rate and any related spread or other adjustment) that is an alternative or replacement for or successor to any such rate (including, without limitation, any Successor Rate) (or any component of any of the foregoing) or the effect of any of the foregoing, or of any Conforming Changes. The Administrative Agent and its affiliates or other related entities may engage in transactions or other activities that affect any reference rate referred to herein, or any alternative, successor or replacement rate (including, without limitation, any Successor Rate) (or any component of any of the foregoing) or any related spread or other adjustments thereto, in each case, in a manner adverse to the Borrowers. The Administrative Agent may select information sources or services in its reasonable good faith discretion to ascertain any reference rate referred to herein or any alternative, successor or replacement rate (including, without limitation, any Successor Rate) (or any component of any of the foregoing), in each case pursuant to and in accordance with the terms of this Agreement, and shall have no liability to the Borrowers, any Lender or any other person or entity for damages of any kind, including direct or indirect, special, punitive, incidental or consequential damages, costs, losses or expenses (whether in tort, contract or otherwise and whether at law or in equity), for any error or other action or omission related to or affecting the selection, determination, or calculation of any rate (or component thereof) provided by any such information source or service. For the avoidance of doubt, this Section 1.09 does not alter or impair the rights and obligations of the Administrative Agent otherwise expressly set forth in this Agreement.

 

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SECTION 1.10.      Timing of Payment or Performance. When payment of any obligation or the performance of any covenant, duty or obligation (including, without limitation, the due date for the delivery of any report, certificate or other information) is stated to be due or required on a day which is not a Business Day, the date of such payment (other than as described in the definition of “Interest Period”) or performance shall extend to the immediately succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension.

 

ARTICLE II

 

The Credits

 

SECTION 2.01.      Commitments.

 

(a)            Subject to the terms and conditions set forth herein, each Revolving Lender (severally and not jointly) agrees to make Revolving Loans to the applicable Borrowers in Agreed Currencies from time to time during the Availability Period in an aggregate principal amount that will not result (after giving effect to any application of proceeds of such Borrowing to any Swingline Loans outstanding pursuant to Section 2.05(c)) in, subject to Sections 2.04 and 2.11(b), (i) the Dollar Amount of such Lender’s Revolving Credit Exposure exceeding such Lender’s Revolving Commitment, (ii) the Dollar Amount of the Total Revolving Credit Exposure exceeding the aggregate Revolving Commitments and (iii) the Dollar Amount of the total outstanding Revolving Loans, denominated in Foreign Currencies, exceeding the Foreign Currency Sublimit. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrowers may borrow, prepay and reborrow Revolving Loans.

 

(b)            Subject to the terms and conditions set forth herein, each Term Lender with a Term Loan Commitment (severally and not jointly) agrees to make a Term Loan to the Parent Borrower or the Opco Borrower or in part to each of them (as determined by the Parent Borrower and notified to the Administrative Agent and the Lenders at least three (3) Business Days prior to the Closing Date) in Dollars in a single drawing on the Closing Date in an aggregate amount equal to such Lender’s Term Loan Commitment on the Closing Date, by making immediately available funds available to the Administrative Agent’s designated account not later than the time specified by the Administrative Agent.

 

(c)            Amounts repaid or prepaid in respect of any Term Loans may not be reborrowed.

 

SECTION 2.02.      Loans and Borrowings(a)      .

 

(a)            Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the applicable Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required. Any Swingline Loan shall be made in accordance with the procedures set forth in Section 2.05. The Term Loans shall amortize as set forth in Section 2.10.

 

(b)            Subject to Section 2.14, each Revolving Borrowing and each Term Loan Borrowing shall be comprised entirely of ABR Loans, Term SOFR Loans, Daily SOFR Loans, Alternative Currency Daily Rate Loans or Alternative Currency Term Rate Loans as the relevant Borrower may request in accordance herewith; provided that each ABR Loan shall only be made in Dollars. Each Lender at its option may make any Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan (and in the case of an Affiliate, the provisions of Sections 2.14, 2.15, 2.16 and 2.17 shall apply to such Affiliate to the same extent as to such Lender); provided that any exercise of such option shall not affect the obligation of any Borrower to repay such Loan in accordance with the terms of this Agreement.

 

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(c)            At the commencement of each Interest Period for any Term SOFR Borrowing and any Alternative Currency Term Rate Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 (or, if such Borrowing is denominated in a Foreign Currency, 500,000 units of such currency) and not less than $3,000,000 (or, if such Borrowing is denominated in a Foreign Currency, 3,000,000 units of such currency). At the time that each Alternative Currency Daily Rate Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of 500,000 units of the applicable Foreign Currency and not less than 3,000,000 units of such Foreign Currency. At the time that each ABR Revolving Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $500,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the aggregate Revolving Commitments. Each Swingline Loan shall be in an amount that is an integral multiple of $100,000 and not less than $100,000. Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of ten (10) Daily SOFR Borrowings, Term SOFR Borrowings, Alternative Currency Term Rate Borrowings and Alternative Currency Daily Rate Borrowings outstanding in respect of Revolving Borrowings and a total of ten (10) Daily SOFR Borrowings and Term SOFR Borrowings outstanding in respect of Term Loan Borrowings.

 

(d)            Notwithstanding any other provision of this Agreement, no Borrower shall be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the applicable Maturity Date.

 

SECTION 2.03.      Requests for Borrowings. To request a Borrowing, the applicable Borrower shall notify the Administrative Agent of such request by (A) telephone or (B) a Borrowing Request (provided that any telephonic notice must be confirmed immediately by delivery to the Administrative Agent of a Borrowing Request) (a) in the case of a Term SOFR Borrowing, an Alternative Currency Daily Rate Borrowing or an Alternative Currency Term Rate Borrowing, not later than 12:00 noon, New York City time, three (3) Business Days before the date of the proposed Borrowing (provided that, if a Borrower wishes to request Term SOFR Loans or Alternative Currency Term Rate Loans having an Interest Period other than one, three or six months in duration as provided in the definition of “Interest Period,” the applicable notice must be received by the Administrative Agent not later than 12:00 noon, New York City time, four Business Days prior to the requested date of such Borrowing, conversion or continuation, whereupon the Administrative Agent shall give prompt notice to the Appropriate Lenders of such request and determine whether the requested Interest Period is acceptable to all of them) or (b)  in the case of an ABR Borrowing or a Daily SOFR Borrowing, not later than 12:00 noon, New York City time, on the date of the proposed Borrowing. Each such Borrowing Request shall specify the following information in compliance with Section 2.02:

 

(i)            the aggregate principal amount of the requested Borrowing;

 

(ii)            the date of such Borrowing, which shall be a Business Day;

 

(iii)            whether such Borrowing is to be an ABR Borrowing, an Alternative Currency Term Rate Borrowing, an Alternative Currency Daily Rate Borrowing, a Daily SOFR Borrowing or a Term SOFR Borrowing and whether such Borrowing is a Revolving Borrowing or a Term Loan Borrowing;

 

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(iv)            in the case of a Term SOFR Borrowing or an Alternative Currency Term Rate Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”;

 

(v)            the location and number of the applicable Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.07; and

 

(vi)            in the case of an Alternative Currency Daily Rate Borrowing or an Alternative Currency Term Rate Borrowing, the Agreed Currency.

 

If no election as to the Type of Borrowing is specified, then, in the case of a Borrowing denominated in Dollars, the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Term SOFR Borrowing or Alternative Currency Term Rate Borrowing, as applicable, then the relevant Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

 

SECTION 2.04.      Determination of Dollar Amounts. The Administrative Agent will determine the Dollar Amount of:

 

(a)            any Revolving Loan denominated in a Foreign Currency, on each Revaluation Date; and

 

(b)            any Borrowing, on any additional date as the Administrative Agent may determine at any time when an Event of Default exists.

 

Each day upon or as of which the Administrative Agent determines Dollar Amounts as described in the preceding clauses (a) and (b) is herein described as a “Computation Date” with respect to each Borrowing for which a Dollar Amount is determined on or as of such day.

 

SECTION 2.05.      Swingline Loans.

 

(a)            Subject to the terms and conditions set forth herein, each Swingline Lender may agree, but shall have no obligation, to make Swingline Loans in Dollars to the Opco Borrower from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans exceeding the Swingline Sublimit, (ii) subject to Section 2.04, such Swingline Lender’s Revolving Credit Exposure exceeding its Revolving Commitment or (iii) the Dollar Amount of the Total Revolving Credit Exposure exceeding the aggregate Revolving Commitments; provided that no Swingline Lender shall be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Opco Borrower may borrow, prepay and reborrow Swingline Loans.

 

(b)            To request a Swingline Loan, the Opco Borrower shall notify the applicable Swingline Lender (with a copy to the Administrative Agent) of such request by (A) telephone or (B) by a Borrowing Request (provided that any telephonic notice must be confirmed promptly by delivery to the applicable Swingline Lender and the Administrative Agent of a Borrowing Request) not later than 3:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day), Type and amount (which shall be a minimum of $100,000) of the requested Swingline Loan. Each Swingline Lender shall (subject to such Swingline Lender’s discretion to make Swingline Loans as set forth in Section 2.05(a)) make each Swingline Loan available to the Opco Borrower by means of a credit to an account of the Opco Borrower with the Administrative Agent designated for such purpose (or, in the case of a Swingline Loan made to finance the reimbursement of an L/C Disbursement as provided in Section 2.06(f), by remittance to the applicable L/C Issuer) by 5:00 p.m., New York City time, on the requested date of such Swingline Loan.

 

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(c)            Any Swingline Lender may by written notice given to the Administrative Agent require the Revolving Lenders to acquire participations in all or a portion of the Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, promptly upon receipt of such notice from the Administrative Agent (and in any event, if such notice is received by 1:00 p.m., New York City time, on a Business Day, no later than 3:00 p.m., New York City time, on such Business Day and if received after 3:00 p.m., New York City time, on a Business Day, no later than 10:00 a.m., New York City time, on the immediately succeeding Business Day), to pay in Dollars to the Administrative Agent, for the account of such Swingline Lender, such Lender’s Applicable Percentage of such Swingline Loan or Loans. Notwithstanding the foregoing, upon the occurrence of (i) the Revolving Credit Maturity Date, (ii) any Event of Default described in Section 7.01(f), (iii) the date on which the Loans are accelerated, or (iv) the termination of the Revolving Commitments, each Revolving Lender shall be deemed to absolutely and unconditionally acquire participations in all of the Swingline Loans outstanding at such time in an amount equal to its Applicable Percentage of such Swingline Loans in each case without notice or any further action from any Swingline Lender, any Lender or the Administrative Agent (such occurrence an “Automatic Participation Event”). Upon the occurrence of an Automatic Participation Event, the Administrative Agent will give notice thereof to each Revolving Lender, specifying in such notice such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, promptly upon receipt of such notice from the Administrative Agent (and in any event, if such notice is received by 3:00 p.m., New York City time, on a Business Day, no later than 5:00 p.m., New York City time, on such Business Day and if received after 3:00 p.m., New York City time, on a Business Day, no later than 10:00 a.m., New York City time, on the immediately succeeding Business Day), to pay to the Administrative Agent, for the account of such Swingline Lender, such Lender’s Applicable Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Revolving Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to such Swingline Lender the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify the Opco Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to such Swingline Lender. Any amounts received by such Swingline Lender from the Opco Borrower (or other party on behalf of the Opco Borrower) in respect of a Swingline Loan after receipt by such Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Revolving Lenders that shall have made their payments pursuant to this paragraph and to such Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to such Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Opco Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Opco Borrower of any obligation with respect to the payment thereof.

 

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(d)            Any Swingline Lender may be replaced at any time by written agreement among the Opco Borrower, the Administrative Agent, the replaced Swingline Lender and the successor Swingline Lender. The Administrative Agent shall notify the Revolving Lenders of any such replacement of the relevant Swingline Lender. At the time any such replacement shall become effective, the Opco Borrower shall pay all unpaid interest accrued for the account of the replaced Swingline Lender pursuant to Section 2.13(a). From and after the effective date of any such replacement, (i) the successor Swingline Lender shall have all the rights and obligations of the replaced Swingline Lender under this Agreement with respect to Swingline Loans made thereafter and (ii) references herein to the term “Swingline Lender” shall be deemed to refer to such successor or to any previous Swingline Lender, or to such successor and all previous Swingline Lenders, as the context shall require. After the replacement of a Swingline Lender hereunder, the replaced Swingline Lender shall remain a party hereto and shall continue to have all the rights and obligations of a Swingline Lender under this Agreement with respect to Swingline Loans made by it prior to its replacement, but shall not be required to make additional Swingline Loans.

 

(e)            Subject to the appointment and acceptance of a successor Swingline Lender, any Swingline Lender may resign as a Swingline Lender at any time upon thirty (30) days’ prior written notice to the Administrative Agent, the Opco Borrower and the Revolving Lenders, in which case, such Swingline Lender shall be replaced in accordance with Section 2.05(d) above.

 

SECTION 2.06.      Letters of Credit.

 

(a)            General. Subject to the terms and conditions set forth herein, in addition to the Loans provided for in Section 2.01, any Borrower may request any L/C Issuer, in reliance on the agreements of the Lenders set forth in this Section 2.06, to issue, at any time and from time to time during the Availability Period, Letters of Credit denominated in Dollars or an Alternative Currency for its own account or the account of any of its Subsidiaries in such form as is acceptable to the Administrative Agent and such L/C Issuer in its reasonable determination. Letters of Credit issued hereunder shall constitute utilization of the Revolving Commitments.

 

(b)            Notice of Issuance, Amendment, Extension, Reinstatement or Renewal. To request the issuance of a Letter of Credit (or the amendment of the terms and conditions, extension of the terms and conditions, extension of the expiration date, or reinstatement of amounts paid, or renewal of an outstanding Letter of Credit), the applicable Borrower shall deliver (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable L/C Issuer) to an L/C Issuer selected by it and to the Administrative Agent not later than 11:00 a.m. at least two Business Days (or such later date and time as the Administrative Agent and such L/C Issuer may agree in a particular instance in their sole discretion) prior to the proposed issuance date or date of amendment, as the case may be a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, extended, reinstated or renewed, and specifying the date of issuance, amendment, extension, reinstatement or renewal (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with Section 2.06(d)), the amount of such Letter of Credit, the name and address of the beneficiary thereof, the purpose and nature of the requested Letter of Credit and such other information as shall be necessary to prepare, amend, extend, reinstate or renew such Letter of Credit. If requested by the applicable L/C Issuer, such Borrower also shall submit a letter of credit application and reimbursement agreement on such L/C Issuer’s standard form in connection with any request for a Letter of Credit. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application and reimbursement agreement or other agreement submitted by any Borrower to, or entered into by any Borrower with, an L/C Issuer relating to any Letter of Credit, the terms and conditions of this Agreement shall control.

 

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If any Borrower so requests in any applicable Letter of Credit Application (or the amendment of an outstanding Letter of Credit), the applicable L/C Issuer may, in its sole discretion, agree to issue a Letter of Credit that has automatic extension provisions (each, an “Auto-Extension Letter of Credit”); provided that any such Auto-Extension Letter of Credit shall permit such L/C Issuer to prevent any such extension at least once in each twelve-month period (commencing with the date of issuance of such Letter of Credit) by giving prior notice to the beneficiary thereof not later than a day (the “Non-Extension Notice Date”) in each such twelve-month period to be agreed upon by the applicable Borrower and the applicable L/C Issuer at the time such Letter of Credit is issued. Unless otherwise directed by the applicable L/C Issuer, no Borrower shall be required to make a specific request to such L/C Issuer for any such extension. Once an Auto-Extension Letter of Credit has been issued, the Lenders shall be deemed to have authorized (but may not require) the applicable L/C Issuer to permit the extension of such Letter of Credit at any time to an expiration date not later than the date permitted pursuant to Section 2.03(d); provided that such L/C Issuer shall not (i) permit any such extension if (A) such L/C Issuer has determined that it would not be permitted, or would have no obligation, at such time to issue such Letter of Credit in its extended form under the terms hereof (except that the expiration date may be extended to a date that is no more than one year from the then-current expiration date) or (B) it has received notice (which may be in writing or by telephone (if promptly confirmed in writing)) on or before the day that is seven Business Days before the Non-Extension Notice Date from the Administrative Agent that the Required Lenders have elected not to permit such extension or (ii) be obligated to permit such extension if it has received notice (which may be in writing or by telephone (if promptly confirmed in writing)) on or before the day that is seven Business Days before the Non-Extension Notice Date from the Administrative Agent, any Lender or any Borrower that one or more of the applicable conditions set forth in Section 4.02 is not then satisfied, and in each such case directing such L/C Issuer not to permit such extension.

 

If any Borrower so requests in any applicable Letter of Credit Application, any L/C Issuer may, in its sole discretion, agree to issue a Letter of Credit that permits the automatic reinstatement of all or a portion of the stated amount thereof after any drawing thereunder (each, an “Auto-Reinstatement Letter of Credit”). Unless otherwise directed by the applicable L/C Issuer, no Borrower shall be required to make a specific request to such L/C Issuer to permit such reinstatement. Once an Auto-Reinstatement Letter of Credit has been issued, except as provided in the following sentence, the Lenders shall be deemed to have authorized (but may not require) the applicable L/C Issuers to reinstate all or a portion of the stated amount thereof in accordance with the provisions of such Letter of Credit. Notwithstanding the foregoing, if such Auto-Reinstatement Letter of Credit permits the applicable L/C Issuer to decline to reinstate all or any portion of the stated amount thereof after a drawing thereunder by giving notice of such non-reinstatement within a specified number of days after such drawing (the “Non-Reinstatement Deadline”), such L/C Issuer shall not permit such reinstatement if it has received a notice (which may be by telephone or in writing) on or before the day that is seven Business Days before the Non-Reinstatement Deadline (A) from the Administrative Agent that the Required Lenders have elected not to permit such reinstatement or (B) from the Administrative Agent, any Lender or any Borrower that one or more of the applicable conditions specified in Section 4.02 is not then satisfied (treating such reinstatement as an L/C Credit Extension for purposes of this clause) and, in each case, directing such L/C Issuer not to permit such reinstatement.

 

(c)            Limitations on Amounts, Issuance and Amendment. A Letter of Credit shall be issued, amended, extended, reinstated or renewed only if (and upon issuance, amendment, extension, reinstatement or renewal of each Letter of Credit the applicable Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, extension, reinstatement or renewal (i) the aggregate amount of the outstanding Letters of Credit issued by any L/C Issuer shall not exceed its L/C Commitment, (ii) the aggregate L/C Obligations shall not exceed the L/C Sublimit, (iii) the Revolving Credit Exposure of any Lender shall not exceed its Revolving Commitment and (iv) the Total Revolving Credit Exposure shall not exceed the total Revolving Commitments.

 

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(i)            No L/C Issuer shall be under any obligation to issue any Letter of Credit if:

 

(A)            any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such L/C Issuer from issuing the Letter of Credit, or any Law applicable to such L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such L/C Issuer shall prohibit, or request that such L/C Issuer refrain from, the issuance of letters of credit generally or the Letter of Credit in particular or shall impose upon such L/C Issuer with respect to the Letter of Credit any restriction, reserve or capital requirement (for which such L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which such L/C Issuer in good faith deems material to it;

 

(B)            the issuance of such Letter of Credit would violate one or more policies of such L/C Issuer applicable to letters of credit generally;

 

(C)            except as otherwise agreed by the Administrative Agent and such L/C Issuer, the Letter of Credit is in an initial stated amount less than $50,000;

 

(D)            any Lender is at that time a Defaulting Lender, unless such L/C Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory to such L/C Issuer (in its sole discretion) with the Borrowers or such Lender to eliminate such L/C Issuer’s actual or potential Fronting Exposure (after giving effect to Section 2.22(d)) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other L/C Obligations as to which such L/C Issuer has actual or potential Fronting Exposure, as it may elect in its sole discretion; or

 

(E)            the Letter of Credit contains any provisions for automatic reinstatement of the stated amount after any drawing thereunder.

 

(ii)            No L/C Issuer shall be under any obligation to increase or extend any Letter of Credit if (A) such L/C Issuer would have no obligation at such time to issue the Letter of Credit in its amended form under the terms hereof, or (B) the beneficiary of the Letter of Credit does not accept the proposed amendment to the Letter of Credit.

 

(d)            Expiration Date. Each Letter of Credit shall have a stated expiration date no later than the earlier of (i) the date twelve months after the date of the issuance of such Letter of Credit (or, in the case of any extension of the expiration date thereof, whether automatic or by amendment, twelve months after the then current expiration date of such Letter of Credit) and (ii) the date that is five Business Days prior to the Revolving Credit Maturity Date; provided that, upon the Opco Borrower’s request and subject to the approval, in its reasonable discretion, by the Administrative Agent and the applicable L/C Issuer that has issued such Letter of Credit, any such Letter of Credit may have a later expiration date (but in any event not later than one year after the Revolving Credit Maturity Date) if Cash Collateralized.

 

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(e)            Participations.

 

(i)            By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount or extending the expiration date thereof), and without any further action on the part of the applicable L/C Issuer or the Lenders, such L/C Issuer hereby grants to each Lender, and each Lender hereby acquires from such L/C Issuer, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this Section 2.06(e)(i) in respect of Letters of Credit is absolute, unconditional and irrevocable and shall not be affected by any circumstance whatsoever, including any amendment, extension, reinstatement or renewal of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Revolving Commitments.

 

(ii)            In consideration and in furtherance of the foregoing, each Lender hereby absolutely, unconditionally and irrevocably agrees to pay to the Administrative Agent in Dollars, for account of the applicable L/C Issuer, such Lender’s Applicable Percentage of each L/C Disbursement made by an L/C Issuer (expressed in Dollars in the Dollar Amount thereof) not later than 1:00 p.m. on the Business Day specified in the notice provided by the Administrative Agent to the Lenders pursuant to Section 2.06(f) until such L/C Disbursement is reimbursed by the Borrowers or at any time after any reimbursement payment is required to be refunded to any Borrower for any reason, including after the Revolving Credit Maturity Date. Such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each such payment shall be made in the same manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the applicable L/C Issuer the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrowers pursuant to Section 2.06(f), the Administrative Agent shall distribute such payment to the applicable L/C Issuer or, to the extent that the Lenders have made payments pursuant to this Section 2.06(e) to reimburse such L/C Issuer, then to such Lenders and such L/C Issuer as their interests may appear. Any payment made by a Lender pursuant to this Section 2.06(e) to reimburse an L/C Issuer for any L/C Disbursement shall not constitute a Loan and shall not relieve any Borrower of its obligation to reimburse such L/C Disbursement.

 

Each Lender further acknowledges and agrees that its participation in each Letter of Credit will be automatically adjusted to reflect such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit at each time such Lender’s Revolving Commitment is amended pursuant to the operation of Section 2.20 or 2.23, as a result of an assignment in accordance with Section 9.04 or otherwise pursuant to this Agreement.

 

(f)            Reimbursement. If an L/C Issuer shall make any L/C Disbursement in respect of a Letter of Credit, the Borrowers shall reimburse such L/C Issuer in respect of such L/C Disbursement in the currency in which such L/C Disbursement was made (or, if requested by such L/C Issuer by notice to the applicable Borrower, in the Dollar Amount of such L/C Disbursement) by paying to the Administrative Agent an amount equal to such L/C Disbursement not later than 12:00 noon on (i) the Business Day that the Opco Borrower receives notice of such L/C Disbursement, if such notice is received prior to 10:00 a.m. or (ii) the Business Day immediately following the day that the Opco Borrower receives such notice, if such notice is not received prior to such time; provided that, if such L/C Disbursement is not less than $1,000,000, the Borrowers may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or Section 2.05 that such payment be financed with a Borrowing of ABR Loans or Swingline Loan in the Dollar Amount of such L/C Disbursement and, to the extent so financed, the Borrowers’ obligation to make such payment shall be discharged and replaced by the resulting Borrowing of ABR Loans or Swingline Loan. If the Borrowers fail to make such payment when due, the Administrative Agent shall notify each Lender of the Dollar Amount of the applicable L/C Disbursement, the payment then due from the Borrowers in respect thereof (the “Unreimbursed Amount”) and such Lender’s Applicable Percentage thereof. In such event, the Opco Borrower shall be deemed to have requested a Borrowing of ABR Loans to be disbursed on the date of payment by the applicable L/C Issuer under a Letter of Credit in the Dollar Amount equal to the Unreimbursed Amount, without regard to the minimum and multiples specified in Section 2.02 for the principal amount of ABR Loans, but subject to the amount of the unutilized portion of the Aggregate Revolving Commitments and the conditions set forth in Section 4.03 (other than the delivery of a Borrowing Request). Any notice given by any L/C Issuer or the Administrative Agent pursuant to this Section 2.06(f) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

 

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(g)            Obligations Absolute. The Borrowers’ joint and several obligation to reimburse L/C Disbursements as provided in Section 2.06(f) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of:

 

(i)            any lack of validity or enforceability of this Agreement, any other Loan Document or any Letter of Credit, or any term or provision herein or therein;

 

(ii)            the existence of any claim, counterclaim, setoff, defense or other right that any Borrower or any Subsidiary may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), any L/C Issuer or any other Person, whether in connection with this Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

(iii)           any draft, demand, certificate or other document presented under a Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement in such draft or other document being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

 

(iv)          waiver by any L/C Issuer of any requirement that exists for such L/C Issuer’s protection and not the protection of the Borrowers or any waiver by such L/C Issuer which does not in fact materially prejudice the Borrowers;

 

(v)           honor of a demand for payment presented electronically even if such Letter of Credit required that demand be in the form of a draft;

 

(vi)           any payment made by any L/C Issuer in respect of an otherwise complying item presented after the date specified as the expiration date of, or the date by which documents must be received under such Letter of Credit if presentation after such date is authorized by the UCC, the ISP or the UCP, as applicable;

 

(vii)          payment by the applicable L/C Issuer under a Letter of Credit against presentation of a draft or other document that does not comply strictly with the terms of such Letter of Credit; or any payment made by any L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any Debtor Relief Law;

 

(viii)         any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.06, constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrowers’ obligations hereunder; or

 

(ix)           any adverse change in the relevant exchange rates or in the availability of the relevant Alternative Currency to the Borrowers or any Subsidiary or in the relevant currency markets generally.

 

The applicable Borrower shall promptly examine a copy of each Letter of Credit and each amendment thereto that is delivered to it and, in the event of any claim of noncompliance with such Borrower’s instructions or other irregularity, the Opco Borrower will immediately notify the applicable L/C Issuer. The Borrowers shall be conclusively deemed to have waived any such claim against each L/C Issuer and its correspondents unless such notice is given as aforesaid.

 

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None of the Administrative Agent, the Lenders, any L/C Issuer, or any of their Related Parties shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit by the applicable L/C Issuer or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms, any error in translation or any consequence arising from causes beyond the control of the applicable L/C Issuer; provided that the foregoing shall not be construed to excuse an L/C Issuer from liability to the Borrowers to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrowers to the extent permitted by applicable Law) suffered by any Borrower that are caused by such L/C Issuer’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of an L/C Issuer (as finally determined by a court of competent jurisdiction), an L/C Issuer shall be deemed to have exercised care in each such determination, and that:

 

(A)            an L/C Issuer may replace a purportedly lost, stolen, or destroyed original Letter of Credit or missing amendment thereto with a certified true copy marked as such or waive a requirement for its presentation;

 

(B)            an L/C Issuer may accept documents that appear on their face to be in substantial compliance with the terms of a Letter of Credit without responsibility for further investigation, regardless of any notice or information to the contrary, and may make payment upon presentation of documents that appear on their face to be in substantial compliance with the terms of such Letter of Credit and without regard to any non-documentary condition in such Letter of Credit;

 

(C)            an L/C Issuer shall have the right, in its sole discretion, to decline to accept such documents and to make such payment if such documents are not in strict compliance with the terms of such Letter of Credit; and

 

(D)            this sentence shall establish the standard of care to be exercised by an L/C Issuer when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof (and the parties hereto hereby waive, to the extent permitted by applicable Law, any standard of care inconsistent with the foregoing).

 

Without limiting the foregoing, none of the Administrative Agent, the Lenders, any L/C Issuer, or any of their Related Parties shall have any liability or responsibility by reason of (i) any presentation that includes forged or fraudulent documents or that is otherwise affected by the fraudulent, bad faith, or illegal conduct of the beneficiary or other Person, (ii) an L/C Issuer declining to take-up documents and make payment (A) against documents that are fraudulent, forged, or for other reasons by which that it is entitled not to honor or (B) following a Borrower’s waiver of discrepancies with respect to such documents or request for honor of such documents or (iii) an L/C Issuer retaining proceeds of a Letter of Credit based on an apparently applicable attachment order, blocking regulation, or third-party claim notified to such L/C Issuer.

 

(h)            Applicability of ISP and UCP; Limitation of Liability. Unless otherwise expressly agreed by the applicable L/C Issuer and the applicable Borrower when a Letter of Credit is issued by it, (i) the rules of the ISP shall apply to each standby Letter of Credit, and (ii) the rules of the UCP shall apply to each commercial Letter of Credit. Notwithstanding the foregoing, no L/C Issuer shall be responsible to any Borrower for, and no L/C Issuer’s rights and remedies against any Borrower shall be impaired by, any action or inaction of any L/C Issuer required or permitted under any law, order, or practice that is required or permitted to be applied to any Letter of Credit or this Agreement, including the Law or any order of a jurisdiction where any L/C Issuer or the beneficiary is located, the practice stated in the ISP or UCP, as applicable, or in the decisions, opinions, practice statements, or official commentary of the ICC Banking Commission, the Bankers Association for Finance and Trade - International Financial Services Association (BAFT-IFSA), or the Institute of International Banking Law & Practice, whether or not any Letter of Credit chooses such law or practice.

 

(i)            Each L/C Issuer shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and each L/C Issuer shall have all of the benefits and immunities (A) provided to the Administrative Agent in Article VIII with respect to any acts taken or omissions suffered by such L/C Issuer in connection with Letters of Credit issued by it or proposed to be issued by it and Issuer Documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in Article VIII included such L/C Issuer with respect to such acts or omissions, and (B) as additionally provided herein with respect to such L/C Issuer.

 

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(j)            Letter of Credit Fees. The Borrowers shall pay to the Administrative Agent for the account of each Lender in accordance, subject to Section 2.22, with its Applicable Percentage a Letter of Credit fee (the “Letter of Credit Fee”) for each Letter of Credit equal to the Applicable Rate times the Dollar Amount of the daily amount available to be drawn under such Letter of Credit. For purposes of computing the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.08. Letter of Credit Fees shall be (i) due and payable on the first Business Day after the end of each March, June, September and December, commencing with the first such date to occur after the issuance of such Letter of Credit, on the Revolving Credit Maturity Date and thereafter on demand and (ii) computed on a quarterly basis in arrears. If there is any change in the Applicable Rate during any quarter, the daily amount available to be drawn under each Letter of Credit shall be computed and multiplied by the Applicable Rate separately for each period during such quarter that such Applicable Rate was in effect. Notwithstanding anything to the contrary contained herein, upon the request of the Required Lenders, while any Event of Default exists, all Letter of Credit Fees shall accrue at a rate equal to the Applicable Rate plus 2% per annum.

 

(k)            Fronting Fee and Documentary and Processing Charges Payable to L/C Issuers. The Borrowers shall pay directly to the applicable L/C Issuer for its own account a fronting fee, with respect to each Letter of Credit, at the rate per annum equal to the percentage separately agreed upon between the Company (or any Borrower) and such L/C Issuer, computed on the Dollar Amount of the daily amount available to be drawn under such Letter of Credit on a quarterly basis in arrears. Such fronting fee shall be due and payable on the first Business Day after the end of each March, June, September and December in respect of the most recently-ended quarterly period (or portion thereof, in the case of the first payment), commencing with the first such date to occur after the issuance of such Letter of Credit, on the Revolving Credit Maturity Date and thereafter on demand. For purposes of computing the Dollar Amount of the daily amount available to be drawn under any Letter of Credit, the amount of such Letter of Credit shall be determined in accordance with Section 1.08. In addition, the Borrowers shall pay directly to the applicable L/C Issuer for its own account the customary issuance, presentation, amendment and other processing fees, and other standard costs and charges, of such L/C Issuer relating to letters of credit as from time to time in effect. Such customary fees and standard costs and charges are due and payable on demand and are nonrefundable.

 

(l)            Disbursement Procedures. The L/C Issuer for any Letter of Credit shall, within the time allowed by applicable Laws or the specific terms of the Letter of Credit following its receipt thereof, examine all documents purporting to represent a demand for payment under such Letter of Credit. Such L/C Issuer shall promptly after such examination notify the Administrative Agent and the Opco Borrower in writing of such demand for payment if such L/C Issuer has made or will make an L/C Disbursement thereunder; provided that any failure to give or delay in giving such notice shall not relieve the Borrowers of their obligation to reimburse such L/C Issuer and the Lenders with respect to any such L/C Disbursement.

 

(m)            Interim Interest. If the L/C Issuer for any Letter of Credit shall make any L/C Disbursement, then, unless the Borrowers shall reimburse such L/C Disbursement in full on the date such L/C Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such L/C Disbursement is made to but excluding the date that the Borrowers reimburse such L/C Disbursement, at the rate per annum then applicable to ABR Loans; provided that, if the Borrowers fail to reimburse such L/C Disbursement when due pursuant to clause (f) of this Section 2.06, then Section 2.13(c) shall apply. Interest accrued pursuant to this clause (m) shall be for account of such L/C Issuer, except that interest accrued on and after the date of payment by any Lender pursuant to clause (f) of this Section 2.06 to reimburse such L/C Issuer shall be for account of such Lender to the extent of such payment.

 

(n)            Replacement of any L/C Issuer. Any L/C Issuer may be replaced at any time by written agreement between the Opco Borrower, the Administrative Agent, the replaced L/C Issuer and the successor L/C Issuer. The Administrative Agent shall notify the Lenders of any such replacement of an L/C Issuer. At the time any such replacement shall become effective, the Borrowers shall pay all unpaid fees accrued for the account of the replaced L/C Issuer pursuant to Section 2.06(j). From and after the effective date of any such replacement, (i) the successor L/C Issuer shall have all the rights and obligations of an L/C Issuer under this Agreement with respect to Letters of Credit to be issued by it thereafter and (ii) references herein to the term “L/C Issuer” shall be deemed to include such successor or any previous L/C Issuer, or such successor and all previous L/C Issuer, as the context shall require. After the replacement of an L/C Issuer hereunder, the replaced L/C Issuer shall remain a party hereto and shall continue to have all the rights and obligations of an L/C Issuer under this Agreement with respect to Letters of Credit issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

 

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(o)            Cash Collateralization. If any Event of Default shall occur and be continuing, on the Business Day that the Opco Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with L/C Obligations representing greater than 50% of the total L/C Obligations) demanding the deposit of Cash Collateral pursuant to this clause (o), the Borrowers shall immediately deposit into an account established and maintained on the books and records of the Administrative Agent (the “Collateral Account”) an amount in cash equal to 105% of the total L/C Obligations as of such date plus any accrued and unpaid interest thereon; provided that the obligation to deposit such Cash Collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to any Borrower described in clause (f) of Section 7.01. Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the obligations of the Borrowers under this Agreement. In addition, and without limiting the foregoing or clause (d) of this Section 2.06, if any L/C Obligations remain outstanding after the expiration date specified in said clause (d), the Borrowers shall immediately deposit into the Collateral Account an amount in cash equal to 105% of such L/C Obligations as of such date plus any accrued and unpaid interest thereon.

 

The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over the Collateral Account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrowers’ risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in the Collateral Account. Moneys in the Collateral Account shall be applied by the Administrative Agent to reimburse each L/C Issuer for L/C Disbursements for which it has not been reimbursed, together with related fees, costs, and customary processing charges, and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrowers for the L/C Obligations at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with L/C Obligations representing 50% of the total L/C Obligations), be applied to satisfy other obligations of the Borrowers under this Agreement. If any Borrower is required to provide an amount of Cash Collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Opco Borrower within three Business Days after all Events of Default have been cured or waived.

 

(p)            L/C Issuer Reports to the Administrative Agent. Unless otherwise agreed by the Administrative Agent, each L/C Issuer shall, in addition to its notification obligations set forth elsewhere in this Section 2.06, provide the Administrative Agent a Letter of Credit Report, as set forth below:

 

(i)            reasonably prior to the time that such L/C Issuer issues, amends, renews, increases or extends a Letter of Credit, the date of such issuance, amendment, renewal, increase or extension and the stated amount of the applicable Letters of Credit after giving effect to such issuance, amendment, renewal or extension (and whether the amounts thereof shall have changed);

 

(ii)            on each Business Day on which such L/C Issuer makes a payment pursuant to a Letter of Credit, the date and amount of such payment;

 

(iii)            on any Business Day on which a Borrower fails to reimburse a payment made pursuant to a Letter of Credit required to be reimbursed to such L/C Issuer on such day, the date of such failure and the amount of such payment;

 

(iv)          on any other Business Day, such other information as the Administrative Agent shall reasonably request as to the Letters of Credit issued by such L/C Issuer; and

 

(v)            for so long as any Letter of Credit issued by an L/C Issuer is outstanding, such L/C Issuer shall deliver to the Administrative Agent (A) on the last Business Day of each calendar month, (B) at all other times a Letter of Credit Report is required to be delivered pursuant to this Agreement and (C) on each date that (1) an L/C Credit Extension occurs or (2) there is any expiration, cancellation and/or disbursement, in each case, with respect to any such Letter of Credit, a Letter of Credit Report appropriately completed with the information for every outstanding Letter of Credit issued by such L/C Issuer.

 

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(q)            Letters of Credit Issued for Subsidiaries. Notwithstanding that a Letter of Credit issued or outstanding hereunder is in support of any obligations of, or is for the account of, a Subsidiary, the Borrowers shall be obligated to reimburse, indemnify and compensate the applicable L/C Issuer hereunder for any and all drawings under such Letter of Credit as if such Letter of Credit had been issued solely for the account of the Borrowers. Each Borrower irrevocably waives any and all defenses that might otherwise be available to it as a guarantor or surety of any or all of the obligations of such Subsidiary in respect of such Letter of Credit. The Borrowers hereby acknowledge that the issuance of Letters of Credit for the account of Subsidiaries inures to the benefit of the Borrowers, and that the Borrowers’ business derives substantial benefits from the businesses of such Subsidiaries.

 

(r)            Conflict with Issuer Documents. In the event of any conflict between the terms hereof and the terms of any Issuer Document, the terms hereof shall control.

 

SECTION 2.07.      Funding of Borrowings.

 

(a)            Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof solely by wire transfer of immediately available funds (i) in the case of Loans denominated in Dollars, by 2:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders and (ii) in the case of each Loan denominated in a Foreign Currency, by 12:00 noon, New York City time, in the city of the Administrative Agent’s Office for such currency and at such Administrative Agent’s Office for such currency; provided that (i) Term Loans shall be made as provided in Section 2.01(b) and Section 2.01(c) and (ii) Swingline Loans shall be made as provided in Section 2.05. The Administrative Agent will make such Loans available to the relevant Borrower by promptly crediting the funds so received in the aforesaid account of the Administrative Agent to (x) an account of the relevant Borrower maintained with the Administrative Agent and designated by the relevant Borrower in the applicable Borrowing Request, in the case of Loans denominated in Dollars and (y) an account of the relevant Borrower in the relevant jurisdiction and designated by the relevant Borrower in the applicable Borrowing Request, in the case of Loans denominated in a Foreign Currency; provided that Revolving Loans made to finance the reimbursement of an L/C Disbursement as provided in Section 2.06(f) shall be remitted by the Administrative Agent to the applicable L/C Issuer.

 

(b)            Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing (or in the case of an ABR Borrowing, prior to 2:00 p.m., New York City time, on the date of such Borrowing) that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the relevant Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the applicable Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount in Same Day Funds with interest thereon, for each day from and including the date such amount is made available to such Borrower to but excluding the date of payment to the Administrative Agent, at (A) in the case of a payment to be made by such Lender, the greater of the applicable Overnight Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Administrative Agent in connection with the foregoing, and (B) in the case of a payment to be made by such Borrower, the interest rate applicable to ABR Loans, or in the case of Alternative Currencies, in accordance with such market practice, in each case, as applicable. If such Borrower and such Lender shall pay such interest to the Administrative Agent for the same or an overlapping period, the Administrative Agent shall promptly remit to such Borrower the amount of such interest paid by such Borrower for such period. If such Lender pays its share of the applicable Borrowing to the Administrative Agent, then the amount so paid shall constitute such Lender’s Loan included in such Borrowing. Any payment by such Borrower shall be without prejudice to any claim the Borrowers may have against a Lender that shall have failed to make such payment to the Administrative Agent.

 

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SECTION 2.08.      Interest Elections.

 

(a)            Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request (or, if not so specified, as provided in Section 2.03) and, in the case of a Term SOFR Borrowing or an Alternative Currency Term Rate Borrowing, shall have an initial Interest Period as specified in such Borrowing Request (or, if not so specified, as provided in Section 2.03). Thereafter, the relevant Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Term SOFR Borrowing or an Alternative Currency Term Rate Borrowing, may elect Interest Periods therefor, all as provided in this Section. Each Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This Section shall not apply to Borrowings of Swingline Loans, which may not be converted or continued.

 

(b)            To make an election pursuant to this Section, a Borrower shall notify the Administrative Agent of such election (by irrevocable written notice via an Interest Election Request signed by such Borrower) by the time that a Borrowing Request would be required under Section 2.03 if such Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Notwithstanding any contrary provision herein, this Section shall not be construed to permit any Borrower to (i) change the currency of any Borrowing, (ii) elect an Interest Period for Term SOFR Loans or Alternative Currency Term Rate Loans that does not comply with Section 2.02(d) or (iii) convert any Borrowing to a Borrowing of a Type not available under the Class of Commitments pursuant to which such Borrowing was made.

 

(c)            Each Interest Election Request shall specify the following information in compliance with Section 2.02:

 

(i)            the name of each applicable Borrower and the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

 

(ii)             the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

 

(iii)            whether the resulting Borrowing is to be an ABR Borrowing, a Term SOFR Borrowing, a Daily SOFR Borrowing, an Alternative Currency Term Rate Borrowing or an Alternative Currency Daily Rate Borrowing; and

 

(iv)            if the resulting Borrowing is a Term SOFR Borrowing or an Alternative Currency Term Rate Borrowing, the Interest Period and Agreed Currency to be applicable thereto after giving effect to such election, which Interest Period shall be a period contemplated by the definition of the term “Interest Period”.

 

If any such Interest Election Request requests a Term SOFR Borrowing or an Alternative Currency Term Rate Borrowing but does not specify an Interest Period, then the applicable Borrower shall be deemed to have selected an Interest Period of one month’s duration.

 

(d)            Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

 

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(e)            If the relevant Borrower fails to deliver a timely Interest Election Request with respect to a conversion or continuation, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing; provided, however, that in the case of a failure to timely request a continuation of Alternative Currency Term Rate Loans, such Borrowing shall automatically continue as an Alternative Currency Term Rate Borrowing in the same Agreed Currency with an Interest Period of one month unless such Alternative Currency Term Rate Borrowing is or was repaid in accordance with Section 2.11. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Opco Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing denominated in Dollars may be converted to or continued as a Daily SOFR Borrowing or a Term SOFR Borrowing, (ii) unless repaid, each Daily SOFR Borrowing and Term SOFR Borrowing denominated in Dollars shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto and (iii) unless repaid, each Alternative Currency Term Rate Borrowing denominated in a Foreign Currency shall automatically be continued as an Alternative Currency Term Rate Borrowing with an Interest Period of one month.

 

(f)            Except as otherwise provided herein, a Term SOFR Loan or an Alternative Currency Term Rate Loan may be continued or converted only on the last day of an Interest Period for such Loan.

 

(g)            With respect to any Alternative Currency Daily Rate, Term SOFR, Daily SOFR or SOFR, the Administrative Agent will have the right (in consultation with the Opco Borrower) to make Conforming Changes from time to time in accordance with the terms of this Agreement and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other Loan Document; provided that, with respect to any such amendment effected, the Administrative Agent shall post each such amendment implementing such Conforming Changes to the Opco Borrower and the Lenders reasonably promptly after such amendment becomes effective.

 

SECTION 2.09.      Termination and Reduction of Commitments.

 

(a)            Unless previously terminated, (i) the Term Loan Commitments shall terminate on the Closing Date upon the funding of the Term Loans and (iii) the Revolving Commitments shall terminate on the Revolving Credit Maturity Date (subject to Section 2.23).

 

(b)            The Opco Borrower may at any time terminate, or from time to time reduce, the Revolving Commitments; provided that (i) each reduction of the Revolving Commitments shall be in an amount that is an integral multiple of $500,000 and not less than $1,000,000 and (ii) the Opco Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.11, the Dollar Amount of the Total Revolving Credit Exposure would exceed the aggregate Revolving Commitments.

 

(c)            Notwithstanding the foregoing, upon the acquisition of one Lender by another Lender, or the merger, consolidation or other combination of any two or more Lenders (any such acquisition, merger, consolidation or other combination being referred to hereinafter as a “Combination” and each Lender which is a party to such Combination being hereinafter referred to as a “Combined Lender”), the Opco Borrower may notify the Administrative Agent that it desires to reduce the Commitment of the Lender surviving such Combination (the “Surviving Lender”) to an amount equal to the Commitment of that Combined Lender which had the largest Commitment of each of the Combined Lenders party to such Combination (such largest Commitment being the “Surviving Commitment” and the Commitments of the other Combined Lenders being hereinafter referred to, collectively, as the “Retired Commitments”). If the Required Lenders (determined as set forth below) and the Administrative Agent agree to such reduction in the Surviving Lender’s Commitment, then (i) the aggregate amount of the Commitments shall be reduced by the Retired Commitments effective upon the effective date of the Combination (or such later date as the Opco Borrower may specify in its request); provided that, on or before such date the Borrowers have paid in full the outstanding principal amount of the Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder of each of the Combined Lenders other than the Combined Lender whose Commitment is the Surviving Commitment, (ii) from and after the effective date of such reduction, the Surviving Lender shall have no obligation with respect to the Retired Commitments, and (iii) the Opco Borrower shall notify the Administrative Agent whether it wants such reduction to be a permanent reduction or a temporary reduction. If such reduction is to be a temporary reduction, then the Opco Borrower shall be responsible for finding one or more financial institutions (which for the avoidance of doubt may be an existing Lender) (each, a “Replacement Lender”), acceptable to the Administrative Agent (such acceptance not to be unreasonably withheld, conditioned or delayed), willing to assume the obligations of a Lender hereunder with aggregate Commitments up to the amount of the Retired Commitments. The Administrative Agent may require the Replacement Lenders to execute such documents, instruments or agreements as the Administrative Agent reasonably deems necessary or desirable to evidence such Replacement Lenders’ agreement to become parties hereunder. For purposes of this paragraph (c), Required Lenders shall be determined as if the reduction in the aggregate amount of the Commitments requested by the Opco Borrower had occurred (i.e., the Combined Lenders shall be deemed to have a single Commitment equal to the Surviving Commitment and the aggregate amount of the Commitments shall be deemed to have been reduced by the Retired Commitments).

 

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(d)            The Opco Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Opco Borrower pursuant to this Section shall be irrevocable; provided that a notice to terminate or reduce the Commitments delivered by the Opco Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities or other transactions specified therein, in which case such notice may be revoked by the Opco Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.

 

(e)            Notwithstanding anything to the contrary herein or in any other Loan Document, the Term Loan Commitments and the Revolving Commitments shall terminate on the date, if any, that is the earliest of (i) March 30, 2023 if the Closing Date shall not have occurred on or prior to such date, (ii) a public announcement by the Company that the board of directors of the Company has determined not to proceed with the Spin-Off (excluding, for the avoidance of doubt, any such announcement regarding a delay of the Spin-Off) and (iii) the occurrence of the Spin-Off if the Closing Date shall not have occurred on or prior to such date.

 

SECTION 2.10.      Repayment and Amortization of Loans; Evidence of Debt.

 

(a)            Each Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Revolving Lender the then unpaid principal amount of each Revolving Loan on the Revolving Credit Maturity Date in the currency of such Loan and (ii) to the applicable Swingline Lender (with notice of each such payment being delivered by such Borrower to the Administrative Agent) the then unpaid principal amount of each Swingline Loan made by such Swingline Lender on the earlier of the Revolving Credit Maturity Date and the 15th Business Day after the date such Swingline Loan is made; provided that, on each date that a Revolving Borrowing is made, the Opco Borrower shall repay all Swingline Loans then outstanding and the proceeds of any such Borrowing shall be applied by the Administrative Agent to repay any Swingline Loans outstanding.

 

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(b)            The relevant Borrower shall repay the outstanding Term Loans on the following dates in the respective amounts set forth opposite such dates (which amounts shall be reduced as a result of the application of prepayments made in accordance with Section 2.11):

 

Date Aggregate Annual Amount
The last Business Day of each of the first four full Fiscal Quarters of the Parent Borrower occurring after the Closing Date. 0.000% of the aggregate principal amount of Term Loans incurred on the Closing Date.

The last Business Day of each of the fifth, sixth, seventh and eighth full Fiscal Quarters of the Parent Borrower occurring after the Closing Date. 

 2.500% of the aggregate principal amount of Term Loans incurred on the Closing Date.
The last Business Day of each of the ninth, tenth, eleventh and twelfth full Fiscal Quarters of the Parent Borrower occurring after the Closing Date. 5.000% of the aggregate principal amount of Term Loans incurred on the Closing Date.
The last Business Day of each of the thirteenth, fourteenth, fifteenth and sixteenth full Fiscal Quarters of the Parent Borrower occurring after the Closing Date. 5.000% of the aggregate principal amount of Term Loans incurred on the Closing Date.
The last Business Day of each of the Fiscal Quarters of the Parent Borrower occurring thereafter. 5.000% of the aggregate principal amount of Term Loans incurred on the Closing Date.

 

provided, however, that the final principal repayment installment of the Term Loans shall be repaid on the Term Loan Maturity Date and in any event shall be in an amount equal to the aggregate principal amount of all Term Loans outstanding on such date.

 

(c)            Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of each Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

 

(d)            The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class, Agreed Currency and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from each Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

 

(e)            The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the Obligations.

 

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(f)            Any Lender may request that Loans made by it be evidenced by a promissory note. In such event, the relevant Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form.

 

SECTION 2.11.      Prepayment of Loans.

 

(a)            The Opco Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, without premium or penalty (but subject to break funding payments required by Section 2.16), subject to prior notice in accordance with the provisions of this Section 2.11(a). The applicable Borrower, or the Opco Borrower on behalf of the applicable Borrower, shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the applicable Swingline Lender) by written notice (promptly followed by telephonic confirmation of such request) of any prepayment hereunder (i) in the case of prepayment of a Borrowing (other than an ABR Borrowing or a Daily SOFR Loan), not later than 12:00 noon, New York City time, three (3) Business Days (or such shorter period of time as the Administrative Agent may agree) before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing or a Daily SOFR Loan, not later than 12:00 noon, New York City time, on the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 1:00 pm, New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, (y) if a notice of prepayment is given in connection with a conditional notice of reduction or termination of the Commitments as contemplated by Section 2.09, then such notice of prepayment may be revoked if such notice of reduction or termination is revoked in accordance with Section 2.09 and (z) a notice of prepayment by any Borrower, or the Opco Borrower on behalf of any Borrower, may state that such notice is conditioned upon the effectiveness of other credit facilities or other transactions specified therein, in which case such notice may be revoked by the applicable Borrower, or the Opco Borrower on behalf of the applicable Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02. Each prepayment of a Revolving Borrowing shall be applied ratably to the Revolving Loans included in the prepaid Revolving Borrowing and each voluntary prepayment of a Term Loan Borrowing shall be applied ratably to the Term Loans included in the prepaid Term Loan Borrowing in such order of application as directed by the Opco Borrower. Prepayments shall be accompanied by (i) accrued interest to the extent required by Section 2.13 and (ii) any break funding payments required by Section 2.16.

 

(b)            If at any time, (i) other than as a result of fluctuations in currency exchange rates, (A) the aggregate principal Dollar Amount of the Total Revolving Credit Exposure (calculated, with respect to those Borrowings denominated in Foreign Currencies, as of the most recent Computation Date with respect to each such Borrowing) exceeds the aggregate Revolving Commitments or (B) the aggregate principal Dollar Amount of the Total Revolving Credit Exposure denominated in Foreign Currencies (the “Foreign Currency Exposure”) (so calculated), as of the most recent Computation Date with respect to each such Borrowing, exceeds the Foreign Currency Sublimit or (ii) solely as a result of fluctuations in currency exchange rates, (A) the aggregate principal Dollar Amount of the Total Revolving Credit Exposure (so calculated) exceeds 105% of the aggregate Revolving Commitments or (B) the Foreign Currency Exposure, as of the most recent Computation Date with respect to each such Borrowing, exceeds 105% of the Foreign Currency Sublimit, the Borrowers shall, within two Business Days after receipt of written notice from the Administrative Agent, in each such case repay Revolving Borrowings in an aggregate principal amount sufficient to cause (x) the aggregate Dollar Amount of the Total Revolving Credit Exposure (so calculated) to be less than or equal to the aggregate Revolving Commitments and (y) the Foreign Currency Exposure to be less than or equal to the Foreign Currency Sublimit, as applicable.

 

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(c)            Upon the incurrence or issuance of any Debt for borrowed money by the Parent Borrower and/or any of its Subsidiaries (other than any Debt permitted by Section 6.02), the applicable Borrower(s) shall prepay the Term Loans in an aggregate amount equal to 100% of the Net Proceeds received in connection with the incurrence or issuance of such Debt no later than (1) in the case of the incurrence or issuance by the Parent Borrower, the Opco Borrower or a Domestic Subsidiary, the fifth Business Day or (2) in the case of the incurrence or issuance by a Foreign Subsidiary, the tenth Business Day, in each case, following receipt of such Net Proceeds by the Parent Borrower and/or its Subsidiaries.

 

(d)            In the event and on each occasion that any Net Proceeds are received by or on behalf of the Parent Borrower or any of its Subsidiaries in respect of any Prepayment Event, the applicable Borrower(s) shall, within five Business Days after such Net Proceeds are received, prepay the Term Loans in an aggregate amount equal to 100% of such Net Proceeds; provided that, if the Opco Borrower shall deliver to the Administrative Agent a certificate of a Financial Officer to the effect that the Parent Borrower and/or any of its Subsidiaries intends to apply the Net Proceeds from such event (or a portion thereof specified in such certificate), within 365 days after receipt of such Net Proceeds, to acquire (or replace, rebuild, construct or upgrade) real property, equipment or other tangible assets (excluding inventory) to be used in the business of the Parent Borrower and/or any of its Subsidiaries, to make Permitted Acquisitions and/or other permitted Investments (excluding cash and Cash Equivalents and Investments in the Parent Borrower and its Subsidiaries), to reimburse the cost of any of the foregoing and/or, in the case of any Net Proceeds received by a Foreign Subsidiary, to make a repayment under any local credit facility constituting Debt to the extent required by such credit facility and certifying that no Default has occurred and is continuing, then no prepayment shall be required pursuant to this paragraph in respect of the Net Proceeds specified in such certificate; provided further that, to the extent of any such Net Proceeds therefrom that have not been so applied by the end of such 365-day period (or within a period of 180 days thereafter if, by the end of such initial 365-day period, the Parent Borrower and/or one or more of its Subsidiaries shall have entered into an agreement with an unaffiliated third party to use such Net Proceeds as provided above), a prepayment on the last day of such period shall be required in an amount equal to such Net Proceeds that have not been so applied.

 

(e)            Upon (1) the termination of a Designated Subsidiary Borrower’s status as a “Designated Subsidiary Borrower” or (2) the Disposition of a Designated Subsidiary Borrower in a Disposition permitted under Section 6.05 (other than the merger into or consolidation with any other Subsidiary to the extent such continuing or surviving Person of such transaction shall be a Designated Subsidiary Borrower), such Designated Subsidiary Borrower shall, prior to such termination or Disposition, repay and satisfy (or cause to be repaid and satisfied) in full in cash its respective Obligations.

 

(f)            All amounts prepaid pursuant to Sections 2.11(c) and (d) shall, unless otherwise directed by the Opco Borrower, be applied to prepay the Term Loans (i) first, to the next eight scheduled principal installments in respect of the Term Loans immediately following the date of prepayment in direct order of maturity and (ii) thereafter, pro rata to all remaining scheduled principal installments of the Term Loans (excluding the final payment of the Term Loans on the Term Loan Maturity Date).

 

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(g)            Notwithstanding any other provisions of this Section 2.11 to the contrary, (i) to the extent that any or all of the Net Proceeds of any Prepayment Event by a Foreign Subsidiary giving rise to a prepayment event under Section 2.11(d) (a “Foreign Subsidiary Asset Sale Recovery Event”) are prohibited or delayed by applicable local law from being repatriated to the United States, an amount equal to the portion of such Net Proceeds so affected will not be required to be paid by the applicable Borrower(s) in respect of the Term Loans at the times provided in this Section 2.11 so long as the applicable local law will not permit repatriation to the United States (the Opco Borrower hereby agreeing to cause the applicable Foreign Subsidiary to promptly take all commercially reasonable actions required by the applicable local law to permit such repatriation), and once such repatriation of any of such affected Net Proceeds would be permitted under the applicable local law, the applicable Borrower(s) will promptly (and in any event not later than five (5) Business Days after the date that such repatriation would be permitted under applicable local law) prepay the Term Loans in an amount equal to such Net Proceeds, which amount shall be applied to the repayment of the Term Loans pursuant to this Section 2.11 to the extent otherwise provided herein or (ii) to the extent that the Opco Borrower has determined in good faith that repatriation of any of or all Net Proceeds from such Foreign Subsidiary Asset Sale Recovery Event could reasonably be expected to result in a material adverse tax consequence to the Parent Borrower or its Subsidiaries with respect to such Net Proceeds, the applicable Borrower(s) shall have no obligation to repay an amount equal to such Net Proceeds so affected until such time that such amounts could be repatriated without incurring such material adverse tax consequence, and once any of such affected Net Proceeds is able to be repatriated to the United States without such material adverse tax consequence, the applicable Borrower(s) will promptly (and in any event not later than five (5) Business Days after such repatriation would cease to incur such material adverse tax consequence) prepay the Term Loans in an amount equal to such Net Proceeds, which amount shall be applied to the repayment of the Term Loans pursuant to this Section 2.11 to the extent otherwise provided herein. Nothing in this Section 2.11 shall be construed as a covenant by any Foreign Subsidiary to distribute any amounts to any Loan Party or a covenant by the Parent Borrower or any Loan Party to cause any Foreign Subsidiary to distribute any amounts to any Loan Party (it being understood that this Section 2.11(g) requires only that the applicable Borrower(s) repay the Term Loans in certain amounts calculated by reference to certain Foreign Subsidiary Asset Sale Recovery Events).

 

SECTION 2.12.      Fees.

 

(a)            The Opco Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee, which shall accrue at the applicable Commitment Fee Rate (as specified in the definition of “Applicable Rate”) on the actual daily amount of the Available Revolving Commitment of such Lender during the period from and including the Closing Date to but excluding the date on which such Commitment terminates. Commitment fees accrued through and including the last day of March, June, September and December of each year shall be payable in arrears on the last Business Day of March, June, September and December and on the date on which the Revolving Commitments terminate, commencing on the first such date to occur after the date hereof; provided that any commitment fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).

 

(b)            The Opco Borrower agrees to pay to the Administrative Agent for the account of each Lender a ticking fee, which shall accrue at a rate per annum based on the following grid on the amount of such Lender’s Commitment during the period from and including the Effective Date to but excluding the earliest of (i) the Closing Date, (ii) the consummation of the Spin-Off and (iii) the date on which the Commitments terminate (such earliest date, the “Ticking Fee Date”). All ticking fees shall be payable on the Ticking Fee Date and shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day):

 

Period  Rate 
Days 0-44 after Effective Date   0.20%
Days 45-89 after Effective Date   0.30%
Days 90-134 after Effective Date   0.40%
Days 135-179 after Effective Date   0.50%

 

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(c)            The Opco Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon in writing between the Company (or any Borrower) and the Administrative Agent.

 

(d)            All fees payable hereunder shall be paid on the dates due, in Dollars (except as otherwise expressly provided in Section 2.06 or this Section 2.12) and immediately available funds, to the Administrative Agent (or to the L/C Issuers, in the case of fees payable thereto) for distribution, in the case of commitment fees and participation fees, to the applicable Lenders. Fees paid shall not be refundable under any circumstances.

 

SECTION 2.13.      Interest.

 

(a)            The Loans comprising each ABR Borrowing (other than any Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.

 

(b)            Each Swingline Loan shall bear interest at a rate per annum agreed upon between the Opco Borrower and the relevant Swingline Lender (or, if such a rate per annum is not agreed upon between the Opco Borrower and the relevant Swingline Lender in respect of a Swingline Loan, such Swingline Loan shall bear interest at the Alternate Base Rate plus the Applicable Rate). The Loans comprising each Alternative Currency Daily Rate Borrowing shall bear interest at a rate per annum equal to the Alternative Currency Daily Rate plus the Applicable Rate. The Loans comprising each Alternative Currency Term Rate Borrowing shall bear interest at a rate per annum equal to the Alternative Currency Term Rate for the Interest Period for such Borrowing plus the Applicable Rate. The Loans comprising each Term SOFR Borrowing shall bear interest at a rate per annum equal to Term SOFR for the Interest Period in effect for such Borrowing, plus the Applicable Rate. The Loans comprising each Daily SOFR Borrowing shall bear interest at a rate per annum equal to Daily SOFR plus the Applicable Rate.

 

(c)            Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by any Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section.

 

(d)            Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of Revolving Loans, upon termination of the Revolving Commitments; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Daily SOFR Loan, Term SOFR Loan or Alternative Currency Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

 

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(e)           All interest hereunder shall be computed on the basis of a year of 360 days, except that interest (i) computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the prime rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), (ii) for Borrowings denominated in Pounds Sterling shall be computed on the basis of a year of 365 days, and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day) and (iii) in the case of interest in respect of Loans denominated in Alternative Currencies as to which market practice differs from the foregoing, in accordance with such market practice. The applicable Alternate Base Rate, SOFR, Term SOFR, Daily SOFR, Alternative Currency Daily Rate or Alternative Currency Term Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent demonstrable error.

 

(f)            Interest in respect of Loans denominated in Dollars shall be paid in Dollars, and interest in respect of Loans denominated in a Foreign Currency shall be paid in such Foreign Currency.

 

SECTION 2.14.     Alternate Rate of Interest.

 

(a)           If in connection with any request for a Daily SOFR Loan, a Term SOFR Loan or an Alternative Currency Loan or a conversion of ABR Loans to a Daily SOFR Loan, a Term SOFR Loan or an Alternative Currency Loan or a continuation of any of such Loans, as applicable, (i) the Administrative Agent determines (which determination shall be conclusive absent demonstrable error) that (A) no Successor Rate for the Relevant Rate for the applicable Agreed Currency has been determined in accordance with Section 2.14(b) or Section 2.14(c) and the circumstances under clause (i) of Section 2.14(b) or of Section 2.14(c) or the Scheduled Unavailability Date, or the SOFR Scheduled Unavailability Date, has occurred with respect to such Relevant Rate (as applicable), or (B) adequate and reasonable means do not otherwise exist for determining the Relevant Rate for the applicable Agreed Currency for any determination date(s) or requested Interest Period, as applicable, with respect to a proposed Daily SOFR Loan, Term SOFR Loan or Alternative Currency Loan or in connection with an existing or proposed ABR Loan, or (ii) the Administrative Agent or the Required Lenders determine that for any reason that the Relevant Rate with respect to a proposed Loan denominated in an Agreed Currency for any requested Interest Period or determination date(s) does not adequately and fairly reflect the cost to such Lenders of funding such Loan, the Administrative Agent will promptly so notify the Opco Borrower and each Lender.

 

Thereafter, (x) the obligation of the Lenders to make or maintain Daily SOFR Loans, Term SOFR Loans or Loans in the affected currencies, as applicable, or to convert ABR Loans to Daily SOFR Loans, Term SOFR Loans or Loans in the affected currencies, as applicable, shall be suspended in each case to the extent of the affected Daily SOFR Loans, Term SOFR Loans, Alternative Currency Loans or Interest Period or determination date(s), as applicable, and (y) in the event of a determination described in the preceding sentence with respect to the Term SOFR component of the Alternate Base Rate, the utilization of the Term SOFR component in determining the Alternate Base Rate shall be suspended, in each case until the Administrative Agent (or, in the case of a determination by the Required Lenders described in clause (ii) of this Section 2.14(a), until the Administrative Agent upon instruction of the Required Lenders) revokes such notice, which the Administrative Agent hereby agrees to do reasonably promptly following its determination (or the determination of the Required Lenders, as the case may be) that the aforementioned circumstances have ceased to exist.

 

Upon the Opco Borrower’s receipt of such notice, (i) the Opco Borrower may revoke any pending request for a Borrowing of, or conversion to Daily SOFR Loans, Term SOFR Loans or Alternative Currency Loans or Borrowing of, or continuation of, Daily SOFR Loans, Term SOFR Loans or Alternative Currency Loans to the extent of the affected Term SOFR Loans, Alternative Currency Loans or Interest Period or determination date(s), as applicable or, failing that, will be deemed to have converted such request into a request for a Borrowing of ABR Loans denominated in Dollars in the Dollar Amount of the amount specified therein and (ii) (A) any outstanding Daily SOFR Loans and Term SOFR Loans shall be deemed to have been converted to ABR Loans immediately and (B) any outstanding affected Alternative Currency Loans, at the Opco Borrower’s election, shall either (1) be converted into a Borrowing of ABR Loans denominated in Dollars in the Dollar Amount of such outstanding Alternative Currency Loan immediately, in the case of an Alternative Currency Daily Rate Loan or at the end of the applicable Interest Period, in the case of an Alternative Currency Term Rate Loan or (2) be prepaid in full immediately, in the case of an Alternative Currency Daily Rate Loan, or at the end of the applicable Interest Period, in the case of an Alternative Currency Term Rate Loan; provided that, if no election is made by the Opco Borrower (x) in the case of an Alternative Currency Daily Rate Loan, by the date that is three Business Days after receipt by the Opco Borrower of such notice or (y) in the case of an Alternative Currency Term Rate Loan, by the last day of the current Interest Period for the applicable Alternative Currency Term Rate Loan, the Opco Borrower shall be deemed to have elected clause (1) above.

 

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(b)           Replacement of SOFR or SOFR Successor Rate. Notwithstanding anything to the contrary in this Agreement or any other Loan Documents, if the Administrative Agent determines (which determination shall be conclusive absent demonstrable error), or the Opco Borrower or Required Lenders notify the Administrative Agent (with, in the case of the Required Lenders, a copy to the Opco Borrower) that the Opco Borrower or Required Lenders (as applicable) have determined, that:

 

(i)            adequate and reasonable means do not exist for ascertaining SOFR because SOFR is not available or published on a current basis and such circumstances are unlikely to be temporary; or

 

(ii)           the Applicable Authority has made a public statement identifying a specific date after which SOFR shall or will no longer be made available, or permitted to be used for determining the interest rate of syndicated loans denominated in Dollars, or shall or will otherwise cease; provided that, in each case, at the time of such statement, there is no successor administrator that is satisfactory to the Administrative Agent that will continue to provide SOFR (the date on which SOFR is no longer available permanently or indefinitely, the “SOFR Scheduled Unavailability Date”);

 

or if the events or circumstances of the type described in Section 2.14(b)(i) or (ii) have occurred with respect to the SOFR Successor Rate then in effect, then, the Administrative Agent and the Opco Borrower may amend this Agreement solely for the purpose of replacing SOFR for Dollars or any then current SOFR Successor Rate for Dollars in accordance with this Section 2.14 with an alternative benchmark rate giving due consideration to any evolving or then existing convention for similar credit facilities syndicated and agented in the U.S. and denominated in Dollars for such alternative benchmarks, and, in each case, including any mathematical or other adjustments to such benchmark giving due consideration to any evolving or then existing convention for similar credit facilities syndicated and agented in the U.S. and denominated in Dollars for such benchmarks, which adjustment or method for calculating such adjustment shall be published on an information service as reasonably selected in good faith by the Administrative Agent from time to time in its reasonable discretion and may be periodically updated (and any such proposed rate, including for the avoidance of doubt, any adjustment thereto, a “SOFR Successor Rate”), and any such amendment shall become effective at 5:00 p.m. on the fifth Business Day after the Administrative Agent shall have posted such proposed amendment to all Lenders and the Opco Borrower unless, prior to such time, Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders object to such amendment.

 

Notwithstanding the foregoing paragraph, it is understood that, to the extent the Administrative Agent has determined that Section 2.14(b)(i) or (ii) is applicable with respect to Term SOFR and Daily SOFR is available, the Successor Rate for Term SOFR will be Daily SOFR plus the SOFR Adjustment for any payment period for interest calculated that can be determined by the Administrative Agent, without any amendment to, or further action or consent of any other party to, this Agreement or any other Loan Document.

 

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(c)           Replacement of Relevant Rate or Successor Rate. Notwithstanding anything to the contrary in this Agreement or any other Loan Documents, if the Administrative Agent determines (which determination shall be conclusive absent demonstrable error), or the Opco Borrower or Required Lenders notify the Administrative Agent (with, in the case of the Required Lenders, a copy to the Opco Borrower) that the Opco Borrower or Required Lenders (as applicable) have determined, that:

 

(i)            adequate and reasonable means do not exist for ascertaining the Relevant Rate (other than SOFR) for an Agreed Currency (other than Dollars) because none of the tenors of such Relevant Rate (other than SOFR) under this Agreement is available or published on a current basis, and such circumstances are unlikely to be temporary; or

 

(ii)           the Applicable Authority has made a public statement identifying a specific date after which all tenors of the Relevant Rate (other than SOFR) for an Agreed Currency (other than Dollars) under this Agreement shall or will no longer be representative or made available, or permitted to be used for determining the interest rate of syndicated loans denominated in such Agreed Currency (other than Dollars), or shall or will otherwise cease; provided that, in each case, at the time of such statement, there is no successor administrator that is satisfactory to the Administrative Agent that will continue to provide such representative tenor(s) of the Relevant Rate (other than SOFR) for such Agreed Currency (other than Dollars) (the latest date on which all tenors of the Relevant Rate for such Agreed Currency (other than Dollars) under this Agreement are no longer representative or available permanently or indefinitely, the “Scheduled Unavailability Date”);

 

or if the events or circumstances of the type described in Section 2.14(c)(i) or (ii) have occurred with respect to the Successor Rate then in effect, then, the Administrative Agent and the Opco Borrower may amend this Agreement solely for the purpose of replacing the Relevant Rate for an Agreed Currency or any then current Successor Rate for an Agreed Currency in accordance with this Section 2.14 with an alternative benchmark rate giving due consideration to any evolving or then existing convention for similar credit facilities syndicated and agented in the U.S. and denominated in such Agreed Currency for such alternative benchmarks, and, in each case, including any mathematical or other adjustments to such benchmark giving due consideration to any evolving or then existing convention for similar credit facilities syndicated and agented in the U.S. and denominated in such Agreed Currency for such benchmarks, which adjustment or method for calculating such adjustment shall be published on an information service as reasonably selected in good faith by the Administrative Agent from time to time in its reasonable discretion and may be periodically updated (and any such proposed rate, including for the avoidance of doubt, any adjustment thereto, a “Non-SOFR Successor Rate” and, collectively with the SOFR Successor Rate, each, a “Successor Rate”), and any such amendment shall become effective at 5:00 p.m. on the fifth Business Day after the Administrative Agent shall have posted such proposed amendment to all Lenders and the Opco Borrower unless, prior to such time, Lenders comprising the Required Lenders have delivered to the Administrative Agent written notice that such Required Lenders object to such amendment.

 

(d)          Successor Rate. The Administrative Agent will promptly (in one or more notices) notify the Opco Borrower and each Lender of the implementation of any Successor Rate.

 

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Any Successor Rate shall be applied in a manner consistent with market practice; provided that to the extent such market practice is not administratively feasible for the Administrative Agent, such Successor Rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.

 

Notwithstanding anything else herein, if at any time any Successor Rate as so determined would otherwise be less than zero, the Successor Rate will be deemed to be zero for the purposes of this Agreement and the other Loan Documents.

 

In connection with the implementation of a Successor Rate the Administrative Agent will have the right (in consultation with the Opco Borrower) to make Conforming Changes from time to time in accordance with the terms of this Agreement and, notwithstanding anything to the contrary herein or in any other Loan Document, any amendments implementing such Conforming Changes will become effective without any further action or consent of any other party to this Agreement; provided that, with respect to any such amendment effected, the Administrative Agent shall post each such amendment implementing such Conforming Changes to the Opco Borrower and the Lenders reasonably promptly after such amendment becomes effective.

 

(e)           For purposes of this Section 2.14, those Lenders that either have not made, or do not have an obligation under this Agreement to make, the relevant Loans in the relevant Alternative Currency shall be excluded from any determination of Required Lenders.

 

SECTION 2.15.      Increased Costs.

 

(a)           If any Change in Law shall:

 

(i)            impose, modify or deem applicable any reserve, special deposit, liquidity or similar requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, any Lender (except any reserve requirement expressly reflected in the applicable interest rate) or L/C Issuer;

 

(ii)           impose on any Lender or L/C Issuer or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender or participation therein; or

 

(iii)          subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (d) of the definition of “Excluded Taxes” and (C) Connection Income Taxes) on its loans, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

 

and the result of any of the foregoing shall be to increase the cost to such Lender, such L/C Issuer or such other Recipient of making, continuing, converting or maintaining any Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender, such L/C Issuer or such other Recipient hereunder (whether of principal, interest or otherwise), then the Opco Borrower will pay (or cause the applicable Designated Subsidiary Borrower to pay) to such Lender, such L/C Issuer or such other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, such L/C Issuer or such other Recipient, as the case may be, for such additional costs incurred or reduction suffered as reasonably determined by the Administrative Agent or such Lender or L/C Issuer (which determination shall be made in good faith (and not on an arbitrary or capricious basis) and generally consistent with similarly situated customers of the Administrative Agent or such Lender or L/C Issuer under agreements having provisions similar to this Section 2.15, after consideration of such factors as the Administrative Agent or such Lender or L/C Issuer, as applicable, then reasonably determines to be relevant).

 

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(b)           If any Lender or L/C Issuer determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or L/C Issuer’s capital or on the capital of such Lender’s or L/C Issuer’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit or Swingline Loans held by, such Lender, or the Letters of Credit issued by such L/C Issuer, to a level below that which such Lender or L/C Issuer or such Lender’s or L/C Issuer’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or L/C Issuer’s policies and the policies of such Lender’s or L/C Issuer’s holding company with respect to capital adequacy and liquidity), then from time to time the Opco Borrower will pay (or cause the applicable Designated Subsidiary Borrower to pay) to such Lender or L/C Issuer, as the case may be, such additional amount or amounts as will compensate such Lender or L/C Issuer or such Lender’s or L/C Issuer’s holding company for any such reduction suffered as reasonably determined by the Administrative Agent or such Lender or L/C Issuer (which determination shall be made in good faith (and not on an arbitrary or capricious basis) and generally consistent with similarly situated customers of the Administrative Agent or such Lender or L/C Issuer, as applicable, under agreements having provisions similar to this Section 2.15, after consideration of such factors as the Administrative Agent or such Lender or L/C Issuer, as applicable, then reasonably determines to be relevant).

 

(c)           A certificate of a Lender or an L/C Issuer setting forth the amount or amounts necessary to compensate such Lender or L/C Issuer or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section shall be delivered to the Opco Borrower contemporaneously with any demand for payment and shall be conclusive absent demonstrable error. The Borrowers shall pay such Lender or L/C Issuer, as the case may be, the amount due within thirty (30) days after receipt thereof.

 

(d)          Failure or delay on the part of any Lender or L/C Issuer to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or L/C Issuer’s right to demand such compensation; provided that the Opco Borrower shall not be required to compensate a Lender or an L/C Issuer pursuant to this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender or L/C Issuer, as the case may be, notifies the Opco Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or L/C Issuer’s demand for compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 90-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

SECTION 2.16.      Break Funding Payments. In the event of (a) the payment of any principal of any Loan (other than an ABR Loan) other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default or as a result of any prepayment pursuant to Section 2.11), (b) the conversion of any Loan (other than an ABR Loan) other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Loan (other than an ABR Loan) on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(a) and is revoked in accordance therewith) or (d) the assignment of any Loan (other than an ABR Loan) other than on the last day of the Interest Period applicable thereto as a result of a request by the Opco Borrower pursuant to Section 2.19 or 9.02(e), then, in any such event, the Opco Borrower shall compensate each Lender for the loss, cost and expense arising from such event. For purposes of calculating amounts payable by the Borrowers to the Lenders under this Section 2.16, each applicable Loan made by a Lender (and each related reserve, special deposit or similar requirement) shall be conclusively deemed to have been funded at Term SOFR or the applicable Relevant Rate used in determining the rate for such Loan by a matching deposit or other borrowing in the interbank market for such currency for a comparable amount and for a comparable period, whether or not such Loan was in fact so funded. A certificate of any Lender setting forth in reasonable detail any amount or amounts that such Lender is entitled to receive pursuant to this Section shall be delivered to the Opco Borrower and shall be conclusive absent demonstrable error. The Opco Borrower shall pay such Lender the amount due within thirty (30) days after receipt thereof.

 

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SECTION 2.17.      Taxes.

 

(a)            Payments Free of Taxes. All payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable Law. If any applicable Law (as determined in the good faith discretion of an applicable withholding agent) requires the deduction or withholding of any Tax from any such payment by any applicable withholding agent, then the applicable withholding agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.17) the applicable Lender (or, in the case of a payment received by the Administrative Agent for its own account, the Administrative Agent) receives an amount equal to the sum it would have received had no such deduction or withholding been made.

 

(b)            Payment of Other Taxes by the Opco Borrower. The Opco Borrower shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for, Other Taxes.

 

(c)            Evidence of Payments. As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 2.17, such Loan Party shall deliver to the Administrative Agent the original or a copy of a receipt issued by such Governmental Authority, if any, evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

(d)            Indemnification by the Loan Parties. The Loan Parties shall indemnify each Recipient, within 10 Business Days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Opco Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, in each case contemporaneously with such demand, shall be conclusive absent demonstrable error.

 

(e)            [Reserved]

 

(f)            Status of Lenders. (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to any payments made under any Loan Document shall deliver to the Opco Borrower and the Administrative Agent, at the time or times reasonably requested by the Opco Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Opco Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Opco Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable Law or reasonably requested by the Opco Borrower or the Administrative Agent as will enable the Opco Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements.

 

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(ii)            Without limiting the generality of the foregoing:

 

(A)            any Lender that is a U.S. Person shall deliver to the Opco Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Opco Borrower or the Administrative Agent), an executed copy of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

(B)            any Foreign Lender shall, to the extent it is legally eligible to do so, deliver to the Opco Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Opco Borrower or the Administrative Agent), whichever of the following is applicable:

 

(1)            in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party, an executed copy of IRS Form W-8BEN or IRS Form W-8BEN-E, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to such tax treaty;

 

(2)            in the case of a Foreign Lender claiming that its extension of credit will generate U.S. effectively connected income, an executed copy of IRS Form W-8ECI;

 

(3)            in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit D-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of any Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” that is related to any Borrower as described in Section 881(c)(3)(C) of the Code and that no payment under any Loan Document is effectively connected with such Foreign Lender’s conduct of a U.S. trade or business (a “U.S. Tax Compliance Certificate”) and (y) an executed original copy of IRS Form W-8BEN or IRS Form W-8BEN-E; or

 

(4)            to the extent a Foreign Lender is not the beneficial owner (e.g., a partnership or a participating Lender), an executed copy of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit D-2 or Exhibit D-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that, if the Foreign Lender is a partnership (and not a participating Lender) and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit D-4 on behalf of such direct and indirect partner(s);

 

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(C)            any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Opco Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Opco Borrower or the Administrative Agent), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Opco Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

 

(D)            if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Opco Borrower and the Administrative Agent at the time or times prescribed by Law and at such time or times reasonably requested by the Opco Borrower or the Administrative Agent such documentation prescribed by applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Opco Borrower or the Administrative Agent as may be necessary for the Opco Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 2.17(f)(ii)(D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

 

Each Lender agrees that if any documentation it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such documentation or promptly notify the Opco Borrower and the Administrative Agent in writing of its legal inability to do so. Each Lender hereby authorizes the Administrative Agent to deliver to the Loan Parties and to any successor Administrative Agent any documentation provided by such Lender to the Administrative Agent pursuant to this Section 2.17(f).

 

(g)           Treatment of Certain Refunds. If any Recipient determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.17 (including by the payment of additional amounts pursuant to this Section 2.17), it shall pay to the applicable Loan Party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.17 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such Recipient and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such Loan Party, upon the request of such Recipient, shall repay to such Recipient the amount paid over pursuant to this Section 2.17(g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such Recipient is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.17(g), in no event will the Recipient be required to pay any amount to any Loan Party pursuant to this Section 2.17(g) the payment of which would place the Recipient in a less favorable net after-Tax position than the Recipient would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This Section 2.17(g) shall not be construed to require any Recipient to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to any Loan Party or any other Person.

 

(h)           The Administrative Agent, and any successor or supplemental Administrative Agent, shall deliver to the Opco Borrower (in such number of copies as shall be requested by the Opco Borrower) on or prior to the date on which the Administrative Agent becomes the administrative agent hereunder or under any other Loan Document (and from time to time thereafter upon the reasonable request of the Opco Borrower) properly completed and duly executed copies of either (i) if it is a U.S. Person, IRS Form W-9 (or any successor form) or (ii) if it is not a U.S. Person, a U.S. branch withholding certificate on IRS Form W-8IMY (or any successor form), together with the required accompanying documentation, evidencing its agreement with the Opco Borrower to be treated as a U.S. Person (with respect to amounts received on account of any Lender) and IRS Form W-8ECI (with respect to amounts received on its own account), together with the required accompanying documentation with the effect that, in either case, the Opco Borrower will be entitled to make payments hereunder to the Administrative Agent without withholding or deduction on account of U.S. federal withholding Tax. Notwithstanding any other provision of this Section 2.17(h), the Administrative Agent shall not be required to provide any documentation that the Administrative Agent is not legally eligible to provide as a result of a Change in Law.

 

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(i)            Survival. Each party’s obligations under this Section 2.17 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

 

(j)            Defined Terms. For the avoidance of doubt, for purposes of this Section 2.17, the term “Lender” includes any L/C Issuer and any Swingline Lender. For purposes of this Section 2.17, the term “applicable law” includes FATCA.

 

SECTION 2.18.      Payments Generally; Allocations of Proceeds; Pro Rata Treatment; Sharing of Setoffs.

 

(a)           The applicable Borrowers shall make each payment or prepayment required to be made by it hereunder (whether of principal, interest or fees, or of amounts payable under Section 2.15, 2.16 or 2.17, or otherwise) prior to (i) in the case of payments denominated in Dollars, 12:00 noon, New York City time and (ii) in the case of payments denominated in a Foreign Currency, 12:00 noon, New York City time, in the city of the Administrative Agent’s Office for such currency, in each case on the date when due or the date fixed for any prepayment hereunder, in immediately available funds, free and clear of and without condition or deduction for any counterclaim, defense, recoupment or setoff. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made (i) in the same currency in which the applicable Borrowing was made (or where such currency has been converted to Euros, in Euros) and (ii) to the Administrative Agent at the Administrative Agent’s Office for such currency, except payments to be made directly to an L/C Issuer or a Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15, 2.16, 2.17 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments denominated in the same currency received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. Notwithstanding the foregoing provisions of this Section, if, after the making of any Borrowing in any Foreign Currency, currency control or exchange regulations are imposed in the country which issues such currency with the result that the type of currency in which the Borrowing was made (the “Original Currency”) no longer exists or the relevant Borrower is not able to make payment to the Administrative Agent for the account of the Lenders in such Original Currency, then all payments to be made by such Borrower hereunder in such currency shall instead be made when due in Dollars in an amount equal to the Dollar Amount (as of the date of repayment) of such payment due, it being the intention of the parties hereto that each Borrower takes all risks of the imposition of any such currency control or exchange regulations.

 

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(b)          At any time that payments are not required to be applied in the manner required by Section 7.03, if at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, L/C Borrowings, interest and fees then due hereunder, such funds shall be applied (i) first, toward payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, toward payment of principal and L/C Borrowings then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and L/C Borrowings then due to such parties.

 

(c)           [Reserved].

 

(d)           If, except as otherwise expressly provided herein, any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in Swingline Loans and accrued interest thereon than the proportion received by any other similarly situated Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by all such Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in Swingline Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by the Borrowers pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in Swingline Loans to any assignee or participant, other than to the Parent Borrower or any Subsidiary or Affiliate thereof (as to which the provisions of this paragraph shall apply). The Opco Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrowers rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrowers in the amount of such participation.

 

(e)           Unless the Administrative Agent shall have received, prior to any date on which any payment is due to the Administrative Agent for the account of the Lenders or the L/C Issuers pursuant to the terms of this Agreement or any other Loan Document (including any date that is fixed for prepayment by notice from the Opco Borrower to the Administrative Agent pursuant to Section 2.11(b)), notice from the Opco Borrower that the applicable Borrower will not make such payment or prepayment, the Administrative Agent may assume that the applicable Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the relevant Lenders or L/C Issuers, as applicable, the amount due.

 

(f)            With respect to any payment that the Administrative Agent makes for the account of the Lenders hereunder as to which the Administrative Agent determines (which determination shall be conclusive absent manifest error) that any of the following applies (such payment referred to as the “Rescindable Amount”): (1) a Borrower has not in fact made such payment; (2) the Administrative Agent has made a payment in excess of the amount so paid by the applicable Borrower (whether or not then owed); or (3) the Administrative Agent has for any reason otherwise erroneously made such payment; then each of the Lender Recipient Parties severally agrees to repay to the Administrative Agent forthwith on demand the Rescindable Amount so distributed to such Lender Recipient Party, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect. A notice of the Administrative Agent to any Lender Recipient Party with respect to any amount owing under this clause (f) shall be conclusive, absent manifest error.

 

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SECTION 2.19.      Mitigation Obligations; Replacement of Lenders.

 

(a)           If any Lender requests compensation under Section 2.15, or if any Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the good-faith judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or 2.17, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Opco Borrower hereby agrees to pay (or cause the applicable Designated Subsidiary Borrower to pay) all reasonable and documented costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

(b)           If (i) any Lender (or any of its Participants) requests compensation under Section 2.15, (ii) any Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender (or any of its Participants) or any Governmental Authority for the account of any Lender (or any of its Participants) pursuant to Section 2.17, (iii) any Lender becomes a Defaulting Lender, a Disqualified Institution or a Designated Person or invokes Section 2.27, (iv) any Lender shall reject a requested additional Alternative Currency or requested jurisdiction for a Designated Subsidiary Borrower, (v) the credit (or similar) rating of any Lender (or any Lender Parent thereof) by one or more of S&P or Moody’s or any other nationally recognized statistical rating organization shall at any time be lower than BBB/Baa2 (or the equivalent), (vi) as to any Lender, such Lender (or Lender Parent thereof) shall at any time have no credit (or similar) rating in effect by at least one such organization, (vii) any Lender or its Lender Parent has become the subject of a Bail-In Action (or any case or other proceeding in which a Bail-In Action may occur), (viii) any Lender that is a Swingline Lender or an L/C Issuer shall (A) resign in its capacity as such, (B) fail to promptly approve the assignment of a Revolving Commitment that the Administrative Agent has approved as contemplated by clause (x) of the proviso below or (C) fail to promptly approve an Additional Lender that the Administrative Agent has approved in the case of any Incremental Facilities as contemplated by Section 2.20 or (ix) any Lender is an Ineligible Institution at the time it becomes a Lender or any Lender assigns or participates (or purports to assign or participate) all or any portion of its Loans and/or Commitments to an Ineligible Institution or a Disqualified Institution in violation of Section 9.04 without the written consent of the Opco Borrower, then the Opco Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights (other than its existing rights to payments pursuant to Section 2.15 or 2.17) and obligations under this Agreement and the other Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (x) to the extent such consent would be required pursuant to Section 9.04(b), the Opco Borrower shall have received the prior written consent of the Administrative Agent (and if a Revolving Commitment is being assigned, the L/C Issuers and the Swingline Lenders), which consent shall not unreasonably be withheld, delayed or conditioned, and (y) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Opco Borrower (in the case of all other amounts). Each party hereto agrees that (a) an assignment required pursuant to this paragraph may be effected pursuant to an Assignment and Assumption executed by the Opco Borrower, the Administrative Agent and the assignee (or, to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to an Approved Electronic Platform as to which the Administrative Agent and such parties are participants), and (b) the Lender required to make such assignment need not be a party thereto in order for such assignment to be effective and shall be deemed to have consented to and be bound by the terms thereof; provided that, following the effectiveness of any such assignment, the other parties to such assignment agree to execute and deliver such documents necessary to evidence such assignment as reasonably requested by the applicable Lender; provided that any such documents shall be without recourse to or warranty by the parties thereto.

 

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SECTION 2.20.      Incremental Facilities.

 

(a)           The Opco Borrower may at any time or from time to time on and after the Security Date, by notice to the Administrative Agent, request one or more additional tranches of term loans (which may take the form of an increase in the principal amount of any existing tranche of Term Loans) (the “Incremental Term Loans”) or increases in the aggregate amount of Revolving Commitments (each such increase a “Incremental Revolving Commitment”; Incremental Term Loans and Incremental Revolving Commitments are collectively referred to herein as the “Incremental Facilities”) so long as, upon giving effect thereto, the aggregate amount of all such Incremental Facilities does not exceed (I) other than during an Investment Grade Period, the sum of (x) the greater of $250,000,000 and 100% of EBITDA plus (y) an unlimited additional amount so long as immediately after giving effect (including pro forma effect) to such Incremental Facilities (assuming that any such Incremental Facilities are drawn in full (but excluding the proceeds of any such Incremental Facilities for purposes of calculating clause (b) of the definition of Consolidated Total Net Debt in the calculation of the Secured Net Leverage Ratio)), the Secured Net Leverage Ratio would not exceed 3:00 to 1.00 (other than to the extent such Incremental Facilities are incurred pursuant to this clause (y) concurrently with the incurrence of Incremental Facilities in reliance on clause (x) of this sentence, in which case the Secured Net Leverage Ratio shall be permitted to exceed 3.00 to 1.00 to the extent of such Incremental Facilities incurred in reliance on such clause (x)) or (II) during an Investment Grade Period, an unlimited amount so long as immediately after giving effect (including pro forma effect) to such Incremental Facilities (assuming that any such Incremental Facilities are drawn in full (but excluding the proceeds of any such Incremental Facilities for purposes of calculating clause (b) of the definition of Consolidated Total Net Debt in the calculation of the Total Net Leverage Ratio)), the Parent Borrower shall be in compliance with the covenants contained in Section 6.11 (provided that, for the avoidance of doubt, with respect to this clause (II), all such Incremental Facilities shall be unsecured); provided that, in each case of clauses (I) and (II), no Incremental Term Loans may be made and no Incremental Revolving Commitments may become effective unless, (i) on the proposed date of the making of such Incremental Term Loans or the effectiveness of such Incremental Revolving Commitments, as applicable, (A) the conditions set forth in clauses (a) and (b) of Section 4.03 shall be satisfied or waived by the Required Lenders and the Administrative Agent shall have received a certificate on behalf of the Parent Borrower to that effect dated such date and executed by a Financial Officer of the Parent Borrower and (B) the Parent Borrower shall be in compliance (on a pro forma basis, assuming full drawing under the applicable Incremental Facility) with the covenants contained in Section 6.11; provided that, in the case of any Incremental Facilities the proceeds of which are to be used to finance a Limited Condition Transaction permitted hereunder, to the extent agreed by the Lenders providing such Incremental Facilities, (I) the representations and warranties the accuracy of which are a condition to the funding of such Incremental Facilities may be limited to (1) customary specified representations (or such other formulation thereof as may be agreed by the lenders providing such Incremental Facilities), and (2) those representations of the acquired company in the applicable acquisition agreement that are material to the interests of the lenders under the Incremental Facilities and if breached would give the Opco Borrower the right to terminate or refuse to close under the applicable acquisition agreement and (II) (x) at the time of the execution and delivery of the purchase agreement or other definitive documentation related to such Limited Condition Transaction, no Default or Event of Default shall have occurred and be continuing or shall occur as a result thereof and (y) on the date of the effectiveness and the making of any such Incremental Facilities, no Specified Default shall have occurred and be continuing or shall occur as a result thereof, and (ii) the Administrative Agent shall have received such legal opinions, board resolutions, secretary’s certificates, directors or officer’s certificates (as applicable) and other documents as shall reasonably be requested by the Administrative Agent in connection with any such transaction. Each Incremental Facility shall be in an integral multiple of $5,000,000 and be in an aggregate principal amount that is not less than $10,000,000 (unless otherwise agreed by the Administrative Agent in its reasonable discretion); provided that such amount may be less than the applicable minimum amount if such amount represents all the remaining availability hereunder as set forth above. Each such notice shall specify (A) the date on which the Opco Borrower proposes that the Incremental Revolving Commitments or the Incremental Term Loans, as applicable, shall be effective, which shall be a date not less than ten (10) Business Days (or such shorter period as may be agreed to by the Administrative Agent) after the date on which such notice is delivered to the Administrative Agent and (B) the amount of the Incremental Revolving Commitments or Incremental Term Loans, as applicable, being requested.

 

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(b)           No Subsidiary shall be a borrower or a guarantor under any Incremental Facility unless such Subsidiary is a Loan Party which shall have previously or substantially concurrently guaranteed or been a borrower with respect to, as applicable, the Obligations. Each Incremental Revolving Commitment shall be on terms and pursuant to documentation applicable to the existing Revolving Commitments. The Incremental Term Loans (i) if made as an increase in the principal amount of any existing tranche of Term Loans, shall have terms identical to those applicable to such Term Loans, (ii) shall rank pari passu or junior in right of payment with the Revolving Loans, (iii) shall not mature earlier than the Latest Maturity Date (but may have amortization and/or customary prepayments prior to such date); provided that the foregoing requirement shall not apply to the extent such Debt constitutes a customary bridge facility, so long as the long-term Debt into which such customary bridge facility is to be converted or exchanged satisfies the requirements of this clause (iii) and such conversion or exchange is subject only to conditions customary for similar conversions or exchanges, (iv) except as set forth above, shall be treated substantially the same (as reasonably determined by the Opco Borrower and the Administrative Agent) as (and in any event, no more favorably than) the Term Loans; provided that (x) the terms and conditions applicable to any tranche of Incremental Term Loans maturing after the Latest Maturity Date may provide for material additional or different financial or other covenants or prepayment requirements applicable only during periods after the Latest Maturity Date and (y) the Incremental Term Loans may have different pricing and economics (including, without limitation, with respect to upfront fees, original issue discount, premiums, and interest rate) than the Term Loans, and (v) will accrue interest at rates determined by the Opco Borrower and the lenders providing such Incremental Term Loans. For the avoidance of doubt, upon the effectiveness of any Incremental Revolving Commitment, the Revolving Credit Exposure of the Lender holding such Incremental Revolving Commitment, and the Applicable Percentage of all the Revolving Lenders, shall automatically be adjusted to give effect thereto. On the date of effectiveness of any Incremental Revolving Commitments, each Revolving Lender shall assign to each Lender holding such Incremental Revolving Commitment, and each such Lender holding such Incremental Revolving Commitment shall purchase from each Revolving Lender, at the principal amount thereof (together with accrued interest), such interests in the Revolving Loans and participations Swingline Loans outstanding on such date as shall be necessary in order that, after giving effect to all such assignments and purchases, such Revolving Loans and participations in Swingline Loans will be held by all the Revolving Lenders ratably in accordance with their Applicable Percentages after giving effect to the effectiveness of such Incremental Revolving Commitment. The Administrative Agent shall notify the Lenders promptly upon receipt by the Administrative Agent of any notice from the Opco Borrower referred to in Section 2.20(a) and of the effectiveness of any Incremental Facility, in each case advising the Lenders of the details thereof and, in the case of effectiveness of any Incremental Revolving Commitments, of the Applicable Percentages of the Revolving Lenders after giving effect thereto and of the assignments required to be made pursuant to this Section 2.20(b).

 

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(c)           Incremental Facilities may be provided by one or more existing Lenders (provided that no existing Lender shall have (x) an obligation to provide all or any portion of any Incremental Facility unless it so agrees in writing as provided in this Section 2.20 or (y) the right to provide all or any portion of any Incremental Facility) and/or by one or more other banks, financial institutions or other institutional lenders or investors (other than an Ineligible Institution), in each case as requested by the Opco Borrower (any such other bank, financial institution or other institutional lender or investor being called an “Additional Lender”); provided that the Administrative Agent, the L/C Issuers and the Swingline Lenders shall have consented (such consent not to be unreasonably withheld, conditioned or delayed) to such Lender or Additional Lender providing such Incremental Facility, to the extent such consent would be required under Section 9.04(b) for an assignment of Loans or Commitments to such Lender or Additional Lender. Commitments in respect of Incremental Facilities shall become Commitments under this Agreement pursuant to an amendment or amendment and restatement (each, an “Incremental Amendment”) of this Agreement and, as appropriate, the other Loan Documents, executed by the Opco Borrower, each Lender agreeing to provide such Commitment, if any, each Additional Lender, if any, and the Administrative Agent. The Incremental Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Opco Borrower, to effect the provisions of this Section. The Opco Borrower will use the proceeds of the Incremental Facilities for any purpose not prohibited by this Agreement.

 

(d)           This Section 2.20 shall supersede any provisions in Section 2.18(d) or Section 9.02 to the contrary.

 

SECTION 2.21.      Judgment Currency. If for the purposes of obtaining judgment in any court it is necessary to convert a sum due from any Borrower hereunder in the currency expressed to be payable herein (the “specified currency”) into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Administrative Agent could purchase the specified currency with such other currency at the Administrative Agent’s main New York City office on the Business Day preceding that on which final, non-appealable judgment is given. The obligations of each Borrower in respect of any sum due to any Lender or the Administrative Agent hereunder shall, notwithstanding any judgment in a currency other than the specified currency, be discharged only to the extent that on the Business Day following receipt by such Lender or the Administrative Agent (as the case may be) of any sum adjudged to be so due in such other currency such Lender or the Administrative Agent (as the case may be) may in accordance with normal, reasonable banking procedures purchase the specified currency with such other currency. If the amount of the specified currency so purchased is less than the sum originally due to such Lender or the Administrative Agent, as the case may be, in the specified currency, each Borrower agrees, to the fullest extent that it may effectively do so, as a separate obligation and notwithstanding any such judgment, to indemnify such Lender or the Administrative Agent, as the case may be, against such loss, and if the amount of the specified currency so purchased exceeds (a) the sum originally due to any Lender or the Administrative Agent, as the case may be, in the specified currency and (b) any amounts shared with other Lenders as a result of allocations of such excess as a disproportionate payment to such Lender under Section 2.18, such Lender or the Administrative Agent, as the case may be, agrees to remit such excess to such Borrower.

 

SECTION 2.22.      Defaulting Lenders. Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

 

(a)           fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.12(a);

 

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(b)           any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Section 7.03 or otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to Section 9.08 shall be applied at such time or times as may be reasonably determined by the Administrative Agent as follows: first, to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to an L/C Issuer and/or a Swingline Lender hereunder; third, as the Opco Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as reasonably determined by the Administrative Agent; fourth, if so determined by the Administrative Agent and the Opco Borrower, to be held in a deposit account and released pro rata in order to satisfy such Defaulting Lender’s potential future funding obligations with respect to Loans under this Agreement; fifth, to the payment of any amounts owing to the Lenders, the L/C Issuers or the Swingline Lenders as a result of any judgment of a court of competent jurisdiction obtained by any Lender, L/C Issuer or Swingline Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement or under any other Loan Document; sixth, so long as no Default or Event of Default exists, to the payment of any amounts owing to any Borrower as a result of any judgment of a court of competent jurisdiction obtained by any Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement or under any other Loan Document; and seventh, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that, if (x) such payment is a payment of the principal amount of any Loans in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made at a time when the conditions set forth in Section 4.03 were satisfied or waived, such payment shall be applied solely to pay the Loans of all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of such Defaulting Lender until such time as all Loans and funded and unfunded participations in the Borrowers’ obligations corresponding to such Defaulting Lender’s Swingline Loans are held by the Lenders pro rata in accordance with the Commitments without giving effect to clause (d) below. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to this Section shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto;

 

(c)           the Commitment and Revolving Credit Exposure of such Defaulting Lender shall not be included in determining whether the Required Lenders, the Required Revolving Lenders, the Required Term Lenders or the Required Term Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 9.02); provided that any amendment, waiver or other modification requiring the consent of all Lenders or all Lenders directly affected thereby shall not, except as otherwise provided in Section 9.02, require the consent of such Defaulting Lender in accordance with the terms hereof;

 

(d)           if any Swingline Exposure exists or L/C Obligations exist at the time such Lender becomes a Defaulting Lender then:

 

(i)            all or any part of the Swingline Exposure of such Defaulting Lender (other than, in the case of a Defaulting Lender that is a Swingline Lender, the portion of such Swingline Exposure referred to in clause (b) of the definition of such term) and L/C Obligations of such Defaulting Lender shall be reallocated among the non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to the extent the sum of all non-Defaulting Lenders’ Revolving Credit Exposures plus such Defaulting Lender’s Swingline Exposure and L/C Obligations do not exceed the total of all non-Defaulting Lenders’ Commitments;

 

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(ii)           if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrowers shall within one (1) Business Day following notice by the Administrative Agent (x) first, prepay such Swingline Exposure and (y) second, either (A) procure the reduction or termination of the Defaulting Lender’s L/C Obligations (after giving effect to any partial reallocation pursuant to clause (i) above) or (B) cash collateralize for the benefit of the L/C Issuers only the Borrowers’ obligations corresponding to such Defaulting Lender’s L/C Obligations (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.06(o) for so long as such L/C Obligations are outstanding;

 

(iii)          if the Borrowers cash collateralize any portion of such Defaulting Lender’s L/C Obligations pursuant to clause (ii) above, the Borrowers shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.06 with respect to such Defaulting Lender’s L/C Obligations during the period such Defaulting Lender’s L/C Obligations are cash collateralized;

 

(iv)         to the extent that the L/C Obligations of the non-Defaulting Lenders are reallocated pursuant to clause (i) above, then the Letter of Credit Fees payable to the Lenders pursuant to Section 2.06(j) shall to the same extent be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages; and

 

(v)           if all or any portion of such Defaulting Lender’s L/C Obligations is not reallocated, reduced, terminated nor cash collateralized pursuant to clause (i) or (ii) above, then, without prejudice to any rights or remedies of any L/C Issuer or any other Lender hereunder, all Letter of Credit Fees payable under Section 2.06(j) with respect to such Defaulting Lender’s L/C Obligations shall be payable to the L/C Issuers until and to the extent that such L/C Obligations are reallocated, reduced, terminated and/or cash collateralized; and

 

(e)           so long as such Lender is a Defaulting Lender, no Swingline Lender shall be required to fund any Swingline Loan and no L/C Issuer shall be required to issue, amend or increase any Letter of Credit, unless it is satisfied that the related exposure will be 100% covered by the Revolving Commitments of the non-Defaulting Lenders and/or prepaid, reduced, terminated and/or cash collateralized in accordance with Section 2.22(d), and participating interests in any newly made Swingline Loan or any newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.22(d)(i) (and such Defaulting Lender shall not participate therein).

 

If (i) a Bankruptcy Event or a Bail-In Action with respect to a Lender Parent shall occur following the date hereof and for so long as such event shall continue or (ii) an L/C Issuer or a Swingline Lender has a good faith belief that any Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, no Swingline Lender shall be required to fund any Swingline Loan and no L/C Issuer shall be required to issue, amend or increase any Letter of Credit, unless the Swingline Lenders or the L/C Issuers, as the case may be, shall have entered into arrangements with the Opco Borrower or such Lender, satisfactory to the Swingline Lenders or the L/C Issuers, as the case may be, to defease any risk to the Swingline Lenders or the L/C Issuers in respect of such Lender hereunder relating to Swingline Exposure and/or L/C Obligations.

 

In the event that the Administrative Agent, the Opco Borrower, the Swingline Lenders and the L/C Issuers agree that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the Swingline Exposure and L/C Obligations of the Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and on such date such Lender shall purchase at par such of the Loans of the other Lenders (other than Swingline Loans) as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage.

 

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SECTION 2.23.      Extension of Maturity Date.

 

(a)           Requests for Extension. The Opco Borrower may, by notice to the Administrative Agent (who shall promptly notify the applicable Class of Lenders) at any time, request that each applicable Lender extend such Lender’s Revolving Credit Maturity Date or Term Loan Maturity Date, as the case may be (the “Applicable Maturity Date”), to a date (the “Extended Maturity Date” and the date on which such extension becomes effective (which date shall be not less than 30 days after the date of such extension notice (or such longer or shorter periods as the Administrative Agent shall agree in its reasonable discretion upon request by the Opco Borrower)), the “Extension Date”) that is after the Applicable Maturity Date then in effect with respect to such Class for such Lender. For the avoidance of doubt, the Opco Borrower may request extensions of any Class without requesting an extension of the other Class.

 

(b)           Lender Elections to Extend. Each Lender of the applicable Class, acting in its sole and individual discretion, shall, by notice to the Administrative Agent (which shall be irrevocable unless the Opco Borrower otherwise consents in writing in its sole discretion) given not later than the date that is 15 days after the date on which the Administrative Agent received the Opco Borrower’s extension request (the “Lender Notice Date”), advise the Administrative Agent whether or not such Lender agrees to such extension (each Lender of the applicable Class that determines to so extend its Applicable Maturity Date, an “Extending Lender”). Each Lender of the applicable Class that determines not to so extend its Applicable Maturity Date (a “Non-Extending Lender”) shall notify the Administrative Agent of such fact promptly after such determination (but in any event no later than the Lender Notice Date), and any Lender of the applicable Class that does not so advise the Administrative Agent on or before the Lender Notice Date shall be deemed to be a Non-Extending Lender. The election of any Lender to agree to such extension shall not obligate any other Lender to so agree, and it is understood and agreed that no Lender shall have any obligation whatsoever to agree to any request made by the Opco Borrower for extension of the Applicable Maturity Date.

 

(c)           Notification by Administrative Agent. The Administrative Agent shall notify the Opco Borrower of each applicable Lender’s determination under this Section promptly after the Administrative Agent’s receipt thereof and, in any event, no later than the date that is 15 days prior to the applicable proposed Extension Date (or, if such date is not a Business Day, on the next preceding Business Day).

 

(d)           Additional Commitment Lenders. The Opco Borrower shall have the right, but shall not be obligated, on or before the Applicable Maturity Date for any Non-Extending Lender to replace such Non-Extending Lender with, and add as a “Revolving Lender” (in the case of any extension of the Revolving Credit Maturity Date) or as a “Term Lender” (in the case of any extension of the Term Loan Maturity Date) under this Agreement in place thereof, one or more financial institutions that are not Ineligible Institutions (each, an “Additional Commitment Lender”) approved by the Administrative Agent (in each case, such approval not to be unreasonably withheld, conditioned or delayed) in accordance with the procedures provided in Section 2.19(b), each of which applicable Additional Commitment Lenders shall have entered into an Assignment and Assumption (in accordance with and subject to the restrictions contained in Section 9.04, with the Opco Borrower or replacement Lender obligated to pay any applicable processing or recordation fee) with such Non-Extending Lender, pursuant to which such Additional Commitment Lenders shall, effective on or before the Applicable Maturity Date for such Non-Extending Lender, assume a Revolving Commitment and/or Term Loans, as the case may be (and, if any such Additional Commitment Lender is already a Lender of the applicable Class, its Revolving Commitment and/or its outstanding Term Loans, as applicable, so assumed shall be in addition to such Lender’s Revolving Commitment and/or its outstanding Term Loans, as applicable, hereunder on such date). Prior to any Non-Extending Lender being replaced by one or more Additional Commitment Lenders pursuant hereto, such Non-Extending Lender may elect, in its sole discretion, by giving irrevocable notice thereof to the Administrative Agent and the Opco Borrower (which notice shall set forth such Lender’s new Applicable Maturity Date), to become an Extending Lender; provided that the Opco Borrower consents thereto in writing in its sole discretion. The Administrative Agent may effect such amendments to this Agreement as are reasonably necessary to provide for any such extensions with the consent of the Opco Borrower but without the consent of any other Lenders.

 

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(e)           Minimum Extension Requirement. If (and only if) the total of the applicable Revolving Commitments or the applicable outstanding Term Loans of the Lenders of the applicable Class that have agreed to extend their Applicable Maturity Date and the new or increased Revolving Commitments or the applicable newly assumed outstanding Term Loans of the applicable Class of any Additional Commitment Lenders is more than 50% of the aggregate amount of the Revolving Commitments or the applicable outstanding Term Loans, as applicable, in effect immediately prior to the applicable Extension Date, then, effective as of the applicable Extension Date, the Applicable Maturity Date of each Extending Lender and of each Additional Commitment Lender of the applicable Class shall be extended to the Extended Maturity Date (except that, if such date is not a Business Day, such Applicable Maturity Date as so extended shall be the next preceding Business Day) and each Additional Commitment Lender of such Class shall thereupon become a “Revolving Lender” and/or a “Term Lender”, as the case may be, for all purposes of this Agreement and shall be bound by the provisions of this Agreement as a Revolving Lender and/or Term Lender, as the case may be, hereunder and shall have the obligations of a Revolving Lender and/or Term Lender, as the case may be, hereunder.

 

(f)           Conditions to Effectiveness of Extension. Notwithstanding the foregoing, any extension of any Maturity Date pursuant to this Section 2.23 shall not be effective with respect to any Extending Lender and each Additional Commitment Lender unless:

 

(i)            no Default or Event of Default shall have occurred and be continuing on the applicable Extension Date and immediately after giving effect thereto;

 

(ii)           the representations and warranties of the Loan Parties set forth in this Agreement shall be true and correct in all material respects (provided that any representation or warranty that is qualified by materiality or Material Adverse Effect shall be true and correct in all respects) on and as of the applicable Extension Date and immediately after giving effect thereto, as though made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date); and

 

(iii)          the Administrative Agent shall have received a certificate from the Parent Borrower signed by a Financial Officer of the Parent Borrower (A) certifying the accuracy of the foregoing clauses (i) and (ii) and (B) certifying and attaching the resolutions adopted by the Parent Borrower and the Opco Borrower approving or consenting to such extension (or to the extent the resolutions delivered on the Effective Date approve such matters, a certification from the Parent Borrower and the Opco Borrower that the resolutions delivered on the Effective Date remain in full force and effect and have not been amended or otherwise modified since the adoption thereof).

 

(g)           Maturity Date for Non-Extending Lenders. On the Applicable Maturity Date of each Non-Extending Lender, (i) to the extent of the Revolving Commitments and Term Loans of each Non-Extending Lender of the relevant Class not assigned to the Additional Commitment Lenders of such Class, the Revolving Commitment of each Non-Extending Lender of such Class shall automatically terminate and (ii) the Opco Borrower shall repay such Non-Extending Lender of such Class in accordance with Section 2.10 (and shall pay to such Non-Extending Lender all of the other Obligations due and owing to it under this Agreement) and after giving effect thereto shall prepay any Loans of the applicable Class outstanding on such date (and pay any additional amounts required pursuant to Section 2.16) to the extent necessary to keep outstanding Loans of the applicable Class ratable with any revised Applicable Percentages of the respective Lenders of such Class effective as of such date, and the Administrative Agent shall administer any necessary reallocation of the applicable Credit Exposures (without regard to any minimum borrowing, pro rata borrowing and/or pro rata payment requirements contained elsewhere in this Agreement).

 

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(h)           Conflicting Provisions. This Section shall supersede any provisions in Section 2.18 or Section 9.02 to the contrary.

 

SECTION 2.24.      Designated Subsidiary Borrowers.

 

(a)           Designated Subsidiary Borrowers. The Opco Borrower may at any time, upon not less than fifteen (15) Business Days’ notice from the Opco Borrower to the Administrative Agent (or such shorter period as may be agreed by the Administrative Agent in its sole discretion), request to designate any additional Subsidiary of the Parent Borrower organized under the laws of the United States, the United Kingdom or any other jurisdiction approved by the Administrative Agent and the Lenders (an “Applicant Borrower”) as a co-borrower to receive Revolving Loans hereunder by delivering to the Administrative Agent (which shall promptly deliver counterparts thereof to each Lender) a duly executed notice and agreement in substantially the form of Exhibit H (a “Designated Subsidiary Borrower Request and Assumption Agreement”). The parties hereto acknowledge and agree that prior to any Applicant Borrower becoming entitled to utilize the credit facilities provided for herein (i) (other than in relation to any Applicant Borrower organized under the laws of the United States or England and Wales) any appropriate changes to the Loan Documents as the Administrative Agent may reasonably request and as may be required in connection with local law considerations, in each case in form and substance reasonably satisfactory to the Administrative Agent, shall have been made (provided that, in the case of any Applicant Borrower incorporated in the United Kingdom, such designation shall be conditional upon the Administrative Agent and the Opco Borrower entering into an amendment to this Agreement reflecting mutually and reasonably satisfactory customary United Kingdom-related tax provisions), (ii) the Administrative Agent and such Lenders shall have received such supporting resolutions, incumbency certificates, opinions of counsel and other documents or information, in form, content and scope reasonably satisfactory to the Administrative Agent, as may be required by the Administrative Agent, and promissory notes signed by such new Designated Subsidiary Borrowers to the extent any Lender so requires and (iii) upon the reasonable request of any Revolving Lender, (x) the Applicant Borrowers shall have provided to such Revolving Lender, and such Revolving Lender shall be reasonably satisfied with, the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act and (y) any Applicant Borrower that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation shall have delivered, to each Revolving Lender that so requests, a Beneficial Ownership Certification in relation to such Applicant Borrower (the requirements in clauses (i), (ii) and (iii) hereof, the “Designated Subsidiary Borrower Requirements”). If the Designated Subsidiary Borrower Requirements are met, the Administrative Agent shall send a notice in substantially the form of Exhibit I (a “Designated Subsidiary Borrower Notice”) to the Opco Borrower and the Lenders specifying the effective date upon which the Applicant Borrower shall constitute a Designated Subsidiary Borrower for purposes hereof, whereupon each of the Lenders agrees to permit such Designated Subsidiary Borrower to receive Revolving Loans hereunder, on the terms and conditions set forth herein, and each of the parties agrees that such Designated Subsidiary Borrower otherwise shall be a Borrower for all purposes of this Agreement; provided that no Borrowing Request may be submitted by or on behalf of such Designated Subsidiary Borrower until the date four (4) Business Days after such effective date.

 

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(b)            Appointment. Each Subsidiary of the Parent Borrower that is or becomes a “Designated Subsidiary Borrower” pursuant to this Section 2.24 hereby irrevocably appoints the Opco Borrower to act as its agent for all purposes of this Agreement and the other Loan Documents and agrees that (i) the Opco Borrower may execute such documents on behalf of such Designated Subsidiary Borrower as the Opco Borrower deems appropriate in its sole discretion and each Designated Subsidiary Borrower shall be obligated by all of the terms of any such document executed on its behalf, (ii) any notice or communication delivered by the Administrative Agent or the Lender to the Opco Borrower shall be deemed delivered to each Designated Subsidiary Borrower and (iii) the Administrative Agent or the Lenders may accept, and be permitted to rely on, any document, instrument or agreement executed by the Opco Borrower on behalf of each of the Loan Parties.

 

(c)            For the avoidance of doubt, it is understood and agreed that a Designated Subsidiary Borrower shall cease to constitute a Designated Subsidiary Borrower as a result of the delivery of an Election to Terminate to the Administrative Agent with respect to such Designated Subsidiary Borrower and/or any Disposition of such Designated Subsidiary Borrower to any Person (other than the merger into or consolidation with any other Subsidiary to the extent such continuing or surviving Person of such transaction shall be a Designated Subsidiary Borrower).

 

SECTION 2.25.      Designated Lenders. Each of the Administrative Agent, each L/C Issuer, each Swingline Lender and each Lender at its option may make any Loan or otherwise perform its obligations hereunder through any lending office (each, a “Designated Lender”); provided that any exercise of such option shall not affect the obligation of such Borrower to repay any Borrowing in accordance with the terms of this Agreement. Any Designated Lender who has funded any Borrowing shall be considered a Lender; provided that designation of a Designated Lender is for administrative convenience only and does not expand the scope of liabilities or obligations of any Lender or Designated Lender beyond those of the Lender designating such Person as a Designated Lender as provided in this Agreement.

 

SECTION 2.26.      Sustainability Adjustments; Successor Sustainability Structuring Agent.

 

(a)            After the Closing Date, the Opco Borrower may appoint a sustainability structuring agent (in such capacity, the “Sustainability Structuring Agent”) and, in consultation with the Sustainability Structuring Agent and the Administrative Agent, may establish specified Key Performance Indicators (“KPIs”) with respect to certain Environmental, Social and Governance (“ESG”) targets of the Borrowers and their respective Subsidiaries. The Borrowers and the Required Lenders may amend this Agreement (such amendment, the “ESG Amendment”) solely for the purpose of incorporating the KPIs and other related provisions (including the ESG Pricing Provisions as defined below) into this Agreement. Upon effectiveness of any such ESG Amendment, based on the Borrowers’ performance against the KPIs, certain adjustments to the Applicable Rate for Revolving Loans, Term Loans and Letters of Credit and the Commitment Fee Rate may be made; provided that the amount of any such adjustments made pursuant to an ESG Amendment shall not result in an increase or decrease of more than (a) 1.00 basis point in the Commitment Fee Rate and/or (b) 5.00 basis points in the Applicable Rate for Revolving Loans, Term Loans or Letters of Credit, and such adjustments shall not be cumulative year-over-year (such adjustments, the “ESG Pricing Provisions”). The pricing adjustments in the ESG Amendment will require, among other things, reporting and validation of the measurement of the KPIs in a manner that is aligned with the Sustainability Linked Loan Principles (as published from time to time by the Loan Market Association, Asia Pacific Loan Market Association and Loan Syndications & Trading Association). Following the effectiveness of the ESG Amendment, any modification to the ESG Pricing Provisions which does not have the effect of reducing the Applicable Rate for Revolving Loans, Term Loans or Letters of Credit or the Commitment Fee Rate to a level not otherwise permitted by this paragraph shall be subject only to the consent of the Opco Borrower and the Required Lenders.

 

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(b)            The Sustainability Structuring Agent will assist the Opco Borrower in preparing informational materials focused on ESG to be used in connection with the ESG Amendment.

 

(c)            This Section 2.26 shall supersede any provisions in Section 9.02 to the contrary.

 

(d)            The Sustainability Structuring Agent shall have the benefit of the provisions in Section 8.01, 8.02, 8.03, 8.04, 8.06, 9.03 and 9.17 in each case to the same effect as the Administrative Agent thereunder.

 

(e)            Successor Sustainability Structuring Agent:

 

(i)            The Sustainability Structuring Agent may at any time give notice of its resignation to the Administrative Agent, the Lenders and the Opco Borrower. Upon receipt of any such notice of resignation, the Opco Borrower, with the consent of the Required Lenders (not to be unreasonably withheld or delayed), shall have the right to appoint a successor. If no such successor shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Sustainability Structuring Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “Sustainability Resignation Effective Date”), then the retiring Sustainability Structuring Agent may (but shall not be obligated to) on behalf of the Revolving Lenders and the Term Lenders, appoint a successor Sustainability Structuring Agent subject to the consents set forth above. Whether or not a successor has been appointed, such resignation shall become effective in accordance with such notice on the Sustainability Resignation Effective Date.

 

(ii)            With effect from the Sustainability Resignation Effective Date (1) the retiring or removed Sustainability Structuring Agent shall be discharged from its duties and obligations hereunder and (2) except for any indemnity payments or other amounts then owed to the retiring or removed Sustainability Structuring Agent, all determinations to be made by the Sustainability Structuring Agent shall instead be made by the Required Lenders directly, until such time, if any, as a successor Sustainability Structuring Agent has been appointed as provided for above. Upon the acceptance of a successor’s appointment as Sustainability Structuring Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Sustainability Structuring Agent (other than any rights to indemnity payments or other amounts owed to the retiring Sustainability Structuring Agent as of the Sustainability Resignation Effective Date), and the retiring Sustainability Structuring Agent shall be discharged from all of its duties and obligations hereunder (if not already discharged therefrom as provided above in this Section 2.26(e)). The fees payable by the Opco Borrower to a successor Sustainability Structuring Agent (if any) shall be the same as those payable to its predecessor unless otherwise agreed between the Opco Borrower and such successor. After the retiring Sustainability Structuring Agent’s resignation hereunder, the provisions of this Section 2.26(e) and Section 9.03 shall continue in effect for the benefit of such retiring Sustainability Structuring Agent and its Related Parties in respect of any actions taken or omitted to be taken by any of them (i) while the Sustainability Structuring Agent was acting as Sustainability Structuring Agent and (ii) after such resignation for as long as any of them continues to act in any capacity hereunder, including in respect of any actions taken in connection with transferring the agency to any successor Sustainability Structuring Agent.

 

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SECTION 2.27.      Illegality. If any Lender determines that the introduction after the Effective Date of any Law, or any Change in Law, has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender or its applicable lending office to make, maintain or fund Loans whose interest is determined by reference to a Relevant Rate, or to determine or charge interest rates based upon a Relevant Rate or to purchase or sell, or to take deposits of, any Alternative Currency in the applicable interbank market, then, upon notice thereof by such Lender to the Opco Borrower (through the Administrative Agent), (a) any obligation of such Lender to make or maintain Alternative Currency Loans in the affected currency or currencies or, in the case of Loans denominated in Dollars, to make or maintain Daily SOFR Loans or Term SOFR Loans or to convert ABR Loans to Daily SOFR Loans or Term SOFR Loans shall be, in each case, suspended, and (b) if such notice asserts the illegality of such Lender making or maintaining ABR Loans the interest rate on which is determined by reference to the Term SOFR component of the Alternate Base Rate, the interest rate on which ABR Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Term SOFR component of the Alternate Base Rate, in each case until such Lender notifies the Administrative Agent and the Opco Borrower that the circumstances giving rise to such determination no longer exist, at which time such Lender shall promptly notify the Administrative Agent and the Opco Borrower, and such Lender’s obligation to make such Loans shall be reinstated. Upon receipt of such notice, (i) the Borrowers shall, upon demand from such Lender (with a copy to the Administrative Agent), prepay all Daily SOFR Loans, Term SOFR Loans or Alternative Currency Loans of such Lender, as applicable, in the affected currency or currencies or, if applicable and such Loans are denominated in Dollars, convert all Daily SOFR Loans and Term SOFR Loans of such Lender to ABR Loans (the interest rate on which ABR Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Term SOFR component of the Alternate Base Rate), in each case, immediately, or, in the case of Term SOFR Loans or Alternative Currency Term Rate Loans, on the last day of the Interest Period therefor if such Lender may lawfully continue to maintain such Loans to such day and (ii) if such notice asserts the illegality of such Lender determining or charging interest rates based upon SOFR, the Administrative Agent shall during the period of such suspension compute the Alternate Base Rate applicable to such Lender without reference to the Term SOFR component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon SOFR, at which time such Lender shall promptly notify the Administrative Agent and the Opco Borrower, and the Administrative Agent shall return to computing interest rates based upon Term SOFR for such Lender. Upon any such prepayment or conversion, the Borrowers shall also pay accrued interest on the amount so prepaid or converted, together with any additional amounts required pursuant to Section 2.16. If the obligation of any Lender to make or maintain any Loans has been terminated or suspended pursuant to the provisions of this Section, the Opco Borrower may elect, by giving notice to such Lender through the Administrative Agent, that all Loans which would otherwise be made or maintained by such Lender based upon SOFR, as applicable, instead be made or maintained as ABR Loans (the interest rate on which ABR Loans of such Lender shall, if necessary to avoid such illegality, be determined by the Administrative Agent without reference to the Term SOFR component of the Alternate Base Rate) made to or maintained for, as applicable, the applicable Borrower.

 

ARTICLE III

 

Representations and Warranties

 

The Loan Parties represent and warrant as of the Effective Date (and as of each date as and to the extent required under Sections 4.02 and 4.03) to the Administrative Agent and the Lenders that:

 

SECTION 3.01.      Existence, Qualification and Power. Each Loan Party (a) is a legal entity duly organized, validly existing and in good standing (as applicable) under the laws of the jurisdiction of its organization, (b) is duly qualified in every jurisdiction in which such qualification is required and (c) has all requisite power and authority (including, without limitation, all material Governmental Authorizations, which Governmental Authorizations are current and valid) to own or lease and operate its properties and to carry on its business as now conducted and as proposed to be conducted, except in the case of clauses (b) and (c) where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

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SECTION 3.02.      Authorization; No Contravention. The execution, delivery and performance by each Loan Party of each Loan Document to which it is a party, and the consummation of the transactions contemplated thereby, are within such Loan Party’s corporate (or other) powers, have been duly authorized by all necessary corporate (or other) action, and do not (a) contravene such Loan Party’s Organization Documents, (b) violate any law, rule, regulation (including, without limitation, Regulation X of the Board), order, writ, judgment, injunction, decree, determination or award, the violation of which could reasonably be expected to have a Material Adverse Effect, (c) conflict with or result in the breach of, or constitute a default or require any payment to be made under, any material contract, loan agreement, indenture, or other instrument binding on or affecting any Loan Party, any of its Subsidiaries or any of their properties the effect of which could reasonably be expected to result in a Material Adverse Effect, or (d) result in or require the creation or imposition of any Lien upon or with respect to any of the properties of any Loan Party or any of its Subsidiaries (other than any Lien created pursuant to the Loan Documents). No Loan Party or any of its Subsidiaries is in violation of any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or in breach of any such contract, loan agreement, indenture, or other instrument, the violation or breach of which could be reasonably likely to have a Material Adverse Effect.

 

SECTION 3.03.      Governmental Authorization; Other Consents. No Governmental Authorization, and no notice to or filing with, any Governmental Authority is required to be made or obtained by any Loan Party for the due execution, delivery or performance by, or enforcement against, any Loan Party of any Loan Document to which it is a party, except (a) those that have been obtained and remain in effect and disclosure filings that are required to be made with the SEC in connection with the transactions contemplated by the Loan Documents and (b) for filings necessary to perfect Liens created pursuant to the Loan Documents.

 

SECTION 3.04.      Binding Effect. This Agreement has been, and each other Loan Document when delivered will have been, duly executed and delivered by each Loan Party. This Agreement is, and each other Loan Document when delivered will be, the legal, valid and binding obligation of each Loan Party party thereto, enforceable against such Loan Party in accordance with its terms subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally, and subject to the effects of general principles of equity (regardless whether considered in a proceeding in equity or at law).

 

SECTION 3.05.      Litigation. There is no action, suit, investigation, litigation or proceeding against any Loan Party or any of its Subsidiaries pending or, to the knowledge of a Responsible Officer of the Parent Borrower or the Opco Borrower, threatened in writing before any Governmental Authority or arbitrator that (i) could reasonably be expected to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby.

 

SECTION 3.06.      Financial Statements; No Material Adverse Effect.

 

(a)            The Parent Borrower has heretofore furnished to the Administrative Agent and the Lenders the Audited Financial Statements. Such financial statements (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein; and (ii) fairly present, in all material respects, the financial condition of the Parent Borrower and its Subsidiaries as of the dates thereof and their results of operations for the period covered thereby.

 

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(b)            [Reserved].

 

(c)            Since the date of the most recent Audited Financial Statements, there has been no change in the operations, business, assets, properties or financial condition of the Parent Borrower and its Subsidiaries, taken as a whole, that has had a Material Adverse Effect.

 

SECTION 3.07.      Disclosure. No written information, exhibit or report furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the negotiation and syndication of the Loan Documents or pursuant to the terms of the Loan Documents (as modified or supplemented by other information so furnished from time to time, including updates reflected in SEC filings), taken as a whole, contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading (when taken as a whole), in each case, as of the date stated therein; provided that with respect to projected financial information, the Loan Parties represent only that such information was proposed in good faith based upon assumptions believed to be reasonable at the time, it being understood that projections are subject to uncertainties and contingencies beyond the control of the Loan Parties and their Subsidiaries and that no assurances can be given that such projections will be realized.

 

SECTION 3.08.      Margin Regulations. Neither the Parent Borrower nor any of its Subsidiaries are engaged in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no proceeds of any Borrowing will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock, in each case, in violation of Regulation U.

 

SECTION 3.09.      Investment Company Act. No Loan Party is required to be registered as an “investment company” under the Investment Company Act of 1940, as amended.

 

SECTION 3.10.      Solvency. The Parent Borrower is, together with its Subsidiaries, Solvent.

 

SECTION 3.11.      ERISA Compliance.

 

(a)            Except as could not reasonably be expected to result in a Material Adverse Effect, each Borrower and each ERISA Affiliate have complied with their obligations under the Pension Funding Rules with respect to each Plan subject to Pension Funding Rules, and no application for a funding waiver or an extension of any amortization period pursuant to Pension Funding Rules has been made with respect to any Plan.

 

(b)            There are no pending or, to the knowledge of a Responsible Officer of the Parent Borrower or the Opco Borrower, threatened (in writing) claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan that could reasonably be expected to have a Material Adverse Effect. There has been no prohibited transaction or violation of the fiduciary responsibility rules with respect to any Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect.

 

(c)            (i) No ERISA Event likely to result in a material liability for any Loan Party has occurred or is reasonably expected to occur; (ii) no Plan has any Unfunded Pension Liability that could reasonably be expected to result in a Material Adverse Effect; (iii) none of any Borrower or any ERISA Affiliate has incurred, or reasonably expects to incur, any material liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA with respect to a Multiemployer Plan; (v) none of any Borrower or any ERISA Affiliate has engaged in a transaction that could reasonably be expected to be subject to Sections 4069 or 4212(c) of ERISA; and (vi) no Plan has been terminated by the plan administrator thereof pursuant to Section 4041(c) of ERISA.

 

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SECTION 3.12.      Environmental Compliance. There are no facts, circumstances or conditions in any way relating to the past or present business or operations of the Parent Borrower and its Subsidiaries or, to the knowledge of a Responsible Officer of the Parent Borrower or the Opco Borrower, any of their respective predecessors (including with respect to the Release of any wastes, Hazardous Materials or other materials), or to any past or present property of the Parent Borrower or any of its Subsidiaries, that could reasonably be expected to give rise to any, or that have given rise to any, Environmental Liability or to any claim, proceeding or other liability under or relating to any Environmental Law, except, in each case, as would not reasonably be expected to have a Material Adverse Effect.

 

SECTION 3.13.      Taxes. Except for failures that would not, individually or in the aggregate, have a Material Adverse Effect, each Loan Party and each of its Subsidiaries (a) has timely filed all Tax returns that were required to have been filed by it, taking into account any valid extension thereof and (b) has paid all Taxes that were required to have been paid by it (including in its capacity as a withholding agent) to the extent due and payable, except, in each case, for any such Tax that is currently being contested in good faith by appropriate action and for which adequate reserves have been established in accordance with GAAP.

 

SECTION 3.14.      Use of Proceeds.

 

(a)            All proceeds of the Term Loans will be used only to finance the Special Payment and to pay fees and expenses in connection with the Effective Date Transactions and the Closing Date Transactions.

 

(b)            All proceeds of the Revolving Loans and the Swingline Loans will be used only to finance the Special Payment, for working capital and general corporate purposes of the Parent Borrower and its Subsidiaries and to pay fees and expenses in connection with the Effective Date Transactions and the Closing Date Transactions; provided that the amount of Revolving Loans drawn on the Closing Date shall not exceed $100,000,000. All Letters of Credit will be issued only to support working capital and general corporate purposes of the Parent Borrower and its Subsidiaries.

 

SECTION 3.15.      Anti-Corruption Laws; Anti-Terrorism Laws; OFAC.

 

(a)            The Parent Borrower has implemented and maintains in effect policies and procedures reasonably designed to promote and achieve compliance by itself and its Subsidiaries and their respective directors, officers, employees and agents with applicable Anti-Corruption Laws and Sanctions Laws and Regulations in all material respects.

 

(b)            The Parent Borrower, the Opco Borrower and each other Loan Party, their respective officers and employees, and, to the knowledge of an executive officer of the Parent Borrower or the Opco Borrower, their respective directors and agents acting or directly benefiting in any capacity in connection with any credit facility under this Agreement are in compliance in all material respects with applicable Anti-Corruption Laws, applicable Sanctions Laws and Regulations.

 

(c)            None of the Parent Borrower, the Opco Borrower, any other Loan Party nor, to the knowledge of an executive officer of the Parent Borrower or the Opco Borrower, their respective directors, officers, employees or agents acting or directly benefiting in any capacity in connection with any credit facility under this Agreement is a Designated Person.

 

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SECTION 3.16.      Affected Financial Institutions. No Loan Party is an Affected Financial Institution.

 

SECTION 3.17.      Security Interest in Collateral. On and after the Security Date, the provisions of this Agreement and the other Loan Documents create legal and valid perfected Liens on all the Collateral to the extent required thereby in favor of the Administrative Agent, for the benefit of the Secured Parties, and such Liens constitute perfected and continuing Liens on the Collateral to the extent required thereby, securing the Secured Obligations, enforceable against the applicable Loan Party and all third parties, and having priority over all other Liens on the Collateral to the extent required thereby except in the case of (a) Permitted Liens and (b) Liens perfected only by possession (including possession of any certificate of title) to the extent the Administrative Agent has not obtained or does not maintain possession of such Collateral.

 

ARTICLE IV

 

Conditions

 

SECTION 4.01.      Effective Date. The effectiveness of this Agreement is subject to satisfaction (or waiver in accordance with Section 9.02) of the following conditions:

 

(a)            Executed Counterparts. The Administrative Agent (or its counsel) shall have received (i) from each party hereto either (A) a counterpart of this Agreement signed on behalf of such party or (B) written evidence reasonably satisfactory to the Administrative Agent (which may include facsimile or electronic transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement and (ii) duly executed copies of the other Loan Documents to the extent required to be executed on or prior to the Effective Date (including, from the Company, the Company Guaranty) and such other legal opinions, certificates, documents, instruments and agreements as the Administrative Agent shall reasonably request in connection with the effectiveness of this Agreement, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel and as further described in the list of closing documents attached as Exhibit B.

 

(b)            Opinion of Counsel to the Loan Parties. The Administrative Agent shall have received a favorable written opinion (addressed to the Administrative Agent and the Lenders as of the Effective Date and dated the Effective Date) of Foley & Lardner LLP, special counsel to the Loan Parties, in form and substance reasonably satisfactory to the Administrative Agent and covering such matters relating to the Loan Parties, this Agreement and the Effective Date Transactions as the Administrative Agent shall reasonably request (and the Parent Borrower hereby instructs such counsel to deliver such opinion to the Lenders and the Administrative Agent).

 

(c)            Organizational Documents. The Administrative Agent shall have received such documents and certificates as the Administrative Agent or its counsel may reasonably request relating to the organization, existence and good standing (as applicable) of the initial Loan Parties, the authorization of the Effective Date Transactions and any other legal matters relating to such Loan Parties, the Loan Documents (to the extent required to be executed on or prior to the Effective Date) or the Effective Date Transactions, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel and set forth on Exhibit B hereto.

 

(d)            Registration Statement. The Administrative Agent shall have received the Registration Statement, and all amendments, supplements and modifications thereto from time to time, filed with the SEC with respect to the IPO, including carved-out financial statements of the Parent Borrower that satisfy the rules and requirements of the SEC (the “Audited Financial Statements”) and are otherwise reasonably satisfactory to the Administrative Agent.

 

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(e)            Officer’s Certificate. The Administrative Agent shall have received a certificate, dated the Effective Date and signed by a Responsible Officer of the Parent Borrower, confirming compliance with the conditions set forth in Sections 4.03(a) and (b).

 

(f)            Fees and Expenses. All fees and expenses due and payable to the Administrative Agent, the Lenders and their respective Affiliates and required to be paid on or prior to the Effective Date shall have been paid, so long as any such fees or expenses not expressly set forth in the fee letters related to this Agreement or one or more of the credit facilities hereunder entered into by the Company and the Administrative Agent, the Lenders and/or their respective Affiliates in connection with the Effective Date Transactions have been invoiced not less than one (1) Business Day prior to the Effective Date (except as otherwise agreed by the Opco Borrower).

 

(g)            Information. To the extent reasonably requested at least ten (10) Business Days prior to the Effective Date, (x) the Parent Borrower and each initial Borrower shall have provided to the Administrative Agent and each requesting Lender, and the Administrative Agent and such Lender shall be reasonably satisfied with, the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act, in each case at least three (3) Business Days prior to the Effective Date and (y) any Loan Party that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation shall have delivered to the Administrative Agent and each Lender that so requests a Beneficial Ownership Certification in relation to such Loan Party at least three (3) Business Days prior to the Effective Date.

 

The Administrative Agent shall notify the Opco Borrower and the Lenders of the Effective Date, and such notice shall be conclusive and binding.

 

SECTION 4.02.      Closing Date. The initial extension of credit hereunder on the Closing Date is subject to satisfaction (or waiver in accordance with Section 9.02) of the following conditions:

 

(a)            Effective Date. The Effective Date shall have occurred.

 

(b)            Third Party Indebtedness. On the Closing Date, immediately after giving effect to the Closing Date Transactions, neither the Parent Borrower nor any of its Subsidiaries shall have any third party indebtedness other than any such indebtedness permitted by this Agreement to remain outstanding on the Closing Date.

 

(c)            Closing Date Transactions. Subject to the Post-Closing Ownership and the Post-Closing Distribution, the Closing Date Transactions shall have been (or will be) consummated on the Closing Date.

 

(d)            Solvency Certificate. The Administrative Agent shall have received a Solvency Certificate substantially in the form of Exhibit C, dated the Closing Date and signed by the chief financial officer of the Parent Borrower.

 

(e)            Officer’s Certificate. The Administrative Agent shall have received a certificate, dated the Closing Date and signed by a Responsible Officer of the Parent Borrower, confirming compliance with the conditions set forth in Sections 4.02(b), 4.02(c), 4.03(a) and 4.03(b). The Administrative Agent shall be entitled to conclusively rely on such certificate in making a determination of the satisfaction of the conditions set forth in Sections 4.02(b) and 4.02(c).

 

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(f)            Fees and Expenses. All fees and expenses due and payable to the Administrative Agent, the Lenders and their respective Affiliates and required to be paid on or prior to the Closing Date shall have been paid or shall have been authorized to be deducted from the proceeds of the initial Loans, so long as any such fees or expenses not expressly set forth in the fee letters related to this Agreement or one or more of the credit facilities hereunder entered into by the Company (or any Borrower) and the Administrative Agent, the Lenders and/or their respective Affiliates in connection with the Closing Date Transactions have been invoiced not less than one (1) Business Day prior to the Closing Date (except as otherwise agreed by the Opco Borrower).

 

The Administrative Agent shall notify the Opco Borrower and the Lenders of the Closing Date, and such notice shall be conclusive and binding.

 

SECTION 4.03.      Each Borrowing. The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of each L/C Issuer to issue, increase or extend any Letter of Credit, is subject to the occurrence of the Closing Date and the satisfaction of the following conditions:

 

(a)            The representations and warranties of the Loan Parties set forth in this Agreement shall be true and correct in all material respects (provided that any representation or warranty that is qualified by materiality or Material Adverse Effect shall be true and correct in all respects) on and as of the date of such Borrowing, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they shall be true and correct in all material respects (provided that any representation or warranty that is qualified by materiality or Material Adverse Effect shall be true and correct in all respects) as of such earlier date.

 

(b)            At the time of and immediately after giving effect to such Borrowing or the issuance, increase or extension of such Letter of Credit, as applicable, no Default or Event of Default shall have occurred and be continuing.

 

(c)            If applicable, the Administrative Agent shall have received a Borrowing Request.

 

(d)            If the applicable Borrower is a Designated Subsidiary Borrower, then the conditions of Section 2.24 to the designation of such Borrower as a Designated Subsidiary Borrower shall have been met to the reasonable satisfaction of the Administrative Agent.

 

Each Borrowing shall be deemed to constitute a representation and warranty by the Parent Borrower and the Opco Borrower on the date thereof as to the matters specified in paragraphs (a) and (b) of this Section.

 

ARTICLE V

 

Affirmative Covenants

 

Commencing on the Effective Date and until the Termination Date Conditions have been satisfied, each Loan Party will:

 

SECTION 5.01.      Compliance with Laws. Comply, and cause each of its Subsidiaries to comply with all applicable Laws, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect, and maintain policies and procedures reasonably designed to promote and achieve compliance by itself, each of its Subsidiaries and their respective directors, officers, employees and agents with applicable Anti-Corruption Laws or applicable Sanctions Laws and Regulations in all material respects.

 

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SECTION 5.02.      Payment of Obligations. Except where the failure to do so could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, pay and discharge, and cause each of its Subsidiaries to pay and discharge, before the same shall become delinquent, (i) all Taxes imposed upon it or upon its property and (ii) all lawful claims that, if unpaid, could reasonably be expected by law to become a Lien upon its property (other than Liens permitted under Section 6.01); provided, however, that neither the Parent Borrower nor any of its Subsidiaries shall be required to pay or discharge any such Tax, assessment, charge or claim that is being contested in good faith and by appropriate action and as to which appropriate reserves have been established in accordance with GAAP.

 

SECTION 5.03.      Compliance with Environmental Laws. Except, in each case, to the extent that the failure to do so could not reasonably be expected to have a Material Adverse Effect, (i) comply, and cause each of its Subsidiaries to comply, with all applicable Environmental Laws and Environmental Permits and (ii) obtain and renew, and cause each of its Subsidiaries to obtain and renew, all Environmental Permits necessary for its operations and properties.

 

SECTION 5.04.      Maintenance of Insurance. Maintain with carriers (that are not Affiliates of the Borrowers) reasonably believed by the Parent Borrower to be financially sound and reputable at the time the insurance is procured, insurance with respect to its properties and business against loss or damage of the kinds customarily insured against by Persons engaged in the same or similar business, of such types and in such amounts as are customarily carried under similar circumstances by such other Persons, except to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect; provided that the Parent Borrower and its Subsidiaries may self-insure against such risks and in such amounts customary in the industry of the Parent Borrower and its Subsidiaries; provided further that, on and after the Security Date, all such insurance shall (a) provide for not less than 30 days’ prior notice to the Administrative Agent of termination, lapse or cancellation of such insurance (or 10 days’ prior notice for non-payment) and (b) name the Administrative Agent as mortgagee (in the case of property insurance) or additional insured on behalf of the Secured Parties (in the case of liability insurance) or loss payee (in the case of property insurance), as applicable.

 

SECTION 5.05.      Preservation of Existence, Etc. Except as otherwise permitted by this Agreement or as otherwise agreed by the Administrative Agent in its sole discretion (and excluding Excluded Subsidiaries), preserve and maintain, and cause each of its Subsidiaries to preserve and maintain (a) its existence and (b) its rights, permits, licenses, approvals, privileges and franchises; provided, however, that neither the Parent Borrower nor any Subsidiary shall be required to preserve any right, permit, license, approval, privilege or franchise if the preservation thereof is no longer necessary or desirable in the normal conduct of the business of the Parent Borrower or such Subsidiary, as the case may be, and if the loss thereof could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 5.06.      Inspection Rights. At any reasonable time and from time to time during normal business hours and following reasonable prior notice, permit the Administrative Agent or any of the Lenders, or any agents or representatives of the Administrative Agent, to examine and make copies of and abstracts from the records and books of account of the Parent Borrower or any other Loan Party (other than materials protected by attorney-client privilege or that a Loan Party may not disclose without violation of a confidentiality obligation binding on it or subject to any other data protection laws) and visit the properties of the Parent Borrower and any other Loan Party, and to discuss the affairs, finances and accounts of the Parent Borrower and any other Loan Party with any of their officers, directors and/or, in the presence of the Parent Borrower if the Parent Borrower shall so request, independent public accountants, all at the expense of such Lender or, if applicable, the Administrative Agent and at such reasonable times during normal business hours, upon reasonable advance notice to the Parent Borrower and on only one occasion during any Fiscal Year; provided that, when an Event of Default exists, the Administrative Agent or any Lender may do any of the foregoing at the expense of the Borrowers at any time during normal business hours, as often as may be reasonably desired and without advance notice. Notwithstanding anything to the contrary set forth in this Agreement or any other Loan Document none of the Parent Borrower or any of its Subsidiaries shall be required to disclose or discuss, or permit the inspection, examination or making of extracts of, any records, books, information or account or other matter (x) in respect of which disclosure to the Administrative Agent, any Lender or their agents or representatives is then prohibited by applicable law or any agreement binding on the Parent Borrower or its Subsidiaries, (y) that is protected from disclosure by the attorney-client privilege or the attorney work product doctrine or (z) that constitutes non-financial trade secrets or non-financial proprietary information (collectively, the “Disclosure Exceptions”).

 

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SECTION 5.07.      Books and Records. Keep, and cause each of its Subsidiaries to keep, books of record and account sufficient to permit the preparation of consolidated financial statements in conformity with GAAP.

 

SECTION 5.08.      Maintenance of Properties. Except as otherwise expressly permitted by this Agreement, maintain and preserve, and cause each of its Subsidiaries to maintain and preserve, all of its properties that are useful and necessary in the normal conduct of its business in good working order and condition, ordinary wear and tear excepted, except where failure to do so could not reasonably be expected to have a Material Adverse Effect.

 

SECTION 5.09.      Transactions with Affiliates. Conduct, and cause each of its Subsidiaries to conduct, all transactions otherwise permitted under the Loan Documents with any of its Affiliates on terms that are fair and reasonable and, when taken as a whole, substantially no less favorable to the Parent Borrower and its Subsidiaries than they would obtain in a comparable arm’s-length transaction with a Person that is not an Affiliate, other than the following:

 

(a)            transactions between and among the Company (until the Post-Closing Distribution), the Parent Borrower and its Subsidiaries (including any Person that becomes a Subsidiary as a result of such transaction) and between and among the Subsidiaries of the Parent Borrower (including any Person that becomes a Subsidiary as a result of such transaction);

 

(b)            transfer pricing transactions in the ordinary course of business on terms providing for the Opco Borrower and its Subsidiaries to recover, in the aggregate, their costs (plus any arm’s length profit mark-up) in respect of any transferred product;

 

(c)            transactions permitted under this Agreement, including, without limitation, any transactions permitted under Section 6.04, Dispositions permitted under Section 6.05, Investments permitted under Section 6.06, and Restricted Payments permitted under 6.07;

 

(d)            customary transactions with (including any Investment in or relating to) any Receivables Subsidiary as part of any Receivables Facility;

 

(e)            transactions with Affiliates for the purchase, sale, or lease of goods in the ordinary course of business for less than fair market value, but for not less than cost;

 

(f)            any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, equity purchase agreements, stock options and stock ownership plans approved by the board of directors of the Parent Borrower;

 

(g)            the payment of fees, advances, reasonable out-of-pocket costs and indemnities to directors, officers, consultants and employees of the Parent Borrower and any of its Subsidiaries in the ordinary course of business;

 

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(h)            the Parent Borrower or any Subsidiary may make equity contributions, and/or intercompany loans that have below market interest rates, to any Subsidiary, so long as any such intercompany loan is payable upon demand and this Agreement does not otherwise prohibit any such equity contribution or intercompany loan;

 

(i)            (A) any employment agreements entered into by the Parent Borrower or any of its Subsidiaries in the ordinary course of business, (B) any subscription agreement or similar agreement pertaining to the repurchase of Equity Interests pursuant to put/call rights or similar rights with employees, officers or directors, and (C) any employee compensation, benefit plan or arrangement, any health, disability or similar insurance plan which covers employees, and any reasonable employment contract and transactions pursuant thereto;

 

(j)            transactions between the Parent Borrower or any of its Subsidiaries and any Person, a director of which is also a director of the Parent Borrower or any Subsidiary of the Parent Borrower; provided, however, that (i) such director abstains from voting as a director of the Parent Borrower or the applicable Subsidiary on any matter involving such other Person and (ii) such Person is not an Affiliate of the Parent Borrower or any Subsidiary for any reason other than such director’s acting in such capacity;

 

(k)           transactions, agreements and arrangements in existence or committed, or anticipated to exist in the future, as set forth on Schedule 5.09, and, in each case, any amendment thereto or replacement thereof or similar arrangement to the extent such amendment, replacement or arrangement is not adverse to the Lenders when taken as a whole in any material respect (as determined by the Parent Borrower in good faith);

 

(l)            transactions for cash management and other management services for Subsidiaries on customary terms; and

 

(m)          the Spin-Off Transactions to the extent (i) described in the Registration Statement, (ii) otherwise disclosed in writing by the Parent Borrower to the Administrative Agent and the Lenders prior to the Effective Date and (x) filed by the Parent Borrower with the SEC and/or (y) obtained by the Company or the Parent Borrower from the IRS or (iii) not materially adverse to the Administrative Agent and the Lenders.

 

Nothing in this Section 5.09 shall impair or prevent any allocation of expenses among the Parent Borrower and its Subsidiaries; provided that such allocation is made on a reasonable basis.

 

SECTION 5.10.      Covenant to Guarantee Obligations and Provide Security.

 

(a)           On or prior to the date of the Post-Closing Distribution, each of the Parent Borrower and Opco Borrower shall cause all of the owned property (whether personal, tangible, intangible, or mixed, but excluding the Excluded Assets) of the Parent Borrower, the Opco Borrower and each Wholly-Owned Domestic Subsidiary (other than any Excluded Subsidiary) to be subject to first priority, perfected Liens in favor of the Administrative Agent for the benefit of the Secured Parties to secure the Secured Obligations to the extent required by and in accordance with the terms and conditions of the Collateral Documents, subject in any case to Liens permitted by Section 6.01, including Liens encumbering (A) 100% of the issued and outstanding Equity Interests of each Pledge Subsidiary that is a Domestic Subsidiary and (B) 65% of the issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) in each Pledge Subsidiary that is a Foreign Subsidiary, in each case directly owned by such Loan Party.

 

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(b)            (x) In respect of the Parent Borrower, the Opco Borrower and each Wholly-Owned Domestic Subsidiary (other than any Excluded Subsidiary), on or prior to the date of the Post-Closing Distribution (or such later date as the Administrative Agent may agree in its sole discretion) and (y) in respect of any Wholly-Owned Domestic Subsidiary (other than any Excluded Subsidiary) formed or acquired after the Post-Closing Distribution, on or prior to the 60th day following the formation or acquisition of such Subsidiary (or such later date as the Administrative Agent may agree to in its reasonable discretion), cause:

 

(i)            each such Person to deliver to the Administrative Agent a Guaranty Supplement and a joinder to the Security Agreement (in the form contemplated thereby) pursuant to which such Person agrees to be bound by the terms and provisions thereof, such Guaranty Supplement and joinder to the Security Agreement to be accompanied by appropriate corporate resolutions, other corporate documentation and legal opinions reasonably requested by the Administrative Agent, all in form and substance reasonably satisfactory to the Administrative Agent and its counsel; and

 

(ii)            all of the owned property (whether personal, tangible, intangible, or mixed, but excluding the Excluded Assets) of each such Person to be subject at all times to first priority, perfected Liens in favor of the Administrative Agent for the benefit of the Secured Parties to secure the Secured Obligations to the extent required by and in accordance with the terms and conditions of the Collateral Documents, subject in any case to Liens permitted by Section 6.01, including Liens encumbering (A) 100% of the issued and outstanding Equity Interests of each Pledge Subsidiary that is a Domestic Subsidiary and (B) 65% of the issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) in each Pledge Subsidiary that is a Foreign Subsidiary, in each case directly owned by such Person.

 

(c)            Execute and deliver, and cause each Subsidiary to execute and deliver, or cause to be executed and delivered, to the Administrative Agent such documents, agreements and instruments, and will take or cause to be taken such further actions (including actions or deliveries of the type required by Section 4.01, as applicable), which may be required by law or which the Administrative Agent may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents and to ensure perfection and priority of the Liens created or intended to be created by the Collateral Documents, all at the expense of the Borrowers.

 

(d)            If any assets are acquired by a Domestic Loan Party on or after the Security Date with an aggregate value in excess of $5,000,000 (other than (x) assets constituting Collateral under any Collateral Document that become subject to the Lien under such Collateral Document upon acquisition thereof and (y) Excluded Assets), the Opco Borrower will notify the Administrative Agent thereof, and, if requested by the Administrative Agent, such Domestic Loan Party will (i) cause such assets to be subjected to a Lien securing the Secured Obligations and (ii) take such actions as shall be necessary or reasonably requested by the Administrative Agent to grant and perfect such Liens, including actions described in paragraph (c) of this Section, all at the expense of the Borrowers.

 

(e)            If and when a Wholly-Owned Domestic Subsidiary ceases to be an Excluded Subsidiary, cause such Domestic Subsidiary to comply with the provisions and requirements of this Section 5.10 as set forth above within 60 days of such cessation (or by such later date as the Administrative Agent may permit in its discretion).

 

(f)            Notwithstanding anything to the contrary in this Agreement or any other Loan Documents, (1) no Loan Party shall be required, nor shall the Administrative Agent be authorized, (i) to perfect any Liens in the Collateral by any means other than by (A) filings pursuant to the Uniform Commercial Code in the office of the secretary of state (or similar central filing office) of the relevant jurisdiction, (B) filings in United States government offices with respect to intellectual property to the extent required by the Collateral Documents, (C) delivery to the Administrative Agent to be held in its possession of all Collateral consisting of intercompany notes, stock certificates and instruments, in each case to the extent required by the Collateral Documents or (D) necessary perfection steps with respect to commercial tort claims and letter of credit rights that constitute Collateral or (ii) to take any action (other than the actions listed in clauses (i)(A) and (C) above) with respect to any assets located outside of the United States; and (2) none of the Loan Parties shall be required to enter into any control agreement with respect to any deposit account, securities account, commodity account or other account.

 

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(g)            This Section 5.10 is subject in all respects to the terms of Section 9.20.

 

SECTION 5.11.      Use of Proceeds. Use the proceeds of the Loans only as provided in Section 3.14.

 

SECTION 5.12.      Reporting Requirements. Furnish to the Administrative Agent and the Lenders:

 

(a)            Default Notices. As soon as possible and in any event within five Business Days of a Responsible Officer of the Parent Borrower or the Opco Borrower obtaining knowledge of the occurrence of a Default or Event of Default which is continuing, a statement of a Responsible Officer of the Parent Borrower setting forth details of such Default or Event of Default and the action that the Parent Borrower has taken and proposes to take with respect thereto.

 

(b)            Annual Financials. As soon as available and in any event within 90 days after the end of each Fiscal Year (commencing with the Fiscal Year ending December 31, 2022), (i) a copy of the annual audit report for such Fiscal Year for the Parent Borrower, including Consolidated balance sheets of the Parent Borrower and its Subsidiaries as of the end of such Fiscal Year and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Borrower and its Subsidiaries for such Fiscal Year, in each case accompanied by a report and opinion of independent public accountants of recognized standing, which shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification, exception or explanatory paragraph or any qualification, exception or explanatory paragraph as to the scope of such audit (other than such a qualification or exception that is solely with respect to, or resulting solely from, the upcoming maturity date of any of the Loans hereunder being scheduled to occur within twelve months from the time such report is delivered) to the effect that such Consolidated financial statements fairly present in all material respects the financial position, results of operations and cash flows of the Parent Borrower on a Consolidated basis in accordance with GAAP; provided that, if the independent auditor’s report with respect to such Consolidated financial statements is a combined report (that is, one report containing both an opinion on such consolidated financial statements and an opinion on internal controls over financial reporting), then such report may include a qualification or limitation relating to the Parent Borrower’s system of internal controls over financial reporting due to the exclusion of any acquired business from the management report on internal controls over financial reporting made pursuant to Item 308 of Regulation S-K of the SEC, to the extent such exclusion is permitted under provisions published by the SEC; provided further that, if applicable, the independent auditor’s report may contain references to independent audits performed by other independent public accountants of recognized national standing as contemplated by AU Section 543, Part of Audit Performed by Other Independent Auditors, or any successor standard under GAAP; and (ii) a Compliance Certificate, which shall include a statement from a Financial Officer of the Parent Borrower stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent Borrower has taken and proposes to take with respect thereto.

 

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(c)            Quarterly Financials. As soon as available and in any event within 45 days (or, in the case of the Fiscal Quarter ending September 30, 2022, within 60 days) after the end of each of the first three quarters of each Fiscal Year (commencing with the Fiscal Quarter ending September 30, 2022), (i) Consolidated balance sheets of the Parent Borrower and its Subsidiaries as of the end of such quarter, Consolidated statements of income and a Consolidated statement of cash flows of the Parent Borrower and its Subsidiaries for the period commencing at the end of the previous Fiscal Quarter and ending with the end of such Fiscal Quarter and Consolidated statements of income and a Consolidated statement of cash flows of the Parent Borrower and its Subsidiaries for the period commencing at the end of the previous Fiscal Year and ending with the end of such quarter, all certified by a Financial Officer of the Parent Borrower as fairly presenting in all material respects the financial position, results of operations and cash flows of the Parent Borrower on a Consolidated basis in accordance with GAAP, subject to normal year-end audit adjustments and the absence of footnotes; and (ii) a Compliance Certificate, which shall include a statement from a Financial Officer of the Parent Borrower stating that no Default has occurred and is continuing or, if a Default has occurred and is continuing, a statement as to the nature thereof and the action that the Parent Borrower has taken and proposes to take with respect thereto.

 

(d)            Litigation. Promptly after a Responsible Officer of the Parent Borrower or the Opco Borrower has knowledge of the commencement thereof, notice of all actions, suits, investigations, litigation and proceedings before any Governmental Authority against any Loan Party or any of its Subsidiaries that (i) could reasonably be expected to have a Material Adverse Effect or (ii) purports to affect the legality, validity or enforceability of any Loan Document or the consummation of the transactions contemplated thereby.

 

(e)            ERISA. Promptly and in any event within 10 Business Days of any Responsible Officer of the Parent Borrower or the Opco Borrower obtaining knowledge of the occurrence of any ERISA Event or the incurrence of a Withdrawal Liability to a Multiemployer Plan, in each case that could reasonably be expected to have a Material Adverse Effect, a statement of a Responsible Officer of the Parent Borrower describing such ERISA Event or Withdrawal Liability and the action, if any, that the applicable Loan Party or ERISA Affiliate has taken and proposes to take with respect thereto.

 

(f)            Other Information. (i) Documentation and other information in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the Patriot Act, as the Administrative Agent, or any Lender through the Administrative Agent, may from time to time reasonably request and (ii) subject to the Disclosure Exceptions, such other information respecting the business, condition (financial or otherwise), operations, performance or properties of any Loan Party as the Administrative Agent, or any Lender through the Administrative Agent, may from time to time reasonably request.

 

(g)            Important Events. Within five Business Days of any Responsible Officer of the Parent Borrower or the Opco Borrower acquiring knowledge of any event that could reasonably be expected to have a Material Adverse Effect, notice of such event.

 

Documents required to be delivered pursuant to Section 5.12(b) or (c) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and, if so delivered, shall be deemed to have been delivered on the date (i) on which the Parent Borrower posts such documents, or provides a link thereto, on the Internet in the investors’ relations section of the Parent Borrower’s website; (ii) on which such documents are posted on the Parent Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent) or (iii) on which such documents are posted on the website of the SEC at http://www.sec.gov (or any successor website); provided that (A) upon request of the Administrative Agent or any Lender, the Parent Borrower shall deliver paper copies of such documents to the Administrative Agent or such Lender until a written request to cease delivering paper copies is given by the Administrative Agent or such Lender, as applicable, and (B) the Parent Borrower shall notify the Administrative Agent (by facsimile, electronic mail or otherwise) of the posting of any such documents under the foregoing clause (i) or (ii). The Administrative Agent shall have no obligation to request the delivery or to maintain copies of the documents referred to above and, in any event, shall have no responsibility to monitor compliance by the Parent Borrower with any such request for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents. Notwithstanding the above, if any report, certificate or other information required under this Section is due on a day that is not a Business Day, then such report, certificate or other information shall be required to be delivered on the first day after such day that is a Business Day.

 

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Each Borrower hereby acknowledges that (a) the Administrative Agent, the Bookrunners and/or the Arrangers may, but shall not be obligated to, make available to the Lenders and the L/C Issuers materials and/or information provided by or on behalf of such Borrowers hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on an Approved Electronic Platform and (b) certain of the Lenders (each, a “Public Lender”) may have personnel who do not wish to receive material non-public information with respect to any of the Borrowers or their respective Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons’ securities. Each Borrower hereby agrees that (w) all Borrower Materials that are to be made available to Public Lenders shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC”, the Borrowers shall be deemed to have authorized the Administrative Agent, the Bookrunners, the Arrangers, the L/C Issuers and the Lenders to treat such Borrower Materials as not containing any material non-public information with respect to the Borrowers or their respective securities for purposes of United States Federal and state securities laws (provided, however, that, to the extent such Borrower Materials constitute Information, they shall be treated as set forth in Section 9.12); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of an Approved Electronic Platform designated “Public Side Information”; and (z) the Administrative Agent, each Bookrunner and each Arranger shall be entitled to treat any Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of an Approved Electronic Platform not designated “Public Side Information”. Notwithstanding the foregoing, no Loan Party shall be under any obligation to mark any Borrower Materials “PUBLIC”. Each Borrower acknowledges and agrees that the DQ List does not constitute material non-public information and shall be posted promptly to all Lenders by the Administrative Agent (including any updates thereto from time to time).

 

ARTICLE VI

 

Negative Covenants

 

Commencing on the Effective Date and until the Termination Date Conditions have been satisfied, the Loan Parties shall not:

 

SECTION 6.01.      Liens. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or with respect to any of its properties of any character (including, without limitation, accounts) whether now owned or hereafter acquired, except (collectively, “Permitted Liens”):

 

(a)            Permitted Encumbrances;

 

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(b)            Liens existing, or applicable to committed obligations, or anticipated to exist in the future, on the Effective Date and set forth in Schedule 6.01, and Liens securing any Permitted Refinancing of any obligations secured by a Lien described in this clause (b);

 

(c)            any Lien on any asset securing Debt permitted under Section 6.02(e); provided that such Liens do not at any time encumber any property other than the property acquired, developed, purchased, leased, constructed, repaired, restored, replaced, maintained, upgraded, expanded or improved with the proceeds of such Debt, except for accessions and additions to such property, replacements or improvements thereof, customary security deposits with respect thereto, related contract rights and payment intangibles, and the proceeds and the products thereof, and any lease of such property (including accessions thereto) and the proceeds and products thereof; provided further that individual financings provided by one lender may be cross-collateralized to other financings provided by such lender or its affiliates;

 

(d)            Liens arising in connection with Capitalized Leases permitted under Section 6.02(f); provided that such Liens do not extend to any assets (except for accessions and additions to such assets, replacements and products thereof and customary security deposits, related contracts rights and payment intangibles, and the proceeds and products of such assets) other than the property financed by such Debt; provided further that individual financings provided by one lender may be cross-collateralized to other financings provided by such lender or its affiliates;

 

(e)            to the extent such transactions create a Lien thereunder, liens in favor of lessors securing Sale and Leaseback Transactions permitted under this Agreement on the asset subject to such Sale and Leaseback Transactions;

 

(f)            Liens securing (i) Debt permitted by Section 6.02(j)(ii) existing on property at the time of acquisition or existing on the property of any Person at the time such Person becomes a Subsidiary, in each case after the Effective Date; provided that (x) such Lien was not incurred in contemplation of such acquisition or such Person becoming a Subsidiary and (y) such Lien does not extend to or cover any other assets or property (other than the proceeds or products thereof and after acquired property subject to a Lien pursuant to terms existing at the time of such acquisition, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition), and (ii) any Permitted Refinancing of Debt secured by a Lien permitted under this clause (f);

 

(g)            Liens securing Debt of Foreign Subsidiaries permitted to be incurred under Section 6.02(a);

 

(h)            Liens securing Debt permitted to be incurred under Section 6.02(i);

 

(i)             Liens created pursuant to any Loan Document or otherwise securing any Secured Obligations;

 

(j)             pledges and deposits and other Liens securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Parent Borrower or any Subsidiary;

 

(k)            Liens securing obligations in respect of letters of credit, bank guarantees, warehouse receipts or similar obligations permitted under this Agreement and incurred in the ordinary course of business or consistent with past practice or industry practices and not supporting obligations in respect of Debt for borrowed money;

 

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(l)             Liens solely on any cash earnest money deposits made by the Parent Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement in respect of any Investment permitted hereunder;

 

(m)            Liens on any amounts held by a trustee or other escrow agent under any indenture or other debt agreement issued in escrow pursuant to customary escrow arrangements pending the release thereof, or under any indenture or other debt agreement pursuant to customary discharge, redemption or defeasance provisions;

 

(n)            Liens on Equity Interests in joint ventures that are not Subsidiaries (i) securing obligations of such joint venture or (ii) pursuant to the relevant joint venture agreement or arrangement;

 

(o)            Liens on securities that are the subject of repurchase agreements constituting Investments permitted under Section 6.06 (other than Section 6.06(n));

 

(p)            subordination, non-disturbance and/or attornment agreements with any ground lessor, lessor or any mortgagor of any of the foregoing, with respect to any ground lease or other lease or sublease entered into by the Parent Borrower or any Subsidiary;

 

(q)            Liens securing insurance premium financing arrangements; provided that such Liens are limited to the applicable unearned insurance premiums; and

 

(r)            Liens in favor of a Receivables Subsidiary or a Person that is not a Subsidiary of the Parent Borrower on Receivables Assets or the Equity Interests of a Receivables Subsidiary, in each case granted in connection with a Receivables Facility solely to secure obligations owing to such Receivables Subsidiary or other Person that is not a Subsidiary of the Parent Borrower under such Receivables Facility.

 

Any Lien permitted above on any property or assets may extend to the identifiable proceeds thereof.

 

Notwithstanding the foregoing, none of the Liens permitted pursuant to this Section 6.01 may, at any time, attach to any real property located within the United States and owned by the Parent Borrower or any of its Subsidiaries, other than Permitted Encumbrances.

 

SECTION 6.02.      Debt. Create, incur, assume or suffer to exist, or permit any Subsidiary of the Parent Borrower to create, incur, assume or suffer to exist, any Debt, except:

 

(a)            Debt in respect of Hedge Agreements not prohibited by Section 6.09;

 

(b)            intercompany Debt of the Parent Borrower or any of its Subsidiaries owing to the Parent Borrower or any of its Subsidiaries to the extent not prohibited by Section 6.06;

 

(c)            the Secured Obligations;

 

(d)            Debt existing, or applicable to committed obligations, or anticipated to exist in the future, on the Effective Date and set forth on Schedule 6.02, and any Permitted Refinancing of Debt permitted by this clause (d);

 

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(e)            (i) Debt incurred or assumed by the Parent Borrower or any of its Subsidiaries for the purpose of financing the acquisition, development, purchase, lease, construction, repair, restoration, installation, replacement, maintenance, upgrade, expansion or improvement of fixed or capital assets or other property (whether real or personal) (whether through the direct purchase of property or the Equity Interests of any Person owning such assets or property); provided that (x) such Debt is incurred concurrently with or within 270 days after the applicable acquisition, purchase or lease (or, if applicable, the completion of development, construction, repair, restoration, installation, replacement, maintenance, upgrade, expansion or improvement or the commencement of operation of the applicable property, whichever occurs later) and (y) such Debt does not exceed the cost of such acquisition, development, purchase, lease, construction, repair, restoration, installation, replacement, maintenance, upgrade, expansion or improvement; and (ii) any Permitted Refinancing thereof;

 

(f)            Debt under Capitalized Leases; provided that the aggregate principal amount of Debt outstanding under Sale and Leaseback Transactions shall not exceed, at the time of incurrence thereof, together with any Permitted Refinancing thereof, the greater of (x) $75,000,000 and (y) 10% of the Consolidated Net Tangible Assets;

 

(g)            (i) additional unsecured Debt of the Loan Parties in an unlimited amount subject to pro forma compliance, at the time of incurrence thereof, with Section 6.11 as of the last day of the most recently ended Measurement Period; (ii) additional unsecured Debt (or, after the Security Date, (x) unsecured Debt or (y) Debt that is secured on a pari passu basis with the Secured Obligations pursuant to an intercreditor agreement reasonably satisfactory to the Administrative Agent) in an aggregate outstanding principal amount not to exceed, at the time of incurrence thereof, together with any Permitted Refinancing thereof, the greater of (A) $150,000,000 and (B) 20% of the Consolidated Net Tangible Assets; and (iii) Debt consisting of the accretion of original issue discount with respect to any Permitted Convertible Indebtedness not prohibited under this Section 6.02;

 

(h)            Debt of the Parent Borrower and its Subsidiaries incurred in connection with any Receivables Facility in an aggregate principal amount not to exceed, at the time of incurrence thereof, together with any Permitted Refinancing thereof, $100,000,000;

 

(i)            secured Debt, Debt of Foreign Subsidiaries of the Parent Borrower, and Debt of non-Loan Parties in an aggregate outstanding principal amount not to exceed, at the time of incurrence thereof, together with any Permitted Refinancing thereof, (A) except during any Investment Grade Period, the greater of (x) $75,000,000 and (y) 10% of the Consolidated Net Tangible Assets and (B) during any Investment Grade Period, the greater of (x) $115,000,000 and (y) 15% of the Consolidated Net Tangible Assets;

 

(j)            (i) unsecured Debt assumed in connection with a Permitted Acquisition in an unlimited amount subject to pro forma compliance, at the time of incurrence thereof, with Section 6.11 as of the last day of the most recently ended Measurement Period, and (ii) subject to pro forma compliance, at the time of incurrence thereof, with Section 6.11 as of the last day of the most recently ended Measurement Period, secured Debt assumed in connection with a Permitted Acquisition in an outstanding principal amount not to exceed, at the time of assumption thereof, the greater of (A) $75,000,000 and (B) 10% of the Consolidated Net Tangible Assets (provided that, in the case of this clause (ii), the Lien securing such Debt does not extend to or cover any other assets or property (other than the proceeds or products thereof and after acquired property subject to a Lien pursuant to terms existing at the time of such acquisition, it being understood that such requirement shall not be permitted to apply to any property to which such requirement would not have applied but for such acquisition)); provided that, in each case of clauses (i) and (ii), such Debt was not incurred or issued in contemplation of or in connection with such Permitted Acquisition and was in existence on the date of such Permitted Acquisition;

 

(k)            unsecured Subordinated Debt in an unlimited amount subject to pro forma compliance, at the time of incurrence thereof, with Section 6.11 as of the last day of the most recently ended Measurement Period, if no Default or Event of Default exists at the time of, or would be caused by, the incurrence of any such Subordinated Debt;

 

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(l)             Debt owed to (including obligations in respect of letters of credit or bank guarantees or similar instruments for the benefit of) any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance to the Parent Borrower or any Subsidiary, pursuant to reimbursement or indemnification obligations to such Person, in each case in the ordinary course of business or consistent with past practice or industry practices;

 

(m)            Debt in respect of performance bonds, bid bonds, appeal bonds, surety bonds, completion guarantees, performance guarantees and similar obligations, in each case provided in the ordinary course of business or consistent with past practice or industry practices, including those incurred to secure health, safety and environmental obligations in the ordinary course of business or consistent with past practice or industry practices;

 

(n)            Debt arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business or other cash management services, in each case incurred in the ordinary course of business;

 

(o)            Debt arising from agreements of the Parent Borrower or any Subsidiary providing for indemnification, adjustment of purchase or acquisition price or similar obligations (including earn-outs), in each case, incurred or assumed in connection with any Investments or the Disposition of any business, assets or any Subsidiary not prohibited by this Agreement;

 

(p)            Debt in respect of letters of credit, bank guarantees, warehouse receipts or similar instruments issued in the ordinary course of business or consistent with past practice or industry practices and not supporting obligations in respect of Debt for borrowed money;

 

(q)            Debt incurred in the ordinary course of business in respect of obligations of the Parent Borrower or any Subsidiary to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services; provided that such obligations are incurred in connection with open accounts extended by suppliers on customary trade terms in the ordinary course of business and not in connection with the borrowing of money;

 

(r)            Debt representing deferred compensation to employees, consultants or independent contractors of the Parent Borrower or any Subsidiary incurred in the ordinary course of business;

 

(s)            Debt (and any Permitted Refinancing thereof) issued by the Parent Borrower or any Subsidiary to current or former directors, officers, employees or consultants or their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of the Parent Borrower permitted by Section 6.07, in an aggregate outstanding amount not exceeding, together with outstanding Investments permitted by Section 6.06(c)(iii), $15,000,000;

 

(t)            Debt consisting of (i) the financing of insurance premiums, (ii) take-or-pay obligations contained in supply arrangements or (iii) surety bonds and similar instruments, in each case, incurred in the ordinary course of business;

 

(u)           Guarantees of Debt of the Parent Borrower and/or any of its Subsidiaries to the extent such Debt being guaranteed is permitted by any of clauses (a) through (c), (e), (f), (h), (l) through (r), (t) and (v) of this Section 6.02; and

 

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(v)            Debt in respect of the Spin-Off Transactions to the extent (i) described in the Registration Statement or (ii) otherwise disclosed in writing by the Parent Borrower to the Administrative Agent and the Lenders prior to the Effective Date and (x) filed by the Parent Borrower with the SEC and/or (y) obtained by the Company or the Parent Borrower from the IRS.

 

SECTION 6.03.      Change in Nature of Business. Conduct, transact or engage, or permit any Subsidiary of the Parent Borrower to conduct, transact or engage, in any business or operation other than those conducted on the Effective Date or any activities or business that is reasonably similar, ancillary, incidental, complementary or related thereto or a reasonable extension, development or expansion thereof.

 

SECTION 6.04.      Fundamental Changes. Merge, wind up, dissolve or liquidate into or consolidate with (or any local law equivalent thereof) any Person or permit any Person to merge, liquidate into it, or consummate a Division as the Dividing Person, or permit any Subsidiary of the Parent Borrower to do so, except that:

 

(a)            any Domestic Subsidiary may merge, wind up, dissolve or liquidate into or consolidate with (i) the Parent Borrower; provided that the Parent Borrower shall be the continuing or surviving Person of such transaction or (ii) any one or more other Domestic Subsidiaries; provided that, if the merger, wind up, dissolution, liquidation or consolidation involves a Guarantor, the continuing or surviving Person of such transaction shall either be such Guarantor or become a Guarantor pursuant to the terms of Section 5.10;

 

(b)            any Foreign Subsidiary may merge, wind up, dissolve or liquidate into or consolidate with (i) any one or more other Foreign Subsidiaries (provided that, if the merger, windup, dissolution, liquidation or consolidation involves a Designated Subsidiary Borrower, the continuing or surviving Person of such transaction shall be a Designated Subsidiary Borrower) or (ii) except to the extent such Foreign Subsidiary is a Designated Subsidiary Borrower, with any Domestic Subsidiary (provided that such Domestic Subsidiary is the continuing or surviving Person of such transaction);

 

(c)            any Subsidiary that is not a Loan Party may merge, wind up, dissolve or liquidate into or consolidate with any other Subsidiary that is not a Loan Party;

 

(d)            any Subsidiary may merge, wind up, dissolve or liquidate into or consolidate with another Person to effectuate an Investment permitted under Section 6.06 (including any merger, windup, dissolution, liquidation or consolidation to effectuate a Permitted Acquisition) or any Disposition permitted under Section 6.05 (other than clause (b) thereof);

 

(e)            any Subsidiary that is an LLC may consummate a Division as the Dividing Person if, immediately upon the consummation of the Division, the assets of the applicable Dividing Person are held by one or more Domestic Loan Parties at such time, or, with respect to assets not so held by one or more Domestic Loan Parties, such Division, in the aggregate, would otherwise result in a Disposition permitted by Section 6.05 (other than clause (b) thereof); and

 

(f)            the Parent Borrower and its Subsidiaries may effectuate the Spin-Off Transactions to the extent (i) described in the Registration Statement or (ii) otherwise disclosed in writing by the Parent Borrower to the Administrative Agent and the Lenders prior to the Effective Date and (x) filed by the Parent Borrower with the SEC and/or (y) obtained by the Company or the Parent Borrower from the IRS.

 

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SECTION 6.05.      Dispositions. Dispose of, or permit any Subsidiary of the Parent Borrower to Dispose of, any assets, except:

 

(a)            Dispositions of inventory in the ordinary course of its business;

 

(b)            transactions permitted by Section 6.04, Investments permitted by Section 6.06 and Restricted Payments permitted by Section 6.07;

 

(c)            Dispositions of assets by the Parent Borrower and its Subsidiaries to any Subsidiary of the Parent Borrower or the Parent Borrower;

 

(d)            Dispositions of assets in an aggregate amount not to exceed during the term of this Agreement the greater of (x) 15% of the Consolidated Net Tangible Assets (calculated based on the most recent financial statements that have been delivered pursuant to Section 5.12(b) or 5.12(c) (or, prior to the delivery of any such financial statements, the most recently completed four consecutive Fiscal Quarters covered in the financial statements referred to in Section 4.01(d))) and (y) $115,000,000; provided that (i) in the case of Dispositions involving aggregate consideration of at least $10,000,000, at least 75% of such proceeds consist of cash or Cash Equivalents (it being agreed that the following shall be considered “cash” for purposes hereof: (x) liabilities assumed by the transferee or that are otherwise cancelled or terminated in connection with the Disposition; (y) securities, notes or other obligations or assets received from the transferee that are converted into cash or Cash Equivalents within 180 days of the Disposition and (z) Debt of a Subsidiary that ceases to be a Subsidiary as a result of the Disposition, so long as there is no recourse to any Loan Party in connection with such Debt), (ii) such Dispositions are for fair market value (other than minority interests in Subsidiaries) and (iii) no Default shall have occurred and be continuing or would result from such Dispositions;

 

(e)            Dispositions of obsolete or surplus assets or other assets no longer used or useful in the conduct of such Person’s business;

 

(f)            Dispositions consisting of the licensing of intangible assets in the ordinary course between Subsidiaries of the Parent Borrower or between the Parent Borrower and any of its Subsidiaries;

 

(g)            Dispositions of Receivables Assets to a Receivables Subsidiary or a Person that is not a Subsidiary of the Parent Borrower in connection with any Receivables Facility;

 

(h)            in addition to Dispositions permitted under this Section 6.05 (the other exceptions not limiting the ability of Dispositions to be made under this subsection), Dispositions by the Parent Borrower and its Subsidiaries in an amount not to exceed in any Fiscal Year the greater of (x) 5% of the Consolidated Net Tangible Assets (calculated based on the most recent financial statements that have been delivered pursuant to Section 5.12(b) or 5.12(c) (or, prior to the delivery of any such financial statements, the most recently completed four consecutive Fiscal Quarters covered in the financial statements referred to in Section 4.01(d))) and (y) $37,500,000;

 

(i)            Dispositions of any assets acquired as part of any Permitted Acquisition that the Parent Borrower or any Subsidiary Disposes as part of its integration efforts relating to such Permitted Acquisition;

 

(j)            any Disposition of property or assets subject to a Sale and Leaseback Transaction not prohibited by this Agreement;

 

(k)            any exchange or swap of property or assets (other than cash and Cash Equivalents) for other assets (other than cash and Cash Equivalents) of comparable or greater value or usefulness to the business of the Parent Borrower and its Subsidiaries (taken as a whole), determined in good faith by the Parent Borrower;

 

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(l)            leases, licenses, subleases and sublicenses of any property or assets of the Parent Borrower and its Subsidiaries in the ordinary course of business;

 

(m)            Dispositions of any intellectual property rights of the Parent Borrower or any Subsidiary determined in good faith by the Parent Borrower to be no longer economically practicable to maintain or useful or necessary in the operation of the business of the Parent Borrower or any Subsidiaries;

 

(n)            any Disposition by the Parent Borrower of its treasury stock;

 

(o)            any Disposition of cash, Cash Equivalents or marketable securities in the ordinary course of business;

 

(p)            any Disposition of cash or Cash Equivalents as consideration for, and in accordance with the requirements of, any Permitted Acquisition or any other transaction not prohibited by this Agreement;

 

(q)            any issuance or Disposition by a Person of its own Equity Interests;

 

(r)            any casualty loss, governmental taking or other involuntary Disposition;

 

(s)            (i) the discount or write-off of accounts receivable for the purpose of collection to any collection agency, in each case in the ordinary course of business and (ii) Dispositions of receivables (including defaulted receivables), notes receivable, rights to payment or other current assets or, in each case, participations therein, in the ordinary course of business or the conversion of accounts receivable to notes receivable or other dispositions of accounts receivable or rights to payment in connection with the settlement of delinquent accounts receivable, the collection or compromise thereof or as part of any bankruptcy or reorganization process of suppliers, customers or other commercial counterparties (including any discount or forgiveness in connection with the foregoing);

 

(t)            Dispositions (i) in connection with any casualty event or any eminent domain, condemnation or similar proceeding, (ii) by reason of the exercise of termination rights under any lease, sublease, license, sublicense, concession or other agreement or (iii) pursuant to buy/sell arrangements under any joint venture or similar agreement or arrangement;

 

(u)            the unwinding of any Hedge Agreement pursuant to its terms;

 

(v)            any surrender or waiver of contract rights or the settlement, release, recovery on or surrender of contract, tort or other claims of any kind;

 

(w)            the Disposition of any Investment acquired by virtue of any Bail-in Action with respect to any Lender;

 

(x)            Dispositions required to be made to comply with the order of any Governmental Authority or applicable Law;

 

(y)            any Disposition of any interest in any bank acceptance draft or similar instrument delivered by a customer in the ordinary course of business; and

 

(z)            any Disposition to effectuate the Spin-Off Transactions to the extent (i) described in the Registration Statement or (ii) otherwise disclosed in writing by the Parent Borrower to the Administrative Agent and the Lenders prior to the Effective Date and (x) filed by the Parent Borrower with the SEC and/or (y) obtained by the Company or the Parent Borrower from the IRS.

 

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SECTION 6.06.      Investments. Make, hold or acquire, or permit any Subsidiary of the Parent Borrower to so make, hold or acquire, any Investment in any Person, except:

 

(a)            Investments existing, or applicable to committed obligations, or anticipated to exist in the future, on the Effective Date and set forth in Schedule 6.06, and any extensions, renewals, replacements or reinvestments of Investments permitted by this clause (a), so long as the aggregate amount of all Investments pursuant to this clause (a) is not increased at any time above the amount of such Investment existing or committed as of the Effective Date (other than pursuant to an increase as required by the terms of any such Investment as in existence as of the Effective Date, or as otherwise permitted by this Section 6.06);

 

(b)            equity Investments by the Parent Borrower and its Subsidiaries in their respective Subsidiaries;

 

(c)            loans and advances to officers, directors, employees or consultants of the Parent Borrower or any Subsidiaries (i) in the ordinary course of business in an aggregate outstanding amount not to exceed $5,000,000, (ii) in respect of payroll payments and expenses in the ordinary course of business or (iii) in connection with any such Person’s purchase of Equity Interests of the Parent Borrower in an aggregate outstanding amount not exceeding, together with outstanding Debt permitted by Section 6.02(s), $15,000,000;

 

(d)            deposits required by government agencies or public utilities;

 

(e)            accounts receivable, security deposits and prepayments, trade credit and bank acceptance drafts and similar instruments delivered by customers, in each case, in the ordinary course of business;

 

(f)            Investments by the Parent Borrower and its Subsidiaries in Cash Equivalents;

 

(g)            Investments in Hedge Agreements not prohibited by Section 6.09;

 

(h)            intercompany Investments by the Parent Borrower and its Subsidiaries to any Subsidiary of the Parent Borrower or the Parent Borrower; provided that not more than an aggregate amount of $50,000,000 of Investments may be made and remain outstanding, at any time, by Domestic Loan Parties to Subsidiaries which are not Domestic Loan Parties;

 

(i)            Investments (i) in accounts receivable in the ordinary course of business and (ii) received in connection with the bankruptcy or reorganization of suppliers and customers and in settlement of delinquent obligations of, and other disputes with, customers and suppliers arising in the ordinary course of business to the extent that the Parent Borrower or relevant Subsidiary was a creditor of such customer or supplier at the time of filing of such bankruptcy, reorganization or at the time such obligation became delinquent or such dispute arose, as the case may be;

 

(j)            Investments arising out of the receipt of non-cash consideration for the Disposition of any property or assets permitted under Section 6.05;

 

(k)            Investments by the Parent Borrower and its Subsidiaries consisting of the purchase or other acquisition of all of the Equity Interests of another Person or the assets comprising a division or business unit or a substantial part or all of the business of another Person; provided that (i) the aggregate consideration in cash, Cash Equivalents and/or promissory notes for such purchases or other acquisitions (excluding any common stock of the Parent Borrower and cash received substantially simultaneously with such purchase or other acquisition from the issuance of common stock of the Parent Borrower) may not exceed, at the time of the making thereof, the greater of (A) $115,000,000 and (B) 15% of the Consolidated Net Tangible Assets and (ii) in the case of a purchase or acquisition of the Equity Interests of another Person, such purchase or acquisition was not preceded by an unsolicited tender offer for such Equity Interests by, or proxy contest initiated by, the Parent Borrower or any of its Subsidiaries;

 

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(l)            other Investments by the Parent Borrower and its Subsidiaries consisting of the purchase or other acquisition of all of the Equity Interests of another Person or the assets comprising a division or business unit or a substantial part or all of the business of another Person; provided that (i) immediately before and immediately after giving pro forma effect to any such purchase or other acquisition, no Default shall have occurred and be continuing, (ii) the aggregate consideration in cash, Cash Equivalents and/or promissory notes for such purchases or other acquisitions (excluding any common stock of the Parent Borrower and cash received substantially simultaneously with such purchase or other acquisition from the issuance of common stock of the Parent Borrower) may not exceed an unlimited amount if, immediately after giving effect to such purchase or other acquisition, the Parent Borrower shall be in pro forma compliance with Section 6.11, such compliance to be determined on the basis of the financial information most recently delivered (or required to have been delivered) to the Administrative Agent and the Lenders as though such Investment had been consummated as of the first day of the fiscal period covered thereby, (iii) in the case of a purchase or acquisition of the Equity Interests of another Person, such purchase or acquisition was not preceded by an unsolicited tender offer for such Equity Interests by, or proxy contest initiated by, the Parent Borrower or any Subsidiary and (iv) immediately before and immediately after giving pro forma effect to any such purchase or other acquisition, the Loan Parties are in compliance with Section 6.03; provided further that, if such acquisition is a Limited Condition Transaction, the conditions in clauses (i) and (ii) above may be satisfied as of the date of the entering into of the definitive agreement for such Limited Condition Transaction so long as no Specified Default shall have occurred and be continuing at the time of, or would result from, the consummation thereof;

 

(m)            Investments by the Parent Borrower and its Subsidiaries in joint venture entities that are not Subsidiaries in an aggregate amount not to exceed $50,000,000 (in each case, net of cash repayments of principal in the case of Investments consisting of loans, sale proceeds in the case of Investments consisting of debt instruments and cash equity returns (whether as a distribution, dividend, redemption or sale) in the case of Investments consisting of equity investments);

 

(n)            Investments resulting from pledges and deposits permitted under Section 6.01 (other than Section 6.01(r));

 

(o)            transactions permitted by Section 6.02 (other than Section 6.02(b) or (h)), including the issuance by the Parent Borrower and/or any of its Subsidiaries of any permitted Guarantees;

 

(p)            (i) Guarantees by the Parent Borrower or any of its Subsidiaries of operating leases or of other obligations that do not constitute Debt, in each case entered into by the Parent Borrower or any of its Subsidiaries in the ordinary course of business and (ii) Guarantees by the Parent Borrower or any of its Subsidiaries of the lease obligations of suppliers, customers, franchisees and licensees of the Parent Borrower or any of its Subsidiaries, in each case, entered into in the ordinary course of business;

 

(q)            the Parent Borrower’s entry into (including payments of premiums in connection therewith), and the performance of obligations under, any Permitted Bond Hedge Transactions and Permitted Warrant Transactions in accordance with their terms;

 

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(r)            Investments in connection with any Receivables Facility permitted under Section 6.02, the contribution, sale or other transfer of Receivables Assets, cash or Cash Equivalents made in connection with a Receivables Facility permitted under Section 6.02 or repurchases in connection with the foregoing (including the contribution or lending of cash and/or Cash Equivalents to Subsidiaries to finance the purchase of Receivables Assets from the Parent Borrower or any Subsidiary or to otherwise fund required reserves, the contribution of replacement or substitute assets to a Receivables Subsidiary and Investments of funds held in accounts permitted or required by the arrangements governing such Receivables Facility or any related Debt);

 

(s)            Investments of a Subsidiary acquired after the Effective Date or of a Person merged into the Parent Borrower or merged into or consolidated with any Subsidiaries after the Effective Date, in each case, (i) to the extent such acquisition, merger, or consolidation is permitted under this Section 6.06 and Section 6.04 (other than Section 6.04(d)) and (ii) to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger, or consolidation and were in existence on the date of such acquisition, merger, or consolidation;

 

(t)            acquisitions by the Parent Borrower or any of its Subsidiaries of obligations of one or more directors, officers, employees or consultants of the Parent Borrower or any of its Subsidiaries in connection with such director’s, officer’s, employee’s or consultant’s acquisition of Equity Interests of the Parent Borrower or any Subsidiary, so long as no cash is actually advanced by the Parent Borrower or any of its Subsidiaries to such directors, officers, employees or consultants in connection with the acquisition of any such obligations;

 

(u)            Investments to the extent that payment for such Investments is made with the Parent Borrower’s common Equity Interests;

 

(v)            Investments in the ordinary course of business consisting of UCC Article 3 endorsements for collection or deposit and UCC Article 4 customary trade arrangements with customers;

 

(w)            any Investment acquired by virtue of any Bail-in Action with respect to any Lender;

 

(x)            additional Investments not otherwise permitted under this Section 6.06 subject to pro forma compliance at the time such Investments are made, with Section 6.11 as of the most recent Measurement Period; provided that, immediately before and immediately after giving pro forma effect to any such Investments, no Default or Event of Default shall have occurred and be continuing; and

 

(y)            any Investment in respect of the Spin-Off Transactions to the extent (i) described in the Registration Statement or (ii) otherwise disclosed in writing by the Parent Borrower to the Administrative Agent and the Lenders prior to the Effective Date and (x) filed by the Parent Borrower with the SEC and/or (y) obtained by the Company or the Parent Borrower from the IRS.

 

SECTION 6.07.      Restricted Payments. Declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its Equity Interests (other than, with respect to the Parent Borrower, any Permitted Convertible Indebtedness, any Permitted Bond Hedge Transactions or any Permitted Warrant Transactions) now or hereafter outstanding, return any capital to its stockholders, partners or members (or the equivalent Persons thereof) or permit any of its Subsidiaries to do any of the foregoing (collectively, “Restricted Payments”), except that, so long as no Default or Event of Default shall have occurred and be continuing at the time of any action described below or would result therefrom:

 

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(a)            the Parent Borrower may (i) declare and pay dividends and distributions payable in its common stock and purchase, redeem, retire, defease or otherwise acquire shares of its Equity Interests with the proceeds received contemporaneously from the issue of new shares of its Equity Interests with equal or inferior voting powers, designations, preferences and rights, and (ii) declare and pay dividends and distributions in cash and purchase, redeem, retire, defease or otherwise acquire Equity Interests with cash and notes so long as before and upon giving effect to the payment of such distribution or dividend pursuant to this clause (a)(ii), the Total Net Leverage Ratio of the Parent Borrower, calculated on a pro forma basis for the most recent Measurement Period, shall not exceed 3.00 to 1.00;

 

(b)            any Subsidiary of the Parent Borrower may (i) declare and make Restricted Payments to the Parent Borrower, (ii) declare and make Restricted Payments to any Subsidiary of the Parent Borrower of which it is a Subsidiary; provided that, if such Subsidiary declaring and making Restricted Payments is not Wholly-Owned, the Parent Borrower or the Subsidiary of the Parent Borrower which owns equity interests in the Subsidiary making such Restricted Payments shall receive at least its proportionate share thereof (based upon its relative holding of the equity interest in the Subsidiary making such Restricted Payments and taking into account the relative preferences, if any, of the various classes of equity interests of such Subsidiary) unless its then shareholders, members or partners are required under applicable Law to receive a greater proportionate share thereof;

 

(c)            the Parent Borrower or any of its Subsidiaries may purchase, redeem, retire, defease or otherwise acquire Equity Interests in any Subsidiary;

 

(d)            Restricted Payments made to purchase, redeem or settle the Equity Interests of the Parent Borrower (including related stock appreciation rights or similar securities) held by present or former directors, officers, employees or consultants of the Parent Borrower or any Subsidiaries upon any such Person’s death, disability, retirement or termination of employment or under the terms of any benefit plan or any other agreement under which such shares of stock or related rights were issued in an aggregate amount not to exceed $15,000,000 in any Fiscal Year;

 

(e)            non-cash repurchases of Equity Interests deemed to occur upon the exercise or settlement of stock options, stock appreciation rights, restricted stock units, warrants or other convertible or exchangeable securities or other Equity Interests if such Equity Interests represent a portion of the exercise price of, or withholding obligation with respect to, such options, stock appreciation rights, restricted stock units, warrants or other convertible or exchangeable securities or other Equity Interests;

 

(f)            Restricted Payments to make payments, in cash, in lieu of the issuance of fractional shares, upon the exercise of warrants or upon the conversion or exchange of Equity Interests of any such Person;

 

(g)            withholding tax payments made on behalf of present or former directors, officers, employees or consultants, or any beneficiary thereof following the death of any such Person, in connection with the exercise by such Persons of stock options or other rights to purchase Equity Interests or the vesting of restricted Equity Interests (including any repurchase of restricted Equity Interests representing the holder’s tax liability in connection with the vesting thereof);

 

(h)            additional Restricted Payments not otherwise permitted under this Section 6.07 in an aggregate amount not to exceed in any Fiscal Year, at the time of the making thereof, the greater of (A) $150,000,000 and (B) 20% of the Consolidated Net Tangible Assets (the “Specified Restricted Payment Basket”); provided that, immediately before and immediately after giving pro forma effect to any such Restricted Payments, no Default or Event of Default shall have occurred and be continuing; provided further that up to $75,000,000 of unused amounts of the Specified Restricted Payment Basket may be carried forward to the next succeeding Fiscal Year if not used in such Fiscal Year, and any amount so carried over may not be used in that Fiscal Year until the Specified Restricted Payment Basket permitted to be expended in such Fiscal Year has first been used in full and any such carry-over amount applicable to a succeeding Fiscal Year may not be carried forward to another Fiscal Year; and

 

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(i)            any Restricted Payments in respect of the Spin-Off Transactions to the extent (i) described in the Registration Statement or (ii) otherwise disclosed in writing by the Parent Borrower to the Administrative Agent and the Lenders prior to the Effective Date and (x) filed by the Parent Borrower with the SEC and/or (y) obtained by the Company or the Parent Borrower from the IRS.

 

Notwithstanding anything in this Agreement to the contrary, the foregoing provisions of this Section 6.07 will not prohibit any Restricted Payment within sixty (60) days after the date of declaration thereof or the giving of notice with respect thereto, as applicable, if at the date of declaration or the giving of such notice such Restricted Payment would have complied with the provisions of this Section 6.07 (it being understood that such Restricted Payment shall be deemed to have been made on the date of declaration or notice for purposes of such provision).

 

Notwithstanding the foregoing, and for the avoidance of doubt, (i) the conversion by holders of (including any cash payment upon conversion), or required payment of any principal or premium on, or required payment of any interest with respect to, any Permitted Convertible Indebtedness, in each case, in accordance with the terms of the indenture or other instrument governing such Permitted Convertible Indebtedness, shall not constitute a Restricted Payment; provided that, to the extent both (a) the aggregate amount of cash payable upon conversion or payment of any Permitted Convertible Indebtedness (excluding any required payment of interest with respect to such Permitted Convertible Indebtedness and excluding any payment of cash in lieu of a fractional share due upon conversion thereof) exceeds the aggregate principal amount thereof and (b) such conversion or payment does not trigger or correspond to an exercise or early unwind or settlement of a corresponding portion of the Permitted Bond Hedge Transactions relating to such Permitted Convertible Indebtedness (including, for the avoidance of doubt, the case where there is no Permitted Bond Hedge Transaction relating to such Permitted Convertible Indebtedness), the payment of such excess cash shall constitute a Restricted Payment notwithstanding this clause (i); and (ii) any required payment with respect to, or required early unwind or settlement of, any Permitted Bond Hedge Transaction or Permitted Warrant Transaction, in each case, in accordance with the terms of the agreement governing such Permitted Bond Hedge Transaction or Permitted Warrant Transaction shall not constitute a Restricted Payment; provided that, to the extent cash is required to be paid under a Permitted Warrant Transaction as a result of the election of “cash settlement” (or substantially equivalent term) as the “settlement method” (or substantially equivalent term) thereunder by the Parent Borrower (or its Affiliate) (including in connection with the exercise and/or early unwind or settlement thereof), the payment of such cash shall constitute a Restricted Payment notwithstanding this clause (ii).

 

Notwithstanding the foregoing, the Parent Borrower may repurchase, exchange or induce the conversion of Permitted Convertible Indebtedness by delivery of shares of the Parent Borrower’s common stock and/or a different series of Permitted Convertible Indebtedness (which series (x) matures after, and does not require any scheduled amortization or other scheduled payments of principal prior to, the analogous date under the indenture or other instrument governing the Permitted Convertible Indebtedness that is so repurchased, exchanged or converted and (y) has terms, conditions and covenants that are no less favorable to the Parent Borrower than the Permitted Convertible Indebtedness that is so repurchased, exchanged or converted (as determined by the board of directors of the Parent Borrower, or a committee thereof, in good faith)) (any such series of Permitted Convertible Indebtedness, “Refinancing Convertible Notes”) and/or by payment of cash (in an amount that does not exceed the proceeds received by the Parent Borrower from the substantially concurrent issuance of shares of the Parent Borrower’s common stock and/or Refinancing Convertible Notes plus the net cash proceeds, if any, received by the Parent Borrower pursuant to the related exercise or early unwind or termination of the related Permitted Bond Hedge Transactions and Permitted Warrant Transactions, if any, pursuant to the immediately following proviso); provided that, substantially concurrently with, or a commercially reasonable period of time before or after, the related settlement date for the Permitted Convertible Indebtedness that is so repurchased, exchanged or converted, the Parent Borrower shall (and, for the avoidance of doubt, shall be permitted under this Section 6.07 to) exercise or unwind or terminate early (whether in cash, shares or any combination thereof) the portion of the Permitted Bond Hedge Transactions and Permitted Warrant Transactions, if any, corresponding to such Permitted Convertible Indebtedness that is so repurchased, exchanged or converted.

 

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SECTION 6.08.      Accounting Changes. Make or permit any change in the Fiscal Year of the Parent Borrower without (a) providing the Administrative Agent with prior written notice of such change; and (b) executing and delivering to the Administrative Agent, prior to such change, such amendments to this Agreement and the other Loan Documents as the Required Lenders may reasonably deem necessary and appropriate as a result of such change in Fiscal Year.

 

SECTION 6.09.      Speculative Transactions. Enter into, or permit any Subsidiary of the Parent Borrower to enter into, any Hedge Agreement unless such Hedge Agreement is incurred to hedge bona fide business risks and not for speculative purposes.

 

SECTION 6.10.      Anti-Corruption; Sanctions Laws and Regulations.

 

(a)            Engage in any transaction, or knowingly permit any of its Subsidiaries to engage in any transaction, that violates applicable Sanctions Laws and Regulations.

 

(b)            Use any funding or proceeds from this Agreement (or lend, contribute or otherwise make any such funding or proceeds available to any Subsidiary, joint venture partner or other person):

 

(i)            in connection with any transaction relating directly or indirectly to any Designated Person or in a Sanctioned Country, in each case to the extent such transaction would violate Sanctions Laws and Regulations; or

 

(ii)            in violation of applicable Anti-Corruption Laws or applicable Sanctions Laws and Regulations, or in a manner that causes any Lender to violate any applicable Sanctions Laws and Regulations.

 

(c)            Permit any of the funds or assets of any Borrower that are used to repay or prepay any credit facility under this Agreement to constitute property of, or to be beneficially owned by, any Designated Person, or be directly obtained or derived from transactions with or relating to countries subject to U.S., EU or United Kingdom economic sanctions, in each case in any manner that would result in a violation of applicable Sanctions Laws and Regulations or that violate any applicable Anti-Corruption Laws.

 

(d)            Any provision of this Section 6.10, Section 3.15 or Section 5.01 shall not apply to or in favour of any person if and to the extent that it would result in a breach, by or in respect of that person, of any applicable Blocking Law.

 

(e)            For the purposes of this Section 6.10, “Blocking Law” means:

 

(i)            any provision of Council Regulation (EC) No 2271/1996 of 22 November 1996 (or any law or regulation implementing such Regulation in any member state of the European Union);

 

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(ii)            any provision of Council Regulation (EC) No 2271/1996 of 22 November 1996, as it forms part of domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018; or

 

(iii)            section 7 of the German Foreign Trade Regulation (Außenwirtschaftsverordnung).

 

SECTION 6.11.      Financial Covenants.

 

(a)            Total Net Leverage Ratio. Permit the Total Net Leverage Ratio, as of the last day of each Fiscal Quarter ending after the Effective Date, for each Measurement Period ended as of such Fiscal Quarter, to exceed 4.00:1.00; provided that, with respect to any period occurring on or after the second full Fiscal Quarter ending after the Closing Date, to the extent that (i) the Parent Borrower or any of its Subsidiaries consummates, during any period of four Fiscal Quarters for which financial statements are available, one or more acquisitions for which the aggregate consideration, including assumed Debt, for all such acquisitions, is $100,000,000 or more and (ii) within 30 days of consummating such acquisition or acquisitions referred to in clause (i) of this proviso, the Parent Borrower notifies the Administrative Agent that the Parent Borrower elects to increase the maximum Total Net Leverage Ratio threshold as a result thereof, then the maximum Total Net Leverage Ratio threshold for the Fiscal Quarter in which such election is made by the Parent Borrower and the immediately three following Fiscal Quarters (unless earlier terminated by the Parent Borrower by written notice to the Administrative Agent) (such period of four Fiscal Quarters, subject to any such earlier termination, an “Acquisition Holiday Period”) shall be increased to 4.50:1.00. The Parent Borrower may not make such election unless at least one full Fiscal Quarter has ended following the end of the most recently completed Acquisition Holiday Period (if any) and the Parent Borrower may not make more than two such elections during the term of this Agreement.

 

(b)            Interest Coverage Ratio. Permit the Interest Coverage Ratio, as of the last day of each Fiscal Quarter ending after the Effective Date, for each Measurement Period ended as of such Fiscal Quarter, to be less than 3.00:1.00.

 

ARTICLE VII

 

Events of Default

 

SECTION 7.01.      Events of Default. If any of the following events (each, an “Event of Default”) shall occur and be continuing:

 

(a)            (i) any Borrower shall fail to pay, in the currency required hereunder, any principal of any Loan when the same shall become due and payable or (ii) any Borrower shall fail to pay, in the currency required hereunder, any interest on any Loan, or any Loan Party shall fail to make any other payment, in the currency required hereunder, under any Loan Document, in each case under this clause (ii), within three Business Days after the same shall become due and payable; or

 

(b)            any representation or warranty made by any Loan Party (or any of its Responsible Officers) herein or in any other Loan Document, or contained in any certificate, document or other written statement by any Loan Party (or any of its Responsible Officers), furnished at any time pursuant to this Agreement or in or under any other Loan Document, shall prove to have been incorrect in any material respect when made or deemed made; or

 

(c)            any Loan Party shall fail to perform or observe any term, covenant or agreement contained in Section 5.09, Section 5.11, Section 5.12(a) or Article VI; or

 

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(d)            any Loan Party shall fail to perform or observe any other term, covenant or agreement contained in any Loan Document on its part to be performed or observed if such failure shall remain unremedied for 30 days after the earlier of the date upon which (i) a Responsible Officer becomes aware of such failure or (ii) written notice thereof shall have been given to the Opco Borrower by the Administrative Agent or any Lender; or

 

(e)            any Loan Party or any of its Subsidiaries shall fail to pay any principal of, premium or interest on or any other amount payable in respect of any Debt of such Loan Party or such Subsidiary (as the case may be) that is outstanding in a principal amount (or, in the case of any Hedge Agreement, an Agreement Value) of at least $50,000,000 either individually or in the aggregate for all such Loan Parties and Subsidiaries (but excluding Debt outstanding hereunder), when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt or otherwise to cause, or to permit the holder thereof to cause, such Debt to mature; or any such Debt shall be declared to be due and payable or required to be prepaid or redeemed (other than by a regularly scheduled required prepayment or redemption), purchased or defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; provided that none of the following events shall constitute an Event of Default under this this clause (e): (A) secured Debt that becomes due as a result of the voluntary sale, or a transfer of the property or assets securing such Debt, or a casualty, condemnation or similar event, in each case so long as such Debt is repaid in accordance with its terms, (B) any change of control offer made within 60 days after a Permitted Acquisition with respect to Debt assumed in connection with such Permitted Acquisition unless such event results in the acceleration of such Debt, (C) any default under Debt of an acquired business assumed in connection with a Permitted Acquisition if such default is cured, or such Debt is repaid, within 60 days after consummation of such Permitted Acquisition so long as no other creditor accelerates or commences any kind of enforcement action in respect of such Debt, (D) any mandatory prepayment requirement in any agreement arising from the receipt of net cash proceeds from Debt, dispositions (including casualty losses, governmental takings and other involuntary dispositions), equity issuances or excess cash flow so long as, in each case, no default or event of default occurs under such agreement in connection with such mandatory prepayment requirement, (E) prepayments required by the terms of applicable Debt as a result of customary provisions in respect of illegality, replacement of lenders and gross-up provisions for Taxes, increased costs, capital adequacy and other similar customary requirements (in each case, to the extent any such circumstance would not give rise to an Event of Default), (F) any voluntary prepayment, redemption or other satisfaction of Debt that becomes mandatory in accordance with the terms of such Debt solely as the result of the delivery by the Parent Borrower or any Subsidiary of a prepayment, redemption or similar notice with respect to such prepayment, redemption or other satisfaction and (G) any redemption, exchange, repurchase, conversion or settlement with respect to any Permitted Convertible Indebtedness, or satisfaction of any condition giving rise to or permitting the foregoing, pursuant to their terms unless such redemption, repurchase, conversion or settlement results from a default thereunder or an event of the type that constitutes an Event of Default; or

 

(f)            any Loan Party or any of its Subsidiaries (other than any Immaterial Subsidiary and, in each case, any UK Loan Party) shall generally not pay its debts as such debts become due (subject to applicable grace periods), or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any Loan Party or any of its Subsidiaries (other than any Immaterial Subsidiary and, in each case, any UK Loan Party) whose Relevant Jurisdiction is the Federal Republic of Germany is unable to pay its debts as and when they fall due (zahlungsunfähig) (subject to applicable grace periods), over-indebted (überschuldet) or subject to imminent illiquidity (drohende Zahlungsunfähigkeit) (all within the meaning of Sections 17 to 19, inclusive, of the German Insolvency Act (Insolvenzordnung)); or a UK Insolvency Event shall occur in respect of any UK Loan Party; or any proceeding shall be instituted by or against any Loan Party (other than a UK Loan Party) or any of its Subsidiaries (other than any Immaterial Subsidiary or any UK Loan Party) seeking to adjudicate it a bankrupt or insolvent, or seeking the liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of such Loan Party or Subsidiary or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors (including any Debtor Relief Laws), or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it) that is being diligently contested by it in good faith, either such proceeding shall remain undismissed or unstayed for a period of 60 days or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or any substantial part of its property) shall occur; or any Loan Party (other than a UK Loan Party) or any of its Subsidiaries (other than any Immaterial Subsidiary or UK Loan Party) shall take any corporate action to authorize any of the actions set forth above in this subsection (f); or

 

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(g)            any judgments or orders, either individually or in the aggregate, for the payment of money in excess of $50,000,000 shall be rendered against any Loan Party or any of its Subsidiaries (other than any Immaterial Subsidiary) (to the extent not covered by independent third-party insurance as to which the insurer does not dispute coverage) and either (i) enforcement proceedings shall have been commenced by any creditor upon such judgment or order or (ii) there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

 

(h)            any nonmonetary judgment or order shall be rendered against any Loan Party or any of its Subsidiaries (other than any Immaterial Subsidiary) that could be reasonably likely to have a Material Adverse Effect, and there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect; or

 

(i)            a Change of Control shall occur; or

 

(j)            any ERISA Event shall have occurred with respect to a Plan that could reasonably be expected to have a Material Adverse Effect; or

 

(k)            any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that it has incurred Withdrawal Liability to such Multiemployer Plan in an amount that, when aggregated with all other amounts required to be paid to Multiemployer Plans by the Loan Parties and the ERISA Affiliates as Withdrawal Liability (determined as of the date of such notification), could reasonably be expected to have a Material Adverse Effect; or

 

(l)            any Loan Party or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is insolvent or is being terminated, within the meaning of Title IV of ERISA, and as a result of such insolvency or termination the aggregate annual contributions of the Loan Parties and the ERISA Affiliates to all Multiemployer Plans that are then insolvent or being terminated have been or will be increased over the amounts contributed to such Multiemployer Plans for the plan years of such Multiemployer Plans immediately preceding the plan year in which such insolvency or termination occurs by an amount that could reasonably be expected to have a Material Adverse Effect; or

 

(m)            any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms, or the Parent Borrower or any Subsidiary shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms (other than, in each case, the termination or expiration of any Loan Documents in accordance with their terms), or an event of default shall occur under the Company Guaranty; or

 

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(n)            any Collateral Document shall for any reason (except to the extent any loss of perfection or priority results solely from (i) the Administrative Agent no longer having possession of certificates actually delivered to it representing equity interests pledged under any Loan Document or (ii) a UCC filing having lapsed because a UCC continuation statement was not filed in a timely manner) fail to create a valid and perfected first priority security interest (subject to Permitted Liens) in any material portion of the Collateral purported to be covered thereby, except as permitted by the terms of any Loan Document; provided that, if any provision of any Collateral Document fails to be in full force and effect or ceases to create a valid and perfected lien, with the priority set forth in the Loan Documents, on a material portion of the Collateral covered thereby resulting solely from the circumstances described in the foregoing clause (i) or (ii), no Event of Default shall result until the Parent Borrower becomes aware of such failure and such failure continues for fifteen (15) days after the Parent Borrower’s knowledge of such failure.

 

SECTION 7.02.      Remedies Upon an Event of Default. If an Event of Default occurs (other than an event with respect to the Parent Borrower or the Opco Borrower described in Section 7.01(f)), and at any time thereafter during the continuance of such Event of Default, the Administrative Agent may with the consent of the Required Lenders, and shall at the request of the Required Lenders, by notice to the Opco Borrower, take any or all of the following actions, at the same or different times:

 

(a)            terminate the Commitments and thereupon the Commitments shall terminate immediately;

 

(b)            declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other Secured Obligations of the Loan Parties accrued hereunder and under any other Loan Document, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind (except as otherwise required by the Loan Documents), all of which are hereby waived by the Borrowers;

 

(c)            require that the Borrowers provide Cash Collateral as required in Section 2.06(o); and

 

(d)            exercise on behalf of itself, the Lenders and the L/C Issuers all rights and remedies available to it, the Lenders and the L/C Issuers under the Loan Documents and applicable Law.

 

If an Event of Default described in Section 7.01(f) occurs with respect to any Borrower, the Commitments shall (other than in respect of any UK Loan Party) automatically terminate and the principal of the Loans then outstanding and cash collateral for the L/C Obligations, together with accrued interest thereon and all fees and other Secured Obligations accrued hereunder and under any other Loan Document, shall (other than in respect of any UK Loan Party) automatically become due and payable, and the obligation of the Borrowers (other than any UK Loan Party) to cash collateralize the L/C Obligations as provided in clause (c) above shall automatically become effective, in each case, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers.

 

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SECTION 7.03.      Application of Payments. Notwithstanding anything herein to the contrary, following the occurrence and during the continuance of an Event of Default, and notice thereof to the Administrative Agent by the Opco Borrower or the Required Lenders:

 

(a)            all payments received on account of the Secured Obligations shall, subject to Section 2.22, be applied by the Administrative Agent as follows:

 

(i)            first, to payment of that portion of the Secured Obligations constituting fees, indemnities, expenses and other amounts payable to the Administrative Agent (including fees and disbursements and other charges of counsel to the Administrative Agent payable under Section 9.03 and amounts pursuant to Section 2.12(c) payable to the Administrative Agent in its capacity as such);

 

(ii)            second, to payment of that portion of the Secured Obligations constituting fees, expenses, indemnities and other amounts (other than principal, reimbursement obligations in respect of L/C Disbursements, interest and Letter of Credit Fees) payable to the Lenders, the L/C Issuers and the other Secured Parties (including fees and disbursements and other charges of counsel to the Lenders and the L/C Issuers payable under Section 9.03) arising under the Loan Documents, ratably among them in proportion to the respective amounts described in this clause (ii) payable to them;

 

(iii)            third, to payment of that portion of the Secured Obligations constituting accrued and unpaid Letter of Credit Fees and charges and interest on the Loans and unreimbursed L/C Disbursements, ratably among the Lenders and the L/C Issuers in proportion to the respective amounts described in this clause (iii) payable to them;

 

(iv)            fourth, (A) to payment of that portion of the Secured Obligations constituting unpaid principal of the Loans and unreimbursed L/C Disbursements, (B) to cash collateralize that portion of L/C Obligations comprising the undrawn amount of Letters of Credit to the extent not otherwise cash collateralized by the Borrowers pursuant to Section 2.06 or 2.22; provided that (x) any such amounts applied pursuant to subclause (B) above shall be paid to the Administrative Agent for the account of the L/C Issuers to cash collateralize Secured Obligations in respect of Letters of Credit, (y) subject to Section 2.06 or 2.22, amounts used to cash collateralize the aggregate amount of Letters of Credit pursuant to this clause (iv) shall be used to satisfy drawings under such Letters of Credit as they occur and (z) upon the expiration of any Letter of Credit (without any pending drawings), the pro rata share of cash collateral shall be distributed to the other Secured Obligations, if any, in the order set forth in this Section 7.03 and (C) to any other amounts owing with respect to Banking Services Obligations and Swap Obligations, in each case, ratably among the Lenders and the L/C Issuers and any other applicable Secured Parties in proportion to the respective amounts described in this clause (iv) payable to them;

 

(v)            fifth, to the payment in full of all other Secured Obligations, in each case ratably among the Administrative Agent, the Lenders, the L/C Issuers and the other Secured Parties based upon the respective aggregate amounts of all such Secured Obligations owing to them in accordance with the respective amounts thereof then due and payable; and

 

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(vi)            finally, the balance, if any, after all Secured Obligations have been paid in full, to the Borrowers or as otherwise required by law; and

 

(b)            if any amount remains on deposit as cash collateral after all Letters of Credit have either been fully drawn or expired (without any pending drawings), such remaining amount shall be applied to the other Secured Obligations, if any, in the order set forth above.

 

Notwithstanding the foregoing, other than with respect to any such Swap Obligations and Banking Services Obligations held by the Lender acting as Administrative Agent (or any Affiliate thereof), Secured Obligations arising under Swap Obligations and Banking Services Obligations shall be excluded from the application described above if the Administrative Agent has not received written notice thereof, together with such supporting documentation as the Administrative Agent may request, from the holder of the Swap Obligations or Banking Services Obligations, as the case may be. Each holder of Swap Obligations or Banking Services Obligations not a party to this Agreement that has given the notice contemplated by the preceding sentence shall, by such notice, be deemed to have acknowledged and accepted the appointment of the Administrative Agent pursuant to the terms of Article VIII for itself and its Affiliates as if a “Lender” party hereto.

 

ARTICLE VIII

 

The Administrative Agent

 

SECTION 8.01.      Authorization and Action.

 

(a)            Each Lender and each L/C Issuer hereby irrevocably appoints the entity named as Administrative Agent in the heading of this Agreement and its successors and permitted assigns to serve as the administrative agent and collateral under the Loan Documents and each Lender and each L/C Issuer authorizes the Administrative Agent to take such actions as agent on its behalf and to exercise such powers under this Agreement and the other Loan Documents as are delegated to the Administrative Agent under such agreements and to exercise such powers as are reasonably incidental thereto. Without limiting the foregoing, each Lender and each L/C Issuer hereby authorizes the Administrative Agent to execute and deliver, and to perform its obligations under, each of the Loan Documents to which the Administrative Agent is a party, and to exercise all rights, powers and remedies that the Administrative Agent may have under such Loan Documents.

 

(b)            The Administrative Agent shall also act as the “collateral agent” under the Loan Documents, and each of the Lenders (including in its capacities as potential holders of Swap Obligations and Banking Services Obligations) and each of the L/C Issuers hereby irrevocably appoints and authorizes the Administrative Agent to act as the agent of such Lender and L/C Issuer for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Obligations, together with such powers and discretion as are reasonably incidental thereto. In this connection, the Administrative Agent, as “collateral agent” and any co-agents, sub-agents and attorneys-in-fact appointed by the Administrative Agent pursuant to this Section 8.01 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof granted under the Collateral Documents, or for exercising any rights and remedies thereunder at the direction of the Administrative Agent), shall be entitled to the benefits of all provisions of this Article VIII and Article IX (including Section 9.04, as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents) as if set forth in full herein with respect thereto.

 

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(c)            As to any matters not expressly provided for herein and in the other Loan Documents (including enforcement or collection), the Administrative Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the written instructions of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, pursuant to the terms in the Loan Documents), and, unless and until revoked in writing, such instructions shall be binding upon each Lender and each L/C Issuer; provided, however, that the Administrative Agent shall not be required to take any action that (i) the Administrative Agent in good faith believes exposes it to liability unless the Administrative Agent receives an indemnification and is exculpated in a manner satisfactory to it from the Lenders and the L/C Issuers with respect to such action or (ii) is contrary to this Agreement or any other Loan Document or applicable Law, including any action that may be in violation of the automatic stay under any requirement of law relating to bankruptcy, insolvency or reorganization or relief of debtors or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any requirement of law relating to bankruptcy, insolvency or reorganization or relief of debtors; provided further that the Administrative Agent may seek clarification or direction from the Required Lenders prior to the exercise of any such instructed action and may refrain from acting until such clarification or direction has been provided. Except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Parent Borrower, any of its Subsidiaries or any Affiliate of any of the foregoing that is communicated to or obtained by the Person serving as Administrative Agent or any of its Affiliates in any capacity. Nothing in this Agreement shall require the Administrative Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

 

(d)            In performing its functions and duties hereunder and under the other Loan Documents, the Administrative Agent is acting solely on behalf of the Lenders and the L/C Issuers (except in limited circumstances expressly provided for herein relating to the maintenance of the Register), and its duties are entirely mechanical and administrative in nature. Without limiting the generality of the foregoing:

 

(i)            the Administrative Agent does not assume and shall not be deemed to have assumed any obligation or duty or any other relationship as the agent, fiduciary or trustee of or for any Lender, any L/C Issuer or any other Secured Party other than as expressly set forth herein and in the other Loan Documents, regardless of whether a Default or an Event of Default has occurred and is continuing (and it is understood and agreed that the use of the term “agent” (or any similar term) herein or in any other Loan Document with reference to the Administrative Agent is not intended to connote any fiduciary duty or other implied (or express) obligations arising under agency doctrine of any applicable Law, and that such term is used as a matter of market custom and is intended to create or reflect only an administrative relationship between contracting parties); additionally, each Lender and L/C Issuer agrees that it will not assert any claim against the Administrative Agent based on an alleged breach of fiduciary duty by the Administrative Agent in connection with this Agreement and/or the transactions contemplated hereby;

 

(ii)            [reserved];

 

(iii)            nothing in this Agreement or any Loan Document shall require the Administrative Agent to account to any Lender or L/C Issuer for any sum or the profit element of any sum received by the Administrative Agent for its own account; and

 

(iv)            the Administrative Agent shall not be responsible or have any liability for, or have any duty to ascertain, inquire into, monitor or enforce, compliance with the provisions of this Agreement relating to Disqualified Institutions (and, without limiting the generality of the foregoing, the Administrative Agent shall not ‎(x) be obligated to ascertain, monitor or inquire as to whether any Lender or prospective Lender is a Disqualified ‎Institution or (y) have any liability with respect to or arising out of any assignment of Loans, or disclosure of confidential information, to any ‎Disqualified Institution).

 

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(e)            The Administrative Agent may perform any of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any of their respective duties and exercise their respective rights and powers through their respective Related Parties. The exculpatory provisions of this Article VIII shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities pursuant to this Agreement. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agent except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agent.

 

(f)            None of the Syndication Agent, any Co-Documentation Agent, the Sustainability Structuring Agent, any Bookrunner or any Arranger shall have obligations or duties whatsoever in such capacity under this Agreement or any other Loan Document and shall incur no liability hereunder or thereunder in such capacity, but all such persons shall have the benefit of the indemnities provided for hereunder.

 

(g)            In case of the pendency of any proceeding with respect to any Loan Party under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on any Loan Party) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise:

 

(i)            to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans and all other Secured Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the L/C Issuers and the Administrative Agent (including any claim under Sections 2.06, 2.12, 2.13, 2.15, 2.17 and 9.03) allowed in such judicial proceeding; and

 

(ii)            to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;

 

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such proceeding is hereby authorized by each Lender, each L/C Issuer and each other Secured Party to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, the L/C Issuer or the other Secured Parties, to pay to the Administrative Agent any amount due to it, in its capacity as the Administrative Agent, under the Loan Documents (including under Section 9.03). Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or L/C Issuer any plan of reorganization, arrangement, adjustment or composition affecting the Secured Obligations or the rights of any Lender or L/C Issuer or to authorize the Administrative Agent to vote in respect of the claim of any Lender or L/C Issuer in any such proceeding.

 

(h)            Each Lender and L/C Issuer hereby authorizes the Administrative Agent to enter into one or more intercreditor agreements acceptable to the Administrative Agent in its reasonable discretion with parties to any Receivables Facility permitted by this Agreement. Such intercreditor agreements may provide for, among other things, (i) the Administrative Agent’s and the Lenders’ forbearance of, and other limitations on, any exercise of remedies in respect of any equity interests in any Receivables Subsidiary and/or any notes issued by any Receivables Subsidiary to any Receivables Seller in connection with any such Receivables Facility, in any case, that have been pledged to secure the Secured Obligations and/or (ii) disclaimers of interests on, and releases of security interests in, any Receivables Assets. Each Lender and L/C Issuer hereby further authorizes the Administrative Agent to enter into one or more intercreditor agreements acceptable to the Administrative Agent in its reasonable discretion in connection with pari passu Debt to be incurred pursuant to Section 6.02(g)(ii).

 

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(i)            The provisions of this Article VIII are solely for the benefit of the Administrative Agent, the Lenders and the L/C Issuers, and, except solely to the extent of the Opco Borrower’s rights to consent pursuant to and subject to the conditions set forth in this Article VIII, neither the Parent Borrower nor any of its Subsidiaries, or any of their respective Affiliates, shall have any rights as a third party beneficiary under any such provisions. Each Secured Party, whether or not a party hereto, will be deemed, by its acceptance of the benefits of the Collateral and of the Guarantees of the Secured Obligations provided under the Loan Documents, to have agreed to the provisions of this Article VIII.

 

SECTION 8.02.      Administrative Agent’s Reliance, Indemnification, Etc.

 

(a)            Neither the Administrative Agent nor any of its Related Parties shall be (i) liable for any action taken or omitted to be taken by such party, the Administrative Agent or any of its Related Parties under or in connection with this Agreement or the other Loan Documents (x) with the consent of or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith to be necessary, under the circumstances as provided in the Loan Documents) or (y) in the absence of its own gross negligence or willful misconduct (such absence to be presumed unless otherwise determined by a court of competent jurisdiction by a final and non-appealable judgment) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document (including, for the avoidance of doubt, in connection with the Administrative Agent’s reliance on any Electronic Signature transmitted by facsimile, emailed .pdf or any other electronic means that reproduces an image of an actual executed signature page) or for any failure of any Loan Party to perform its obligations hereunder or thereunder.

 

(b)            The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof (stating that it is a “notice of default”) is given to the Administrative Agent by the Opco Borrower, a Lender or an L/C Issuer and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered thereunder or in connection therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document or the occurrence of any Default, (iv) the sufficiency, validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items (which on their face purport to be such items) expressly required to be delivered to the Administrative Agent or satisfaction of any condition that expressly refers to the matters described therein being acceptable or satisfactory to the Administrative Agent or (vi) the creation, perfection or priority of Liens on the Collateral or the existence of the Collateral. Notwithstanding anything herein to the contrary, the Administrative Agent shall not be liable for, or be responsible for any claim, liability, loss, cost or expense suffered by the Parent Borrower, the Opco Borrower, any Subsidiary, any Lender or any L/C Issuer as a result of, any determination of the Credit Exposure, any of the component amounts thereof or any portion thereof attributable to each Lender or L/C Issuer or any Dollar Amount thereof.

 

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(c)            Without limiting the foregoing, the Administrative Agent (i) may treat the payee of any promissory note as its holder until such promissory note has been assigned in accordance with Section 9.04, (ii) may rely on the Register to the extent set forth in Section 9.04(b), (iii) may consult with legal counsel (including counsel to the Parent Borrower and the Opco Borrower), independent public accountants and other experts selected by it in its commercially reasonable judgment, and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (iv) makes no warranty or representation to any Lender or L/C Issuer and shall not be responsible to any Lender or L/C Issuer for any statements, warranties or representations made by or on behalf of any Loan Party in connection with this Agreement or any other Loan Document, (v) in determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an L/C Issuer, may presume that such condition is satisfactory to such Lender or L/C Issuer unless the Administrative Agent shall have received notice to the contrary from such Lender or L/C Issuer sufficiently in advance of the making of such Loan or the issuance of a Letter of Credit and (vi) shall be entitled to rely on, and shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon, any notice, consent, certificate or other instrument or writing (which writing may be a fax, any electronic message, Internet or intranet website posting or other distribution) or any statement made to it orally or by telephone and reasonably and in good faith believed by it to be genuine and signed or sent or otherwise authenticated by the proper party or parties (whether or not such Person in fact meets the requirements set forth in the Loan Documents for being the maker thereof).

 

SECTION 8.03.      Posting of Communications.

 

(a)            Each Borrower agrees that the Administrative Agent may, but shall not be obligated to, make any Communications available to the Lenders and the L/C Issuers by posting the Communications on IntraLinks™, DebtDomain, SyndTrak, ClearPar or any other similar electronic platform chosen by the Administrative Agent reasonably and in good faith to be its electronic transmission system and used by it for such purpose with respect to its credit facilities generally (the “Approved Electronic Platform”).

 

(b)            Although the Approved Electronic Platform and its primary web portal are secured with generally-applicable security procedures and policies implemented or modified by the Administrative Agent from time to time (including, as of the Effective Date, a user ID/password authorization system) and the Approved Electronic Platform is secured through a per-deal authorization method whereby each user may access the Approved Electronic Platform only on a deal-by-deal basis, each of the Lenders, the L/C Issuers and each Borrower acknowledges and agrees that the distribution of material through an electronic medium is not necessarily secure, that the Administrative Agent is not responsible for approving or vetting the representatives or contacts of any Lender or L/C Issuers that are added to the Approved Electronic Platform, and that there may be confidentiality and other risks associated with such distribution. Each of the Lenders, the L/C Issuers and each Borrower hereby approves distribution of the Communications through the Approved Electronic Platform and understands and assumes the risks of such distribution, other than risks arising from the gross negligence, bad faith or willful misconduct of any of the foregoing parties (as determined by a court of competent jurisdiction in a final and nonappealable judgment).

 

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(c)            THE APPROVED ELECTRONIC PLATFORM AND THE COMMUNICATIONS ARE PROVIDED “AS IS” AND “AS AVAILABLE”. THE APPLICABLE PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE COMMUNICATIONS, OR THE ADEQUACY OF THE APPROVED ELECTRONIC PLATFORM AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS OR OMISSIONS IN THE APPROVED ELECTRONIC PLATFORM AND THE COMMUNICATIONS. NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY THE APPLICABLE PARTIES IN CONNECTION WITH THE COMMUNICATIONS OR THE APPROVED ELECTRONIC PLATFORM. IN NO EVENT SHALL THE ADMINISTRATIVE AGENT, ANY BOOKRUNNER, ANY ARRANGER, THE SYNDICATION AGENT, ANY CO-DOCUMENTATION AGENT OR ANY OF THEIR RESPECTIVE RELATED PARTIES (COLLECTIVELY, “APPLICABLE PARTIES”) HAVE ANY LIABILITY TO ANY LOAN PARTY, ANY LENDER, ANY L/C ISSUER OR ANY OTHER PERSON OR ENTITY FOR DAMAGES OF ANY KIND, INCLUDING DIRECT OR INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, LOSSES OR EXPENSES (WHETHER IN TORT, CONTRACT OR OTHERWISE) ARISING OUT OF ANY LOAN PARTY’S OR THE ADMINISTRATIVE AGENT’S TRANSMISSION OF COMMUNICATIONS THROUGH THE INTERNET OR THE APPROVED ELECTRONIC PLATFORM, OTHER THAN DIRECT OR ACTUAL DAMAGES ARISING FROM THE GROSS NEGLIGENCE, BAD FAITH OR WILLFUL MISCONDUCT OF ANY APPLICABLE PARTY (AS DETERMINED BY A COURT OF COMPETENT JURISDICTION BY A FINAL AND NONAPPEALABLE JUDGMENT).

 

(d)            Each Lender and L/C Issuer agrees that notice to it (as provided in the next sentence) specifying that Communications have been posted to the Approved Electronic Platform shall constitute effective delivery of the Communications to such Lender or L/C Issuer for purposes of the Loan Documents. Each Lender and L/C Issuer agrees (i) to notify the Administrative Agent in writing (which could be in the form of electronic communication) from time to time of such Lender’s or L/C Issuer’s email address to which the foregoing notice may be sent by electronic transmission and (ii) that the foregoing notice may be sent to such email address.

 

(e)            Each of the Lenders, the L/C Issuers and each Borrower agrees that the Administrative Agent may, but (except as may be required by applicable Law) shall not be obligated to, store the Communications on the Approved Electronic Platform in accordance with the Administrative Agent’s generally applicable document retention procedures and policies.

 

(f)            Nothing herein shall prejudice the right of the Administrative Agent, any Lender or any L/C Issuer to give any notice or other communication pursuant to any Loan Document in any other manner specified in such Loan Document.

 

SECTION 8.04.      The Administrative Agent Individually. With respect to its Commitment and Loans, the Person serving as the Administrative Agent shall have and may exercise the same rights and powers hereunder and is subject to the same obligations and liabilities as and to the extent set forth herein for any other Lender or L/C Issuer. The terms “L/C Issuers”, “Lenders”, “Required Lenders”, “Required Term Lenders” “Required Revolving Lenders” and any similar terms shall, unless the context clearly otherwise indicates, include the Administrative Agent in its individual capacity as a Lender or an L/C Issuer or as one of the Required Lenders, the Required Term Lenders or the Required Revolving Lenders, as applicable. The Person serving as the Administrative Agent and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of banking, trust or other business with, the Parent Borrower, the Opco Borrower, any Subsidiary or any Affiliate of any of the foregoing as if such Person was not acting as the Administrative Agent and without any duty to account therefor to the Lenders or the L/C Issuers.

 

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SECTION 8.05.      Successor Administrative Agent.

 

(a)            The Administrative Agent may resign at any time by giving 30 days’ prior written notice thereof to the Lenders, the L/C Issuers and the Opco Borrower, whether or not a successor Administrative Agent has been appointed. Upon any such resignation, the Required Lenders shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within 30 days after the retiring Administrative Agent’s giving of notice of resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the L/C Issuers, appoint a successor Administrative Agent, which shall be a bank with an office in New York, New York or an Affiliate of any such bank. In either case, such appointment shall be subject to the prior written approval of the Opco Borrower (which approval may not be unreasonably withheld and shall not be required while an Event of Default has occurred and is continuing). Upon the acceptance of any appointment as Administrative Agent by a successor Administrative Agent, such successor Administrative Agent shall succeed to, and become vested with, all the rights, powers, privileges and duties of the retiring Administrative Agent. Upon the acceptance of appointment as Administrative Agent by a successor Administrative Agent, the retiring Administrative Agent shall be discharged from its duties and obligations under this Agreement and the other Loan Documents. The fees payable by any Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Opco Borrower and such successor. Prior to any retiring Administrative Agent’s resignation hereunder as Administrative Agent, the retiring Administrative Agent shall take such action as may be reasonably necessary to assign to the successor Administrative Agent its rights as Administrative Agent under the Loan Documents.

 

(b)            Notwithstanding paragraph (a) of this Section, in the event no successor Administrative Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its intent to resign, the retiring Administrative Agent may give notice of the effectiveness of its resignation to the Lenders, the L/C Issuers and the Opco Borrower, whereupon, on the date of effectiveness of such resignation stated in such notice, (i) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders or the L/C Issuers under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (ii) the Required Lenders shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent; provided that (A) all payments required to be made hereunder or under any other Loan Document to the Administrative Agent for the account of any Person other than the Administrative Agent shall be made directly to such Person and (B) all notices and other communications required or contemplated to be given or made to the Administrative Agent shall directly be given or made to each Lender and each L/C Issuer. Following the effectiveness of the Administrative Agent’s resignation from its capacity as such, the provisions of this Article VIII and Section 9.03, as well as any exculpatory, reimbursement and indemnification provisions set forth in any other Loan Document, shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent and in respect of the matters referred to in the proviso under clause (i) above.

 

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SECTION 8.06.      Acknowledgements of Lenders and L/C Issuers.

 

(a)            Each Lender and L/C Issuer represents and warrants that (i) the Loan Documents set forth the terms of a commercial lending facility, (ii) it is engaged in making, acquiring or holding commercial loans and in providing other facilities set forth herein as may be applicable to such Lender or L/C Issuer, in each case in the ordinary course of business, and not for the purpose of purchasing, acquiring or holding any other type of financial instrument (and each Lender and L/C Issuer agrees not to assert a claim in contravention of the foregoing), (iii) it has, independently and without reliance upon the Administrative Agent, any Bookrunner, any Arranger, the Syndication Agent, any Co-Documentation Agent or any other Lender or L/C Issuer, or any of the Related Parties of any of the foregoing, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement as a Lender, and to make, acquire or hold Loans hereunder and (iv) it is sophisticated with respect to decisions to make, acquire and/or hold commercial loans and to provide other facilities set forth herein, as may be applicable to such Lender or L/C Issuer, and either it, or the Person exercising discretion in making its decision to make, acquire and/or hold such commercial loans or to provide such other facilities, is experienced in making, acquiring or holding such commercial loans or providing such other facilities. Each Lender and L/C Issuer also acknowledges that it will, independently and without reliance upon the Administrative Agent, any Bookrunner, any Arranger, the Syndication Agent, any Co-Documentation Agent or any other Lender or L/C Issuer, or any of the Related Parties of any of the foregoing, and based on such documents and information (which may contain material, non-public information within the meaning of the United States securities laws concerning the Parent Borrower, the Opco Borrower and its Affiliates) as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

 

(b)            Each Lender, by delivering its signature page to this Agreement on the Effective Date, or delivering its signature page to an Assignment and Assumption or any other Loan Document pursuant to which it shall become a Lender hereunder, shall be deemed to have acknowledged receipt of, and consented to and approved, each Loan Document and each other document required to be delivered to, or be approved by or satisfactory to, the Administrative Agent or the Lenders on the Effective Date.

 

SECTION 8.07.      Recovery of Erroneous Payment.

 

Without limitation of any other provision in this Agreement, if at any time the Administrative Agent makes a payment hereunder in error to any Lender Recipient Party, whether or not in respect of an Obligation due and owing by any Borrower at such time, where such payment is a Rescindable Amount, then in any such event, each Lender Recipient Party receiving a Rescindable Amount severally agrees to repay to the Administrative Agent forthwith on demand the Rescindable Amount received by such Lender Recipient Party in immediately available funds in the currency so received, with interest thereon, for each day from and including the date such Rescindable Amount is received by it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation from time to time in effect. Each Lender Recipient Party irrevocably waives any and all defenses, including any “discharge for value” (under which a creditor might otherwise claim a right to retain funds mistakenly paid by a third party in respect of a debt owed by another) or similar defense to its obligation to return any Rescindable Amount. The Administrative Agent shall inform each Lender Recipient Party promptly upon determining that any payment made to such Lender Recipient Party comprised, in whole or in part, a Rescindable Amount.

 

SECTION 8.08.      Collateral and Guaranty Matters. Each Secured Party irrevocably authorizes the Administrative Agent, at its option and in its discretion:

 

(a)            to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (i) upon the satisfaction of the Termination Date Conditions, (ii) that is sold or otherwise Disposed of or to be sold or otherwise Disposed of as part of or in connection with any sale or other Disposition permitted hereunder or under any other Loan Document, (iii) that constitutes Excluded Assets or that is owned by an Excluded Subsidiary, (iv) if approved, authorized or ratified in writing in accordance with Section 9.02, or (v) pursuant to Section 9.20;

 

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(b)            to release any Guarantor from its obligations under the Guaranty (i) upon the satisfaction of the Termination Date Conditions, (ii) if such Person ceases to be a Subsidiary as a result of a transaction permitted under the Loan Documents, (iii) if such Person constitutes an Excluded Subsidiary or is otherwise no longer obligated to be a Guarantor pursuant to Section 5.10 hereof, (iv) if approved, authorized or ratified in writing in accordance with Section 9.02, or (v) pursuant to Section 9.20; and

 

(c)            to subordinate any Lien on any property granted to or held by the Administrative Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 6.01(c).

 

Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release or subordinate its interest in particular types or items of property, or to release any Guarantor from its obligations under the Guaranty pursuant to this Section 8.08. In each case as specified in this Section 8.08, the Administrative Agent will, at the Borrowers’ expense, promptly execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to evidence the release of such item of Collateral from the assignment and security interest granted under the Collateral Documents or to subordinate its interest in such item, or to release such Guarantor from its obligations under the Guaranty, in each case in accordance with the terms of the Loan Documents and this Section 8.08.

 

The Administrative Agent shall not be responsible for or have a duty to ascertain or inquire into any representation or warranty regarding the existence, value or collectability of the Collateral, the existence, priority or perfection of the Administrative Agent’s Lien thereon, or any certificate prepared by any Loan Party in connection therewith, nor shall the Administrative Agent be responsible or liable to the Lenders for any failure to monitor or maintain any portion of the Collateral.

 

SECTION 8.09.      Certain ERISA Matters.

 

(a)            Each Lender (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, the Sustainability Structuring Agent, the Bookrunners, the Arrangers, the Syndication Agent, the Co-Documentation Agents and their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Parent Borrower, the Opco Borrower or any other Loan Party, that at least one of the following is and will be true:

 

(i)            such Lender is not using “plan assets” (within the meaning of the Plan Asset Regulations) of one or more Benefit Plans in connection with the Loans or the Commitments,

 

(ii)            the transaction exemption set forth in one or more PTEs, such as PTE 84-14 (a class exemption for certain transactions determined by independent qualified professional asset managers), PTE 95-60 (a class exemption for certain transactions involving insurance company general accounts), PTE 90-1 (a class exemption for certain transactions involving insurance company pooled separate accounts), PTE 91-38 (a class exemption for certain transactions involving bank collective investment funds) or PTE 96-23 (a class exemption for certain transactions determined by in-house asset managers), is applicable with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement,

 

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(iii)            (A) such Lender is an investment fund managed by a “Qualified Professional Asset Manager” (within the meaning of Part VI of PTE 84-14), (B) such Qualified Professional Asset Manager made the investment decision on behalf of such Lender to enter into, participate in, administer and perform the Loans, the Commitments and this Agreement, (C) the entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement satisfies the requirements of sub-sections (b) through (g) of Part I of PTE 84-14 and (D) to the best knowledge of such Lender, the requirements of subsection (a) of Part I of PTE 84-14 are satisfied with respect to such Lender’s entrance into, participation in, administration of and performance of the Loans, the Commitments and this Agreement, or

 

(iv)            such other representation, warranty and covenant as may be agreed in writing between the Administrative Agent, in its sole discretion, and such Lender.

 

(b)            In addition, unless sub-clause (i) in the immediately preceding clause (a) is true with respect to a Lender or such Lender has provided another representation, warranty and covenant as provided in sub-clause (iv) in the immediately preceding clause (a), such Lender further (x) represents and warrants, as of the date such Person became a Lender party hereto, to, and (y) covenants, from the date such Person became a Lender party hereto to the date such Person ceases being a Lender party hereto, for the benefit of, the Administrative Agent, and the Bookrunners, the Arrangers, the Syndication Agent, any Co-Documentation Agent or any of their respective Affiliates, and not, for the avoidance of doubt, to or for the benefit of the Parent Borrower, the Opco Borrower or any other Loan Party, that none of the Administrative Agent, or the Bookrunners, the Arrangers, the Syndication Agent, the Co-Documentation Agents or any of their respective Affiliates is a fiduciary with respect to the Collateral or the assets of such Lender (including in connection with the reservation or exercise of any rights by the Administrative Agent under this Agreement, any Loan Document or any documents related hereto or thereto).

 

(c)            The Administrative Agent, the Bookrunners, the Arrangers, the Syndication Agent and the Co-Documentation Agents hereby inform the Lenders that each such Person is not undertaking to provide impartial investment advice, or to give advice in a fiduciary capacity, in connection with the transactions contemplated hereby, and that such Person has a financial interest in the transactions contemplated hereby in that such Person or an Affiliate thereof (i) may receive interest or other payments with respect to the Loans, the Commitments, this Agreement and any other Loan Documents, (ii) may recognize a gain if it extended the Loans or the Commitments for an amount less than the amount being paid for an interest in the Loans or the Commitments by such Lender or (iii) may receive fees or other payments in connection with the transactions contemplated hereby, the Loan Documents or otherwise, including structuring fees, commitment fees, arrangement fees, facility fees, commitment fees, upfront fees, underwriting fees, ticking fees, agency fees, administrative agent fees, utilization fees, minimum usage fees, letter of credit fees, fronting fees, deal-away or alternate transaction fees, amendment fees, processing fees, term out premiums, banker’s acceptance fees, breakage or other early termination fees or fees similar to the foregoing.

 

SECTION 8.10.      Withholding Taxes. To the extent required by any applicable Law, the Administrative Agent may withhold in respect of any payment to any Lender the amount of any applicable withholding Tax. Without limiting or expanding the provisions of Section 2.17, each Lender shall indemnify and hold harmless the Administrative Agent against, and shall make payable in respect thereof within 10 days after demand therefor, all Taxes and all related losses, claims, liabilities and expenses (including fees, charges and disbursements of any counsel for the Administrative Agent) incurred by or asserted against the Administrative Agent by any other Governmental Authority as a result of the failure of the Administrative Agent to properly withhold Tax in respect of any amounts paid to or for the account of such Lender for any reason (including because the appropriate documentation was not delivered or not properly executed, or because such Lender failed to notify the Administrative Agent of a change in circumstance that rendered the exemption from, or reduction of, withholding Tax ineffective), whether or not such Taxes are correctly or legally asserted. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply all amounts at any time owing to such Lender under this Agreement, any other Loan Document or otherwise against any amount due the Administrative Agent under this Section 8.10. The agreements in this Section 8.10 shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender, the termination of the commitments and the repayment, satisfaction or discharge of all other Secured Obligations. For the avoidance of doubt, for purposes of this Section 8.10, the term “Lender” shall include any L/C Issuer and any Swingline Lender.

 

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SECTION 8.11.      Credit Bidding. The Secured Parties hereby irrevocably authorize the Administrative Agent, at the direction of the Required Lenders, to credit bid all or any portion of the Secured Obligations (including accepting some or all of the Collateral in satisfaction of some or all of the Secured Obligations pursuant to a deed in lieu of foreclosure or otherwise) and in such manner purchase (either directly or through one or more acquisition vehicles) all or any portion of the Collateral (a) at any sale thereof conducted under the provisions of the Bankruptcy Code of the United States, including under Sections 363, 1123 or 1129 of the Bankruptcy Code of the United States, or any similar Laws in any other jurisdictions to which a Loan Party is subject, (b) at any other sale or foreclosure or acceptance of collateral in lieu of debt conducted by (or with the consent or at the direction of) the Administrative Agent (whether by judicial action or otherwise) in accordance with any applicable Law. In connection with any such credit bid and purchase, the Secured Obligations owed to the Secured Parties shall be entitled to be, and shall be, credit bid on a ratable basis (with Secured Obligations with respect to contingent or unliquidated claims receiving contingent interests in the acquired assets on a ratable basis that would vest upon the liquidation of such claims in an amount proportional to the liquidated portion of the contingent claim amount used in allocating the contingent interests) in the asset or assets so purchased (or in the Equity Interests or debt instruments of the acquisition vehicle or vehicles that are used to consummate such purchase). In connection with any such bid (i) the Administrative Agent shall be authorized to form one or more acquisition vehicles to make a bid, (ii) to adopt documents providing for the governance of the acquisition vehicle or vehicles (provided that any actions by the Administrative Agent with respect to such acquisition vehicle or vehicles, including any disposition of the assets or Equity Interests thereof shall be governed, directly or indirectly, by the vote of the Required Lenders, irrespective of the termination of this Agreement and without giving effect to the limitations on actions by the Required Lenders contained in Section 9.02), (iii) the Administrative Agent shall be authorized to assign the relevant Secured Obligations to any such acquisition vehicle pro rata by the Lenders, as a result of which each of the Lenders shall be deemed to have received a pro rata portion of any Equity Interests and/or debt instruments issued by such an acquisition vehicle on account of the assignment of the Secured Obligations to be credit bid, all without the need for any Secured Party or acquisition vehicle to take any further action and (iv) to the extent that Secured Obligations that are assigned to an acquisition vehicle are not used to acquire Collateral for any reason (as a result of another bid being higher or better, because the amount of Secured Obligations assigned to the acquisition vehicle exceeds the amount of debt credit bid by the acquisition vehicle or otherwise), such Secured Obligations shall automatically be reassigned to the Lenders pro rata and the Equity Interests and/or debt instruments issued by any acquisition vehicle on account of the Secured Obligations that had been assigned to the acquisition vehicle shall automatically be cancelled, without the need for any Secured Party or any acquisition vehicle to take any further action.

 

SECTION 8.12.      Swap Obligations and Banking Services Obligations. No Lender or Affiliate thereof in its capacity as a holder of Swap Obligations or Banking Services Obligations that obtains the benefits of Section 7.03, the Guaranty or any Collateral by virtue of the provisions hereof or of the Guaranty or any Collateral Document shall have any right to notice of any action or to consent to, direct or object to any action hereunder or under any other Loan Document or otherwise in respect of the Collateral (including the release or impairment of any Collateral) other than in its capacity as a Lender and, in such case, only to the extent expressly provided in the Loan Documents. Notwithstanding any other provision of this Article VIII to the contrary, the Administrative Agent shall not be required to verify the payment of, or that other satisfactory arrangements have been made with respect to, Swap Obligations and Banking Services Obligations unless the Administrative Agent has received written notice of such Swap Obligations or Banking Services Obligations, as applicable, together with such supporting documentation as the Administrative Agent may request, from the applicable Lender or Affiliate thereof, as the case may be.

 

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ARTICLE IX

 

Miscellaneous

 

SECTION 9.01.      Notices.

 

(a)            Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile or email, as follows:

 

(i)            if to the Parent Borrower, the Opco Borrower or any other Loan Party, to it at 26 Century Boulevard, One Century Place, 5th Floor, North Tower, Suite 500, Nashville, Tennessee 37214, Attention of Matthew Sullivan, Treasury Leader – Cummins Filtration (Telephone No.: 812-344-1170; Email: matthew.sullivan@cummins.com;

 

(ii)          if to the Administrative Agent:

 

Administrative Agent’s Office

(for payments, Borrowing Requests and Interest Election Requests):

 

Bank of America, N.A.

Gateway Village – 900 Building, 900 W Trade St

Mail Code: NC1-026-06-04

Charlotte, NC 28255-0001

Attention: Amreen Taher

Telephone: +1.980.386.7637

Electronic Mail: amreen.taher@bofa.com

Account No.: 1366072250600

Ref: Wire Clearing Acct for Syn Loans – LIQ

ABA# 026009593

 

Revolving Loan Assignment Consents

(for approving assignments of Revolving Loans):

 

Bank of America, N.A.

Bank of America Tower Chicago, 110 N Wacker Dr

Mail Code: IL4-110-14-10

Chicago, IL 60606-1511

Attention: Prath Kshirsagar

Telephone: +1.312.992.9035

Facsimile: +1.312.453.3078

Electronic Mail: prathamesh.s.kshirsagar@bofa.com

 

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Other Notices as Administrative Agent:

 

Bank of America, N.A.

Agency Management

540 W. Madison Street

Mail Code: IL4-540-22-29

Chicago, IL 60661

Attention: Angela Larkin

Telephone: +1-312-828-3882

Facsimile: +1-877-206-8409

Electronic Mail: angela.larkin@bofa.com

 

(iii)         if to Bank of America as an L/C Issuer:

 

Bank of America, N.A.

Trade Operations 

1 Fleet Way

Mail Code: PA6-580-02-30

Scranton, PA 18507

Attention: Mike Grizzanti

Telephone: +1.570.496.9621

Facsimile: +1.800.755.8743

Electronic Mail: michael.a.grizzanti@bofa.com

 

(iv)         if to Bank of America as a Swingline Lender:

 

Bank of America, N.A.

Gateway Village – 900 Building, 900 W Trade St

Mail Code: NC1-026-06-04

Charlotte, NC 28255-0001

Attention: Amreen Taher

Telephone: +1.980.386.7637

Electronic Mail: amreen.taher@bofa.com

Account No.: 1366072250600

Ref: Wire Clearing Acct for Syn Loans – LIQ

ABA# 026009593

 

(v)          if to Wells Fargo Bank as an L/C Issuer:

 

Wells Fargo Bank, N.A.

7711 Plantation Rd

Roanoke, VA 24019

Attention: Michaele Eddy

Email: rkelcfx@wellsfargo.com

Fax: 866-270-7214

 

(vi)         if to PNC Bank as a L/C Issuer:

 

PNC Bank, National Association

300 Fifth Avenue

Pittsburgh, PA 15222

Attention: Roz Cunningham

Telephone: 440-546-6647

Fax: 877-717-9534

Email: ParticipationLA11BRV@pnc.com

 

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(vii)        if to Wells Fargo Bank as a Swingline Lender:

 

Wells Fargo Bank, N.A.

7711 Plantation Rd

Roanoke, VA 24019

Attention: Michaele Eddy

Email: rkelcfx@wellsfargo.com

Fax: 866-270-7214

 

(viii)       if to PNC Bank as a Swingline Lender:

 

PNC Bank, National Association

300 Fifth Avenue

Pittsburgh, PA 15222

Attention: Judith Gordon

Telephone: 214-706-8076

Fax: 877-717-9534

Email: ParticipationLA11BRV@pnc.com

 

(ix)          if to any other Lender, to it at its address (or facsimile number) set forth in its Administrative Questionnaire.

 

Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by facsimile shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Notices delivered through Approved Electronic Platforms, to the extent provided in paragraph (b) below, shall be effective as provided in said paragraph (b).

 

(b)            Notices and other communications to the Parent Borrower, the Opco Borrower, any other Loan Party, the Lenders and the L/C Issuers hereunder may be delivered or furnished by using Approved Electronic Platforms pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Opco Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

 

(c)            Unless the Administrative Agent otherwise prescribes, (i) notices and other communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement), and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient, at its e-mail address as described in the foregoing clause (i), of notification that such notice or communication is available and identifying the website address therefor; provided that, for both clauses (i) and (ii) above, if such notice, email or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next business day for the recipient.

 

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(d)            Any party hereto may change its address, email address or facsimile number for notices and other communications hereunder by notice to the other parties hereto.

 

SECTION 9.02.      Waivers; Amendments.

 

(a)            No failure or delay by the Administrative Agent, any L/C Issuer or any Lender in exercising any right or power hereunder or under any other Loan Document 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 a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Administrative Agent, the L/C Issuers and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any L/C Issuer may have had notice or knowledge of such Default at the time.

 

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(b)            Except as provided in Section 2.20 with respect to an Incremental Amendment, or as provided in Section 2.23 with respect to the extension of any Applicable Maturity Date, or as provided in Section 2.14, neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrowers and the Required Lenders or by the Borrowers and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender (provided that an amendment, modification, waiver or consent with respect to any condition precedent, covenant, mandatory prepayment, Event of Default or Default shall not constitute an increase in the Commitment of any Lender), (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender directly affected thereby (except that (x) neither (A) any amendment or modification of the financial covenants in this Agreement (or defined terms used in the financial covenants in this Agreement) nor (B) any amendment entered into pursuant to the terms of Section 2.14(b) shall constitute a reduction in the rate of interest or fees for purposes of this clause (ii) even if the effect of such amendment or modification would be to reduce the rate of interest on any Loan or to reduce any fee payable hereunder and (y) only the consent of the Required Lenders shall be necessary to reduce or waive any obligation of any Borrower to pay interest or any other amount at the applicable default rate set forth in Section 2.13(c) or to amend Section 2.13(c)), (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender directly affected thereby (it being understood and agreed that no amendment, modification or waiver of, or consent to departure from, any condition precedent, covenant, Default, Event of Default or mandatory prepayment, in any such case, shall be considered a postponement or delay of any date fixed for payment by this Agreement or any other Loan Document), (iv) change Section 2.09(d) or 2.18(b) or (d) in a manner that would alter the ratable reduction of Commitments or the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) change the payment waterfall provisions of Section 2.22(b) or 7.03 without the written consent of each Lender, (vi) waive any condition set forth in Section 4.03 in respect of the making of a Revolving Loan without the written consent of the Required Revolving Lenders (it being understood and agreed that any amendment or waiver of, or any consent with respect to, any provision of this Agreement (other than any waiver expressly relating to Section 4.03) or any other Loan Document, including any amendment of any affirmative or negative covenant set forth herein or in any other Loan Document or any waiver of a Default or an Event of Default, shall not be deemed to be a waiver of a condition set forth in Section 4.03 for purposes of this Section 9.02), (vii) change any of the provisions of this Section or the definition of “Required Lenders”, “Required Revolving Lenders”, “Required Term Lenders”, “Required Term Lenders” or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender directly affected thereby (it being understood that, solely with the consent of the parties prescribed by Section 2.20 to be parties to an Incremental Amendment, Incremental Term Loans may be included in the determination of Required Lenders on substantially the same basis as the Commitments and the Loans are included on the Effective Date), (viii) (x) release the Parent Borrower or the Opco Borrower from its obligations under Article X, (y) release any Designated Subsidiary Borrower from its obligations hereunder, except in connection with (1) the termination of a Designated Subsidiary Borrower’s status as such under Section 2.24, (2) a merger or consolidation or other transaction permitted under Section 6.04 or (3) a Disposition permitted under Section 6.05 (provided that, in the case of the foregoing clauses (1), (2) and (3), the Secured Obligations of the applicable Designated Subsidiary Borrower shall have been paid and satisfied in full in cash in accordance with Section 2.11(e)) or (z) release all or substantially all of the Guarantors from their obligations under the Guaranty (other than in accordance with the terms of Section 8.08, 9.14 or 9.20), in each case, without the written consent of each Lender, (ix) release or terminate the Company Guaranty prior to the Security Date, (x) except as provided in Section 8.08, 9.14 or 9.20 or in any Collateral Document, release all or substantially all of the Collateral, without the written consent of each Lender, (xi) except as provided in Section 8.08, subordinate the Obligations hereunder to any other Debt or other obligation without the written consent of each Lender or (xii) amend Section 1.06 or the definition of “Agreed Currencies”, “Alternative Currency Daily Rate” or “Alternative Currency Term Rate” without the written consent of each Lender directly affected thereby; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of (x) the Administrative Agent, any L/C Issuer or any Swingline Lender hereunder without the prior written consent of the Administrative Agent, such L/C Issuer or such Swingline Lender, as the case may be (it being understood that any change to Section 2.22 shall require the consent of the Administrative Agent, each L/C Issuer and each Swingline Lender) or (y) an L/C Issuer under any Issuer Document relating to any Letter of Credit issued or to be issued by it without the prior written consent of such L/C Issuer. Notwithstanding the foregoing, (A) no consent with respect to any amendment, waiver or other modification of this Agreement shall be required of any Defaulting Lender, except with respect to any amendment, waiver or other modification referred to in clause (i), (ii) or (iii) of the first proviso of this paragraph and then only in the event such Defaulting Lender shall be directly and adversely affected by such amendment, waiver or other modification in a non-ratable manner; and (B) as to any amendment, amendment and restatement or other modification otherwise approved in accordance with this Section, it shall not be necessary to obtain the consent or approval of any Lender that, upon giving effect to such amendment, amendment and restatement or other modification, would have no Commitment or outstanding Loans, so long as such Lender receives payment in full of the principal of and interest on each Loan made by, and all other amounts owing to, such Lender or accrued for the account of such Lender under this Agreement and the other Loan Documents at the time such amendment, amendment and restatement or other modification becomes effective.

 

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(c)            Notwithstanding the foregoing, this Agreement and any other Loan Document may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent and the Borrowers (x) to add one or more credit facilities (in addition to the Incremental Term Loans pursuant to an Incremental Amendment) to this Agreement and to permit extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Revolving Loans, the initial Term Loans, Incremental Term Loans and the accrued interest and fees in respect thereof and (y) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders and Lenders (it being understood and agreed that any such amendment (i) in connection with new Commitments or increases to the Commitments and/or Incremental Term Loans in accordance with Section 2.20 or (ii) in connection with any extension in accordance with Section 2.23 shall, in any such case, require solely the consent of the parties prescribed by such Section and shall not require the consent of the Required Lenders).

 

(d)            [Reserved].

 

(e)            If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender directly affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but not obtained being referred to herein as a “Non-Consenting Lender”), then the Opco Borrower may elect to replace a Non-Consenting Lender as a Lender party to this Agreement; provided that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Opco Borrower and the Administrative Agent shall agree, as of such date, to purchase for cash the Loans and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of clause (b) of Section 9.04, (ii) the Opco Borrower shall pay to such Non-Consenting Lender in Same Day Funds on the day of such replacement (1) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Opco Borrower hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Sections 2.15 and 2.17, and (2) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 2.16 had the Loans of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender and (iii) such Non-Consenting Lender shall have received the outstanding principal amount of its Loans. Each party hereto agrees that (a) an assignment required pursuant to this paragraph may be effected pursuant to an Assignment and Assumption executed by the Opco Borrower, the Administrative Agent and the assignee (or, to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to an Approved Electronic Platform as to which the Administrative Agent and such parties are participants), and (b) the Lender required to make such assignment need not be a party thereto in order for such assignment to be effective and shall be deemed to have consented to and be bound by the terms thereof; provided that, following the effectiveness of any such assignment, the other parties to such assignment agree to execute and deliver such documents necessary to evidence such assignment as reasonably requested by the applicable Lender; provided that any such documents shall be without recourse to or warranty by the parties thereto.

 

(f)            Notwithstanding anything to the contrary herein, if the Administrative Agent and the Opco Borrower acting together identify any ambiguity, omission, mistake, typographical error or other defect in any provision of this Agreement or any other Loan Document, then the Administrative Agent and the Opco Borrower shall be permitted to amend, modify or supplement such provision to cure such ambiguity, omission, mistake, typographical error or other defect, and such amendment shall become effective without any further action or consent of any other party to this Agreement.

 

(g)            Notwithstanding anything to the contrary herein, in connection with the designation of a Designated Subsidiary Borrower in accordance with Section 2.24 of this Agreement, the Administrative Agent and the Opco Borrower may amend the Loan Documents to address local law considerations to the extent reasonably necessary or customary in the applicable jurisdiction, and such amendment shall become effective without any further action or consent of any other party to this Agreement.

 

(h)            Notwithstanding any provision herein to the contrary, this Agreement may be amended with the written consent of the Administrative Agent, the Opco Borrower and the Appropriate Lenders directly affected thereby to amend the definition of “Alternative Currency”, “Alternative Currency Daily Rate” or “Alternative Currency Term Rate” or Section 1.06 solely to add additional currency options and the applicable interest rate with respect thereto, in each case solely to the extent permitted pursuant to Section 1.06.

 

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SECTION 9.03.      Expenses; Indemnity; Damage Waiver.

 

(a)            The Opco Borrower shall pay (i) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent and its Affiliates (which shall be limited, in the case of legal fees and expenses, to the reasonable and documented fees, charges and disbursements and other charges of one firm of counsel and, if necessary, one firm of local counsel in each appropriate jurisdiction, in each case, for the Administrative Agent and its Affiliates), in connection with the syndication and distribution (including, without limitation, via the internet or through a service such as IntraLinks™) of the credit facilities provided for herein, the preparation and administration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable and documented out-of-pocket expenses incurred by the L/C Issuers in connection with the issuance, amendment or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable and documented out-of-pocket expenses incurred by the Administrative Agent, any L/C Issuer or any Lender (which shall be limited, in the case of legal fees and expenses, to the reasonable and documented fees, disbursements and other charges of one firm of counsel for the Administrative Agent (and, to the extent reasonably required by the Administrative Agent, one firm of local counsel for the Administrative Agent in each applicable jurisdiction) and one counsel for all of the other Lenders and L/C Issuers (and, to the extent reasonably required by the Lenders, up to one firm of local counsel for all of the other Lenders and L/C Issuers in each applicable jurisdiction), unless a Lender or its counsel reasonably determines that it would create actual or potential conflicts of interests to not have individual counsel, in which case similarly affected Lenders may have one additional firm of counsel) in connection with the enforcement or protection of its rights in connection with this Agreement and any other Loan Document, including its rights under this Section, or in connection with the Loans made, including all such out-of-pocket expenses (subject to the foregoing limitations with respect to legal fees and expenses) incurred during any workout, restructuring or negotiations in respect of such Loans.

 

(b)            The Opco Borrower shall indemnify the Administrative Agent, each Bookrunner, each Arranger, the Syndication Agent, each Co-Documentation Agent, each L/C Issuer and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and reasonable and documented out-of-pocket expenses incurred in connection with investigating or defending any of the foregoing (limited, in the case of legal expenses, to the reasonable and documented out-of-pocket fees, charges and disbursements of one firm of counsel as primary counsel and, to the extent reasonably required, a single firm of local counsel in each applicable jurisdiction for the Indemnitees, taken as a whole, and, in the event of an actual or reasonably perceived conflict of interest (as reasonably determined in good faith by the applicable Indemnitee), one additional firm of counsel to each group of similarly affected Indemnitees) incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Effective Date Transactions, the Closing Date Transactions or any other transactions contemplated hereby, (ii) any Loan or the use of proceeds therefrom (including any refusal by an L/C Issuer to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by the Parent Borrower, the Opco Borrower or any Subsidiary, or any Environmental Liability related in any way to the Parent Borrower, the Opco Borrower or any Subsidiary, or (iv) any actual or prospective claim, litigation, investigation, arbitration or proceeding relating to any of the foregoing, whether or not such claim, litigation, investigation, arbitration or proceeding is brought by the Opco Borrower or any other Loan Party or its or their respective equity holders, Affiliates, creditors or any other third Person and whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (i) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from (x) the willful misconduct, bad faith or gross negligence of such Indemnitee or any of its Related Indemnified Persons or (y) a material breach of such Indemnitee’s or any of its Related Indemnified Persons’ obligations under the applicable Loan Documents or (ii) have resulted from any dispute solely among Indemnitees (not arising as a result of any act or omission by any Loan Party or any Subsidiaries or Affiliates), other than any dispute involving claims against any Credit Party in its capacity as, or in fulfilling its role as, the Administrative Agent, an L/C Issuer, a Swingline Lender, an Arranger, a Bookrunner, agent or any similar role under or in connection with this Agreement. This Section 9.03(b) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim. For purposes of this Section 9.03(b), a “Related Indemnified Person” of an Indemnitee means (1) any controlled Affiliate of such Indemnitee, (2) the respective directors, managers, officers and employees of such Indemnitee and of its controlled Affiliates and (3) the respective agents of such Indemnitee and its controlled Affiliates, in the case of this clause (3), acting at the express instructions of such Indemnitee or such controlled Affiliate; provided that each reference to a controlled affiliate, director, manager, officer or employee in this sentence pertains to a controlled affiliate, director, manager, officer or employee involved in the structuring, arrangement, negotiation or syndication of the credit facilities evidenced by this Agreement and/or the consummation of the transactions contemplated by the Loan Documents.

 

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(c)            To the extent that the Opco Borrower fails to pay any amount required to be paid by it to the Administrative Agent, any L/C Issuer or any Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, and each Revolving Lender severally agrees to pay to the applicable L/C Issuer or Swingline Lender, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount (it being understood that the Opco Borrower’s failure to pay any such amount shall not relieve the Opco Borrower of any default in the payment thereof); provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent, such L/C Issuer or such Swingline Lender in its capacity as such.

 

(d)            To the extent permitted by applicable Law, and subject to the last sentence of this Section 9.03(d), no party hereto shall assert, and each party hereto hereby waives, any claim against any other party hereto for any damages arising from the use by others of information or other materials obtained through telecommunications, electronic or other information transmission systems (including the Internet), other than damages that are determined by a court of competent jurisdiction by final and non-appealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of such party. To the extent permitted by applicable Law, no Indemnitee shall assert against any Loan Party and no Loan Party shall assert against any Indemnitee, and each Indemnitee and Loan Party hereby waives, any claim against any other party hereto, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document, or any agreement or instrument contemplated hereby or thereby, the Effective Date Transactions, the Closing Date Transactions, any Loan, any Letter of Credit or the use of proceeds thereof. Notwithstanding the foregoing, nothing contained in this Section 9.03(d) shall limit the Opco Borrower’s indemnity obligations to the extent set forth in Section 9.03(b).

 

(e)            All amounts due under this Section shall be payable not later than thirty (30) days after written demand therefor accompanied by a reasonably detailed calculation of the amount demanded.

 

SECTION 9.04.      Successors and Assigns.

 

(a)            The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of any L/C Issuer that issues any Letter of Credit), except that (i) no Borrower may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender and the Administrative Agent (and any attempted assignment or transfer by any Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section. Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of any L/C Issuer that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, the L/C Issuers and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

 

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(b)            (i) Subject to the conditions set forth in paragraph (b)(ii) below, any Lender may assign to one or more Persons (other than an Ineligible Institution or any Disqualified Institution) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld, conditioned or delayed, it being understood that in the case of any assignment that requires the Opco Borrower’s consent, without limiting any other factors that may be reasonable, it shall be reasonable for the Opco Borrower to consider a proposed assignee’s right to require reimbursement for increased costs when determining whether to consent to such an assignment) of:

 

(A)            the Opco Borrower (provided that the Opco Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within ten (10) Business Days after having received notice thereof); provided further that no consent of the Opco Borrower shall be required (but notice to the Opco Borrower, either prior to or promptly after such assignment, shall be required) (1) for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund (provided, however, that, notwithstanding the preceding clause (1), so long as no Specified Default has occurred and is continuing, the consent of the Opco Borrower shall be required if, after giving effect to such assignment, the assignee, collectively with its affiliated Lenders and affiliated Approved Funds, would, as a result of such assignment, hold more than 15% of the aggregate principal amount of unused Revolving Commitments or 15% of the aggregate outstanding principal amount of Term Loans (collectively, the “15% Limitation”) (it being understood and agreed that (x) it shall be solely the responsibility of the applicable assignee to determine that an assignment is not in violation of the 15% Limitation and (y) the Administrative Agent shall have no duty or obligation to monitor the 15% Limitation and shall have no liability for assignments in violation of the 15% Limitation) or (2) if a Specified Default has occurred and is continuing, for an assignment to any assignee;

 

(B)            the Administrative Agent;

 

(C)            each L/C Issuer; provided that no consent of any L/C Issuer shall be required for an assignment of all or any portion of a Term Loan; and

 

(D)            each Swingline Lender; provided that no consent of any Swingline Lender shall be required for an assignment of all or any portion of a Term Loan.

 

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(ii)            Assignments shall be subject to the following additional conditions:

 

(A)            except in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5,000,000 (in the case of Revolving Commitments and Revolving Loans) or $1,000,000 (in the case of a Term Loan) unless each of the Opco Borrower and the Administrative Agent otherwise consent; provided that no such consent of the Opco Borrower shall be required if a Specified Default has occurred and is continuing;

 

(B)            each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement; provided that this clause shall not be construed to prohibit the assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans;

 

(C)            the parties to each assignment shall execute and deliver to the Administrative Agent (x) an Assignment and Assumption or (y) to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to an Approved Electronic Platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants, together with a processing and recordation fee of $3,500, such fee to be paid by either the assigning Lender or the assignee Lender or shared between such Lenders; and

 

(D)            the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Opco Borrower and its Affiliates and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable Laws, including federal and state securities laws.

 

For the purposes of this Section 9.04(b), the terms “Approved Fund” and “Ineligible Institution” have the following meanings:

 

“Approved Fund” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

 

“Ineligible Institution” means (a) a natural person, (b) a Defaulting Lender or its Lender Parent, (c) the Company, the Parent Borrower, the Opco Borrower, any Subsidiary or any of its Affiliates, or (d) a company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s) thereof.

 

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(iii)            Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15, 2.16, 2.17 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

 

(iv)            The Administrative Agent, acting for this purpose as a non-fiduciary agent of the Borrowers, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrowers, the Administrative Agent, the L/C Issuers and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Opco Borrower, any L/C Issuer and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

 

(v)            Upon its receipt of (x) a duly completed Assignment and Assumption executed by an assigning Lender and an assignee or (y) to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to an Approved Electronic Platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register; provided that, if either the assigning Lender or the assignee shall have failed to make any payment required to be made by it pursuant to Section 2.05(c), 2.06(d) or (e), 2.07(b), 2.18(e) or 9.03(c), the Administrative Agent shall have no obligation to accept such Assignment and Assumption and record the information therein in the Register unless and until such payment shall have been made in full, together with all accrued interest thereon. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

 

(c)            Any Lender may, without the consent of, or notice to, the Opco Borrower, the Administrative Agent, any L/C Issuer or any Swingline Lender, sell participations to one or more banks or other entities (a “Participant”), other than an Ineligible Institution or a Disqualified Institution, in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged; (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations; and (C) the Borrowers, the Administrative Agent, the L/C Issuers and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Each Participant shall be entitled to the benefits of Sections 2.15, 2.16 and 2.17 (subject to the requirements and limitations therein, including the requirements under Section 2.17(f) (it being understood that the documentation required under Section 2.17(f) shall be delivered solely to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) shall be subject to the provisions of Sections 2.18 and 2.19 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Section 2.15 or 2.17, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation shall, at the Opco Borrower’s request and expense, use reasonable efforts to cooperate with the Opco Borrower to effectuate the provisions of Section 2.19(b) with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender; provided that such Participant shall be subject to Section 2.18(d) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Opco Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such Commitment, Loan or other obligation is in registered form under Treasury Regulations Section 5f.103-1(c) and Proposed Treasury Regulations Section 1.163-5(b) (or any amended or successor version). The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

 

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(d)            Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

 

(e)            Disqualified Institutions.

 

(i)            No assignment or participation shall be made to any Person that was a Disqualified Institution as of the date (the “Trade Date”) on which the applicable Lender entered into a binding agreement to sell and assign or grant a participation in all or a portion of its rights and obligations under this Agreement to such Person (unless the Opco Borrower has consented to such assignment or participation in writing in its sole and absolute discretion, in which case such Person will not be considered a Disqualified Institution for the purpose of such assignment or participation). For the avoidance of doubt, with respect to any assignee or Participant that becomes a Disqualified Institution after the applicable Trade Date (including as a result of the delivery of a notice pursuant to, and/or the expiration of the notice period referred to in, the definition of “Disqualified Institution”), (x) such assignee or Participant shall not retroactively be disqualified from becoming a Lender or Participant with respect to the assignment or participation effectuated on such Trade Date and (y) the execution by the Opco Borrower of an Assignment and Assumption with respect to such assignee will not by itself result in such assignee no longer being considered a Disqualified Institution. Any assignment or participation in violation of this clause (e)(i) shall not be void, but the other provisions of this clause (e) shall apply.

 

(ii)            If any assignment or participation is made to any Disqualified Institution without the Opco Borrower’s prior written consent in violation of clause (i) above, or if any Person becomes a Disqualified Institution after the applicable Trade Date, the Opco Borrower may, at its sole expense and effort, upon notice to the applicable Disqualified Institution and the Administrative Agent, (A) terminate any Revolving Commitment of such Disqualified Institution and repay all obligations of the Borrowers owing to such Disqualified Institution in connection with such Revolving Commitment, (B) in the case of outstanding Term Loans held by Disqualified Institutions, prepay such Term Loan by paying the lesser of (x) the principal amount thereof and (y) the amount that such Disqualified Institution paid to acquire such Term Loans, in each case plus accrued interest, accrued fees and all other amounts (other than principal amounts) payable to it hereunder and under the other Loan Documents and/or (C) require such Disqualified Institution to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in this Section 9.04), all of its interest, rights and obligations under this Agreement and related Loan Documents to one or more Persons (other than an Ineligible Institution or other Disqualified Institution) that shall assume such obligations at the lesser of (x) the principal amount thereof and (y) the amount that such Disqualified Institution paid to acquire such interests, rights and obligations, in each case plus accrued interest, accrued fees and all other amounts (other than principal amounts) payable to it hereunder and other the other Loan Documents; provided that (I) the Borrowers shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 9.04(b), (II) such assignment does not conflict with applicable Laws and (III) in the case of clause (B), no Borrower shall use the proceeds from any Loans to prepay Term Loans held by Disqualified Institutions.

 

(iii)            Notwithstanding anything to the contrary contained in this Agreement, Disqualified Institutions (A) will not (x) have the right to receive information, reports or other materials provided to Lenders by any Borrower, the Administrative Agent or any other Lender, (y) attend or participate in meetings attended by the Lenders (or any of them) and the Administrative Agent or (z) access any electronic site established for the Lenders or confidential communications from counsel to or financial advisors of the Administrative Agent or the Lenders and (B) (x) for purposes of any consent to any amendment, waiver or modification of, or any action under, and for the purpose of any direction to the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) under this Agreement or any other Loan Document, each Disqualified Institution will be deemed to have consented in the same proportion as the Lenders that are not Disqualified Institutions consented to such matter and (y) for purposes of voting on any plan of reorganization or plan of liquidation pursuant to any Debtor Relief Laws (“Plan of Reorganization”), each Disqualified Institution party hereto hereby agrees (1) not to vote on such Plan of Reorganization, (2) if such Disqualified Institution does vote on such Plan of Reorganization notwithstanding the restriction in the foregoing clause (1), such vote will be deemed not to be in good faith and shall be “designated” pursuant to Section 1126(e) of the Bankruptcy Code (or any similar provision in any other Debtor Relief Laws), and such vote shall not be counted in determining whether the applicable class has accepted or rejected such Plan of Reorganization in accordance with Section 1126(c) of the Bankruptcy Code (or any similar provision in any other Debtor Relief Laws) and (3) not to contest any request by any party for a determination by the Bankruptcy Court (or other applicable court of competent jurisdiction) effectuating the foregoing clause (2).

 

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(iv)            The Administrative Agent shall have the right, and each Borrower hereby expressly authorizes the Administrative Agent to, and the Administrative Agent promptly shall, (A) post the list of Disqualified Institutions provided by any Loan Party and any updates thereto from time to time (collectively, the “DQ List”) on the Approved Electronic Platform, including that portion of the Approved Electronic Platform that is designated for “public side” Lenders or (B) provide the DQ List to each Lender or potential Lender requesting the same.

 

SECTION 9.05.      Survival. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any L/C Issuer or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect in accordance with their terms as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15, 2.16, 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any other Loan Document or any provision hereof or thereof.

 

SECTION 9.06.      Electronic Execution; Electronic Records; Counterparts; Effectiveness. This Agreement, any Loan Document and any other Ancillary Document, including Ancillary Documents required to be in writing, may be in the form of an Electronic Record and may be executed using Electronic Signatures. Each of the Loan Parties and each of the Administrative Agent and each Lender Party agrees that any Electronic Signature on or associated with any Ancillary Document shall be valid and binding on such Person to the same extent as a manual, original signature, and that any Ancillary Document entered into by Electronic Signature, will constitute the legal, valid and binding obligation of such Person enforceable against such Person in accordance with the terms thereof to the same extent as if a manually executed original signature was delivered. Any Ancillary Document may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Ancillary Document. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance of a manually signed paper Ancillary Document which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Ancillary Document converted into another format, for transmission, delivery and/or retention. The Administrative Agent and each of the Lender Parties may, at its option, create one or more copies of any Ancillary Document in the form of an imaged Electronic Record (“Electronic Copy”), which shall be deemed created in the ordinary course of such Person’s business, and destroy the original paper document. All Ancillary Document in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record. Notwithstanding anything contained herein to the contrary, neither the Administrative Agent, L/C Issuer nor Swingline Lender is under any obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by such Person pursuant to procedures approved by it; provided further that, without limiting the foregoing, (a) to the extent the Administrative Agent, L/C Issuer and/or Swingline Lender has agreed to accept such Electronic Signature, the Administrative Agent and each of the Lender Parties shall be entitled to rely on any such Electronic Signature purportedly given by or on behalf of any Loan Party and/or any Lender Party without further verification and (b) upon the request of the Administrative Agent or any Lender Party, any Electronic Signature shall be promptly followed by such manually executed counterpart.

 

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Neither the Administrative Agent, L/C Issuer nor Swingline Lender shall be responsible for or have any duty to ascertain or inquire into the sufficiency, validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document (including, for the avoidance of doubt, in connection with the Administrative Agent’s, L/C Issuer’s or Swingline Lender’s reliance on any Electronic Signature transmitted by telecopy, emailed .pdf or any other electronic means). The Administrative Agent, L/C Issuer and Swingline Lender shall be entitled to rely on, and shall incur no liability under or in respect of this Agreement or any other Loan Document by acting upon, any Ancillary Document (which writing may be a fax, any electronic message, Internet or intranet website posting or other distribution or signed using an Electronic Signature) or any statement made to it orally or by telephone and believed by it to be genuine and signed or sent or otherwise authenticated (whether or not such Person in fact meets the requirements set forth in the Loan Documents for being the maker thereof).

 

Each of the Loan Parties and each Lender Party hereby waives (i) any argument, defense or right to contest the legal effect, validity or enforceability of this Agreement, any other Loan Document based solely on the lack of paper original copies of this Agreement, such other Loan Document, and (ii) waives any claim against the Administrative Agent, each Lender Party and each Related Party for any liabilities arising solely from the Administrative Agent’s and/or any Lender Party’s reliance on or use of Electronic Signatures, including any liabilities arising as a result of the failure of the Loan Parties to use any available security measures in connection with the execution, delivery or transmission of any Electronic Signature.

 

Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.

 

SECTION 9.07.      Severability. Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

 

SECTION 9.08.      Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender, each L/C Issuer, and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to setoff and apply any and all deposits (general or special, time or demand, provisional or final, but excluding deposits held in a trustee, fiduciary, agency or similar capacity or otherwise for the benefit of a third party) at any time held, and other obligations at any time owing, by such Lender, such L/C Issuer or any such Affiliate, to or for the credit or the account of any Borrower against any and all of the Obligations held by such Lender or L/C Issuer or their respective Affiliates, irrespective of whether or not such Lender, L/C Issuer or Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrowers may be contingent or unmatured or are owed to a branch office or Affiliate of such Lender or L/C Issuer different from the branch office or Affiliate holding such deposit or obligated on such indebtedness; provided that, in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so setoff shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.22 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the L/C Issuers and the Lenders, and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Secured Obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender, each L/C Issuer and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, L/C Issuer or their respective Affiliates may have. Each Lender and L/C Issuer agrees to notify the Opco Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

 

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SECTION 9.09.      Governing Law; Jurisdiction; Consent to Service of Process.

 

(a)            THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK, EXCLUDING CONFLICT OF LAW PRINCIPLES PROVIDING FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

 

(b)            Each of the Lenders and the Administrative Agent hereby irrevocably and unconditionally agrees that, notwithstanding the governing law provisions of any applicable Loan Document, any claims brought against the Administrative Agent by any Secured Party relating to this Agreement, any other Loan Document, the Collateral or the consummation or administration of the transactions contemplated hereby or thereby shall be construed in accordance with and governed by the law of the State of New York.

 

(c)            Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the non-exclusive jurisdiction of the United States District Court for the Southern District of New York sitting in the Borough of Manhattan (or if such court lacks subject matter jurisdiction, the Supreme Court of the State of New York sitting in the Borough of Manhattan), and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may (and any such claims, cross-claims or third party claims brought against the Administrative Agent or any of its Related Parties may only) be heard and determined in such Federal (to the extent permitted by law) or New York State court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or in any other Loan Document shall affect any right that the Administrative Agent, any L/C Issuer or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction.

 

(d)            Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (c) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

 

(e)            Each of the parties hereto (other than Designated Subsidiary Borrowers) hereby irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by applicable Law.

 

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(f)            Without prejudice to any other mode of service allowed under any relevant law, each Designated Subsidiary Borrower: (i) irrevocably appoints the Opco Borrower as its agent for service of process in relation to any proceedings before the courts of the state of New York in connection with any Loan Document and (ii) agrees that failure by a process agent to notify the Designated Subsidiary Borrower of the process will not invalidate the proceedings concerned. Each Designated Subsidiary Borrowers expressly agrees and consents to the provisions of this Section 9.09(f).

 

SECTION 9.10.      WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

 

SECTION 9.11.      Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

 

SECTION 9.12.      Confidentiality. Each of the Administrative Agent, the L/C Issuers and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors on a need-to-know basis (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential to the same extent as if they were parties hereto and the disclosing Administrative Agent, L/C Issuer or Lender shall be responsible for any violation of the provisions of this Section 9.12 by any such Person), (b) to the extent requested by any Governmental Authority (including any self-regulatory authority, such as the National Association of Insurance Commissioners), (c) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process (provided that the applicable disclosing Person shall, to the extent not prohibited by applicable law, rule or regulation, notify the Opco Borrower in writing in advance of such required disclosure), (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies under this Agreement or any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (1) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement or (2) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Parent Borrower and its obligations, (g) on a confidential basis to (1) any rating agency in connection with rating the Parent Borrower or its Subsidiaries or the credit facilities provided for herein or (2) the CUSIP Service Bureau or any similar agency in connection with the issuance and monitoring of identification numbers with respect to the credit facilities provided for herein, (h) with the prior written consent of the Opco Borrower or (i) to the extent such Information (1) becomes publicly available other than as a result of a breach of this Section or (2) becomes available to the Administrative Agent, any L/C Issuer or any Lender on a nonconfidential basis from a source other than the Parent Borrower or any of its Subsidiaries that the Administrative Agent, such L/C Issuer or such Lender, as applicable, reasonably believes is not prohibited from disclosing such information to such party in violation of a duty or contractual obligation of confidentiality to the Parent Borrower or any of its Subsidiaries. For the purposes of this Section, “Information” means all information received from or on behalf of the Parent Borrower and/or any Subsidiary relating to the Parent Borrower, its Subsidiaries or Affiliates or their respective businesses, other than, after the Parent Borrower has publicly filed this Agreement with the SEC, information pertaining to this Agreement routinely provided by arrangers to data service providers, including league table providers, that serve the lending industry. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information but in no event less than a reasonable degree of care.

 

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EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN THE IMMEDIATELY PRECEDING PARAGRAPH FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING THE PARENT BORROWER, THE OPCO BORROWER AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

 

ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY OR ON BEHALF OF THE PARENT BORROWER, THE OPCO BORROWER, ANY SUBSIDIARIES OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE PARENT BORROWER, THE OPCO BORROWER, THE OTHER LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS TO THE PARENT BORROWER AND THE OPCO BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW.

 

SECTION 9.13.      USA PATRIOT Act. Each Lender that is subject to the requirements of the Patriot Act and the requirements of the Beneficial Ownership Regulation hereby notifies each Loan Party that pursuant to the requirements of the Patriot Act and the Beneficial Ownership Regulation, it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name, address and tax identification number of such Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the Patriot Act and the Beneficial Ownership Regulation and other applicable “know your customer” and anti-money laundering rules and regulations.

 

SECTION 9.14.      Releases of Subsidiary Guarantors and Collateral.

 

(a)            A Subsidiary Guarantor shall automatically be released from its obligations under the Loan Documents (i) pursuant to the terms of Section 9.20 and (ii) upon the consummation of any transaction permitted by this Agreement as a result of which such Subsidiary Guarantor ceases to be a Subsidiary; provided that, in the case of clause (ii) above, if so required by this Agreement, the Required Lenders shall have consented to such transaction and the terms of such consent shall not have provided otherwise. In connection with any termination or release pursuant to this Section (including pursuant to clause (b) below), the Administrative Agent shall (and is hereby irrevocably authorized by each Lender to) promptly execute and deliver to any Loan Party, at such Loan Party’s expense, all documents that such Loan Party shall reasonably request to evidence such termination or release. Any execution and delivery of documents pursuant to this Section shall be without recourse to or warranty by the Administrative Agent except as may otherwise be expressly agreed in writing by the Administrative Agent and such Loan Party.

 

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(b)            Further, the Administrative Agent may (and is hereby irrevocably authorized by each Lender to), upon the request of the Opco Borrower, release any Subsidiary Guarantor from its obligations under the Guaranty if such Subsidiary Guarantor is no longer a Subsidiary or becomes an Excluded Subsidiary or is otherwise not required pursuant to the terms of this Agreement to provide the Guaranty.

 

(c)            Upon (i) any Disposition by any Loan Party (other than to any Loan Party) of any Collateral in a transaction permitted under this Agreement (including, without limitation, by virtue of any merger or consolidation permitted under this Agreement) or (ii) any release of the Lien created under any Collateral Document in any Collateral pursuant to Sections 8.08, 9.14 or 9.20 or as otherwise provided in any Collateral Document, the Liens in such Collateral created by the Collateral Documents shall be automatically and immediately released. In connection with any such termination or release pursuant to this Section, the Administrative Agent shall (and is hereby irrevocably authorized by each Secured Party to) promptly execute and deliver to the applicable Loan Party, at such Loan Party’s expense, all documents that such Loan Party shall reasonably request to evidence such termination or release; provided, however, that (i) the Administrative Agent shall not be required to execute any such document on terms which, in the Administrative Agent’s reasonable opinion, would expose the Administrative Agent to liability or create any obligation or entail any consequence other than the release of such Liens without recourse or warranty, and (ii) such release shall not in any manner discharge, affect or impair the Secured Obligations or any Liens upon (or obligations of the Parent Borrower or any Subsidiary in respect of) all interests retained by the Parent Borrower or any Subsidiary, including (without limitation) the proceeds of such sale or disposition, all of which shall continue to constitute part of the Collateral. Any execution and delivery of documents pursuant to this Section shall be without recourse to or warranty by the Administrative Agent.

 

SECTION 9.15.      Appointment for Perfection. Each Lender hereby appoints each other Lender as its agent for the purpose of perfecting Liens, for the benefit of the Administrative Agent and the Secured Parties, in assets which, in accordance with Article 9 of the UCC or any other applicable Law can be perfected only by possession or control. Should any Lender (other than the Administrative Agent) obtain possession or control of any such Collateral, such Lender shall notify the Administrative Agent thereof, and, promptly upon the Administrative Agent’s request therefor shall deliver such Collateral to the Administrative Agent or otherwise deal with such Collateral in accordance with the Administrative Agent’s instructions.

 

SECTION 9.16.      Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable Law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable Law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Overnight Rate to the date of repayment, shall have been received by such Lender.

 

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SECTION 9.17.      No Fiduciary Duty, etc.

 

(a)            Each of the Parent Borrower and the Opco Borrower acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that no Credit Party will have any obligations except those obligations expressly set forth herein and in the other Loan Documents and each Credit Party is acting solely in the capacity of an arm’s length contractual counterparty to the Loan Parties with respect to the Loan Documents and the transactions contemplated herein and therein and not as a financial advisor or a fiduciary to, or an agent of, any Loan Party or any other person. Each of the Parent Borrower and the Opco Borrower agrees that it will not assert any claim against any Credit Party based on an alleged breach of fiduciary duty by such Credit Party in connection with this Agreement and the transactions contemplated hereby. Additionally, each of the Parent Borrower and the Opco Borrower acknowledges and agrees that no Credit Party is advising the Loan Parties as to any legal, tax, investment, accounting, regulatory or any other matters in any jurisdiction in connection with this Agreement, the other Loan Documents and the credit facilities evidenced hereby. Each of the Parent Borrower and the Opco Borrower shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated herein or in the other Loan Documents, and the Credit Parties shall have no responsibility or liability to the Loan Parties with respect thereto.

 

(b)            Each of the Parent Borrower and the Opco Borrower further acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that each Credit Party, together with its Affiliates, is a full service securities or banking firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, any Credit Party may provide investment banking and other financial services to, and/or acquire, hold or sell, for its own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of, the Parent Borrower, the Opco Borrower, their Subsidiaries and other companies with which the Parent Borrower, the Opco Borrower or any Subsidiary may have commercial or other relationships. With respect to any securities and/or financial instruments so held by any Credit Party or any of its customers, all rights in respect of such securities and financial instruments, including any voting rights, will be exercised by the holder of the rights, in its sole discretion.

 

(c)            In addition, each of the Parent Borrower and the Opco Borrower acknowledges and agrees, and acknowledges its Subsidiaries’ understanding, that each Credit Party and its Affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which the Parent Borrower, the Opco Borrower or any Subsidiary may have conflicting interests regarding the transactions described herein and otherwise. No Credit Party will use Information obtained from or on behalf of the Loan Parties by virtue of the transactions contemplated by the Loan Documents or its other relationships with the Loan Parties in connection with the performance by such Credit Party of services for other companies, and no Credit Party will furnish any such Information to other companies. Each of the Parent Borrower and the Opco Borrower also acknowledges that no Credit Party has any obligation to use in connection with the transactions contemplated by the Loan Documents, or to furnish to the Parent Borrower, the Opco Borrower or any Subsidiary, confidential information obtained from other companies.

 

SECTION 9.18.      Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Affected Financial Institution arising under any Loan Document may be subject to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

 

(a)            the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and

 

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(b)            the effects of any Bail-In Action on any such liability, including, if applicable:

 

(i)            a reduction in full or in part or cancellation of any such liability;

 

(ii)            a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected Financial Institution, its parent entity, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

 

(iii)            the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of the applicable Resolution Authority.

 

To the extent not prohibited by applicable Law, each Lender shall notify the Opco Borrower and the Administrative Agent if it has become the subject of a Bail-In Action (or any case or other proceeding in which a Bail-In Action may occur).

 

SECTION 9.19.      Acknowledgement Regarding Any Supported QFCs. To the extent that the Loan Documents provide support, through a guarantee or otherwise, for Swap Agreements or any other agreement or instrument that is a QFC (such support “QFC Credit Support” and each such QFC a “Supported QFC”), the parties acknowledge and agree as follows with respect to the resolution power of the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (together with the regulations promulgated thereunder, the “U.S. Special Resolution Regimes”) in respect of such Supported QFC and QFC Credit Support (with the provisions below applicable notwithstanding that the Loan Documents and any Supported QFC may in fact be stated to be governed by the laws of the State of New York and/or of the United States or any other state of the United States):

 

In the event a Covered Entity that is party to a Supported QFC (each, a “Covered Party”) becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer of such Supported QFC and the benefit of such QFC Credit Support (and any interest and obligation in or under such Supported QFC and such QFC Credit Support, and any rights in property securing such Supported QFC or such QFC Credit Support) from such Covered Party will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if the Supported QFC and such QFC Credit Support (and any such interest, obligation and rights in property) were governed by the laws of the United States or a state of the United States. In the event a Covered Party or a BHC Act Affiliate of a Covered Party becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under the Loan Documents that might otherwise apply to such Supported QFC or any QFC Credit Support that may be exercised against such Covered Party are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if the Supported QFC and the Loan Documents were governed by the laws of the United States or a state of the United States. Without limitation of the foregoing, it is understood and agreed that rights and remedies of the parties with respect to a Defaulting Lender shall in no event affect the rights of any Covered Party with respect to a Supported QFC or any QFC Credit Support.

 

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SECTION 9.20.      Investment Grade Fallaway Provision; Release of Company Guaranty. Notwithstanding anything to the contrary set forth herein:

 

(a)            Upon evidence being provided by the Parent Borrower to the Administrative Agent confirming that the Parent Borrower has obtained, after the Security Date, a corporate rating from at least two of S&P, Moody’s and Fitch of BBB-, Baa3 or BBB-, as applicable (any period of such achievement, an “Investment Grade Period”), the Guarantee of the Subsidiary Guarantors contained in Article X and the security interests in the Collateral, in each case unless the Opco Borrower elects otherwise by written notice to the Administrative Agent, shall be automatically and immediately released and each reference to the Guarantee of the Subsidiary Guarantors contained in Article X shall, so long as no Default is in existence and continuing at such time, be deemed to be of no further force and effect; provided that, if the Parent Borrower shall at any time after the initial achievement of such investment grade rating fail to maintain such corporate rating from at least two of S&P, Moody’s and Fitch, (i) each Wholly-Owned Domestic Subsidiary (other than any Excluded Subsidiary) shall execute and deliver to the Administrative Agent a Guaranty Supplement and (ii) the Parent Borrower, the Opco Borrower and each Wholly-Owned Domestic Subsidiary (other than any Excluded Subsidiary) shall execute and deliver to the Administrative Agent the Security Agreement (or a joinder thereto) and each other Collateral Document reasonably requested by the Administrative Agent, in each case on substantially the same terms as the Guaranty or Guaranty Supplement and Collateral Documents, as applicable, previously delivered by such Subsidiary, and together with any certificates, corporate authorizations, legal opinions and other documentation reasonably required by the Administrative Agent (the date any such guarantees and collateral documentation become effective, a “Reversion Date”). No Default or Event of Default shall be deemed to have occurred on the Reversion Date as a result of any actions taken by the Parent Borrower or any of its Subsidiaries during the Investment Grade Period, or any actions taken at any time pursuant to any contractual obligations arising during the Investment Grade Period (provided that such contractual obligations were not entered into in contemplation of, or with awareness of, the cessation or expected cessation of an Investment Grade Period), in each case that were permitted under the Loan Documents as in effect at the time such actions were taken or such contractual obligations arose, regardless of whether such actions would have been permitted in the absence of the related Investment Grade Period. It is hereby understood and agreed that this Section 9.20(a) shall not, in any event, effect the release of (i) the Guaranty of the Parent Borrower or the Opco Borrower contained in Article X, which shall remain in effect during the entire term of this Agreement or (ii) the Company Guaranty.

 

(b)            The Company Guaranty shall automatically and immediately terminate on the earlier of the Security Date and the occurrence of the Termination Date Conditions, unless the Company elects otherwise by written notice to the Administrative Agent.

 

ARTICLE X

 

Guaranty

 

SECTION 10.01.      Guaranty, Limitation of Liability.

 

(a)            Each Guarantor, jointly and severally, hereby absolutely, unconditionally and irrevocably guarantees the punctual payment when due, whether at scheduled maturity or by acceleration, demand or otherwise, of all Secured Obligations now or hereafter existing (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Secured Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise (such Secured Obligations being the “Guaranteed Obligations”). Each Guarantor agrees to pay any and all expenses (including, without limitation, and subject to the limitations in Section 9.03, reasonable, documented and out-of-pocket fees and expenses of counsel) incurred by the Administrative Agent or any Lender Party in enforcing any rights against such Guarantor under this Agreement or any other Loan Document. Without limiting the generality of the foregoing, each Guarantor’s liability shall extend to all amounts that constitute part of the Guaranteed Obligations, in each case that would be owed by the Parent Borrower and the other Loan Parties, respectively, to any Lender Party but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving the Parent Borrower or other Loan Party.

 

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(b)            Each Guarantor and each Lender Party hereby confirms that it is the intention of all such Persons that the Secured Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of any Debtor Relief Laws, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law or other applicable Law to the extent applicable to the Guaranty and the Secured Obligations of such Guarantor hereunder. To effectuate the foregoing intention, each Lender Party and each Guarantor hereby irrevocably agree that the Secured Obligations of each Guarantor with respect to the Guaranty at any time shall be limited to the maximum amount as will result in the Secured Obligations of such Guarantor under the Guaranty not constituting a fraudulent transfer or conveyance.

 

(c)            Each Guarantor hereby unconditionally and irrevocably agrees that in the event any payment shall be required to be made to any Lender Party with respect to the Guaranty, such Guarantor will contribute, to the maximum extent permitted by applicable Law, such amounts to each other Guarantor and each other guarantor so as to maximize the aggregate amount paid to the Lender Parties under or in respect of the Loan Documents.

 

(d)            The Guaranty contained herein is a guarantee of payment and not of collection.

 

SECTION 10.02.      Guaranty Absolute.

 

To the fullest extent permitted pursuant to applicable Law, each Guarantor guarantees that the Guaranteed Obligations guaranteed by it will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Lender Party with respect thereto. The Secured Obligations of each Guarantor under or in respect of the Guaranty are independent of the Guaranteed Obligations or any other Secured Obligations of any other Loan Party under or in respect of the Loan Documents, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce the Guaranty, irrespective of whether any action is brought against the Parent Borrower or any other Loan Party or whether the Parent Borrower or any other Loan Party is joined in any such action or actions. The liability of each Guarantor under the Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

 

(a)            any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

 

(b)            any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other Secured Obligations of any other Loan Party under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to any Loan Party or any of its Subsidiaries or otherwise;

 

(c)            any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

 

(d)            any change, restructuring or termination of the corporate structure or existence of any Loan Party or any of its Subsidiaries;

 

160

 

 

(e)            the failure of any other Person to execute or deliver any Guaranty Supplement or any other guaranty or agreement or the release or reduction of liability of any Guarantor or other guarantor or surety with respect to the Guaranteed Obligations; or

 

(f)            to the fullest extent permitted by applicable Law, any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by any Lender Party that might otherwise constitute a defense available to, or a discharge of, any Loan Party or any other guarantor or surety.

 

The Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Lender Party or any other Person upon the insolvency, bankruptcy or reorganization of the Parent Borrower or any other Loan Party or otherwise, all as though such payment had not been made.

 

SECTION 10.03.      Waivers and Acknowledgments.

 

(a)            Except as otherwise expressly provided in this Agreement and/or the other Loan Documents, each Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and the Guaranty and any requirement that the Administrative Agent, any L/C Issuer or any Lender exhaust any right or take any action against any Loan Party or any other Person.

 

(b)            Each Guarantor hereby unconditionally and irrevocably waives any right to revoke its Secured Obligations with respect to the Guaranty and acknowledges that such Secured Obligations are continuing in nature and apply to all Guaranteed Obligations, whether existing now or in the future.

 

(c)            Each Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by the Administrative Agent, any L/C Issuer or any Lender that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against any of the other Loan Parties, any other guarantor or any other Person and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Secured Obligations of such Guarantor hereunder.

 

(d)            Each Guarantor hereby unconditionally and irrevocably waives any duty on the part of the Administrative Agent, any L/C Issuer or any Lender to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of any other Loan Party or any of its Subsidiaries now or hereafter known by the Administrative Agent, any L/C Issuer or any Lender.

 

(e)            Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in Section 10.02 and this Section 10.03 are knowingly made in contemplation of such benefits.

 

161

 

 

SECTION 10.04.      Subrogation. Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the Parent Borrower, any other Loan Party or any other insider guarantor that arise from the existence, payment, performance or enforcement of such Guarantor’s Secured Obligations under or in respect of the Guaranty or any Loan Document, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any of the Administrative Agent, the L/C Issuers or the Lenders against the Parent Borrower, any other Loan Party or any other insider guarantor, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Parent Borrower, any other Loan Party or any other insider guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under the Guaranty shall have been paid in full in cash and the Commitments shall have expired or been terminated; provided that each Guarantor may make any necessary filings solely to preserve its claims against the Parent Borrower, other Loan Party or other insider guarantor. If any amount shall be paid to any Guarantor in violation of the immediately preceding sentence at any time prior to the later of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under the Guaranty and (b) the date on which the Commitments shall have been terminated in whole, such amount shall be received and held in trust for the benefit of the Administrative Agent, the L/C Issuers and the Lenders, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Guaranteed Obligations and all other amounts payable under the Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents. If (i) any Guarantor shall make payment to any of the Administrative Agent, the L/C Issuers or the Lenders of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under the Guaranty shall have been paid in full in cash and (iii) the Commitments shall have been terminated in whole, the Administrative Agent, the L/C Issuers and the Lenders will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to the Guaranty.

 

SECTION 10.05.      Guaranty Supplements.

 

(a)            The Parent Borrower may at any time have additional Subsidiaries joined as Guarantors by execution and delivery of a Guaranty Supplement, together with such customary certificates, evidences of authority and opinions of counsel as the Administrative Agent may reasonably request in connection therewith.

 

(b)            Upon the execution and delivery by any Person of a Guaranty Supplement, (a) such Person shall be referred to as an “Additional Guarantor” and shall become and be a Guarantor hereunder, and each reference in this Agreement or any other Loan Document to a “Guarantor,” shall also mean and be a reference to such Additional Guarantor and (b) each reference herein to “the Guaranty,” “hereunder,” “hereof” or words of like import referring to the Guaranty under this Article X, and each reference in any Loan Document to the “Guaranty,” “thereunder,” “thereof” or words of like import referring to the Guaranty, shall mean and be a reference to the Guaranty as supplemented by such Guaranty Supplement.

 

SECTION 10.06.      Subordination. Each Guarantor hereby subordinates any and all debts, liabilities and other obligations owed to such Guarantor by each other Loan Party arising from the Guaranty (the “Subordinated Obligations”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 10.06:

 

(a)            Prohibited Payments, Etc. Except during the continuance of an Event of Default, each Guarantor may receive regularly scheduled payments from any other Loan Party on account of the Subordinated Obligations. After the occurrence and during the continuance of any Event of Default, however, unless the Required Lenders otherwise agree, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

 

162

 

 

(b)            Prior Payment of Guaranteed Obligations. Each Guarantor agrees that in any proceeding under any Debtor Relief Laws relating to any other Loan Party, the Administrative Agent, the L/C Issuers and the Lenders shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Debtor Relief Laws, whether or not constituting an allowed claim in such proceeding (“Post-Petition Interest”)) before such Guarantor receives payment of any Subordinated Obligations.

 

(c)            Turn-Over. After the occurrence and during the continuance of any Event of Default, each Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Lenders and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post-Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of the Guaranty.

 

(d)            Administrative Agent Authorization. After the occurrence and during the continuance of any Event of Default, the Administrative Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of each Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post-Petition Interest), and (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Administrative Agent for application to the Guaranteed Obligations (including any and all Post-Petition Interest).

 

SECTION 10.07.      Continuing Guaranty; Assignments. Subject to Sections 8.08, 9.14 and 9.20, the Guaranty under this Article X is a continuing guaranty and shall remain in full force and effect until satisfaction of the Termination Date Conditions.

 

SECTION 10.08.      Keepwell. Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party to honor all of its obligations under the Guaranty in respect of a Swap Obligation (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 10.08 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 10.08 or otherwise under the Guaranty under this Article X voidable under applicable Law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). Except as otherwise provided herein (including Section 10.07), the obligations of each Qualified ECP Guarantor under this Section 10.08 shall remain in full force and effect until the termination of all Swap Obligations. Each Qualified ECP Guarantor intends that this Section 10.08 constitute, and this Section 10.08 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

 

[Reminder of page intentionally left blank]

 

163

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

  FILT RED, INC., as the Parent Borrower
     
  By: /s/ Toni Hickey
  Name: Toni Hickey
  Title: Secretary
     
  CUMMINS FILTRATION INC, as the Opco Borrower
     
  By: /s/ Donald G. Jackson
  Name: Donald G. Jackson
  Title: Treasurer

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

BANK OF AMERICA, N.A.,  
as Administrative Agent  
     
By: /s/ Angela Larkin  
Name: Angela Larkin  
Title: Vice President  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

BANK OF AMERICA, N.A.,  
as a Lender, an L/C Issuer and a Swingline Lender  
   
By: /s/ Prathamesh Kshirsagar  
Name: Prathamesh Kshirsagar  
Title: Director  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,  
as a Lender, an L/C Issuer and a Swingline Lender  
     
By: /s/ Kieran Mahon  
Name: Kieran Mahon  
Title: Managing Director  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

PNC BANK, NATIONAL ASSOCIATION,  
as a Lender, an L/C Issuer and a Swingline Lender  
   
By: /s/ Eric Estes  
Name: Eric Estes  
Title: Sr. Vice President  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

JPMORGAN CHASE BANK, N.A.,  
as a Lender  
   
By: /s/ Robert P. Kellas  
Name: Robert P. Kellas  
Title: Executive Director  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

ING CAPITAL LLC,  
as a Lender  
   
By: /s/ Michael Kim  
Name: Michael Kim  
Title: Director  
   
   
By: /s/ Ian J. Nyi  
Name: Ian J. Nyi  
Title: Director  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

KEYBANK NATIONAL ASSOCIATION,  
as a Lender  
   
By: /s/ Lynnette Ritter  
Name: Lynnette Ritter  
Title: SVP  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

HSBC BANK USA, NATIONAL ASSOCIATION,  
as a Lender  
     
By: /s/ Matthew McLaurin  
Name: Matthew McLaurin  
Title: Director  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

U.S. BANK NATIONAL ASSOCIATION,  
as a Lender  
   
By: /s/ Jeffrey S. Johnson  
Name: Jeffrey S. Johnson  
Title: Senior Vice President  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

CITY NATIONAL BANK,  
as a Lender  
   
By: /s/ Molly Drennan  
Name: Molly Drennan  
Title: Senior Vice President  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

GOLDMAN SACHS BANK USA,  
as a Lender  
   
By: /s/ Jonathan Dworkin  
Name: Jonathan Dworkin  
Title: Authorized Signatory  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

BANK OF CHINA, NEW YORK BRANCH,  
as a Lender  
   
By: /s/ Raymond Qiao  
Name: Raymond Qiao  
Title: Executive Vice President  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

THE NORTHERN TRUST COMPANY,  
as a Lender  
   
By: /s/ Tim Ramos  
Name: Tim Ramos  
Title: Vice President  

 

Signature Page to Credit Agreement

Cummins Filtration Inc

 

 

 

 

SCHEDULE 2.01

 

COMMITMENTS

 

Revolving Commitments and Term Loan Commitments

 

Lender  Revolving
Commitment		   Term Loan
Commitment		 
Bank of America, N.A.  $50,000,000.00   $75,000,000.00 
Wells Fargo Bank, National Association  $50,000,000.00   $75,000,000.00 
PNC Bank, National Association  $50,000,000.00   $75,000,000.00 
JPMorgan Chase Bank, N.A.  $36,000,000.00   $54,000,000.00 
ING Capital LLC  $36,000,000.00   $54,000,000.00 
KeyBank National Association  $36,000,000.00   $54,000,000.00 
HSBC Bank USA, National Association  $36,000,000.00   $54,000,000.00 
U.S. Bank National Association  $36,000,000.00   $54,000,000.00 
City National Bank  $26,000,000.00   $39,000,000.00 
Goldman Sachs Bank USA  $16,000,000.00   $24,000,000.00 
Bank of China, New York Branch  $14,000,000.00   $21,000,000.00 
The Northern Trust Company  $14,000,000.00   $21,000,000.00 
TOTAL  $400,000,000.00   $600,000,000.00 

 

L/C Commitments

 

L/C Issuer  L/C Commitment 
Bank of America, N.A.  $16,666,666.67 
Wells Fargo Bank, National Association  $16,666,666.66 
PNC Bank, National Association  $16,666,666.66 
TOTAL  $50,000,000.00 

 

 

 

Exhibit 10.14

 

EXECUTION VERSION

 

AMENDMENT NO. 1 TO CREDIT AGREEMENT

 

This Amendment No. 1 to Credit Agreement, dated as of February 15, 2023 (this “Amendment”), is by and among ATMUS FILTRATION TECHNOLOGIES INC., a Delaware corporation (the “Parent Borrower”), CUMMINS FILTRATION INC, an Indiana corporation (the “Opco Borrower”), each Lender, Bank of America, N.A., as Administrative Agent (in such capacity, the “Administrative Agent”), a Swingline Lender and an L/C Issuer, and the other Swingline Lenders and L/C Issuers. Capitalized terms not otherwise defined herein have the definitions provided therefor in the Amended Credit Agreement referenced below.

 

WHEREAS, the Parent Borrower, the Opco Borrower, the other Borrowers and Loan Parties from time to time party thereto, the financial institutions from time to time party thereto as Lenders, Swingline Lenders and L/C Issuers and the Administrative Agent are parties to that certain Credit Agreement, dated as of September 30, 2022 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “Credit Agreement” and, as amended by this Amendment, the “Amended Credit Agreement”);

 

WHEREAS, the Borrowers have requested that the Administrative Agent and each of the Lenders, Swingline Lenders and L/C Issuers agree to certain amendments to the Credit Agreement; and

 

WHEREAS, the Borrowers, the Administrative Agent, each Lender, each Swingline Lender and each L/C Issuer have so agreed on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows:

 

1.Amendments to the Credit Agreement. Subject to the satisfaction of the conditions precedent set forth in Section 2 below, the parties hereto agree as follows:

 

(a)Section 1.01 of the Credit Agreement is hereby amended by adding the following definitions in appropriate alphabetical order:

 

“First Amendment” means Amendment No. 1 to Credit Agreement, dated as of the First Amendment Effective Date, by and among the Parent Borrower, the Opco Borrower, each Lender, each Swingline Lender, each L/C Issuer and the Administrative Agent.

 

“First Amendment Effective Date” means February 15, 2023.

 

(b)Section 2.09(e) of the Credit Agreement is hereby amended by replacing the words “March 30, 2023” with the words “June 30, 2023”; and

 

(c)Section 2.12(b) of the Credit Agreement is hereby amended and restated in its entirety as follows:

 

 

 

 

(b)    The Opco Borrower agrees to pay to the Administrative Agent for the account of each Lender a ticking fee, which shall accrue at a rate per annum based on the following grid on the amount of such Lender’s Commitment during the period from and including the Effective Date to but excluding the earliest of (i) the Closing Date, (ii) the consummation of the Spin-Off and (iii) the date on which the Commitments terminate (such earliest date, the “Ticking Fee Date”). Ticking fees shall (A) be payable on (I) the First Amendment Effective Date, (II) the last day of each Fiscal Quarter ending after the First Amendment Effective Date and prior to the Ticking Fee Date and (III) the Ticking Fee Date, (B) be computed on the basis of a year of 360 days and (C) be payable for the actual number of days elapsed (including the first day but excluding the last day): 

           
Period Rate
Days 0-44 after Effective Date 0.20%
Days 45-89 after Effective Date 0.30%
Days 90-134 after Effective Date 0.40%
Days 135-272 after Effective Date 0.50%

 

(d)Section 2.12 of the Credit Agreement is hereby amended by adding a new clause (e) at the end thereof as follows:

 

(e)    The Opco Borrower agrees to pay to the Administrative Agent, for the account of the Lenders on the Closing Date, upfront fees (the “Closing Date Upfront Fees”) in an amount equal to 0.1022375% of the aggregate principal amount of (i) the Revolving Commitments outstanding on the Closing Date and (ii) the Term Loans funded on the Closing Date (it being understood and agreed that the Closing Date Upfront Fees, together with the First Amendment Upfront Fees (as defined in the First Amendment), shall replace the upfront fees payable pursuant to any fee letter entered into prior to the First Amendment Effective Date in connection with the facilities evidenced by this Agreement).

 

2.Conditions of Effectiveness. The effectiveness of this Amendment is subject to the conditions precedent that:

 

(a)the Administrative Agent shall have received counterparts to this Amendment, duly executed by each Borrower, each Lender, each Swingline Lender, each L/C Issuer and the Administrative Agent; and

 

(b)the Borrowers shall have paid:

 

(i) to the Administrative Agent, upfront fees (the “First Amendment Upfront Fees”), payable for the account of the Lenders on the date hereof, in an amount equal to 0.1022375% of the aggregate principal amount of the Revolving Commitments and the Term Loan Commitments on the date hereof;

 

(ii) to the Administrative Agent, the ticking fees payable on the First Amendment Effective Date for the account of the Lenders pursuant to Section 2.12(b) of the Amended Credit Agreement; and

 

(iii) all other fees due and payable to the Lenders and all of the Administrative Agent’s and its Affiliates’ fees and expenses (including reasonable fees and expenses of counsel for the Administrative Agent to the extent due and payable under Section 9.03 of the Amended Credit Agreement), for which invoices have been presented a reasonable period of time prior to the effectiveness hereof, in each case in connection with this Amendment and the other Loan Documents.

 

2 

 

 

3.Representations and Warranties. Each Loan Party hereby represents and warrants as follows:

 

(a)each of this Amendment and the Amended Credit Agreement constitutes the legal, valid and binding obligation of such Loan Party, enforceable against such Loan Party in accordance with its terms subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally, and subject to the effects of general principles of equity (regardless whether considered in a proceeding in equity or at law); and

 

(b)as of the date hereof, after giving effect to the terms of this Amendment, (i) no Default or Event of Default has occurred and is continuing and (ii) the representations and warranties of such Loan Party set forth in the Amended Credit Agreement are true and correct in all material respects (provided that any representation or warranty that is qualified by materiality or Material Adverse Effect is true and correct in all respects), except to the extent that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects (provided that any representation or warranty that is qualified by materiality or Material Adverse Effect is true and correct in all respects) as of such earlier date.

 

4.Consent and Reaffirmation. Each Loan Party hereby consents to this Amendment and reaffirms the terms and conditions of the Guaranty and each other Loan Document to which it is a party and acknowledges and agrees that each of the Guaranty and each other Loan Document to which it is a party remains in full force and effect and is hereby reaffirmed, ratified and confirmed.

 

5.Reference to and Effect on the Credit Agreement.

 

(a)Upon the effectiveness hereof, each reference to the Credit Agreement in the Credit Agreement or any other Loan Document shall mean and be a reference to the Amended Credit Agreement.

 

(b)Except as amended hereby, each Loan Document and all other documents, instruments and agreements executed and/or delivered in connection therewith shall remain in full force and effect and are hereby ratified and confirmed.

 

(c)Except with respect to the subject matter hereof, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Administrative Agent or the Lenders, nor constitute a waiver of any provision of the Amended Credit Agreement, the Loan Documents or any other documents, instruments and agreements executed and/or delivered in connection therewith.

 

(d)This Amendment is a Loan Document under (and as defined in) the Amended Credit Agreement.

 

6.Governing Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK, EXCLUDING CONFLICT OF LAW PRINCIPLES PROVIDING FOR THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.

 

7.Headings. Section headings used herein are for convenience of reference only, are not part of this Amendment and shall not affect the construction of, or be taken into consideration in interpreting, this Amendment.

 

8.Counterparts. This Amendment may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Amendment. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance of a manually signed paper Amendment which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Amendment converted into another format, for transmission, delivery and/or retention.

 

9.Electronic Execution; Electronic Records; Jurisdiction; Consent to Service of Process; Waiver of Jury Trial. Each of the parties hereto agrees that Sections 9.06, 9.09(c), (d), (e) and (f) and 9.10 of the Amended Credit Agreement are incorporated by reference herein, mutatis mutandis, and shall have the same force and effect with respect to this Amendment as if originally set forth herein.

 

[Signature Pages Follow]

 

3 

 

 

IN WITNESS WHEREOF, this Amendment has been duly executed as of the day and year first above written.

 

ATMUS FILTRATION TECHNOLOGIES INC.,  
as the Parent Borrower  
   
By: /s/ Jack Kienzler  
Name: Jack Kienzler  
Title: CFO – ATMUS Filtration Technologies Inc.  
   
CUMMINS FILTRATION INC,  
as the Opco Borrower  
   
By: /s/ Donald G. Jackson  
Name: Donald G. Jackson  
Title: VP – Treasury & Tax  
   
BANK OF AMERICA, N.A.,  
as Administrative Agent  
   
By: /s/ Angela Larkin  
Name: Angela Larkin  
Title: Vice President  
   
BANK OF AMERICA, N.A.,  
as a Lender, a Swingline Lender and an L/C Issuer  
   
By: /s/ Eric Hill  
Name: Eric Hill  
Title: Director  
   
WELLS FARGO BANK, NATIONAL ASSOCIATION,  
as a Lender, a Swingline Lender and an L/C Issuer  
   
By: /s/ Bryan Girouard  
Name: Bryan Girouard  
Title: Vice President  
   
PNC BANK, NATIONAL ASSOCIATION,  
as a Lender, a Swingline Lender and an L/C Issuer  
   
By: /s/ Eric Estes  
Name: Eric Estes  
Title: Sr. Vice President  
   
JPMORGAN CHASE BANK, N.A.,  
as a Lender  
   
By: /s/ Robert P. Kellas  
Name: Robert P. Kellas  
Title: Executive Director  

 

4 

 

 

ING CAPITAL LLC,  
as a Lender  
   
By: /s/ Michael Kim  
Name: Michael Kim  
Title: Director  
   
By: /s/ Ian J. Nyi  
Name: Ian J. Nyi  
Title: Director  
   
KEYBANK NATIONAL ASSOCIATION,  
as a Lender  
   
By: /s/ Lynnette Ritter  
Name: Lynnette Ritter  
Title: SVP  
   
HSBC BANK USA, NATIONAL ASSOCIATION,  
as a Lender  
   
By: /s/ Matthew McLaurin  
Name: Matthew McLaurin  
Title: Director  
   
U.S. BANK NATIONAL ASSOCIATION,  
as a Lender  
   
By: /s/ Jeffrey S. Johnson  
Name: Jeffrey S. Johnson  
Title: Senior Vice President  

 

5 

 

 

CITY NATIONAL BANK,  
as a Lender  
   
By: /s/ Molly Drennan  
Name: Molly Drennan  
Title: Senior Vice President  
   
GOLDMAN SACHS BANK USA,  
as a Lender  
   
By: /s/ Keshia Leday  
Name: Keshia Leday  
Title: Authorized Signatory  
   
BANK OF CHINA, NEW YORK BRANCH,  
as a Lender  
   
By: /s/ Raymond Qiao  
Name: Raymond Qiao  
Title: Executive Vice President  
   
THE NORTHERN TRUST COMPANY,  
as a Lender  
   
By: /s/ Tim Rohde  
Name: Tim Rohde  
Title: Vice President  

 

Signature Page to Amendment No. 1 to Credit Agreement

Cummins Filtration Inc

 

 

 

Exhibit 21.1

 

Atmus Filtration Technologies Inc.

 

Subsidiaries of the Registrant

 

Entity Name Country or State of Organization
Cummins Filtration International Corporation, Australia Branch Australia
CMI Filtration Belgium BV Belgium
Cummins Filtros Ltda. Brazil
Cummins Filtration (Shanghai) Co. Ltd. China
Shanghai Fleetgaurd Filter Co. Ltd. China
Cummins Filtration Trading (Shanghai) Co. Ltd. China
Fleetguard Colombia Colombia
Cummins Filtration SARL France
Cummins Filtration GmbH Germany
Filtrium Fibertechnologies Pvt. Ltd. India
Fleetguard Filters Pvt. Ltd. India
Fleetguard India Private Limited India
Fleetguard Italy S.r.l. Italy
Cummins Filtration International Japan Japan
CMI Filtration México Comercializadora, S. de R.L. de C.V. Mexico
CMI Filtration México Manufactura, S. de R.L. de C.V. Mexico
Fleetguard Poland sp. z o.o. Poland
Fleetguard Filtration Pte. Ltd.   Singapore
Cummins Filtration International Corporation, South Africa Branch South Africa
Cummins Filtration Ltd. South Korea
Fleetguard UK Limited Merkezi İngiltere İstanbul Merkez Şubesi Turkey
Fleetgaurd UK Limited UK
Cummins Filtration Inc. IN
Cummins Filtration International Corporation IN
Cummins Filtration IP, Inc. DE
Fleetguard USA NewCo LLC DE
Fleetguard US Singapore LLC DE

 

 

 

 

Exhibit 23.1

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

We hereby consent to the use in this Amendment No. 1 to the Registration Statement on Form S-1 of Atmus Filtration Technologies Inc. of our report dated February 21, 2023 relating to the financial statements of Atmus, a business of Cummins Inc., which appears in this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.

 

/s/ PricewaterhouseCoopers LLP

Indianapolis, Indiana

March 31, 2023