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As filed with the Securities and Exchange Commission on February 7, 2020

Registration Statement No. 333-                    

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

CPG Newco LLC

to be converted as described herein to a corporation named

The AZEK Company Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   3089   90-1017663
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

1330 W Fulton Street #350

Chicago, IL 60607

877-275-2935

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Jesse Singh

Chief Executive Officer

CPG Newco LLC

1330 W Fulton Street, #350

Chicago, IL 60607

877-275-2935

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

John L. Savva, Esq.

Rita-Anne O’Neill, Esq.

Sullivan & Cromwell LLP

1870 Embarcadero Road

Palo Alto, CA 94303

650-461-5600

 

Rachel Sheridan, Esq.

Samuel D. Rettew, Esq.

Latham & Watkins LLP
555 Eleventh Street, NW
Suite 1000

Washington, D.C. 20004
202-637-2200

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, as amended, 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, 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 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. (Check one):

 

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 pursuant to Section 7(a)(2)(B) of the Securities Act of 1933.  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of Securities
to be Registered
  Proposed Maximum
Aggregate Offering Price(1)(2)
  Amount of
Registration Fee

Class A Common Stock, par value $0.001 per share

  $100,000,000   $12,980.00

 

 

(1) Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) under the Securities Act of 1933.

(2) Includes the aggregate offering price of additional shares that the underwriters have the option to purchase.

 

 

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 that 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 Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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EXPLANATORY NOTE

CPG Newco LLC, the registrant whose name appears on the cover of this registration statement, is a Delaware limited liability company. Prior to the effectiveness of this registration statement, CPG Newco LLC intends to convert into a Delaware corporation pursuant to a statutory conversion and change its name to The AZEK Company Inc. as described in the section “Corporate Conversion” of the accompanying prospectus. In addition, a special purpose entity, CPG Holdco LLC, which was formed at the time of the acquisition of CPG Newco LLC solely for the purpose of holding membership interests in CPG Newco LLC and that will continue to hold such interests until the Corporate Conversion, will be merged with and into us. In the accompanying prospectus, we refer to all of the transactions related to our conversion to a corporation and the merger described above as the Corporate Conversion. As a result of the Corporate Conversion, the members of CPG Newco LLC will become holders of shares of Class A common stock and Class B common stock of The AZEK Company Inc. Except as disclosed in the prospectus, the Consolidated Financial Statements and selected historical consolidated financial data and other financial information included in this registration statement are those of CPG Newco LLC and its subsidiaries and do not give effect to the Corporate Conversion. Shares of Class A common stock of The AZEK Company Inc. are being offered by the prospectus.


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This information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell, 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 February 7, 2020

PROSPECTUS

 

 

                     Shares

 

 

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Class A Common Stock

 

 

This is the initial public offering of shares of Class A common stock of The AZEK Company Inc. We are offering                      shares of Class A common stock.

Prior to this offering, there has been no public market for our Class A common stock. We anticipate that the initial public offering price for our Class A common stock will be between $                     and $                     per share. We have applied to list our Class A common stock on the New York Stock Exchange under the symbol “AZEK”.

After giving effect to this offering and the Corporate Conversion (as defined in this prospectus), an entity affiliated with Ares Management Corporation, or Ares, will hold                      shares of our Class A common stock, and Ontario Teachers’ Pension Plan Board, or OTPP, will hold                      shares of our Class A common stock. OTPP will hold all of our outstanding Class B common stock. After giving effect to this offering and the Corporate Conversion, Ares and OTPP will hold approximately                     % and                     %, respectively, of our aggregate common stock. Accordingly, we expect to be a “controlled company” as defined in the corporate governance rules of the New York Stock Exchange and will be exempt from certain corporate governance requirements of the rules. We are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements.

Investing in our Class A common stock involves risks. See “Risk Factors” beginning on page 23.

 

     Per Share      Total  

Price to the public

   $                            $                        

Underwriting discounts and commissions

   $        $    

Proceeds, before expenses, to us(1)

   $        $    

 

(1)

See “Underwriting” for additional information regarding underwriting compensation.

We have granted the underwriters a 30-day option to purchase up to                      additional shares at the initial public offering price, less the underwriting discount.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares on or about                     , 2020.

 

 

 

Barclays   BofA Securities     Goldman Sachs & Co. LLC       Jefferies  

 

 

 

Citigroup   Credit Suisse     Deutsche Bank Securities       RBC Capital Markets  

 

 

 

B. Riley FBR    Baird    Stephens Inc.
Stifel    SunTrust Robinson Humphrey    William Blair

 

 

Prospectus dated                     , 2020


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Prospectus

 

     Page  

Prospectus Summary

     1  

Risk Factors

     23  

Special Note Regarding Forward-Looking Statements

     53  

Market and Industry Data

     55  

Use of Proceeds

     56  

Corporate Conversion

     57  

Dividend Policy

     58  

Capitalization

     59  

Dilution

     61  

Selected Consolidated Financial Data

     63  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     68  

Business

     97  

Management

     124  

Executive Compensation

     133  

Certain Relationships and Related Party Transactions

     151  

Principal Stockholders

     154  

Description of Certain Indebtedness

     156  

Description of Capital Stock

     160  

Shares Eligible for Future Sale

     166  

Material U.S. Tax Consequences to Non-U.S. Holders of Common Stock

     169  

Underwriting

     172  

Validity of Class A Common Stock

     180  

Experts

     181  

Where You Can Find Additional Information

     182  

Index to Consolidated Financial Statements

     F-1  

 

 

Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We are offering to sell, and seeking offers to buy, shares of Class A common stock only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of Class A common stock.

You should rely only on the information contained in this prospectus. No dealer, salesperson or other person is authorized to give information that is not contained in this prospectus. This prospectus is not an offer to sell nor is it seeking an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or the possession or distribution of this prospectus in any jurisdiction where action for those purposes is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, this offering of Class A common stock and the distribution of this prospectus outside the United States.

Until                      (25 days 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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PROSPECTUS SUMMARY

The following summary contains selected information about us and about this offering. It does not contain all of the information that is important to you and your investment decision. Before you make an investment decision, you should review this prospectus in its entirety, including matters set forth under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our Consolidated Financial Statements and the related notes included elsewhere in this prospectus. Some of the statements in the following summary constitute forward-looking statements. See “Special Note Regarding Forward-Looking Statements.” Our fiscal year ends on September 30. Any references to fiscal years in this prospectus are to the 12 months ended September 30 of that year and any references to fiscal quarters in this prospectus are to the applicable quarter or quarters within a fiscal year. Certain percentages and other figures provided and used in this prospectus may not add up to 100.0% due to the rounding of individual components. Unless the context otherwise requires, all references in this prospectus to “The AZEK Company,” “AZEK,” “CPG Newco LLC,” the “company,” “we,” “us,” “our” or similar terms refer to CPG Newco LLC and its consolidated subsidiaries, and after the Corporate Conversion, The AZEK Company Inc. and its consolidated subsidiaries.

COMPANY OVERVIEW

We are an industry-leading designer and manufacturer of beautiful, low-maintenance and environmentally sustainable products focused on the highly attractive, fast-growing Outdoor Living market. Homeowners are continuing to invest in their outdoor spaces and are increasingly recognizing the significant advantages of long-lasting products, which are converting demand away from traditional materials, particularly wood. Our products transform those outdoor spaces by combining highly appealing aesthetics with significantly lower maintenance costs compared to traditional materials. Our innovative portfolio of Outdoor Living products, including deck, rail, trim and accessories, inspires consumers to design outdoor spaces tailored to their unique lifestyle needs. We are well known in the industry, and, according to data provided by Principia, we generally hold one of the top two market share positions by revenue in our product categories. In addition to our leading suite of Outdoor Living products, we sell a broad range of highly engineered products that are sold in commercial markets, including partitions, lockers and storage solutions.

One of our core values is to “always do the right thing”. We make decisions according to what is right, not what is the cheapest, fastest or easiest, and we strive to always operate with integrity, transparency and with the customer in mind. In furtherance of that value, we are focused on sustainability across our operations and have adopted strategies to enable us to meet the growing demand for environmentally-friendly products.

Our businesses leverage a shared material technology and U.S.-based manufacturing platform to create products that convert demand from traditional materials to those that are long lasting and low maintenance, fulfilling our brand commitment to deliver products that are “Beautifully Engineered to Last”. Our Residential segment product portfolio is highly complementary and allows us to provide a wide-ranging solutions set to Outdoor Living projects. Our primary consumer brands in our Residential segment, TimberTech and AZEK, are recognized by contractors and consumers for their premium aesthetics, uncompromising quality and performance and for their diversity of style and design options. In our Commercial segment, we manufacture engineered sheet products and high-quality bathroom partitions and lockers. Over our history, we have developed a reputation as a leading innovator in our markets by leveraging our differentiated manufacturing capabilities, material science expertise and product management proficiency to consistently introduce new products into the market. This long-standing commitment to innovation has been critical to our ability to stay at the forefront of evolving industry trends and consumer demands, which in turn has allowed us to become a market leader across our core product categories.



 

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Our focus on new product development, material science and research and development, or R&D, enables us to capitalize on favorable secular growth trends that are accelerating material conversion from traditional materials such as wood, to sustainable, low-maintenance engineered materials, and to expand our markets. We believe our core competency of consistently launching new products into the market, combined with our recent investments in sales, marketing, R&D and manufacturing, will continue to accelerate our growth. Over our 30-year history, we have introduced numerous disruptive products and demonstrated our ability to drive material conversion and extend our portfolio, addressing consumer needs across a wide range of price segments. In fiscal 2015, we introduced our Vintage premium decking collection, and through fiscal 2019, sales for these products, including new colors introduced in fiscal 2018 and variable widths introduced in fiscal 2019, have increased at a compound annual growth rate, or CAGR, of more than 50.0% per year. We have leveraged the strong consumer response to Vintage to expand the platform with the introduction of new designs that address evolving industry trends and consumer demands. Our material science expertise and differentiated R&D capabilities enable us to create award-winning products and back them with some of the industry’s longest warranties, such as the 50-year fade & stain warranty that we offer on our TimberTech AZEK decking product line. Most of our product categories are in the early growth stage of their life cycles, and we anticipate that they will continue to benefit from substantial material conversion over the long term.

We have created an operating platform that is centered around sustainability, one of our core strategic pillars, which extends across our value chain from product design to raw material sourcing and manufacturing, and we increasingly utilize plastic waste, recycled wood and scrap in our products. We have also made significant recent investments in our recycling capabilities, which further enhance the sustainability of our manufacturing operations and reduce our costs. In fiscal 2019, we utilized more than 200 million pounds of recycled materials in our deck boards, and we expect to increase the amount of recycled materials used in our deck boards by over 25% in fiscal 2020. In addition, we believe we have the opportunity to further increase the amount of recycled material used in our products. In fiscal 2019, we opened a new 100,000 square foot recycling facility that utilizes advanced technologies to transform a broad range of plastic waste into raw material used in our products. Today, our TimberTech PRO and EDGE decking lines offer high-quality products made from approximately 80% recycled material. Through our recycling programs, approximately 290 million pounds of waste and scrap were diverted from landfills in fiscal 2019. Furthermore, approximately 98% of scrap generated is re-used, and the majority of our TimberTech, AZEK Exteriors and Versatex products are recyclable at the end of their useful lives.

Within our Residential segment, we sell our products through a national network of more than 4,200 dealers, more than 35 distributors and multiple home improvement retailers providing extensive geographic coverage, enabling us to effectively serve contractors across the United States and Canada. Our geographic breadth, combined with our extensive market knowledge and broad product portfolio, positions us to continue to accelerate our growth within the industry. Our customer-focused sales organization generates pull-through demand for our products by driving increased downstream engagement with consumers and key influencers such as architects, builders and contractors, and by focusing on strengthening our position with dealers and growing our presence in retail. We have been investing in our consumer brands, marketing campaigns and digital tools in order to strengthen our relationships with consumers and key influencers, many of whom serve as advocates of our brands. Within our Commercial segment, we sell our products through a broad distribution network as well as directly to original equipment manufacturers, or OEMs.



 

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Through our Residential and Commercial segments, we deliver market-focused product solutions that drive material conversion. We have experienced strong growth over our history, and over the last several years we have made significant investments in our business to further accelerate our growth and increase our profitability.

 

 

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(1)

For a discussion of Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin, see the Segments Note in the Notes to our Consolidated Financial Statements included elsewhere in this prospectus and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment Results of Operations.”

(2)

10-Year Net Sales CAGR refers to the CAGR for the ten years ended September 30, 2019, on a trailing twelve-month basis. Our growth over this period reflects the contribution to net sales of acquisitions, including the acquisitions of VAST Enterprises and TimberTech in fiscal 2012 and Ultralox and Versatex in fiscal 2018.

(3)

We define Five Year New Product Vitality as the percentage of gross sales in fiscal 2019 derived from products first introduced in fiscal 2019 and the four preceding years, excluding gross sales from Versatex and Ultralox.

In fiscal 2019, our net sales, net loss and Adjusted EBITDA were $794.2 million, $20.2 million and $179.6 million, respectively. We intend to continue developing new products, building the leading consumer brand in Outdoor Living and growing our downstream-focused sales force, and we believe the demand for our products will benefit from continued material conversion and growth of the Outdoor Living market. Adjusted EBITDA is a non-GAAP financial measure used by management as a measure of our core operating results and the effectiveness of our business strategy. For more information on Adjusted EBITDA and for a reconciliation to net income, its most comparable financial measure calculated in accordance with GAAP, see “Selected Consolidated Financial Data—Non-GAAP Financial Measures.”

INDUSTRY OVERVIEW

Our products are widely used across several large, attractive markets, including residential and commercial end markets. We primarily serve the Outdoor Living market, which we define as the market for decks, rail, trim, wood and wood-look siding, porches, pavers, outdoor furniture, outdoor cabinetry and outdoor lighting designed to enhance the utility and improve the aesthetics of outdoor living spaces. We expect the Outdoor Living market will continue to benefit from increased investment as homeowners choose to spend more leisure time outdoors. As more members of the Millennial generation purchase first homes in the United States, we expect the demand for outdoor living spaces will rise, and the appeal of low- to no-maintenance features to gain further momentum. We believe that consumers are increasingly environmentally-conscious in their purchasing behaviors, and that our sustainable manufacturing practices and the high recycled content of our products address evolving consumer preferences.



 

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The primary products that we sell into the Outdoor Living market are composite deck, composite and aluminum rail and PVC trim. Based on data provided by Principia Consulting, LLC, a third-party industry research and consulting firm, or Principia, the total U.S. market sales of these products were $7.2 billion in 2018, grew at a 6.3% CAGR from 2014 to 2018 on a linear foot basis and are expected to grow at a 3.0% CAGR from 2018 to 2022 on a linear foot basis to $8.3 billion in 2022. By material type, based on data provided by Principia, the total U.S. market sales of composite deck, composite and aluminum rail and PVC trim products are expected to grow at a 5.7% CAGR from 2018 to 2022, compared to deck, rail and trim manufactured from wood which are expected to grow at a 2.7% CAGR and to deck, rail and trim manufactured from other materials, such as engineered wood, vinyl and other metals, which are expected to grow at a 1.4% CAGR, in each case measured in terms of linear feet. In addition, based on data provided by The Freedonia Group, Inc., an international market research company, or Freedonia, the total U.S. market sales of wood and wood-look siding, pavers, outdoor furniture and outdoor lighting were $10.9 billion in 2018, and, when combined with the total U.S. market sales of deck, rail and trim, according to Principia, in 2018, totaled $18.1 billion in 2018.

 

 

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Source:

2018 and 2022 projected market sizes based on data provided by Principia.

(1)

Represents total market (all materials). Principia market definition for trim excludes specialty exteriors products, such as tongue and groove profiles, sheets, sills, thresholds and column wraps.

(2)

Decking category includes composite and PVC decking, rail category includes composite and aluminum rail and trim category includes PVC trim.

Based on data provided by Principia, there were approximately 57 million decks in the United States as of 2018, of which approximately 5.0 million were built in 2018, up from approximately 4.0 million in 2014, representing a CAGR of 5.9%. Decking, our single largest product category, represents a significant opportunity for homeowners to extend the total livable space of their home and to design a unique space for relaxation and entertainment. Through our portfolio of Outdoor Living products, we provide a broad range of material and design options to homeowners as they tailor their outdoor living space to their unique lifestyle. In addition, we believe that we have significant opportunities to leverage our material science expertise, brand awareness and channel relationships to expand into additional segments of the Outdoor Living market.

We believe our products offer a compelling value proposition due to their enhanced durability, quality, attractive aesthetics and lower life-cycle costs relative to traditional materials such as wood. For example, we estimate the total lifecycle cost of our new TimberTech EDGE Prime decking, including materials, labor and annual maintenance, is approximately 37% less expensive over its 25-year warranty period than the cost of a comparable pressure treated lumber deck.



 

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Total Deck Project Installation Costs(1) Total Deck Life-Cycle Costs(2)

 

 

 

(1)

These assumptions and estimates are based on AZEK market knowledge and feedback from decking-focused contractors with experience installing TimberTech and wood decking products. Actual costs for any particular installation can vary significantly.

(2)

Total Deck Project Installation Costs represent the total aggregate costs of an initial deck installation for a 16’ x 20’ elevated deck and exclude costs associated with the installation of rail or stairs.

(3)

Total Deck Life-Cycle Costs represent both the aggregate costs of an initial deck installation and the estimated maintenance costs over a 25-year period for a 16’ x 20’ elevated deck excluding potential replacement costs.

(4)

Other costs include substructure installation costs, initial staining and sealing of wood decking materials and the cost of top down fasteners for EDGE Prime and pressure treated lumber and hidden fasteners for ipe and AZEK Vintage.

(5)

Estimated maintenance costs include an assumed annual cleaning of TimberTech products and an assumed maintenance requirement of annual pressure washing and sanding, staining and sealing a pressure treated lumber deck every three years and an ipe deck every two years to maintain aesthetics.

Composite deck (which includes wood composite and PVC decking), rail and trim products have continued to increase market share relative to other materials, due to their superior product qualities. Based on data provided by Principia, between 2014 and 2018, composite deck, composite and aluminum rail and PVC trim products collectively grew at a CAGR of 8.7% as compared to deck, rail and trim manufactured from wood, which grew at a CAGR of 5.9%, in each case measured in terms of linear feet. We believe the market for composite products will continue to increase at an above-market growth rate as it benefits from material conversion. Based on data provided by Principia, wood represented approximately 65% of the total U.S. deck, rail and trim markets based on 2018 linear feet sold. With respect to the individual components of these markets, based on this data, composite deck represented approximately 18% of the decking market, composite and aluminum rail represented approximately 16% of the rail market and PVC trim products represented approximately 11% of the trim market, each in terms of linear feet.



 

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Material Type Penetration By Market (Linear Feet, 2017)(1)

 

(1)

Based on data provided by Principia. Other includes (A) hollow vinyl, plastic lumber and metal for decking, (B) iron, stainless steel, hollow vinyl and other plastic for railing and (C) engineered wood, fiber cement, vinyl, other polymer composite and other for trim.

(2)

Wood for the decking market includes premium hardwoods, cedar and redwood, which accounted for approximately 13% of the total decking market in 2018 according to data provided by Principia.

We believe there is a significant opportunity for further market penetration by composite products as consumer awareness towards sustainable materials increases and advances in material science and manufacturing improve the range of colors and textures available. We offer products that reduce the relative premium between composite and other materials to increase the affordability and further improve the lifetime value advantages of composite products. In addition, we believe our products are well positioned to benefit from growth across economic cycles given their low market penetration and improving cost and value proposition. We believe that we have been, and will continue to be, a driving force behind the growth of low-maintenance products in our markets.

Our engineered deck, trim, rail and accessory products are sold through both one-step and two-step distribution channels. Within our Residential segment, we sell our products to distributors, professional dealers and home improvement retailers, who in turn sell our products to builders, contractors and homeowners. Based on data provided by Principia, the relative industry volumes of composite deck, composite and aluminum rail and PVC trim products sold by distribution channel and by end user channel are as follows:

 

 

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Residential Channel Summary Sales by Manufacturers Residential Channel Summary Sales to End Users

 

(1)

Rail includes composite and aluminum rail.



 

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We are a leader within the professional dealer channel due to our depth across product categories, brand reputation and the superior quality of our products. We estimate that our U.S. decking sales represented approximately 34% of total composite decking sales in 2018 and that our U.S. trim sales represented approximately 36% of total PVC trim sales in 2018, in each case within the professional dealer channel. Based on data provided by Principia, in 2018, the retail channel represented approximately 35% of the total $3.1 billion decking market, and, within that channel, composite decking sales represented approximately $0.3 billion. We estimate approximately half of all composite decking sales through that retail channel were special order products. Although less than 10% of our Residential segment sales were directly through home improvement retailers, we have seen substantial year-over-year growth in special order sales through such retailers, resulting in a CAGR of such gross sales of over 20% between fiscal 2015 and fiscal 2019. We believe we have an opportunity for significant expansion within retail and that this channel represents a key area of potential growth for us in the future. Our Commercial segment sells its products to OEMs and through distribution channels that reach a number of end markets including education, industrial, commercial and marine.

THE AZEK DIFFERENCE

An Industry Leader in the Outdoor Living Market

We are a leader in a number of large and growing segments of the Outdoor Living market and are benefiting from the early stages of material conversion and secular growth trends. Our significant scale, vertically-integrated manufacturing capabilities and extensive material science expertise enable our leadership position. We have leveraged these capabilities to establish a track record of innovation across a broad range of products with superior quality, aesthetics and performance that has been recognized by respected industry sources. In Hanley Wood’s 2019 BUILDER brand use study of U.S. builders, developers and contractors, TimberTech AZEK decking ranked #1 for quality within the deck category, and AZEK trim ranked #1 for quality within the decorative mouldings, trim and columns category. Additionally, our engineered bathroom partitions are a leading product specified by architects, and our Aria partitions won a Product Innovation Award from Architectural Products Magazine in 2018. These strengths, combined with our downstream focus and expanding marketing and digital strategy, have generated strong brand awareness and preference among contractors and consumers.

Serving Large, High-Growth and Resilient Markets That Are Benefitting from Material Conversion

We believe that the Outdoor Living market is benefiting from material conversion from traditional wood materials to low-maintenance, engineered materials. Based on data provided by Principia, wood represented approximately 65% of the total U.S. deck, rail and trim markets as measured by linear feet sold in 2018. Within the decking market specifically, wood represented approximately 80% of the total decking market in 2018, with premium hardwoods, cedar and redwood comprising 13% of the total decking market. We believe these markets present substantial growth opportunities in the coming years and that our leading scale, vertically-integrated manufacturing capabilities and extensive material science expertise position us to capitalize on these highly attractive markets as material conversion continues.

In addition, we believe that the residential repair and remodel market, which is the primary market served by our core products, is significantly more resilient through economic cycles than the home building industry. We estimate that, within our Residential segment, over 85% of our net sales are attributable to repair and remodel activity. Based on data provided by Principia, in 2018, approximately 95% of total decking, 80% of rail and 65% of trim sales were attributable to the residential repair and remodel market. Our markets are also experiencing multiple favorable long-term secular growth trends. For example, within our Residential segment, consumers increasingly spend their leisure time outdoors and demand products that expand the usable living space of their home and enhance their outdoor lifestyle. In addition, according to a 2019 survey by the American Institute of



 

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Architects, outdoor living spaces have ranked as the most popular space amongst residential architects over the past two years and continue to increase in popularity. As a result, we believe our business will continue to benefit from strong material conversion, continued repair and remodel activity and favorable secular trends.

Premium Brands Known for Service, Quality, Aesthetics and a Broad Range of Styles and Designs

We achieved our premium brand reputation through our unwavering commitment to developing innovative new products that combine the latest style and design trends with our differentiated material science expertise and proprietary production technologies. For example, we have launched products that take premium flooring trends, such as wire-brushed and hand-scraped finishes and multiple widths, into the decking market.

In addition, we have deployed significant direct sales and service resources that have helped us develop strong brand awareness and loyalty among dealers, home improvement retailers and contractors. Over the last several years, we have made substantial investments to further enhance and strengthen our brands, including launching a variety of innovative new products with superior aesthetics, initiating cutting edge marketing campaigns, expanding our digital footprint and capabilities and unveiling a new set of tools focused on enhancing the consumer experience. We are well known in the industry, and we are generally one of the top two recognized brands in our product categories.

Committed to Sustainably Produced, Long-Lasting, Beautiful Products

Our commitment to sustainability permeates our operations, and our products divert waste from landfills and reduce deforestation. Approximately 90% of our gross sales are attributable to products that are manufactured through an extrusion process, and approximately 44% of all of our extruded materials were manufactured from recycled materials in fiscal 2019. We expect this percentage to increase to approximately 54% in fiscal 2020, and we believe there is an opportunity to increase this percentage in the future. Additionally, our operations are designed with sustainability in mind, with our facilities in Wilmington, OH and Scranton, PA employing closed-loop water filtration systems that recycle approximately 96% of water used annually and our polyethylene recycling facility utilizing energy-efficient systems for power, water, heating, cooling and lighting. Further, our products are designed to retain their aesthetic and structural qualities throughout their lifetimes, and the majority of our products are recyclable at the end of their useful lives. The increasing use of recycled content in our products also leads to improvements in our operating margins, as the flexibility of material input sourcing lowers input costs and reduces reliance on virgin raw materials.

Highly Versatile, U.S.-based Manufacturing Platform with Differentiated Capabilities

We are a vertically-integrated manufacturer, delivering superior quality products with a competitive cost position. Our versatile, process-oriented manufacturing operations are built on a foundation of extensive material development and processing capabilities. Our proprietary production technologies, material blending proficiency and range of extrusion methods enable innovation and facilitate expansion into new markets. We have deep experience working with multiple technologies that enable us to provide some of the industry’s most attractive visuals through advanced streaking and multi-color technologies. Our manufacturing footprint has been consolidated into six facilities over four geographic locations totaling over 1.6 million square feet, and we have made significant investments in people, processes and systems to increase our manufacturing scale and productivity. We continue to invest in expanding our vertical manufacturing capabilities, including recent investments in our new 100,000 square foot polyethylene recycling facility, which enables further use of recycled content in our product offering and further reduces our reliance on higher-cost alternatives. In 2017, we introduced our AZEK Integrated Management System, or AIMS, to manage and monitor operations, and in 2018, we implemented Lean Six Sigma, or LSS, tools and techniques at our manufacturing facilities to reduce material waste and improve manufacturing efficiency. We believe these initiatives create an opportunity for continued expansion of our margins.



 

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Leader in Product Development and Innovation with a Robust New Product Pipeline

Over the past 30 years, we have built an R&D organization with significant expertise in material science and production process technologies. We leverage our R&D and manufacturing capabilities to deliver innovative new products to market that address evolving customer needs while expanding our use of recycled materials. Our product managers and marketing team actively analyze proprietary consumer research and work with architects, contractors and consumers to identify and develop new products that incorporate consumer feedback, expand our portfolio and extend the range of style and design options we offer. Our R&D team then designs, prototypes and tests these new products prior to full scale production. Our rigorous R&D process incorporates in-house analytical capabilities and comprehensive product testing with more than 260 distinct tests, such as accelerated weathering. During the four years ended September 30, 2019, our team successfully led over 20 significant new product introductions, and, for the twelve-month period ended September 30, 2019, our Five Year New Product Vitality for our Residential segment was approximately 51%. We expect to continue to maintain a robust pipeline of new products and technologies that we intend to launch over the next several years, which we believe will help us continue to maintain our leadership in product innovation and drive strong product vitality.

Extensive Network of Contractors, Dealers and Distributors

Throughout our history, we have developed an extensive network in the United States and Canada of loyal contractors, dealers and distributors, many of whom are brand advocates for our products. Our extensive network consists of more than 4,200 dealers, over 130 distributor branch locations and thousands of contractors throughout the United States and Canada. We believe our strong relationships with dealers and contractors are driven by the trust and reliability that we have generated through product innovation, superior quality and performance, and the continuing service and support that we offer. Such support includes specialized training opportunities such as AZEK University and sales support initiatives such as digital lead generation, joint marketing funds, new sample kits, display kiosks, enhanced product literature, print, TV and radio advertising and social media initiatives. AZEK University provides hands-on training for contractors and customers using TimberTech and AZEK Exteriors products and our AZEK Pro Rewards program leverages our new website and digital capabilities to share curated digital leads with our contractors. In our Commercial segment, we sell our highly engineered polymer sheeting products through a network of approximately 130 engineered product distributors across the United States, Canada and Latin America, who sell primarily to OEMs, and we sell our low-maintenance bathroom partitions, shower and dressing stalls, lockers and other storage solutions through a network of approximately 900 dealers who sell to institutional and commercial customers across the United States and in Canada.

Strong Margin Profile with Significant Opportunity for Expansion

Our business has a strong margin profile driven by our differentiated premium branded products, vertically-integrated U.S.-based manufacturing capabilities and strong customer relationships. We continue to invest in new innovations in current and adjacent markets that we believe will support our long-term growth. Our Residential segment generated Segment Adjusted EBITDA Margin of 28.8% in the year ended September 30, 2019, and we are well positioned to continue to execute on our operational excellence initiatives, including recycling and continuous manufacturing efficiency improvement. We have made significant recent capital investments, and as these investments mature, we believe there is a significant opportunity for us to expand our margins.

Proven Management Team Focused on Execution

We have assembled a diverse team of highly experienced and accomplished executives with public company experience, a proven track record of leading global consumer and industrial organizations and driving profitable growth, product innovation, cost reduction and manufacturing efficiency. In the past two years, under



 

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our management team’s leadership, our Adjusted Gross Profit as a percentage of net sales increased by approximately 400 basis points while we continue to enjoy strong top line growth. Our Chief Executive Officer, Jesse Singh, joined our team in 2016, after serving in numerous leadership roles at 3M, including Chief Commercial Officer, President of 3M’s Health Information Systems business and VP of the Stationery and Office supplies business, which included the iconic Post-it and Scotch Brands. Our Chief Financial Officer, Ralph Nicoletti, joined our team in 2019 after serving as Executive Vice President and Chief Financial Officer of Newell Brands and has more than 35 years of finance experience. Collectively, our team is approximately 50% gender and ethnically diverse and has extensive experience at leading companies, including 3M, Newell Brands, Owens Corning, Eaton, Armstrong, Grainger and Emerson. Our management team has executed key strategic initiatives across the platform to drive accelerated growth and profitability, including upgrading operational capabilities, implementing productivity tools, and investing in new products, sales force expansion, marketing, M&A and internal recycling capabilities.

OUR GROWTH STRATEGY

We believe our multi-faceted growth strategy positions us to drive profitable above-market growth in the markets we serve.

Introduce Innovative New Products That Expand Our Markets

We have a proven track record of developing innovative new products across multiple price points that accelerate material conversion, increase the use of recycled materials and expand our markets. Our strong manufacturing capabilities, proprietary production technologies, detailed consumer research and extensive material science expertise allow us to rapidly introduce differentiated products. In our Residential segment, our new products are driving conversion away from traditional wood materials across all pricing segments, from various forms of pressure treated wood at the entry level to more exotic woods such as cedar and ipe at the premium level. In 2019, our Residential segment launched three new product platforms: TimberTech EDGE, Multi-Width decking and PaintPro trim. We believe that TimberTech EDGE will accelerate conversion of low-cost traditional pressure treated wood materials by offering superior aesthetics and performance at an accessible price point. Our entry-level decking category volume, which includes our TimberTech PRO Terrain collection in addition to our TimberTech EDGE Prime and Premier collections, increased over 35% on a linear foot basis in fiscal 2019 as compared to the prior year. Multi-Width decking, which extends the technological advancements available in our highly successful Vintage platform, expands the range of style and design options available to consumers seeking premium decking solutions and provides a unique combination of superior performance and a natural wood-look and feel. Our premium Vintage collection volume increased approximately 50% on a linear foot basis in fiscal 2019 as compared to the prior year. PaintPro expands the addressable market for our trim products and accelerates wood conversion by delivering the same high-quality, low-maintenance performance of traditional white PVC trim across a full spectrum of paintable colors. Each year, we continue to launch new products across our business, and as of the year ended September 30, 2019, our blended Five Year New Product Vitality across our Residential segment and Commercial segment was approximately 45%.

In 2020, we are expanding on these product innovations in our Residential segment and launching a new multi-color TimberTech EDGE Prime+ decking collection, a new Wide-Width profile for the TimberTech AZEK Harvest decking collection and the new, multi-tonal Reserve collection under the TimberTech PRO decking line, among others. In addition, we are implementing a multi-year, $100 million capital investment program to increase capacity and further support our future growth. We will continue to leverage our material technology capabilities and commission detailed consumer research to regularly introduce new products that set us apart from our competition and accelerate future growth.



 

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Accelerate Market Conversion by Capitalizing on Downstream Investments

We view the continued growth in homeowner outdoor investment and repair and remodel activity as a powerful secular trend driving material conversion across our industry. We believe low-maintenance alternatives at a range of premium quality designs and accessible pricing will continue to increase consumer demand and accelerate material conversion.

Over the three years ended September 30, 2019, we have increased our R&D, sales and marketing expenses by over 40% in the aggregate, and we are continuing to make additional investments during fiscal 2020 that we believe will accelerate material conversion and growth in our markets. We expanded our marketing organization and sales force with new talent, enabling us to generate greater awareness of our products and enhance our sales growth in underpenetrated markets and geographies. We invested in new premium and traditional merchandising displays for our dealers and special order merchandising and training for pro desk support associates for our home improvement retailers to increase consumer awareness of our products and to accelerate sales growth. Starting in 2018, we have added new trim and retail focused sales teams and have also established a dedicated sales team to enhance our dealer sales in underpenetrated geographies. We believe these initiatives are helping to accelerate our growth. For example, we believe our new trim-focused sales team has helped increase our AZEK Exteriors trim net sales by more than 15% in fiscal 2019 as compared to the prior year. In addition to expanding our sales force, we realigned the compensation framework for our sales teams to increase downstream engagement with consumers and key influencers such as architects, builders and contractors, to drive increased pull-through demand for our products. We recently opened our third AZEK University location in Chicago, and we are hosting regular contractor training events to encourage contractors to use our products. We believe we can continue to leverage our downstream investments to accelerate material conversion in our markets, strengthen our position in the pro channel and enhance our retail presence.

Build the Leading Consumer Brand in Outdoor Living

We are well-known for quality, innovation and delivering a broad range of on-trend style and design options to customers. We have made significant investments in sales and marketing and R&D over the past two years to differentiate and strengthen our brands and to simplify and transform the consumer experience for purchasing our products. In 2019, we unified our decking and railing product portfolio under our leading TimberTech brand with a differentiated “Go Against the Grain” marketing campaign. We continue to invest in our marketing organization and alongside our channel partners to increase consumer awareness and preference for our products. Our focused digital strategy, enhanced media presence and differentiated marketing campaigns drive increased engagement with consumers and homeowners as well as key influencers such as architects, builders and contractors. Our new digital platform facilitates the consumer journey from inspiration and design through installation. The experience educates consumers on the features and benefits of our products versus traditional materials, utilizes digital visualization tools to allow consumers to re-imagine their outdoor living spaces and directly connects them to a pre-qualified local contractor. During fiscal 2019, website traffic to our outdoor living branded websites increased by approximately 45% and sample orders for our decking products have increased at a double-digit rate, in each case when compared to the prior year. We enjoy strong preference for our products among contractors, who typically purchase our products at dealers, and we are investing to increase our presence within home improvement retailers as the majority of consumers include visits to home improvement retailers in their research of deck products. These consumer engagement strategies are focused on creating additional pull-through demand and accelerating our growth.

Expand Margins Through Enhanced Recycling Capabilities and Productivity Initiatives

Our broad range of U.S.-based manufacturing capabilities, proprietary production technologies and extensive material science expertise position us as a leading innovator in the Outdoor Living market, and our



 

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brands command premium prices and afford us a strong margin profile. However, we believe there is an opportunity for significant improvement in our margins as we continue to invest in and expand our recycling capabilities and focus on operational excellence. Since fiscal 2017, we have invested over $28 million in developing our recycling capabilities to substantially reduce our material cost, divert waste from landfills and increase our utilization of recycled materials. For example, in fiscal 2019, we increased the recycled material content used in the core of our deck boards by approximately 20%, as compared to the recycled material content in fiscal 2018. Increasing the recycled material content in our deck boards has allowed us to substantially reduce the utilization of virgin HDPE in the production of the core of our TimberTech PRO and EDGE products, representing approximately $9 million in cost savings on an annualized basis when compared to legacy material content formulations. We are still in the early stages of material substitution across our manufacturing network and realizing the benefits of our investments in recycling, and we expect to drive additional cost savings as we ramp up internal processing of recycled materials used in the manufacturing of our products.

In addition to enhancing our recycling capabilities, we have also implemented various LSS initiatives across our manufacturing operations to reduce waste and enhance productivity. We utilize a systematic approach, AIMS, to drive continuous improvement throughout our organization. In fiscal 2019, we realized approximately $11 million of cost savings related to net manufacturing productivity improvements. We define net manufacturing productivity as the year-over-year change in net manufacturing expenses required to achieve a given level of manufacturing output, assuming constant raw material and other manufacturing input prices and excluding the effect of freight expense, warranty expense and unusual items. We identified and have begun to implement additional projects that we expect will provide incremental net manufacturing productivity in the coming years. We believe AIMS, our investments in people, processes and equipment and our investments in recycling, productivity and operational excellence will enable us to expand our margins through reduced material cost, improved net manufacturing productivity and enhanced business operations.

Execute Strategic Acquisitions That Broaden Our Platform

Our markets are large and highly fragmented, and they provide a wide range of opportunities for us to execute acquisitions to augment our growth independent of end-market demand. We have completed several strategic acquisitions since our company was founded, and we have proven to be a highly effective consolidation platform. For example, the acquisition of Versatex strengthened our position in the exterior trim and moulding market, enhanced our product capabilities and generated attractive cost savings, and the acquisition of Ultralox extended our rail portfolio to include aluminum solutions with proprietary interlocking technology and expanded our ability to address the high-growth aluminum railing market.

We intend to continue to execute strategic acquisitions and utilize our disciplined process to identify, evaluate, execute and integrate acquired businesses. We actively monitor a pipeline of attractive consolidation opportunities across multiple product categories and geographies. We target opportunities that enhance our market positions, expand our portfolio of products and technology capabilities and increase our business diversity. In addition, the acquisitions we pursue must also provide opportunities for us to leverage our strong U.S.-based manufacturing capabilities, material formulation proficiency and extensive dealer and distributor network to meaningfully enhance their scale, growth, profitability and cash flow.



 

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Risk Factors

Investing in our Class A common stock involves risks, which are discussed more fully under “Risk Factors.” You should carefully consider all the information in this prospectus, including under “Risk Factors,” before making an investment decision. These risks include, but are not limited to, the following:

 

   

demand for our products is significantly influenced by general economic conditions and trends in consumer spending on outdoor living and home exteriors, and adverse trends in, among other things, the health of the economy, repair and remodel and new construction activity, industrial production and institutional funding constraints;

 

   

we compete against other manufacturers of (i) engineered and composite products; and (ii) products made from wood, metal and other traditional materials;

 

   

the seasonal nature of certain of our products and the impact that changes in weather conditions and product mix may have on our sales;

 

   

our ability to develop new and improved products and effectively manage the introduction of new products;

 

   

our ability to effectively manage changes in our manufacturing process resulting from cost savings and integration initiatives and the introduction of new products;

 

   

risks related to our ability to accurately predict demand for our products and risks related to our ability to maintain our relationships with key distributors or other customers;

 

   

risks related to shortages in supply, price increases or deviations in the quality of raw materials;

 

   

our ability to retain management;

 

   

risks related to acquisitions or joint ventures we may pursue;

 

   

our ability to maintain product quality and product performance at an acceptable cost, and potential exposures resulting from our product warranties;

 

   

our ability to ensure that our products comply with local building codes and ordinances;

 

   

risks arising from the material weaknesses we have identified in our internal control over financial reporting and any failure to remediate these material weaknesses;

 

   

our ability to maintain an effective system of internal controls and produce timely and accurate financial statements or comply with applicable regulations;

 

   

our ability to protect our intellectual property rights;

 

   

the increased expenses associated with being a public company;

 

   

risks associated with our substantial indebtedness and debt service;

 

   

our reliance on dividends, distributions and other payments from our subsidiaries to meet our obligations;

 

   

the continuing control after this offering of our company, including the right to designate individuals to be included in the slate of nominees for election to our board of directors, by our Sponsors, whose interests may conflict with our interests and those of other stockholders;

 

   

our status as a “controlled company” within the meaning of the NYSE rules, and our exemption from certain corporate governance requirements; and

 

   

certain provisions in our certificate of incorporation and our bylaws that may delay or prevent a change of control.



 

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Implications of Being an Emerging Growth Company

We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of relief from certain reporting requirements and other burdens that are otherwise applicable generally to public companies. These provisions include:

 

   

reduced obligations with respect to financial data, including presenting only two years of audited financial statements and only two years of selected financial data;

 

   

an exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;

 

   

reduced disclosure about our executive compensation arrangements in our periodic reports, proxy statements, and registration statements; and

 

   

exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements.

In addition, under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards, and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period, which may make comparison of our financial statements with those of other public companies more difficult. We may take advantage of these reporting exemptions until we no longer qualify as an emerging growth company, or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; and (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC. We may choose to take advantage of some but not all of these reduced reporting burdens.

Our Sponsors

Prior to this offering, Ares and OTPP, and, together with Ares, the Sponsors, indirectly owned substantially all of our limited liability company interests. Following the Corporate Conversion, each of the Sponsors will receive a number of shares of our common stock in direct proportion to their respective interests in AOT Building Products, L.P., our indirect parent, or the Partnership. In order to ensure compliance with the requirements of certain provisions of the Pension Benefits Act (Ontario) applicable to OTPP, pursuant to which OTPP is restricted from investing monies of the Ontario Teachers’ Pension Plan, directly or indirectly, in securities of a corporation to which are attached more than 30% of the votes that may be cast for the election of directors of the corporation, OTPP will hold a number of shares of our Class A common stock representing 30% or less of the total number of shares of Class A common stock outstanding. The remaining shares of common stock to be received by OTPP following the Corporation Conversion will be shares of our Class B common stock. The relative economic interests of Ares and OTPP will not be altered as a result of the Corporate Conversion or our dual-class common stock structure. After giving effect to this offering and the Corporate Conversion, Ares and OTPP will hold                      and                      shares of our Class A common stock, respectively. OTPP will hold all of our Class B common stock. After giving effect to this offering and the Corporate Conversion, Ares and OTPP will hold approximately                      % and                      %, respectively, of our aggregate common stock.



 

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Our Sponsors will have significant power to control our affairs and policies, including with respect to the election of directors (and through the election of directors, the appointment of management). For a description of certain potential conflicts between the Sponsors and our other stockholders, see “Risk Factors—We continue to be controlled by the Sponsors, and the Sponsors’ interests may conflict with our interests and the interests of other stockholders.” For a description of the Sponsors’ ownership interests in us and their rights with respect to such ownership interests, including the right to designate individuals to be included in the slate of nominees for election to our board of directors, see “Certain Relationships and Related Party Transactions,” “Principal Stockholders” and “Description of Capital Stock.”

Corporate Conversion

We currently operate as a Delaware limited liability company under the name CPG Newco LLC. CPG Newco LLC is a holding company which holds all of the limited liability company interests in CPG International LLC, the entity which directly and indirectly holds all of the equity interests in our operating subsidiaries. Prior to the effectiveness of the registration statement of which this prospectus forms a part, CPG Newco LLC will convert into a Delaware corporation pursuant to a statutory conversion and will change its name to The AZEK Company Inc. In addition, a special purpose entity, CPG Holdco LLC, which was formed at the time of the acquisition of CPG Newco LLC solely for the purpose of holding membership interests in CPG Newco LLC and that will continue to hold such interests until the Corporate Conversion, will be merged with and into us. In this prospectus, we refer to all of the transactions related to our conversion into a corporation and the merger described above as the Corporate Conversion. For more information, see “Corporate Structure” and “Corporate Conversion.”



 

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Corporate Structure

The following diagram sets forth a simplified view of our corporate structure and our principal indebtedness as of December 31, 2019 after the consummation of the Corporate Conversion and the consummation of this offering and giving effect to the use of proceeds therefrom, including the redemption of our 8.000% senior notes due 2021, or the Senior Notes, with such proceeds; for more information, see “Description of Certain Indebtedness.” This chart is for illustrative purposes only and does not represent all legal entities affiliated with, or all obligations of, the entities depicted. Our indirect subsidiaries are omitted.

 

 

LOGO

 

 

 

(1)

Prior to the Corporate Conversion, AZEK was named CPG Newco LLC.

(2)

Amounts reflect amounts outstanding as of December 31, 2019 under the Term Loan Credit Agreement and the Revolving Credit Agreement. The Revolving Credit Agreement provides for commitments, as of December 31, 2019, of up to $150.0 million, subject to our option to increase the commitments by up to $100.0 million, subject to certain conditions.

(3)

The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. See “Description of Capital Stock.”

Corporate Information

CPG Newco LLC (formerly known as AOT Building Products Newco LLC) was formed on August 15, 2013 in connection with the Sponsors’ acquisition of CPG International LLC. Upon completion of this offering, we will be a Delaware corporation, and we will change our name to The AZEK Company Inc. Our principal executive offices are located at 1330 W Fulton Street, Suite 350, Chicago, Illinois 60607, and our telephone number is 877-275-2935. Our website address is www.AzekCo.com. Information contained on, or that can be accessed through, our website is not part of and is not incorporated by reference into this prospectus, and you should not consider information on our website to be part of this prospectus.



 

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“The AZEK Company,” “AZEK,” “TimberTech,” “TimberTech EDGE,” “TimberTech PRO,” “TimberTech AZEK,” “PaintPro,” “Harvest Collection,” “Arbor Collection,” “Vintage Collection,” “ULTRALOX,” “VERSATEX,” “Vycom,” “Impression Rail Express,” “Scranton Products,” the AZEK logo, the TimberTech logo, the ULTRALOX logo, the VERSATEX Logo, the Vycom logo, the Scranton Products logo and other trademarks or service marks of The AZEK Company and its direct and indirect subsidiaries appearing in this prospectus are the property of The AZEK Company. This prospectus contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus generally appear without the ® or symbols.



 

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The Offering

 

Class A common stock offered by us

                     shares

 

Class A common stock to be outstanding after this offering

                     shares

 

Class B common stock to be outstanding after this offering

                     shares

 

Total Class A common stock and Class B common stock to be outstanding after this offering

                     shares

 

Option to purchase additional shares of Class A common stock offered by us

                     shares

 

Use of proceeds

We estimate that we will receive net proceeds from this offering of approximately $                     million (or approximately $                     million if the underwriters exercise their option to purchase additional shares of Class A common stock from us in full), based on an assumed initial public offering price of $                     per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, and after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us.

 

  We intend to use net proceeds received by us from this offering to redeem the Senior Notes, plus accrued and unpaid interest thereon. As of December 31, 2019, $315.0 million of aggregate principal amount of Senior Notes was outstanding.

 

  We will use any additional net proceeds raised in this offering for general corporate purposes, including working capital, operating expenses and capital expenditures. We may also use a portion of any additional net proceeds we receive from this offering for acquisitions or other strategic investments, although we do not currently have any specific plans to do so. See “Use of Proceeds.”

 

Voting and conversion rights

Following this offering, we will have two classes of common stock: Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion.

 

 

Each share of our Class A common stock entitles its holder to one vote per share on all matters to be voted upon by the stockholders. Each share of our Class B common stock entitles its holder to one vote per share on all matters to be voted upon by stockholders, except with respect to the election, removal or replacement of directors. Shares of our Class B common stock will not entitle the holders thereof to vote with respect to the election, removal or replacement of directors. Holders of Class A common stock and Class B common



 

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stock will generally vote together as a single class on all matters other than with respect to the election, removal or replacement of directors.

 

  Holders of our shares of Class B common stock may convert their shares of Class B common stock into shares of our Class A common stock on a one-for-one basis, in whole or in part, at any time and from time to time at their option. Additionally, each share of Class A common stock is convertible into one share of Class B common stock at any time and from time to time at the option of the holder so long as such holder holds one or more shares of Class B common stock at the time of conversion. OTPP will hold all shares of our Class B common stock outstanding immediately following this offering. See “Description of Capital Stock.”

 

Dividend policy

We currently do not anticipate paying any cash dividends after this offering and for the foreseeable future. Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including restrictions in our current and future debt instruments, our future earnings, capital requirements, financial condition, future prospects, and applicable Delaware law, which provides that dividends are only payable out of surplus or current net profits. See “Dividend Policy.”

 

Risk factors

See “Risk Factors” and the other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our Class A common stock.

 

Controlled company

Following this offering, affiliates of the Sponsors will continue to control a majority of the voting power of our outstanding voting stock, and as a result we will be a controlled company within the meaning of the NYSE corporate governance standards.

 

Proposed NYSE symbol

“AZEK ”

The numbers of shares of Class A common stock and Class B common stock that will be outstanding following this offering do not include                      shares of Class A common stock reserved for future issuance under our Equity Incentive Plan, as well as any future increases, including annual automatic increases, in the number of shares of Class A common stock reserved for issuance thereunder. See “Executive Compensation—Treatment of Awards on IPO; Post-IPO Compensation Programs.”

All references to common stock that are not qualified by reference to a particular class refer to our Class A common stock and our Class B common stock collectively.

In addition, unless otherwise expressly stated or the context otherwise requires, the information in this prospectus assumes:

 

   

the completion of the Corporate Conversion;

 

   

no exercise of the underwriters’ option to purchase                      additional shares of our common stock; and

 

   

the effectiveness of our certificate of incorporation and bylaws in connection with the completion of this offering.



 

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Summary Consolidated Financial Data

The summary consolidated statements of income data and summary consolidated statements of cash flow data for fiscal years 2019 and 2018 and the consolidated balance sheet data as of September 30, 2019 have been derived from our Consolidated Financial Statements included elsewhere in this prospectus. The summary consolidated statement of income data and summary consolidated statement of cash flow data for fiscal year 2017 have been derived from our Consolidated Financial Statements not included in this prospectus. The summary consolidated statements of income data and summary consolidated statements of cash flow data for the three months ended December 31, 2019 and 2018 and the summary consolidated balance sheet data as of December 31, 2019 have been derived from our unaudited Consolidated Financial Statements included elsewhere in this prospectus. In the opinion of management, our unaudited Consolidated Financial Statements were prepared on the same basis as our audited Consolidated Financial Statements and include all adjustments necessary for a fair presentation of the financial information set forth in those statements.

Our historical results are not necessarily indicative of future operating results and our results for the three months ended December 31, 2019 are not necessarily indicative of the results that may be expected for the full fiscal year or any other period. Because this table is a summary and does not provide all of the data contained in our Consolidated Financial Statements, it should be read together with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Capitalization” and our Consolidated Financial Statements and related notes included elsewhere in this prospectus.

 

     Three Months ended
December 31,
    Years Ended September 30,  
(In thousands, except unit/share and per unit/share data)    2019     2018     2019     2018     2017  

Consolidated Statements of Income Data:

          

Net Sales

   $ 166,043     $ 137,431     $ 794,203     $ 681,805     $ 632,631  

Cost of Sales

     (114,752     (96,525     (541,006     (479,769     (463,643
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     51,291       40,906       253,197       202,036       168,988  

Selling, general and administrative expenses

     (43,473     (42,467     (183,572     (144,688     (147,003

Impairment of goodwill

     —         —         —         —         (32,200

Impairment of property, plant and equipment

     —         —         —         —         (11,380

Other general expenses

     (1,978     (1,810     (9,076     (4,182     —    

Gain (loss) on disposal of property, plant and equipment

     73       (1,247     (1,495     (791     (4,288
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     5,913       (4,618     59,054       52,375       (25,883

Interest expense

     (19,759     (20,490     (83,205     (68,742     (61,577

Loss before income taxes

     (13,846     (25,108     (24,151     (16,367     (87,460

Income tax benefit

     4,000       5,837       3,955       23,112       20,049  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (9,846   $ (19,271   $ (20,196   $ 6,745     $ (67,411
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted earnings (loss) per unit attributable to the member

   $ (9,846   $ (19,271   $ (20,196   $ 6,745     $ (67,411
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted weighted-average units outstanding

     1       1       1       1       1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted pro forma earnings (loss) per share attributable to common stockholders(1)

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted pro forma weighted-average common shares outstanding(1)

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


 

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     Three Months ended
December 31,
    Years Ended September 30,  
(In thousands, except unit/share and per unit/share data)    2019     2018     2019     2018     2017  

Consolidated Statements of Cash Flow Data:

          

Net cash provided by (used in) operating activities

   $ (56,361   $ (50,438   $ 94,872     $ 67,302     $ 57,368  

Net cash provided by (used in) investing activities

     (19,018     (12,943     (62,935     (335,682     (22,511

Net cash provided by (used in) financing activities

     (8,100     (3,065     (8,273     248,742       (12,104

Purchases of property, plant and equipment

     (19,131     (12,943     (63,006     (42,758     (22,511

Other Financial Data:

          

Adjusted Gross Profit(2)

   $ 66,442     $ 54,558     $ 314,858     $ 254,075     $ 224,516  

Adjusted Net Income(3)

     11,604       5,264       72,277       59,226       42,812  

Adjusted EBITDA(4)

     33,806       27,375       179,566       150,065       131,266  

Adjusted EBITDA Margin(5)

     20.4     19.9     22.6     22.0     20.7

 

(1)

Pro forma to reflect the Corporate Conversion, without giving effect to the issuance of shares of Class A common stock in this offering.

(2)

We define Adjusted Gross Profit as gross profit before depreciation and amortization, business transformation costs and acquisition costs. See “Selected Consolidated Financial Data—Non-GAAP Financial Measures.”

(3)

We define Adjusted Net Income as net income (loss) before depreciation and amortization, share-based compensation costs, asset impairment costs, business transformation costs, acquisition costs, initial public offering costs, capital structure transaction costs and certain other costs. In addition, Adjusted Net Income for fiscal 2018 excludes the net benefit related to the remeasurement of our deferred tax assets and deferred tax liabilities as a result of the Tax Act. See “Selected Consolidated Financial Data—Non-GAAP Financial Measures.”

(4)

We define Adjusted EBITDA as net income (loss) before interest expense, net, income tax (benefit) expense and depreciation and amortization and by adding to or subtracting therefrom certain items of expense and income. See “Selected Consolidated Financial Data—Non-GAAP Financial Measures.”

(5)

Adjusted EBITDA Margin is equal to Adjusted EBITDA divided by net sales. See “Selected Consolidated Financial Data—Non-GAAP Financial Measures.”

 

     2015-2019
CAGR
    Years ended
September 30,
 
    2019     2018     2017  

Net Sales Growth:

        

Residential Segment

     12.3     20.9     7.9     7.2

Deck, Rail and Accessories

     11.2     9.4     7.6     8.3

Exteriors

     15.1     60.3     9.1     3.4

Commercial Segment

     1.4     -0.8     7.1     -0.8

 

     As of December 31, 2019  
     Actual      As adjusted(1)(2)  
(In thousands)              

Consolidated Balance Sheet Data:

     

Cash and cash equivalents

   $ 22,468     

Working capital(3)

     140,973     

Total assets

     1,729,291     

Total current liabilities

     96,322     

Total long-term debt – less current portion

     1,102,144     

Total member’s/stockholders’ equity

     479,996     


 

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(1)

As adjusted consolidated balance sheet data additionally gives effect to (i) the sale of             shares of our Class A common stock in this offering, assuming an initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us and (ii) the application of the estimated net proceeds from this offering as described under “Use of Proceeds.”

(2)

A $1.00 increase (decrease) in the assumed initial public offering price of $             per share of Class A common stock (the midpoint of the estimated price range set forth on the cover page of this prospectus) would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders’ equity by $             million and would decrease (increase) total long-term debt—less current portion by $             million, assuming that the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million             shares in the number of shares of Class A common stock offered by us would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders’ equity by $             million and would decrease (increase) total long-term debt—less current portion by $             million, assuming the assumed initial public offering price of $             per share remains the same, and after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us.

(3)

Working capital represents current assets less current liabilities.



 

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RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the following risks and uncertainties, together with all of the other information contained in this prospectus, including our Consolidated Financial Statements and related notes included elsewhere in this prospectus, before making an investment decision. The occurrence of any of the following risks, or additional risks not presently known to us or that we currently believe to be immaterial, could materially and adversely affect our business, financial condition, results of operations and prospects. In such case, the trading price of our Class A common stock could decline, and you may lose all or part of your investment.

Risks Relating to Our Business and Industry

Demand for our products is significantly influenced by general economic conditions and trends in consumer spending on outdoor living and home exteriors, and adverse trends in, among other things, the health of the economy, repair and remodel and new construction activity, industrial production, consumer confidence and discretionary spending and institutional funding constraints could have a material adverse effect on our business.

Demand for our products is significantly influenced by a number of economic factors affecting our customers, including distributors, dealers, contractors, architects, builders, homeowners and institutional and commercial consumers. Demand for our products depends on the level of residential and commercial improvement and renovation and new construction activity, and, in particular, the amount of spending on outdoor living spaces and home exteriors. Home and commercial renovation and improvement and new construction activity are affected by, among other things, interest rates, consumer confidence and spending habits, demographic trends, housing affordability levels, unemployment rates, institutional funding constraints, industrial production levels, tariffs and general economic conditions.

For example, in our Residential segment, sales of our products depend primarily on the level of repair and remodel activity and, to a lesser extent, new construction activity. Accordingly, increases in interest rates or the reduced availability of financing can reduce the level of home improvement and new construction activity and the demand for our products. In addition, the residential repair and remodel market depends in part on home equity financing, and accordingly, the level of equity in homes will affect consumers’ ability to obtain a home equity line of credit and engage in renovations that would result in purchases of our products. Accordingly, a weakness in home prices may result in a decreased demand for our residential products.

Many of our residential products are impacted by consumer demand for, and spending on, outdoor living spaces and home exteriors. For example, sales of our deck and rail products depend on lifestyle and architectural trends and the extent to which consumers prioritize spending to enhance outdoor living spaces for their homes. While we believe consumer preferences have increased spending on outdoor living and home exteriors in recent years, the level of spending could decrease in the future. Decreased spending on outdoor living spaces and home exteriors generally or as a percentage of home improvement activity may decrease demand for our deck, railing and trim products.

Demand for our products in our Commercial segment is affected by the level of commercial and governmental construction and renovation activity. The levels of commercial and governmental construction and renovation activity are affected by the levels of interest rates, availability of financing for commercial and industrial projects, the general business environment and the availability of governmental funding. Sales of products by our Commercial segment include sales for use in institutions, such as universities and schools, and in federal, state and local government buildings, which depend on federal, state and local funding for construction and renovation projects. Sales to institutions that depend on public funding are affected by factors that may impose constraints on funding availability for construction and renovation projects, including increased operational costs, budget cuts by federal, state and local governments, including as a result of lower than

 

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anticipated tax revenues, increased limitations on federal spending or government shutdowns. Sales to commercial establishments depend on, among other things, general levels of industrial production and business growth and the performance of the various markets in which our commercial end customers operate.

Adverse trends in any of the foregoing factors could reduce our sales and have a material adverse effect on our business, financial condition and results of operations. Such factors could also alter the balance of our Residential and Commercial sales or the balance of our product sales within either such segment. In light of differing margins, changes in the relative amount and type of residential and commercial industrial activity or the mix of products sold may have an impact on our business and cause our revenues and profitability to fluctuate from period to period.

We operate in a competitive business environment. If we are unable to compete effectively our sales would suffer and our business, financial condition and operating results would be adversely affected.

We operate in a competitive business environment, and we compete with multiple companies with respect to each of our products. While we have longstanding business relationships with many of our distributors, dealers and contractors, we generally do not have long-term contracts with these customers. Accordingly, any failure to compete effectively, including as a result of the various factors described below, could cause our customers to cease purchasing our products or rapidly decrease our sales.

Our residential products compete primarily with wood products that comprise the majority of decking, railing, trim and related market sales. We also compete with metal products and with engineered products sold by other companies. In our Commercial segment, we compete in several highly fragmented markets. Our Vycom products compete with products sold into narrow market segments with a wide range of end uses through specialized distribution networks that vary depending on the particular end use. Products made by Scranton Products compete with bathroom partitions, lockers and storage solutions sold at a wide range of prices and manufactured using a variety of materials.

Our business model relies on the continued conversion in demand from traditional wood products to our engineered products, and our business could suffer if this conversion does not continue in the future. A number of suppliers of wood and wood composite deck, trim and rail products have established relationships with contractors, builders and large home improvement retailers, and, to compete successfully, we must expand and strengthen our relationships with those parties. We must also compete successfully with products from other manufacturers that offer alternatives to wood and wood composite products, including by developing competitive new products and by responding successfully to new products introduced, and pricing and other competitive actions taken, by competitors.

Some of our competitors have financial, production, marketing and other resources that are significantly greater than ours. Consolidation by industry participants could further increase their resources and result in competitors with expanded market share, larger customer bases, greater diversified product offerings and greater technological and marketing expertise, which may allow them to compete more effectively against us. Moreover, our competitors may develop products that are superior to our products (on a price-to-value basis or otherwise) or may adapt more quickly to new technologies or evolving customer requirements. Technological advances by our competitors may lead to new manufacturing techniques and make it more difficult for us to compete.

Our quarterly operating results may fluctuate as a result of seasonality, changes in weather conditions and changes in product mix.

We have typically experienced moderately higher levels of sales of our residential products in the second fiscal quarter of the year as a result of our “early buy” sales and extended payment terms typically available during the second fiscal quarter of the year. As a result of these extended payment terms, our accounts receivable have typically reached seasonal peaks at the end of the second fiscal quarter of the year, and our net cash

 

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provided by operating activities has typically been lower in the second fiscal quarter relative to other quarters. Our sales are also generally impacted by the number of days in a quarter or a year that contractors and other professionals are able to install our products. We have generally experienced lower levels of sales of residential products during the first fiscal quarter due to adverse weather conditions in certain markets, which typically reduces the construction and renovation activity during the winter season. Although our products can be installed year-round, unusually adverse weather conditions can negatively impact the timing of the sales of certain of our products, causing reduced sales and negatively impacting profitability when such conditions exist. Our residential products are generally purchased shortly before installation and used in outdoor environments. As a result, there is a correlation between the amount of products we sell and weather conditions during the time they are to be installed. Adverse weather conditions may interfere with ordinary construction, delay projects or lead to cessation of construction involving our products. Prolonged adverse weather conditions could significantly reduce our sales in one or more periods. These conditions may shift sales to subsequent reporting periods or decrease overall sales, given the limited outdoor construction season in many locations. In addition, we have experienced higher levels of sales of our engineered bathroom partition products and our locker products during the second half of our fiscal year, which includes the summer months during which schools are typically closed and therefore more likely to be undergoing remodel activities. These factors can cause our operating results to fluctuate on a quarterly basis.

Our operating results may also fluctuate due to changes in the mix of products sold. We sell products at different prices, composed of different materials and involving varying levels of manufacturing complexity. Changes in the mix of products sold from period to period may affect our average selling price, cost of sales and gross margins.

If we fail to develop new and improved products successfully, or fail to effectively manage the introduction of new products, our business will suffer.

Our continued success depends on our ability to predict the products that will be demanded by our customers and consumers, such as homeowners or commercial or industrial purchasers, and to continue to innovate and introduce improved products in our existing product lines and products in new product categories. We may not be successful in anticipating these needs or preferences or in developing new and improved products. If we do not respond effectively to changing market trends, demands and preferences and to actions by competitors by introducing competitive new products, our business, financial condition and results of operations would suffer.

Even if we do introduce new products in the market, consumers may not choose our new products over existing products. In addition, competitors could introduce new or improved products that would replace or reduce demand for our products or develop proprietary changes in manufacturing technologies that may render our products obsolete or too expensive to compete effectively. In addition, when we introduce new products, we must effectively anticipate and manage the effect of new product introductions on sales of our existing products. If new products displace sales of existing products more broadly or rapidly than anticipated, we may have excess inventory of existing products and be required to reduce prices on existing products, which could adversely affect our results of operations. As we continue to introduce new products at varying price points to broaden our product offerings to compete with products made with wood or other traditional materials across a wide range of prices, our overall gross margins may vary from period to period as a result of changes in product mix. Moreover, we may introduce new products with initially lower gross margins with the expectation that the gross margins associated with those products may improve over time as we improve our manufacturing efficiency for those products, and our results of operations would be adversely affected if we are unable to realize the anticipated improvements.

We have devoted, and expect to continue to devote, significant resources to developing new products. However, we cannot be sure that we will successfully complete the development and testing of new products and be able to release the products when anticipated or at all. From time to time, we may make investments in the

 

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development of products we ultimately determine not to release resulting in write-downs of inventory and related assets.

Our business would suffer if we do not effectively manage changes in our manufacturing processes resulting from growth of our business, cost savings and integration initiatives and the introduction of new technologies and products.

We continually review our manufacturing operations in an effort to achieve increased manufacturing efficiencies, integrate new technologies and to address changes in our product lines and in market demand. Periodic manufacturing integrations, realignments and cost savings programs and other changes have adversely affected, and could in the future adversely affect, our operating efficiency and results of operations during the periods in which such programs are being implemented. Such programs may include the addition of manufacturing lines and the consolidation, integration and upgrading of facilities, functions, systems and procedures, including the introduction of new manufacturing technologies and product innovations. These programs involve substantial planning, often require capital investments, and may result in charges for fixed asset impairments or obsolescence and substantial severance costs. Our ability to achieve cost savings or other benefits within the time frames we anticipate is subject to many estimates and assumptions, a number of which are subject to significant economic, competitive and other uncertainties. For example, we have made substantial investments to expand our recycling capabilities and to increase the use of reclaimed materials in our manufacturing processes. While we anticipate that enhancing these capabilities will ultimately decrease our costs, the introduction of these capabilities has required significant initial investment, and we cannot be certain we will realize the benefits of this initiative when anticipated or at all. If these investments and other changes are not effectively integrated into our manufacturing processes, we may suffer from production delays, lower efficiency and manufacturing yields, increased costs and reduced net sales.

We must also effectively address changes to our manufacturing operations resulting from growth of our business generally and introduction of new products. As we increase our manufacturing capacity to meet market demand or begin to manufacture new products at scale, we may face unanticipated manufacturing challenges as production volumes increase, new processes are implemented and new supplies of raw materials used in these products are secured. New products may initially be more costly and less efficient to produce than our existing products. In addition, we could experience delays in production as we increase our manufacturing capacity or begin to manufacture new products that may result in the products ordered by our customers being on back-order as initial production issues are addressed. As a result, increases in manufacturing capacity or the introduction of new products may initially be associated with lower efficiency and manufacturing yields and increased costs, including shipping costs to fill back-orders.

If we experience production delays or inefficiencies, a deterioration in the quality of our products or other complications in managing changes to our manufacturing processes, including those that are designed to increase capacity, enhance efficiencies and reduce costs or that relate to new products or technologies, we may not achieve the benefits that we anticipate from these actions when expected, or at all, and our operations could experience disruptions, our manufacturing efficiency could suffer and our business, financial condition and results of operations could be materially and adversely affected.

Our sales and results of operations may suffer if we do not maintain our relationships with, forecast the demand of and make timely deliveries to our key distributors or other customers.

Our operations depend upon our ability to maintain our strong relationships with our network of distributors and dealers. Our top ten distributors collectively accounted for a majority of our net sales for the year ended September 30, 2019. Our largest distributor, Parksite Inc., accounted for approximately 20% of our net sales for the year ended September 30, 2019. While we have long-standing business relationships with many of our key distributors and our distribution contracts generally provide for exclusive relationships with respect to certain products within certain geographies, these contracts typically permit the distributor to terminate for convenience

 

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on several months’ notice. The loss of, or a significant adverse change in, our relationships with one or more of our significant distributors could materially reduce our net sales.

Distributors and dealers that sell our products, are sensitive to meeting the demands of their end customers on a timely basis. Dealers that sell our products typically place orders with our distributors that need to be filled in a short time frame and these dealers typically do not have an exclusive relationship with us. Purchases by our distributors and dealers are affected by their individual decisions on the levels of inventory they carry, their views on product demand, their financial condition and the manner in which they choose to manage inventory risk. In addition, purchases by distributors and dealers are affected by a variety of other factors, including product pricing, increases in the number of competitive producers and the production capacity of other producers, new product introductions, changes in levels of home renovation and new construction activity, and weather-related fluctuations in demand. As a result, demand for our products can be difficult to predict. If we do not forecast and plan production effectively to manufacture sufficient products to meet demand or if we experience delays in our ability to manufacture products, dealers may seek alternative products, including those of our competitors. Failure to meet demand requirements on a timely basis, may cause distributors or dealers to build up inventory as a precautionary measure, rapidly shift their product mix away from our products, harm our long-term relationships with distributors and dealers, harm our brand and reduce, or increase the variability of, our net sales.

We must continue to provide product offerings at price points that meet the needs of distributors and dealers and that they perceive to be competitive with the products on the market. If our key distributors or dealers are unwilling to continue to sell our products at existing or higher levels, or if they desire to sell competing products alongside our products, our ability to maintain or increase our sales could suffer. In addition, mergers or acquisitions involving our distributors or dealers and one of our competitors, or a distributor or dealer with a relationship with one of our competitors, could decrease or eliminate purchases of our product by that distributor or dealer. If a key distributor or dealer were to terminate its relationship with us or reduce purchases of our products, we may not be able to replace that relationship with a relationship with a new distributor or dealer in a timely manner or at all. In addition, any such new relationship may take time to develop and may not be as favorable to us as the relationship it is replacing. The loss of, or a reduction in orders from, any significant distributor or dealer, may have a material adverse effect on our business, financial condition or results of operations.

Shortages in supply, price increases or deviations in the quality of the raw materials used to manufacture our products could adversely affect our sales and operating results.

The primary raw materials used in our products are various petrochemical resins, including polyethylene, polypropylene and PVC resins, reclaimed polyethylene and PVC material, waste wood fiber and aluminum. We also utilize other additives including modifiers, titanium dioxide, or TiO2, and pigments. Our contracts with key suppliers are typically short term in nature, with terms generally ranging from one to three years. While we do not rely on any single supplier for the majority of our raw materials, we do obtain certain raw materials from single or a limited number of suppliers. In particular, we rely on a single supplier for certain critical capped compounds used in our deck and railing products. We do not currently have arrangements in place for a redundant or second-source supply for those compounds. If one or more suppliers were unable to satisfy our requirements for particular raw materials, we believe alternative sources of supply would be available. However, we could experience a disruption to our operations as alternative suppliers are identified and qualified and new supply arrangements are entered into, and we cannot be sure we will be able to identify alternative sources of supply rapidly, without incurring significant costs or at all.

In the event of an industry-wide general shortage of our raw materials, a shortage affecting or discontinuation in providing any such raw materials by one or more of our suppliers or a supplier’s declaration of force majeure, we may not be able to arrange for alternative sources of such materials on a timely basis or on equally favorable terms. We have also recently significantly increased the use of reclaimed polyethylene and

 

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PVC material in our products. As we increase our use of such materials and introduce new materials into our manufacturing processes, we may be unable to obtain adequate quantities of such new raw materials in a timely manner. Any such shortage may materially adversely affect our production process as well as our competitive position as compared to companies that are able to source their raw materials more reliably or at lower cost.

In addition, significant increases in the cost of the raw materials used to manufacture our products could adversely affect our operating results. The cost of some of the raw materials we use in the manufacture of our products is subject to significant price volatility. For example, the cost of petrochemical resins used in our manufacturing processes has historically varied significantly and has been affected by changes in supply and demand and in the price of crude oil. We have not entered into hedges of our raw material costs, and our supply contracts with our major vendors do not contain obligations to sell raw materials to us at a fixed price. Accordingly, we are exposed to the risk of increases in the market prices of raw materials used in the manufacture of our products. Our results of operations have been affected in the past by changes in the cost of resins, and we expect that our results of operations in the future will continue to be affected by changes in resin costs. In the event of an increase in the cost of resins or other raw materials, we may not be able to recover the increases through corresponding increases in the prices of our products. Even if we are able to increase prices over time, we may not be able to increase prices as rapidly as the increase in our costs. If we are unable to increase our prices or experience a delay in our ability to increase our prices or to recover such increases in our costs, our gross profit will suffer. In addition, increases in the price of our products to compensate for increased costs of raw materials may reduce demand for our products and adversely affect our competitive position as compared to products made of other materials, such as wood and metal, that are not affected by changes in the price of resins and some of the other raw materials that we use in the manufacture of our products.

We are dependent upon the ability of our suppliers to consistently provide raw materials that meet our specifications, quality standards and other applicable criteria. Our suppliers’ failure to provide raw materials that meet such criteria could adversely affect production schedules and our product quality, which in turn could materially adversely affect our business, financial condition and results of operations.

An interruption of our production capability at one or more of our manufacturing facilities from accident, calamity or other causes, or events affecting the global economy, could adversely affect our business.

We manufacture our products at a limited number of manufacturing facilities, and we generally do not have redundant production capabilities that would enable us to shift production of a particular product rapidly to another facility in the event of a loss of one of or a portion of one of our manufacturing facilities. A catastrophic loss of the use of one or more of our manufacturing facilities due to accident, fire, explosion, labor issues, tornado, other weather conditions, natural disasters, condemnation, cancellation or non-renewals of leases, terrorist attacks or other acts of violence or war or otherwise could have a material adverse effect on our production capabilities. In addition, unexpected failures, including as a result of power outages or similar disruptions outside of our control, of our equipment and machinery could result in production delays or the loss of raw materials or products in the equipment or machinery at the time of such failures. Any of these events could result in substantial revenue loss and repair costs. An interruption in our production capabilities could also require us to make substantial capital expenditures to replace damaged or destroyed facilities or equipment. There are a limited number of manufacturers that make some of the equipment we use in our manufacturing facilities, and we could experience significant delay in replacing manufacturing equipment necessary to resume production. An interruption in our production capability, particularly if it is of significant duration, could result in a permanent loss of customers who decide to seek alternate products.

Our business operations could be adversely affected by the loss of the services from members of our senior management team and other key employees.

Our success depends in part on the continued contributions of our senior management and other key employees. Our senior operating management members have extensive sales and marketing, engineering, product

 

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development, manufacturing and finance backgrounds. The loss of any member of our senior management team or other key employees in the future could significantly impede our ability to successfully implement our business strategy, financial plans, product development goals, marketing initiatives and other objectives. Should we lose the services of any member of our senior management team or key personnel, replacing such personnel could involve a prolonged search and divert management time and attention and we may not be able to locate and hire a qualified replacement. We do not carry key man insurance to mitigate the financial effect of losing the services of any member of our management team.

Acquisitions or joint ventures we may pursue in the future may be unsuccessful.

We may consider the acquisition of other manufacturers or product lines of other businesses that either complement or expand our existing business, or may enter into joint ventures. We cannot assure you that we will be able to consummate any such acquisitions or joint ventures or that any future acquisitions or joint ventures will be able to be consummated at acceptable prices and on acceptable terms. Any future acquisitions or joint ventures we pursue may involve a number of risks, including some or all of the following:

 

   

difficulty in identifying acceptable acquisition candidates;

 

   

the inability to consummate acquisitions or joint ventures on favorable terms and obtain adequate financing;

 

   

the diversion of management’s attention from our core businesses;

 

   

the disruption of our ongoing business;

 

   

entry into markets in which we have limited or no experience;

 

   

the inability to integrate our acquisitions or enter into joint ventures without substantial costs, delays or other problems;

 

   

unexpected liabilities for which we may not be adequately indemnified;

 

   

inability to enforce indemnification and non-compete agreements;

 

   

failing to successfully incorporate acquired product lines or brands into our business;

 

   

the failure of the acquired business or joint venture to perform as well as anticipated;

 

   

the failure to realize expected synergies and cost savings;

 

   

the loss of key employees or customers of the acquired business;

 

   

increasing demands on our operational systems and the potential inability to implement adequate internal controls covering an acquired business or joint venture;

 

   

any requirement that we make divestitures of operations or property in order to comply with applicable antitrust laws;

 

   

possible adverse effects on our reported operating results, particularly during the first several reporting periods after the acquisition is completed; and

 

   

impairment of goodwill relating to an acquired business, which could reduce reported income.

Any of these risks could have a material adverse effect on our business, financial condition or results of operations.

In addition, acquisitions or joint ventures could result in significant increases in our outstanding indebtedness and debt service requirements or could involve the issuance of preferred stock or common stock that would be dilutive to existing stockholders. Incurring additional debt to fund an acquisition may result in higher debt service and a requirement to comply with additional financial and other covenants, including

 

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potential restrictions on future acquisitions and distributions. Funding an acquisition with our existing cash would reduce our liquidity. The terms of our existing and future debt agreements may limit the size and/or number of acquisitions we can pursue or our ability to enter into a joint venture.

Our business could be adversely affected if we fail to maintain product quality and product performance at an acceptable cost or if we incur significant losses, increased costs or harm to our reputation or brand as a result of product liability claims or product recalls.

In order to maintain and increase our net sales and sustain profitable operations we must produce high-quality products at acceptable manufacturing costs and yields. If we are unable to maintain the quality and performance of our products at acceptable costs, our brand, the market acceptance of our products and our results of operations would suffer. As we regularly modify our product lines and introduce changes to our manufacturing processes or incorporate new raw materials, we may encounter unanticipated issues with product quality or production delays. For example, we have recently introduced products that incorporate larger proportions of reclaimed raw materials, primarily reclaimed polyethylene and PVC. While we engage in product testing in an effort to identify and address any product quality issues before we introduce products to market, unanticipated product quality or performance issues may be identified after a product has been introduced and sold.

In addition, we face the risk of exposure to product liability or other claims, including class action lawsuits, in the event our products are, or are alleged to be, defective or have resulted in harm to persons or to property. We may in the future incur significant liabilities if product liability lawsuits against us are successful. We may also have to recall and/or replace defective products, which would also result in adverse publicity and loss of sales, and would result in us incurring costs connected with the recall, which could be material. Any losses not covered by insurance could have a material adverse effect on our business, financial condition and results of operations. Real or perceived quality issues, including those arising in connection with product liability lawsuits, warranty claims or recalls, could also result in adverse publicity, which could harm our brand and reputation and cause our sales to decline rapidly. In addition, any such issues may be seized on by competitors in efforts to increase their market share.

We provide product warranties and, if our product warranty obligations were significantly in excess of our reserves, our business, financial condition and results of operations could be materially and adversely affected.

We provide various warranties on our products, ranging from five years to lifetime warranties depending on the product and subject to various limitations. Management estimates warranty reserves, based in part upon historical warranty costs, as a proportion of sales by product line. Management also considers various relevant factors, including our stated warranty policies and procedures, as part of the evaluation of our warranty liability. Because warranty issues may surface later in the life cycle of a product, management continues to review these estimates on a regular basis and considers adjustments to these estimates based on actual experience compared to historical estimates. Estimating the required warranty reserves requires a high level of judgment, especially as many of our products are at a relatively early stage in their product life cycles, and we cannot be sure that our warranty reserves will be adequate for all warranty claims that arise. We have recently increased our use of reclaimed materials in the manufacturing of our products. While we performed extensive testing in connection with the utilization of such materials, the use of reclaimed materials represents a recent and significant change in our business and the use of such materials may result in unanticipated product quality or performance issues and an increase in warranty claims for certain of our products. We have also recently introduced a new warranty that provides coverage for labor costs incurred in the replacement of products under warranty under specified circumstances. Although we have significant experience regarding warranty claims on our products generally, we do not have historical experience relating to warranty claims under the terms of this new warranty coverage. Warranty obligations in excess of our reserves could have a material adverse effect on our business, financial condition and results of operations.

 

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We depend on third parties for transportation services, and the lack of availability of and/or increases in the cost of transportation could have a material adverse effect on our business and results of operations.

Our business depends on the transportation of both finished goods to our distributors and other customers and the transportation of raw materials to us primarily through the use of flatbed trucks and rail transportation. We rely on third parties for transportation of these items. The availability of these transportation services is subject to various risks, including those associated with supply shortages, change in fuel prices, work stoppages, operating hazards and interstate transportation regulations. In particular, a significant portion of our finished goods are transported by flatbed trucks, which are occasionally in high demand (especially at the end of calendar quarters) and/or subject to price fluctuations based on market conditions and the price of fuel.

If the required supply of transportation services is unavailable when needed, we may be unable to sell our products when they are requested by our customers. In that event, we may be required to reduce the price of the affected products, seek alternative and, potentially more costly, transportation services or be unable to sell the affected products. Similarly, if any of these transportation providers were unavailable to deliver raw materials to us in a timely manner, we may be unable to manufacture our products in response to customer demand. In addition, a significant increase in transportation rates or fuel surcharges could adversely affect our profitability. Any of these events could have a material adverse effect on our business and results of operations.

Increases in labor costs, potential labor disputes and work stoppages or an inability to hire skilled manufacturing, sales and other personnel could adversely affect our business.

Our financial performance is affected by the availability of qualified personnel and the cost of labor. As of September 30, 2019, we had approximately 1,429 employees. An increase in labor costs, work stoppages or disruptions at our facilities or those of our suppliers or transportation service providers, or other labor disruptions, could decrease our sales and increase our expenses. In addition, although our employees are not represented by a union, our labor force may become subject to labor union organizing efforts, which could cause us to incur additional labor costs and increase the related risks that we now face.

The competition for skilled manufacturing, sales and other personnel is intense in the regions in which our manufacturing facilities are located, including in Wilmington, Ohio and Scranton, Pennsylvania. A significant increase in the salaries and wages paid by competing employers could result in a reduction of our labor force, increases in the salaries and wages that we must pay or both. If we are unable to hire skilled manufacturing, sales and other personnel, our ability to execute our business plan, and our results of operations, would suffer.

If we are unable to collect accounts receivable from one or more of our significant distributors, dealers or other customers, our financial condition and operating results could suffer.

We extend credit to our distributors and, to a lesser extent, dealers and other customers, based on an evaluation of their financial condition, and we generally do not require collateral to secure these extensions of credit. The financial health of many of our customers is affected by changes in the economy and the cyclical nature of the building industry. Especially during protracted or severe economic declines and cyclical downturns in the building industry, our customers may be unable to satisfy their payment obligations, including their debts to us. While we maintain allowances for doubtful accounts, these allowances may not be adequate to provide for actual losses, and our financial condition and results of operation could be materially and adversely affected if our losses from doubtful accounts significantly exceed our estimates.

We may incur goodwill and other intangible or long-lived asset impairment charges that adversely affect our operating results.

We review our goodwill and other intangibles not subject to amortization for impairment annually, or when events or circumstances indicate that it is more likely than not that the fair value of a reporting unit could be lower than its carrying value. Changes in economic or operating conditions impacting our estimates and

 

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assumptions could result in the impairment of our goodwill or long-lived assets. Although no impairments were recorded for the three months ended December 31, 2019 or the years ended September 30, 2019 or 2018, an impairment of $32.2 million was recorded as of September 30, 2017 with respect to one of our reporting units as a result of lower than anticipated sales revenue and operating margins due to manufacturing inefficiencies and service issues. In the event that we determine our goodwill or long-lived assets are impaired, we may be required to record a significant charge to earnings in our financial statements that could have a material adverse effect on our results of operations.

We have identified material weaknesses in our internal control over financial reporting. If our remediation of these material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, investors may lose confidence in the accuracy and completeness of our financial reports and the trading price of our Class A common stock may decline.

As of September 30, 2019, we determined that we have three material weaknesses in our internal control over financial reporting. The first material weakness relates to the maintenance of an effective control environment as we lacked a sufficient complement of resources. This material weakness contributed to an additional material weakness relating to the design and maintenance of formal accounting policies, procedures and controls. The third relates to the design and maintenance of effective controls over certain information technology general controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The first material weakness relates to the fact that we did not design or maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of resources with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and disclose accounting matters timely and accurately. This material weakness contributed to the following additional three material weaknesses.

The second material weakness relates to the fact that we did not design and maintain adequate formal accounting policies, procedures and controls, or maintain documentary evidence of existing control activities. Specifically, we did not design and maintain adequate formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting, reporting and disclosures, including adequate controls over the preparation and review of account reconciliations and journal entries. Additionally, we did not maintain adequate documentary evidence of existing control activities, and we did not design and maintain controls over the appropriate classification and presentation of accounts and disclosures in the financial statements.

We also had a previous material weakness, which was remediated during fiscal 2019, that related to the fact that we did not design and maintain formal accounting policies, procedures and controls to analyze, account for and disclose non-routine or complex transactions.

These two remaining material weaknesses and the previous material weakness resulted in revision of our consolidated financial statements as of September 30, 2018 and for the year then ended, and in immaterial audit adjustments to our consolidated financial statements as of September 30, 2019, 2018 and 2017 and for the years then ended.

As of September 30, 2019, we also have a third material weakness as a result of the material weakness in our control environment in that we did not design and maintain effective controls over certain information technology, or IT, general controls for information systems and applications that are relevant to the preparation of the financial statements. Specifically, we did not design and maintain:

 

   

User access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs and data to appropriate Company personnel;

 

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Program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately;

 

   

Computer operations controls to ensure that critical batch jobs are monitored, and data backups are authorized and monitored; and

 

   

Testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.

These IT control deficiencies did not result in a misstatement to our financial statements. However, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatements to one or more assertions, and IT controls and underlying data that support the effectiveness of IT system-generated data and reports).

Each of the remaining material weaknesses described above involve control deficiencies that could result in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected, and, accordingly, we determined that these control deficiencies constitute material weaknesses.

We are in the process of taking steps intended to address the underlying causes of the material weaknesses and to remediate the three remaining material weaknesses. Our efforts to date have included: (i) hiring additional qualified finance and accounting personnel, including the hiring of a new Chief Financial Officer and Chief Accounting Officer; (ii) the implementation of formal policies, procedures and controls, training on standards of documentary evidence, as well as implementation of controls designed to ensure the reliability of critical spreadsheets and system generated reports; and (iii) designing and engaging in the implementation of an IT general controls framework that addresses risks associated with user access and security, application change management and IT operations, focused training for control owners to help sustain effective control operations and comprehensive remediation efforts relating to segregation of duties to strengthen user access controls and security.

While we believe these efforts will improve our internal controls and address the underlying causes of the three remaining material weaknesses, such material weaknesses will not be fully remediated until our remediation plan has been fully implemented and we have concluded that our controls are operating effectively for a sufficient period of time. For more information on our efforts to remediate these material weaknesses, see “Management’s Discussion and Analysis of Financial Condition and Operations—Internal Control over Financial Reporting.”

We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, we cannot be certain that we have identified all material weaknesses in our internal control over financial reporting, or that in the future we will not have additional material weaknesses in our internal control over financial reporting.

If we fail to effectively remediate the remaining material weaknesses in our internal control over financial reporting, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may be unable to accurately or timely report our financial condition or results of operations. We also could become subject to sanctions or investigations by the securities exchange on which our Class A common stock is listed, the SEC or other regulatory authorities. In addition, if we are unable 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, when required, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets, and the trading price of our Class A common stock may decline.

 

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If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and, if approved for listing, the rules and regulations and the listing standards of the New York Stock Exchange, or the NYSE.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.

In addition to the material weaknesses in our internal control over financial reporting that we have identified, we may discover additional weaknesses in our disclosure controls and internal control over financial reporting in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which could have a negative effect on the trading price of our Class A common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE. We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K.

Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. 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. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material adverse effect on our business and operating results and could cause a decline in the price of our Class A common stock.

Subjective estimates and judgments used by management in the preparation of our financial statements, including estimates and judgments that may be required by new or changed accounting standards, may impact our financial condition and results of operations.

The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. Due to the inherent uncertainty in making estimates, results reported in future periods may be affected by changes in estimates reflected in our financial statements for earlier periods. Estimates and judgments are continually evaluated and are based on historical

 

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experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. From time to time, there may be changes in the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can materially impact how we record and report our financial condition and results of operations. In some instances, we could be required to apply a new or revised standard retrospectively. If the estimates and judgments we use in preparing our financial statements are subsequently found to be incorrect or if we are required to restate prior financial statements, our financial condition or results of operations could be significantly affected.

The estimates and forecasts of market opportunity and market growth included in this prospectus may prove to be inaccurate, and we cannot assure you our business will grow at similar rates, or at all.

Estimates and forecasts of market size and opportunity and of market growth are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. The estimates and forecasts in this prospectus of the size of the markets that we may be able to address and the growth in these markets are subject to many assumptions and may prove to be inaccurate. We may not be able to address fully the markets that we believe we can address, and we cannot be sure that these markets will grow at historical rates or the rates we expect for the future. Even if we are able to address the markets that we believe represent our market opportunity and even if these markets experience the growth we expect, we may not grow our business at similar rates, or at all. Our growth is subject to many factors, including our success in implementing our business strategy, which is subject to many risks and uncertainties. Accordingly, the estimates and forecasts of market size and opportunity and of market growth included in this prospectus may not be indicative of our future growth.

We may be subject to significant compliance costs as well as liabilities under environmental, health and safety laws and regulations which could materially and adversely affect our business, financial condition and operations.

Our past and present operations, assets and products are subject to regulation by extensive environmental laws and regulations at the federal, state and local levels. These laws regulate, among other things, air emissions, the discharge or release of materials into the environment, the handling and disposal of wastes, remediation of contaminated sites, worker health and safety and the impact of products on human health and safety and the environment. Under some of these laws, liability for contaminated property may be imposed on current or former owners or operators of the property or on parties that generated or arranged for waste sent to the property for disposal. Liability under these laws may be joint and several and may be imposed without regard to fault or the legality of the activity giving rise to the contamination. Our facilities are located on sites that have been used for manufacturing activities for an extended period of time, which increases the possibility of contamination being present. Despite our compliance efforts, we may still face material liability, limitations on our operations or fines or penalties for violations of environmental, health and safety laws and regulations, including releases of regulated materials and contamination by us or previous occupants at our current or former properties or at offsite disposal locations we use.

We are also subject to permitting requirements under environmental, health and safety laws and regulations applicable in the jurisdictions in which we operate. Those requirements obligate us to obtain permits from one or more governmental agencies in order to conduct our operations. Such permits are typically issued by state agencies, but permits and approvals may also be required from federal or local governmental agencies. The requirements for such permits vary depending on the location where our regulated activities are conducted. As with all governmental permitting processes, there is a degree of uncertainty as to whether a permit will be granted, the time it will take for a permit to be issued and the conditions that may be imposed in connection with the granting of the permit. Any failure to obtain or delay in obtaining a permit required for our operations, or the imposition of onerous conditions in any such permits, could adversely affect our business, financial condition and operations.

Applicable environmental, health and safety laws and regulations, and any changes to them or in their enforcement, may require us to make material expenditures with respect to ongoing compliance with, or

 

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remediation under, these laws and regulations or require that we modify our products or processes in a manner that increases our costs and/or reduces our profitability. For example, additional pollution control equipment, process changes or other environmental control measures may be needed at our facilities to meet future requirements. In addition, discovery of currently unknown or unanticipated soil or groundwater contamination at our properties could result in significant liabilities and costs. Accordingly, we are unable to predict the future costs of compliance with, or liability under, environmental, health and safety laws and regulations.

Our business operations could suffer if we fail to adequately protect our intellectual property rights, and we may experience claims by third parties that we are violating their intellectual property rights.

We rely on trademark and service mark protection to protect our brands, and we have registered or applied to register many of these trademarks and service marks. In particular, we believe the AZEK and AZEK Exteriors brands, the TimberTech brand and the VERSATEX brand are significant to the success of our business. In the event that our trademarks or service marks are successfully challenged and we lose the rights to use those trademarks or service marks, or if we fail to prevent others from using them (or similar marks), we could be forced to rebrand our products, requiring us to devote resources to advertising and marketing new brands. In addition, we cannot be sure that any pending trademark or service mark applications will be granted or will not be challenged or opposed by third parties or that we will be able to enforce our trademark rights against counterfeiters.

We generally rely on a combination of unpatented proprietary know-how and trade secrets, and to a lesser extent, patents to preserve our position in the market. Because of the importance of our proprietary know-how and trade secrets, we employ various methods to protect our intellectual property, such as entering into confidentiality agreements with third parties, and controlling access to, and distribution of, our proprietary information. We may not be able to deter current and former employees, contractors and other parties from breaching confidentiality obligations and misappropriating proprietary information. It is difficult for us to monitor unauthorized uses of our products and technology. Accordingly, these protections may not be adequate to prevent competitors from copying, imitating or reverse engineering our products or from developing and marketing products that are substantially equivalent to or superior to our own.

In addition, we have applied for patent protection relating to certain existing and proposed products, processes and services or aspects thereof. We cannot be sure that any of our pending patent applications will be granted or that any patents issued as a result of our patent applications will be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage.

If third parties take actions that affect our rights or the value of our intellectual property or proprietary rights, or if we are unable to protect our intellectual property from infringement or misappropriation, other companies may be able to offer competitive products at lower prices, and we may not be able to effectively compete against these companies. In addition, if any third party copies or imitates our products in a manner that affects customer or consumer perception of the quality of our products, or of engineered products generally, our reputation and sales could suffer whether or not these violate our intellectual property rights.

In addition, we face the risk of claims that we are infringing third parties’ intellectual property rights. Any such claim, even if it is without merit, could be expensive and time-consuming to defend and could divert the time and attention of our management. An intellectual property claim against us that is successful could cause us to cease making or selling products that incorporate the disputed intellectual property, require us to redesign our products, which may not be feasible or cost effective, and require us to enter into costly royalty or licensing arrangements, any of which could have a material adverse effect on our business, financial condition and results of operations. Moreover, certain material technology and know-how we use to manufacture our products is licensed to us rather than owned by us, and our license is subject to termination in the event of uncured material breach, among other reasons.

 

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Any major disruption or failure of our information technology systems or our website, or our failure to successfully implement new technology effectively, could adversely affect our business and operations.

We rely on various information technology systems, owned by us and third parties, to manage our operations, maintain books and records, record transactions, provide information to management and prepare our financial statements. In addition, we have made a significant investment in our website which we believe is critical for lead generation and is the primary forum through which we interact with end consumers. A failure of our information technology systems or our website to operate as expected could disrupt our business and adversely affect our financial condition and results of operations. These systems and our website are vulnerable to damage from hardware failure; fire; power loss; Internet; data network and telecommunications failure; loss or corruption of data and impacts of terrorism; natural disasters or other disasters. We may not have sufficient redundant operations to cover a loss or failure in a timely manner. In addition, the operation of these systems and our website is dependent upon third party technologies, systems and services, and support by third party vendors, and we cannot be sure that these third party systems, services and support will continue to be available to us without interruption. Any damage to our information technology systems or website could cause interruptions to our operations that materially adversely affect our ability to meet customers’ requirements, resulting in an adverse impact to our business, financial condition and results of operations. Periodically, these systems and our website need to be expanded, updated or upgraded as our business needs change. We may not be able to successfully implement changes in our information technology systems and to our website without experiencing difficulties, which could require significant financial and human resources.

We face cybersecurity risks and risks arising from new regulations governing information security and privacy and may incur increasing costs in an effort to mitigate those risks.

We utilize systems and websites that allow for the secure storage and transmission of proprietary or confidential information regarding our customers, employees and others, including personal information. We may be vulnerable to, and unable to anticipate or detect, data security breaches and data loss, including rapidly evolving and increasingly sophisticated and prevalent cybersecurity attacks. In addition, data security breaches can also occur as a result of a breach by us or our employees or by persons with whom we have commercial relationships that result in the unauthorized release of personal or confidential information. In addition to our own databases, we use third-party service providers to store, process and transmit confidential or sensitive information on our behalf. A data security breach could occur in the future either at their location or within their systems that could affect our personal or confidential information.

A data security breach may expose us to a risk of loss or misuse of this information, and could result in significant costs to us, which may include, among others, fines and penalties, costs related to remediation, potential costs and liabilities arising from governmental or third-party investigations, proceedings or litigation, diversion of management attention and harm to our reputation. We could also experience delays or interruptions in our ability to function in the normal course of business, including delays in the fulfillment of customer orders or disruptions in the manufacture and shipment of products. In addition, actual or anticipated attacks may cause us to incur costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. Any compromise or breach of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, and a loss of confidence in our security measures, which could have an adverse effect on our business, financial condition and reputation.

The regulatory environment surrounding information security and privacy is increasingly demanding, with frequent imposition of new and changing requirements, which could cause us to incur substantial costs. In the United States, various laws and regulations apply to the collection, processing, disclosure and security of certain types of data, including the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the Health Insurance Portability and Accountability Act of 1996, the Gramm Leach Bliley Act and various state laws relating to privacy and data security, including the California Consumer Privacy Act, which is set to take effect on January 1, 2020.

 

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Any failure or perceived failure by us to comply with laws, regulations, policies or regulatory guidance relating to privacy or data security may result in governmental investigations and enforcement actions, litigation, fines and penalties or adverse publicity, and could cause our customers and consumers to lose trust in us, which could have an adverse effect on our reputation and business.

Changes to legislative and regulatory policies related to promoting or incentivizing home ownership may have a material adverse effect on our business, financial condition and results of operations.

Our markets are also affected by legislative and regulatory policies that promote or do not promote home ownership, such as U.S. tax rules allowing for deductions of mortgage interest or interest on home equity loans. For example, the Tax Cuts and Jobs Act, or the Tax Act, which was enacted into law on December 22, 2017, imposes limitations on the deductibility of interest on mortgages qualifying of the home mortgage interest deduction. Beginning in 2018, taxpayers may only deduct interest on $750,000 of qualified residence loans, including home equity loans that are used to substantially improve the taxpayer’s home that secures the loan, a reduction from the prior limit of $1.0 million. As many consumers finance renovation projects that use our products with home equity loans, limitations on the deductibility of interest on those loans could reduce demand for our products. Future change to laws or policies relating to these or similar matters could reduce demand for our products and have a material adverse effect on our business, financial condition and results of operations.

Many of our products must comply with local building codes and ordinances and failure of our products to comply with such codes and ordinances may have an adverse effect on our business.

Many of our products must comply with local building codes and ordinances. These codes and ordinances are subject to future government review and interpretation. If our products fail to comply with such local building codes or ordinances, our ability to market and sell such products would be impaired. Also, should these codes and ordinances be amended or expanded, or should new laws and regulations be enacted, we could incur additional costs or become subject to requirements or restrictions that require us to modify our products or adversely affect our ability to market and sell our products. Furthermore, failure of our products to comply with such codes or ordinances could subject us to negative publicity or damage our reputation.

Comprehensive tax reform legislation could adversely affect our business, financial condition and results of operations.

The Tax Act, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of “adjusted earnings” (roughly defined as earnings before interest, taxes, depreciation and amortization in the case of taxable years beginning before January 1, 2022 and earnings before interest and taxes thereafter), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. The most significant impacts of the Tax Act on our financial results to date have included lowering of the U.S. federal corporate income tax rate and remeasurement of our net deferred tax liabilities. During the year ended September 30, 2018, we recorded a $22.5 million net income tax benefit for the remeasurement of certain deferred taxes, and our effective tax rate for the year was significantly reduced by the recognition of this remeasurement. We expect the limitation under the Tax Act on the tax deduction of interest expense will limit our annual deductions of interest expense as a result of our significant outstanding indebtedness until we reduce our outstanding indebtedness or our adjusted earnings increase by an amount sufficient to permit full deductibility of our interest expense. In the event we are subject to limitations on the deductibility of interest under the Tax Act, we will be permitted an indefinite carryforward, and disallowed interest expense will be deductible in later years, subject to the same 30% limitation and to ownership change limitations under Sections 382 of the Internal Revenue Code of 1986, as amended, or the Code, similar to net operating losses.

 

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We continue to examine the impact that the Tax Act may have on our business in the longer term. Accordingly, notwithstanding the reduction in the corporate income tax rate, the overall impact on us of the Tax Act is uncertain.

Our insurance coverage may be inadequate to protect against the potential hazards incident to our business.

We maintain property, business interruption, product liability and casualty insurance coverage, but such insurance may not provide adequate coverage against potential claims, including losses resulting from interruptions in our production capability or product liability claims relating to the products we manufacture. Consistent with market conditions in the insurance industry, premiums and deductibles for some of our insurance policies have been increasing and may, in the future, increase substantially. In some instances, some types of insurance may become available only for reduced amounts of coverage, if at all. In addition, our insurers could deny coverage for claims. If we were to incur a significant liability for which we were not fully insured or that our insurers disputed, our business, financial condition or results of operations could be materially adversely affected.

We are in the early stages of implementing strategic initiatives related to the use of recycled materials. If we fail to implement these initiatives as expected, our business, financial condition and results of operations could be adversely affected.

Our future financial performance depends in part on our management’s ability to successfully implement our strategic initiatives related to developing our recycling capabilities and other cost savings measures, with an aim to reduce our material costs, improve net manufacturing productivity and enhance our business operations. We are still in the early stages of material substitution across our manufacturing network and realizing the benefits of our investments in recycling. To achieve such benefits, we must recycle materials on a cost-effective basis and efficiently convert these materials into high-quality finished goods. This strategy involves significant risks, including the risks that:

 

   

Our profitability may be materially diminished. The variability of our raw material sources can result in considerable reduction in our operating rates and yields, which may more than offset any savings we realize from the low purchase price of the materials.

 

   

We may not produce a sustainable return on investment. Our plants must convert our raw materials at high rates and net yields to generate the profit margins and cash flows necessary to achieve sustainable returns.

Changes in trade policies, including the imposition of tariffs, could negatively impact our business, financial condition and results of operations.

The current U.S. administration has signaled support for, and in some instances has taken action with respect to, major changes to certain trade policies, such as the imposition of tariffs on imported products and the withdrawal from or renegotiation of certain trade agreements, including the North American Free Trade Agreement. For example, the United States has increased tariffs on certain imports from China, as well as on steel and aluminum products imported from various countries. We procure certain of the raw materials we use in the manufacturing of our products directly or indirectly from outside of the United States. The imposition of tariffs and other potential changes in U.S. trade policy could increase the cost or limit the availability of raw materials, which could hurt our competitive position and adversely impact our business, financial condition and results of operations.

 

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We operate in select non-U.S. markets and are subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, as well anti-corruption laws and regulations in other countries, in addition to laws and regulations relating to export controls and economic sanctions. Violations of these laws and regulations could have a material adverse effect on our business, financial condition and results of operations.

We are subject to various U.S. and non-U.S. anti-corruption laws, including the FCPA. These laws generally prohibit companies and their intermediaries from engaging in bribery or making other improper payments of cash (or anything else of value) to government officials and other persons in order to obtain or retain business. Our business operations also must be conducted in compliance with applicable export control and economic sanctions laws and regulations, including rules administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the U.S. Department of State, the U.S. Department of Commerce, the United Nations Security Council, and other relevant authorities.

We strive to conduct our business activities in compliance with relevant anti-corruption and trade control laws and regulations, and we are not aware of issues of historical noncompliance. However, full compliance cannot be guaranteed. Further expansion outside the United States would likely increase our future legal exposure. Violations of anti-corruption or trade control laws and regulations, or even allegations of such violations, could result in civil or criminal penalties, as well as disrupt our business, operations, financial condition and results of operations. Further, changes to the applicable laws and regulations, and/or significant business growth, may result in the need for increased compliance-related resources and costs.

Risks Relating to Our Indebtedness

Our substantial indebtedness could materially adversely affect our financial condition.

We have, and after this offering will continue to have, a significant amount of indebtedness. As of September 30, 2019, our total indebtedness was $1,123.5 million, including $808.5 million under our first lien credit facility, or the Term Loan Credit Agreement, no amounts outstanding under our revolving credit agreement, or the Revolving Credit Agreement, and $315.0 million of Senior Notes. We refer to the Term Loan Credit Agreement and the Revolving Credit Agreement collectively as the Senior Secured Credit Facilities. We intend to use net proceeds from this offering to redeem the Senior Notes. After giving effect to this offering, on an as adjusted basis, as of September 30, 2019, our total indebtedness would have been approximately $                    .

Our substantial indebtedness could have important consequences to the holders of our Class A common stock, including the following:

 

   

making it more difficult for us to satisfy our obligations with respect to our other debt;

 

   

limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements;

 

   

requiring us to dedicate a substantial portion of our cash flows to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, acquisitions and other general corporate purposes;

 

   

increasing our vulnerability to general adverse economic and industry conditions;

 

   

exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings under the Senior Secured Credit Facilities, are at variable rates of interest;

 

   

limiting our flexibility in planning for and reacting to changes in the industry in which we compete;

 

   

placing us at a disadvantage compared to other, less leveraged competitors; and

 

   

increasing our cost of borrowing.

 

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In addition, the credit agreements that govern the Senior Secured Credit Facilities and the indenture that governs the Senior Notes contain restrictive covenants that limit our ability to engage in activities that may be in our long-term best interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all our debt. See “Description of Certain Indebtedness.”

The Term Loan Credit Agreement will mature on the earlier of (i) May 5, 2024 and (ii) 181 days prior to the maturity of the Senior Notes, which mature on October 1, 2021. The Revolving Credit Agreement will mature on the earlier of (i) March 9, 2022 and (ii) 91 days prior to the maturity of the Term Loan Credit Agreement, or the maturity of the Senior Notes, whichever occurs first. We may need to refinance all or a portion of our indebtedness on or before the maturity thereof. We may not be able to obtain such financing on commercially reasonable terms or at all. Failure to refinance our indebtedness could have a material adverse effect on us.

We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

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 financial, business, legislative, regulatory and other factors, some of which are beyond our control. We cannot be sure that our business will generate sufficient cash flows from operating activities, or that future borrowings will be available, to permit us to pay the principal, premium, if any, 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, seek additional debt or equity capital or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures, if necessary, 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 credit agreements that govern the Senior Secured Credit Facilities and the indenture that governs the Senior Notes restrict our ability to dispose of assets and use the 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 then due. See “Description of Certain 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, would have a material adverse effect on our financial condition and results of operations.

If we cannot make scheduled payments on our debt, we will be in default, and the lenders under the Senior Secured Credit Facilities could terminate their commitments to loan money, the holders of the Senior Notes could declare all outstanding principal and interest on the Senior Notes to be due and payable, the lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation. Any of these events could result in you losing all or a portion of your investment in the Class A common stock.

Despite our current level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks to our financial condition described herein.

We and our subsidiaries may be able to incur significant additional indebtedness in the future. Although the credit agreements that govern the Senior Secured Credit Facilities and the indenture that governs the Senior Notes contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that do not constitute indebtedness. As of December 31, 2019 and September 30, 2019, we had commitments available for borrowing under the Revolving Credit Agreement of up to $150.0 million. We also have the option to increase the

 

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commitments under the Revolving Credit Agreement by up to $100.0 million, subject to certain conditions. Because our borrowing capacity under the Revolving Credit Agreement depends, in part, on inventory, accounts receivable and other assets that fluctuate from time to time, the amount of commitments may not reflect actual borrowing capacity. In addition, the Term Loan Credit Agreement provides for additional uncommitted incremental term loans of up to $150.0 million, with additional incremental term loans available if certain leverage ratios are maintained. All of those borrowings would be secured by first-priority liens on our property.

The terms of the credit agreements that govern the Senior Secured Credit Facilities and the indenture that governs the Senior Notes restrict our current and future operations, including our ability to respond to changes or to take certain actions.

The credit agreements that govern the Senior Secured Credit Facilities and the indenture that governs the Senior Notes contain a number of restrictive covenants that impose significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best interest. See “Description of Certain Indebtedness.” Although we intend to redeem the Senior Notes following this offering with the proceeds of this offering, the Senior Notes will remain outstanding, and we will continue to be subject to the covenants under the indenture governing the Senior Notes, until the redemption is completed. The indebtedness under the Senior Secured Credit Facilities will continue to be outstanding following completion of this offering. The restrictive covenants under the Senior Secured Credit Facilities and the indenture governing the Senior Notes include restrictions on our ability to:

 

   

incur additional indebtedness and guarantee indebtedness;

 

   

pay dividends or make other distributions or repurchase or redeem our capital stock;

 

   

prepay, redeem or repurchase junior debt;

 

   

issue certain preferred stock or similar equity securities;

 

   

make loans and investments;

 

   

sell assets or property, except in certain circumstances;

 

   

incur liens;

 

   

enter into transactions with affiliates;

 

   

modify or waive certain material agreements in a manner that is adverse in any material respect to the lenders;

 

   

enter into agreements restricting our subsidiaries’ ability to pay dividends; and

 

   

make fundamental changes in our business, corporate structure or capital structure, including, among other things, entering into mergers, acquisitions, consolidations and other business combinations or selling all or substantially all of our assets.

As a result of these restrictions, we may be:

 

   

limited in how we conduct our business;

 

   

unable to raise additional debt or equity financing to operate during general economic or business downturns; or

 

   

unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect our ability to grow in accordance with our strategy.

A breach of the covenants or restrictions under the credit agreements that govern the Senior Secured Credit Facilities and the indenture that governs the Senior Notes could result in a default or an event of default. Such a

 

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default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Senior Secured Credit Facilities would permit the lenders under the Revolving Credit Agreement to terminate all commitments to extend further credit under such facility. Furthermore, if we were unable to repay the amounts due and payable under the Senior Secured Credit Facilities, those lenders under each facility could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or the holders of the Senior Notes were to accelerate the repayment of our indebtedness, we and our subsidiaries may not have sufficient assets to repay that indebtedness. In exacerbated or prolonged circumstances, one or more of these events could result in our bankruptcy or liquidation.

We rely on available borrowings under the Revolving Credit Agreement for cash to operate our business, and the availability of credit under the Revolving Credit Agreement may be subject to significant fluctuation.

In addition to cash we generate from our business, our principal existing source of cash is borrowings available under the Revolving Credit Agreement. As of December 31, 2019 and September 30, 2019, we had commitments available to be borrowed under the Revolving Credit Agreement of up to $150.0 million. We also have the option to increase the commitments under the Revolving Credit Agreement by up to $100.0 million, subject to certain conditions. There are limitations on our ability to incur the full $150.0 million of existing commitments under the Revolving Credit Agreement. Availability will be limited to the lesser of a borrowing base and $150.0 million. The borrowing base is calculated on a monthly (or more frequent under certain circumstances) valuation of our inventory, accounts receivable and certain cash balances. As a result, our access to credit under the Revolving Credit Agreement is potentially subject to significant fluctuation, depending on the value of the borrowing base-eligible assets as of any measurement date. The inability to borrow under the Revolving Credit Agreement may adversely affect our liquidity, financial position and results of operations.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under the Senior Secured Credit Facilities are at variable rates of interest and expose us to interest rate risk. If interest rates were to continue to increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease. Based on amounts outstanding as of December 31, 2019 and September 30, 2019, each 100 basis point change in interest rates would result in a $8.1 million and $8.1 million change, respectively, in annual interest expense on our indebtedness under the Senior Secured Credit Facilities. See “Description of Certain Indebtedness.” We do not currently hedge the risk of changes in the interest rate under the Senior Secured Credit Facilities. In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate interest payments or other instruments in order to reduce interest rate volatility. However, we may not maintain interest rate swaps with respect to all of our variable rate indebtedness, and any swaps or other instruments we enter into may not fully mitigate our interest rate risk.

Uncertainty relating to the LIBOR calculation process and potential phasing out of LIBOR in the future may adversely affect our financing costs.

Currently, the Revolving Credit Agreement and the Term Loan Credit Agreement utilize LIBOR (as defined below) or various alternative methods set forth in the Revolving Credit Agreement and the Term Loan Credit Agreement to calculate interest on any borrowings. National and international regulators and law enforcement agencies have conducted investigations into a number of rates or indices known as “reference rates.” Actions by such regulators and law enforcement agencies may result in changes to the manner in which certain reference rates are determined, their discontinuance or the establishment of alternative reference rates. In particular, on July 27, 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, or the FCA, which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. Such announcement indicates that the continuation of LIBOR on the current

 

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basis cannot and will not be guaranteed after 2021. As a result, it appears highly likely that LIBOR will be discontinued or modified by 2021.

At this time, it is not possible to predict the effect that these developments, any discontinuance, modification or other reforms to LIBOR or any other reference rate, or the establishment of alternative reference rates may have on LIBOR, other benchmarks or LIBOR-based debt instruments. Uncertainty as to the nature of such potential discontinuance, modification, alternative reference rates or other reforms could cause the interest rate calculated for the Revolving Credit Agreement and the Term Loan Credit Agreement to be materially different than expected, which could have a material adverse effect on our financing costs.

A lowering or withdrawal of the ratings assigned to our debt by rating agencies may increase our future borrowing costs and reduce our access to capital.

Our debt currently has a non-investment grade rating, and any rating assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant. Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing.

Risks Relating to This Offering and Ownership of Our Class A Common Stock

The market price of our Class A common stock may be volatile or may decline steeply or suddenly regardless of our operating performance. You may not be able to resell your shares at or above the initial public offering price and may lose all or part of your investment.

There has been no prior public market for our common stock prior to our initial public offering. The initial public offering price for our Class A common stock will be determined through negotiations among the underwriters and us, and may vary from the market price of our Class A common stock following this offering. If you purchase shares of Class A common stock in this offering, you may not be able to resell those shares at or above the initial public offering price. The market price of our Class A common stock may fluctuate or decline significantly in response to numerous factors, many of which are beyond our control, including:

 

   

actual or anticipated fluctuations in our revenues or other operating results;

 

   

variations between our actual operating results and the expectations of securities analysts, investors and the financial community;

 

   

any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information;

 

   

actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow us or our failure to meet these estimates or the expectations of investors;

 

   

additional shares of Class A common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales, including if existing stockholders sell shares into the market when the applicable “lock-up” periods end;

 

   

announcements by us or our competitors of significant products or features, innovations, acquisitions, strategic partnerships, joint ventures, capital commitments, divestitures or other dispositions;

 

   

loss of relationships with significant distributors, dealers or other customers;

 

   

changes in operating performance and stock market valuations of companies in our industry, including our competitors;

 

   

increases in interest rates or changes in tax laws that make it more costly for consumers to finance home renovation or purchases;

 

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difficulties in integrating any new acquisitions we may make;

 

   

loss of services from members of management or employees or difficulty in recruiting additional employees;

 

   

worsening of economic conditions in the United States and reduction in demand for our products;

 

   

price and volume fluctuations in the overall stock market, including as a result of general economic trends;

 

   

lawsuits threatened or filed against us, or events that negatively impact our reputation; and

 

   

developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies.

In addition, extreme price and volume fluctuations in the stock markets have affected and continue to affect the stock prices of many companies. Often, their stock prices have fluctuated in ways unrelated or disproportionate to their operating performance. In the past, stockholders have filed securities class action litigation against companies following periods of market volatility. Such securities litigation, if instituted against us, could subject us to substantial costs, divert resources and the attention of management from our business and seriously harm our business.

An active trading market for our Class A common stock may never develop or be sustained.

We have applied to list our Class A common stock on the NYSE under the symbol “AZEK”. However, we cannot be certain that an active trading market for our Class A common stock will develop on that exchange or elsewhere or, if developed, that any market will be sustained. Furthermore, even if we are approved to list our common stock on the NYSE, we cannot be certain that we will continue to satisfy the continued listing standards of the NYSE. If we fail to satisfy the continued listing standards, we could be de-listed, which would have a material adverse effect on the liquidity and price of our Class A common stock.

Future sales of our Class A common stock and other actions by existing stockholders could cause our stock price to decline.

If our existing stockholders, including employees, who have or obtain equity, sell or indicate an intention to sell, substantial amounts of our Class A common stock in the public market after the lock-up and legal restrictions on resale discussed in this prospectus lapse, the trading price of our Class A common stock could decline. Based on shares outstanding as of                     , upon the completion of this offering, we will have outstanding a total of                      shares of Class A common stock and                      shares of Class B common stock (assuming the underwriters exercise their option to purchase additional shares in full). Of these shares, only the shares of Class A common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, or the Securities Act, except for any shares held by persons who are not our “affiliates” as defined in Rule 144 under the Securities Act and who have complied with the holding period requirements of Rule 144 under the Securities Act.

Subject to certain exceptions described under “Underwriting,” we and all of our stockholders have entered into or will enter into agreements with the underwriters under which we and they have agreed or will agree, subject to certain exceptions, not to dispose of any shares of common stock, any options or warrants to purchase any shares of common stock or any securities convertible into or exchangeable for or that represent the right to receive shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus.

When the lock up period in these agreements expires, we and our stockholders will be able to sell shares in the public market. In addition, Barclays Capital Inc. and BofA Securities, Inc. may, together in their sole discretion, release all or some portion of the shares subject to the lock up agreements prior to the expiration of

 

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the lock-up period. See “Shares Eligible for Future Sale.” Sales of a substantial number of such shares, or the perception that such sales may occur, upon the expiration or early release of the securities subject to the lock up agreements could cause the price of our Class A common stock to decline or make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate.

In addition, the Sponsors have demand and “piggy-back” registration rights with respect to our common stock that they will retain following this offering. See “Shares Eligible for Future Sale” for a discussion of the shares of our common stock that may be sold into the public market in the future, including our common stock held by the Sponsors.

We currently do not intend to pay dividends on our Class A common stock, and our indebtedness could limit our ability to pay dividends on our Class A common stock.

After completion of this offering, we currently do not anticipate paying any cash dividends for the foreseeable future. In addition, the terms of our indebtedness limit our ability to pay dividends or make other distributions on, or to repurchase or redeem, shares of our capital stock. See “Description of Certain Indebtedness.” Consequently, your only opportunity to achieve a return on your investment in our company will be if the market price of our Class A common stock appreciates and you sell your shares at a profit. There is no guarantee that the price of our Class A common stock that will prevail in the market after this offering will ever exceed the price that you pay. For more information, see “Dividend Policy.” We cannot be sure that we will pay dividends in the future or continue to pay dividends if we do commence paying dividends.

If securities or industry analysts either do not publish research about us or publish inaccurate or unfavorable research about us, our business or our market, if they adversely change their recommendations regarding our Class A common stock, or if our operating results do not meet their expectations or any financial guidance we may provide, the trading price or trading volume of our Class A common stock could decline.

The trading market for our Class A common stock will be influenced in part by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors. If one or more of the analysts initiate research with an unfavorable rating or downgrade our Class A common stock, provide a more favorable recommendation regarding our competitors or publish inaccurate or unfavorable research about our business, our Class A common stock price would likely decline. If one or more analysts who may cover us were to cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price or trading volume of our Class A common stock to decline.

In addition, if we do not meet any financial guidance that we may provide to the public or if we do not meet expectations of securities analysts or investors, the trading price of our Class A common stock could decline significantly. Our operating results may fluctuate significantly from period to period as a result of changes in a variety of factors affecting us or our industry, many of which are difficult to predict. As a result, we may experience challenges in forecasting our operating results for future periods.

Future issuances of our Class A common stock, including upon conversion of our Class B common stock, could result in significant dilution to our stockholders, dilute the voting power of our Class A common stock and depress the market price of our Class A common stock.

Future issuances of our Class A common stock could result in dilution to existing holders of our Class A common stock. Such issuances, or the perception that such issuances may occur, could depress the market price of our Class A common stock. We may issue additional equity securities from time to time, including equity securities that could have rights senior to those of our Class A common stock. As a result, purchasers of shares of Class A common stock in this offering bear the risk that future issuances of equity securities may reduce the value of their shares and dilute their ownership interests. Also, to the extent outstanding stock-based awards are issued or become vested, there will be further dilution to the holders of our Class A common stock.

 

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We have a dual-class capitalization structure, which may pose a particular risk of dilution to the holders of our Class A common stock. Each share of our Class B common stock, which is not entitled to vote for the election, removal and replacement of our directors, is convertible at any time at the option of the holder of the Class B common stock into one share of Class A common stock, which is entitled to vote for the election, removal and replacement of our directors. Accordingly, conversion of shares of our Class B common stock into shares of our Class A common stock would dilute holders of Class A common stock, including holders of shares purchased in this offering, in terms of voting power in connection with the election, removal and replacement of our directors.

We will incur increased costs and devote substantial management time as a result of operating as a public company.

As a public company, we will incur significant legal, accounting, investor relations and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Exchange Act, and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC and the NYSE, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. We expect that the requirements of operating as a public company will increase our legal and financial compliance and investor relations costs and will make some activities more time consuming and costly. In addition, we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when we are no longer an emerging growth company, as defined by the JOBS Act. We will also need to establish an investor relations function. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of those costs.

Public company reporting and disclosure obligations and a broader shareholder base as a result of our status as a public company may expose us to a greater risk of claims by shareholders, and we may experience threatened or actual litigation from time to time. If claims asserted in such litigation are successful, our business and operating results could be adversely affected, and, even if claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them and the diversion of management resources, could adversely affect our business and operating results.

We are an “emerging growth company” and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.

We are an emerging growth company, as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, under the JOBS Act, emerging growth companies can delay the adoption of certain new or revised accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period, which may make comparison of our financial statements with those of other public companies more difficult. We cannot predict if investors will find our Class A common stock less attractive because we may rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.

 

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We may take advantage of these reporting exemptions until we are no longer an emerging growth company or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

If you purchase shares of our Class A common stock in this offering, you will experience substantial and immediate dilution in net tangible book value per share.

The assumed initial public offering price of $                     per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus, is substantially higher than the net tangible book value per share of our outstanding Class A common stock immediately after this offering. If you purchase shares of Class A common stock in this offering, you will experience substantial and immediate dilution in the pro forma net tangible book value per share of $                     per share as of                     , based on the assumed initial public offering price of $                     per share. That is because the price that you pay will be substantially greater than the pro forma net tangible book value per share of Class A common stock that you acquire. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of our capital stock. You will experience additional dilution to the extent that new securities are issued under our equity incentive plans or we issue additional shares of Class A common stock or Class B common stock in the future. See “Dilution.”

Risks Relating to Our Organizational Structure

Provisions in our certificate of incorporation and bylaws, each of which will be in effect upon the completion of this offering, could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our Class A common stock.

Our certificate of incorporation and bylaws, each of which will be in effect upon the completion of this offering, contain provisions that could depress the trading price of our Class A common stock by acting to discourage, delay or prevent a change of control of our company or changes in our management that our stockholders may deem advantageous. In particular, our certificate of incorporation and bylaws:

 

   

establish a classified board of directors so that not all members are elected at one time, which could delay the ability of stockholders to change the membership of a majority of our board of directors;

 

   

permit our board of directors to establish the number of directors and fill any vacancies (including vacancies resulting from an expansion in the size of our board of directors), except in the case of the vacancy of a Sponsor-designated director (in which case the Sponsor that designated the director will be able to fill the vacancy);

 

   

establish limitations on the removal of directors;

 

   

authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan;

 

   

provide that our board of directors is expressly authorized to make, alter or repeal our bylaws;

 

   

restrict the forum for certain litigation against us to Delaware;

 

   

provide that stockholders may not act by written consent following the time when the Sponsors collectively cease to beneficially own at least a majority of the shares of our outstanding common stock, which time we refer to as the Trigger Date, which would require stockholder action to be taken at an annual or special meeting of our stockholders;

 

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prohibit stockholders from calling special meetings following the Trigger Date, which would delay the ability of our stockholders to force consideration of a proposal or to take action, including with respect to the removal of directors; and

 

   

establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

Section 203 of the Delaware General Corporation Law, or the DGCL, prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person, individually or together with any other interested stockholder, who owns or within the last three years has owned 15% of our voting stock, unless the business combination is approved in a prescribed manner. We have elected to opt out of Section 203 of the DGCL. However, our certificate of incorporation will contain a provision that is of similar effect, except that it will exempt from its scope the Sponsors, any of their affiliates and certain of their respective direct or indirect transferees as described under “Description of Capital Stock—Anti-Takeover Provisions.”

Any provision of our certificate of incorporation, our bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of Class A common stock and could also affect the price that some investors are willing to pay for our Class A common stock. See “Description of Capital Stock—Anti-Takeover Provisions.”

Our certificate of incorporation, which will be in effect upon the completion of this offering, will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for a wide range of disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation, which will be in effect upon the completion of this offering, will provide that the Court of Chancery of the State of Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

 

   

any derivative action or proceeding brought on our behalf;

 

   

any action asserting a breach of fiduciary duty;

 

   

any action asserting a claim against us arising under the DGCL, our certificate of incorporation or our bylaws; and

 

   

any action asserting a claim against us that is governed by the internal-affairs doctrine.

This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. 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 certificate of incorporation.

The exclusive-forum provisions will also provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive-forum provision. However, there is substantial uncertainty as to whether a court would enforce the exclusive-forum provisions relating to causes of action arising under the Securities Act. For example, the Court of Chancery of the State of Delaware recently determined that a provision stating that federal district courts are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act is not enforceable. This decision may be reviewed and

 

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ultimately overturned by the Delaware Supreme Court. If a court were to find any of the exclusive-forum provisions in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business.

These exclusive-forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or employees, which may discourage lawsuits against us and our directors, officers and employees, although our stockholders will not be deemed to have waived our compliance with federal securities laws and the rules and regulations thereunder.

Our certificate of incorporation will contain a provision renouncing our interest and expectancy in certain corporate opportunities.

Under our certificate of incorporation, neither of the Sponsors nor any of their respective portfolio companies, funds or other affiliates, nor any of their officers, directors, employees, agents, stockholders, members or partners will have any duty to refrain from engaging, directly or indirectly, in the same business activities, similar business activities, or lines of business in which we operate. In addition, our certificate of incorporation provides that, to the fullest extent permitted by law, no officer or director of ours who is also an officer, director, employee, agent, stockholder, member, partner or affiliate of either of the Sponsors will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such individual directs a corporate opportunity to a Sponsor, instead of to us, or does not communicate information regarding a corporate opportunity to us that the officer, director, employee, agent, stockholder, member, partner or affiliate has directed to such Sponsor. For example, a director of our company who also serves as an officer, director, employee, agent, stockholder, member, partner or affiliate of one of the Sponsors, or any of their respective portfolio companies, funds, or other affiliates may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisition or other opportunities may not be available to us. These potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are allocated by either of the Sponsors to itself or themselves or their respective portfolio companies, funds or other affiliates instead of to us. A description of our obligations related to corporate opportunities under our certificate of incorporation are more fully described in “Description of Capital Stock—Corporate Opportunity.”

We are a holding company and rely on dividends, distributions, and other payments, advances and transfers of funds from our subsidiaries to meet our obligations.

We are a holding company that does not conduct any business operations of our own. As a result, we are largely dependent upon cash distributions and other transfers from our direct and indirect subsidiaries to meet our obligations. The agreements governing the indebtedness of our subsidiaries impose restrictions on our subsidiaries’ ability to pay dividends or other distributions to us. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Each of our subsidiaries is a distinct legal entity, and under certain circumstances legal and contractual restrictions may limit our ability to obtain cash from them and we may be limited in our ability to cause any future joint ventures to distribute their earnings to us. The deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could impair their ability to make distributions to us.

We continue to be controlled by the Sponsors, and the Sponsors’ interests may conflict with our interests and the interests of other stockholders.

Following this offering, the Sponsors will beneficially own                     % of our common stock (or                     % if the underwriters exercise their option to purchase additional shares in full). Pursuant to the stockholders agreement, or the Stockholders Agreement, that will be entered into among the Sponsors and us in connection with this offering, the Sponsors will have the right to designate a number of individuals to be

 

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included in the slate of nominees for election to our board of directors equal to the greater of up to                      directors and the number of directors comprising a majority of our board of directors for so long as the Sponsors collectively own 50% or more of the outstanding shares of our common stock. Except as otherwise described in this prospectus, for so long as the Sponsors collectively own less than 50% of the outstanding shares of our common stock, the Sponsors will have the right to designate that number of individuals to be included in the slate of nominees for election to our board of directors (rounded up to the nearest whole number or, if such rounding would cause the Sponsors to have the right to elect a majority of our board of directors, rounded to the nearest whole number) that is the same percentage of the total number of directors comprising our board as the collective percentage of common stock owned by the Sponsors. Because our board of directors will be divided into three staggered classes, the Sponsors may be able to influence or control our affairs and policies even after they cease to own a majority of our outstanding Class A common stock during the period in which the Sponsors’ nominees finish their terms as members of our board, but in any event no longer than would be permitted under applicable law and the NYSE listing requirements. Therefore, following the completion of this offering and for so long as the Sponsors continue to own 50% or more of our common stock, individuals affiliated with the Sponsors will have the power to elect a majority of our directors and will have effective control over the outcome of votes on all matters requiring approval by our board of directors or our stockholders regardless of whether other stockholders believe such matter is in our best interests.

In addition, following the completion of this offering, the Stockholders Agreement will provide that, for so long as the Sponsors collectively own at least 30% of the outstanding shares of our common stock, certain significant corporate actions will require the prior written consent of each of the Sponsors, subject to certain exceptions. If either Sponsor owns less than 10% of the outstanding shares of our common stock, such action will not be subject to the approval of such Sponsor and the shares of common stock owned by such Sponsor will be excluded in calculating the 30% threshold. See “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

These actions include:

 

   

merging or consolidating with or into any other entity, or transferring all or substantially all of our assets, taken as a whole, to another entity, or undertaking any transaction that would constitute a “Change of Control” as defined in our debt agreements;

 

   

acquiring or disposing of assets, in a single transaction or a series of related transactions, or entering into joint ventures, in each case with a value in excess of $75.0 million;

 

   

incurring indebtedness in a single transaction or a series of related transactions in an aggregate principal amount in excess of $100.0 million;

 

   

issuing our or our subsidiaries’ equity other than pursuant to an equity compensation plan approved by our stockholders or a majority of the directors designated by the Sponsors;

 

   

terminating the employment of our chief executive officer or hiring or designating a new chief executive officer;

 

   

entering into any transactions, agreements, arrangements or payments with either of the Sponsors or any other person who owns greater than or equal to 10% of our common stock then outstanding that are material or involve aggregate payments or receipts in excess of $500,000;

 

   

amending, modifying or waiving any provision of our organizational documents in a manner that adversely affects the Sponsors;

 

   

commencing any liquidation, dissolution or voluntary bankruptcy, administration, recapitalization or reorganization;

 

   

increasing or decreasing the size of our board of directors; and

 

   

entering into of any agreement to do any of the foregoing.

 

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The interests of the Sponsors and their affiliates, including funds affiliated with the Sponsors, could conflict with or differ from our interests or the interests of our other stockholders. For example, the concentration of ownership held by the Sponsors could delay, defer or prevent a change in control of our company or impede a merger, takeover or other business combination which may otherwise be favorable for us. Additionally, the Sponsors and their affiliates are in the business of making investments in companies and may, from time to time, acquire and hold interests in or provide advice to businesses that compete directly or indirectly with us, or are suppliers or customers of ours. Any such investment may increase the potential for the conflicts of interest discussed in this risk factor. So long as funds affiliated with the Sponsors continue to directly or indirectly own a significant amount of our equity, even if such amount is less than 50%, the Sponsors will continue to be able to substantially influence or effectively control our ability to enter into corporate transactions.

We are a “controlled company” within the meaning of the NYSE rules and, as a result, qualify for and intend to rely on exemptions from certain corporate governance requirements.

Following this offering, affiliates of the Sponsors will continue to control a majority of the voting power of our outstanding voting stock, and as a result we will be a controlled company within the meaning of the NYSE corporate governance standards. Under the NYSE rules, a company of which more than 50% of the voting power is held by another person or group of persons acting together is a controlled company and may elect not to comply with certain corporate governance requirements, including the requirements that:

 

   

a majority of the board of directors consist of independent directors;

 

   

the nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

the compensation committee be composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

We intend to utilize these exemptions as long as we remain a controlled company. As a result, we will not have a majority of independent directors and our nominating and corporate governance committee and compensation committee will not consist entirely of independent directors. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the                     .

Pursuant to Rule 10C-1 under the Exchange Act, the NYSE has adopted amendments to its listing standards that require, among other things, that:

 

   

compensation committees be composed of fully independent directors, as determined pursuant to new independence requirements;

 

   

compensation committees be explicitly charged with hiring and overseeing compensation consultants, legal counsel, and other committee advisors; and

 

   

compensation committees be required to consider, when engaging compensation consultants, legal counsel, or other advisors, certain independence factors, including factors that examine the relationship between the consultant or advisor’s employer and us.

As a “controlled company,” we will not be subject to these compensation committee independence requirements.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. Many statements included in this prospectus that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. These risks and other factors include, but are not limited to, those listed under “Risk Factors.” In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “predict,” “project,” “potential,” “should,” “will,” “would” or the negative of these terms or other comparable terminology. In particular, statements about the markets in which we operate, including growth of our various markets and growth in the use of engineered products, statements about potential new products and product innovation and our expectations, beliefs, plans, strategies, objectives, prospects, assumptions or future events or performance contained in this prospectus under the headings “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business” are forward-looking statements. Forward-looking statements include, but are not limited to, statements about:

 

   

our market opportunity and the potential growth of that market;

 

   

our strategy, outcomes and growth prospects;

 

   

trends in our industry and markets; and

 

   

the competitive environment in which we operate.

Some of the factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include:

 

   

demand for our products is significantly influenced by general economic conditions and trends in consumer spending on outdoor living and home exteriors, and adverse trends in, among other things, the health of the economy, repair and remodel and new construction activity, industrial production and institutional funding constraints;

 

   

risks associated with us competing against other manufacturers of (i) engineered and composite products; and (ii) products made from wood, metal and other traditional materials;

 

   

risks related to the seasonal nature of certain of our products and the impact that changes in weather conditions and product mix may have on our sales;

 

   

our ability to develop new and improved products and effectively manage the introduction of new products;

 

   

our ability to effectively manage changes in our manufacturing process resulting from cost savings and integration initiatives and the introduction of new products;

 

   

risks related to our ability to accurately predict demand for our products and risks related to our ability to maintain relationships with key distributors or other customers;

 

   

risks related to shortages in supply, price increases or deviation in the quality of raw materials;

 

   

our ability to retain management;

 

   

risks related to acquisitions or joint ventures we may pursue;

 

   

our ability to maintain product quality and product performance at an acceptable cost, and potential exposures resulting from our product warranties;

 

   

our ability to ensure that our products comply with local building codes and ordinances;

 

   

risks arising from the material weaknesses we have identified in our internal control over financial reporting and any failure to remediate these material weaknesses;

 

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our ability to maintain an effective system of internal controls and produce timely and accurate financial statements or comply with applicable regulations;

 

   

our ability to protect our intellectual property rights;

 

   

the increased expenses associated with being a public company;

 

   

risks associated with our substantial indebtedness and debt service;

 

   

our reliance on dividends, distributions and other payments from our subsidiaries to meet our obligations; and

 

   

other risks and uncertainties, including those described under “Risk Factors.”

We have based the forward-looking statements contained in this prospectus primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, business strategy and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions and other factors described under “Risk Factors” and elsewhere in this prospectus. These risks are not exhaustive. Other sections of this prospectus include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. We cannot be sure that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in, or implied by, the forward-looking statements.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this prospectus, and while we believe that information forms a reasonable basis for such statements, that information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.

The forward-looking statements made in this prospectus relate only to events as of the date on which such statements are made. We undertake no obligation to update any forward-looking statements after the date of this prospectus or to conform such statements to actual results or revised expectations, except as required by law.

 

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MARKET AND INDUSTRY DATA

We obtained the industry and market and competitive position data used throughout this prospectus from our own internal estimates and research, as well as from industry and general publications. Internal estimates are derived from information released by industry analysts and third-party sources, our internal research and our industry experience, and are based on assumptions made by us based on that information and our knowledge of our industry and market, which we believe to be reasonable. Certain industry and market data and forecasts in this prospectus are based on the independent research of Principia and Freedonia. In addition, while we believe the industry and market data included in this prospectus are reliable and are based on reasonable assumptions, the industry and market data involve risks and uncertainties and are subject to change based on various factors, including those discussed in “Risk Factors.” These and other factors could cause results to differ materially from those expressed in, or implied by, the estimates made by independent parties and by us. Furthermore, we cannot assure you that a third party using different methods to assemble, analyze or compute industry and market data would obtain the same results.

Information based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. In some cases, we do not expressly refer to the sources from which data is derived.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $                     million (or approximately $                     million if the underwriters exercise their option to purchase additional shares of Class A common stock from us in full) based upon an assumed initial public offering price of $                     per share, the midpoint of the estimated price range set forth on the cover page of this prospectus, after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase (decrease) in the assumed initial public offering price of $                     per share of Class A common stock, the midpoint of the estimated price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $                     million, assuming that the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1.0 million shares in the number of shares of Class A common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $                     million, assuming the assumed initial public offering price of $                     per share remains the same, and after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use net proceeds received by us from this offering to redeem the Senior Notes, plus accrued and unpaid interest thereon. As of December 31, 2019, $315.0 million aggregate principal amount of the Senior Notes was outstanding. The Senior Notes mature on October 1, 2021 and bear interest at an annual rate of 8.000%. To the extent the proceeds we receive in this offering are lower than currently estimated, we may, if necessary, reduce the principal amount of Senior Notes that will be redeemed.

We will use any additional net proceeds raised in this offering for general corporate purposes, including working capital, operating expenses and capital expenditures. We may also use a portion of any additional net proceeds we receive from this offering for acquisitions or other strategic investments, although we do not currently have any specific plans to do so.

We intend to invest the net proceeds to us from this offering that are not used as described above (or pending such use) in investment-grade, interest-bearing instruments. The precise allocation of funds among these uses will depend upon future developments in or affecting our business and the emergence of future opportunities.

 

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CORPORATE CONVERSION

We currently operate as a Delaware limited liability company under the name CPG Newco LLC. CPG Newco LLC is a holding company which holds all of the limited liability company interests in CPG International LLC, the entity which directly and indirectly holds all of the equity interests in our operating subsidiaries. Prior to the effectiveness of the registration statement of which this prospectus forms a part, CPG Newco LLC will convert into a Delaware corporation pursuant to a statutory conversion and will change its name to The AZEK Company Inc. In addition, a special purpose entity, CPG Holdco LLC, which was formed at the time of the acquisition of CPG Newco LLC solely for the purpose of holding membership interests in CPG Newco LLC and that will continue to hold such interests until the Corporate Conversion, will be merged with and into us. In this prospectus, we refer to all of the transactions related to our conversion into a corporation and the merger described above as the Corporate Conversion.

The purpose of the Corporate Conversion is to reorganize our corporate structure so that the entity that is offering Class A common stock to the public in this offering is a corporation rather than a limited liability company.

In conjunction with the Corporate Conversion, all of our outstanding membership interests will be converted into an aggregate of                      shares of our common stock.                      shares of common stock will be designated Class A common stock and                      shares of common stock will be designated Class B common stock. The number of shares of Class A common stock and Class B common stock issuable in connection with the Corporate Conversion will be determined pursuant to the applicable provisions of the plan of conversion.

As a result of the Corporate Conversion, The AZEK Company Inc. will succeed to all of the property and assets of CPG Newco LLC and will succeed to all of the debts and obligations of CPG Newco LLC. The AZEK Company Inc. will be governed by a certificate of incorporation filed with the Delaware Secretary of State and bylaws, the material provisions of which are described under the heading “Description of Capital Stock.” On the effective date of the Corporate Conversion, each of our directors and officers will be as described elsewhere in this prospectus. See “Management.”

Except as otherwise noted herein, the Consolidated Financial Statements included elsewhere in this prospectus are those of CPG Newco LLC and its consolidated operations. We do not expect that the Corporate Conversion will have an effect on our results of operations.

 

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DIVIDEND POLICY

We did not declare any dividends in fiscal years 2019 and 2018, and we currently do not anticipate paying any cash dividends after this offering and for the foreseeable future. Instead, we anticipate that all of our earnings on our common stock in the foreseeable future will be used to repay debt, for working capital, to support our operations and to finance the growth and development of our business. Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including restrictions in our current and future debt instruments, our future earnings, capital requirements, financial condition, prospects, and applicable Delaware law, which provides that dividends are only payable out of surplus or current net profits.

As a holding company, our ability to pay dividends depends on our receipt of cash dividends from our operating subsidiaries. Our ability to pay dividends will therefore be restricted as a result of restrictions on their ability to pay dividends to us, including under the agreements governing our existing and any future indebtedness. See “Risk Factors—Risks Relating to This Offering and Ownership of Our Class A Common Stock,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Description of Certain Indebtedness.”

 

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CAPITALIZATION

The following table describes our cash, cash equivalents and available-for-sale securities and capitalization as of December 31, 2019:

 

   

on an actual basis;

 

   

on a pro forma basis to give effect to the Corporate Conversion; and

 

   

on a pro forma as adjusted basis to additionally give effect to (i) the sale of                      shares of our Class A common stock in this offering, assuming an initial public offering price of $                     per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us and (ii) the application of the estimated net proceeds from this offering as described under “Use of Proceeds.”

You should read the following information together with the information contained under the headings “Use of Proceeds,” “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and the related Notes appearing at the end of this prospectus.

 

    As of December 31, 2019  
    Actual     Pro forma     Pro forma
as adjusted
 
(In thousands, except share and per share data)      

Cash and Cash Equivalents

  $ 22,468                                                        
 

 

 

   

 

 

   

 

 

 

Total Debt:

     

Revolving Credit Agreement

  $ —        

Term Loan Credit Agreement

    806,491      

Senior Notes

    315,000      
 

 

 

   

 

 

   

 

 

 

Total debt

  $ 1,121,491      
 

 

 

   

 

 

   

 

 

 

Member’s equity:

     

1 unit outstanding(1)

  $ —        

Additional paid-in capital(1)

    651,084      

Accumulated deficit(1)

    (171,088    
 

 

 

   

 

 

   

 

 

 

Total member’s equity(1)

  $ 479,996      
 

 

 

   

 

 

   

 

 

 

Stockholders’ equity:

     

Preferred stock, $0.001 par value; no shares authorized, issued or outstanding, actual;                      shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted

     

Class A common stock, $0.001 par value; no shares authorized, issued or outstanding, actual;                      shares authorized,                      shares issued and outstanding, pro forma;                      shares authorized,                      shares issued and outstanding, pro forma as adjusted(1)

     

Class B common stock, $0.001 par value; no shares authorized, issued or outstanding, actual;                      shares authorized,                      shares issued and outstanding, pro forma;                    shares authorized,                    shares issued and outstanding, pro forma as adjusted(1)

     

Additional paid-in capital(1)

     

Accumulated deficit(1)

     
 

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     
 

 

 

   

 

 

   

 

 

 

Total capitalization

  $ 1,601,487      
 

 

 

   

 

 

   

 

 

 

 

(1)

In connection with the Corporate Conversion, the membership interests and member’s accumulated deficit will be reduced to zero to reflect the elimination of all outstanding interests in CPG Newco LLC and corresponding adjustments will be reflected as Class A common stock, Class B common stock, additional paid-in capital, accumulated deficit and total stockholders’ equity in CPG Newco LLC.

 

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Assuming no change in the number of shares offered by us as set forth on the cover page of this prospectus, a $1.00 increase (decrease) in the assumed initial public offering price of $                     per share of Class A common stock (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) each of cash and cash equivalents, additional paid-in capital, and total equity by $                    , would decrease (increase) total debt by $                    , and would increase (decrease) total capitalization by $                    , after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us.

Similarly, a                      share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) each of cash and cash equivalents, additional paid-in capital, and total equity by $                    , would decrease (increase) total debt by $                    , and would increase (decrease) total capitalization by $                    , after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us, based on the assumed initial public offering price of $                     per share, which is the midpoint of the price range set forth on the cover of this prospectus, remained the same.

The table above does not include                      shares of Class A common stock reserved for future issuance under our Equity Incentive Plan, as well as any future increases, including annual automatic increases, in the number of shares of Class A common stock reserved for issuance thereunder.

 

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DILUTION

If you invest in our Class A common stock, your ownership interest in us will be diluted to the extent of the difference between the initial public offering price in this offering per share of our Class A common stock and the pro forma as adjusted net tangible book value per share of our common stock upon consummation of this offering. Pro forma net tangible book value per share represents the book value of our total tangible assets less the book value of our total liabilities divided by the total number of shares of common stock then issued and outstanding, on a pro forma basis after giving effect to the Corporate Conversion.

After giving effect to the Corporate Conversion, pro forma net tangible book value (deficit) as of                     , 2019 was $                     million, or $                     per share based on                      shares of our common stock outstanding. After giving effect to (i) our sale of                      shares of Class A common stock in this offering, at an assumed initial public offering price of $                     per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting assumed underwriting discounts and commissions and estimated offering expenses payable by us and (ii) the application of the estimated net proceeds from this offering as described under “Use of Proceeds,” our pro forma as adjusted net tangible book value as of                     , 2019 would have been $                     million, or $                     per share (assuming no exercise of the underwriters’ option to purchase additional shares of our Class A common stock). This amount represents an immediate increase in pro forma net tangible book value of $                     per share of Class A common stock to our existing investors before this offering and an immediate dilution of $                     per share to new investors purchasing Class A common stock in this offering. The following table illustrates this dilution per share:

 

Assumed initial public offering price per share

      $                        

Pro forma net tangible book value (deficit) per share as of                     , 2019

   $                           

Increase (decrease) in pro forma net tangible book value (deficit) per share attributable to this offering

   $       
  

 

 

    

Pro forma as adjusted net tangible book value (deficit) per share after giving effect to this offering

      $    
     

 

 

 

Dilution per share to new investors in this offering

      $    
     

 

 

 

A $1.00 increase (decrease) in 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, would increase (decrease) our pro forma as adjusted net tangible book value (deficit) per share after this offering by $                     million and dilution per share to new investors purchasing Class A common stock in this offering by $                    , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting assumed underwriting discounts and commissions and estimated offering expenses by us. An increase (decrease) of                      shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value after this offering by $                     million and $                     per share and decrease (increase) the dilution per share to new investors purchasing Class A common stock in this offering by $                    , assuming no change in the assumed initial public offering price per share and after deducting assumed underwriting discounts and commissions and estimated offering expenses by us.

If the underwriters exercise in full their option to purchase                      additional shares of Class A common stock in this offering, our pro forma as adjusted net tangible book value (deficit) per share after this offering would be $                     and the dilution in pro forma as adjusted net tangible book value (deficit) per share to new investors purchasing Class A common stock in this offering would be $                     , assuming no change in the initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 

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The following table summarizes, on a pro forma as adjusted basis as of                     , 2019, the differences between the number of shares of Class A common stock purchased from us, the total consideration paid and the average price per share paid by existing stockholders and to be paid by the new investors purchasing shares of Class A common stock in this offering, at an 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 underwriting discounts and commissions and offering expenses payable by us in connection with this offering.

 

     Shares purchased     Total consideration     Average
price per share
 
     Number      Percent     Amount      Percent  

Existing investors

   $                                                     $                                                     $                        

New investors in this offering

   $                 $                 $    
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $                 $                 $    

A $1.00 increase (decrease) in 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, would increase (decrease) the total consideration paid by new investors in this offering by $                     million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by                      percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by                      percentage points, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and before deducting the underwriting discounts and commissions and offering expenses payable by us in connection with this offering. An increase (decrease) of                      shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by new investors by $                     million and, in the case of an increase, would increase the percentage of total consideration paid by new investors by                      percentage points and, in the case of a decrease, would decrease the percentage of total consideration paid by new investors by                      percentage points, assuming no change in the assumed initial public offering price per share and before deducting the underwriting discounts and commissions and offering expenses payable by us in connection with this offering.

The table above assumes no exercise of the underwriters’ option to purchase additional shares in this offering. If the underwriters’ option to purchase additional shares is fully exercised, the number of shares of our common stock held by existing stockholders would be reduced to                     % of the total number of shares of our common stock outstanding after this offering, and the number of shares of Class A common stock held by new investors purchasing common stock in this offering would be increased to                     % of the total number of shares of our common stock outstanding after this offering.

The discussion and tables above give effect to the Corporate Conversion and exclude shares of our common stock reserved for issuance under our Equity Incentive Plan.

We expect to require additional capital to fund our current and future operating plans. To the extent additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders. See “Risk Factors—Risks Relating to This Offering and Ownership of Our Class A Common Stock—Future issuances of our Class A common stock, including upon conversion of our Class B common stock, could result in significant dilution to our stockholders, dilute the voting power of our Class A common stock and depress the market price of our Class A common stock.”

 

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SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated statements of income data and selected consolidated statements of cash flow data for fiscal years 2019 and 2018 and the selected consolidated balance sheet data as of September 30, 2019 and September 30, 2018 have been derived from our Consolidated Financial Statements included elsewhere in this prospectus. The selected consolidated statement of income data and summary consolidated statement of cash flow data for fiscal year 2017 have been derived from our Consolidated Financial Statements not included in this prospectus. The selected consolidated statements of income data and selected consolidated statements of cash flow data for the three months ended December 31, 2019 and 2018 and the selected consolidated balance sheet data as of December 31, 2019 have been derived from our unaudited Consolidated Financial Statements included elsewhere in this prospectus. In the opinion of management, our unaudited Consolidated Financial Statements were prepared on the same basis as our audited Consolidated Financial Statements and include all adjustments necessary for a fair presentation of the financial information set forth in those statements.

Our historical results are not necessarily indicative of future operating results and our results for the three months ended December 31, 2019 are not necessarily indicative of the results that may be expected for the full fiscal year or any other period. The selected financial data set forth below should be read together with “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements and related Notes included elsewhere in this prospectus.

 

     Three Months ended
December 31,
    Years Ended September 30,  
(In thousands, except unit/share and per unit/share data)    2019     2018     2019     2018     2017  

Consolidated Statements of Income Data:

          

Net Sales

   $ 166,043     $ 137,431     $ 794,203     $ 681,805     $ 632,631  

Cost of Sales

     (114,752     (96,525     (541,006     (479,769     (463,643
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

     51,291       40,906       253,197       202,036       168,988  

Selling, general and administrative expenses

     (43,473     (42,467     (183,572     (144,688     (147,003

Impairment of goodwill

     —           —         —         (32,200

Impairment of property, plant and equipment

     —           —         —         (11,380

Other general expenses

     (1,978     (1,810     (9,076     (4,182     —    

Gain (loss) on disposal of property, plant and equipment

     73       (1,247     (1,495     (791     (4,288
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     5,913       (4,618     59,054       52,375       (25,883

Interest expense

     (19,759     (20,490     (83,205     (68,742     (61,577

Loss before income taxes

     (13,846     (25,108     (24,151     (16,367     (87,460

Income tax benefit

     4,000       5,837       3,955       23,112       20,049  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (9,846   $ (19,271   $ (20,196   $ 6,745     $ (67,411
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted earnings (loss) per unit attributable to the member

   $ (9,846   $ (19,271   $ (20,196   $ 6,745     $ (67,411
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted weighted-average units outstanding

     1       1       1       1       1  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted pro forma earnings (loss) per share attributable to common stockholders(1)

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted pro forma weighted-average common shares outstanding(1)

          
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated Statements of Cash Flow Data:

          

Net cash provided by (used in) operating activities

   $ (56,361   $ (50,438   $ 94,872     $ 67,302     $ 57,368  

Net cash provided by (used in) investing activities

     (19,018     (12,943     (62,935     (335,682     (22,511

Net cash provided by (used in) financing activities

     (8,100     (3,065     (8,273     248,742       (12,104

Purchases of property, plant and equipment

     (19,131     (12,943     (63,006     (42,758     (22,511

 

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     As of
December 31,
     As of September 30,  
     2019      2018  
     2019      Actual      Actual  
(In thousands)                     

Consolidated Balance Sheet Data:

        

Cash and cash equivalents

   $ 22,468      $ 105,947      $ 82,283  

Working capital(2)

     140,973        150,593        138,870  

Total assets

     1,729,291        1,788,263        1,779,180  

Total current liabilities

     96,322        139,997        109,799  

Total long-term debt—less current portion

     1,102,144        1,103,313        1,107,989  

Total member’s/stockholders’ equity

     479,996        490,023        505,553  

 

(1)

Pro forma to reflect the Corporate Conversion, without giving effect to the issuance of shares of Class A common stock in this offering.

(2)

Working capital represents current assets less current liabilities.

Non-GAAP Financial Measures

To supplement our Consolidated Financial Statements prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we use certain non-GAAP performance financial measures, as described below, to provide investors with additional useful information about our financial performance, to enhance the overall understanding of our past performance and future prospects and to allow for greater transparency with respect to important metrics used by our management for financial and operational decision-making. We are presenting these non-GAAP financial measures to assist investors in seeing our financial performance from management’s view and because we believe they provide an additional tool for investors to use in comparing our core financial performance over multiple periods with other companies in our industry. Our GAAP financial results include significant expenses that are not indicative of our ongoing operations as detailed in the tables below.

However, non-GAAP financial measures have limitations in their usefulness to investors because they have no standardized meaning prescribed by GAAP and are not prepared under any comprehensive set of accounting rules or principles. In addition, non-GAAP financial measures may be calculated differently from, and therefore may not be directly comparable to, similarly titled measures used by other companies. As a result, non-GAAP financial measures should be viewed as supplementing, and not as an alternative or substitute for, our Consolidated Financial Statements prepared and presented in accordance with GAAP.

 

     Three Months Ended
December 31,
    Years Ended September 30,  
     2019     2018     2019     2018     2017  
(In thousands)                               

Non-GAAP financial measures:

          

Adjusted Gross Profit

   $ 66,442     $ 54,558     $ 314,858     $ 254,075     $ 224,516  

Adjusted Net Income

     11,604       5,264       72,277       59,226       42,812  

Adjusted EBITDA

     33,806       27,375       179,566       150,065       131,266  

Adjusted EBITDA Margin

     20.4     19.9     22.6     22.0     20.7

Adjusted Gross Profit, Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin

We define Adjusted Gross Profit as gross profit before depreciation and amortization, business transformation costs and acquisition costs as described below. We define Adjusted Net Income as net income (loss) before depreciation and amortization, share-based compensation costs, asset impairment costs, business transformation costs, acquisition costs, initial public offering costs, capital structure transaction costs and certain other costs as described below. In addition, Adjusted Net Income for fiscal 2018 excludes the net benefit related to the remeasurement of our deferred tax assets and deferred tax liabilities as a result of the Tax Act. We define Adjusted EBITDA as net income (loss) before interest expense, net, income tax (benefit) expense and

 

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depreciation and amortization and by adding to or subtracting therefrom items of expense and income as described above. Adjusted EBITDA Margin is equal to Adjusted EBITDA divided by net sales. We believe Adjusted Gross Profit, Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin are useful to investors because they help identify underlying trends in our business that could otherwise be masked by certain expenses that can vary from company to company depending on, among other things, its financing, capital structure and the method by which its assets were acquired, and can also vary significantly from period to period. We also add back depreciation and amortization and share-based compensation because we do not consider them indicative of our core operating performance. We believe their exclusion facilitates comparisons of our operating performance on a period-to-period basis. Therefore, we believe that showing gross profit and net income, as adjusted to remove the impact of these expenses, is helpful to investors in assessing our gross profit and net income performance in a way that is similar to the way management assesses our performance. Additionally, EBITDA and EBITDA margin are common measures of operating performance in our industry, and we believe they facilitate operating comparisons. Our management also uses Adjusted Gross Profit, Adjusted EBITDA and Adjusted EBITDA Margin in conjunction with other GAAP financial measures for planning purposes, including as a measure of our core operating results and the effectiveness of our business strategy, and in evaluating our financial performance. Management considers Adjusted Gross Profit and Adjusted Net Income as useful measures because our cost of sales includes the depreciation of property, plant and equipment used in the production of products and the amortization of various intangibles related to our manufacturing processes.

Adjusted Gross Profit, Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

 

   

These measures do not reflect our cash expenditures, future requirements for capital expenditures or contractual commitments;

 

   

These measures do not reflect changes in, or cash requirements for, our working capital needs;

 

   

Adjusted EBITDA and Adjusted EBITDA Margin do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;

 

   

Adjusted EBITDA and Adjusted EBITDA Margin do not reflect our income tax expense or the cash requirements to pay our taxes;

 

   

Adjusted Gross Profit, Adjusted Net Income and Adjusted EBITDA exclude the expense of depreciation and amortization of our assets, and, although these are non-cash expenses, the assets being depreciated may have to be replaced in the future;

 

   

Adjusted Net Income and Adjusted EBITDA exclude the expense associated with our equity compensation plan, although equity compensation has been, and will continue to be, an important part of our compensation strategy;

 

   

Adjusted Gross Profit, Adjusted Net Income and Adjusted EBITDA exclude certain business transformation costs, acquisition costs and other costs, each of which can affect our current and future cash requirements; and

 

   

Other companies in our industry may calculate Adjusted Gross Profit, Adjusted Net Income, Adjusted EBITDA and Adjusted EBITDA Margin differently than we do, limiting their usefulness as comparative measures.

Because of these limitations, none of these metrics should be considered indicative of discretionary cash available to us to invest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

 

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The following table presents reconciliations of the most comparable financial measures calculated in accordance with GAAP to these non-GAAP financial measures for the periods indicated:

Adjusted EBITDA and Adjusted EBITDA Margin Reconciliation

 

     Three Months Ended
December 31,
    Years Ended
September 30,
 
         2019             2018             2019             2018             2017      
(In thousands)                               

Net income (loss)

   $ (9,846   $ (19,271   $ (20,196   $ 6,745     $ (67,411

Interest expense

     19,759       20,490       83,205       68,742       61,577  

Depreciation and amortization

     24,141       22,459       93,929       77,665       77,657  

Tax benefit

     (4,000     (5,837     (3,955     (23,112     (20,049

Share-based compensation costs

     1,046       982       3,682       3,099       1,459  

Asset impairment costs(1)

     —         —         —         920       48,846  

Business transformation costs(2)

     163       3,833       16,560       5,822       8,562  

Capital structure transaction costs(3)

     —         —         —         367       295  

Acquisition costs(4)

     565       2,521       4,110       7,361       —    

Initial public offering costs

     1,978       1,810       9,076       789       —    

Other costs(5)

     —         388       (6,845     1,667       20,330  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total adjustments

     43,652       46,646       199,762       143,320       198,677  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 33,806     $ 27,375     $ 179,566     $ 150,065     $ 131,266  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA Margin

     20.4     19.9     22.6     22.0     20.7
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Asset impairment costs reflect tangible and intangible asset impairment costs of $0.9 million and $48.8 million for fiscal 2018 and 2017, respectively. The tangible asset impairment costs for fiscal 2017 include the write off of $1.1 million of inventory relating to certain products determined not to be commercially viable.

(2)

Business transformation costs reflect consulting costs related to repositioning of our brands of $0.0 million and $0.4 million for the three months ended December 31, 2019 and 2018, respectively, and $4.3 million, $0.0 million and $2.0 million in fiscal 2019, 2018 and 2017, respectively, compensation costs related to the transformation of the senior management team of $0.2 million and $0.6 million for the three months ended December 31, 2019 and 2018, respectively, and $2.3 million, $0.2 million and $4.3 million in fiscal 2019, 2018 and 2017, respectively, costs related to the relocation of our corporate headquarters of $2.0 million in fiscal 2019, startup costs of our new recycling facility of $5.3 million in fiscal 2019, and other integration-related costs of $0.0 million and $2.8 million for the three months ended December 31, 2019 and 2018, respectively, and $2.7 million, $5.6 million and $2.3 million in fiscal 2019, 2018 and 2017, respectively.

(3)

Capital structure transaction costs reflect non-capitalizable debt and equity issuance costs.

(4)

Acquisition costs reflect costs directly related to completed acquisitions of $0.6 million and $2.5 million for the three months ended December 31, 2019 and 2018, respectively, and $4.1 million and $4.9 million in fiscal 2019 and 2018, respectively, and inventory step-up adjustments related to recording the inventory of acquired businesses at fair value on the date of acquisition of $2.4 million in fiscal 2018.

(5)

Other costs reflect costs for legal defense of $0.0 million and $0.4 million for the three months ended December 31, 2019 and 2018, respectively, and $0.9 million, $1.5 million and $5.2 million in fiscal 2019, 2018 and 2017, respectively, insurance reimbursement of ($7.7) million in fiscal 2019, settlement costs of $0.0 million and $15.0 million in fiscal 2018 and 2017, respectively, and other miscellaneous adjustments of $0.0 million, $0.2 million and $0.1 million in fiscal 2019, 2018 and 2017, respectively.

Adjusted Gross Profit Reconciliation

 

     Three Months Ended
December 31,
     Years Ended
September 30,
 
         2019              2018              2019              2018              2017      
(In thousands)                                   

Gross profit

   $ 51,291      $ 40,906      $ 253,197      $ 202,036      $ 168,988  

Depreciation and amortization(1)

     15,151        13,282        56,398        49,611        53,917  

Business transformation costs(2)

     —          370        5,263        —          1,611  

Acquisition costs(3)

     —          —          —          2,428        —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted Gross Profit

   $ 66,442      $ 54,558      $ 314,858      $ 254,075      $ 224,516  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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(1)

Depreciation and amortization for the three months ended December 31, 2019 and 2018, and fiscal 2019, 2018 and 2017 consists of $8.9 million, $6.3 million, $28.9 million, $23.0 million and $27.2 million, respectively, of depreciation and $6.2 million, $6.9 million, $27.5 million, $26.6 million and $26.7 million, respectively, of amortization of intangibles, comprised of intangibles relating to our manufacturing processes.

(2)

Business transformation costs reflect startup costs of our new recycling facility of $5.3 million in fiscal 2019 and other integration-related expenses for the three months ended December 31, 2018 and in fiscal 2017.

(3)

Acquisition costs reflect inventory step-up adjustments related to recording the inventory of acquired businesses at fair value on the date of acquisition.

Adjusted Net Income Reconciliation

 

     Three Months Ended
December 31,
    Years Ended
September 30,
 
         2019             2018             2019             2018             2017      
(In thousands)                               

Net income (loss)

   $ (9,846   $ (19,271   $ (20,196   $ 6,745     $ (67,411

Depreciation and amortization(1)

     24,141       22,459       93,929       77,665       77,657  

Share-based compensation costs

     1,046       982       3,682       3,099       1,459  

Asset impairment costs(2)

     —         —         —         920       48,846  

Business transformation costs(3)

     163       3,833       16,560       5,822       8,562  

Capital structure transaction costs(4)

     —         —         —         367       295  

Acquisition costs(5)

     565       2,521       4,110       7,361       —    

Initial public offering costs

     1,978       1,810       9,076       789       —    

Other costs(6)

     —         388       (6,845     1,667       20,330  

Tax impact of adjustments(7)

     (6,443     (7,458     (28,039     (22,702     (46,926

Tax Act remeasurement(8)

     —         —         —         (22,507     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Net Income

   $ 11,604     $ 5,264     $ 72,277     $ 59,226     $ 42,812  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Depreciation and amortization reflects depreciation of $10.3 million and $7.2 million for the three months ended December 31, 2019 and 2018, respectively, and $33.7 million, $26.3 million and $30.0 million in fiscal 2019, 2018 and 2017, respectively, and amortization of $13.8 million and $15.2 million for the three months ended December 31, 2019 and 2018, respectively, and $60.2 million, $51.4 million and $47.6 million in fiscal 2019, 2018 and 2017, respectively.

(2)

Asset impairment costs reflect tangible and intangible asset impairment costs of $0.9 million and $48.8 million in fiscal 2018 and 2017. The tangible asset impairment costs for fiscal 2017 include the write off of $1.1 million of inventory relating to certain products determined not to be commercially viable.

(3)

Business transformation costs reflect consulting costs related to repositioning of our brands of $0.0 million and $0.4 million for the three months ended December 31, 2019 and 2018, respectively, and $4.3 million, $0.0 million and $2.0 million in fiscal 2019, 2018 and 2017, respectively, compensation costs related to the transformation of the senior management team of $0.2 million and $0.6 million for the three months ended December 31, 2019 and 2018, respectively, and $2.3 million, $0.2 million and $4.3 million in fiscal 2019, 2018 and 2017, respectively, costs related to the relocation of our corporate headquarters of $2.0 million in fiscal 2019, startup costs of our new recycling facility of $5.3 million in fiscal 2019, and other integration-related costs of $0.0 million and $2.8 million for the three months ended December 31, 2019 and 2018, respectively, and $2.7 million, $5.6 million and $2.3 million in fiscal 2019, 2018 and 2017, respectively.

(4)

Capital structure transaction costs reflect non-capitalizable debt and equity issuance costs.

(5)

Acquisition costs reflect costs directly related to completed acquisitions of $0.6 million and $2.5 million for the three months ended December 31, 2019 and 2018, respectively, and $4.1 million and $4.9 million in fiscal 2019 and 2018, respectively, and inventory step-up adjustments related to recording the inventory of acquired businesses at fair value on the date of acquisition of $2.4 million in fiscal 2018.

(6)

Other costs reflect costs for legal defense of $0.0 million and $0.4 million for the three months ended December 31, 2019 and 2018, respectively, and $0.9 million, $1.5 million and $5.2 million in fiscal 2019, 2018 and 2017, respectively, insurance reimbursement of ($7.7) million in fiscal 2019, settlement costs of $0.0 million and $15.0 million in fiscal 2018 and 2017, respectively, and other miscellaneous adjustments of $0.0 million, $0.2 million and $0.1 million in fiscal 2019, 2018 and 2017, respectively.

(7)

Tax impact of adjustments is based on applying a combined U.S. federal and state statutory tax rate of 24%, 24% and 38% for fiscal 2019, 2018 and 2017, respectively, except that a tax rate of 0% was applied to the adjustments for share-based compensation costs and for goodwill impairment in fiscal 2017 as those items did not give rise to income tax deductions.

(8)

Tax Act remeasurement is a one-time tax benefit of $22.5 million as a result of the remeasurement of certain deferred taxes due to the enactment of the Tax Act.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our Consolidated Financial Statements and related Notes and other financial information included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements.

Overview

We are an industry-leading designer and manufacturer of beautiful, low-maintenance and environmentally sustainable products focused on the highly attractive, fast-growing Outdoor Living market. Homeowners are continuing to invest in their outdoor spaces and are increasingly recognizing the significant advantages of long-lasting products, which are converting demand away from traditional materials, particularly wood. Our products transform those outdoor spaces by combining highly appealing aesthetics with significantly lower maintenance costs compared to traditional materials. Our innovative portfolio of Outdoor Living products, including deck, rail, trim and accessories, inspires consumers to design outdoor spaces tailored to their unique lifestyle needs. We are well known in the industry, and, according to data provided by Principia, we generally hold one of the top two market share positions by revenue in our product categories. In addition to our leading suite of Outdoor Living products, we also sell a broad range of highly engineered products that are sold in commercial markets, including partitions, lockers and storage solutions. One of our core values is to “always do the right thing”. We make decisions according to what is right, not what is the cheapest, fastest or easiest, and we strive to always operate with integrity, transparency and the customer in mind. In furtherance of that value, we are focused on sustainability across our operations and have adopted strategies to enable us to meet the growing demand for environmentally-friendly products. Our businesses leverage a shared technology and U.S.-based manufacturing platform to create products that convert demand from traditional materials to those that are long lasting and low maintenance, fulfilling our brand commitment to deliver products that are “Beautifully Engineered to Last”.

We report our results in two segments: Residential and Commercial. In our Residential segment, our primary consumer brands, TimberTech and AZEK, are recognized by contractors and consumers for their premium aesthetics, uncompromising quality and performance, and diversity of style and design options. In our Commercial segment, we manufacture engineered sheet products and high-quality bathroom partitions and lockers. Over our history we have developed a reputation as a leading innovator in our markets by leveraging our differentiated manufacturing capabilities, material science expertise and product management proficiency to consistently introduce new products into the market. This long-standing commitment has been critical to our ability to stay at the forefront of evolving industry trends and consumer demands, which in turn has allowed us to become a market leader across our core product categories.

Basis of Presentation

Our Consolidated Financial Statements in this prospectus have been derived from our accounts and those of our wholly-owned subsidiaries. Our Consolidated Financial Statements are based on a fiscal year ending September 30.

In June 2018, we acquired Versatex Holdings, LLC, or Versatex. The assets acquired and liabilities assumed in connection with this acquisition were included in our consolidated balance sheet as of September 30, 2018 and in our consolidated statement of comprehensive income (loss) and statement of cash flow beginning from the effective date of the acquisition in June 2018. The results of operations of Versatex are included in our Residential segment.

 

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Key Factors Affecting Our Results of Operations

Our results of operations and financial condition are affected by the following factors, which reflect our operating philosophy and continued focus on driving material conversion to our low-maintenance, engineered products in each of our markets.

Volume of Products Sold

Our net sales depend primarily on the volume of products we sell during any given period, and volume is affected by the following items:

 

   

Economic conditions: Demand for our products is significantly affected by a number of economic factors impacting our customers and consumers. For example, demand for products sold by our Residential segment is driven primarily by home repair and remodeling activity and, to a lesser extent, new home construction activity. The residential repair and remodeling market depends in part on home equity financing, and accordingly, the level of equity in homes will affect consumers’ ability to obtain a home equity line of credit and engage in renovations that would result in purchases of our products. Demand for our products is also affected by the level of interest rates and the availability of credit, consumer confidence and spending, housing affordability, demographic trends, employment levels and other macroeconomic factors that may influence the extent to which consumers engage in repair and remodeling projects to enhance the outdoor living spaces of their homes. Sales by our Commercial segment in the institutional construction market are affected by amounts available for expenditures in school construction, military bases and other public institutions, which depend in part on the availability of government funding and budgetary priorities. Sales of our engineered polymer materials in our industrial OEM markets are also affected by macroeconomic factors, in particular gross domestic product levels and levels of industrial production. Changes in these economic conditions can impact the volume of our products sold during any given period.

 

   

Material conversion: We have continued to increase sales of our products through our focused efforts to drive material conversion and market penetration of our products. We believe that there is a long-term trend toward material conversion from traditional materials, such as wood, to the low-maintenance, engineered materials we produce. We believe that our products offer a compelling value proposition due to their enhanced durability and lower maintenance costs compared to products manufactured from traditional materials, and we anticipate that sales of our products will continue to benefit from material conversion. The success of our efforts to drive conversion during any given period will impact the volume of our products sold during that period.

 

   

Product innovation: We continue to develop and introduce innovative products to accelerate material conversion and expand our markets. We believe that new products will enhance our ability to compete with traditional materials at a variety of price points, and we expect to continue to devote significant resources to developing innovative new products. The volume of our products sold during a given period will depend in part on our successfully introducing new products that generate additional demand as well as the extent to which new products may impact our sales of existing products.

 

   

Marketing and distribution: Demand for our products is influenced by our efforts to expand and enhance awareness of our premium brands and the benefits of our products as well as to drive continued material conversion. Within our Residential segment, we sell our products through a national network of more than 4,200 dealers, more than 35 distributors and multiple home improvement retailers providing extensive geographic coverage enabling us to effectively serve contractors across the United States and Canada. Within our Commercial segment, we sell our products through a widespread distribution network as well as directly to OEMs. Our customer-focused sales organization generates pull-through demand for our products by driving increased downstream engagement with consumers and key influencers such as architects, builders and contractors and by focusing on strengthening our position with dealers and growing our presence in retail. Our volume of product sales in a given period will be impacted by our ability to raise awareness of our brands and products. We expect to continue to devote

 

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significant sales and marketing resources to create additional pull-through demand for our products and enhance our sales growth in underpenetrated markets and geographies.

Pricing

In general, our pricing strategy is to price our products at a premium relative to competing materials based on the value proposition they provide, including lower maintenance and lifetime costs. Our pricing strategy differs as between our two operating segments as follows:

 

   

Residential: Prices for our residential products are typically set annually, taking into account anticipated changes in input costs, market dynamics and new product introductions by us or our competitors.

 

   

Commercial: A number of our commercial product sales, such as those related to our partitions and lockers product lines, are customized by order, and, therefore, these products are typically priced based on the nature of the particular specifications ordered. For other commercial products, such as various Vycom product lines, we maintain standard pricing lists that we review and change periodically.

Cost of Materials

Raw material costs, including costs of petrochemical resins, reclaimed polyethylene and PVC material, waste wood fiber and aluminum, represent a majority of our cost of sales. The cost of petrochemical resins used in our manufacturing processes has historically varied significantly and has been affected by changes in supply and demand and in the price of crude oil. In addition, the price of reclaimed polyethylene material, waste wood fiber, aluminum, other additives (including modifiers, TiO2 and pigments) and other raw materials fluctuates depending on, among other things, overall market supply and demand and general business conditions. We seek to mitigate the effects of increases in raw material costs by broadening our supplier base, increasing our use of recycled material and scrap, reducing waste and exploring options for material substitution without sacrificing quality. We have long-standing relationships as well as guaranteed supply contracts with some of our key suppliers but, other than certain contracts with prices determined based on the current index price, we have no fixed-price contracts with any of our major vendors. Under our guaranteed supply contracts, the prices are either established annually based on a discount to the then-current market prices or, for purchase orders, based on market rates in effect when the orders become effective. Prices for spot market purchases are negotiated on a continuous basis in line with the market at the time. We have not entered into hedges with respect to our raw material costs at this time, but we may choose to enter into such hedges in the future. For additional information, see “—Quantitative and Qualitative Disclosures about Market Risk—Raw Materials; Commodity Price Risk.”

Product Mix

We offer a wide variety of products across numerous product lines within our Residential and Commercial segments, and these products are sold at different prices, are composed of different materials and involve varying levels of manufacturing complexity. In any particular period, changes in the volume of particular products sold and the prices of those products relative to other products will impact our average selling price and our cost of sales. For example, the gross margins of our Residential segment significantly exceed the gross margins of our Commercial segment. In addition to the impacts attributable to product mix as between the Residential and Commercial segments, our results of operations are impacted by the relative margins associated with individual products within our Residential and Commercial segments, which vary among products. As we continue to introduce new products at varying price points to compete with products made with wood or other traditional materials across a wide range of prices, our overall gross margins may vary from period to period as a result of changes in product mix and different margins for our higher and lower price point offerings. We may choose to introduce new products with initially lower gross margins with the expectation that those margins will improve over time as we improve our manufacturing efficiency for those products. In addition, our product mix and our gross margins may be impacted by our marketing decisions in a particular period as well as the rebates and incentives that we may extend to our customers in a particular period. We also continue to seek to enhance our gross margins by improving manufacturing efficiency across our operations, including by investing in, and

 

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expanding, our recycling capabilities and implementing initiatives to more efficiently use scrap and to reduce waste. Our success in achieving margin improvements through these initiatives may vary due to changes in product mix as different products benefit to different degrees from these initiatives.

Seasonality

Although we generally have demand for our products throughout the year, our sales have historically experienced some seasonality. We have typically experienced moderately higher levels of sales of our residential products in the second fiscal quarter of the year as a result of our “early buy” sales and extended payment terms typically available during the second fiscal quarter of the year. As a result of these extended payment terms, our accounts receivable have typically reached seasonal peaks at the end of the second fiscal quarter of the year, and our net cash provided by operating activities has typically been lower in the second fiscal quarter relative to in other quarters. Our sales are also generally impacted by the number of days in a quarter or a year that contractors and other professionals are able to install our products. This can vary dramatically based on, among other things, weather events such as rain, snow and extreme temperatures. We have generally experienced lower levels of sales of our residential products in the first fiscal quarter due to adverse weather conditions in certain markets, which typically reduce the construction and renovation activity during the winter season. In addition, we have experienced higher levels of sales of our bathroom partition products and our locker products during the second half of our fiscal year, which includes the summer months when schools are typically closed and therefore are more likely to undergo remodel activities.

Acquisitions

Throughout our history, we have made selected acquisitions, and we expect to continue to strategically pursue acquisitions to enhance our market position, supplement our product and technology portfolios and increase the diversity of our business.

Acquisition of Versatex and WES, LLC (Ultralox)

During the year ended September 30, 2018, we acquired two businesses, Versatex and WES, LLC and its wholly owned subsidiary Ultralox Technology, LLC, which, together with WES, LLC, we collectively refer to as Ultralox. Versatex is a leading producer of premium, low-maintenance engineered products with a focus on PVC trim and moulding products. Ultralox is a manufacturer of innovative aluminum railing systems and assembly machines.

The acquisitions were accounted for as business combinations, and Versatex and Ultralox were acquired for aggregate consideration of $297.9 million, including $3.2 million for cash acquired. The cash purchase price for Versatex was financed with incremental borrowings under the Term Loan Credit Agreement in the amount of $225.0 million, through an equity contribution from the Sponsors in the amount of $40.0 million and with cash on hand. The Ultralox acquisition was paid for with cash on hand.

 

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Results of Operations

The following tables summarize certain financial information relating to our operating results that have been derived from our audited Consolidated Financial Statements for the years ended September 30, 2019 and 2018 and unaudited Consolidated Financial Statements for the three months ended December 31, 2019 and 2018.

 

    Three months ended
December 31,
    $ Variance
Increase/
(Decrease)
    % Variance
Increase/
(Decrease)
    Year ended
September 30,
    $ Variance
Increase/
(Decrease)
    % Variance
Increase/
(Decrease)
 
(Dollars in thousands)   2019     2018     2019     2018  

Net sales

  $ 166,043     $ 137,431     $ 28,612       20.8   $ 794,203     $ 681,805     $ 112,398       16.5

Cost of sales

    (114,752     (96,525     (18,227     18.9       (541,006     (479,769     (61,237     12.8  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    51,291       40,906       10,385       25.4       253,197       202,036       51,161       25.3  

Selling, general and administrative expenses

    (43,473     (42,467     (1,016     2.4       (183,572     (144,688     (38,884     26.9  

Other general expenses

    (1,978     (1,810     (168     9.3       (9,076     (4,182     (4,894     N/M (1) 

Gain (loss) on disposal of property, plant and equipment

    73       (1,247     1,320       N/M (1)      (1,495     (791     (704     89.0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    5,913       (4,618     10,531       N/M (1)      59,054       52,375       6,679       12.8  

Interest expense, net

    (19,759     (20,490     731       (3.6     (83,205     (68,742     (14,463     21.0  

Income tax benefit

    4,000       5,837       (1,837     (31.5     3,955       23,112       (19,157     (82.9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    (9,846     (19,271     9,425       (48.9     (20,196     6,745       (26,941     N/M (1) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

“N/M” indicates that variance as a percentage is not meaningful.

Three Months Ended December 31, 2019, Compared with Three Months Ended December 31, 2018

Net Sales

Net sales for the three months ended December 31, 2019 increased by $28.6 million, or 20.8%, to $166.0 million from $137.4 million for the three months ended December 31, 2018. The increase was attributable to organic sales volume growth during the quarter and the expansion of our west coast distribution network. Net sales for the three months ended December 31, 2019 increased for our Residential segment by 25.2% and increased for our Commercial segment by 4.5%, as compared to the prior year.

Cost of Sales

Cost of sales for the three months ended December 31, 2019 increased by $18.2 million, or 18.9%, to $114.8 million from $96.5 million for the three months ended December 31, 2018, primarily due to $19.2 million of costs related to higher organic sales volumes, partially offset by net manufacturing productivity improvements as well as declining amortization expenses.

Gross Profit

Gross profit for the three months ended December 31, 2019 increased by $10.4 million, or 25.4%, to $51.3 million from $40.9 million for the three months ended December 31, 2018. Gross profit as a percent of net sales increased to 30.9% for the three months ended December 31, 2019 compared to 29.7% for the three months ended December 31, 2018. The increase in gross profit as a percent of net sales was primarily driven by net manufacturing productivity improvements, as well as declining amortization expenses as a percentage of sales.

 

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Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $1.0 million primarily due to recent investments made in fiscal 2019, partially offset by the absence of non-recurring expenses.

Other General Expenses

Other general expenses incurred in the three months ended December 31, 2018 related to costs associated with our initial public offering and remained consistent in the three months ended December 31, 2019.

Interest Expense, net

Interest expense, net, did not significantly change during the three months ended December 31, 2019 and 2018 as there were no significant changes in debt during either quarter.

Income Tax Benefit

Income tax benefit decreased by $1.8 million to $4.0 million for the three months ended December 31, 2019 from $5.8 million for the three months ended December 31, 2018 primarily due to a lower loss before income taxes during the quarter.

Net Income (Loss)

Net income increased by $9.4 million to a net loss of $9.8 million for the three months ended December 31, 2019 from a net loss of $19.3 million for the three months ended December 31, 2018, primarily as a result of the changes described above.

Year Ended September 30, 2019, Compared with Year Ended September 30, 2018

Net Sales

Net sales for the year ended September 30, 2019 increased by $112.4 million, or 16.5%, to $794.2 million from $681.8 million for the year ended September 30, 2018. The increase was primarily attributable to an increase in organic sales volume and $50.8 million from the Versatex and Ultralox acquisitions. Net sales for the year ended September 30, 2019 increased for our Residential segment by 20.9% and decreased for our Commercial segment by 0.8%, as compared to the prior year. Organic net sales, which excludes sales that are attributable to acquisitions, increased 8.3% for the year ended September 30, 2019 as compared to the year ended September 30, 2018.

Cost of Sales

Cost of sales for the year ended September 30, 2019 increased by $61.2 million, or 12.8%, to $541.0 million from $479.8 million for the year ended September 30, 2018, primarily due to $43.4 million of costs related to higher organic sales volumes, $35.7 million of costs related to higher acquisition sales volumes and $5.3 million of startup costs of our recycling facility. These increases were partially offset by net manufacturing productivity of $11.4 million in fiscal 2019 and no revaluation of off-specification finished goods in fiscal 2019, as compared to an $11.8 million revaluation in fiscal 2018, of which $2.0 million related to our Residential segment and $9.8 million related to our Commercial segment.

Gross Profit

Gross profit for the year ended September 30, 2019 increased by $51.2 million, or 25.3%, to $253.2 million from $202.0 million for the year ended September 30, 2018. Gross profit as a percent of net sales increased to 31.9% for the year ended September 30, 2019 compared to 29.6% for the year ended September 30, 2018. The

 

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increase in gross profit as a percent of net sales was primarily driven by net manufacturing productivity improvements, as well as by the absence in fiscal 2019 of revaluation of off-specification finished goods. The increase was partially offset by the startup costs of our recycling facility.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased by $38.9 million, or 26.9%, to $183.6 million, or 23.1% of net sales, for the year ended September 30, 2019 from $144.7 million, or 21.2% of net sales, for the year ended September 30, 2018. The increase was primarily attributable to $18.2 million resulting from our acquisitions of Versatex and Ultralox, $9.3 million in increased marketing spending related to our rebranding initiative, $9.2 million primarily related to increased headcount in our sales organization and professional fees of $3.4 million as we continue to invest in selling, marketing and R&D, partially offset by a $7.7 million insurance recovery received related to a previous litigation settlement.

Other General Expenses

Other general expenses increased by $4.9 million to $9.1 million during fiscal 2019 from $4.2 million during fiscal 2018. Fiscal 2019 expenses related to costs associated with our initial public offering, while fiscal 2018 expenses related to transaction costs in connection with the aforementioned fiscal 2018 acquisitions.

Loss on Disposal of Property, Plant and Equipment

Loss on disposal of property, plant and equipment increased by $0.7 million to $1.5 million for the year ended September 30, 2019 from $0.8 million during the year ended September 30, 2018 due to disposal of fixed assets in the normal course of business.

Interest Expense, net

Interest expense, net, increased by $14.5 million, or 21.0%, to $83.2 million for the year ended September 30, 2019 from $68.7 million for the year ended September 30, 2018. Interest expense increased primarily due to an increase of $225.0 million in borrowing under the Term Loan Credit Agreement relating to the acquisition of Versatex in fiscal 2018, as well as, higher rates on amounts borrowed under the Term Loan Credit Agreement.

Income Tax Benefit

Income tax benefit decreased by $19.1 million to $4.0 million for the year ended September 30, 2019 compared to $23.1 million for the year ended September 30, 2018. The decrease was primarily driven by the impact of remeasuring our deferred tax assets and liabilities as a result of the Tax Act in 2018, which lowered our statutory federal tax rate to 21% in the year ended September 30, 2018 from 35% in the year ended September 30, 2017. As a result of remeasuring our deferred tax assets and liabilities, we recorded a net benefit of approximately $22.5 million in fiscal 2018.

Net Income (Loss)

Net income decreased by $26.9 million to a net loss of $20.2 million for the year ended September 30, 2019 compared to net income of $6.7 million for the year ended September 30, 2018 primarily as a result of the changes described above.

 

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Segment Results of Operations

We report our results in two segments: Residential and Commercial. The key segment measures used by our chief operating decision maker in deciding how to evaluate performance and allocate resources to each of the segments are Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin. Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin are calculated differently than our Adjusted EBITDA and Adjusted EBITDA Margin, which are further discussed under the heading “Selected Consolidated Financial Data—Non-GAAP Financial Measures.” Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin represent measures of segment profit reported to our chief operating decision maker for the purpose of making decisions about allocating resources to a segment and assessing its performance and are determined as disclosed in our Consolidated Financial Statements included elsewhere in this prospectus consistent with the requirements of the Financial Accounting Standards Board’s, or FASB, Accounting Standards Codification, or ASC, 280. We define Segment Adjusted EBITDA as a segment’s net income (loss) before income tax (benefit) expense and by adding to or subtracting therefrom interest expense, net, depreciation and amortization, share-based compensation costs, asset impairment and inventory revaluation costs, business transformation costs, capital structure transaction costs, acquisition costs, initial public offering costs and certain other costs. Segment Adjusted EBITDA Margin is equal to a segment’s Segment Adjusted EBITDA divided by such segment’s net sales. Corporate expenses, which include selling, general and administrative costs related to our corporate offices, including payroll and other professional fees, are not included in computing Segment Adjusted EBITDA. Such corporate expenses increased by $1.9 million to $42.3 million during the year ended September 30, 2019, from $40.4 million during the year ended September 30, 2018, and decreased by $2.5 million to $12.3 million for the three months ended December 31, 2019 from $14.8 million for the three months ended December 31, 2018.

Residential

The following table summarizes certain financial information relating to the Residential segment results that have been derived from our Consolidated Financial Statements for the years ended September 30, 2019 and 2018 and unaudited Consolidated Financial Statements for the three months ended December 31, 2019 and 2018.

 

    Three months ended     Years Ended  
    December 31,     September 30,  
    2019     2018     $
Variance
    %
Variance
    2019     2018     $
Variance
     %
Variance
 
(Dollars in thousands)                                                 

Net Sales

  $ 135,668     $ 108,374     $ 27,294       25.2%     $ 655,445     $ 541,942     $ 113,503        20.9%  

Segment Adjusted EBITDA

    38,915       30,624     $ 8,291       27.1%       188,742       168,438     $ 20,304        12.1%  

Segment Adjusted EBITDA Margin

    28.7     28.3     N/A       N/A       28.8     31.1     N/A        N/A  

Net Sales

Net sales of the Residential segment for the three months ended December 31, 2019 increased by $27.3 million, or 25.2%, to $135.7 million from $108.4 million for the year ended December 31, 2018. The increase was primarily attributable to an increase in organic sales volume and the expansion of our west coast distribution network.

Net sales of the Residential segment for the year ended September 30, 2019 increased by $113.5 million, or 20.9%, to $655.4 million from $541.9 million for the year ended September 30, 2018. The increase was primarily attributable to an increase in organic sales volume and $50.8 million from acquisitions. Organic net sales increased 10.9% for the year ended September 30, 2019 as compared to the year ended September 30, 2018.

 

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Segment Adjusted EBITDA

Segment Adjusted EBITDA of the Residential segment for the three months ended December 31, 2019 increased by $8.3 million, or 27.1%, to $38.9 million from $30.6 million for the three months ended December 31, 2018. The increase was mainly driven by higher net sales and net manufacturing productivity improvements, partially offset by investments in selling, marketing and R&D.

Segment Adjusted EBITDA of the Residential segment for the year ended September 30, 2019 increased by $20.3 million, or 12.1%, to $188.7 million from $168.4 million for the year ended September 30, 2018. The increase was mainly driven by higher net sales, acquisitions and net manufacturing productivity improvements, partially offset by investments in selling, marketing and R&D.

Commercial

The following table summarizes certain financial information relating to the Commercial segment results that have been derived from our Consolidated Financial Statements for the years ended September 30, 2019 and 2018 and unaudited Consolidated Financial Statements for the three months ended December 31, 2019 and 2018:

 

    Three months ended      Years Ended  
    December 31,      September 30,  
    2019     2018     $
Variance
    %
Variance
     2019     2018     $
Variance
    %
Variance
 
(Dollars in thousands)                                                 

Net Sales

  $ 30,375     $ 29,057     $ 1,318       4.5%      $ 138,758     $ 139,863     $ (1,105     (0.8)%  

Segment Adjusted EBITDA

    3,023     $ 3,375       (352     (10.4)%        21,493       21,669       (176     (0.8)%  

Segment Adjusted EBITDA Margin

    10.0     11.6     N/A       N/A        15.5     15.5     N/A       N/A  

Net Sales

Net sales of the Commercial segment for the three months ended December 31, 2019 increased by $1.3 million, or 4.5%, to $30.4 million from $29.1 million for the three months ended December 31, 2018. The increase was driven by sales growth in partitions and locker sales.

Net sales of the Commercial segment for the year ended September 30, 2019 decreased by $1.1 million, or 0.8%, to $138.8 million from $139.9 million for the year ended September 30, 2018. The slight decrease was driven by weakness in certain end-user markets offset by growth in partitions and locker sales.

Segment Adjusted EBITDA

Segment Adjusted EBITDA of the Commercial segment was $3.0 million for the three months ended December 31, 2019, compared to $3.4 million for the three months ended December 31, 2018. The slight decrease was primarily driven by continued selling and marketing investments.

Segment Adjusted EBITDA of the Commercial segment was $21.5 million for the year ended September 30, 2019 compared to $21.7 million for the year ended September 30, 2018. A slight decrease in net sales was largely offset by improved net manufacturing productivity.

Quarterly Results of Operations

The following tables set forth our historical unaudited consolidated statements of income and operating results expressed as a dollar amount and as a percentage of net sales for each of the quarters indicated. The information for each quarter has been prepared on the same basis as our audited Consolidated Financial

 

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Statements included elsewhere in this prospectus and reflects, in the opinion of management, all adjustments necessary for a fair presentation of the financial information presented. Our historical results are not necessarily indicative of future operating results, and our interim results are not necessarily indicative of the results to be expected for the full year or any other period. The quarterly financial data set forth below should be read together with our Consolidated Financial Statements and related Notes included elsewhere in this prospectus.

 

    Three Months Ended  
    December 31
   2019   
    September 30
   2019   
    June 30
   2019   
    March 31
   2019   
    December 31
   2018   
    September 30
   2018   
    June 30
   2018   
    March 31
   2018   
    December 31
   2017   
 

Net sales(1)

  $ 166,043     $ 215,534     $ 221,307     $ 219,931     $ 137,431     $ 191,137     $ 184,406     $ 200,863     $ 105,399  

Cost of sales

    (114,752     (146,058     (145,897     (152,526     (96,525     (135,134     (133,045     (135,652     (75,938
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Gross profit     51,291       69,476       75,410       67,405       40,906       56,003       51,361       65,211       29,461  

Selling, general and administrative expenses

    (43,473     (46,584     (50,185     (44,336     (42,467     (38,058     (42,040     (37,023     (27,567

Other general expenses

    (1,978     (2,921     (1,997     (2,348     (1,810     —         (3,857     —         (325

Gain (loss) on disposal of property

    73       (23     (36     (189     (1,247     (465     (215     16       (127
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating (loss) income

    5,913       19,948       23,192       20,532       (4,618     17,480       5,249       28,204       1,442  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other expenses:

                 

Interest expense

    (19,759     (19,992     (21,440     (21,283     (20,490     (20,256     (17,477     (15,732     (15,277

Total other expenses

    (19,759     (19,992     (21,440     (21,283     (20,490     (20,256     (17,477     (15,732     (15,277
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    (13,846     (44     1,752       (751     (25,108     (2,776     (12,228     12,472       (13,835

Income tax provision (benefit)(2)

    4,000       (876     (241     (765     5,837       (1,788     2,000       (3,400     26,300  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  $ (9,846   $ (920   $ 1,511     $ (1,516   $ (19,271   $ (4,564   $ (10,228   $ 9,072     $ 12,465  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Net sales are impacted by seasonality as we have typically experienced moderately higher levels of sales of our residential products in the second fiscal quarter of the year as a result of our “early buy” sales. Net sales are also generally impacted by the number of days in a quarter or a year that contractors and other professionals are able to install our products. This can vary dramatically based on, among other things, weather events such as rain, snow and extreme temperatures. We have generally experienced lower levels of sales of our residential products in the first fiscal quarter due to adverse weather conditions in certain markets, which typically reduce the construction and renovation activity during the winter season. In addition, we have experienced higher levels of sales of our bathroom partition products and our locker products during the second half of our fiscal year, which includes the summer months when schools are typically closed and therefore are more likely to undergo remodel activities.

 

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(2)

On December 22, 2017, the President of the United States signed and enacted the Tax Act. This lowered our federal corporate tax rate, and, as a result, we recorded a $22.5 million net income tax benefit in three months ended December 31, 2017 for the remeasurement of our deferred tax assets and liabilities.

 

    Three Months Ended  
    December 31
2019
    September 30
2019
    June 30
2019
    March 31
2019
    December 31
2018
    September 30
2018
    June 30
2018
    March 31
2018
    December 31
2017
 

Net sales(1)

    100.0     100.0     100.0     100.0     100.0     100.0     100.0     100.0     100.0

Cost of sales

    (69.1 )%      (67.8 )%      (65.9 )%      (69.4 )%      (70.2 )%      (70.7 )%      (72.1 )%      (67.5 )%      (72.0 )% 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Gross profit     30.9     32.2     34.1     30.6     29.8     29.3     27.9     32.5     28.0

Selling, general and administrative expenses

    (26.2 )%      (21.6 )%      (22.7 )%      (20.2 )%      (30.9 )%      (19.9 )%      (22.8 )%      (18.4 )%      (26.2 )% 

Other general expenses

    (1.2 )%      (1.4 )%      (0.9 )%      (1.1 )%      (1.3 )%      0.0     (2.1 )%      0.0     (0.3 )% 

Gain (loss) on disposal of property

    0.0     0.0     0.0     (0.1 )%      (0.9 )%      (0.2 )%      (0.1 )%      0.0     (0.1 )% 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Operating (loss) income     3.6     9.3     10.5     9.3     (3.4 )%      9.1     2.8     14.0     1.4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other expenses:

                 

Interest expense

    (11.9 )%      (9.3 )%      (9.7 )%      (9.7 )%      (14.9 )%      (10.6 )%      (9.5 )%      (7.8 )%      (14.5 )% 
Total other expenses     (11.9 )%      (9.3 )%      (9.7 )%      (9.7 )%      (14.9 )%      (10.6 )%      (9.5 )%      (7.8 )%      (14.5 )% 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

    (8.3 )%      0.0     0.8     (0.3 )%      (18.3 )%      (1.5 )%      (6.6 )%      6.2     (13.1 )% 

Income tax provision (benefit)(2)

    2.4     (0.4 )%      (0.1 )%      (0.3 )%      4.2     (0.9 )%      1.1     (1.7 )%      25.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

    (5.9 )%      (0.4 )%      0.7     (0.7 )%      (14.0 )%      (2.4 )%      (5.5 )%      4.5     11.8
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Net sales are impacted by seasonality as we have typically experienced moderately higher levels of sales of our residential products in the second fiscal quarter of the year as a result of our “early buy” sales. Net sales are also generally impacted by the number of days in a quarter or a year that contractors and other professionals are able to install our products. This can vary dramatically based on, among other things, weather events such as rain, snow and extreme temperatures. We have generally experienced lower levels of sales of our residential products in the first fiscal quarter due to adverse weather conditions in certain markets, which typically reduce the construction and renovation activity during the winter season. In addition, we have experienced higher levels of sales of our bathroom partition products and our locker products during the second half of our fiscal year, which includes the summer months when schools are typically closed and therefore are more likely to undergo remodel activities.

(2)

On December 22, 2017, the President of the United States signed and enacted the Tax Act. This lowered our federal corporate tax rate, and, as a result, we recorded a $22.5 million net income tax benefit in three months ended December 31, 2017 for the remeasurement of our deferred tax assets and liabilities.

Liquidity and Capital Resources

Liquidity Outlook

Our primary cash needs are to fund working capital, capital expenditures, debt service and any acquisitions we may undertake. We have significant debt and debt service requirements. As of December 31, 2019, we had cash and cash equivalents of $22.5 million and total indebtedness of $1,121.5 million. CPG International LLC had approximately $134.6 million available under the borrowing base for future borrowings as of December 31, 2019. CPG International LLC also has the option to increase the commitments under the Revolving Credit Agreement by up to $100.0 million, subject to certain conditions. In the year ended September 30, 2019, we had interest expense of $83.2 million. We believe we will have adequate liquidity over the next 12 months to operate our business and to meet our cash requirements as a result of cash flows from operating activities, available cash balances and availability under our Revolving Credit Agreement after consideration of our debt service and other cash requirements. In the longer term, our liquidity will depend on many factors, including our results of operations, our future growth, the timing and extent of our expenditures to develop new products and improve our manufacturing capabilities, the expansion of our sales and marketing activities and the extent to which we make acquisitions. Changes in our operating plans, material changes in anticipated sales, increased expenses, acquisitions or other events may cause us to seek additional equity and/or debt financing in future periods.

 

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Holding Company Status

We are a holding company and do not conduct any business operations of our own. As a result, we are largely dependent upon cash dividends and distributions and other transfers from our subsidiaries to meet our obligations. The agreements governing the indebtedness of our subsidiaries impose restrictions on our subsidiaries’ ability to pay dividends or make other distributions to us. See “Description of Certain Indebtedness.”

CPG International LLC is party to the Senior Secured Credit Facilities and the indenture that governs the Senior Notes. The obligations under the Senior Secured Credit Facilities are secured by specified assets as described under “Description of Certain Indebtedness.” The obligations under the Senior Secured Credit Facilities are guaranteed by CPG Newco LLC and the wholly owned domestic subsidiaries of CPG International LLC other than certain immaterial subsidiaries and other excluded subsidiaries.

The Senior Secured Credit Facilities and the indenture governing the Senior Notes contain covenants restricting payments of dividends by CPG International LLC unless certain conditions, as provided in the Senior Secured Credit Facilities or the indenture governing the Senior Notes, as applicable, are met. The covenants under our Senior Secured Credit Facilities and the indenture governing the Senior Notes provide for certain exceptions for specific types of payments. However, other than restricted payments under the specified exceptions, the covenants under our Term Loan Credit Agreement and the indenture governing the Senior Notes generally prohibit the payment of dividends unless the fixed charge coverage ratio of CPG International LLC, on a pro forma basis, for the four quarters preceding the declaration or payment of such dividend would be at least 2.00 to 1.00 and such restricted payments do not exceed an amount based on the sum of $40 million plus 50% of consolidated net income for the period commencing, in the case of the Term Loan Credit Agreement, October 1, 2013, and in the case of the indenture governing the Senior Notes, July 1, 2013, to the end of the most recent fiscal quarter for which internal consolidated financial statements of CPG International LLC are available at the time of such restricted payment, plus certain customary addbacks. Based on the general restrictions in our Term Loan Credit Agreement and the indenture governing the Senior Notes, as of September 30, 2019, CPG International LLC would not have been permitted to declare or pay dividends, except for the specific purposes specified in the Senior Secured Credit Facilities and the indenture governing the Senior Notes, and, accordingly, $490.0 million of the assets of CPG International LLC were restricted pursuant to the terms of the Senior Secured Credit Facilities and the indenture governing the Senior Notes.

Since the restricted net assets of CPG Newco LLC and its subsidiaries exceed 25% of our consolidated net assets, in accordance with Rule 12-04, Schedule 1 of Regulation S-X, refer to our Consolidated Financial Statements included elsewhere in this prospectus for condensed parent company financial statements of CPG Newco LLC.

Cash Sources

We have historically relied on cash flows from operations generated by CPG International LLC, borrowings under the credit facilities, issuances of notes and other forms of debt financing and capital contributions to fund our cash needs.

On September 30, 2013, our subsidiary, CPG International LLC (as successor-in-interest to CPG Merger Sub LLC, a limited liability company formed to effect the acquisition of CPG International LLC), Deutsche Bank AG New York Branch, as administrative agent and collateral agent, or the Revolver Administrative Agent, and the lenders party thereto entered into the Revolving Credit Agreement. On March 9, 2017, the Revolving Credit Agreement was amended and restated to provide for maximum aggregate borrowings of up to $150.0 million, subject to an asset-based borrowing base. The borrowing base is limited to a specified percentage of eligible accounts receivable and inventory, less reserves that may be established by the Revolver Administrative Agent in the exercise of its reasonable credit judgment. As of December 31, 2019 and September 30, 2019 and 2018, CPG International LLC had no outstanding borrowings under the Revolving Credit Agreement and had $3.0 million,

 

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$3.0 million and $3.1 million, respectively, of outstanding letters of credit held against the Revolving Credit Agreement. As of December 31, 2019 and September 30, 2019, CPG International LLC had approximately $134.6 million and $113.7 million, respectively, available under the borrowing base for future borrowings in addition to cash and cash equivalents on hand of $22.5 million and $105.9 million, respectively. Because our borrowing capacity under the Revolving Credit Agreement depends, in part, on inventory, accounts receivable and other assets that fluctuate from time to time, the amount available under the borrowing base may not reflect actual borrowing capacity under the Revolving Credit Agreement.

Cash Uses

Our principal cash requirements have included working capital, capital expenditures, payments of principal and interest on our debt, and, if market conditions warrant, making selected acquisitions. We may elect to use cash from operations, debt proceeds, equity or a combination thereof to finance future acquisition opportunities.

Cash Flows

 

    Three Months Ended
December 31,
    $ Variance     % Variance     Years Ended
September 30,
    $ Variance     % Variance  
    2019     2018     Increase/
(Decrease)
    Increase/
(Decrease)
    2019     2018     Increase/
(Decrease)
    Increase/
(Decrease)
 

Net cash provided by (used in) operating activities

  $ (56,361   $ (50,438   $ 5,923       11.7   $ 94,872     $ 67,302     $ 27,570       41.0

Net cash provided by (used in) investing activities

    (19,018     (12,943     6,075       46.9     (62,935     (335,682     272,747       81.3

Net cash provided by (used in) financing activities

    (8,100     (3,065     5,035       164.3     (8,273     248,742       (257,015     -103.3
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (decrease) increase in cash

  $ (83,479   $ (66,446   $ 17,033       25.6   $ 23,664     $ (19,638   $ 43,302       N/M (1) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

“N/M” indicates that variance as a percentage is not meaningful

Three Months Ended December 31, 2019, Compared with Three Months Ended December 31, 2018

Cash Provided by (Used in) Operating Activities

Net cash used in operating activities was $56.4 million and $50.4 million for the three months ended December 31, 2019 and 2018, respectively. During the first quarter we operate programs to prepare for increased purchases during the building season, and as a result we typically experience an increase in cash used in operating activities relative to other quarters. The $6.0 million increase quarter over quarter is a result of a net increase in working capital, as we built inventory during the quarter as well as reduced certain payables in accrued expenses.

Cash Provided by (Used in) Investing Activities

Net cash used in investing activities was $19.0 million and $12.9 million for the three months ended December 31, 2019 and 2018, respectively, primarily representing purchases of property, plant and equipment in the normal course of business.

Cash Provided by (Used in) Financing Activities

Net cash used in financing activities was $8.1 million and $3.1 million for the three months ended December 31, 2019 and 2018, respectively. Net cash used in the quarter ended December 31, 2019 consisted of

 

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debt payments, redemptions of membership interests and payments of costs related to our initial public offering, as compared to December 31, 2018, which consisted of payments for debt and contingent consideration related to the acquisition of Ultralox.

Year Ended September 30, 2019, Compared with Year Ended September 30, 2018

Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities was $94.9 million and $67.3 million for the years ended September 30, 2019 and 2018, respectively. Cash provided by operating activities for fiscal 2019 increased by approximately $27.6 million over fiscal 2018 as the decrease in net income in fiscal 2019 compared to fiscal 2018 was more than offset by increased deferred tax expense and depreciation and amortization in fiscal 2019 compared to fiscal 2018 and a net increase in working capital in fiscal 2019 primarily related to the timing of payments.

Cash Provided by (Used in) Investing Activities

Net cash used in investing activities was $62.9 million and $335.7 million for the years ended September 30, 2019 and 2018, respectively. In fiscal 2019, cash used in investing activities related to $63.0 million for purchases of property, plant and equipment. In fiscal 2018, cash used in investing activities primarily related to $293.0 million used to complete acquisitions as well as $42.8 million for purchases of property, plant and equipment. A majority of the $42.8 million of property, plant and equipment purchased in fiscal 2018 related to the purchase of manufacturing equipment in connection with the establishment of a recycling plant that was opened in 2019.

Cash Provided by (Used in) Financing Activities

Net cash provided by (used in) financing activities was $(8.3) million and $248.7 million for the years ended September 30, 2019 and 2018, respectively. Net cash used in financing activities in fiscal 2019 consisted primarily of payments of $8.3 million on long-term debt. In fiscal 2018, we received $224.4 million of proceeds from incremental borrowings under the Term Loan Credit Agreement as well as $40.0 million of aggregate proceeds from capital contributions by the Sponsors and certain of the other limited partners of the Partnership, made in connection with acquisitions. We expect to redeem the Senior Notes with the net proceeds from this offering for an aggregate amount equal to the outstanding principal amount of $315.0 million, plus accrued and unpaid interest to the redemption date. As a result of the expected redemption of the Senior Notes with net proceeds of this offering, our annual cash interest payments are expected to be reduced by approximately $25.2 million.

Indebtedness

Revolving Credit Agreement

The Revolving Credit Agreement provides for maximum aggregate borrowings of up to $150.0 million, subject to an asset-based borrowing base. Outstanding principal under the Revolving Credit Agreement will bear interest at a rate which equals, at our option, either (i) for alternative base rate, or ABR, borrowings, the highest of (a) the Federal Funds Rate plus 50 basis points, (b) the prime rate and (c) the London Interbank Offered Rate, or LIBOR, as of such date for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, plus, in each case, a spread of 50 to 100 basis points based on average historical availability, or (ii) for Eurocurrency borrowings, adjusted LIBOR plus a spread of 150 to 200 basis points, based on average historical availability. A “commitment fee” accrues on any unused portion of the commitments under the Revolving Credit Agreement during the preceding three calendar month period. If the average daily used percentage is greater than 50%, the commitment fee equals 25 basis points, and if the average daily used percentage is less than or equal to 50%, the commitment fee equals 37.5 basis points. The Revolving Credit Agreement has a maturity of the earlier of (i) March 9, 2022 and (ii) 91 days prior to the earlier of the maturity of the Term Loan Credit Agreement and the maturity of the Senior Notes.

 

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The obligations under the Revolving Credit Agreement are secured by a first priority security interest in certain assets, including substantially all of the accounts receivable, inventory, deposit accounts, securities accounts and cash assets of CPG Newco LLC, CPG International LLC and the subsidiaries of CPG International LLC that are guarantors under the Revolving Credit Agreement, and the proceeds thereof (subject to certain exceptions), or the Revolver Priority Collateral, plus a second priority security interest in all of the Term Loan Priority Collateral (as defined below). The obligations under the Revolving Credit Agreement are guaranteed by CPG Newco LLC and the wholly owned domestic subsidiaries of CPG International LLC other than certain immaterial subsidiaries and other excluded subsidiaries.

The Revolving Credit Agreement may be voluntarily prepaid in whole, or in part, in each case without premium or penalty. CPG International LLC is also required to make mandatory prepayments (i) when aggregate borrowings exceed commitments or the applicable borrowing base and (ii) during “cash dominion,” which occurs if (a) the availability under the Revolving Credit Agreement is less than the greater of (i) $12.5 million and (ii) 10% of the lesser of (x) $150.0 million and (y) the borrowing base, for five consecutive business days or (b) certain events of default have occurred and are continuing.

The Revolving Credit Agreement contains affirmative covenants that are customary for financings of this type, including allowing the Revolver Administrative Agent to perform periodic field exams and appraisals to evaluate the borrowing base. The Revolving Credit Agreement contains various negative covenants, including limitations on, subject to certain exceptions, the incurrence of indebtedness, the incurrence of liens, dispositions, investments, acquisitions, restricted payments, transactions with affiliates, as well as other negative covenants customary for financings of this type. The Revolving Credit Agreement also includes a financial maintenance covenant, applicable only when the excess availability is less than the greater of (i) 10% of the lesser of the aggregate commitments under the Revolving Credit Agreement and the borrowing base, and (ii) $12.5 million. In such circumstances, we would be required to maintain a minimum fixed charge coverage ratio (as defined in the Revolving Credit Agreement) for the trailing four quarters equal to at least 1.0 to 1.0; subject to our ability to make an equity cure (no more than twice in any four quarter period and up to five times over the life of the facility). As of December 31 and September 30, 2019, CPG International LLC was in compliance with the financial and nonfinancial covenants imposed by the Revolving Credit Agreement. The Revolving Credit Agreement also includes customary events of default, including the occurrence of a change of control.

We also have the option to increase the commitments under the Revolving Credit Agreement by up to $100.0 million, subject to certain conditions.

Term Loan Credit Agreement

The Term Loan Credit Agreement is a first lien term loan. As of December 31 and September 30, 2019, CPG International LLC had $806.5 million and $808.5 million, respectively, outstanding under the Term Loan Credit Agreement. The Term Loan Credit Agreement will mature on the earlier of (i) May 5, 2024 and (ii) 181 days prior to the maturity of the Senior Notes.

The interest rate applicable to the outstanding principal under the Term Loan Credit Agreement equals, at our option, either, (i) in the case of ABR borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime rate and (c) the LIBOR as of such day for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, provided that in no event will the alternative base rate be less than 200 basis points, plus, in each case, the applicable margin of 275 basis points per annum; or (ii) in the case of Eurocurrency borrowings, the greater of (a) the LIBOR in effect for such interest period divided by one, minus the statutory reserves applicable to such Eurocurrency borrowing, if any, and (b) 100 basis points, plus the applicable margin of 375 basis points per annum.

The obligations under the Term Loan Credit Agreement are secured by a first priority security interest in the membership interests of CPG International LLC owned by CPG Newco LLC, the equity interests of CPG

 

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International LLC’s domestic subsidiaries and all remaining assets not constituting Revolver Priority Collateral (subject to certain exceptions) of CPG Newco LLC, CPG International LLC and the subsidiaries of CPG International LLC that are guarantors under the Term Loan Credit Agreement, or the Term Loan Priority Collateral, and a second priority security interest in the Revolver Priority Collateral. The obligations under the Term Loan Credit Agreement are guaranteed by CPG Newco LLC and the wholly owned domestic subsidiaries of CPG International LLC other than certain immaterial subsidiaries and other excluded subsidiaries.

The Term Loan Credit Agreement may be voluntarily prepaid in whole, or in part, in each case without premium or penalty (other than the Prepayment Premium, as defined in the Term Loan Credit Agreement, if applicable), subject to certain customary conditions. CPG International LLC is also required to make mandatory prepayments in an amount equal to (i) 100% of the net cash proceeds from casualty events or the disposition of property or assets, subject to customary reinvestment rights, (ii) 100% of the net cash proceeds from the incurrence or issuance of indebtedness (other than permitted indebtedness) by CPG International LLC or any restricted subsidiary and (iii) 50% of excess cash flow, with such percentage subject to reduction (to 25% and to 0%) upon achievement of specified leverage ratios and which prepayment may be declined by the lenders under the Term Loan Credit Agreement. The estimated prepayment from excess cash flow was $6.4 million at September 30, 2019. Additionally, CPG International LLC is required to pay the outstanding principal amount of the Term Loan Credit Agreement in quarterly installments of 0.25253% of the aggregate principal amount under the Term Loan Credit Agreement outstanding, and such quarterly payments may be reduced as a result of prepayments.

The Term Loan Credit Agreement contains affirmative covenants, negative covenants and events of default, which are broadly consistent with those in the Revolving Credit Agreement (with certain differences consistent with the differences between a revolving loan and term loan) and that are customary for facilities of this type. The Term Loan Credit Agreement does not have any financial maintenance covenants. As of December 31 and September 30, 2019, CPG International LLC was in compliance with the covenants imposed by the Term Loan Credit Agreement. The Term Loan Credit Agreement also includes customary events of default, including the occurrence of a change of control.

We have the right to arrange for incremental term loans under the Term Loan Credit Agreement of up to an aggregate principal amount of $150.0 million, plus the amounts incurred under Incremental Amendment No. 1 thereto, plus any amounts previously voluntarily prepaid, with additional incremental term loans available if certain leverage ratios are achieved.

Senior Notes

On September 30, 2013, CPG International LLC (as successor-in-interest to CPG Merger Sub LLC) issued $315.0 million aggregate principal amount of 8.000% senior notes due October 1, 2021. The obligations under the Senior Notes are guaranteed by CPG International LLC and its subsidiaries that also guarantee the Revolving Credit Agreement and the Term Loan Credit Agreement.

At any time, CPG International LLC may redeem the Senior Notes in whole or in part, subject to specified make-whole obligations or redemption prices. As of October 1, 2019, the redemption price of the Senior Notes is the par value of the Senior Notes, plus accrued and unpaid interest. We will use net proceeds received by us from this offering to redeem all of the aggregate principal amount of the Senior Notes, plus accrued and unpaid interest.

The Senior Secured Credit Facilities and the Senior Notes each restrict payments of dividends unless certain conditions, as provided in the Revolving Credit Agreement, the Term Loan Credit Agreement or the indenture governing the Senior Notes, as applicable, are met. For more information on our outstanding indebtedness, see “Description of Certain Indebtedness.”

 

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Off-Balance Sheet Arrangements

In addition to our debt guarantees, we have contractual commitments for purchases of certain minimum quantities of raw materials at index-based prices, and non-cancelable capital and operating leases, outstanding letters of credit and fixed asset purchase commitments. We have no other material non-cancelable guarantees or commitments, and no material special purpose entities or other off-balance sheet debt obligations.

Contractual Obligations

The following table summarizes our contractual cash obligations as of September 30, 2019. This table does not include information on our recurring purchases of materials for use in production, as our raw materials purchase contracts do not require fixed or minimum quantities.

 

     Payments Due by Period  
     Total      Less than 1
year
     1-3 years      3-5 years      More than 5
years
 
(In thousands)       

Long-term indebtedness, excluding interest(1)

   $ 1,124,612      $ 8,304      $ 331,608      $ 784,700      $ —    

Interest on long-term indebtedness(2)

     271,185        72,948        119,219        79,018        —    

Capital lease obligations

     8,457        1,510        2,725        1,433        2,789  

Finance lease obligations

     8,258        459        1,557        1,635        4,607  

Raw material purchase commitments(3)

     5,631        5,631        —          —          —    

Operating lease obligations

     3,045        1,097        1,485        463        —    

Fixed asset purchase commitments(4)

     670        670        —          —          —    
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total contractual obligations

   $ 1,421,858      $ 90,619      $ 456,594      $ 867,249      $ 7,396  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)

As of September 30, 2019, long-term indebtedness, excluding interest, consisted of $808.5 million under the Term Loan Credit Agreement and $315.0 million of outstanding Senior Notes. As a result of the redemption of the Senior Notes with net proceeds of this offering, our long-term indebtedness, excluding interest, under “Due in 1—3 years” is expected to be reduced by $315.0 million with a corresponding reduction in “Total contractual obligations”. The Term Loan Credit Agreement will mature on the earlier of (i) May 5, 2024 and (ii) 181 days prior to the maturity of the Senior Notes. The Revolving Credit Agreement has a maturity of the earlier of (i) March 9, 2022 and (ii) 91 days prior to the maturity of the earlier of the Term Loan Credit Agreement and the Senior Notes.

(2)

Interest on long-term indebtedness includes interest of 8.000% on our $315.0 million outstanding Senior Notes and interest on our outstanding borrowings of $808.5 million under the Term Loan Credit Agreement equal to, at our option, either, (i) in the case of ABR borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime rate and (c) the LIBOR as of such day for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, provided that in no event will the alternative base rate be less than 200 basis points, plus, in each case, the applicable margin of 275 basis points per annum; or (b) in the case of the Eurocurrency borrowings, the greater of (a) the LIBOR in effect for such interest period divided by one, minus the statutory reserves applicable to such Eurocurrency borrowing, if any, and (b) 100 basis points, plus the applicable margin of 375 basis points per annum. For purposes of this table, we have assumed an interest rate of 5.93% on the Term Loan Credit Agreement for all future periods, which is the rate as of September 30, 2019. As a result of the redemption of the Senior Notes with net proceeds of this offering, our interest on long-term indebtedness “Due in 1—3 years” is expected to be reduced by $25.2 million with corresponding reductions in “Total contractual obligations.”

(3)

Substantially all of our resins are purchased under supply contracts that average approximately one to two years, for which pricing is variable based on an industry benchmark price index. The resin supply contracts are negotiated annually and generally provide that we are obligated to purchase a minimum amount of resins from each supplier. As of September 30, 2019, we have purchase commitments under material supply contracts of $5.6 million for the year ending December 31, 2019.

(4)

Primarily related to purchases of equipment for the recycling plant opened in the first half of fiscal 2019.

The following is a summary of outstanding letter of credit arrangements as of September 30, 2019:

 

     Amount of commitment expiration per period  
     Total
amount
     Less than 1
year
     1-3
years
     3-5
years
     After 5
years
 
(In thousands)                                   

Letters of credit

   $ 3,040      $ —        $ 3,040      $ —        $ —    

 

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Critical Accounting Policies, Estimates and Assumptions

A discussion of our significant accounting policies and significant accounting estimates and judgments is presented in the Summary of Significant Accounting Policies in the Notes to our Consolidated Financial Statements included elsewhere in this prospectus. Throughout the preparation of the financial statements, we employ significant judgments in the application of accounting principles and methods. These judgments are primarily related to the assumptions used to arrive at various estimates. These significant accounting estimates and judgments include:

Revenue Recognition

Our Residential segment generates revenue from the sale of our innovative, low-maintenance, sustainable Outdoor Living products, including decking, railing, trim, moulding, pavers products and accessories. Our Commercial segment generates revenue from the sale of sustainable low-maintenance privacy and storage solution products and highly engineered plastic sheet products.

On October 1, 2018, we early adopted ASC 606, using the modified retrospective method with an adjustment to the opening balance of equity of $0.2 million, due to the cumulative impact of adopting Topic 606. The adoption of ASC 606 did not have a material impact on the Consolidated Financial Statements, and the timing and amounts of our revenue recognition is substantially unchanged as a result of this new guidance. We did not restate comparative period amounts. Therefore, the comparative information continues to be reported under ASC 605, Revenue Recognition.

ASC 606 includes a five-step model for contracts with customers as follows:

 

   

Identify the contract with a customer;

 

   

Identify the performance obligations in the contract;

 

   

Determine the transaction price, which is the total consideration provided by the customer;

 

   

Allocate the transaction price among the separate performance obligations within the contract; and

 

   

Recognize revenue when the performance obligations are satisfied.

We recognize revenues when control of the promised goods is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods, at a point in time, when shipping occurs. Each product we transfer to the customer is considered one performance obligation. We have elected to account for shipping and handling costs as activities to fulfill the promise to transfer the goods. As a result of this accounting policy election, we do not consider shipping and handling activities as promised services to our customers.

Customer contracts are typically fixed price and short-term in nature. The transaction price is based on the product specifications and is determined at the time of order. We do not engage in contracts greater than one year, and therefore do not have any incremental costs capitalized as of December 31 or September 30, 2019. We may offer various sales incentive programs throughout the year. We estimate the amount of sales incentive to allocate to each performance obligation, or product shipped, using the most-likely-amount method of estimation, based on sales to the direct customer or sell-through customer. The estimate is updated each reporting period and any changes are allocated to the performance obligations on the same basis as at inception. Changes in estimate allocated to a previously satisfied performance obligation are recognized as part of net revenue in the period in which the change occurs under the cumulative catch-up method. In addition to sales incentive programs, we may offer a payment discount, if payments are received within 30 days. We estimate the payment discount that we determine will be taken by the customer based on prior history and using the most-likely-amount method of estimation. We believe the most-likely-amount method best predicts the amount of consideration to which we will be entitled. The payment discounts are also reflected as part of net revenue. The total amount of incentives was $10.3 million and $8.1 million for the three months ended December 31, 2019 and 2018, respectively, and $50.8 million and $42.4 million for the years ended September 30, 2019 and 2018, respectively.

 

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The differences between revenue recognized and cash payments received are reflected in accounts receivable, other assets, or deferred revenue, as appropriate.

Inventories

Inventories (mainly petrochemical resin in raw materials and finished goods), are valued at the lower of cost or net realizable value and are reduced for slow-moving and obsolete inventory. At the end of each quarter, management within each business segment performs a detailed review of its inventory on an item by item basis and identifies which products are believed to be obsolete, excess or slow moving. Management assesses the need for and the amount of any obsolescence write-down based on customer demand for the item, the quantity of the item on hand and the length of time the item has been in inventory. Further, management also considers net realizable value in assessing inventory balances. Inventory costs include those costs directly attributable to products, including all manufacturing overhead but excluding costs to distribute. Inventory cost is recorded at standard cost, which approximates actual cost, on the first-in, first-out basis.

Intangible Asset Valuation

Accounting for business combinations requires management to make significant estimates and assumptions at the acquisition date specifically for the valuation of intangible assets. In the year of such acquisitions, critical estimates in valuing certain of the intangible assets we have acquired include, but are not limited to, future expected cash flows from product sales, customer contracts and acquired technologies and discount rates. The discount rates used to discount expected future cash flows to present value are typically derived from a weighted-average cost of capital analysis and adjusted to reflect inherent risks. Unanticipated events and circumstances may occur that could affect either the accuracy or validity of such assumptions, estimates or actual results.

Goodwill

We evaluate the recoverability of goodwill at the reporting unit level annually, or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below the carrying amount. During fiscal 2019, we changed the annual impairment assessment date on which impairment is tested to August 1 from September 30 to align more consistently with the annual budgeting process. This change did not accelerate, delay, avoid or cause an impairment charge, nor did this change result in adjustments to any previously issued financial statements. Goodwill is considered to be impaired when the net book value of the reporting unit exceeds its estimated fair value. We may first assess qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount or may elect to bypass the qualitative assessment and proceed to a quantitative assessment to determine if goodwill is impaired. In quantitative impairment tests, we first compare the fair value of the reporting unit to the carrying value. If the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is impaired and an impairment loss is recognized for the excess up to the amount of goodwill allocated to the reporting unit.

We measure fair value of the reporting units to which goodwill is allocated using an income based approach, a generally accepted valuation methodology, using relevant data available through and as of the impairment testing date. Under the income approach, fair value is determined using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflects the relative risk of the cash flows. The key estimates and factors used in this approach include, but are not limited to, revenue growth rates and profit margins based on internal forecasts, a weighted-average cost of capital used to discount future cash flows, and a review with comparable market multiples for the industry segment as well as our historical operating trends. Any impairment is increased to encompass the income tax effects of any tax deductible goodwill on the carrying amount of the reporting unit, so that the after-tax impairment loss is equivalent to the amount by which the carrying value of the reporting unit exceeds its fair value.

 

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No impairments were recorded during the year ended September 30, 2019 as the estimated fair value substantially exceeded the carrying value for all reporting units other than the Versatex reporting unit. We determined that the fair value of the Versatex reporting unit exceeded its carrying value by 12.5% as of August 1, 2019. The Versatex reporting unit was acquired in June 2018, and, therefore, at August 1, 2019, the annual goodwill impairment test date, the fair value of the reporting unit was similar to the fair value of the reporting unit determined as of the date of acquisition in the purchase accounting process. The goodwill associated with the Versatex reporting unit was $110.4 million at September 30, 2019.

In determining the fair value of our reporting units, including the Versatex reporting unit, we use the income test, as described above, which includes, among key estimates, anticipated revenue growth rates and profit margins, based on internal forecasts, as well as performance for the industry segment, all of which are subject to uncertainty. Future adverse developments relating to such matters as the growth in the market for Versatex’s products, competition, general economic conditions, the market appeal of Versatex’s products or anticipated profit margins could reduce the fair value of the Versatex reporting unit.

Long-Lived Assets

We evaluate potential impairment of amortizable intangible assets and long-lived tangible assets whenever events or changes in circumstances indicate the carrying value of the asset may not be recoverable. Amortizable intangible assets and long-lived tangible assets include customer relationships, proprietary knowledge, trademarks and property, plant and equipment. If a triggering event has occurred, recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If an impairment is indicated, an impairment charge is recorded for the amount by which the carrying value of the long-lived asset group exceeds its fair value. Such an impairment loss would be recognized as a non-cash component of operating income. For the three months ended December 31, 2019 and years ended September 30, 2019 and September 30, 2018, we concluded that there were no impairments to the carrying value of our long-lived intangible assets.

Our amortization of intangible assets is performed on an accelerated basis over the useful lives, which reflects the pattern in which the economic benefits are consumed or otherwise used up.

Customer Program Costs—Rebates

Customer programs and incentives are a common practice in our business. We incur customer program costs to promote sales of products and to maintain competitive pricing. Customer program costs and incentives include annual programs related to volume growth as well as certain product-specific incentives. The program costs are accounted for at the time the revenue is recognized in net sales. Management’s estimates are based on historical and projected experience for each type of program or customer and in consideration of product specific incentives. Management periodically reviews accruals for these rebates and allowances, and adjusts accruals when circumstances indicate (typically as a result of a change in volume expectations).

Product Warranties

We provide product assurance warranties against certain defects to our customers based on standard terms and conditions for periods beginning as of the sale date and lasting from five years to a lifetime, depending on the product and subject to various limitations. We provide for the estimated cost of warranties by product line at the time revenue is recognized based on management’s judgment, considering such factors as cost per claim, historical experience, anticipated rates of claims, and other available information, including our stated warranty policies and procedures. Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates. Because warranty issues may surface later in the product life cycle, management continues to review these estimates on a regular basis and considers adjustments to these estimates based on actual experience compared to historical estimates. Estimating the required warranty reserves

 

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requires a high level of judgment, especially as many of our products are at a relatively early stage in their product life cycles. The warranty obligation is reflected in other current and other non-current liabilities in the consolidated balance sheets.

Contingent Consideration

From time to time we may offer contingent payments in connection with acquisitions. The contingent payments may be based on achievement of a minimum EBITDA amount or a multiple of EBITDA or other performance measures. We may also issue contingent compensation to retain certain key former employees of the acquired company. Contingent consideration is part of the purchase price and as such is recorded as a liability as of the acquisition date and is remeasured at each quarter end, with changes in fair value being reflected in earnings for cash based settlements. Contingent compensation is recorded as expense recognized over the required service period of the related employees with changes in fair value of the compensation recorded as part of the compensation expense.

We use the option pricing method to estimate the acquisition date fair value of contingent consideration liabilities, based on the likelihood and probability of the contingent earn-out payments. We classify the contingent liability as Level 3 fair value liabilities, due to the lack of observable inputs.

Equity-Based Compensation

To assist us in attracting, retaining, incentivizing and motivating employees, certain employees have been granted limited partnership interests in the Partnership that generally are intended to constitute “profits interests,” or the Profits Interests. The Profits Interests are subject to specified hurdle amounts, which function like option exercise prices because the Profits Interests do not participate in distributions by the Partnership until distributions to equity holders have exceeded the relevant hurdle amounts. In general, awards of Profits Interests are 50% time vested and 50% performance vested.

Prior to completion of this offering, interests in the Partnership, including the Profits Interests, were not listed on any established exchange. In determining the fair value of the Profits Interests we took into account the methodologies and approaches described in the American Institute of Certified Public Accountants Accounting and Valuation Guide, Valuation of Privately-Held Company Equity Securities Issued as Compensation. The sole material asset of the Partnership is indirect ownership of our company. Accordingly, the fair value of the Profits Interests was derived by reference to the value of our company, which we estimated using a combination of the income approach and the market approach. Under the income approach, we estimated the fair value of our company based on the present value of our future estimated cash flows and the estimated residual value of our company beyond the forecast period. These future values were discounted to their present values at a discount rate deemed appropriate to reflect the risks inherent in achieving these estimated cash flows. Significant estimates and judgments involved in the income approach include our estimated future cash flows, the perpetuity growth rate assumed in estimating the residual value of our cash flows and the discount rate used to discount our cash flows to present value. For the market approach, we utilized the comparable company method by analyzing a group of companies that were considered to be comparable to us in terms of product offerings, revenue, margins and/or growth. We then used these companies to develop relevant market multiples, which were applied to our corresponding financial metrics to estimate our equity value. Significant estimates and judgments used in the comparable company method included the selection of comparable companies and the selection of appropriate market multiples. Application of these approaches involves the use of estimates, judgment and assumptions that are highly subjective. Following this offering, it will not be necessary to apply these valuation approaches as shares of our common stock will be traded in the public market.

In order to determine the value of the Profits Interests, the estimated equity value of the Partnership was allocated among the various interests in the Partnership, including the Profits Interests, using the option pricing method, or OPM, which treats the various interests in the Partnership as call options with exercise prices

 

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determined based on their respective rights to participate in distributions by the Partnership. The values attributable to these implicit call options were determined using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires the use of highly subjective assumptions, including volatility and the expected term of the call options. As equity interests in the Partnership have not been publicly traded, expected volatility was derived based on the volatilities of a peer group of publicly-traded companies that were deemed to be similar to us. The expected term of the options was based on the anticipated time to liquidity. Other assumptions include the risk-free rate of interest and dividend yield. The risk-free rate of interest was based on yields for U.S. Treasury securities with remaining maturities corresponding to the estimated term of the options. Dividends were assumed to be zero, consistent with historical experience. After the equity value was determined and allocated to the various classes of interests in the Partnership, including the Profits Interests, a discount for lack of marketability, or DLOM, was applied to derive the fair value of the Profits Interests. A DLOM is meant to account for the lack of marketability of a security that is not publicly traded.

The cost of time vested Profits Interests is recognized as an expense generally on a straight-line basis over the employee’s requisite service period, which generally coincides with the vesting of the award. For performance vested Profits Interests, expense will be recognized if and when the achievement of the applicable performance criteria becomes probable. Performance vested Profits Interests only vest upon receipt by the Sponsors of specified proceeds (in the form of cash and marketable securities) or, in the event of a Change of Control (as defined in the Amended and Restated Agreement of Limited Partnership of the Partnership, dated as of September 30, 2013, or the Partnership Agreement), upon the Sponsors achieving a specified rate of return. See “Executive Compensation—Narrative Disclosure to Summary Compensation Table—Long-Term Incentives.” Through September 30, 2019, no compensation expense has been reported with respect to the performance vested Profits Interest because the achievement of the performance criteria had not become probable. As of December 31, 2019 and September 30, 2019, unrecognized compensation related to unvested performance vested Profits Interests was $11.0 million and $10.8 million, respectively. Additionally, during the three months ended December 31, 2019 and the year ended September 30, 2019, we granted certain awards that have similar performance criteria to the performance vested Profits Interests. As those criteria have not been met, no compensation expense has been recognized. As of December 31 and September 30, 2019, unrecognized compensation related to these awards was $4.1 million and $4.1 million, respectively.

Litigation Contingencies

We are subject to risks related to threatened or pending litigation and are from time to time defendants in lawsuits associated with the normal conduct of business. Liabilities associated with litigation-related loss contingencies may be substantial. Litigation contingencies require estimates and judgments based on our knowledge of the facts and circumstances surrounding each matter and the advice of our legal counsel. We record liabilities for litigation-related losses when a loss is probable and we can reasonably estimate the amount of the loss in accordance with accounting requirements for contingencies. We evaluate the measurement of recorded liabilities each reporting period based on the then-current facts and circumstances specific to each matter. The ultimate losses incurred upon final resolution of litigation-related loss contingencies may differ materially from the estimated liability recorded at any particular balance sheet date. Changes in estimates are recorded in earnings in the period in which such changes occur. We carry specialty insurance policies under which we file claims to recover litigation losses and legal defense costs. Recoveries of such losses are generally not recorded unless and until we have received written assurance from the insurer that the claim is covered under the policy; the recovery is deemed to be collectible; and the insurer has not disputed, nor is there any reason to believe that the insurer would dispute, the terms of the policy coverage. Contingent gains for anticipated insurance proceeds in excess of losses incurred, are generally not recorded unless the related proceeds are received from the insurer.

Income Taxes

In determining our current income tax provision, we assessed temporary differences resulting from differing treatments of items for tax and accounting purposes. These differences resulted in deferred tax assets and

 

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liabilities which are recorded in our consolidated balance sheets. When we maintain deferred tax assets, we must assess the likelihood that these assets will be recovered through adjustments to future taxable income. To the extent we believe, based on available evidence, it is more likely than not that all or some portion of the asset will not be realized, we establish a valuation allowance. We record an allowance reducing the asset to a value we believe is more likely than not to be realized based on our expectation of future taxable income. We believe the accounting estimate related to the valuation allowance is a critical accounting estimate because it is highly susceptible to change from period to period as it requires management to make assumptions about our future income over the lives of the deferred tax assets, and the impact of increasing or decreasing the valuation allowance is potentially material to our results of operations.

Forecasting future income requires us to use a significant amount of judgment. In estimating future income, we use our internal operating budgets and long-range planning projections. We developed our budgets and long-range projections based on recent results, trends, economic and industry forecasts influencing our segments’ performance, our backlog, planned timing of new product launches, and customer sales projections. Significant changes in the expected realization of net deferred tax assets would require that we adjust the valuation allowance, resulting in a change to net income.

On December 22, 2017, Congress passed, and the President signed, the Tax Act. The Tax Act makes broad and complex changes to the Code, including, but not limited to, the following items that impact the U.S. taxation of our income: (1) reducing the U.S. federal corporate income tax rate from 35% to 21%; (2) providing for the full expensing of qualified property; (3) revising the limitation imposed on deductions for executive compensation paid by publicly-traded companies; (4) imposing a new limitation on the deductibility of interest expense; and (5) changing the rules related to the uses and limitations of net operating loss carryforwards generated in tax years beginning after December 31, 2017.

As a result of the Tax Act, our deferred tax assets and deferred tax liabilities were remeasured as of December 22, 2017, at the enacted rate of 21%. The impact of remeasuring the deferred tax assets and liabilities reduced our net deferred tax liability by approximately $22.5 million. As a result, we recorded a net benefit of approximately $22.5 million during the first quarter of fiscal 2018 as a result of the Tax Act. This amount is included in income tax benefit in the Consolidated Statements of Comprehensive Income (Loss).

We record liabilities for uncertain income tax positions based on a two-step process. The first step is recognition, where we evaluate whether an individual tax position has a likelihood of greater than 50% of being sustained upon examination based on the technical merits of the position, including resolution of any related appeals or litigation processes. For tax positions that are currently estimated to have a less than 50% likelihood of being sustained, no tax benefit is recorded. For tax positions that have met the recognition threshold in the first step, we perform the second step of measuring the benefit (expense) to be recorded. The actual benefits (expense) ultimately realized may differ from our estimates. In future periods, changes in facts, circumstances, and new information may require us to change the recognition and measurement estimates with regard to individual tax positions. Changes in recognition and measurement estimates are recorded in the consolidated statement of income and consolidated balance sheet in the period in which such changes occur. As of December 31 and September 30, 2019 and September 30, 2018, we had liabilities for unrecognized tax benefits pertaining to uncertain tax positions totaling $1.0 million, $1.0 million and $0.9 million, respectively.

Recently Adopted Accounting Pronouncements

We qualify as an emerging growth company, and as such, have elected not to opt out of the extended transition period for complying with new or revised accounting pronouncements. During the extended transition period, we are not subject to new or revised accounting standards applicable to public companies. The accounting pronouncements pending adoption below reflect effective dates for us as an emerging growth company with the extended transition period.

 

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On October 1, 2017, we adopted ASU No. 2015-11, Inventory—Simplifying the Measurement of Inventory. The update requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The adoption of this amendment did not have a material impact on our Consolidated Financial Statements.

On October 1, 2017, we adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update clarifies the classification of certain cash receipts and payments in the statement of cash flows. Application of the new guidance required reclassification of certain cash flows within operating activities to investing and financing activities on our consolidated statement of cash flows. The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

On October 1, 2018, we early adopted ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The update will supersede most current revenue recognition guidance. Under the new standard, entities are required to identify the contract with a customer; identify the separate performance obligations in the contract; determine the transaction price; allocate the transaction price to the separate performance obligations in the contract; and recognize the appropriate amount of revenue when (or as) the entity satisfies each performance obligation. The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

On October 1, 2019, we adopted ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory. The standard amends several aspects of the tax accounting and recognition timing for intra-company transfers. We adopted the standard using a modified retrospective approach, with an adjustment to the beginning retained earnings of approximately $1.3 million, due to the cumulative impact of adopting the standard. The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), and its subsequent amendments (collectively, the “standard”). In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), deferring the adoption date for private entities by an additional year. Therefore, the standard is effective for private entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early application continues to be allowed. The standard requires lessees to present right-of-use assets and lease liabilities on the balance sheet. For public entities, the updated standard is effective for fiscal years beginning after December 15, 2018. The standard is effective for us, as an emerging growth company, for fiscal years beginning after December 15, 2020, with early adoption permitted. Assuming we remain an emerging growth company, we intend to adopt the updated standard during the year beginning October 1, 2021 and for interim periods within that fiscal year. ASU No. 2018-11 provides the option to initially apply ASU No. 2016-02 at the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, instead of applying the new guidance retrospectively for each prior reporting period presented. We anticipate adopting the standard using the option provided by ASU 2018-11 and are evaluating the impact of the adoption of these ASU’s on our Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13- Financial Instruments—Credit Losses (Topic 326). This ASU sets forth an expected credit loss model which requires the measurement of expected credit losses for financial instruments based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost, and certain off-balance sheet credit exposures. For public entities, the updated standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that

 

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fiscal year. This ASU is effective for us, as an emerging growth company, for the year ending September 30, 2022 and interim reporting periods beginning October 1, 2022. Early adoption is permitted. Assuming we remain an emerging growth company, we intend to adopt the updated standard during the year ended September 30, 2022 and for interim periods within the year beginning October 1, 2022. Adoption will require a modified retrospective transition. We are currently evaluating the impact of this ASU on our Consolidated Financial Statements.

In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326), which provided certain improvements to ASU No. 2016-13. The amendments provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments—Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. An entity that elects the fair value option should subsequently apply the guidance in Subtopics 820-10, Fair Value Measurement—Overall, and 825-10. For entities that have adopted the amendments in ASU No. 2016-13, the amendments in ASU No. 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim period after the issuance of ASU No. 2019-05 as long as an entity has adopted the amendments in ASU No. 2016-13. The amendments in ASU No. 2019-05 should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings balance in the statement of financial position as of the date that an entity adopted the amendments in ASU No. 2016-13. For us, the standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years beginning after December 15, 2021. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which amends ASU Topic 820, Fair Value Measurement. ASU No. 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. For all entities, this standard is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. We intend to adopt the updated standard during the year beginning October 1, 2020 and for interim periods within that fiscal year. The removed and modified disclosures will be adopted on a retrospective basis, and the new disclosures will be adopted on a prospective basis. We are currently evaluating the impact this adoption will have on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. For public entities, the updated standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The amendments in this ASU are effective for us, as an emerging growth company, for annual periods beginning after December 15, 2020 and for interim periods within annual periods beginning after December 15, 2021. The updated standard can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted, and, assuming we remain an emerging growth company, we intend to adopt the updated standard during the year beginning October 1, 2021 and for interim periods within the year beginning October 1, 2022. We are currently evaluating the impact this adoption will have on our Consolidated Financial Statements.

JOBS Act Accounting Election

We are an “emerging growth company” within the meaning of the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those

 

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standards apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards, and, therefore, we will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies or that have opted out of using such extended transition period, which may make comparison of our financial statements with those of other public companies more difficult. We may take advantage of these reporting exemptions until we no longer qualify as an emerging growth company, or, with respect to adoption of certain new or revised accounting standards, until we irrevocably elect to opt out of using the extended transition period.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of the completion of this offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; and (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

Internal Control over Financial Reporting

As of September 30, 2019 we identified three material weaknesses in our internal control over financial reporting. One material weakness related to the design and maintenance of an effective control environment, one material weakness related to the design and maintenance of formal accounting policies, procedures and controls, and one material weakness related to the design and maintenance of effective controls over certain information technology general controls. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. See “Risk Factors—We have identified material weaknesses in our internal control over financial reporting. If our remediation of these material weaknesses is not effective, or if we identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls in the future, we may not be able to accurately or timely report our financial condition or results of operations, investors may lose confidence in the accuracy and completeness of our financial reports and the trading price of our Class A common stock may decline.”

Each of the material weaknesses described above involve control deficiencies that could result in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected, and, accordingly, we determined that these control deficiencies constitute material weaknesses.

We remediated a previous material weakness related to our lack of policies, procedures and internal controls over non-routine or complex transactions during fiscal 2019. We remediated this material weakness by designing and implementing the following controls and procedures:

 

   

We enhanced controls and documentation related to the review of significant assumptions utilized in the assessment of goodwill impairment and valuation of business combinations.

 

   

We designed and implemented controls for management’s review of models utilized in the assessment of goodwill impairment and valuation of business combinations.

 

   

We enhanced controls and documentation related to the review of the completeness and accuracy of computations performed by third party appraisers.

Based on our evaluation, the above controls and procedures were determined to be operating effectively for a reasonable period of time.

We are currently in the process of implementing measures and taking steps to address the underlying causes of the remaining material weaknesses yet to be remediated. Our efforts to date have included the following:

 

   

We hired finance and accounting personnel with prior work experience in finance and accounting departments of public companies and with technical accounting, financial controls and SEC reporting

 

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experience, including the hiring of our Chief Financial Officer in January 2019 and our Chief Accounting Officer in April 2019. We have also reorganized our finance department to place finance personnel in line with our operating functions and to improve internal control over business processes and IT operations.

 

   

Although we have not remediated the material weaknesses related to the maintenance of an effective control environment and related to the design and maintenance of formal policies, procedures and internal controls, we have designed and are currently implementing formal accounting policies and procedures, training on standards of documentary evidence, as well as implementing additional controls to ensure the reliability of critical spreadsheets and system-generated reports.

 

   

Specifically, we have designed and implemented the following as part of our ongoing remediation efforts:

 

   

We formalized and issued accounting policies and position papers covering critical accounting areas.

 

   

We risk ranked business process controls for remediation to address higher priority areas first.

 

   

We strengthened controls related to review of account reconciliations, journal entries and balance sheet and income statement fluctuation analysis.

 

   

We enhanced controls related to the consolidation of financial information of all of our operating companies.

 

   

We provided training to strengthen process documentation and evidence of control operation, as well as precision of review controls.

 

   

To complete our remediation plan, we will perform testing to confirm that such controls are designed and operating effectively for a sufficient period of time.

 

   

Although we have not remediated the material weakness related to the design and maintenance of effective controls over certain information technology general controls, we have designed and are currently implementing an IT general controls framework that addresses risks associated with user access and security, application change management and IT operations; focused training for control owners to help sustain effective control operations; and comprehensive remediation efforts relating to segregation of duties to strengthen user access security.

 

   

Specifically, we have designed and implemented the following as part of our ongoing remediation:

 

   

We have risk ranked segregation of duties conflicts within our core financial system, remediated the highest priority conflicts and, where necessary, identified and validated mitigating controls.

 

   

We enhanced and implemented user administration processes that manage how we grant, modify, and remove user access to our financial applications. We completed a comprehensive review of privileged user access across our financial applications to confirm that access rights are restricted to authorized users based on business need.

 

   

We enhanced and implemented processes for managing changes to our financial applications (including controls that require all changes to be formally submitted, approved, tested and migrated to production by authorized users) as well as over program development.

 

   

We enhanced and implemented processes over our computer operations that restrict access to and continually monitor production batch jobs that support our financial reporting applications.

 

   

To complete our IT general controls remediation plan we will perform testing to confirm that such controls are operating effectively.

While we believe these efforts will improve our internal controls and address the underlying causes of the three remaining material weaknesses, such material weaknesses will not be remediated until our remediation plan

 

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has been fully implemented and we have concluded that our controls are operating effectively for a sufficient period of time. We cannot be certain that the steps we are taking will be sufficient to remediate the control deficiencies that led to our material weaknesses in our internal control over financial reporting or prevent future material weaknesses or control deficiencies from occurring. In addition, we cannot be certain that we have identified all material weaknesses in our internal control over financial reporting, or that in the future we will not have additional material weaknesses in our internal control over financial reporting.

Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

We are subject to interest rate risk in connection with our long-term debt. Our principal interest rate risk relates to the Senior Secured Credit Facilities. To meet our seasonal working capital needs, we borrow periodically on our variable rate revolving line of credit under the Revolving Credit Agreement. As of December 31 and September 30, 2019 we had $806.5 million and $808.5 million, respectively, outstanding under the Term Loan Credit Agreement and no outstanding amounts on the Revolving Credit Agreement. The Term Loan Credit Agreement bears interest at variable rates. An increase or decrease of 100 basis points in the floating rates on the amounts outstanding under the Senior Secured Credit Facilities as of December 31, 2019 and 2018, and September 30, 2019 and 2018 would have increased or decreased, respectively, annual cash interest by approximately $8.1 million, $8.1 million, $8.1 million and $8.2 million, respectively.

In the future, in order to manage our interest rate risk, we may refinance our existing debt or enter into interest rate swaps or otherwise hedge the risk of changes in the interest rate under the Senior Secured Credit Facilities. However, we do not intend or expect to enter into derivative or interest rate swap transactions for speculative purposes.

Credit Risk

As of September 30, 2019 and 2018, our cash and cash equivalents were maintained at major financial institutions in the United States, and our current deposits are likely in excess of insured limits. We believe these institutions have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to us.

Our accounts receivable primarily relate to revenue from the sale of products primarily to established distributors inside of the United States. To mitigate credit risk, ongoing credit evaluations of customers’ financial condition are performed. As of September 30, 2019 and 2018, no customer represented more than 10% of our gross trade accounts receivable.

Foreign Currency Risk

Substantially all of our business is currently conducted in U.S. dollars. We do not believe that an immediate 10% increase or decrease in the relative value of the U.S. dollar as compared to other currencies would have a material effect on our operating results.

Inflation

Our cost of sales is subject to inflationary pressures and price fluctuations of the raw materials we use. Historically, we have generally been able over time to recover the effects of inflation and price fluctuations through sales price increases and production efficiencies associated with technological enhancements and volume growth; however, we cannot reasonably estimate our ability to successfully recover any price increases in the future.

Raw Materials

We rely upon the supply of certain raw materials in our production processes; however, we do not typically enter into fixed price contracts with our suppliers and currently have no fixed price contracts with our major

 

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vendors. The primary raw materials we use in the manufacture of our products are various petrochemical resins, including polyethylene, polypropylene and PVC resins, reclaimed polyethylene and PVC material, waste wood fiber and aluminum. In addition, we utilize a variety of other additives including modifiers, TiO2 and pigments. The exposures associated with these costs are primarily managed through terms of the sales and by maintaining relationships with multiple vendors. Prices for spot market purchases are negotiated on a continuous basis in line with the market at the time. We have not entered into hedges with respect to our raw material costs at this time, but we may choose to enter into such hedges in the future. Other than short term supply contracts for resins with indexed based pricing and occasional strategic purchases of larger quantities of certain raw materials, we generally buy materials on an as-needed basis.

The cost of some of the raw materials we use in the manufacture of our products is subject to significant price volatility. For example, the cost of petrochemical resins used in our manufacturing processes has historically varied significantly and has been affected by changes in supply and demand and in the price of crude oil. Substantially all of our resins are purchased under supply contracts that average approximately one to two years, for which pricing is variable based on an industry benchmark price index. The resin supply contracts are negotiated annually and generally provide that we are obligated to purchase a minimum amount of resins from each supplier. In addition, the price of reclaimed polyethylene material, waste wood fiber, aluminum, other additives (including modifiers, TiO2 and pigments) and other raw materials fluctuates depending on, among other things, overall market supply and demand and general business conditions.

 

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BUSINESS

Company Overview

We are an industry-leading designer and manufacturer of beautiful, low-maintenance and environmentally sustainable products focused on the highly attractive, fast-growing Outdoor Living market. Homeowners are continuing to invest in their outdoor spaces and are increasingly recognizing the significant advantages of long-lasting products, which are converting demand away from traditional materials, particularly wood. Our products transform those outdoor spaces by combining highly appealing aesthetics with significantly lower maintenance costs compared to traditional materials. Our innovative portfolio of Outdoor Living products, including deck, rail, trim and accessories, inspires consumers to design outdoor spaces tailored to their unique lifestyle needs. We are well known in the industry, and, according to data provided by Principia, we generally hold one of the top two market share positions by revenue in our product categories. In addition to our leading suite of Outdoor Living products, we sell a broad range of highly engineered products that are sold in commercial markets, including partitions, lockers and storage solutions.

One of our core values is to “always do the right thing”. We make decisions according to what is right, not what is the cheapest, fastest or easiest, and we strive to always operate with integrity, transparency and the customer in mind. In furtherance of that value, we are focused on sustainability across our operations and have adopted strategies to enable us to meet the growing demand for environmentally-friendly products.

Our businesses leverage a shared material technology and U.S.-based manufacturing platform to create products that convert demand from traditional materials to those that are long lasting and low maintenance, fulfilling our brand commitment to deliver products that are “Beautifully Engineered to Last”. Our Residential segment product portfolio is highly complementary and allows us to provide a wide-ranging solutions set to Outdoor Living projects. Our primary consumer brands in our Residential segment, TimberTech and AZEK, are recognized by contractors and consumers for their premium aesthetics, uncompromising quality and performance and for their diversity of style and design options. In our Commercial segment, we manufacture engineered sheet products and high-quality bathroom partitions and lockers. Over our history, we have developed a reputation as a leading innovator in our markets by leveraging our differentiated manufacturing capabilities, material science expertise and product management proficiency to consistently introduce new products into the market. This long-standing commitment to innovation has been critical to our ability to stay at the forefront of evolving industry trends and consumer demands, which in turn has allowed us to become a market leader across our core product categories.

Our focus on new product development, material science and R&D enables us to capitalize on favorable secular growth trends that are accelerating material conversion from traditional materials such as wood, to sustainable, low-maintenance engineered materials, and to expand our markets. We believe our core competency of consistently launching new products into the market, combined with our recent investments in sales, marketing, R&D and manufacturing, will continue to accelerate our growth. Over our 30-year history, we have introduced numerous disruptive products and demonstrated our ability to drive material conversion and extend our portfolio, addressing consumer needs across a wide range of price segments. In fiscal 2015, we introduced our Vintage premium decking collection, and through fiscal 2019, sales for these products, including new colors introduced in fiscal 2018 and variable widths introduced in fiscal 2019, have increased at a CAGR of more than 50.0% per year. We have leveraged the strong consumer response to Vintage to expand the platform with the introduction of new designs that address evolving industry trends and consumer demands. Our material science expertise and differentiated R&D capabilities enable us to create award-winning products and back them with some of the industry’s longest warranties, such as the 50-year fade & stain warranty that we offer on our TimberTech AZEK decking product line. Most of our product categories are in the early growth stage of their life cycles, and we anticipate that they will continue to benefit from substantial material conversion over the long term.

We have created an operating platform that is centered around sustainability, one of our core strategic pillars, which extends across our value chain from product design to raw material sourcing and manufacturing, and we increasingly utilize plastic waste, recycled wood and scrap in our products. We have also made significant recent investments in our recycling capabilities, which further enhance the sustainability of our manufacturing operations and reduce our costs. In fiscal 2019, we utilized more than 200 million pounds of

 

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recycled materials in our deck boards, and we expect to increase the amount of recycled materials used in our deck boards by over 25% in fiscal 2020. In addition, we believe we have the opportunity to further increase the amount of recycled material used in our products. In fiscal 2019, we opened a new 100,000 square foot recycling facility that utilizes advanced technologies to transform a broad range of plastic waste into raw material used in our products. Today, our TimberTech PRO and EDGE decking lines offer high-quality products made from approximately 80% recycled material. Through our recycling programs, approximately 290 million pounds of waste and scrap were diverted from landfills in fiscal 2019. Furthermore, approximately 98% of scrap generated is re-used, and the majority of our TimberTech, AZEK Exteriors and Versatex products are recyclable at the end of their useful lives.

Within our Residential segment, we sell our products through a national network of more than 4,200 dealers, more than 35 distributors and multiple home improvement retailers providing extensive geographic coverage, enabling us to effectively serve contractors across the United States and Canada. Our geographic breadth, combined with our extensive market knowledge and broad product portfolio, positions us to continue to accelerate our growth within the industry. Our customer-focused sales organization generates pull-through demand for our products by driving increased downstream engagement with consumers and key influencers such as architects, builders and contractors, and by focusing on strengthening our position with dealers and growing our presence in retail. We have been investing in our consumer brands, marketing campaigns and digital tools in order to strengthen our relationships with consumers and key influencers, many of whom serve as advocates of our brands. Within our Commercial segment, we sell our products through a broad distribution network as well as directly to OEMs.

Through our Residential and Commercial segments, we deliver market-focused product solutions that drive material conversion. We have experienced strong growth over our history, and over the last several years we have made significant investments in our business to further accelerate our growth and increase our profitability.

 

 

LOGO

 

 

 

(1)

For a discussion of Segment Adjusted EBITDA and Segment Adjusted EBITDA Margin, see the Segments Note in the Notes to our Consolidated Financial Statements included elsewhere in this prospectus and the discussion under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Segment Results of Operations”

(2)

10-Year Net Sales CAGR refers to the CAGR for the ten years ended September 30, 2019, on a trailing twelve-month basis. Our growth over this period reflects the contribution to net sales of acquisitions, including the acquisitions of VAST Enterprises and TimberTech in fiscal 2012 and Ultralox and Versatex in fiscal 2018.

(3)

We define Five Year New Product Vitality as the percentage of gross sales in fiscal 2019 derived from products first introduced in fiscal 2019 and the four preceding years, excluding gross sales from Versatex and Ultralox.

In fiscal 2019, our net sales, net loss and Adjusted EBITDA were $794.2 million, $20.2 million and $179.6 million, respectively. We intend to continue developing new products, building the leading consumer brand in Outdoor Living and growing our downstream-focused sales force, and we believe the demand for our products will benefit from continued material conversion and growth of the Outdoor Living market. Adjusted EBITDA is a non-GAAP financial measure used by management as a measure of our core operating results and

 

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the effectiveness of our business strategy. For more information on Adjusted EBITDA and for a reconciliation to net income, its most comparable financial measure calculated in accordance with GAAP, see “Selected Consolidated Financial Data—Non-GAAP Financial Measures.”

Industry Overview

Our products are widely used across several large, attractive markets, including residential, and commercial end markets. We primarily serve the Outdoor Living market. We expect the Outdoor Living market will continue to benefit from increased investment as homeowners choose to spend more leisure time outdoors. As more members of the Millennial generation purchase first homes in the United States, we expect the demand for outdoor living spaces will rise, and the appeal of low- to no-maintenance features to gain further momentum. We believe that consumers are increasingly environmentally-conscious in their purchasing behaviors, and that our sustainable manufacturing practices and the high recycled content of our products address evolving consumer preferences.

The primary products that we sell into the Outdoor Living market are composite deck, composite and aluminum rail and PVC trim. Based on data provided by Principia, the total U.S. market sales of these products were $7.2 billion in 2018, grew at a 6.3% CAGR from 2014 to 2018 on a linear foot basis and are expected to grow at a 3.0% CAGR from 2018 to 2022 on a linear foot basis to $8.3 billion in 2022. By material type, based on data provided by Principia, the total U.S. market sales of composite deck, composite and aluminum rail and PVC trim products are expected to grow at a 5.7% CAGR from 2018 to 2022, compared to deck, rail and trim manufactured from wood which are expected to grow at a 2.7% CAGR and to deck, rail and trim manufactured from other materials, such as engineered wood, vinyl and other metals, which are expected to grow at a 1.4% CAGR, in each case measured in terms of linear feet. In addition, based on data provided by Freedonia, the total U.S. market sales of wood and wood-look siding, pavers, outdoor furniture and outdoor lighting were $10.9 billion in 2018, and, when combined with the total U.S. market sales of deck, rail and trim, according to Principia, in 2018, totaled $18.1 billion in 2018.

 

LOGO

Source: 2018 and 2022 projected market sizes based on data provided by Principia.

 

(1)

Represents total market (all materials). Principia market definition for trim excludes specialty exteriors products, such as tongue and groove profiles, sheets, sills, thresholds and column wraps.

(2)

Decking category includes composite and PVC decking, rail category includes composite and aluminum rail and trim category includes PVC trim.

Based on data provided by Principia, there were approximately 57 million decks in the United States as of 2018, of which approximately 5.0 million were built in 2018, up from approximately 4.0 million in 2014, representing a CAGR of 5.9%. Decking, our single largest product category, represents a significant opportunity for homeowners to extend the total livable space of their home and to design a unique space for relaxation and entertainment. Through our portfolio of Outdoor Living products, we provide a broad range of material and design options to homeowners as they tailor their outdoor living space to their unique lifestyle. In addition, we

 

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believe that we have significant opportunities to leverage our material science expertise, brand awareness and channel relationships to expand into additional segments of the Outdoor Living market.

We believe our products offer a compelling value proposition due to their enhanced durability, quality, attractive aesthetics and lower life-cycle costs relative to traditional materials such as wood. For example, we estimate the total lifecycle cost of our new TimberTech EDGE Prime decking, including materials, labor and annual maintenance, is approximately 37% less expensive over its 25-year warranty period than the cost of a pressure treated lumber deck.

 

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Total Deck Project Installation Costs(1) Total Deck Life-Cycle Costs(2)

 

 

(1)

These assumptions and estimates are based on AZEK market knowledge and feedback from decking-focused contractors with experience installing TimberTech and wood decking products. Actual costs for any particular installation can vary significantly.

(2)

Total Deck Project Installation Costs represent the total aggregate costs of an initial deck installation for a 16’ x 20’ elevated deck and exclude costs associated with the installation of rail or stairs.

(3)

Total Deck Life-Cycle Costs represent both the aggregate costs of an initial deck installation and the estimated maintenance costs over a 25-year period for a 16’ x 20’ elevated deck excluding potential replacement costs.

(4)

Other costs include substructure installation costs, initial staining and sealing of wood decking materials and the cost of top down fasteners for EDGE Prime and pressure treated lumber and hidden fasteners for ipe and AZEK Vintage.

(5)

Estimated maintenance costs include an assumed annual cleaning of TimberTech products and an assumed maintenance requirement of annual pressure washing and sanding, staining and sealing a pressure treated lumber deck every three years and an ipe deck every two years to maintain aesthetics.

Composite deck (which includes wood composite and PVC decking), rail and trim products have continued to increase market share relative to other materials, due to their superior product qualities. Based on data provided by Principia, between 2014 and 2018, composite deck, composite and aluminum rail and PVC trim products collectively grew at a CAGR of 8.7% as compared to deck, rail and trim manufactured from wood, which grew at a CAGR of 5.9%, in each case measured in terms of linear feet. We believe the market for composite products will continue to increase at an above-market growth rate as it benefits from material conversion. Based on data provided by Principia, wood represented approximately 65% of the total U.S. deck, rail and trim markets based on 2018 linear feet sold. With respect to the individual components of these markets, based on this data, composite deck represented approximately 18% of the decking market, composite and aluminum rail represented approximately 16% of the rail market and PVC trim products represented approximately 11% of the trim market, each in terms of linear feet.

 

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LOGO

Material Type Penetration By Market (Linear Feet, 2017)(1)

 

(1)

Based on data provided by Principia. Other includes (A) hollow vinyl, plastic lumber and metal for decking, (B) iron, stainless steel, hollow vinyl and other plastic for railing and (C) engineered wood, fiber cement, vinyl, other polymer composite and other for trim.

(2)

Wood for the decking market includes premium hardwoods, cedar and redwood, which accounted for approximately 13% of the total decking market in 2018 according to data provided by Principia.

We believe there is a significant opportunity for further market penetration by composite products as consumer awareness towards sustainable materials increases and advances in material science and manufacturing improve the range of colors and textures available. We offer products that reduce the relative premium between composite and other materials to increase the affordability and further improve the lifetime value advantages of composite products. In addition, we believe our products are well positioned to benefit from growth across economic cycles given their low market penetration and improving cost and value proposition. We believe that we have been, and will continue to be, a driving force behind the growth of low-maintenance products in our markets.

Our engineered deck, trim, rail and accessory products are sold through both one-step and two-step distribution channels. Within our Residential segment, we sell our products to distributors, professional dealers and home improvement retailers, who in turn sell our products to builders, contractors and homeowners. Based on data provided by Principia, the relative industry volumes of composite deck, composite and aluminum rail and PVC trim products sold by distribution channel and by end user channel are as follows:

 

 

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Residential Channel Summary-Sales by Manufacturers Residential Channel Summary-Sales to End Users

 

(1)

Rail includes composite and aluminum rail.

 

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We are a leader within the professional dealer channel due to our depth across product categories, brand reputation and the superior quality of our products. We estimate that our U.S. decking sales represented approximately 34% of total composite decking sales in 2018 and that our U.S. PVC trim sales represented approximately 36% of total PVC trim sales in 2018, in each case within the professional dealer channel. Based on data provided by Principia, in 2018, the retail channel represented approximately 35% of the total $3.1 billion decking market, and, within that channel, composite decking sales represented approximately $0.3 billion. We estimate approximately half of all composite decking sales through that retail channel were special order products. Although less than 10% of our Residential segment sales were directly through home improvement retailers, we have seen substantial year-over-year growth in special order sales through such retailers, resulting in a CAGR of such gross sales of over 20% between 2015 and 2019. We believe we have an opportunity for significant expansion within retail and that this channel represents a key area of potential growth for us in the future. Our Commercial segment sells its products to OEMs and through distribution channels that reach a number of end markets including education, industrial, commercial and marine.

The AZEK Difference

An Industry Leader in the Outdoor Living Market

We are a leader in a number of large and growing segments of the Outdoor Living market and are benefiting from the early stages of material conversion and secular growth trends. Our significant scale, vertically-integrated manufacturing capabilities and extensive material science expertise enable our leadership position. We have leveraged these capabilities to establish a track record of innovation across a broad range of products with superior quality, aesthetics and performance that has been recognized by respected industry sources. In Hanley Wood’s 2019 BUILDER brand use study of U.S. builders, developers and contractors, TimberTech AZEK decking ranked #1 for quality within the deck category, and AZEK trim ranked #1 for quality within the decorative mouldings, trim and columns category. Additionally, our engineered bathroom partitions are a leading product specified by architects, and our Aria partitions won a Product Innovation Award from Architectural Products Magazine in 2018. These strengths, combined with our downstream focus and expanding marketing and digital strategy, have generated strong brand awareness and preference among contractors and consumers.

Serving Large, High-Growth and Resilient Markets That Are Benefitting from Material Conversion

We believe that the Outdoor Living market is benefiting from material conversion from traditional wood materials to low-maintenance, engineered materials. Based on data provided by Principia, wood represented approximately 65% of the total U.S. deck, rail and trim markets as measured by linear feet sold in 2018. Within the decking market specifically, wood represented approximately 80% of the total decking market in 2018, with premium hardwoods, cedar and redwood comprising 13% of the total decking market. We believe these markets present substantial growth opportunities in the coming years and that our leading scale, vertically-integrated manufacturing capabilities and extensive material science expertise position us to capitalize on these highly attractive markets as material conversion continues.

In addition, we believe that the residential repair and remodel market, which is the primary market served by our core products, is significantly more resilient through economic cycles than the home building industry. We estimate that, within our Residential segment, over 85% of our net sales are attributable to repair and remodel activity. Based on data provided by Principia, in 2018, approximately 95% of total decking, 80% of rail and 65% of trim sales were attributable to the residential repair and remodel market. Our markets are also experiencing multiple favorable long-term secular growth trends. For example, within our Residential segment, consumers increasingly spend their leisure time outdoors and demand products that expand the usable living space of their home and enhance their outdoor lifestyle. In addition, according to a 2019 survey by the American Institute of Architects, outdoor living spaces have ranked as the most popular space amongst residential architects over the past two years and continue to increase in popularity. As a result, we believe our business will continue to benefit from strong material conversion, continued repair and remodel activity and favorable secular trends.

 

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Premium Brands Known for Service, Quality, Aesthetics and a Broad Range of Styles and Designs

We achieved our premium brand reputation through our unwavering commitment to developing innovative new products that combine the latest style and design trends with our differentiated material science expertise and proprietary production technologies. For example, we have launched products that take premium flooring trends, such as wire-brushed and hand-scraped finishes and multiple widths, into the decking market.

In addition, we have deployed significant direct sales and service resources that have helped us develop strong brand awareness and loyalty among dealers, home improvement retailers and contractors. Over the last several years, we have made substantial investments to further enhance and strengthen our brands, including launching a variety of innovative new products with superior aesthetics, initiating cutting edge marketing campaigns, expanding our digital footprint and capabilities and unveiling a new set of tools focused on enhancing the consumer experience. We are well known in the industry, and we are generally one of the top two recognized brands in our product categories.

Committed to Sustainably Produced, Long-Lasting, Beautiful Products

Our commitment to sustainability permeates our operations, and our products divert waste from landfills and reduce deforestation. Approximately 90% of our gross sales are attributable to products that are manufactured through an extrusion process, and approximately 44% of all of our extruded materials were manufactured from recycled materials in fiscal 2019. We expect this percentage to increase to approximately 54% in fiscal 2020, and we believe there is an opportunity to increase this percentage in the future. Additionally, our operations are designed with sustainability in mind, with our facilities in Wilmington, OH and Scranton, PA employing closed-loop water filtration systems that recycle approximately 96% of water used annually and our polyethylene recycling facility utilizing energy-efficient systems for power, water, heating, cooling and lighting. Further, our products are designed to retain their aesthetic and structural qualities throughout their lifetimes, and the majority of our products are recyclable at the end of their useful lives. The increasing use of recycled content in our products also leads to improvements in our operating margins, as the flexibility of material input sourcing lowers input costs and reduces reliance on virgin raw materials.

Highly Versatile , U.S.-based Manufacturing Platform with Differentiated Capabilities

We are a vertically-integrated manufacturer, delivering superior quality products with a competitive cost position. Our versatile, process-oriented manufacturing operations are built on a foundation of extensive material development and processing capabilities. Our proprietary production technologies, material blending proficiency and range of extrusion methods enable innovation and facilitate expansion into new markets. We have deep experience working with multiple technologies that enable us to provide some of the industry’s most attractive visuals through advanced streaking and multi-color technologies. Our manufacturing footprint has been consolidated into six facilities over four geographic locations totaling over 1.6 million square feet, and we have made significant investments in people, processes and systems to increase our manufacturing scale and productivity. We continue to invest in expanding our vertical manufacturing capabilities, including recent investments in our new 100,000 square foot polyethylene recycling facility, which enables further use of recycled content in our product offering and further reduces our reliance on higher-cost alternatives. In 2017, we introduced AIMS to manage and monitor operations, and in 2018, we implemented LLS tools and techniques at our manufacturing facilities to reduce material waste and improve manufacturing efficiency.

Leader in Product Development and Innovation with a Robust New Product Pipeline

Over the past 30 years, we have built an R&D organization with significant expertise in material science and production process technologies. We leverage our R&D and manufacturing capabilities to deliver innovative new products to market that address evolving customer needs while expanding our use of recycled materials. Our product managers and marketing team actively analyze proprietary consumer research and work with architects, contractors and consumers to identify and develop new products that incorporate consumer feedback, expand our

 

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portfolio and extend the range of style and design options we offer. Our R&D team then designs, prototypes and tests these new products prior to full scale production. Our rigorous R&D process incorporates in-house analytical capabilities and comprehensive product testing with more than 260 distinct tests, such as accelerated weathering. During the four years ended September 30, 2019, our team successfully led over 20 significant new product introductions, and, for the twelve-month period ended September 30, 2019, our Five Year New Product Vitality for our Residential segment was approximately 51%. We expect to continue to maintain a robust pipeline of new products and technologies that we intend to launch over the next several years, which we believe will help us continue to maintain our leadership in product innovation and drive strong product vitality.

Extensive Network of Contractors, Dealers and Distributors

Throughout our history, we have developed an extensive network in the United States and Canada of loyal contractors, dealers and distributors, many of whom are brand advocates for our products. Our extensive network consists of more than 4,200 dealers, over 130 distributor branch locations and thousands of contractors throughout the United States and Canada. We believe our strong relationships with dealers and contractors are driven by the trust and reliability that we have generated through product innovation, superior quality and performance, and the continuing service and support that we offer. Such support includes specialized training opportunities such as AZEK University and sales support initiatives such as digital lead generation, joint marketing funds, new sample kits, display kiosks, enhanced product literature, print, TV and radio advertising and social media initiatives. AZEK University provides hands-on training for contractors and customers using TimberTech and AZEK Exteriors products and our AZEK Pro Rewards program leverages our new website and digital capabilities to share curated digital leads with our contractors. In our Commercial segment, we sell our Vycom products through a network of approximately 130 engineered product distributors across the United States, Canada and Latin America, who sell primarily to OEMs, and we sell products made by Scranton Products through a network of approximately 900 dealers who sell to institutional and commercial customers across the United States and in Canada.

Strong Margin Profile with Significant Opportunity for Expansion

Our business has a strong margin profile driven by our differentiated premium branded products, vertically-integrated U.S.-based manufacturing capabilities and strong customer relationships. We continue to invest in new innovations in current and adjacent markets that we believe will support our long-term growth. Our Residential segment generated Segment Adjusted EBITDA Margin of 28.8% in the year ended September 30, 2019, and we are well positioned to continue to execute on our operational excellence initiatives, including recycling and continuous manufacturing efficiency improvement. We have made significant recent capital investments, and as these investments mature, we believe there is a significant opportunity for us to expand our margins.

Proven Management Team Focused on Execution

We have assembled a diverse team of highly experienced and accomplished executives with public company experience, a proven track record of leading global consumer and industrial organizations and driving profitable growth, product innovation, cost reduction and manufacturing efficiency. In the past two years, under our management team’s leadership, our Adjusted Gross Profit as a percentage of net sales increased by approximately 400 basis points while we continue to enjoy strong top line growth. Our Chief Executive Officer, Jesse Singh, joined our team in 2016, after serving in numerous leadership roles at 3M, including Chief Commercial Officer, President of 3M’s Health Information Systems business and VP of the Stationery and Office supplies business, which included the iconic Post-it and Scotch Brands. Our Chief Financial Officer, Ralph Nicoletti, joined our team in 2019 after serving as Executive Vice President and Chief Financial Officer of Newell Brands and has more than 35 years of finance experience. Collectively, our team is approximately 50% gender and ethnically diverse and has extensive experience at leading companies, including 3M, Newell Brands, Owens Corning, Eaton, Armstrong, Grainger and Emerson. Our management

 

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team has executed key strategic initiatives across the platform to drive accelerated growth and profitability, including upgrading operational capabilities, implementing productivity tools, and investing in new products, sales force expansion, marketing, M&A and internal recycling capabilities.

Our Growth Strategy

We believe our multi-faceted growth strategy positions us to drive profitable above-market growth in the markets we serve.

Introduce Innovative New Products That Expand Our Markets

We have a proven track record of developing innovative new products across multiple price points that accelerate material conversion, increase the use of recycled materials and expand our markets. Our strong manufacturing capabilities, proprietary production technologies, detailed consumer research and extensive material science expertise allow us to rapidly introduce differentiated products. In our Residential segment, our new products are driving conversion away from traditional wood materials across all pricing segments, from various forms of pressure treated wood at the entry level to more exotic woods such as cedar and ipe at the premium level. In 2019, our Residential segment launched three new product platforms: TimberTech EDGE, Multi-Width decking and PaintPro trim. We believe that TimberTech EDGE will accelerate conversion of low-cost traditional pressure treated wood materials by offering superior aesthetics and performance at an accessible price point. Our entry-level decking category volume, which includes our TimberTech PRO Terrain collection in addition to our TimberTech EDGE Prime and Premier collections, increased over 35% on a linear foot basis in fiscal 2019 as compared to the prior year. Multi-Width decking, which extends the technological advancements available in our highly successful Vintage platform, expands the range of style and design options available to consumers seeking premium decking solutions and provides a unique combination of superior performance and a natural wood-look and feel. Our premium Vintage collection volume increased approximately 50% on a linear foot basis in fiscal 2019 as compared to the prior year. PaintPro expands the addressable market for our trim products and accelerates wood conversion by delivering the same high-quality, low-maintenance performance of traditional white PVC trim across a full spectrum of paintable colors. Each year, we continue to launch new products across our business, and as of the year ended September 30, 2019, our blended Five Year New Product Vitality across our Residential segment and Commercial segment was approximately 45%.

In 2020, we are expanding on these product innovations in our Residential segment and launching a new multi-color TimberTech EDGE Prime+ decking collection, a new Wide-Width profile for the TimberTech AZEK Harvest decking collection and the new, multi-tonal Reserve collection under the TimberTech PRO decking line, among others. In addition, we are implementing a multi-year, $100 million capital investment program to increase capacity and further support our future growth. We will continue to leverage our material technology capabilities and commission detailed consumer research to regularly introduce new products that set us apart from our competition and accelerate future growth.

Accelerate Market Conversion by Capitalizing on Downstream Investments

We view the continued growth in homeowner outdoor investment and repair and remodel activity as a powerful secular trend driving material conversion across our industry. We believe low-maintenance alternatives at a range of premium quality designs and accessible pricing will continue to increase consumer demand and accelerate material conversion.

Over the three years ended September 30, 2019, we have increased our R&D, sales and marketing expenses by over 40% in the aggregate, and we are continuing to make additional investments during fiscal 2020 that we believe will accelerate material conversion and growth in our markets. We expanded our marketing organization and sales force with new talent, enabling us to generate greater awareness of our products and enhance our sales growth in underpenetrated markets and geographies. We invested in new premium and traditional merchandising displays for our dealers and special order merchandising and training for pro desk support associates for our home improvement retailers to increase consumer awareness of our products and to accelerate sales growth.

 

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Starting in 2018, we have added new trim and retail focused sales teams and have also established a dedicated sales team to enhance our dealer sales in underpenetrated geographies. We believe these initiatives are helping to accelerate our growth. For example, we believe our new trim-focused sales team has helped increase our AZEK Exteriors trim net sales by more than 15% in fiscal 2019 as compared to the prior year. In addition to expanding our sales force, we realigned the compensation framework for our sales teams to increase downstream engagement with consumers and key influencers such as architects, builders and contractors, to drive increased pull-through demand for our products. We recently opened our third AZEK University location in Chicago, and we are hosting regular contractor training events to encourage contractors to use our products. We believe we can continue to leverage our downstream investments to accelerate material conversion in our markets, strengthen our position in the pro channel and enhance our retail presence.

Build the Leading Consumer Brand in Outdoor Living

We are well-known for quality, innovation and delivering a broad range of on-trend style and design options to customers. We have made significant investments in sales and marketing and R&D over the past two years to differentiate and strengthen our brands and to simplify and transform the consumer experience for purchasing our products. In fiscal 2019, we unified our decking and railing product portfolio under our leading TimberTech brand with a differentiated “Go Against the Grain” marketing campaign. We continue to invest in our marketing organization and alongside our channel partners to increase consumer awareness and preference for our products. Our focused digital strategy, enhanced media presence and differentiated marketing campaigns drive increased engagement with consumers and homeowners as well as key influencers such as architects, builders and contractors. Our new digital platform facilitates the consumer journey from inspiration and design through installation. The experience educates consumers on the features and benefits of our products versus traditional materials, utilizes digital visualization tools to allow consumers to re-imagine their outdoor living spaces and directly connects them to a pre-qualified local contractor. During fiscal 2019, website traffic to our outdoor living branded websites increased by approximately 45% and sample orders for our decking products have increased at a double-digit rate, in each case when compared to the prior year.

We enjoy strong preference for our products among contractors, who typically purchase our products at dealers, and we are investing to increase our presence within home improvement retailers as the majority of consumers include visits to home improvement retailers in their research of deck products. These consumer engagement strategies are focused on creating additional pull-through demand and accelerating our growth.

Expand Margins Through Enhanced Recycling Capabilities and Productivity Initiatives

Our broad range of U.S.-based manufacturing capabilities, proprietary production technologies and extensive material science expertise position us as a leading innovator in the Outdoor Living market, and our brands command premium prices and afford us a strong margin profile. However, we believe there is an opportunity for significant improvement in our margins as we continue to invest in and expand our recycling capabilities and focus on operational excellence. Since fiscal 2017, we have invested over $28 million in developing our recycling capabilities to substantially reduce our material cost, divert waste from landfills and increase our utilization of recycled materials. For example, in fiscal 2019, we increased the recycled material content used in the core of our deck boards by approximately 20%, as compared to the recycled material content in fiscal 2018. Increasing the recycled material content in our deck boards has allowed us to substantially reduce the utilization of virgin HDPE in the production of the core of our TimberTech PRO and EDGE products, representing approximately $9 million in cost savings on an annualized basis when compared to legacy material content formulations. We are still in the early stages of material substitution across our manufacturing network and realizing the benefits of our investments in recycling, and we expect to drive additional cost savings as we ramp up internal processing of recycled materials used in the manufacturing of our products.

In addition to enhancing our recycling capabilities, we have also implemented various LSS initiatives across our manufacturing operations to reduce waste and enhance productivity. We utilize a systematic approach,

 

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AIMS, to drive continuous improvement throughout our organization. In fiscal 2019, we realized approximately $11 million of cost savings related to net manufacturing productivity improvements. We identified and have begun to implement additional projects that we expect will provide incremental net manufacturing productivity in the coming years. We believe AIMS, our investments in people, processes and equipment and our investments in recycling, productivity and operational excellence will enable us to expand our margins through reduced material cost, improved net manufacturing productivity and enhanced business operations.

Execute Strategic Acquisitions That Broaden Our Platform

Our markets are large and highly fragmented, and they provide a wide range of opportunities for us to execute acquisitions to augment our growth independent of end-market demand. We have completed several strategic acquisitions since our company was founded, and we have proven to be a highly effective consolidation platform. For example, the acquisition of Versatex strengthened our position in the exterior trim and moulding market, enhanced our product capabilities and generated attractive cost savings, and the acquisition of Ultralox extended our rail portfolio to include aluminum solutions with proprietary interlocking technology and expanded our ability to address the high-growth aluminum railing market.

We intend to continue to execute strategic acquisitions and utilize our disciplined process to identify, evaluate, execute and integrate acquired businesses. We actively monitor a pipeline of attractive consolidation opportunities across multiple product categories and geographies. We target opportunities that enhance our market positions, expand our portfolio of products and technology capabilities and increase our business diversity. In addition, the acquisitions we pursue must also provide opportunities for us to leverage our strong U.S.-based manufacturing capabilities, material formulation proficiency and extensive dealer and distributor network to meaningfully enhance their scale, growth, profitability and cash flow.

Our Brands and Products

We leverage a shared material technology and U.S.-based manufacturing platform to create an extensive range of long-lasting and low-maintenance products that convert demand away from traditional materials. Our Residential segment serves the high-growth Outdoor Living market by offering products that inspire consumers to design outdoor spaces tailored to their individual lifestyles. Our innovative portfolio of Outdoor Living products, including deck, rail, trim and accessories, are sold under our TimberTech, AZEK Exteriors, VERSATEX and ULTRALOX brands. Our Commercial segment addresses demand for low-maintenance, highly engineered products in a variety of commercial and industrial markets, including the outdoor, graphic displays and signage, educational and recreational markets, as well as the food processing and chemical industries. Products sold by our Commercial segment include highly engineered polymer sheeting as well as partitions, lockers and storage solutions.

Residential Segment

In our Residential segment, we design and manufacture engineered Outdoor Living products, including deck, rail, trim and moulding and accessories that drive conversion away from wood and other traditional materials. These products are primarily capped wood composites and PVC that are aesthetically similar, yet functionally superior, to finished wood, as they require less maintenance, do not rot or warp, are resistant to water, insects, stains, moisture, mold, mildew, scuffs and scratching, and do not require paints or stains for protection. Many of our products are also designed to ease installation for contractors and builders and reduce lifetime maintenance costs for consumers, without sacrificing aesthetics. We believe these factors, combined with some of the industry’s longest warranties and a comprehensive range of on-trend color palettes and styles, drive contractor loyalty and offer a compelling choice for consumers looking to reinvent their outdoor living spaces and the exteriors of their homes.

 

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In fiscal 2019, our Residential segment generated net sales of $655.4 million, representing approximately 83% of our total net sales. Demand for our Residential segment products is largely driven by repair and remodel activity, which we estimate accounted for over 85% of our Residential segment net sales in fiscal 2019, with the remaining sales attributable to new construction activity.

 

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TimberTech PRO Legacy Deck Collection with Impression Rail (Deck Colors: Tigerwood and Pecan)

Decking

We are one of the only decking manufacturers to offer both capped wood composite and PVC decking products, and we believe we are the only manufacturer to offer narrow and wide-width PVC deck boards. Our decking products transform consumers’ outdoor areas into aesthetically appealing spaces, while reducing lifetime maintenance costs as compared to those made with traditional materials. These high-quality, innovative products are artfully crafted with a broad range of design options and distinguishing features, such as cascading or variegated tones to emulate the natural look and finish of wood. Our products are long lasting and often a more cost-effective alternative over time than products made of traditional materials such as wood, which can fade quickly, require frequent sanding, staining and maintenance and are prone to rot, splinter and crack. In addition, our decking products span a wide range of entry-level to premium price points and are covered by some of the industry’s longest warranties. We are also committed to sustainability and to manufacturing our products with recycled waste and scrap. The wood used in the core of our decking products is 100% recycled, and we do not use any virgin timber. We continue to expand our use of recycled materials in our decking products, such as in our TimberTech PRO and EDGE decking product lines, which offer products made from approximately 80% recycled material.

 

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Through our three primary decking product lines – TimberTech AZEK, TimberTech PRO and TimberTech EDGE – we offer a broad range of colors, textures and styles to provide consumers with a myriad of design options at a variety of price points.

 

 

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Collection Harvest Collection Arbor Collection Vintage Collection Porch Terrain Collection Tropical Collection Legacy Collection Prime Collection Premier Collection Deck Board Profiles Relative Pricing Recycled Content Approximately 50% Recycled Content Approximately 80% Recycled Content Approximately 80% Recycled Content Collection Highlights Our premium line of capped polymer decking and porch products We have four collections of products that offer many color options spanning from a single color (Harvest) to our multiple color, premium product line (Vintage) that features a wire-brushed finish and visuals that mimic exotic hardwoods The product line offers the subtle intricacy of wood, combined with our Alloy Armour Technology and is our most durable product line Multiple form factors, including traditional-width, narrow-width, wide-width and two widths of tongue and groove porch boards Product does not contain wood and is therefore lighter and more resistant to mold The product line has superior slip resistance, is cooler to the touch and dissipates heat faster than capped composite products The product line exceeds the requirements for Wildland Urban Interface (WUI) areas in California The Vintage Collection has the aesthetics of exotic hardwoods with lower maintenance The Vintage Collection has a Class A Flame Spread Index rating Our premium capped composite line of decking that is made from a combination of recycled plastics, recycled wood and other additives We have three collections of products including a product that comes with a fully capped scalloped bottom (Terrain) and two premium product lines (Tropical and Legacy) that offer unique, non-repeating and natural looking visuals The product line is capped on all four sides and with our Mold Guard Technology, the product is less susceptible to mold when compared to products that are not capped on all four sides The capping technology offers strong resistance to stain damage with a protected, easy to clean surface and does not contain organic materials like wood which over time can become visible in capped products that do contain wood particle The product line offers both full profile and scalloped configurations The Legacy Collection has a unique, hand-scraped finish and leverages our advanced technology to achieve its variegation Our accessible, entry level capped composite line of decking that provides a cost effective alternative to wood We have two collections including a full-profile product [Premier] and an entry-level product [Prime] that comes with a scalloped profile The product line is primarily sold in solid colors and made with a protective cap on three sided that offers a more moisture resistant product compared to traditional wood The product line utilizes our non-wood capping provides strong weatherability, stain and scratch resistance, and wont splinter Features

 

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Our decking product lines are complemented by our porch collection as well as our broad range of deck accessories, including in-deck and riser lighting, risers for use on stairs, fascia, end coating, flashing and joist tape and our new TimberTech Deck Cleaner. Our growing portfolio of porch board products leverages the same materials and production technologies as our industry-leading decking products and allows us to deliver similar design aesthetics and low-maintenance benefits across a variety of textures. Our composite pavers provide a lightweight and easy-to-install alternative to traditional pavers and are available in a variety of colors and styles for landscaping and resurfacing. We offer a broad range of high-quality fasteners that enable an efficient installation, safe fastening and superior aesthetics, including traditional fasteners, which are color-matched to the decking product and are offered in both coated carbon steel and stainless steel; concealed fasteners, which are covered with a color-matching cap to blend into the associated decking product; and hidden fasteners, which are fastened out of sight under the decking boards.

 

 

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TimbeTech PRO Terrain Deck Collection with Contemporary Rail (Deck Color: Sandy Birch) TimberTech PRO Tropical Deck Collection with Radiance Rail (Deck Color: Amazon Mist) TimberTech PRO Legacy Deck Collection with Radiance Rail (Deck Color: Tigerwood) TimberTech AZEK Harvest Deck Collection with Premier Rail (Deck Color: Slate Gray) TimberTech AZEK Vintage Deck Collection with primer Rail (Deck Color: Dark Hickory) TimberTech Porch Collection with Premier Rail (Porch Color: Morado)

Railing

Our railing solutions enable consumers to accent their outdoor living spaces with attractive, high-quality, low-maintenance composite and aluminum railing products, which we offer through our TimberTech and ULTRALOX brands. Our railing products reduce the need for ongoing maintenance by eliminating many of the major functional disadvantages of traditional materials, such as warping and rust, and thus are often a more cost-effective alternative over time. For example, our TimberTech composite railing products are covered by a four-sided cap, which eliminates the need for annual sanding, staining, sealing and painting, and our TimberTech aluminum railing products feature a powder coated surface, which produces a long-lasting, color-durable, moisture-resistant finish.

 

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Our railing products are available in various materials and in a broad range of colors, finishes and styles, including traditional, modern and minimalist designs, and we offer a wide selection of infill options, such as composite and aluminum balusters, cable rails and glass channel kits. Our aluminum railing products are lighter-weight and easier to install than other metal railing materials, and their sleek, minimalistic designs allow unobstructed views, especially when coupled with a glass or cable infill option. Due in part to these attributes, aluminum railing has been the fastest growing material category of railing products in recent years. Our railing products are diverse and highly customizable, and in addition to complementing our decking product lines, they also appeal to a broader, stand-alone market, such as for use on decks constructed from traditional materials and in commercial applications.

We believe we are particularly well positioned to serve the fast growing aluminum railing market following our 2017 acquisition of Ultralox, which significantly expanded our aluminum railing product capabilities. Using Ultralox’s proprietary Interlocking Machine, a dealer or contractor can create a customized aluminum, pre-panelized, interlocking railing system on site. This facilitates faster and easier assembly and installation without special tools, mechanical fasteners or welding for both residential and commercial applications and overcomes the design limitations of pre-fabricated railing products. Our TimberTech brand also sells a pre-panelized version of the Ultralox railing kit branded as Impression Rail Express.

To complement our railing products, we offer an array of functional and decorative accessories, including mounting posts, underrail lights and lighted island caps and gate kits. Our deck, rail and related accessory products are frequently used in combination in order to enable consumers to create their own highly customized outdoor living spaces.

 

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Trim and Moulding

We are the leading designer and manufacturer of PVC trim and moulding products for the Outdoor Living market. We operate two large PVC trim manufacturing plants and offer a diverse portfolio of PVC trim and moulding products through our AZEK Exteriors and VERSATEX brands. Our trim and moulding products are aesthetically similar to wood, and can be easily milled, routed or shaped for use in almost any application. Our products are moisture- and insect-resistant and are more durable and require less maintenance than traditional wood products. Contractors and homeowners can use our products in conventional applications, to express their creativity through unique home exteriors, and to complement our decking and railing products. For example, two story decks are often paired with column wraps, canvas porch ceilings and other trim and moulding accents. Our trim and moulding products are also increasingly utilized within the home, including as wainscot trim or as shiplap, which originated to protect the exteriors of homes in harsh climates, but is now a popular way to create unique interior spaces. Our products are also used by millshops and OEM fabricators, who rely on our products due to their consistent formulation, dimensional accuracy and precision, and high machinability, to manufacture a wide range of other Outdoor Living products such as pergolas, arbors and flowerbeds.

 

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In 2018, we acquired Versatex, which significantly expanded our existing trim product portfolio with a broad range of premium cellular PVC trim and moulding products. It also complements our established PVC trim and moulding capabilities with an organization dedicated to service, customer responsiveness and innovation. Particularly known for its customer-focused approach, Versatex has differentiated itself through its history of quickly addressing special requests from customers, developing cutting-edge products that focus on the needs of builders, architects, fabricators and consumers and rapidly bringing these innovative new products to market.

 

 

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AZEK Exteriors Moulding and Column Wraps AZEK Exteriors Millwork and Cladding AZEK Exteriors Trim and Beadboard

Our full line of AZEK Exteriors and VERSATEX products include trim and moulding, fabricated products, paintable trim and specialty solutions:

 

Boards and Sheets

 

Time-Saving Products

 

Aesthetic Details

 

Paintable Trim

•  Boards – Manufactured with sealed edges and shipped with a protective film, our trim board is highly versatile and can be milled, routed, or heat formed to be used in many different applications.

 

•  Sheet – Our sheets provide a clean backdrop over an expansive area and can be used for large scale fabrication such as pergolas and arbors.

 

•  Skirt Boards – Designed to provide moisture resistance at ground contact and help direct water away from the structure. These products are easy to install with fiber cement, vinyl, or wood siding.

 

•  Column Wraps – Our column wraps are offered in multiple styles and can quickly and easily improve the aesthetics of a standard wood post with minimal labor.

 

•  Corner Boards – Our one-piece corner boards are easy to install, feature smooth, outside edges and are aesthetically superior to two-piece corners, which can gather dirt along their edges.

 

•  J-Channel and Stealth Products – Designed to complement siding and for easy installation around windows and corners.

 

•  Mouldings – Used to enable customizations, cover transitions or provide crisp, architectural style elements to home exteriors.

 

•  Tongue & Groove Profiles – Easily add the classic style of beadboard, nickel gap, and shiplap in horizontal or vertical orientation to complement housing exteriors.

 

•  Canvas – Designed to add contrast to porch ceilings and interior trim projects, these products deliver the look of rich hardwoods without knots or labor intensive staining requirements.

 

•  TimberTech AZEK Cladding – Combines premium natural hardwood aesthetics and the durability of advanced polymer technology for use as a cladding rain screen for premium curb appeal.

 

•  PaintPro – Innovative cellular PVC trim that has the same high-performance and low-maintenance benefits of traditional AZEK trim, but can be painted any color. PaintPro trim offers quick drying times with no priming needed and superior paint adhesion.

 

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In addition to the products described above, we offer custom milled solutions for builders and a number of accessories such as fastening systems, adhesives, sealants and bonding solutions.

Commercial Segment

Leveraging our shared U.S.-based manufacturing platform and material technology, we bring low-maintenance products with superior aesthetics to a variety of commercial and industrial markets. Our Residential and Commercial segments operate synergistically, primarily through our ability to utilize new materials, technologies and products developed by one segment across an array of manufacturing processes and products in our other segment. Our Commercial segment includes our Vycom and Scranton Products product lines. Vycom manufactures a comprehensive line of highly engineered polymer materials designed to offer sustainable, low-maintenance and long-lasting solutions for applications for a variety of commercial and industrial markets, including the markets for outdoor living, graphic displays and signage, recreation and playground equipment and the food processing, marine and chemical industries. Scranton Products manufactures sustainable, low-maintenance privacy and storage solutions primarily for schools, stadium arenas and recreational and commercial facilities. Within our Commercial segment, demand for our products is driven by commercial construction activity, material conversion and favorable secular trends such as an increased emphasis on privacy. In fiscal 2019, our Commercial segment generated net sales of $138.8 million, which represented approximately 17% of our total net sales.

Vycom

Vycom manufactures a comprehensive line of highly engineered polymer materials designed to replace wood, metal and other traditional materials in a variety of applications. Vycom’s products are used in a broad range of commercial end markets, are durable, strong and lightweight and can be ordered in a wide range of sizes, thicknesses and colors. These products provide superior performance compared to traditional materials and are resistant to corrosive chemicals, scratches, flames, odors, moisture, bacteria, rotting, delaminating, chipping and swelling. Vycom’s products are also easier to fabricate, decorate, laminate, weld, machine or form than many traditional materials, which makes them attractive to OEMs that have specialized requirements for fabrication, physical properties or chemical resistance. Vycom’s highly engineered solutions are often developed in consultation with OEMs and, as a result, in certain cases are specified into OEM products and applications such as those illustrated below.

 

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Signboards Industrial Storage Tanks Outdoor Furniture and Cabinetry

Scranton Products

Scranton Products provides low-maintenance bathroom partitions, shower and dressing stalls, lockers and other storage solutions. We market our partitions under the Aria, Eclipse and Hiny Hiders brands and our lockers under the TuffTec and Duralife brands. Our primary customers are schools, parks, recreational facilities, stadium arenas, industrial plants and retail and commercial facilities, and we continue to expand rapidly into the

 

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commercial repair and remodel market primarily through sales of our high-privacy bathroom partitions. Products sold by Scranton Products are designed to replace traditional materials such as metal, wood and baked enamel with more durable, long-lasting, low-maintenance and more aesthetically pleasing materials. These products are highly resistant to rust, dents, scratches and graffiti, and are easily cleaned. We offer an extensive array of attractive colors, textures and finishes that replicate more traditional materials. As compared to metal and wood alternatives, our partitions and locker products sell at premium prices but deliver significantly reduced life-cycle costs through increased durability and lower maintenance expenses. In fiscal 2019, approximately half of Scranton Products’ net sales were attributable to the education market. We expect to continue experiencing significant growth in Scranton Products’ sales in the commercial markets, which we believe is driven primarily by an increased focus on bathroom privacy considerations, design and aesthetics.

 

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Eclipse Partitions Hiny Hiders Partitions TuffTec Lockers

Product Research and Development    

Over the past 30 years, we have built an R&D organization with significant expertise in material science and production process technologies. We leverage our R&D and U.S.-based manufacturing capabilities to deliver innovative new products to market that address evolving customer needs. We have made substantial investments in our R&D organization, which, as of September 30, 2019, consisted of over 25 people, including 21 engineers. We are committed to continuing to invest in our R&D capabilities to further strengthen our ability to regularly introduce new products that set us apart from our competition and accelerate future growth. During the four years ended September 30, 2019, our team successfully led over 20 significant new product introductions, and, as of the year ended September 30, 2019, our blended Five Year New Product Vitality across our Residential segment and Commercial segment was approximately 45%.

Our product managers and marketing team actively analyze proprietary consumer research and work with architects, contractors and consumers to identify and develop new products that incorporate consumer feedback, expand our portfolio and extend the range of style and design options we offer. Our R&D team then designs, prototypes and tests these new products prior to full scale production. Our rigorous R&D process incorporates in-house analytical capabilities and comprehensive product testing with more than 260 distinct tests, such as accelerated weathering.

We believe our focus on innovation allows us to bring on-trend products to market rapidly. For example, we were able to leverage our proprietary color pigmentation technology to adapt quickly to lighter color decking trends and introduce our whitewashed cedar products. Similarly, in response to popular flooring trends, our technological and material science expertise enables us to manufacture wide-width and multi-width decking products that we believe will help accelerate conversion from wood decking products. Our ability to innovate has also helped us introduce opening price point products such as TimberTech EDGE. In our Commercial segment,

 

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the introduction of our Aria partitions responds to demand for increased privacy and the introduction of our TimberLine products addresses the adjacent market demand for beautiful, low-maintenance engineered products with a wood-like look in outdoor furniture, cabinetry and other applications.

We currently have a broad portfolio of ongoing development projects across our core product categories as well as certain adjacent products and markets. We are also continuing to leverage our acquisition of Ultralox to develop additional aluminum and steel rail products. In addition, we are constantly evaluating opportunities to use our technological and U.S.-based manufacturing capabilities to expand into new markets where we believe there is an opportunity to drive material conversion or otherwise broaden our market reach.

Distribution

Within our Residential segment, we sell our products through a network of more than 4,200 dealers, more than 35 distributors and multiple home improvement retail locations enabling us to effectively serve contractors throughout the United States and Canada. Within our Commercial segment, we sell our products through a widespread distribution network, as well as directly to OEMs. Our products are generally sold through both one-step and two-step distribution channels. Our distribution network has broad geographic coverage and benefits from the logistics capabilities of our distributors as well as the ability of our distributors and dealers to help generate demand for our products through direct sales, merchandising and marketing. In fiscal 2019, approximately 98% of our gross sales came from the United States and Canada. Our distributors in locations outside of the United States and Canada are responsible for marketing and selling our products in other countries to which our products are exported. We are continually evaluating our distribution strategy to ensure that we can meet the demands of our consumers in the most effective ways.

Residential Segment

We distribute the majority of our Residential segment products through more than 35 distributors who in turn sell our products to dealers. Our distributors also maintain an inventory of our products and support our dealers by managing shipping logistics. We have exclusive relationships with our distributors for decking and trim with respect to specified geographies, and, although some legacy distributors are permitted to carry only certain of our products, many of our distributors are required to carry a comprehensive selection of our TimberTech and AZEK products. Our top ten distributors for the year ended September 30, 2019 accounted for a majority of our total net sales during that period.

Through our distributors, our products are sold to more than 4,200 professional dealers and lumber yards. Additionally, we have special order and stocking relationships with certain home improvement retailers. We attempt to drive sales to our dealers and retailers through digital tools and extensive marketing directed at consumers who can help create pull-through demand for our products among influencers and decision makers such as architects, builders and contractors. Our dealers typically exhibit high brand loyalty and are incentivized to consolidate the manufacturers from which they purchase to maximize early buy discounts and annual volume rebates.

 

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Contractors purchase our products through dealers and retailers. We believe contractors are typically loyal to brands and products they trust because they are a direct point of contact for consumers and are most likely to receive feedback and feel responsible for product performance. We consider the needs of and feedback from contractors in designing and manufacturing new products, and we invest in strengthening our relationships with these contractors as we believe they significantly influence decisions regarding material and brand selection for the types of products we produce. The graphic below illustrates the distribution channels for the Outdoor Living market in which we sell our Residential composite deck, composite and aluminum rail and PVC trim products.

 

LOGO

 

We allocate significant sales force resources to support our dealers, and we believe our strong relationships with dealers and contractors are driven by the trust and reliability that we have generated through product innovation, superior quality and performance and the continuing support that we offer. Such support includes specialized training opportunities such as AZEK University and sales support initiatives such as digital lead generation, joint marketing funds, new sample kits, display kiosks, enhanced product literature, print, TV and radio advertising and social media initiatives. AZEK University provides hands-on training for contractors and customers using TimberTech and AZEK Exteriors products and our AZEK Pro Rewards program leverages our new website and digital capabilities to share curated digital leads with our contractors.

Parksite Inc., who distributes our Residential segment products, accounted for approximately 20% of our net sales for the year ended September 30, 2019.

Commercial Segment

Our Vycom products are primarily sold through approximately 130 engineered product distributors across the United States, Canada and Latin America, who in turn sell full sheet and/or fabricated products that have been converted into a wide variety of components or items for various industrial uses primarily to OEMs. We also sell certain Vycom products directly to OEMs.

Our Scranton Products bathroom partition and locker systems are sold through a network of approximately 900 dealers who sell to industrial and commercial customers across the United States and in Canada. We market

 

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the benefits of our bathroom partition and locker systems directly to architects and facilities managers, who frequently specify products by name and material in their designs.

Operations and Manufacturing

We are a vertically-integrated, U.S-based manufacturer, delivering superior quality products with a competitive cost position. Our competitive cost position, including our relatively low transportation costs resulting from us being a U.S.-based manufacturer, provides us with a competitive freight advantage relative to imported products. Our versatile, process-oriented manufacturing operations are built on a foundation of extensive material development and processing capabilities. Approximately 90% of our gross sales are attributable to products that are manufactured through an extrusion process that contains a blend of virgin polymers and recycled materials. Our proprietary production technologies, material blending proficiency and range of extrusion capabilities enable innovation and facilitate expansion into new markets. We have deep experience working with multiple technologies that enable us to provide some of the industry’s most attractive visuals through advanced streaking and multi-color technologies. Our manufacturing footprint has been consolidated into six facilities over four geographic locations with over 1.6 million square feet in total, and we have made significant investments in people, processes and systems to increase our manufacturing scale and productivity. We continue to invest in expanding our vertical manufacturing capabilities, including recent investments in our new 100,000 square foot recycling facility.

In 2017, we introduced AIMS to manage and monitor operations, and in 2018, we implemented LSS tools and techniques at all our manufacturing facilities to reduce material waste and improve manufacturing efficiency.

We have integrated manufacturing operations and differentiated technical expertise in utilizing recycled materials to develop sustainable, cutting-edge products. Sustainability is one of our core strategic pillars, and we are committed to introducing sustainable products that utilize recycled materials, reduce deforestation and are versatile and recyclable at the end of their useful lives. We are dedicated to expanding our recycling capability and investing in the use of reclaimed materials in our manufacturing processes.

Facilities Overview

We are headquartered in Chicago, Illinois and operate six manufacturing and recycling facilities in the United States. In alignment with our sustainability values, our Chicago corporate office is located in a 2019 LEED-Certified building. Currently, we produce our AZEK, Scranton and Vycom products primarily at our manufacturing facilities in Scranton, Pennsylvania, our TimberTech products primarily at our manufacturing facilities in Scranton, Pennsylvania and Wilmington, Ohio, all of our VERSATEX trim products at our manufacturing facility in Aliquippa, Pennsylvania and all of our ULTRALOX rail products through our manufacturing facility in Eagan, Minnesota. In 2019, we opened our state-of-the-art polyethylene recycling facility in Wilmington, Ohio. We believe our facilities are adequate and suitable for our current needs.

Manufacturing and Recycling Facilities

 

(as of September 30, 2019)

  Scranton, PA   Scranton, PA   Wilmington, OH   Wilmington, OH   Eagan, MN   Aliquippa, PA   Total

Plant Size (sq. ft.)

  617,760   286,458   518,000   103,000   39,500   125,000   1,689,718

Ownership

  Owned   Leased   Owned   Owned   Leased   Owned  

Headcount

  374   159   435   41   23   179   1,211

Sales and Marketing

Residential Segment

Our Residential segment sales organization is organized under our AZEK, TimberTech, VERSATEX and ULTRALOX product lines and is composed of a general sales organization, which is primarily geographically based, and also includes specialty sales organizations who focus on trim, rail, retail and key accounts. Our sales organization is primarily focused on generating downstream demand with contractors, architects and builders as well as maintaining relationships with and educating influencers. We believe we can continue to leverage our downstream investments to accelerate material conversion in our markets, strengthen our position in the pro channel and enhance our retail presence.

 

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We maintain a national sales organization that works with builders and supports certain national or large regional dealers with multiple locations and/or buying groups to provide a single point of contact and more effectively serve these customers. Our national sales organization is focused on increased penetration into these accounts by working with corporate decision makers and with buyers at the local level. We have also enhanced our retail-focused sales team, who is focused on supporting individual retail locations, training pro desk associates within retail locations and facilitating deliveries for special orders placed at home improvement retailers.

In 2019, we unified our decking and railing product portfolio under our leading TimberTech brand with a differentiated “Go Against the Grain” marketing campaign. TimberTech has strong market awareness, and unifying our deck and rail products under the TimberTech brand allows us to highlight product differentiation, while maintaining brand identity across multiple price points. Following the repositioning of our AZEK decking product lines under the TimberTech brand, we are focusing on leveraging the AZEK brand as our exteriors brand due to the significant brand recognition for AZEK trim and moulding products.

We maintain comprehensive marketing campaigns using various media in support of our brands, targeted towards our growing dealer base, as well as architects, builders, remodelers and consumers. We continue to invest in our marketing organization and alongside our channel partners to increase consumer awareness and preference for our products. Our focused digital strategy, enhanced media presence and differentiated marketing campaigns drive increased engagement with consumers as well as key influencers such as architects, builders and contractors. Our new digital platform facilitates the consumer journey from inspiration and design through installation. The experience educates consumers on the features and benefits of our products versus traditional materials, utilizes digital visualization tools to allow consumers to re-imagine their outdoor living spaces and directly connects them to a pre-qualified local contractor. We enjoy strong preference for our products among contractors, who typically purchase our products at dealers, and we are investing in order to increase our presence within retailers as the majority of consumers include visits to home improvement retailers in their research of deck products. These consumer engagement strategies are focused on creating additional pull-through demand and accelerating our growth. In addition, we have augmented our advertising efforts by developing instructive, educational and visually appealing product displays, marketing tools and sample kits to market our products. We have also invested in digital, print, TV and radio advertising and display kiosks which enhance our dealers’ and home improvement retailers’ ability to exhibit and promote our products.

We also provide frequent demonstrations, education, product training and other sales support and loyalty initiatives to help drive awareness of and demand for our products. In 2010, we established AZEK University to educate dealers, contractors, architects and builders on our product offering and value proposition through training that includes classroom tutorials, hands-on sessions and plant tours. In addition, through our AZEK Pro Rewards program, we seek to secure preferred brand status with contractors by providing contractors with marketing tools, leads and various other rewards in connection with increased purchases of our products. We believe these efforts increase our market position because many buying decisions involve input from both the contractor and consumer, with consumers frequently relying on contractor recommendations.

Commercial Segment

Our Vycom sales organization focuses on providing engineered polymer solutions for a wide variety of industries including the graphic displays and signage, semiconductor, marine, chemical and corrosion, recreation and playground and food processing markets. Our Vycom products are sold to plastics distributors in the United States, Canada and Latin America, who sell primarily to OEMs, and in certain cases are sold directly to OEMs. The Vycom sales force is made up of a combination of direct territory managers and manufacturing representatives focused on increasing market penetration by working with printers, fabricators, OEMs and end-users to generate demand for Vycom materials.

 

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As of September 30, 2019, Scranton Products utilized direct sales and regional manufacturers’ sales representatives to provide coverage to a network of approximately 900 dealers who sell to institutional and commercial customers across the United States and in Canada. The Scranton Products’ sales force and agents service architects and facility managers to create pull-through demand in traditional institutional markets, such as schools, universities and stadium arenas, and in targeted new markets, such as retail stores, commercial and professional buildings, industrial facilities and food processing plants. Our Scranton Products sales force has leveraged a leading market position, enhanced promotional materials and specialized products to develop close relationships with architects and assist them in designing products and has enhanced awareness of the benefits of our products through targeted efforts to educate architects and designers.

Raw Materials and Suppliers

The primary raw materials used in our products are various petrochemical resins, including polyethylene, polypropylene and PVC resins, reclaimed polyethylene and PVC material, waste wood fiber and aluminum. We also utilize other additives, including modifiers, TiO2 and pigments. Our contracts with key suppliers are typically short term in nature, with terms generally ranging from one to three years. We have not entered into hedges of our raw material costs at this time, but we may choose to enter into such hedges in the future, and our supply contracts with our major vendors do not contain obligations to sell raw materials to us at a fixed price. Prices for spot market purchases are negotiated on a continuous basis in line with current market prices. Other than short term supply contracts for resins with indexed based pricing and occasional strategic purchases of larger quantities of certain raw materials, we generally buy materials on an as-needed basis.

The cost of petrochemical resins used in our manufacturing processes has historically varied significantly and has been affected by changes in supply and demand and in the price of crude oil. Substantially all of our resins are purchased under supply contracts that average approximately one to two years, for which pricing is variable based on an industry benchmark price index. The resin supply contracts are negotiated annually and generally provide that we are obligated to purchase a minimum amount of resins from each supplier. In addition, the price of reclaimed polyethylene material, waste wood fiber, aluminum, other additives (including modifiers, TiO2 and pigments) and other raw materials fluctuates depending on, among other things, overall market supply and demand and general economic conditions. We seek to mitigate the effects of fluctuations in our raw material costs by broadening our supplier base, increasing our use of recycled material, increasing our use of scrap and reducing waste and exploring options for material substitution without sacrificing quality. For example, since fiscal 2017, we have invested over $28 million to enhance our recycling capabilities and have increased our use of “regrind,” through the collection and reprocessing of scrap generated in our manufacturing processes. These investments, along with other recycling and substitution initiatives, have contributed to an approximately 15% reduction in our per pound capped composite decking core costs and an approximately 12% reduction in our per pound PVC decking core costs, in each case from fiscal 2017 to fiscal 2019, and we believe we have an opportunity to achieve further cost reductions.

Although we do not rely on any single supplier for the majority of our raw materials, we do obtain certain raw materials from single or a limited number of suppliers. In particular, we rely on a single supplier for certain critical capped compounds used in our deck and railing products. If one or more suppliers were unable to satisfy our requirements for particular raw materials, we believe alternative sources of supply would be available, although we could experience a disruption to our operations as alternative suppliers are identified and qualified and new supply arrangements are entered into.

Environmental Sustainability

We have created an operating platform that is centered around sustainability, one of our core strategic pillars, which extends across our value chain from product design, to raw material sourcing and U.S.-based manufacturing, and we increasingly utilize plastic waste, recycled wood and scrap in our products. We believe that our responsibility is not only to our customers, but also to the environment. This commitment is evident

 

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through our continued effort to introduce sustainable products, products with life spans that are significantly longer than the life spans of the traditional materials they replace (including exotic hardwoods cut from rainforests) with very little need for maintenance or cleaning chemicals, products that reduce deforestation and products that are versatile and recyclable at the end of their useful lives. We estimate that since 2015 more than one million trees have been saved because our customers chose our decking products over wood. The wood used in the core of our composite decking products is 100% recycled from sources that include, but are not limited to, facilities that manufacture wood mouldings, flooring, windows, doors and other products. Through our recycling programs, approximately 290 million pounds of scrap and waste were diverted from landfills in fiscal 2019.

In addition to the sustainability of our products, we have implemented energy-efficient manufacturing processes in our business operations. For example, our facilities in Wilmington, OH and Scranton, PA employ closed-loop water filtration systems that recycle approximately 96% of water used annually, and our polyethylene recycling facility utilizes energy-efficient systems for power, water, heating, cooling and lighting.

Our dedication to expanding our recycling capabilities and to increasing the use of reclaimed materials is also a critical part of our sustainability commitment. Approximately 44% of all of our extruded materials were manufactured from recycled materials in fiscal 2019. We expect this percentage to increase to approximately 54% in fiscal 2020, and we believe there is an opportunity to increase this percentage in the future. Currently, AZEK pavers are made from approximately 95% recycled material, and we estimate that approximately every 500 square feet of AZEK pavers diverts up to 250 passenger vehicle tires and 7,500 plastic containers from landfills. Additionally, through Vycom, we sell effectively 100% post-consumer recycled polymer sheet products used in the manufacturing of outdoor furniture.

Competition

We compete with multiple companies, including divisions or subsidiaries of larger companies and foreign competitors. We compete on the basis of a number of considerations, including service, quality, performance, product characteristics, brand recognition and loyalty, marketing, product development, sales and distribution and price. We believe we compete favorably with respect to these factors.

Residential Segment

Our residential products compete primarily with products made from wood, aluminum and engineered wood that our products are designed to replace. We also compete with other manufacturers of engineered products designed to replace wood and other traditional materials, including Trex Company Inc., Fiberon, LLC, which was acquired by Fortune Brands Home & Security, Inc. in August 2018, Oldcastle Architectural, Inc., Royal Group, Inc., Kleer Lumber LLC and CertainTeed Corporation.

Commercial Segment

Our Vycom products compete in a highly fragmented market. Manufacturers generally focus on a few core materials sold to narrow sub-segments through a specialized distribution network. Competitors for other non-fabricated products include other national and regional manufacturers like Mitsubishi Chemical Advanced Materials (formerly Quadrant EPP), Rochling Engineering Plastics, 3A Composites USA Inc., Simona AG and Kommerling Plastics USA.

The bathroom partition and locker market is also highly fragmented and is addressed by manufacturers producing products in a variety of different materials and at varying price ranges. Scranton Products’ primary plastic bath and locker competitors are Global Partitions Corp. (d/b/a ASI Global Partitions), Hadrian Manufacturing Inc. and Bradley Corporation.

 

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Seasonality

Although we generally experience demand for our products throughout the year, our sales have historically experienced some seasonality. We have typically experienced moderately higher levels of sales of our residential products in the second fiscal quarter of the year as a result of our “early buy” sales and extended payment terms typically available during the second fiscal quarter of the year. As a result of these extended payment terms, our accounts receivable have typically reached seasonal peaks at the end of the second fiscal quarter of the year, and our net cash provided by operating activities has typically been lower in the second fiscal quarter relative to other quarters. In addition, our sales are affected by the individual decisions of distributors and dealers on the levels of inventory they carry, their views on product demand, their financial condition and the manner in which they choose to manage inventory risk. Our sales are also generally impacted by the number of days in a quarter or a year that contractors and other professionals are able to install our products. This can vary dramatically based on, among other things, weather events such as rain, snow and extreme temperatures. We have generally experienced lower levels of sales of our residential products in the first fiscal quarter due to adverse weather conditions in certain markets, which typically reduces the construction and renovation activity during the winter season. In addition, we have experienced higher levels of sales of bathroom partition products and our locker products during the second half of our fiscal year, which includes the summer months during which schools are typically closed and are more likely to undergo remodel activities.

Intellectual Property

We rely on trademark and service mark protection to protect our brands, and we have registered or applied to register many of these trademarks and service marks. In particular, we believe the AZEK and AZEK Exteriors brands, the TimberTech brand and the VERSATEX brand are significant to the success of our business. We also rely on a combination of unpatented proprietary know-how and trade secrets, and to a lesser extent, patents to preserve our position in the market. As of September 30, 2019, we had approximately 260 trademark registrations and 135 issued patents and pending patent applications in the United States and other countries. As of September 30, 2019, we had approximately 101 issued U.S. patents and 4 U.S. patent applications pending. Our issued U.S. patents generally expire between 2026 and 2037. We also had approximately 23 issued foreign patents and 7 foreign patent applications pending. As we develop technologies and processes that we believe are innovative, we intend to continually assess the patentability of new intellectual property. In addition, we employ various other methods, including confidentiality and nondisclosure agreements with third parties and employees who have access to trade secrets, to protect our trade secrets and know-how. Our intellectual property rights may be challenged by third parties and may not be effective in excluding competitors from using the same or similar technologies, brands or works.

Employees

As of September 30, 2019, we had 1,429 full-time employees. Our workforce is not unionized, and we are not a party to any collective bargaining agreements. We believe we have satisfactory relations with our employees.

Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations and businesses that cover a wide range of matters, including, among others, contract and employment claims, personal injury claims, product liability claims and warranty claims. Currently, there are no claims or proceedings against us that we believe will have a material adverse effect on our business, financial condition, results of operations or cash flows. However, the results of any current or future litigation cannot be predicted with certainty and, regardless of the outcome, we may incur significant costs and experience a diversion of management resources as a result of litigation.

 

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Environmental Laws and Regulations

Our operations and properties are subject to extensive and frequently changing federal, state and local environmental protection and health and safety laws, regulations and ordinances. These laws, regulations and ordinances, among other matters, govern activities and operations that may have adverse environmental effects, such as discharges to air, soil and water, and establish standards for the handling of hazardous and toxic substances and the handling and disposal of solid and hazardous wastes.

Some of the environmental laws applicable to us provide that a current or previous owner or operator of real property may be liable for the costs of removal or remediation of environmental contamination on, under, or in that property or other impacted properties. Accordingly, such liability could apply to us in connection with any of our current or former manufacturing plants or other properties. In addition, some of these laws provide that persons who arrange, or are deemed to have arranged, for the disposal or treatment of hazardous substances may also be liable for the costs of removal or remediation of environmental contamination at the disposal or treatment site, regardless of whether the affected site is owned or operated by such person. Environmental laws, in general, often impose liability whether or not the owner, operator or arranger knew of, or caused, the presence of such environmental contamination. Also, third parties may make claims against owners or operators of properties for personal injuries, for property damage and/or for clean-up associated with releases of hazardous or toxic substances pursuant to applicable environmental laws and common law tort theories, including strict liability. Failure to comply with environmental laws or regulations could result in severe fines and penalties.

We are also subject to permitting requirements under environmental, health and safety laws and regulations applicable in the jurisdictions in which we operate. Those requirements obligate us to obtain permits from one or more governmental agencies in order to conduct our operations. Such permits are typically issued by state agencies, but permits and approvals may also be required from federal or local governmental agencies. The requirements for such permits vary depending on the location where our regulated activities are conducted. As with all governmental permitting processes, there is a degree of uncertainty as to whether a permit will be granted, the time it will take for a permit to be issued and the conditions that may be imposed in connection with the granting of the permit.

We are not aware of any environmental liabilities that would be expected to have a material adverse effect on our business, financial condition or results of operations. We believe we comply in all material respects with environmental laws and regulations and possess the permits required to operate our manufacturing and other facilities. Our environmental compliance costs in the future will depend, in part, on the nature and extent of our manufacturing activities, regulatory developments and future requirements that cannot presently be predicted.

Health and Safety Matters

Our health and safety policies and practices include an employee training and competency development program to regularly train, verify and encourage compliance with health and safety procedures and regulations. We regularly monitor our total recordable incident rate, or TRIR, and as a result of our commitment to continuously improve our health and safety policies and practices, our TRIR has improved 45% from 4.02 in fiscal 2016 to 2.20 in fiscal 2019. We employ an environmental, health and safety director whose responsibilities include managing, auditing and executing unified, company-wide safety and compliance programs. The environmental, health and safety director reports directly to the Senior Vice President of Operations and also provides monthly updates to the Chief Executive Officer.

 

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MANAGEMENT

Directors and Executive Officers

The following table sets forth certain information with respect to our directors and executive officers as of the date of this prospectus:

 

Name

   Age     

Position(s)

Non-Employee Directors:

     

Gary Hendrickson

     63      Chairman of our Board of Directors

Sallie B. Bailey

     60      Director

Russell Hammond

     48      Director

James B. Hirshorn

     53      Director

Brian Klos

     38      Director

Ronald A. Pace

     72      Director

Ashfaq Qadri

     38      Director

Bennett Rosenthal

     56      Director

Blake Sumler

     49      Director

Executive Officers:

     

Jesse Singh

     54      Chief Executive Officer, President and Director

Ralph Nicoletti

     62      Senior Vice President and Chief Financial Officer

Jose Ochoa

     56      President, Residential Segment

Scott Van Winter

     54      President, Commercial Segment

Dennis Kitchen

     53      Senior Vice President and Chief Human Resources Officer

Jeanine Gaffke

     51      Chief Marketing Officer

Bobby Gentile

     50      Senior Vice President of Operations

Jonathan Skelly

     42      Senior Vice President of Strategy and Execution

Paul Kardish

     57      Senior Vice President and Chief Legal Officer

Michelle Kasson

     50      Chief Information Officer

Non-Employee Directors

Gary Hendrickson, a director since May 2017, is the Chairman of our board of directors, a position he has held since May 2017. Mr. Hendrickson previously served as the Chairman and Chief Executive Officer of the Valspar Corporation, a global paint and coatings manufacturer, from June 2011 to June 2017, and was its President and Chief Operating Officer from February 2008 until June 2011. Mr. Hendrickson held various executive leadership roles with the Valspar Corporation from 2001 until 2017, including positions with responsibilities for the Asia Pacific operations. Mr. Hendrickson also serves as a director of Polaris Industries Inc., a publicly traded global manufacturer and seller of off-road vehicles, including all-terrain vehicles and snowmobiles and Waters Corporation, a leading specialty measurement company and pioneer of chromatography, mass spectrometry and thermal analysis innovations serving the life, materials and food sciences. Mr. Hendrickson’s experience as President and Chief Executive Officer of a global company provides expertise in corporate leadership and development and execution of business growth strategy. He also brings to the board of directors significant global experience and knowledge of competitive strategy.

Sallie B. Bailey, a director since November 2018, previously served as the Executive Vice President and Chief Financial Officer of Louisiana-Pacific Corporation, a leading manufacturer of engineered wood building products for residential, industrial and light commercial construction, from December 2011 to July 2018. Prior to working for Louisiana-Pacific Corporation, Ms. Bailey worked as the Vice President and Chief Financial Officer of Ferro Corporation, a global specialty materials company, from January 2007 to July 2010 following an eleven-year career at The Timken Company, a global producer of engineered bearings and alloy steel, in various senior management positions of increasing responsibility, lastly as Senior Vice President, Finance and Controller

 

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between 2003 and 2006. Ms. Bailey also currently serves as a director of L3 Harris Technologies, Inc., a technology company, defense contractor and information technology services provider. Ms. Bailey brings to our board of directors a broad knowledge of corporate finance, strategic planning, banking relationships, operations, complex information technology and other systems, enterprise risk management and investor relations gained through prior service as a senior executive of large global manufacturing companies, including as chief financial officer, and she also has knowledge of and experience with complex financial and accounting functions and internal controls.

Russell Hammond, a director since 2013, leads the High Conviction Equities team of OTPP, which invests across the equity asset class and along the liquidity range of pre-IPO, PIPEs and high conviction public companies. He joined OTPP in 2006 and was previously responsible for industrials and business services sector coverage within the Private Capital group. Prior to joining OTPP, Mr. Hammond worked in the investment banking division of Credit Suisse Group AG, as well as the investment banking and private equity departments of Merrill Lynch & Co, Inc. in Toronto, Canada and London, England. Mr. Hammond currently sits on the boards of Stone Canyon Industries Holdings, Inc. and Trivium Packaging B.V. He brings to our board of directors experience with investments in the industrials and business services sectors and has been involved in several transactions in these areas.

James B. Hirshorn, a director since 2013, has been a Partner in the Ares Private Equity Group since 2013, where he focuses on portfolio management. Additionally, Mr. Hirshorn serves as a member of the Management Committee of Ares and the Ares Private Equity Group’s Corporate Opportunities Investment Committee. Previously, Mr. Hirshorn served as an Operating Advisor for Ares from 2009 to 2013. Prior to joining Ares, Mr. Hirshorn was the President of Potbelly Sandwich Works, Inc. from 2007 to 2008 and prior to that he served as Senior Executive Vice President of Finance, Operations, Research and Development for Sealy Mattress Corporation from 2002 to 2006. Mr. Hirshorn currently serves on the Board of Directors of DuPage Medical Group, Ltd., an independent multi-specialty physician’s group, and Dawn Holdings Inc., the parent company of Serta Simmons Bedding, LLC. Mr. Hirshorn was selected to join our board of directors due to his extensive experience in operations for businesses in the retail and consumer products industries and for his senior leadership experience.

Brian Klos, a director since February 2018, is a Partner in the Ares Private Equity Group and serves as a member of the Ares Private Equity Group’s Corporate Opportunities Investment Committee. Prior to joining Ares in 2006, he was a member of the General Industries West Group and Mergers and Acquisitions Group at J.P. Morgan Chase & Co., a global financial services firm, where he participated in the execution of mergers and acquisitions and debt financings spanning various industries from 2003 to 2005. Mr. Klos’s years of experience managing and evaluating investments in companies operating in various industries and his in-depth understanding of our business led to the conclusion that he should serve as a director on our board.

Ronald A. Pace, a director since December 2014, is currently a board member of ORP Management LLC, a provider of specialized services and dignified care for children, adolescents and adults with disabilities, where he has served since December 2016, and chairman of the board of directors of Elkhart Lake’s Road America, Inc. where he has served since March 2008. Previously, Mr. Pace served as a member of the board of directors of AriensCo, an equipment company that manufactures snow blowers, lawn tractors and zero-turn lawn mowers for commercial and high-end consumer markets between December 2013 and December 2016. He also previously worked for Kohler Co., Inc., a global leader in the plumbing industry, serving as the Kohler Co. Group President, Interiors in May 2014 until his retirement in June 2015, and prior to May 2014, Mr. Pace served as President, Decorative Products from September 2012. From March 2011 until September 2012, Mr. Pace served as President, Kitchen & Bath Americas, a role he also performed from June 1995 until August 2008. During the interim, he continued to work as a consultant to Kohler Co. Mr. Pace’s experience in businesses serving both commercial and high-end consumer markets, as well as his experience as a director of other private companies, brings valuable insight to our board of directors.

 

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Ashfaq Qadri, a director since February 2019, is a Senior Principal of OTPP and has served in that role since March 2017. Mr. Qadri joined OTPP in 2016 with more than a decade of experience in private equity and investment banking. In his role as a Senior Principal, he is responsible for execution and portfolio management for direct private equity investments in the industrials and energy sectors. He is currently involved with OTPP’s investments in Hawkwood Energy LLC and KANATA Energy Group Ltd., and serves on the board of KANATA Energy Group Ltd., a privately funded midstream infrastructure and service company, Hawkwood Energy LLC and Trivium Packaging B.V. Prior to joining OTPP, Mr. Qadri was a Vice President at Morgan Stanley Private Equity from 2012 to 2014, with roles based in both New York and London. He also previously worked in Morgan Stanley’s Investment Banking division in New York. Mr. Qadri has an in-depth understanding of our business and has years of experience managing and evaluating investments in companies operating in various industries, including in the industrial and energy sectors. His understanding of our business and broad experience led us to conclude that he should serve as a director on our board.

Bennett Rosenthal, a director since 2013, is a Co-Founder of Ares, a Director and Partner of Ares and Co-Head of the Ares Private Equity Group. He is a member of the Ares Executive Management Committee and the firm’s Management Committee. Mr. Rosenthal additionally serves as the Co-Chairman of the board of directors of Ares Capital Corporation, a specialty finance company that provides debt and equity financing solutions to U.S. middle market companies and power generation projects. Mr. Rosenthal also is a member of the Ares Private Equity Group’s Corporate Opportunities and Special Opportunities Investment Committees. Mr. Rosenthal joined Ares in 1998 from Merrill Lynch & Co., Inc. where he served as a Managing Director in the Global Leveraged Finance Group. He currently serves on the boards of directors of City Ventures, LLC, a homebuilder in California coastal communities, and the parent entities of Aspen Dental Management, Inc., a dental practice management company, CHG Healthcare Holdings L.P., a healthcare staffing services company, DuPage Medical Group, Ltd., an independent multi-specialty physician group, National Veterinary Associates, Inc., an owner and operator of freestanding veterinary hospitals, and other private companies. Mr. Rosenthal’s previous board of directors experience includes, Dawn Holdings, Inc., Hangar, Inc. Maidenform Brands, Inc. and Nortek, Inc. We believe that Mr. Rosenthal’s extensive experience in the financial industry as well as the management of private equity in particular and his experience as a director of other public and private companies give the board of directors valuable insight.

Blake Sumler, a director since January 2020, is a Managing Director at OTPP and leads OTPP’s Diversified Industrials and Business Services team in the Private Capital group. Mr. Sumler joined OTPP in 2013 and has worked in private equity for more than 15 years. Prior to joining OTPP, Mr. Sumler was a Senior Vice President at Callisto Capital, a mid-market Toronto-based private equity firm focusing on buyouts and growth capital investments in Canada. Mr. Sumler’s varied work experience includes hedge fund investing at a Toronto-based firm, equity research at RBC Dominion Securities and debt syndication at Newcourt Capital. He currently serves on the boards of PODS Enterprises LLC and GFL Environmental Inc. Mr. Sumler is a CPA and a CFA charterholder. He holds a BA (Chartered Accounting) and a Master of Accounting from the University of Waterloo. Additionally, he is a graduate of the Institute of Corporate Directors.

Executive Officers

Jesse Singh, a director since he joined us in July 2016, is our Chief Executive Officer and President. Prior to joining us, Mr. Singh worked for 14 years at the 3M Company, a manufacturer and marketer of a range of products and services through its safety & industrial, transportation & electronics, health care and consumer segments, and served in numerous leadership roles at 3M, including Chief Commercial Officer, President of 3M’s Health Information Systems business and VP of the Stationery and Office supplies business, which included the iconic Post-it and Scotch Brands. During his career at 3M, Mr. Singh was involved in running 3M’s worldwide, customer-facing operations, which was comprised of 4,000 shared services, 12,000 sales and 5,000 marketing professionals. He also served as CEO of 3M’s joint venture in Japan and led 3M’s global electronics materials business. Mr. Singh currently serves on the board and as a member of the audit and compensation committees of Carlisle Companies Incorporated. Mr. Singh brings to our board of directors extensive senior leadership experience and a comprehensive knowledge of our business and perspective of our day-to-day operations.

 

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Ralph Nicoletti is currently serving as our Senior Vice President and Chief Financial Officer and joined us in January 2019. Prior to joining us, Mr. Nicoletti served as Senior Vice President and Chief Financial Officer of Newell Brands, Inc., a leading global consumer goods company, since 2016. Prior to Newell Brands, Inc., Mr. Nicoletti served as Executive Vice President and Chief Financial Officer of Tiffany and Co., a design and manufacturer of jewelry, watches and luxury accessories from April 2014. He has also held the role of Chief Financial Officer for Cigna Corporation, a global health services and insurance company, from 2011 to 2013, and Executive Vice President and Chief Financial Officer for Alberto Culver, Inc., a manufacturer and distributor of beauty products, from 2007 to 2011. Previously, Mr. Nicoletti held a number of financial management positions at Kraft Foods, Inc. during his tenure there from 1979 to 2007. Mr. Nicoletti also currently serves as a director and audit committee member of Arthur J. Gallagher & Co., a global insurance broker and risk management consultant company that plans and administers risk management programs.

Jose Ochoa is currently serving as our President, Residential Segment. Mr. Ochoa joined us in July 2017. Prior to joining us, Mr. Ochoa spent 15 years at Owens Corning, a developer and producer of insulation, roofing and fiberglass composites, in various roles. Most recently, he was Vice President of Strategic Marketing for the Roofing and Asphalt division, and served on the operating committee and as an officer of the company. Prior to that, Mr. Ochoa was Vice President and General Manager of the Engineered Insulation Systems (EIS) business, Vice President and General Manager of the Foam Insulation division and General Manager of the Latin America division. Prior to Owens Corning, Mr. Ochoa served as Vice President of Technology for ServiceLane, a privately funded startup focused on home services, where he established a national network for home maintenance with Lowe’s Home Improvement Center. Mr. Ochoa also co-founded Fifth Gear Media, which later merged to form Luminant Worldwide Corp. before its initial public offering. Before Fifth Gear Media, Mr. Ochoa held a variety of leadership positions with Frito-Lay, Inc. (part of the Pepsico Company), The Procter & Gamble Company and AT Kearney, Inc.

Scott Van Winter joined us in January 2017 and is currently serving as our President, Commercial Segment. With more than 25 years of experience in the performance polymers industry, Mr. Van Winter most recently served as Chief Executive Officer and Executive Vice President at Jindal Films Americas, LLC, a leader in the development and manufacture of specialty films, from January 2015 to December 2016, where he led the U.S. and European businesses. Prior to joining Jindal Films America, Mr. Van Winter served as General Manager and Senior Vice President of the Lumirror Polyester Film Division of Toray Plastics (America), Inc., from April 2007 to January 2015, and Vice President of OPS Sheet and Specialty Films for Alcoa KAMA Co. from June 2002 to June 2004.

Dennis Kitchen is currently serving as our Senior Vice President and Chief Human Resources Officer and joined us in October 2016. Mr. Kitchen’s background includes over 24 years of human resources experience in the manufacturing industry, most recently as Vice President of Human Resources for BWAY Corporation, a manufacturer of rigid metal, plastic, and hybrid containers, from November 2010 to October 2016. Prior to that, Mr. Kitchen served as Vice President of Human Resources for Griffin Pipe Products Co., Inc., a manufacturer of water transmission products, from January 2010 to November 2010. Before Griffin Pipe, he held the role of Director of Human Resources for Rio Tinto America Inc., a leading global mining group, from March 2008 to January 2010. Prior to that, Mr. Kitchen held a variety of leadership positions, including Director of Human Resources for BorgWarner Inc., a manufacturer of propulsion systems for combustion, hybrid and electric vehicles, from 1995 to 2008.

Jeanine Gaffke is currently serving as our Chief Marketing Officer and joined us in January 2018. Prior to joining us, Ms. Gaffke served as the Vice President of Marketing and Business Development for Emerson Electric Co., a multinational technology and engineering company, from March 2015 to January 2018. During that time, Ms. Gaffke was responsible for growth initiatives, marketing, communications and digital efforts for Emerson Electric’s Commercial and Residential Solutions division. Prior to that, Ms. Gaffke held a variety of leadership positions, including Head of Global Marketing for Sealed Air Corporation, a packaging company that provides food safety and security solutions, from June 2012 to February 2015. Ms. Gaffke worked at JohnsonDiversey, Inc. from 2009 to 2012 prior to its acquisition by Sealed Air Corporation.

 

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Bobby Gentile is currently serving as our Senior Vice President of Operations and joined us in November 2016. Mr. Gentile has over 20 years of professional operations experience and most recently served as the Vice President of Manufacturing and Logistics at Overhead Door Corporation, a manufacturer of doors and openers, from April 2009 to November 2016. Prior to that, Mr. Gentile was an Operations Leader for Gardner Bender, a manufacturer of electrical and wire management products, from April 2006 to April 2009. He also held the role of Director of Operations for Newell-Rubbermaid Inc., known today as Newell Brands Inc., a leading global consumer goods company, from 2001 to 2006.

Jonathan Skelly is currently serving as our Senior Vice President of Strategy and Execution and joined us in January 2018. Mr. Skelly has 20 years of strategy, mergers and acquisitions, analytics, integration and business development experience. He most recently served as Vice President of Corporate Development for W. W. Grainger, Inc., an industrial supply company, from 2010 to December 2017. During that time, Mr. Skelly was responsible for all global and domestic corporate development and mergers and acquisitions. Prior to that, he held a variety of leadership positions including Director of Strategic Business Development for The Home Depot Inc. and Director of Mergers & Acquisitions for Hughes Supply, Inc.

Paul Kardish is currently serving as our Senior Vice President and Chief Legal Officer. Prior to joining us in September 2019, Mr. Kardish had over 25 years of broad legal, human resources, corporate governance and compliance, security, and government relations experience, serving as the Executive Vice President, General Counsel and Secretary of Schneider National, Inc. from August 2013 through March 2019, and prior to that holding positions at several Fortune 250 companies spanning multiple industries, including Honeywell International Inc., Intel Corporation, Micron Technology, Inc. and Freeport McMoRan Inc. He holds a bachelor’s degree in social work/psychology from Juniata College, a juris doctor from Gonzaga University School of Law and a master of laws degree from New York University School of Law. He was admitted to the Texas Bar in 1993 and to the Wisconsin Bar in 2013. Mr. Kardish also served as a Special Agent with the Federal Bureau of Investigation and is trained in emergency management. He also serves as a member of the Board of Directors for the American Red Cross-Northeastern Wisconsin.

Michelle Kasson is currently serving as our Chief Information Officer and joined us in December 2019. Ms. Kasson has over 25 years of corporate IT experience in the consumer product goods, food and pharmaceutical industries. She most recently served as IT Director at the J.M. Smucker Company for 11 years with responsibilities including enterprise software development, managed service delivery, portfolio development and project execution. Prior to that, Ms. Kasson held a variety of information technology roles at Procter and Gamble, from May 1992 to October 2008. Ms. Kasson received a Bachelors in Management Information Systems from the University of Dayton in 1992 and a Masters of Business Administration from Xavier University in Cincinnati, OH in 1997.

Board Composition and Risk Management Practices

Board Composition

After the completion of this offering, the authorized number of directors comprising our board of directors will be not less than three but not more than thirteen, with the actual number to be fixed from time to time by resolution of our board of directors, subject to the terms of our certificate of incorporation and bylaws that will be in effect upon the completion of this offering and the Stockholders Agreement. Our certificate of incorporation, which will be in effect upon the completion of this offering, provides for a board of directors comprised of three classes of directors, with each class serving a three-year term beginning and ending in different years than those of the other two classes. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our board of directors will be divided among the three classes as follows:

 

   

Our class I directors will be                     ,                       and                      and their term will expire at the annual meeting of stockholders to be held in 2020.

 

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Our class II directors will be                     ,                       and                      and their term will expire at the annual meeting of stockholders to be held in 2021.

 

   

Our class III directors will be                     ,                      ,                      and                      and their term will expire at the annual meeting of stockholders to be held in 2022.

Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our board of directors could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of us.

Pursuant to the Stockholders Agreement, the Sponsors will be entitled to designate individuals to be included in the slate of nominees for election to our board of directors as follows:

 

   

for so long as the Sponsors collectively own 50% or more of the outstanding shares of our common stock, the greater of up to six directors and the number of directors comprising a majority of our board; and

 

   

except as provided below, for so long as the Sponsors collectively own less than 50% of the outstanding shares of our common stock, that number of directors (rounded up to the nearest whole number or, if such rounding would cause the Sponsors to have the right to elect a majority of our board of directors, rounded to the nearest whole number) that is the same percentage of the total number of directors comprising our board as the collective percentage of common stock owned by the Sponsors.

One-half of such nominees will be nominated by each of the Sponsors unless (i) if the number of directors to be nominated is odd, the Sponsors will jointly nominate one such director and each Sponsor will nominate one half of the remaining nominees, and (ii) if either Sponsor owns more than 5%, but less than or equal to 10%, of the outstanding shares of our common stock, one director will be nominated by such Sponsor, and the remaining nominees will be nominated by the other Sponsor.

Under the Stockholders Agreement, each Sponsor will also agree to vote in favor of the other Sponsor’s nominees. See “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

Controlled Company Exemption

Upon the completion of this offering, we will be deemed to be a “controlled company” under the NYSE rules, and we will qualify for the “controlled company” exemption to the board of directors and committee composition requirements under the NYSE rules. Pursuant to this exception, we will be exempt from the requirements that (1) our board of directors be comprised of a majority of independent directors, (2) we have a nominating and corporate governance committee composed entirely of independent directors and (3) our compensation committee be comprised solely 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 rules, which require that our audit committee be composed of at least three directors, one of whom must be independent upon the listing of our common stock on the NYSE, a majority of whom must be independent within 90 days of the date of this prospectus and each of whom must be independent within one year from the date of this prospectus. We intend to utilize these exemptions as long as we remain a controlled company. As a result, we will not have a majority of independent directors and our nominating and corporate governance committee and compensation committee will not consist entirely of independent directors. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the                     .

If at any time we cease to be a “controlled company” under the NYSE rules, the board of directors will take all action necessary to comply with such rules within the applicable transition periods, including appointing a majority of independent directors to the board and establishing certain committees composed entirely of independent directors.

 

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Board Leadership

Our board of directors has no policy with respect to the separation of the offices of Chief Executive Officer and Chairman of the Board. It is our board of directors’ view that rather than having a rigid policy, our board of directors should determine, as and when appropriate upon consideration of all relevant factors and circumstances, whether the two offices should be separate.

Currently, our leadership structure separates the offices of Chief Executive Officer and Chairman of the Board, with Mr. Singh serving as our Chief Executive Officer and Mr. Hendrickson serving as non-executive Chairman of the Board. We believe this is appropriate as it provides Mr. Singh with the ability to focus on our day-to-day operations while Mr. Hendrickson focuses on the oversight of our board of directors.

Board’s Role in Risk Management

Management is responsible for the day-to-day management of the risks facing our company, while our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. Our board of directors regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated therewith. Effective upon the consummation of this offering, our compensation committee will be responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. Effective upon consummation of this offering, our audit committee will oversee management of financial risks. While each committee will be responsible for evaluating certain risks and overseeing the management of such risks, our full board of directors plans to keep itself regularly informed regarding such risks through committee reports and otherwise. We believe that the leadership structure of our board of directors provides appropriate risk oversight of our activities given the controlling interests held by the Sponsors.

Director Independence

Pursuant to the corporate governance standards of the NYSE, a director employed by us cannot be deemed an “independent director,” and each other director will qualify as “independent” only if our board of directors affirmatively determines that he has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. The fact that a director may own our capital stock is not, by itself, considered a material relationship. Based on information provided by each director concerning his or her background, employment and affiliations, our board of directors has affirmatively determined that each of Gary Hendrickson, Sallie Bailey, Russell Hammond, James Hirshorn, Brian Klos, Ronald Pace, Ashfaq Qadri, Bennett Rosenthal and Blake Sumler are independent in accordance with the NYSE rules.

Board Committees

Upon the completion of this offering, our board of directors will have three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee, each of which has the composition and responsibilities described below. From time to time, our board of directors may establish other committees to facilitate the management of our business.

Audit Committee

Upon the completion of this offering, the audit committee will consist of three directors: Sallie Bailey, Ronald Pace and Gary Hendrickson. Our board of directors has determined that Sallie Bailey, Ronald Pace and Gary Hendrickson each satisfy the independence requirements for audit committee members under the listing standards of the NYSE and Rule 10A-3 of the Exchange Act. Sallie Bailey has been determined to be an audit committee “financial expert” as defined under SEC rules. All members of the audit committee are able to read and understand fundamental financial statements, are familiar with finance and accounting practices and principles and are financially literate.

 

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The purpose of the audit committee is to assist our board of directors in overseeing (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent auditors’ qualifications and independence and (4) the performance of the independent auditors and our internal audit function. The audit committee also prepares the audit committee report as required by the SEC for inclusion in our annual proxy statement.

Our board of directors has adopted a written charter for the audit committee which will take effect upon the completion of this offering and which satisfies the applicable rules of the SEC and the listing standards of the NYSE. This charter will be posted on our website upon the completion of this offering.

Compensation Committee

Upon the completion of this offering, the compensation committee will consist of three directors: Gary Hendrickson, Brian Klos and Ashfaq Qadri. We intend to avail ourselves of the “controlled company” exemption under the NYSE rules which exempts us from the requirement that we have a compensation committee composed entirely of independent directors.

The purpose of the compensation committee is to assist our board of directors in discharging its responsibilities relating to (1) setting our compensation program and compensation of our executive officers and directors, (2) monitoring our incentive and equity-based compensation plans and (3) preparing the compensation committee report required to be included in our proxy statement under the rules and regulations of the SEC.

Our board of directors has adopted a written charter for the compensation committee which will take effect upon the completion of this offering and which satisfies the applicable rules of the SEC and the listing standards of the NYSE. This charter will be posted on our website upon the completion of this offering.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee consists of four directors: Gary Hendrickson, Sallie Bailey, Blake Sumler and James Hirshorn. We intend to avail ourselves of the “controlled company” exemption under the NYSE rules which exempts us from the requirement that we have a nominating and corporate governance committee composed entirely of independent directors.

The purpose of the nominating and corporate governance committee is to assist our board of directors in discharging its responsibilities relating to (1) identifying individuals qualified to become new board of directors members, consistent with criteria approved by the board of directors, subject to our certificate of incorporation, bylaws and the Stockholders Agreement, (2) reviewing the qualifications of incumbent directors to determine whether to recommend them for reelection and selecting, or recommending that the board of directors select, the director nominees for the next annual meeting of stockholders, (3) identifying board of directors members qualified to fill vacancies on the board of directors or any board of directors committee and recommending that the board of directors appoint the identified member or members to the board of directors or the applicable committee, subject to our certificate of incorporation, bylaws and the Stockholders Agreement, (4) reviewing and recommending to the board of directors corporate governance principles applicable to us, (5) overseeing the evaluation of the board of directors and management, (6) oversee our strategy on corporate social responsibility and sustainability and (7) handling such other matters that are specifically delegated to the committee by the board of directors from time to time.

Our board of directors has adopted a written charter for the nominating and corporate governance committee which will take effect upon the completion of this offering and which satisfies the applicable rules of the SEC and the listing standards of the NYSE. This charter will be posted on our website upon the completion of this offering.

 

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Compensation Committee Interlocks and Insider Participation

None of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee. None of the members of the compensation committee is, nor has ever been, an officer or employee of our company.

Code of Ethics

Prior to the consummation of this offering, we will adopt a Code of Ethics for Senior Officers applicable to our Chief Executive Officer and senior financial officers. In addition, prior to the consummation of this offering we will adopt a Code of Conduct and Ethics for all officers, directors and employees. Our Code of Ethics for Senior Officers and Code of Conduct and Ethics will be posted on our website at AzekCo.com on the Corporate Governance page of the Investor Relations section of the website. The information contained on our website is not part of this prospectus. We intend to disclose future amendments to certain provisions of our Code of Ethics for Senior Officers, or waivers of such provisions applicable to any principal executive officer, principal financial officer, principal accounting officer or other persons performing similar functions on our website.

 

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EXECUTIVE COMPENSATION

Summary Compensation Table

The following table provides compensation information for the year ended September 30, 2019 for our principal executive officer and our two other most highly compensated persons serving as executive officers as of September 30, 2019. Each of these executive officers was serving as an executive officer of our wholly-owned subsidiary, CPG International LLC, as of September 30, 2019 and also are serving as our executive officers as of the date of this prospectus. We refer to these executive officers as the named executive officers or NEOs.

 

Name and Principal Position

  Year     Salary     Bonus(1)     Stock
Awards(2)
    Non-Equity
Incentive Plan
Compensation(3)
    All Other
Compensation(4)
    Total  

Jesse Singh

President and Chief
Executive Officer

   

2019

2018

 

 

  $

 

745,926

720,650

 

 

  $

 

—  

500,000

 

 

  $

 

1,434,725

—  

 

 

  $
 
662,070
496,331
 
 
  $

 

51,293

57,953

 

 

  $

 

2,894,014

1,774,934

 

 

Ralph Nicoletti(5)

Senior Vice President & Chief Financial Officer

    2019       351,923       250,000       1,794,609       234,270       19,397       2,650,199  

Jonathan Skelly

Senior Vice President of Strategy & Execution

   

2019

2018

 

 

   

351,154

248,461

 

 

   

130,500

60,000

 

 

   

152,262

732,056

 

 

   

155,839

90,220

 

 

   

11,682

7,743

 

 

   

801,437

1,138,480

 

 

 

(1)

With respect to the fiscal year ending September 30, 2019, for Mr. Nicoletti, this amount represents a signing bonus paid to him in connection with the commencement of his employment, and for Mr. Skelly, this amount represents a one-time bonus paid in connection with his purchase of common interests in the Partnership. The bonus paid to Mr. Nicoletti is subject to repayment as described under “Narrative Disclosure to Summary Compensation Table—Employment Agreements and Offer Letters—Sign-on Grants”.

(2)

The amounts in this column reflect the aggregate grant date fair value of performance vested and time vested Profits Interests granted in the fiscal years ending September 30, 2019 and September 30, 2018. The grant date fair value of the Profits Interests was computed in accordance with Accounting Standards Codification 718 issued by the Financial Accounting Standards Board, or FASB ASC 718. For a description of the assumptions used to determine the compensation cost of these awards, see Note 11 to our Consolidated Financial Statements for the year ended September 30, 2019 included elsewhere in this prospectus. The performance conditions applicable to the performance vested Profits Interests are “market conditions” that relate to the attainment of specified equity returns, the impact of which is factored into the grant date fair value. The Partnership Agreement permits the Partnership to redeem time vested and performance vested Profits Interests upon certain terminations of employment. Additionally, Profits Interests are eligible to participate in distributions to the extent provided in the Partnership Agreement, including upon certain strategic or change in control transactions. There is no maximum cap on potential redemption value or distributions. See “Narrative Disclosure to Summary Compensation Table—Long-Term Incentives—Profits Interests” for a description of the Profits Interests.

(3)

The amounts in this column represent annual incentive cash awards earned under the annual incentive program for the year ended September 30, 2019. See “Narrative Disclosure to Summary Compensation Table—Annual Incentive Awards” for a description of the fiscal 2019 annual incentives.

(4)

The amounts shown in the “All Other Compensation” column for the year ended September 30, 2019 are detailed in the table below:

 

     Health and
Welfare Benefits(a)
     401(k)
Contributions(b)
     Commuting
Expenses(c)
     Other
Compensation(d)
 

Jesse Singh

   $ 10,940      $ 9,800      $ 30,553      $ —    

Ralph Nicoletti

     —          6,346        —          13,051  

Jonathan Skelly

     —          11,682        —          —    

 

  (a)

This amount reflects insurance premiums with respect to a long-term disability policy paid on behalf of Mr. Singh of $10,940.

  (b)

These amounts reflect matching contributions under the CPG International 401k Plan, or the 401k Plan. See “Additional Narrative Disclosures—Retirement Plans” for a description of the 401k Plan.

  (c)

Represents certain expenses related to Mr. Singh’s commute to our headquarters in Chicago.

  (d)

Represents the reimbursement of professional fees incurred by Mr. Nicoletti in connection with the negotiation and preparation of his employment agreement.

(5)

Mr. Nicoletti’s employment with CPG International LLC commenced on January 9, 2019.

 

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Narrative Disclosure to Summary Compensation Table

For the year ended September 30, 2019, our NEOs were compensated through a combination of the following components: base salary, annual cash incentive opportunity, long-term incentive awards and employee benefits. Pursuant to employment arrangements and the terms of the long-term incentive awards, our NEOs were also entitled to cash severance and other benefits in the event of a qualifying termination of employment or certain transactions. Each of these compensation elements is described below.

Base Salaries

The base salary earned by each of our NEOs during the year ended September 30, 2019, is reflected in the Summary Compensation Table above. The annual base salaries of the NEOs as of the end of fiscal year 2019 were $760,552 for Mr. Singh, $500,000 for Mr. Nicoletti and $380,000 for Mr. Skelly.

Annual Incentive Awards

In order to motivate the NEOs to achieve short-term performance objectives, a portion of their total target compensation opportunity is in the form of an annual incentive bonus. The annual incentive bonus in respect of the fiscal year ending September 30, 2019 was determined based on the level of achievement of certain financial and individual performance criteria, which are described in more detail below.

Target Incentive Opportunities

The target annual incentive opportunity, expressed as a percentage of an NEO’s base salary, was established in each NEO’s employment agreement or offer letter, which are described under “—Employment Agreements and Offer Letters” below. The target opportunity for the fiscal year ended September 30, 2019 for each of the NEOs was as follows:

 

Named Executive Officer

Target Annual Incentive
(% of Base Salary)
Target Annual Incentive(1)

Jesse Singh

  100 % $ 745,926

Ralph Nicoletti

  75 %   263,942

Jonathan Skelly

  50 % $ 175,577

 

(1)

Target annual incentive amounts represent the percentage of base salary earned during the fiscal year, rather than a percentage of the annualized base salary rate as in effect at the end of the fiscal year.

Performance Targets and Fiscal Year 2019 Performance

For the NEOs, 75% of the fiscal year 2019 annual bonus payout was tied to CPG International LLC financial performance relative to the targets established by the compensation committee of the board of directors of AOT Building Products GP Corp., or the Compensation Committee. The remaining 25% was determined based on individual performance as discussed with the Compensation Committee.

 

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Financial Performance Objectives

For the fiscal year ending September 30, 2019, the financial performance component of the annual incentive opportunities was determined based on CPG International LLC Adjusted EBITDA and Revenue, which accounted for 50% and 25%, respectively, of each NEO’s aggregate annual bonus opportunity. The financial performance objectives and actual company fiscal 2019 performance as determined for purposes of the annual incentive awards were as follows:

 

Performance Targets and Results

(Dollar values in millions)

 
     Threshold     Target     Maximum     Actual
Performance
 

Target Adjusted EBITDA(1)

50% Weighting

   $ 175.8     $ 195.4     $ 226.6     $ 187.8  

Percentage of Target(2)

     0     100     295     61 % 

Target Revenue

25% Weighting

   $ 704.0     $ 782.2     $ 907.3     $ 796.4  

Percentage of Target(2)

     0     100     295     118 % 

 

(1)

Adjusted EBITDA for purposes of fiscal 2019 annual incentives is defined as net income (loss) before interest expense, net, income tax (benefit) expense and depreciation and amortization, adding thereto or subtracting therefrom certain non-cash charges, restructuring and business transformation costs, acquisition costs, initial public offering costs, capital structure transaction costs and certain other costs.

(2)

Performance between levels is generally interpolated on a straight-line basis.

Individual Performance Objectives

The remaining 25% of the annual bonus payout was determined by the Compensation Committee based on the NEOs’ individual performance. The individual performance component was determined based on an overall assessment of the NEO’s performance and was not based on a predefined formula or targets. The maximum award that an NEO can earn for the individual performance component was 130% of the target bonus attributable to this metric, which maximum is intended to reward exceptional performance. Mr. Singh’s individual performance was assessed based on his performance in improving employee safety, preparing and executing monetization efforts, executing CPG International LLC’s strategic value creation plan and delivering the operating plan. Mr. Nicoletti’s individual performance was assessed based on his performance in developing compliance controls, supporting monetization efforts, executing enhanced forecasting projects, strengthening the CPG International LLC financial organization and improving sales forecasting capability. Mr. Skelly’s individual performance was assessed based on monetization efforts, strategy execution and delivery of CPG International LLC’s 2019 plan.

After considering each NEO’s self-assessment and an assessment by the Chief Executive Officer (for Messrs. Nicoletti and Skelly), the Compensation Committee determined that each of Messrs. Singh, Nicoletti and Skelly achieved 115% of the individual performance component.

After incorporating the results of the financial and individual performance components, the Compensation Committee approved the following payouts for the year ended September 30, 2019:

 

     75% of Annual Incentive     25% of Annual Incentive     2019 Earned
Annual
Incentive
 
     CPG Component     Individual Performance
Component
 

Jesse Singh

     80     115     89

Ralph Nicoletti

     80     115     89

Jonathan Skelly

     80     115     89

In addition to the annual incentive earned as discussed above, CPG International LLC paid Mr. Skelly a special cash bonus equal to $130,500, which was used to purchase common interests in the Partnership.

 

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Long-Term Incentives

Profits Interests

The outstanding long-term incentives held by the NEOs consist primarily of Profits Interests granted under the Partnership Agreement. These Profits Interests, which are designed to align employees’ interests with the interests of the Partnership and its subsidiaries, represent interests in the future profits (once a certain level of proceeds has been generated) in the Partnership. In general, awards of Profits Interests are 50% time vested and 50% performance vested.

 

   

Time vested Profits Interests generally vest ratably over five years from the vesting commencement date, subject to continued employment through each vesting date.

 

   

Half of the performance vested Profits Interests vest upon the achievement of one of the following events subject to continued employment through the vesting date:

 

   

When the aggregate proceeds (in the form of cash and marketable securities), or Proceeds, received by each of the Sponsors are at least two times its aggregate capital contributions, or the First MoM Target, or

 

   

In the event of a Change in Control (as defined in the Partnership Agreement), when the aggregate Proceeds received by each of the Sponsors result in an internal rate of return on its aggregate capital contributions, or IRR, that is equal to or greater than 25%.

 

   

The remaining 50% of the performance vested Profits Interests vest upon the achievement of one of the following events subject to continued employment through the vesting date:

 

   

When the aggregate Proceeds received by each of the Sponsors are at least 2.75 times its aggregate capital contributions, or the Second MoM Target, and, together with the First MoM Target, the MoM Targets, or

 

   

In the event of a Change in Control, when the aggregate Proceeds received by each of the Sponsors result in an IRR that is equal to or greater than 30%.

Any unvested performance vested Profits Interests will be forfeited and cancelled upon the tenth anniversary of the grant date.

The Profits Interests granted to each of Messrs. Singh, Nicoletti and Skelly in connection with his appointment, as described under “—Employment Agreements and Offer Letters” below, vest in accordance with the terms described above. In addition to the Profits Interests granted to Mr. Singh in connection with his appointment, Mr. Singh was granted 840 time vested Profits Interests and 840 performance vested Profits Interests on October 11, 2018. The time vested Profits Interests were 40% vested on the grant date, with the remaining 60% vesting in equal installments on May 26, 2019, 2020 and 2021, subject to continued employment through the vesting date. The performance vested Profits Interests vest based on satisfaction of the performance criteria described above. In addition to the Profits Interests granted to Mr. Skelly in connection with his appointment, Mr. Skelly was granted 225 time vested Profits Interests and 225 performance vested Profits Interests on August 7, 2019 that vest in accordance with the terms described above.

Notwithstanding the vesting schedules discussed above, vested Profits Interests are subject to redemption by the Partnership in the event that the NEO’s employment terminates. A discussion of the redemption terms and the treatment of the Profits Interests in connection with a Change in Control, a Strategic Transaction or certain qualifying terminations of employment is described under “Additional Narrative Disclosures—Potential Payments Upon Termination, Change in Control or Strategic Transaction” below.

Long-Term Cash Incentive

Mr. Singh was granted a long-term cash incentive with a value of $765,046 on October 11, 2018, which vests upon the satisfaction of certain time- and performance-vesting conditions. The long-term cash incentive

 

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will be paid in a cash lump sum within 30 days following the date on which both of the following conditions are satisfied:

 

   

Time vesting condition: The long-term cash incentive was 40% time vested on the grant date, with the remaining 60% time vesting in equal installments on May 26 of each of 2019, 2020 and 2021, subject to continued employment through each vesting date.

 

   

Performance vesting condition: The performance-vesting condition is satisfied on the occurrence of either (i) the date following an initial public offering on which the Sponsors own less than 50% of the equity value represented by equity interests of CPG International LLC or (ii) a Change in Control (as defined in the long-term cash incentive award) and where the price per share in the initial public offering, or the transaction price in the Change in Control, implies an equity value at least commensurate with the aggregate investments by the Sponsors in CPG International LLC, as determined by AOT Building Products GP Corp. in its sole discretion, or the Performance Vesting Condition.

If the Performance Vesting Condition is not satisfied prior to May 26, 2026, the long-term cash incentive will be automatically terminated and forfeited without compensation. As of the date of this prospectus, the long-term cash incentive has not been earned.

A discussion of the treatment of the long-term cash incentive in connection with a Change in Control, a Strategic Transaction or certain qualifying terminations of employment is described under “Additional Narrative Disclosures—Potential Payments Upon Termination, Change in Control or Strategic Transaction” below.

Employee Benefits

The NEOs participate in a variety of insurance plans, including medical and dental welfare benefits on the same basis as other employees of CPG International LLC. In lieu of long-term disability benefits provided to other executives, Mr. Singh is entitled pursuant to his employment agreement to a long-term disability insurance policy funded by CPG International LLC that provides a monthly benefit of $25,000 in the event of total and permanent disability. CPG International LLC offers reimbursement for physicals to certain of its employees, including the NEOs.

Employment Agreements and Offer Letters

CPG International LLC entered into an employment agreement or offer letter with each of the NEOs in connection with the commencement of his employment, which are described below. Additionally, each employment agreement or offer letter provides for certain severance and termination benefits that are described below under “—Potential Payments Upon Termination, Change In Control or Strategic Transaction”.

Term. CPG International LLC entered into an employment agreement with Mr. Singh effective as of May 26, 2016, which continues until Mr. Singh’s employment terminates. CPG International LLC entered into an employment agreement with Mr. Nicoletti effective on January 9, 2019, which continues until Mr. Nicoletti’s employment terminates. CPG International LLC entered into an offer letter with Mr. Skelly, dated as of September 20, 2017, pursuant to which Mr. Skelly serves as the Senior Vice President of Business Development and Investor Relations.

Base Salary and Target Bonus. The agreements initially provided, for Mr. Singh, for an annual base salary of $650,000 and an annual target bonus of 100% of base salary; for Mr. Nicoletti, for an annual base salary of $500,000 and an annual target bonus of 75%; and for Mr. Skelly, for an annual base salary of $340,000 and an annual target bonus of 50% of base salary.

Sign-on Grants. In connection with his appointment, Mr. Singh received a one-time award in the amount of $1,000,000, payable 50% in the form of cash and 50% in the form of common interests in the Partnership. The

 

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cash portion was earned and the equity portion vested in full on the second anniversary of Mr. Singh’s start date. Mr. Singh was also granted 7,565 performance vested Profits Interests and 9,065 time vested Profits Interests.

In connection with his appointment, Mr. Nicoletti received a one-time cash bonus in the amount of $250,000. If Mr. Nicoletti voluntarily terminates his employment with CPG International LLC within two years of his start date, he will be required to repay a pro-rata portion of the after-tax value of such sign-on bonus, based on the number of days within that two year period that follow his resignation. Additionally, Mr. Nicoletti was granted 4,750 Profits Interests.

In connection with his appointment, Mr. Skelly received a one-time cash bonus in the amount of $60,000, which was subject to repayment in full if Mr. Skelly voluntarily terminated his employment with CPG International LLC within one year following his start date. Additionally, Mr. Skelly was granted 1,750 Profits Interests. The Profits Interests granted to the NEOs vest as described under “—Long-Term Incentives—Profits Interests.”

Employee Benefits. As discussed under “—Employee Benefits,” each NEO is eligible to participate in certain health and welfare benefit programs. Additionally, Mr. Nicoletti was entitled to reimbursement of up to $15,000 for professional fees incurred by him in connection with the negotiation and preparation of his employment agreement.

Restrictive Covenants

In connection with the commencement of his employment, each of the NEOs agreed to confidentiality, non-disparagement, non-competition and non-solicitation of employees and customers covenants. The non-competition and non-solicitation covenants with each of Messrs. Singh and Nicoletti continue for two years following the termination of his employment for any reason. Mr. Skelly agreed to non-competition and non-solicitation covenants that continue for one year following the termination of his employment for any reason. The NEOs also agreed to covenants assigning rights to intellectual property to CPG International LLC.

Outstanding Equity Awards at 2019 Fiscal Year-End

The following table shows all outstanding equity awards held by each of the NEOs as of September 30, 2019, which consisted entirely of Profits Interests.

 

     Stock Awards  

Name

   Number of
Shares or Units
of Stock That
Have Not
Vested(1)
     Market Value of
Shares or Units of
Stock That Have Not
Vested(2)
     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
or Units of Stock That Have
Not Vested(2)
 

Jesse Singh

     3,626      $ 3,346,798        7,565      $ 6,982,495  
     336        61,488        840        153,720  

Ralph Nicoletti

     2,375        434,625        2,375        434,625  

Jonathan Skelly

     700        646,100        875        807,625  
     225        41,175        225        41,175  

 

(1)

The amounts in this column represent unvested time vested Profits Interests in the Partnership granted to the recipient under the Partnership Agreement. The time vested Profits Interests vest in equal installments on each of the first, second, third, fourth and fifth anniversaries of the grant date or date of hire, as applicable, subject to continued employment through the applicable vesting date.

For Mr. Singh, awards listed in this column represent the remaining unvested portion of the Profits Interests granted on October 11, 2018 and May 26, 2016. Each grant vests in equal installments on May 26, 2017, 2018, 2019, 2020 and 2021 (such that the October 11, 2018 award was 40% vested on the date of grant).

For Mr. Nicoletti, awards listed in this column were granted on January 9, 2019 and vest in equal installments on January 9, 2020, 2021, 2022, 2023 and 2024.

 

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For Mr. Skelly, 225 of the Profits Interests in this column were granted on August 7, 2019 and vest in equal installments on August 7, 2020, 2021, 2022, 2023 and 2024. The remainder of Mr. Skelly’s Profits Interests in this column were granted on February 22, 2018 and vest in equal installments on February 22, 2019, 2020, 2021, 2022 and 2023.

The treatment of time vested Profits Interests in connection with a termination of employment and certain other events is described under “Potential Payments Upon Termination, Change in Control or Strategic Transaction—Treatment of Long-Term Incentives” below.

(2)

There is no public market for the Profits Interests and therefore recipients cannot monetize Profits Interests in their discretion. Each Profits Interest is granted with a hurdle amount, which functions like an option exercise price because the Profits Interests do not participate in distributions to equity holders up to that amount. Profits Interests are subject to redemption by the Partnership upon certain events, including upon termination of employment, and may be redeemed for zero value in certain circumstances. For more information, see “Narrative Disclosure to Summary Compensation Table—Long-Term Incentives—Profits Interests” for a description of the Profits Interests.

The amounts in this column represent the appreciation in the value of each Profits Interest over its hurdle amount from the date of grant through September 30, 2019, based on the Partnership’s valuation as of that date as determined by the board of directors of AOT Building Products GP Corp. Awards granted before June 30, 2018 have a hurdle amount of $1,000 per unit and those granted after June 30, 2018 have a hurdle amount of $1,740 per unit. The grant date of each award is set forth in note 1 to this table.

(3)

The amounts in this column represent unvested performance vested Profits Interests in the Partnership granted to the recipient under the Partnership Agreement. Distributions to performance vested Profits Interests above the applicable hurdle amount, if any, are not payable until the performance vested Profits Interests vest upon the achievement of the performance conditions described under “Narrative Disclosure to Summary Compensation Table—Long-Term Incentives—Profits Interests”.

The treatment of performance vested Profits Interests in connection with a termination of employment and certain other events is described under “Potential Payments Upon Termination, Change in Control or Strategic Transaction—Treatment of Long-Term Incentives” below. Any outstanding unvested performance vested Profits Interests expire on the first to occur of a Change in Control or the tenth anniversary of the grant date.

Additional Narrative Disclosures

Retirement Plans

CPG International LLC maintains a tax-qualified defined contribution plan, the CPG International 401k Plan, in which all employees may contribute up to 100% of his or her salary, subject to Internal Revenue Code limits. CPG International LLC matches 100% of the first 1% of employee contributions and 50% of the next 5% of employee contributions, for a total matching contribution of 3.5% on the first 6% of employee contributions. The NEOs are eligible to participate in the 401k Plan on the same terms as other participating employees.

Potential Payments Upon Termination, Change In Control or Strategic Transaction

The employment agreement or offer letter with each NEO and the long-term incentives awarded to the NEOs provide benefits upon the termination of his employment with CPG International LLC under certain circumstances or upon certain transactions, as described below. Certain terms used in this section have the meanings described under “—Treatment of Long-Term Incentives—Definitions” below.

Severance Under Employment Agreements and Offer Letters

On a termination for any reason, each NEO is entitled to payment of accrued but unpaid base salary and vacation. Additionally, if Mr. Singh’s employment terminates for any reason (other than a termination by CPG International LLC for Cause), Mr. Singh’s base salary and employee benefits continue until the end of the month in which termination occurs.

On a termination without Cause (or, for Messrs. Singh and Nicoletti, for Good Reason), the NEOs are entitled to cash severance equal to, for Mr. Singh, the sum of two times his base salary and one times his target annual bonus, payable in equal monthly installments for 18 months following termination; for Mr. Nicoletti, continued base salary for 12 months following termination; and for Mr. Skelly, continued base salary for 12 months following termination. Additionally, Mr. Singh is entitled to a prorated annual bonus for the year of termination based on actual performance and the number of days Mr. Singh was employed during the year of termination, payable at such times that annual bonuses are paid to executives generally, and any earned but

 

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unpaid bonus for the year prior to termination. In connection with such termination, Mr. Singh is entitled to continued payment of healthcare premiums for 24 months following the date of termination or until Mr. Singh obtains healthcare benefits from another employer, and Mr. Skelly is entitled to continued medical, vision and dental benefits for 12 months. The foregoing benefits to each of Messrs. Singh and Nicoletti are subject to his execution of a release in favor of CPG International LLC and compliance with post-employment restrictive covenants.

In the event that Mr. Singh’s employment is terminated due to death or disability, Mr. Singh will be entitled to: (i) any earned but unpaid bonus for the year prior to termination, (ii) all amounts accrued under any bonus, incentive or other plan and (iii) a prorated annual bonus for the year of termination based on actual performance and the number of days Mr. Singh was employed during the year of termination, payable at such times that annual bonuses are paid to the executives of CPG International LLC generally.

Treatment of Long-Term Incentives

Profits Interests

The Partnership previously granted time vested and performance vested Profits Interests to the NEOs, which are subject to certain treatment upon the occurrence of a Change in Control, a Strategic Transaction or certain qualifying terminations in connection with a Change in Control or Strategic Transaction.

All unvested time vested Profits Interests that remain outstanding and eligible for vesting generally will vest immediately upon a Change in Control. Additionally, all unvested time vested Profits Interests that remain outstanding and eligible for vesting generally will vest upon a termination of employment without Cause or for Good Reason within 12 months following the occurrence of a Strategic Transaction. In addition, with respect to time vested Profits Interests granted to Mr. Singh on October 11, 2018 and May 26, 2016, if a Change in Control occurs within six months following a termination of Mr. Singh’s employment by CPG International LLC without Cause or by Mr. Singh for Good Reason, then all unvested time vested Profits Interests in effect immediately prior to such termination of employment will be treated as outstanding as of the Change in Control and vest immediately upon such Change in Control. With respect to Mr. Nicoletti’s time vested Profits Interests, a prorated portion will vest in connection with a termination of Mr. Nicoletti’s employment without Cause or for Good Reason and all of his time vested Profits Interests will vest if a Change in Control occurs within 180 days after the termination of his employment without Cause. Additionally, certain time vested Profits Interests that are scheduled to vest within a period of time after a termination of employment may vest on such termination.

Performance vested Profits Interests only vest upon a Change in Control to the extent that the performance criteria are met, as described in “Narrative Disclosure to Summary Compensation Table—Long-Term Incentives—Profits Interests” above. If the relevant performance criteria have not been met as of the earlier of a Change in Control and the tenth anniversary of the grant date, any unvested performance vested Profits Interests will be forfeited and cancelled. Upon a termination of employment without Cause or for Good Reason within 12 months following a Strategic Transaction (determined without regard to subpart (ii) of the definition of Change in Control), to the extent that the MoM Targets would have been satisfied had the fair value of any non-freely tradable and marketable securities received by the Sponsors in connection with the Strategic Transaction constituted Proceeds as of the date of such Strategic Transaction, the performance vested Profits Interests will remain outstanding and eligible to vest based upon the Sponsors’ future receipt of Proceeds. In addition, with respect to performance vested Profits Interests granted to Mr. Singh on October 11, 2018 and May 26, 2016, if a Change in Control occurs within six months following a termination of Mr. Singh’s employment by CPG International LLC without Cause or by Mr. Singh for Good Reason, then all unvested performance vested Profits Interests will be treated as outstanding as of the Change in Control and will be eligible to be earned as of the Change in Control based on achievement of the MoM Targets. Mr. Nicoletti will remain eligible to vest in any performance vested Profits Interests that satisfy the performance criteria described above if a Change in Control occurs within 180 days after the termination of his employment without Cause.

 

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Vested Profits Interests generally may be redeemed by the Partnership within six months following a termination of employment. In the event of a termination of employment due to an NEO’s resignation without Good Reason prior to the third anniversary of the date on which the Profits Interests were granted, or the termination of the NEO’s employment for Cause at any time, vested Profits Interests may be redeemed for no value. Good Reason and Cause as used in the preceding sentence have the meanings set forth in the executive’s employment agreement, or if none, then as set forth in the Partnership Agreement. In the event of a termination of employment for any other reason, including death or disability, vested Profits Interests may be redeemed for the fair market value, as determined in accordance with the Partnership Agreement.

All Profits Interests are subject to a clawback provision under which if a recipient willfully or intentionally materially breaches, or fails to correct a material breach of, any non-competition, non-solicitation or non-disclosure covenant to which he or she is subject, then such person will automatically forfeit any outstanding Profits Interests and repay any amounts distributed to him or her (other than certain minimum distributions to partners of the Partnership) within the 24 months prior to such breach.

Long-Term Cash Incentive

On October 11, 2018, Mr. Singh was granted a long-term cash incentive, subject to certain time and performance vesting conditions. See “Narrative Disclosure to Summary Compensation Table—Long-Term Incentives—Long-Term Cash Incentive”. In the event of a Change in Control or a termination of employment by CPG International LLC without Cause or by Mr. Singh for Good Reason within 12 months following the occurrence of a Strategic Transaction, any unvested portion of the long-term cash incentive that remains outstanding and eligible for vesting will immediately time-vest. In addition, if a Change in Control occurs within six months following a termination of Mr. Singh’s employment by CPG International LLC without Cause or by Mr. Singh for Good Reason, then any unvested portion of the long-term cash incentive immediately prior to such termination of employment will be treated as outstanding as of the Change in Control and will time-vest immediately upon such Change in Control and performance-vest upon satisfaction of the Performance Vesting Condition as described above.

Definitions

For Mr. Singh, “Cause” generally means (i) a conviction of a crime constituting fraud, embezzlement, a felony, or an act of moral turpitude, (ii) gross negligence, (iii) breach of the duty of loyalty or care that causes material injury to CPG International LLC, (iv) ongoing willful refusal or failure to perform duties or (v) material breach of any material written agreement with CPG International LLC. Good Reason generally means (i) a reduction in salary or target bonus, (ii) a material reduction in duties or authority, (iii) removal of position and responsibilities, (iv) failure to pay compensation under the employment agreement, (v) relocation by more than 35 miles or (vi) a material breach of the employment agreement, in each case provided that Mr. Singh has given CPG International LLC written notice of the termination within 90 days of the first date on which he has knowledge of such event or conduct and he has provided CPG International LLC with at least 30 days to cure (to the extent curable).

For Mr. Nicoletti, “Cause” generally means (i) commission of an act which constitutes common law fraud or embezzlement, (ii) indictment, conviction or plea of guilty or nolo contendere to a felony or crime involving moral turpitude, (iii) commission of any intentional tortious or intentional unlawful act in either case causing material harm to CPG International LLC’s (or any of its affiliates’) business, standing or reputation, (iv) gross negligence in performing his duties, (v) breach of the duty of loyalty or care, (vi) other misconduct that is materially detrimental to CPG International LLC or its affiliates, (vii) refusal or willful failure to perform Mr. Nicoletti’s duties or the deliberate and consistent refusal to conform to or follow any reasonable policy of CPG International LLC, in each case after receiving written notice from CPG International LLC of such non-compliance and being given 10 business days to cure (to the extent curable) such non-compliance, (viii) material breach of any material written agreement with CPG International LLC which breach is not cured (to the extent

 

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curable) within 10 business days after written notice from CPG International LLC, or (ix) Mr. Nicoletti’s death or disability resulting in his inability to continue to perform the essential functions of his job, with a reasonable accommodation. Good Reason generally means a termination by Mr. Nicoletti of his employment within 90 days following the occurrence of any of the following without his consent that remains uncured for 10 business days after receipt by CPG International LLC of written notice of such event by Mr. Nicoletti: (i) a material reduction in salary, (ii) a materially adverse change in title, duties or responsibilities (including reporting responsibilities), or (iii) relocation by more than 50 miles.

For Mr. Skelly’s Profits Interests, “Cause” (as defined in the Partnership Agreement) generally means (i) indictment, conviction or plea of guilty or nolo contendere to a felony or crime involving moral turpitude, fraud, theft, breach of trust or similar acts, (ii) breach of fiduciary duty, willful misconduct or gross negligence, (iii) willful failure to follow a reasonable and lawful directive or comply with written rules, regulations, policies or procedures that are reasonably expected to have more than a de minimis adverse effect on CPG International LLC, (iv) violation of any employment or similar agreement or any restrictive covenants or (v) deliberate and continued failure to perform material duties. “Cause” is not defined in Mr. Skelly’s offer letter.

A “Change in Control” is defined generally to occur upon the following events:

 

   

(i) any person or group other than an Excluded Entity (as defined below) becomes the beneficial owner of more than 50% of the common interests in the Partnership; (ii) any person or group other than an Excluded Entity becomes the beneficial owner of more than 50% of the voting power in any of CPG Holdco LLC, CPG Newco LLC or CPG International LLC (other than in connection with a public offering registered under the Securities Act), except in a Strategic Transaction (as defined below); or (iii) the sale of all or substantially all of the assets of CPG International LLC to a person or group other than an Excluded Entity, except in a Strategic Transaction; and

 

   

the Sponsors have sold or disposed of more than 65% of their aggregate common interests in the Partnership for cash or freely tradable and marketable securities.

A “Strategic Transaction” for this purpose is any strategic transaction, as determined by AOT Building Products GP Corp. in its sole discretion, in which the consideration received by the Partnership or its subsidiaries consists of the stock of another entity. An “Excluded Entity” for this purpose is any Sponsor, any management limited partner in the Partnership, their respective transferees or any employee benefit plan or trust of CPG International LLC.

Profits Interests Conversion

In connection with this offering, each outstanding Profits Interests award, including awards held by our NEOs, will be exchanged for a number of shares of our Class A common stock determined based the number of Profits Interests and the hurdle amount applicable to the Profits Interests. Profits Interests that are vested at the time of this offering will be exchanged for vested shares of our Class A common stock. Profits Interests that are unvested at the time of this offering will be exchanged for restricted shares of Class A common stock granted under our 2020 Plan, which will remain eligible to vest following this offering generally pursuant to the same time-based and performance-based vesting conditions as the Profits Interests for which they are exchanged, as applicable. The exchange of Profits Interests for shares of Class A common stock will not result in any accelerated vesting of the Profits Interests. See “Narrative Disclosure to Summary Compensation Table—Long-Term Incentives—Profits Interests” and “Additional Narrative Disclosures—Potential Payments Upon Termination, Change In Control or Strategic Transaction” for a description of the Profits Interests vesting terms.

 

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The following table sets forth an estimated number of vested shares of our common stock and unvested restricted shares of our common stock that each of our NEOs will receive upon conversion of their vested and unvested Profits Interests, in each case based on an assumed initial public offering price of $                per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus.

 

Name

   Shares of Class A
Common Stock
     Restricted Shares of
Class A Common Stock
 

Jesse Singh

     

Ralph Nicoletti

     

Jonathan Skelly

     

Upon the effectiveness of this offering, each current employee of CPG International LLC who receives shares in exchange for Profits Interests will be granted options to purchase shares of Class A common stock. This option grant is intended to restore to such holders the same leverage, or amount of equity at work, that the holder had with respect to Profits Interests prior to the exchange (for example, if 100 Profits Interests converted into 40 shares, the holder would be granted options to acquire 60 shares of our Class A common stock). The options will be granted pursuant to our 2020 Plan and have a per-share exercise price equal to the initial public offering price. The options awarded to each such holder will be vested or unvested in the same proportion as the corresponding Profits Interests award was vested and unvested immediately prior to this offering, and the unvested options will have the same time-based and performance-based vesting conditions as the original Profits Interests award.

The following table sets forth an estimated number of stock options that will be issued to our NEOs upon the closing of this offering, assuming an initial public offering price of $                 per share, the midpoint of the estimated offering price range set forth on the cover page of this prospectus.

 

Named Executive Officer

   Number of Options  

Jesse Singh

  

Ralph Nicoletti

  

Jonathan Skelly

  

IPO Long-Term Incentive Awards

In connection with this offering, we are adopting the 2020 Plan described below. Pursuant to that plan, we intend to grant each of our NEOs a stock option award and Mr. Skelly an additional award of restricted stock units to enhance their alignment with our shareholders following the offering. The options will vest ratably over four years beginning on the first anniversary of the grant and have a term of ten years and the restricted stock units will vest on the third anniversary of grant, each subject to continued employment, provided that any unvested awards scheduled to vest within the next 12 months will immediately vest in the event of the NEO’s death or disability or continue to vest in the event of the NEO’s involuntary termination without cause or resignation for good reason, subject to compliance with any applicable restrictive covenants. The awards will be granted with the following grant date fair values: Mr. Singh; $1,300,000, Mr. Nicoletti: $200,000; and Mr. Skelly: $750,000 in the form of options and $750,000 in the form of restricted stock units.

2020 Omnibus Incentive Compensation Plan

General

The board of directors of AOT Building Products GP Corp. has adopted the 2020 Omnibus Incentive Compensation Plan, or the 2020 Plan, which will be submitted to the Partnership’s stockholders for approval prior to the completion of this offering. We expect that the 2020 Plan will have the features described below.

Share Reserve

The number of shares of our Class A common stock available for issuance under our 2020 Plan will be                    shares, which may be shares that are authorized and unissued or shares that were reacquired by the

 

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Company, including treasury shares or shares purchased in the open market. Shares subject to an award under the 2020 Plan that expires, is forfeited or is settled in cash, and shares tendered or withheld in payment of taxes or an exercise price, will become available for future awards under the 2020 Plan. Shares of our Class A common stock subject to awards that are assumed, converted or substituted under the 2020 Plan as a result of our acquisition of another company will not count against the number of shares that may be granted under the 2020 Plan subject to stock exchange requirements. With respect to awards of stock-settled stock appreciation rights (SARs), the total number of shares that may be granted under the 2020 Plan will be reduced only by the number of shares actually delivered upon exercise of such award.

Administration

The 2020 Plan will be administered by the board of directors or the compensation committee or its delegates (collectively, the administrator). Subject to the terms of the 2020 Plan, the administrator will determine which employees, consultants and non-employee directors will receive awards under the 2020 Plan, the dates of grant, the number and types of awards to be granted, the exercise or purchase price of each award, and the terms and conditions of the awards, including the period of their exercisability and vesting and the fair market value applicable to a stock award. The following actions generally require approval by our stockholders: (i) reducing the exercise price of stock options or SARs issued and outstanding, (ii) amending or cancelling a stock option of SAR when the exercise price exceeds the fair market value of one share of common stock in exchange for a grant of a substitute award or repurchase for cash or other consideration, except in connection with certain corporate events and (iii) any other action that would be treated as a repricing under applicable stock exchange rules.

In addition, the administrator has the authority to determine whether any award may be settled in cash, shares of our common stock, other securities or other awards or property. The administrator has the authority to interpret the 2020 Plan and may adopt any administrative rules, regulations, procedures and guidelines governing the 2020 Plan or any awards granted under the 2020 Plan as it deems appropriate. The administrator may also delegate any of its powers, responsibilities or duties to any person who is not a member of the administrator or any administrative group within the company. Our Board of Directors may also grant awards under or administer the 2020 Plan.

Eligibility; Limits on Compensation to Non-Employee Directors

Employees, consultants and directors will be eligible to participate in our 2020 Plan. Under our 2020 Plan, no non-employee director of the company may be granted compensation for service as a director with a value in excess of $500,000 in any calendar year, with the value of any equity-based awards based on the accounting grant date value of such award. The independent members of the board of directors may make exceptions to this limit for a non-executive chair of the board of directors.

Minimum Vesting

Awards other than cash awards granted after this offering will be subject to a minimum vesting schedule of at least 12 months after the grant date. The following awards will not be subject to the minimum vesting requirement: (i) awards granted in connection with this offering, (ii) awards granted in connection with awards assumed or substituted in an acquisition or similar transaction, (iii) shares delivered in lieu of fully vested cash awards, (iv) awards to non-employee directors that vest on the earlier of the one-year anniversary of grant and the next annual meeting of shareholders and (v) up to 5% of the available share reserve under the 2020 Plan. The minimum vesting restriction does not apply to the administrator’s discretion to provide for accelerated vesting of an award, including in the event of retirement, death, disability or a change in control.

Types of Awards

The 2020 Plan provides for the grant of stock options intended to meet the requirements of “incentive stock options” under Section 422 of the Code and “non-qualified stock options” that do not meet those requirements,

 

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SARs, restricted stock, restricted stock units (RSUs), dividend equivalent rights and other equity-based, equity-related or cash-based awards (including performance-based awards).

All of the awards described above are subject to the conditions, limitations, restrictions, vesting and forfeiture provisions determined by the administrator, in its sole discretion, subject to certain limitations provided in the 2020 Plan. The administrator may condition the vesting of or the lapsing of any applicable vesting restrictions or conditions on awards upon the attainment of performance goals, continuation of service, or any other term or conditions. The vesting conditions placed on any award need not be the same with respect to each grantee and the administrator will have the sole discretion to amend any outstanding award to accelerate or waive any or all restrictions, vesting provisions or conditions set forth in an award agreement.

Each award granted under the 2020 Plan will be evidenced by an award agreement, which will govern that award’s terms and conditions. In the case of any conflict or potential inconsistency between the 2020 Plan and a provision of any award or award agreement with respect to an award, the 2020 Plan will govern.

Stock Options

An award of a stock option gives a grantee the right to purchase a certain number of shares of our Class A common stock during a specified term in the future, after a vesting period, at an exercise price equal to at least 100% of the fair market value of our common stock on the grant date. The term of a stock option may not exceed 10 years from the date of grant. Incentive stock options will be exercisable in any fiscal year only to the extent that the aggregate fair market value of our common stock with respect to which the incentive stock options are exercisable for the first time does not exceed $100,000. Incentive stock options may not be granted under the 2020 Plan after the tenth anniversary of the date of the board of director’s most recent approval. No incentive stock option may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of our total combined voting power or that of any of our affiliates unless (i) the option exercise price is at least 110% of the fair market value of the stock subject to the option on the date of grant and (ii) the term of the incentive stock option does not exceed five years from the date of grant. The exercise price of any stock option may be paid using cash, check or certified bank check; shares of our Class A common stock; a net exercise of the stock option; other legal consideration approved by the company and permitted by applicable law and any combination of the foregoing.

Stock Appreciation Rights

A SAR entitles the grantee to receive an amount equal to the difference between the fair market value of our common stock on the exercise date and the exercise price of the SAR (which may not be less than 100% of the fair market value of a share of our common stock on the grant date), multiplied by the number of shares subject to the SAR. The term of a SAR may not exceed 10 years from the date of grant. Payment to a grantee upon the exercise of a SAR may be either in cash, shares of our Class A common stock or other securities or property, or a combination of the foregoing, as determined by the administrator.

Restricted Stock

A restricted stock award is an award of outstanding shares of our Class A common stock that does not vest until a specified period of time has elapsed or other vesting conditions have been satisfied, as determined by the administrator, and which will be forfeited if the conditions to vesting are not met. The administrator will issue a certificate in respect to the shares of restricted stock, unless the administrator elects to use another system, such as book entries by the transfer agent, as evidencing ownership of such shares. During the period that any restrictions apply, the transfer of stock awards is generally prohibited. Grantees have full voting rights with respect to their restricted shares. Unless the administrator determines otherwise, all ordinary cash dividend payments or other ordinary distributions paid upon a restricted stock award will be retained by the company and will be paid to the relevant grantee (without interest) when the award of restricted shares vests and will revert

 

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back to the company if for any reason the restricted share upon which such dividends or other distributions were paid reverts back to the company.

Restricted Stock Units

An RSU is an award representing the right to receive, on the applicable delivery or payment date, one share of our common stock for each granted unit, cash or other securities or property equal in value to such share of common stock or a combination thereof that does not vest until a specified period of time has elapsed or other vesting conditions, including performance-based vesting conditions, have been satisfied, as determined by the administrator, and which will be forfeited if the conditions to vesting are not met. During the period that any restrictions apply, the transfer of RSUs is generally prohibited.

Dividend Equivalent Rights

Dividend equivalent rights entitle the grantee to receive amounts equal to all or any of the ordinary cash dividends that are paid on the shares underlying a grant while the grant is outstanding. Dividend equivalent rights may be paid in cash, in shares of our common stock or in another form. The administrator will determine the terms and conditions of dividend equivalent rights; however, in no event will such dividend equivalent rights be paid unless and until the award to which they relate vests.

Performance-Based and Other Stock-Based or Cash-Based Awards

Under the 2020 Plan, the administrator may grant other types of equity-based, equity-related or cash-based awards, including awards subject to performance-based criteria, subject to such terms and conditions that the administrator may determine. Such awards may include retainers and meeting-based fees for directors and the grant or offer for sale of unrestricted shares of our common stock, performance share awards and performance units settled in cash.

Adjustments

In connection with a recapitalization, stock split, reverse stock split, stock dividend, spinoff, split up, combination, reclassification or exchange of shares, merger, consolidation, rights offering, separation, reorganization or liquidation, or any other change in the corporate structure or shares, including any extraordinary dividend or extraordinary distribution, the administrator will make adjustments as it deems appropriate to (i) the maximum number of shares of our Class A common stock reserved for issuance, (ii) the number and kind of shares covered by outstanding grants, (iii) the kind of shares that may be issued under the 2020 Plan and (iv) the terms of any outstanding awards, including exercise or strike price, if applicable.

Amendment; Termination

Our board of directors may amend or terminate the 2020 Plan at any time, provided that no such amendment may materially adversely impair the rights of an award without the grantee’s consent. Our stockholders must approve any amendment to the extent required to comply with the Internal Revenue Code, applicable laws or applicable stock exchange requirements. Unless terminated sooner by our board of directors or extended with stockholder approval, the 2020 Plan will terminate on the day immediately preceding the tenth anniversary of the date on which our stockholder approved the 2020 Plan, but any outstanding award will remain in effect until the underlying shares are delivered or the award lapses.

Change in Control

Unless the administrator determines otherwise, or as otherwise provided in the applicable award agreement, if a participant’s employment is terminated by us without “cause” (as defined in the 2020 Plan) on or within two

 

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years after a change in control (as defined in the 2020 Plan), (i) all outstanding awards will become fully vested (including lapsing of all restrictions and conditions), and, as applicable, exercisable, with any outstanding performance-based awards deemed earned at target performance and (ii) any shares deliverable pursuant to RSUs will be delivered promptly following the termination.

In the event of a change in control, the administrator may (i) provide for the assumption of or the issuance of substitute awards, (ii) provide that for a period of at least 20 days prior to the change in control, stock options or SARs that would not otherwise become exercisable prior to a change in control will be exercisable as to all shares of common stock, as the case may be, subject thereto and that any stock options or SARs not exercised prior to the consummation of the change in control will terminate and be of no further force or effect as of the consummation of the change in control, (iii) modify the terms of awards to add events or conditions upon which the vesting of such awards will accelerate, (iv) deem any performance conditions satisfied at target, maximum or actual performance through closing or provide for the performance conditions to continue (as is or as adjusted by the administrator) after closing or (v) settle awards for an amount, as determined in the sole discretion of the administrator, of cash or securities (in the case of stock options and SARs that are settled in cash, the amount paid will be equal to the in-the-money spread value, if any, of such awards).

Clawback: Repayment If Conditions Not Met

All awards under the 2020 Plan will be subject to any clawback or recapture policy that we may adopt from time to time. If the administrator determines that terms of an award were not satisfied and the failure to satisfy the terms was material, then the grantee will be obligated to repay the fair market value of the shares issued or delivered in respect of the award or, in the case of options or SARs, the award’s spread value.

 

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DIRECTOR COMPENSATION

For the year ended September 30, 2019 and prior to the Corporate Conversion, as a member-managed limited liability company, our business and affairs were managed under the direction of the board of directors of AOT Building Products GP Corp. In connection with the Corporate Conversion, we will appoint certain directors to serve as members of our newly formed board of directors, as described above under “Management.” In connection with his service on the board of directors of AOT Building Products GP Corp. and as chair for the year ended September 30, 2019, Mr. Hendrickson was paid cash fees of $100,000. In connection with her service on the board of directors of AOT Building Products GP Corp and as chair of its Audit Committee, Ms. Bailey was entitled to receive cash fees of $75,000 per year. In connection with their service on the board of directors of AOT Building Products GP Corp. for the year ended September 30, 2019, each of Messrs. Lee, Pace and O’Meara was paid cash fees of $50,000, which amount was prorated for Mr. O’Meara to reflect the portion of the year in which he served.

Fiscal 2019 Director Compensation Table

The following table sets forth information regarding the compensation earned for service on the board of directors of AOT Building Products GP Corp. during the year ended September 30, 2019 by the directors who were not also NEOs. Mr. Singh did not receive any additional compensation for his service on the board of directors during the year ended September 30, 2019. Mr. Singh’s compensation for the year ended September 30, 2019 is set forth under “Executive Compensation—Summary Compensation Table” above.

 

Name

   Fees Earned for
Fiscal 2019 and
Paid in Cash
    Stock Awards(3)               Total          

Sallie Bailey(1)

   $ 75,000     $ 151,125      $ 226,125  

Russell Hammond

     —    (2)      —          —    

Gary Hendrickson

     100,000       —          100,000  

James B. Hirshorn

     —    (2)      —          —    

Brian Klos

     —    (2)      —          —    

Timothy Lee

     50,000       —          50,000 (4) 

Ronald A. Pace

     50,000       —          50,000  

Asfaq Qadri(1)

     —    (2)      —          —    

Bennett Rosenthal

     —    (2)      —          —    

Former Director

       

Kevin O’Meara(1)

     12,500       —          12,500  

 

(1)

Sallie Bailey was appointed to the board of directors in November 2018. Ashfaq Qadri was appointed to the board of directors in February 2019, at which time Mr. O’Meara ceased to serve on the board of directors.

(2)

Each of Messrs. Hammond, Hirshorn, Klos, Qadri and Rosenthal is affiliated with one of our Sponsors and was designated to the AOT Building Products GP Corp. board of directors by the respective Sponsor. These directors did not receive compensation from AOT Building Products GP Corp. for their service as a director.

(3)

For each non-management director, the aggregate number of Profits Interests held as of September 30, 2019 was as follows: Ms. Bailey: 200 time vested Profits Interests, which grant vests in equal installments on December 26, 2020, 2021, 2022, 2023 and 2024, and 200 performance vested Profits Interests; Mr. Hendrickson: 250 time vested Profits Interests, which grant vests in equal installments on June 14, 2018, 2019, 2020, 2021 and 2022, and 250 performance vested Profits Interests; each of Messrs. Lee and Pace: 155 time vested Profits Interests, which grants vest in equal installments on April 19, 2017, 2018, 2019, 2020 and 2021 for Mr. Lee and on December 3, 2015, 2016, 2017, 2018 and 2019 for Mr. Pace, and 155 performance vested Profits Interests; and Mr. O’Meara: 155 time vested Profits Interests, which grant vested in equal installments on December 13, 2014, 2015, 2016, 2017 and 2018. The performance vested Profits Interests vest upon the achievement of the performance conditions described above under “Executive Compensation—Narrative Disclosure to Summary Compensation Table—Long Term Incentives—Profits Interests” with respect to the Profits Interests granted to the NEOs. The treatment of the Profits Interests in connection with a Change in Control, a Strategic Transaction or a termination of service without Cause is described under “Executive Compensation—Additional Narrative Disclosures—Potential Payments Upon Termination, Change in Control or Strategic Transaction” with respect to the Profits Interests granted to the NEOs. Directors affiliated with our Sponsors did not hold any Profits Interests as of September 30, 2019. For a description of the assumptions used to determine the

 

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  compensation cost of these awards, see Note 11 to our Consolidated Financial Statements included elsewhere in this prospectus. No Profits Interests were granted to our non-management directors during the year ended September 30, 2019, other than the grant to Ms. Bailey as reflected in the table above.
(4)

Table does not include amounts paid by us and our affiliates to Hawksbill Consulting, of which Mr. Lee owns approximately 30% of the ownership interests. See “Certain Relationships and Related Party Transactions—Transactions with Directors and Officers.”

Post-Offering Director Compensation Program

In connection with this offering, we adopted a new director compensation program that will provide the following compensation for non-employee directors:

 

   

An annual cash retainer of $70,000, paid quarterly in arrears;

 

   

An annual equity award of RSUs granted in connection with each annual shareholders meeting with a grant date fair value of $105,000 that vests at the following annual shareholder meeting;

 

   

A one-time inaugural equity award of RSUs granted to newly appointed non-employee directors with a grant date fair value of $105,000 that cliff-vests on the third anniversary of grant;

 

   

An annual cash retainer of $20,000 for the chair of the audit committee, $15,000 for the chair of the compensation committee, and $10,000 for the chair of the nominating and governance committee, in each case paid quarterly in arrears; and

 

   

An additional annual cash retainer of $50,000 for serving as our non-executive chair, paid quarterly in arrears.

We also adopted director stock ownership guidelines that require each non-employee director to hold 100% of after-tax shares from director equity awards until the director holds shares and vested deferred stock units with an aggregate value equal to five times the annual cash retainer paid to non-employee directors.

IPO Director Awards

Following his experience as the former Chairman and CEO of Valspar Corporation, Mr. Hendrickson brings to our board of directors extensive experience in corporate leadership and in the development and execution of business growth strategies. In his role as chair of the board of directors of AOT Building Products GP Corp. since May 2017, Mr. Hendrickson has provided a significant level of counsel to the management team, specifically with respect to the development of the company’s commercial and retail strategy. He has also dedicated a significant amount of time in guiding the company in its preparation for its IPO. Following this offering, Mr. Hendrickson is expected to provide enhanced duties beyond those typically provided by a non-executive chair of a board of directors, including providing support, advice and counsel on special projects and guidance to our management team as the company transitions to a public company.

In recognition of his significant past and ongoing efforts supporting the company, the board of directors of AOT Building Products GP Corp. has approved the award of a one-time grant of options to purchase shares of our Class A common stock (the Chair IPO Award) to Mr. Hendrickson. Mr. Hendrickson and Mr. Singh abstained from the consideration and approval of the Chair IPO Award.

The Chair IPO Award will be granted immediately following the completion of this offering, subject to Mr. Hendrickson’s continued service on the board of directors of AOT Building Products GP Corp. through that date. The number of shares underlying the Chair IPO Award will equal 0.35% of our outstanding shares of common stock (on a fully diluted basis) on the completion of this offering, and will have an exercise price equal to the price at which a share of our Class A common stock is offered pursuant to this offering and a 10-year maximum term. The Chair IPO Award will vest in substantially equal installments on each of the first four anniversaries of the completion of this offering, subject to continued service as chair of our board of directors

 

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through such vesting date. In the event that Mr. Hendrickson ceases to serve as chair for any reason, any unvested options will be forfeited. Mr. Hendrickson has waived any fee for service as chair of our board of directors until the completion of the four-year vesting period as well as any inaugural award granted to other directors in connection with the IPO, but will receive regular board and committee retainers and annual equity awards for board service on the same basis as other non-employee directors. In order to ensure alignment with our investors, no portion of the Chair IPO Award is in the form of cash, and is instead in the form of options to tie to future value creation at the company.

We currently do not expect that Mr. Hendrickson will receive any additional compensation in future years for his service as non-executive chair outside of the regular annual director compensation program.

The other non-employee directors will receive their one-time inaugural award of RSUs, as described above, in connection with this offering with a grant date fair value of $105,000 that cliff vests on the third anniversary of grant subject to continued service (provided that the award will vest in the event that the director’s service on the board ceases due to disability or retirement and a prorated portion of the award will vest in the event that the director’s service on the board ceases absent a termination for cause).

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Stockholders Agreement

In connection with this offering, we intend to enter into the Stockholders Agreement with the Sponsors. Pursuant to the Stockholders Agreement, the Sponsors will be entitled to designate individuals to be included in the slate of nominees for election to our board of directors as follows:

 

   

for so long as the Sponsors collectively own 50% or more of the outstanding shares of our common stock, the greater of up to six directors and the number of directors comprising a majority of our board; and

 

   

except as provided below, for so long as the Sponsors collectively own less than 50% of the outstanding shares of our common stock, that number of directors (rounded up to the nearest whole number or, if such rounding would cause the Sponsors to have the right to elect a majority of our board of directors, rounded to the nearest whole number) that is the same percentage of the total number of directors comprising our board as the collective percentage of common stock owned by the Sponsors.

Each of the Sponsors will be entitled to nominate one-half of the nominees to be nominated unless (i) if the number of directors to be nominated is odd, in which case the Sponsors will jointly nominate one such director and each Sponsor will nominate one half of the remaining nominees, and (ii) if either Sponsor owns more than 5%, but less than or equal to 10%, of the outstanding shares of our common stock, in which case, one director will be nominated by such Sponsor, and the remaining nominees will be nominated by the other Sponsor.

Notwithstanding the foregoing, if either Sponsor at any time ceases to own more than 5% of the outstanding shares of our common stock, that Sponsor will not have the right to designate any directors, the shares of our common stock owned by that Sponsor will be excluded in calculating the thresholds above, and the rights set forth above will only be available to the Sponsor that holds the applicable percentage of shares of our common stock. The Stockholders Agreement will also provide for the nomination to our board of directors, subject to his or her election by our stockholders at the annual meeting, of our chief executive officer. Each Sponsor will agree, for so long as such Sponsor holds more than 5% of the outstanding shares of our common stock, to vote all of the shares of Class A common stock held by it in favor of the foregoing nominees.

The Stockholders Agreement will also provide that, for so long as the Sponsors collectively own at least 30% of the outstanding shares of our common stock, the following actions will require the prior written consent of each of the Sponsors, subject to certain exceptions. If either Sponsor owns less than 10% of the outstanding shares of our common stock, such action will not be subject to the approval of such Sponsor, and the shares of common stock owned by such Sponsor will be excluded in calculating the 30% threshold:

 

   

merging or consolidating with or into any other entity, or transferring all or substantially all of our assets, taken as a whole, to another entity, or undertaking any transaction that would constitute a “Change of Control” as defined in our debt agreements;

 

   

acquiring or disposing of assets, in a single transaction or a series of related transactions, or entering into joint ventures, in each case with a value in excess of $75.0 million;

 

   

incurring indebtedness in a single transaction or a series of related transactions in an aggregate principal amount in excess of $100.0 million;

 

   

issuing our or our subsidiaries’ equity other than pursuant to an equity compensation plan approved by our stockholders or a majority of the directors designated by the Sponsors;

 

   

terminating the employment of our chief executive officer or hiring or designating a new chief executive officer;

 

   

entering into any transactions, agreements, arrangements or payments with either of the Sponsors or any other person who owns greater than or equal to 10% of our common stock then outstanding that are material or involve aggregate payments or receipts in excess of $500,000;

 

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amending, modifying or waiving any provision of our organizational documents in a manner that adversely affects the Sponsors;

 

   

commencing any liquidation, dissolution or voluntary bankruptcy, administration, recapitalization or reorganization;

 

   

increasing or decreasing the size of our board of directors; and

 

   

entering into of any agreement to do any of the foregoing.

The Stockholders Agreement will also grant each of the Sponsors certain information rights.

Transactions with Directors, Officers and Shareholders

On October 12, 2018, we entered into a consulting arrangement with The Hawksbill Group for a term of six months. The Hawksbill Group is 30% owned by Mr. Tim Lee, a former member of our board of directors. Under the terms of the agreement, The Hawksbill Group was to provide advisory services regarding operations and maintenance activities. The consulting agreement was approved by the Chief Executive Officer and the former Chief Financial Officer. The monthly fee under the arrangement was less than $0.1 million per month, and the contract was canceled in June 2019 with fees totaling $0.5 million. Similar related party arrangements existed with The Hawksbill Group during the year ended September 30, 2018, and total fees expensed for the arrangement were $0.6 million. The amount payable to The Hawksbill Group as of September 30, 2019 and 2018 was $0.1 million.

Registration Rights Agreement

In connection with this offering, we intend to enter into a registration rights agreement, or the Registration Rights Agreement, with the Sponsors and certain members of our management. Subject to certain conditions, the Registration Rights Agreement will provide the Sponsors with up to four “demand” registrations each and unlimited “demand” registrations at any time we are eligible to register shares on Form S-3. The Registration Rights Agreement will also provide the Sponsors and certain members of our management with customary “piggyback” registration rights. The Registration Rights Agreement will contain provisions for the coordination by the Sponsors of their sales of shares of our common stock and will contain certain limitations on the ability of the members of our management party to the Registration Rights Agreement to offer, sell or otherwise dispose of shares of our common stock. The Registration Rights Agreement will also provide that we will pay certain expenses of these holders relating to such registrations and indemnify them against certain liabilities which may arise under the Securities Act.

Indemnification of Officers and Directors

Following completion of this offering, our certificate of incorporation and bylaws will provide that we will indemnify each of our directors and officers to the fullest extent permitted by Delaware law. In addition, we have entered, or will enter, into indemnification agreements with each of our directors and executive officers. See “Description of Capital Stock—Limitations of Liability, Indemnification and Advancement” below for more details.

Purchases of Products in the Ordinary Course of Business

Certain of our related persons may, either directly or through their respective affiliates, enter into commercial transactions with us from time to time in the ordinary course of business, primarily for the purchase of merchandise. We believe that none of the transactions with such persons is significant enough to be considered material to such persons or to us.

 

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Related Persons Transaction Policy

We have adopted formal written procedures for the review, approval or ratification of transactions with related persons, or the Related Persons Transaction Policy. The Related Persons Transaction Policy provides that the audit committee of our board of directors is charged with reviewing for approval or ratification all transactions with “related persons” (as defined in paragraph (a) of Item 404 of Regulation S-K) that are brought to the audit committee’s attention. This policy was adopted on January 24, 2020 and will take effect upon the effectiveness of our certificate of incorporation in connection with this offering, and as a result, certain of the transactions entered into prior to that date, including the transactions described under “Certain Relationships and Related Party Transactions—Transactions with Directors and Officers,” were not reviewed under the policy. We had a prior policy with respect to related party transactions that was adopted on February 21, 2019. We expect that the Related Persons Transaction Policy will remain in place following this offering.

We also maintain certain compensation agreements and other arrangements with certain of our executive officers, which are described under “Executive Compensation” elsewhere in this prospectus.

 

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PRINCIPAL STOCKHOLDERS

The following table sets forth the beneficial ownership of our common stock (i) as of                      and (ii) immediately following this offering, as adjusted to reflect the sale of                      shares of Class A common stock by us, in each case, by the following individuals or groups:

 

   

each of our directors;

 

   

each of our named executive officers;

 

   

all of our directors and executive officers as a group; and

 

   

each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our Class A common stock or Class B common stock.

The percentage ownership information shown in the table prior to this offering is based upon                      shares of Class A common stock and                      shares of Class B common stock outstanding as of                     , after giving effect to the Corporate Conversion and the distribution of Class A common stock and Class B common stock to the limited partners of the Partnership. The percentage ownership information shown in the table after this offering is based upon                      shares of Class A common stock and                      shares of Class B common stock outstanding as of                     , after giving effect to the sale of                      shares of Class A common stock by us in this offering and assuming no exercise of the underwriters’ option to purchase additional shares.

We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities, or have the right to acquire such powers within 60 days. Under these rules, more than one person may be deemed beneficial owner of the same securities and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options or warrants that are either immediately exercisable or exercisable on or before                     , 2020, which is 60 days after                     , 2020. These shares are deemed to be outstanding and beneficially owned by the person holding those options or warrants for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. The information contained in the following table is not necessarily indicative of beneficial ownership for any other purpose, and the inclusion of any shares in the table does not constitute an admission of beneficial ownership of those shares. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

 

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Except as otherwise noted below, the address for persons listed in the table is c/o The AZEK Company, 1330 W Fulton Street, Suite #350, Chicago, IL 60607.

 

    Shares Beneficially Owned
Prior to this Offering
    Shares Beneficially Owned
Following this Offering
 
    Class A     Class B     % of Total
Voting

Power
    Class A     Class B     % of Total
Voting

Power
 

Name of Beneficial Owner

  Shares     %     Shares     %     Shares     %     Shares     %  

Directors(1):

                                                                                                                                                                 

Gary Hendrickson

                   

Sallie B. Bailey

                   

Russell Hammond

                   

James B. Hirshorn

                   

Brian Klos

                   

Ronald A. Pace

                   

Ashfaq Qadri

                   

Bennett Rosenthal

                   

Blake Sumler

                   

Named Executive Officers:

                   

Jesse Singh

                   

Ralph Nicoletti

                   

Jonathan Skelly

                   

Directors and executive officers as a group

                   

5% or Greater Stockholders:

                   

Ares Corporate Opportunities Fund IV, L.P.(1)(2)

                   

Ontario Teachers’ Pension Plan Board(1)(3)

                   

 

*

Represents beneficial ownership of less than 1%.

(1)

As discussed in “Certain Relationships and Related Party Transactions—Stockholders Agreement,” prior to the closing of this offering, the Sponsors intend to enter into the Stockholders Agreement with us, pursuant to which the Sponsors will agree to vote their shares of Class A common stock in favor of the election of the nominees of the Sponsors to our board of directors.

(2)

Reflects shares owned by Ares Corporate Opportunities Fund IV, L.P., or Ares IV. The manager of Ares IV is ACOF Operating Manager IV, LLC, and the sole member of ACOF Operating Manager IV, LLC is Ares Management LLC. The sole member of Ares Management LLC is Ares Management Holdings, L.P., and the general partner of Ares Management Holdings, L.P. is Ares Holdco LLC. The sole member of Ares Holdco LLC is Ares Holdings Inc., whose sole stockholder is Ares Management Corporation. Ares Management Corporation is indirectly controlled by Ares Partners Holdco LLC. We refer to all of the foregoing entities collectively as the Ares Entities. Ares Partners Holdco LLC is managed by a board of managers, which is composed of Michael Arougheti, Ryan Berry, R. Kipp deVeer, David Kaplan, Michael McFerran, Antony Ressler and Bennett Rosenthal. Mr. Ressler generally has veto authority over decisions by the board of managers of Ares Partners Holdco LLC. Each of the members of the board of managers expressly disclaims beneficial ownership of our shares of stock of owned by Ares IV. Each of the Ares Entities (other than Ares IV, with respect to the securities owned by it) and the partners, members and managers of the Ares Entities and the executive committee of Ares Partners expressly disclaims beneficial ownership of these shares. The address of each Ares Entity is 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067.

(3)

Each of Blake Sumler, Ashfaq Qadri and Russell Hammond may be deemed to have the power to dispose of the shares held by OTPP because of a delegation of authority from the board of directors of OTPP, and each expressly disclaims beneficial ownership of such shares. As the owner of Class B common stock, OTPP may, at any time, elect to convert shares of Class B common stock into an equal number of shares of Class A common stock, or convert shares of Class A common stock into an equal number of shares of Class B common stock. The table above does not reflect (i) shares of Class B common stock issuable upon conversion of Class A common stock or (ii) shares of Class A common stock issuable upon conversion of Class B common stock. The address of Ontario Teachers’ Pension Plan Board is 5650 Yonge Street, Toronto, Ontario M2M 4H5.

 

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DESCRIPTION OF CERTAIN INDEBTEDNESS

The following is a summary of the material provisions relating to our material indebtedness. The following summary does not purport to be complete and is subject to, and qualified in its entirety by reference to, the provisions of the corresponding agreement or instrument, including the definitions of certain terms therein that are not otherwise defined in this prospectus. You should refer to the relevant agreement or instrument for additional information, copies of which are filed as exhibits to the Registration Statement of which this prospectus is a part.

Revolving Credit Agreement

Overview

On September 30, 2013, our subsidiary, CPG International LLC (as successor-in-interest to CPG Merger Sub LLC), Deutsche Bank AG New York Branch, as the Revolver Administrative Agent, and the lenders party thereto entered into the Revolving Credit Agreement. On March 9, 2017, the Revolving Credit Agreement was amended and restated, with the Revolving Credit Agreement thereafter providing for maximum aggregate borrowings of up to $150.0 million, subject to an asset-based borrowing base. The borrowing base is limited to a set percentage of eligible accounts receivable and inventory, less reserves that may be established by the Revolver Administrative Agent in the exercise of its reasonable credit judgment. As of December 31, 2019, September 30, 2019 and September 30, 2018, CPG International LLC had no outstanding borrowings under the Revolving Credit Agreement and had $3.0 million, $3.0 million and $3.1 million of outstanding letters of credit held against the Revolving Credit Agreement, respectively. CPG International LLC had approximately $113.7 million available under the borrowing base for future borrowings as of September 30, 2019. The Revolving Credit Agreement has a maturity of the earlier of (i) March 9, 2022 and (ii) 91 days prior to the maturity of the earlier of the Term Loan Credit Agreement and the Senior Notes.

Interest Rate and Fees

The Revolving Credit Agreement provides for outstanding principal thereunder to be subject to an interest rate which equals, at our option, either (i) for ABR borrowings, the highest of (a) the Federal Funds Rate plus 50 basis points, (b) the prime rate and (c) the LIBOR as of such date for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, plus, in each case, a spread of 50 to 100 basis points based on average historical availability, or (ii) for Eurocurrency borrowings, adjusted LIBOR plus a spread of 150 to 200 basis points, based on average historical availability. A “commitment fee” accrues on any unused portion of the commitments under the Revolving Credit Agreement during the preceding three calendar month period. If the average daily used percentage is greater than 50%, the commitment fee equals 25 basis points, and if the average daily used percentage is less than or equal to 50%, the commitment fee equals 37.5 basis points.

Guarantees and Security

The obligations under the Revolving Credit Agreement are guaranteed by CPG Newco LLC and its wholly owned domestic subsidiaries other than certain immaterial subsidiaries and other excluded subsidiaries. The obligations under the Revolving Credit Agreement are secured by a first priority security interest in the Revolver Priority Collateral, plus a second priority security interest in all of the Term Loan Priority Collateral.

Prepayments

The Revolving Credit Agreement may be voluntarily prepaid in whole, or in part, in each case without premium or penalty. The Borrower is also required to make mandatory prepayments (i) when aggregate borrowings exceed commitments or the applicable borrowing base and (ii) during “cash dominion,” which occurs if (A) the availability under the Revolving Credit Agreement is less than the greater of (i) $12.5 million and (ii) 10% of the lesser of (x) $150.0 million and (y) the borrowing base, for five consecutive business days or (B) certain events of default have occurred and are continuing.

 

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Restrictive Covenants and Other Matters

The Revolving Credit Agreement contains affirmative covenants that are customary for financings of this type, including allowing the Revolver Administrative Agent to perform periodic field exams and appraisals to evaluate the borrowing base. The Revolving Credit Agreement contains various negative covenants, including limitations on, subject to certain exceptions, the incurrence of indebtedness, the incurrence of liens, dispositions, investments, acquisitions, restricted payments, transactions with affiliates, as well as other negative covenants customary for financings of this type. The Revolving Credit Agreement also includes a financial maintenance covenant, applicable only when the excess availability is less than the greater of (i) 10% of the lesser of the aggregate commitments under the Revolving Credit Agreement and the borrowing base, and (ii) $12.5 million. In such circumstances, we would be required to maintain a minimum fixed charge coverage ratio for the trailing four quarters equal to at least 1.0 to 1.0; subject to our ability to make an equity cure (no more than twice in any four quarter period and up to five times over the life of the facility). As of December 31, 2019 and September 30, 2019, CPG International LLC was in compliance with the financial and nonfinancial covenants imposed by the Revolving Credit Agreement.

We also have the option to increase the commitments under the Revolving Credit Agreement by up to $100.0 million, subject to certain conditions.

The Revolving Credit Agreement also includes customary events of default, including the occurrence of a change of control.

Term Loan Credit Agreement

Overview

On September 30, 2013, CPG International LLC (as successor-in-interest to CPG Merger Sub LLC) and Barclays Bank PLC, as administrative agent and collateral agent, Deutsche Bank AG New York Branch and JPMorgan Chase Bank, N.A., as co-syndication agents, Citibank, N.A., the Royal Bank of Scotland PLC and UBS Securities LLC, as co-documentation agents, and the lenders party thereto entered into the first lien Term Loan Credit Agreement. Pursuant to the Second Amendment to the Term Loan Credit Agreement, dated May 5, 2017, Jefferies Finance LLC was appointed, and currently serves as, the administrative agent and collateral agent under the Term Loan Credit Agreement. As of December 31, 2019 and September 30, 2019, CPG International LLC had $806.5 million and $808.5 million, respectively, outstanding under the Term Loan Credit Agreement. The Term Loan Credit Agreement will mature on the earlier of (i) May 5, 2024 and (ii) 181 days prior to the maturity of the Senior Notes.

Interest Rate and Fees

The interest rate applicable to the outstanding principal under the Term Loan Credit Agreement equals, at our option, either, (i) in the case of ABR borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime rate and (c) the LIBOR as of such day for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, provided that in no event shall the ABR be less than 200 basis points, plus, in each case, the applicable margin of 275 basis points per annum; or (ii) in the case of the Eurocurrency borrowings, the greater of (a) the LIBOR in effect for such interest period divided by one, minus the statutory reserves applicable to such Eurocurrency borrowing, if any, and (b) 100 basis points, plus, in each case, the applicable margin of 375 basis points per annum.

Guarantees and Security

The obligations under the Term Loan Credit Agreement are guaranteed by CPG Newco LLC and its wholly owned domestic subsidiaries other than certain immaterial subsidiaries and other excluded subsidiaries. The obligations under the Term Loan Credit Agreement are secured by a first priority security interest in all of the Term Loan Priority Collateral, and a second priority security interest in the Revolver Priority Collateral.

 

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Prepayments

The Term Loan Credit Agreement may be voluntarily prepaid in whole, or in part, in each case without premium or penalty (other than the Prepayment Premium, as defined in the Term Loan Credit Agreement, if applicable), subject to certain customary conditions. CPG International LLC is also required to make mandatory prepayments in an amount equal to (i) 100% of the net cash proceeds from casualty events or the disposition of property or assets, subject to customary reinvestment rights, (ii) 100% of the net cash proceeds from the incurrence or issuance of indebtedness (other than permitted indebtedness) by CPG International LLC or any restricted subsidiary and (iii) 50% of excess cash flow, with such percentage subject to reduction (to 25% and to 0%) upon achievement of specified leverage ratios and which prepayment may be declined by the lenders under the Term Loan Credit Agreement. Additionally, CPG International LLC is required to pay the outstanding principal amount of the Term Loan Credit Agreement in quarterly installments of 0.25253% of the aggregate principal amount under the Term Loan Credit Agreement outstanding, and such quarterly payments may be reduced as a result of the application of prepayments.

Restrictive Covenants and Other Matters

The Term Loan Credit Agreement contains affirmative covenants, negative covenants, and events of default which are broadly consistent with those in the Revolving Credit Agreement (with certain differences consistent with the differences between a revolving loan and term loan) and that are customary for facilities of this type. The Term Loan Credit Agreement does not have any financial maintenance covenants. As of December 31, 2019 and September 30, 2019, CPG International LLC was in compliance with the covenants imposed by the Term Loan Credit Agreement.

We have the right to arrange for incremental term loans under the Term Loan Credit Agreement of up to an aggregate principal amount of $150.0 million, plus amounts incurred under Incremental Amendment No. 1 thereto, plus any amounts previously voluntarily prepaid, with additional incremental term loans available if certain leverage ratios are achieved.

The Term Loan Credit Agreement also includes customary events of default, including the occurrence of a change of control.

Senior Notes

Overview

On September 30, 2013, CPG International LLC (as successor-in-interest to CPG Merger Sub LLC) issued $315.0 million aggregate principal amount of 8.000% senior notes due October 1, 2021 in an unregistered offering. Interest on the Senior Notes is payable semi-annually in arrears. The obligations under the Senior Notes are guaranteed by CPG International LLC and those of its subsidiaries that also guarantee the Revolving Credit Agreement and the Term Loan Credit Agreement.

Ranking

The Senior Notes are unsecured obligations. Accordingly, they:

 

   

rank equal in right of payment with all of our other existing and future senior unsecured indebtedness;

 

   

rank senior in right of payment to all of our existing and future subordinated indebtedness;

 

   

are effectively subordinated in right of payment to all of our existing and future senior secured indebtedness and other obligations (including our obligations under the Revolving Credit Agreement and the Term Loan Credit Agreement) to the extent of the value of the collateral securing such indebtedness; and

 

   

are structurally subordinated to all obligations of each of our non-guarantor subsidiaries.

 

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As of December 31, 2019 and September 30, 2019, we had $806.5 million and $808.5 million, respectively, of outstanding secured indebtedness, including secured indebtedness under the Revolving Credit Agreement and the Term Loan Credit Agreement, and CPG International LLC had the ability to borrow up to approximately $113.70 million of additional secured indebtedness under the Revolving Credit Agreement.

Optional Redemption

At any time, CPG International LLC may redeem the Senior Notes in whole or in part, at par beginning on October 1, 2019.

Change of Control Offer

Pursuant to the indenture governing the Senior Notes, if CPG International LLC undergoes certain change of control transactions, CPG International LLC is required to offer to purchase all of the Senior Notes from holders thereof at an offer price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest.

Asset Sales

Pursuant to the indenture governing the Senior Notes, CPG International LLC is restricted in the types of asset sales that it can make. Subject to certain customary exceptions and limitations, proceeds of certain asset sales, to the extent not reinvested in our business or used to prepay other indebtedness, must be used to offer to repurchase the Senior Notes at their par value, plus accrued and unpaid interest.

Restrictive Covenants and Other Matters

Subject to certain customary exceptions, the indenture governing the Senior Notes limits CPG International LLC’s ability and the ability of certain of its subsidiaries to:

 

   

incur additional debt or issue certain types of equity securities;

 

   

make certain payments;

 

   

make certain investments;

 

   

sell or transfer certain assets;

 

   

create liens on certain assets to secure debt;

 

   

consolidate, merge, sell or otherwise dispose of all or substantially all of their assets; and

 

   

pay dividends on or make other distributions in respect of their capital stock or enter into certain transactions with affiliates.

The indenture governing the Senior Notes also includes events of default which, if any of them were to occur, would permit or require the principal, premium, if any, and accrued interest, if any, on the Senior Notes to become or be declared due and payable (subject, in some cases, to specified grace periods). As of December 31, 2019 and September 30, 2019, CPG International LLC was in compliance with the covenants imposed by the Senior Notes.

 

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DESCRIPTION OF CAPITAL STOCK

The following descriptions are summaries of our capital stock, certain provisions of our certificate of incorporation and bylaws, as each will be in effect upon the completion of this offering, and certain provisions of Delaware law. The description below reflects the completion of the Corporate Conversion. Please note that these summaries are not intended to be exhaustive. For further information, you should also refer to the full versions of our certificate of incorporation and the bylaws, which are filed as exhibits to the registration statement of which this prospectus is a part.

General

Upon the completion of this offering, our certificate of incorporation will provide for two classes of common stock: Class A common stock and Class B common stock. In addition, our certificate of incorporation will authorize shares of undesignated preferred stock, the rights, preferences and privileges of which may be designated from time to time by our board of directors.

Upon the completion of this offering, our authorized capital stock will consist of                      shares, all with a par value of $0.001 per share, of which                      shares will be designated as Class A common stock,                      shares will be designated as Class B common stock and                      shares will be designated as preferred stock.

As of                     , after giving effect to the Corporate Conversion, there were                      shares of our Class A common stock outstanding, held of record by                      stockholders and there were                      shares of our Class B common stock outstanding, held of record by one stockholder, OTPP. No shares of our preferred stock are designated, issued or outstanding.

Common Stock

Voting Rights

Each share of our Class A common stock entitles its holder to one vote per share on all matters to be voted upon by the stockholders. Each share of our Class B common stock entitles its holder to one vote per share on all matters to be voted upon by stockholders, except with respect to the election, removal or replacement of directors. Shares of our Class B common stock will not entitle the holders thereof to vote with respect to the election, removal or replacement of directors. There is no cumulative voting, which means that a holder or group of holders of more than 50% of the shares of our Class A common stock can elect all of our directors. For a description of the Stockholders Agreement, see “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

Dividend Rights

The holders of our Class A common stock and Class B common stock are entitled to receive, and will share ratably in, dividends when and as declared by our board of directors from legally available sources, subject to the prior rights of the holders of our preferred stock, if any. See “Dividend Policy.”

Conversion Rights

Holders of our shares of Class B common stock may convert their shares of Class B common stock into shares of our Class A common stock on a one-for-one basis, in whole or in part, at any time and from time to time at their option. Additionally, each share of Class A common stock is convertible into one share of Class B common stock at any time and from time to time at the option of the holder so long as such holder holds one or more shares of Class B common stock at the time of conversion. OTPP will hold all shares of our Class B common stock outstanding immediately following this offering.

 

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Preemptive or Similar Rights

Our Class A common stock and Class B common stock are not entitled to preemptive rights. The rights of the holders of our Class A common stock and Class B common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that our board of directors may designate and issue in the future.

Liquidation Rights

Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our Class A common stock and Class B common stock and any participating preferred stock outstanding at that time after payment of liquidation preferences, if any, on any outstanding shares of preferred stock and payment of claims of creditors.

Preferred Stock

Our board of directors is authorized to issue up to                      shares of our preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, to fix the designation, powers, preferences and rights of the shares of each series and any qualifications, limitations or restrictions thereof, in each case without further action by our stockholders. Subject to the terms of any series of preferred stock so designated, our board of directors is also authorized to increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding. Our board of directors may authorize the issuance of preferred stock with voting or conversion or other rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control and could adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. We have no current plan to issue any shares of preferred stock in the foreseeable future.

Anti-Takeover Provisions

Below are brief summaries of various anti-takeover provisions contained primarily in our organizational documents. We believe the benefits of these provisions, including increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure our company, outweigh the disadvantages of discouraging takeover proposals, because negotiation of takeover proposals could result in an improvement of their terms.

Anti-Takeover Statute

Our certificate of incorporation provides that we are not governed by Section 203 of the DGCL which, in the absence of such provisions, would have imposed additional requirements regarding mergers and other business combinations.

However, our certificate of incorporation, which will become effective on the consummation of this offering, will include a provision that restricts us from engaging in any business combination with an interested stockholder for three years following the date that person becomes an interested stockholder. These restrictions will not apply to any business combination involving our Sponsors or any affiliate of either of our Sponsors or their respective direct and indirect transferees, on the one hand, and us, on the other.

Additionally, we would be able to enter into a business combination with an interested stockholder if:

 

   

before that person became an interested stockholder, our board of directors approved the transaction in which the interested stockholder became an interested stockholder or approved the business combination;

 

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upon consummation of the transaction that resulted in the interested stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding 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) stock held by directors who are also officers of our Company and by employee stock plans that do not provide employees with the right to determine confidentially whether shares held under the plan will be tendered in a tender or exchange offer; or

 

   

following the transaction in which that person became an interested stockholder, the business combination is approved by our board of directors and authorized at a meeting of stockholders by the affirmative vote of the holders of at least 66 2/3% of our outstanding voting stock not owned by the interested stockholder.

In general, a “business combination” is defined to include mergers, asset sales and other transactions resulting in financial benefit to a stockholder and an “interested stockholder” is any person who, together with affiliates and associates, is the owner of 15% or more of our outstanding voting stock or is our affiliate or associate and was the owner of 15% or more of our outstanding voting stock at any time within the three-year period immediately before the date of determination. Under our certificate of incorporation, an “interested stockholder” generally does not include our Sponsors or any affiliate of either of our Sponsors or their respective direct and indirect transferees.

This provision of our certificate of incorporation could prohibit or delay mergers or other takeover or change in control attempts and, accordingly, may discourage attempts to acquire us even though such a transaction may offer our stockholders the opportunity to sell their stock at a price above the prevailing market price.

Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and Bylaws to Be in Effect Upon the Completion of This Offering

Undesignated Preferred Stock

As discussed above, subject to the terms of the Stockholders Agreement, our board of directors will have the ability to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire control of us. These and other provisions may have the effect of deterring hostile takeovers or delaying changes in control or management.

Action by Written Consent; Special Meetings of Stockholders

Our certificate of incorporation will provide that, from and after the Trigger Date, our stockholders may not act by written consent, which may lengthen the amount of time required to take stockholder actions. As a result, following the Trigger Date, a holder controlling a majority of our common stock would not be able to amend our bylaws or remove directors without holding a meeting of our stockholders called in accordance with our bylaws. In addition, our certificate of incorporation will provide that, from and after the Trigger Date, special meetings of the stockholders may be called only by the chairperson of our board of directors, our Chief Executive Officer or our board of directors. Following the Trigger Date, stockholders may not call a special meeting of stockholders, which may delay the ability of our stockholders to force consideration of a proposal or for holders controlling a majority of our common stock to take any action, including the removal of directors.

Advance Notice Procedures

Our bylaws will establish advance notice procedures with respect to stockholder proposals and stockholder nomination of candidates for election as directors. These provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

 

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Board Classification

Our certificate of incorporation, which will be in effect upon the completion of this offering, provides for a board of directors comprised of three classes of directors, with each class serving a three-year term beginning and ending in different years than those of the other two classes. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms. The classification of our board of directors and the limitations on the ability of our stockholders to remove directors without cause following the Trigger Date could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of us.

Removal of Directors; Vacancies

From and after the Trigger Date, directors may only be removed for cause by the affirmative vote of at least two-thirds of the voting power of our outstanding Class A common stock. Prior to the Trigger Date, directors may be removed with or without cause by the affirmative vote of at least a majority of the voting power of our outstanding Class A common stock. Except in the case of a vacancy arising with respect to a director designated by one of the Sponsors where such Sponsor continues to have a right of designation pursuant to the Stockholders Agreement, our board of directors has the sole power to fill any vacancy on our board of directors, whether such vacancy occurs as a result of an increase in the number of directors or otherwise.

No Cumulative Voting

Because our stockholders will not have cumulative voting rights, stockholders holding a majority of the voting power of the Class A common stock outstanding will be able to elect all of our directors. The absence of cumulative voting makes it more difficult for a minority stockholder to nominate and elect a director to our board of directors in order to influence our board of directors’ decision regarding a takeover or otherwise.

Amendment of Charter and Bylaw Provisions

Subject to the terms of the Stockholders Agreement, following the Trigger Date, the amendment of certain of the provisions of our certificate of incorporation described in this prospectus will require approval by holders of at least two-thirds of the voting power of our outstanding common stock. Subject to the terms of the Stockholders Agreement, our certificate of incorporation will provide that our board of directors may from time to time adopt, amend, alter or repeal our bylaws without stockholder approval. Subject to the terms of the Stockholders Agreement, the stockholders may adopt, amend, alter or repeal our bylaws by the affirmative vote of a majority of the voting power of our outstanding common stock (other than certain specified bylaws which, following the Trigger Date, will require the affirmative vote of two-thirds of our outstanding common stock).

In addition, following the completion of this offering, the Stockholders Agreement will provide that, for so long as the Sponsors collectively own at least 30% of the outstanding shares of our common stock, certain significant corporate actions will require the prior written consent of each of the Sponsors, subject to certain exceptions. If either Sponsor owns less than 5% of the outstanding shares of our common stock, such action will not be subject to the approval of such Sponsor and the shares of common stock owned by such Sponsor will be excluded in calculating the 30% threshold. See “Certain Relationships and Related Party Transactions—Stockholders Agreement.”

The combination of these provisions will make it more difficult for another party to obtain control of us by replacing our board of directors. Because our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for another party to effect a change in management.

These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage coercive takeover practices and inadequate takeover bids.

 

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These provisions are also designed to reduce our vulnerability to hostile takeovers and to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of delaying changes in our control or management.

Corporate Opportunity

Section 122(17) of the DGCL permits a corporation to renounce, in advance, in its certificate of incorporation or by action of its board of directors, any interest or expectancy of a corporation in certain classes or categories of business opportunities. Where business opportunities are so renounced, certain of our officers and directors will not be obligated to present any such business opportunities to us. Upon the completion of this offering, our certificate of incorporation will provide that, to the fullest extent permitted by law, no officer or director of ours who is also an officer, director, employee, managing director, or other affiliate of the Sponsors will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such individual directs a corporate opportunity to a Sponsor, as applicable, instead of us, or does not communicate information regarding a corporate opportunity to us that the officer, director, employee, managing director, or other affiliate has directed to such Sponsor, as applicable. This provision may not be modified without the written consent of the Sponsors until such time as neither Ares nor OTPP owns any of our outstanding shares of common stock.

Choice of Forum

Upon the completion of this offering, our certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a breach of fiduciary duty; (iii) any action asserting a claim against us arising under the DGCL; (iv) any action regarding our certificate of incorporation or our bylaws; or (v) any action asserting a claim against us that is governed by the internal affairs doctrine. This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the U.S. federal courts have exclusive jurisdiction. These provisions will provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of such exclusive-forum provision. 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 forum provisions in our certificate of incorporation. However, it is possible that a court could find our forum selection provisions to be inapplicable or unenforceable.

Limitations of Liability, Indemnification and Advancement

Upon the completion of this offering, our certificate of incorporation and bylaws will provide that we will indemnify and advance expenses to our directors and officers, and may indemnify and advance expenses to our employees and other agents, to the fullest extent permitted by Delaware law, which prohibits our certificate of incorporation from limiting the liability of our directors for the following:

 

   

any breach of the director’s duty of loyalty to us or to our stockholders;

 

   

acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

 

   

unlawful payment of dividends or unlawful stock repurchases or redemptions; and

 

   

any transaction from which the director derived an improper personal benefit.

If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted

 

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by Delaware law, as so amended. Our certificate of incorporation will not eliminate a director’s duty of care and, in appropriate circumstances, equitable remedies, such as injunctive or other forms of non-monetary relief, remain available under Delaware law. This provision also does not affect a director’s responsibilities under any other laws, such as the federal securities laws or other state or federal laws. Under our certificate of incorporation and bylaws, we will also be empowered to purchase insurance on behalf of any person whom we are required or permitted to indemnify.

In addition to the indemnification and advancement of expenses required in our certificate of incorporation and bylaws, we intend to enter into indemnification agreements with each of our current directors and executive officers. These agreements will provide for the indemnification of, and the advancement of expenses to, such persons for all reasonable expenses and liabilities, including attorneys’ fees, judgments, fines and settlement amounts, incurred in connection with any action or proceeding brought against them by reason of the fact that they are or were serving in such capacity. We believe that these charter and bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors’ and officers’ liability insurance.

The limitation of liability, indemnification and advancement provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification or advancement by any director or officer.

Transfer Agent and Registrar

The transfer agent and registrar for our Class A common stock and Class B common stock is                     . The transfer agent’s address is                     .

Listing

We have applied to have our Class A common stock approved for listing on the NYSE under the symbol “AZEK”.

 

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, no public market existed for our capital stock. Future sales of substantial amounts of Class A common stock in the public market, the availability of shares for future sale or the perception that such sales may occur, could adversely affect the market price of our Class A common stock and/or impair our ability to raise equity capital.

Upon the completion of the Corporate Conversion and this offering,                      shares of our Class A common stock and                      shares of our Class B common stock will be outstanding, or                      shares of Class A common stock and                      shares of our Class B common stock if the underwriters exercise their option to purchase additional shares from us in full.

All of the shares of Class A common stock sold in this offering will be freely tradable without restrictions or further registration under the Securities Act, except for any shares sold to our “affiliates,” as defined in Rule 144 under the Securities Act, or Rule 144. The outstanding shares of our common stock held by existing stockholders are “restricted securities,” as defined in Rule 144. Restricted securities may be sold in the public market only if the offer and sale is registered under the Securities Act or if the offer and sale of those securities qualifies for exemption from registration, including exemptions provided by Rule 144 or Rule 701 under the Securities Act, or Rule 701.

As a result of lock-up agreements described below and the provisions of Rules 144 and 701, shares of our common stock will be available for sale in the public market as follows:

 

   

                     shares of our Class A common stock will be eligible for immediate sale upon the completion of this offering; and

 

   

approximately                      shares of Class A common stock and                      shares of our Class B common stock, upon conversion into shares of Class A common stock, will be eligible for sale upon expiration of lock-up agreements described below, beginning 181 days after the date of this prospectus, subject in certain circumstances to the volume, manner of sale and other limitations under Rules 144 and 701.

We may issue shares of our capital stock from time to time for a variety of corporate purposes, including in capital-raising activities through future public offerings or private placements, in connection with the exercise of stock options and warrants, vesting of RSUs and other issuances relating to our employee benefit plans and as consideration for future acquisitions, investments or other purposes. The number of shares of our capital stock that we may issue may be significant, depending on the events surrounding such issuances. In some cases, the shares we issue may be freely tradable without restriction or further registration under the Securities Act; in other cases, we may grant registration rights covering the shares issued in connection with these issuances, in which case the holders of the shares will have the right, under certain circumstances, to cause us to register any resale of such shares to the public.

Rule 144

In general, persons who have beneficially owned restricted shares of our common stock for at least six months, and any affiliate of ours who owns either restricted or unrestricted shares of our common stock, are entitled to sell their securities without registration with the SEC under an exemption from registration provided by Rule 144.

Non-Affiliates

Any person who is not deemed to have been one of our affiliates at the time of, or at any time during the three months preceding, a sale may sell an unlimited number of restricted securities under Rule 144 if:

 

   

the restricted securities have been held for at least six months, including the holding period of any prior owner other than one of our affiliates;

 

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we have been subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale; and

 

   

we are current in our Exchange Act reporting at the time of sale.

Any person who is not deemed to have been an affiliate of ours at the time of, or at any time during the three months preceding, a sale and has held the restricted securities for at least one year, including the holding period of any prior owner other than one of our affiliates, will be entitled to sell an unlimited number of restricted securities without regard to the length of time we have been subject to Exchange Act periodic reporting or whether we are current in our Exchange Act reporting.

Affiliates

Persons seeking to sell restricted securities who are our affiliates at the time of, or any time during the three months preceding, a sale would be subject to the restrictions described above. Sales of restricted or unrestricted shares of our common stock by affiliates are also subject to additional restrictions, by which such person would be required to comply with the manner of sale and notice provisions of Rule 144 and would be entitled to sell within any three-month period only that number of securities that does not exceed the greater of either of the following:

 

   

1% of the number of shares of our Class A common stock then outstanding, which will equal approximately                      shares immediately following the completion of this offering (or                      shares if the underwriters exercise their option to purchase additional shares in full); or

 

   

the average weekly trading volume of our Class A common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Rule 701

In general, under Rule 701, a person who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been one of our affiliates during the immediately preceding 90 days may sell these shares in reliance upon Rule 144, but without being required to comply with the holding period, notice, manner of sale, public information requirements or volume limitation provisions of Rule 144. Rule 701 also permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. All holders of Rule 701 shares, however, are required to wait until 90 days after the date of this prospectus before selling such shares pursuant to Rule 701, subject to the expiration of the lock-up agreements described below.

Lock-Up Agreements

In connection with this offering, we and our officers, directors and holders of substantially all of our common stock and securities convertible into or exercisable for our common stock, including the Sponsors, have agreed, or will agree, with the underwriters that, until 180 days after the date of this prospectus, we and they will not, without the prior written consent of Barclays Capital Inc. and BofA Securities, Inc. on behalf of the underwriters, offer, sell or transfer any of our shares of common stock or securities convertible into or exchangeable for our common stock.

The agreements do not contain any pre-established conditions to the waiver by Barclays Capital Inc. and BofA Securities, Inc. on behalf of the underwriters of any terms of the lock-up agreements. Any determination to release shares subject to the lock-up agreements would be based on a number of factors at the time of determination, including but not necessarily limited to the market price of the Class A common stock, the liquidity of the trading market for the Class A common stock, general market conditions, the number of shares proposed to be sold and the timing, purpose and terms of the proposed sale.

 

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In addition to the restrictions contained in the lock-up agreements described above, we have entered into agreements with certain of our security holders, including our stockholders agreement and agreements governing our equity awards, that contain market stand-off provisions imposing restrictions on the ability of such security holders to offer, sell or transfer our equity securities for a period of 180 days following the date of this prospectus.

Registration Rights

Following the completion of this offering, under the Registration Rights Agreement, subject to certain conditions, the Sponsors will each have up to four “demand” registrations and unlimited demand registrations at any time we are eligible to register shares on Form S-3. The Sponsors and certain members of our management will also have customary “piggy-back” registration rights. The Registration Rights Agreement will also provide that we will pay certain expenses of these holders relating to such registrations and indemnify them against certain liabilities which may arise under the Securities Act. Following completion of this offering, the shares covered by such registration rights would represent approximately              of our outstanding common stock (or approximately              of our outstanding common stock if the underwriters exercise their option to purchase additional shares in full). These shares also may be sold under Rule 144, depending on their holding period and subject to restrictions in the case of shares held by persons deemed to be our affiliates. For a description of the rights that the Sponsors and certain members of management will have to require us to register shares of common stock they own, see “Certain Relationships and Related Party Transactions — Registration Rights Agreement.”

 

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MATERIAL U.S. TAX CONSEQUENCES

TO NON-U.S. HOLDERS OF COMMON STOCK

This section summarizes certain U.S. federal income and estate tax consequences of the purchase, ownership and disposition of common stock by a non-U.S. holder. You are a non-U.S. holder if you are, for U.S. federal income tax purposes:

 

   

a nonresident alien individual;

 

   

a foreign corporation; or

 

   

an estate or trust that in either case is not subject to U.S. federal income tax on a net income basis on income or gain from common stock.

This section does not consider the specific facts and circumstances that may be relevant to a particular non-U.S. holder and does not address the treatment of a non-U.S. holder under the laws of any state, local or foreign taxing jurisdiction. This section is based on the tax laws of the United States, including the Code, existing and proposed regulations, and administrative and judicial interpretations, all as currently in effect. These laws are subject to change, possibly on a retroactive basis. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below.

If an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes holds our common stock, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding Class A common stock should consult its tax advisor with regard to the U.S. federal income tax treatment of an investment in, and disposition of, the Class A common stock.

You should consult a tax advisor regarding the U.S. federal tax consequences of acquiring, holding and disposing of the Class A common stock in your particular circumstances, as well as any tax consequences that may arise under the laws of any state, local or foreign taxing jurisdiction.

Dividends

If we make a distribution of cash or other property (other than certain distributions of our stock) in respect of our common stock, the distribution generally will be treated as a dividend to the extent of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Any portion of a distribution that exceeds our current and accumulated earnings and profits will generally be treated first as a tax-free return of capital, on a share-by-share basis, to the extent of your tax basis in our Class A common stock (and will reduce your basis in such Class A common stock), and, to the extent such portion exceeds your tax basis in our Class A common stock, the excess will be treated as gain from the taxable disposition of our common stock, the tax treatment of which is discussed below under “Sale or Other Disposition of Class A Common Stock.”

Except as described below, if you are a non-U.S. holder of common stock, dividends paid to you are subject to withholding of U.S. federal income tax at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate. Even if you are eligible for a lower treaty rate, we and other payors will generally be required to withhold at a 30% rate (rather than the lower treaty rate) on dividend payments to you, unless you have furnished to us or another payor:

 

   

a valid IRS Form W-8 or an acceptable substitute form upon which you certify, under penalties of perjury, your status as a non-U.S. person and your entitlement to the lower treaty rate with respect to such payments; or

 

   

in the case of payments made outside the United States to an offshore account (generally, an account maintained by you at an office or branch of a bank or other financial institution at any location outside

 

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the United States), other documentary evidence establishing your entitlement to the lower treaty rate in accordance with U.S. Treasury regulations.

If you do not timely furnish the required documentation, but you are eligible for a reduced rate of U.S. withholding tax under a tax treaty, you may obtain a refund of any amounts withheld in excess of that rate by filing a refund claim with the U.S. IRS.

If dividends paid to you are “effectively connected” with your conduct of a trade or business within the United States, and, if required by a tax treaty, the dividends are attributable to a permanent establishment that you maintain in the United States, we and other payors generally are not required to withhold tax from the dividends, provided that you have furnished to us or another payor a valid IRS Form W-8ECI or an acceptable substitute form upon which you represent, under penalties of perjury, that:

 

   

you are a non-U.S. person; and

 

   

the dividends are effectively connected with your conduct of a trade or business within the United States and are includible in your gross income.

“Effectively connected” dividends are taxed at rates applicable to U.S. citizens, resident aliens and domestic U.S. corporations.

If you are a corporate non-U.S. holder, “effectively connected” dividends that you receive may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate.

Sale or Other Disposition of Class A Common Stock

If you are a non-U.S. holder, you generally will not be subject to U.S. federal income tax on gain that you recognize on a disposition of Class A common stock unless:

 

   

the gain is “effectively connected” with your conduct of a trade or business in the United States (and the gain is attributable to a permanent establishment that you maintain in the United States, if that is required by an applicable income tax treaty as a condition for subjecting you to U.S. taxation on a net income basis);

 

   

you are an individual, you hold Class A common stock as a capital asset, you are present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist; or

 

   

we are or have been a “U.S. real property holding corporation” (as described below) at any time within the five-year period preceding the disposition or your holding period, whichever period is shorter, you are not eligible for a treaty exemption, and either (i) our Class A common stock is not regularly traded on an established securities market during the calendar year in which the sale or disposition occurs or (ii) you owned or are deemed to have owned, at any time within the five-year period preceding the disposition or your holding period, whichever period is shorter, more than 5% of our Class A common stock.

If you are a non-U.S. holder and the gain from the taxable disposition of shares of our Class A common stock is effectively connected with your conduct of a trade or business in the United States (and, if required by a tax treaty, the gain is attributable to a permanent establishment that you maintain in the United States), you will be subject to tax on the net gain derived from the sale at rates applicable to U.S. citizens, resident aliens and domestic U.S. corporations. If you are a corporate non-U.S. holder, “effectively connected” gains that you recognize may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or at a lower rate if you are eligible for the benefits of an income tax treaty that provides for a lower rate. If you are an individual non-U.S. holder described in the second bullet point immediately above, you will be subject to a flat 30% tax (unless an applicable income tax treaty provides otherwise) on the gain derived from the sale, which may be offset by U.S. source capital losses, even though you are not considered a resident of the United States.

 

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We will be a U.S. real property holding corporation at any time that the fair market value of our “U.S. real property interests,” as defined in the Code and applicable Treasury Regulations, equals or exceeds 50% of the aggregate fair market value of our worldwide real property interests and our other assets used or held for use in a trade or business (all as determined for the U.S. federal income tax purposes). We believe that we are not, and do not anticipate becoming in the foreseeable future, a U.S. real property holding corporation.

FATCA Withholding

Pursuant to sections 1471 through 1474 of the Code, commonly known as the Foreign Account Tax Compliance Act, or the FATCA, a 30% withholding tax, which we refer to as FATCA withholding, may be imposed on certain payments to you or to certain foreign financial institutions, investment funds and other non-US persons receiving payments on your behalf if you or such persons fail to comply with certain information reporting requirements. Payments of dividends that you receive in respect of Class A common stock could be affected by this withholding if you are subject to the FATCA information reporting requirements and fail to comply with them or if you hold Class A common stock through a non-US person (e.g., a foreign bank or broker) that fails to comply with these requirements (even if payments to you would not otherwise have been subject to FATCA withholding). You should consult your own tax advisors regarding the relevant U.S. law and other official guidance on FATCA withholding.

While withholding under FATCA would have applied to payments of gross proceeds from the sale or other disposition of stock on or after January 1, 2019, recently proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our Class A common stock.

Federal Estate Taxes

Class A common stock held by a non-U.S. holder at the time of death will be included in the holder’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

Backup Withholding and Information Reporting

If you are a non-U.S. holder, we and other payors are required to report payments of dividends on IRS Form 1042-S even if the payments are exempt from withholding. You are otherwise generally exempt from backup withholding and information reporting requirements with respect to dividend payments and the payment of the proceeds from the sale of Class A common stock effected at a U.S. office of a broker provided that either (i) the payor or broker does not have actual knowledge or reason to know that you are a U.S. person and you have furnished a valid IRS Form W-8 or other documentation upon which the payor or broker may rely to treat the payments as made to a non-U.S. person, or (ii) you otherwise establish an exemption.

Payment of the proceeds from the sale of Class A common stock effected at a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, a sale effected at a foreign office of a broker could be subject to information reporting in the same manner as a sale within the United States (and in certain cases may be subject to backup withholding as well) if (i) the broker has certain connections to the United States, (ii) the proceeds or confirmation are sent to the United States or (iii) the sale has certain other specified connections with the United States.

 

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UNDERWRITING

Barclays Capital Inc., BofA Securities, Inc., Goldman Sachs & Co. LLC and Jefferies LLC are acting as representatives of the underwriters and book-running managers of this offering. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase from us the respective number of common stock shown opposite its name below:

 

Underwriters

   Number of
Shares
 

Barclays Capital Inc.

                           

BofA Securities, Inc

  

Goldman Sachs & Co. LLC

  

Jefferies LLC

  

Citigroup Global Markets Inc.

  

Credit Suisse Securities (USA) LLC

  

Deutsche Bank Securities Inc.

  

RBC Capital Markets, LLC

  

B. Riley FBR, Inc.

  

Robert W. Baird & Co. Incorporated

  

Stephens Inc.

  

Stifel, Nicolaus & Company, Incorporated

  

SunTrust Robinson Humphrey, Inc.

  

William Blair & Company, L.L.C.

  
  

 

 

 

Total

  
  

 

 

 

The underwriting agreement provides that the underwriters’ obligation to purchase shares of common stock depends on the satisfaction of the conditions contained in the underwriting agreement, including:

 

   

the obligation to purchase all of the shares of common stock offered hereby (other than those shares of common stock covered by their option to purchase additional shares as described below), if any of the shares are purchased;

 

   

the representations and warranties made by us to the underwriters are true;

 

   

there is no material change in our business or the financial markets; and

 

   

we deliver customary closing documents to the underwriters.

The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel, including the validity of the shares, and other conditions contained in the underwriting agreement, such as the receipt by the underwriters of officers’ certificates and legal opinions. The underwriters reserve the right to withdraw, cancel, or modify offers to the public and to reject orders in whole or in part.

Commissions and Expenses

The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares. The underwriting fee is the difference between the initial price to the public and the amount the underwriters pay to us for the shares.

 

     Company  
     No Exercise      Full Exercise  

Per Share

                                                       

Total

     

 

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The representatives have advised us that the underwriters propose to offer the shares of common stock directly to the public at the public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a selling concession not in excess of $                     per share. If all the shares are not sold at the initial offering price following the initial offering, the representatives may change the offering price and other selling terms.

The expenses of the offering that are payable by us are estimated to be approximately $                     (excluding underwriting discounts and commissions). We have agreed to reimburse the underwriters for certain of their expenses in an amount up to $                    .

Option to Purchase Additional Shares

We have granted the underwriters an option exercisable for 30 days after the date of this prospectus to purchase, from time to time, in whole or in part, up to an aggregate of                      shares from us at the public offering price less underwriting discounts and commissions. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion of these additional shares based on the underwriter’s percentage underwriting commitment in the offering as indicated in the table at the beginning of this section.

Lock-Up Agreements

We, all of our directors and executive officers, holders of more than                     % of our outstanding stock and                      have agreed, subject to certain exceptions, that, for a period of 180 days after the date of this prospectus, subject to certain limited exceptions as described below, we and they will not directly or indirectly, without the prior written consent of Barclays Capital Inc. and BofA Securities, Inc., (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of common stock (including, without limitation, shares of common stock that may be deemed to be beneficially owned by us or them in accordance with the rules and regulations of the SEC and shares of common stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for common stock (other than the stock and shares issued pursuant to employee benefit plans, qualified stock option plans, or other employee compensation plans existing on the date of this prospectus or pursuant to currently outstanding options, warrants or rights not issued under one of those plans), or sell, purchase or grant options, rights or warrants with respect to any shares of common stock or securities convertible into or exchangeable for common stock (other than the grant of options pursuant to option plans existing on the date of this prospectus), (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of common stock or other securities, in cash or otherwise, (3) make any demand for or exercise any right or file or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible, exercisable or exchangeable into common stock or any of our other securities (other than any registration statement on Form S-8), or (4) publicly disclose the intention to do any of the foregoing.

The restrictions above do not apply to: (a) transactions relating to shares of common stock or other securities acquired in the open market after the completion of this offering, (b) bona fide gifts, sales or other dispositions of shares of any class of our capital stock, in each case that are made exclusively between and among a stockholder or members of a stockholder’s family, or affiliates of a stockholder, including its partners (if a partnership) or members (if a limited liability company); provided that it will be a condition to any transfer described in this clause (b) that (i) the transferee/donee agrees to be bound by the terms of the lock-up agreement to the same extent as if the transferee/donee were a party thereto, (ii) each party (donor, donee, transferor or transferee) will not be required by law to make, and will agree to not voluntarily make, any filing or public

 

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announcement of the transfer or disposition prior to the expiration of the 180-day period referred to above, and (iii) the stockholder notifies Barclays Capital Inc. and BofA Securities, Inc. at least two business days prior to the proposed transfer or disposition, (c) the exercise of warrants or the exercise of stock options granted pursuant to our stock option/incentive plans or otherwise outstanding on the date of this prospectus; provided, that the restrictions will apply to shares of common stock issued upon such exercise or conversion, (d) the establishment of any contract, instruction or plan that satisfies all of the requirements of Rule 10b5-1, which we refer to as a Rule 10b5-1 Plan, under the Exchange Act; provided, however, that no sales of common stock or securities convertible into, or exchangeable or exercisable for, common stock, will be made pursuant to a Rule 10b5-1 Plan prior to the expiration of the lock-up period (as the same may be extended); provided further, that we are not required to report the establishment of such Rule 10b5-1 Plan in any public report or filing with the SEC under the Exchange Act during the lock-up period and do not otherwise voluntarily effect any such public filing or report regarding such Rule 10b5-1 Plan, and (e) any demands or requests for, exercise any right with respect to, or take any action in preparation of, the registration by us under the Securities Act of the stockholder’s shares of common stock, provided that no transfer of a stockholder’s shares of common stock registered pursuant to the exercise of any such right and no registration statement will be filed under the Securities Act with respect to any of the stockholder’s shares of common stock during the lock-up period.

Barclays Capital Inc. and BofA Securities, Inc., together in their sole discretion, may release our common stock and other securities subject to the lock-up agreements described above in whole or in part at any time. When determining whether or not to release common stock and other securities from lock-up agreements, Barclays Capital Inc. and BofA Securities, Inc. will consider, among other factors, the holder’s reasons for requesting the release, the number of shares of common stock and other securities for which the release is being requested and market conditions at the time. At least three business days before the effectiveness of any release or waiver of any of the restrictions described above with respect to our officers or directors, Barclays Capital Inc. and BofA Securities, Inc. will notify us of the impending release or waiver and we have agreed to announce the impending release or waiver by press release through a major news service at least two business days before the effective date of the release or waiver, except where the release or waiver is effected solely to permit a transfer of common stock that is not for consideration and where the transferee has agreed in writing to be bound by the same terms as the lock-up agreements described above to the extent and for the duration that such terms remain in effect at the time of transfer.

Offering Price Determination

Prior to this offering, there has been no public market for our common stock. The initial public offering price was negotiated between the representatives and us. In determining the initial public offering price of our common stock, the representatives considered:

 

   

our history and prospects and the industry in which we compete;

 

   

our financial information;

 

   

the ability of our management and our business potential and earning prospects;

 

   

the prevailing securities markets at the time of this offering; and

 

   

the recent market prices of, and the demand for, publicly traded shares of generally comparable companies.

An active trading market for the shares may not develop. It is also possible that after this offering the shares will not trade in the public market at or above the initial public offering price.

Indemnification

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make for these liabilities.

 

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Stabilization, Short Positions and Penalty Bids

The representatives may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of our common stock, in accordance with Regulation M under the Exchange Act:

 

   

Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.

 

   

A short position involves a sale by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a naked short position. In a covered short position, the number of shares involved in the sales made by the underwriters in excess of the number of shares they are obligated to purchase is not greater than the number of shares that they may purchase by exercising their option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in their option to purchase additional shares. The underwriters may close out any short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market. In determining the source of shares to close out the 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 shares through their option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.

 

   

Syndicate covering transactions involve purchases of our common stock in the open market after the distribution has been completed in order to cover syndicate short positions.

 

   

Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when our common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the                      or otherwise and, if commenced, may be discontinued at any time.

Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Electronic Distribution

A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of shares for sale to online brokerage account holders. Any such allocation for online distributions will be made by the representatives on the same basis as other allocations.

Other than the prospectus in electronic format, the information on any underwriter’s or selling group member’s web site and any information contained in any other web site maintained by an underwriter or selling

 

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group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

Listing on the

Our common stock has been approved for listing on the                      under the symbol “                    ”.

Stamp Taxes

If you purchase shares of common stock offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.

Discretionary Sales

The underwriters have informed us that they do not expect to sell more than 5% of our common stock in the aggregate to accounts over which they exercise discretionary authority.

Other Relationships

The underwriters and certain of their affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The underwriters and certain of their affiliates have, from time to time, performed, and may in the future perform, various commercial and investment banking and financial advisory services for the issuer and its affiliates, for which they received or may in the future receive customary fees and expenses.

In the ordinary course of their various business activities, the underwriters and certain of their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer or its affiliates. If the underwriters or their affiliates have a lending relationship with us, certain of those underwriters or their affiliates may hedge their credit exposure to us consistent with their customary risk management policies. Typically, the underwriters and their affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, including potentially the shares of common stock offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the shares of common stock offered hereby. The underwriters and certain of their affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Selling Restrictions

This prospectus does not constitute an offer to sell to, or a solicitation of an offer to buy from, anyone in any country or jurisdiction (i) in which such an offer or solicitation is not authorized, (ii) in which any person making such offer or solicitation is not qualified to do so or (iii) in which any such offer or solicitation would otherwise be unlawful. No action has been taken that would, or is intended to, permit a public offer of the shares of common stock or possession or distribution of this prospectus or any other offering or publicity material relating to the shares of common stock in any country or jurisdiction (other than the United States) where any such action for that purpose is required. Accordingly, each underwriter has undertaken that it will not, directly or indirectly,

 

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offer or sell any shares of common stock or have in its possession, distribute or publish any prospectus, form of application, advertisement or other document or information in any country or jurisdiction except under circumstances that will, to the best of its knowledge and belief, result in compliance with any applicable laws and regulations and all offers and sales of shares of common stock by it will be made on the same terms.

European Economic Area and United Kingdom

In relation to each Member State of the European Economic Area and the United Kingdom (each a “Relevant State”), no common stock has 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 common stock 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:

 

   

to legal entities which are qualified investors as defined under the Prospectus Regulation;

 

   

by the underwriters to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Regulation), subject to obtaining the prior consent of the representatives of the underwriters for any such offer; or

 

   

in any other circumstances falling within Article 1(4) of the Prospectus Regulation,

provided that no such offer of common stock shall result in a requirement for 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.

For the purposes of this provision the expression an “offer of common stock to the public” in relation to any common stock 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 common stock to be offered so as to enable an investor to decide to purchase or subscribe for our common stock, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.

United Kingdom

This prospectus has only been communicated or caused to have been communicated and will only be communicated or caused to be communicated as an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act of 2000, or the FSMA) as received in connection with the issue or sale of our common stock in circumstances in which Section 21(1) of the FSMA does not apply to us. All applicable provisions of the FSMA will be complied with in respect to anything done in relation to our common stock in, from or otherwise involving the United Kingdom.

Canada

The securities 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 securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

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,

 

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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, or 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.

Dubai International Financial Centre

This document relates to an Exempt Offer in accordance with the Markets Rules 2012 of the Dubai Financial Services Authority (“DFSA”). This document is intended for distribution only to persons of a type specified in the Markets Rules 2012 of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus supplement nor taken steps to verify the information set forth herein and has no responsibility for this document. The securities to which this document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this document you should consult an authorized financial advisor.

In relation to its use in the Dubai International Financial Centre (“DIFC”), this document is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the securities may not be offered or sold directly or indirectly to the public in the DIFC.

Hong Kong

The common stock has not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the common stock has been or may be issued or has been or may be in the possession of any person for the purposes of issue, 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 of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.

Japan

The common stock has not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of the common stock nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any “resident” of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan in effect at the relevant time.

 

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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 common stock may not be circulated or distributed, nor may the common stock 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 common stock is subscribed or purchased under Section 275 of the SFA by a relevant person which is: (a) 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; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired our shares under Section 275 of the SFA except:

 

  a)

to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

 

  b)

where no consideration is or will be given for the transfer;

 

  c)

where the transfer is by operation of law;

 

  d)

as specified in Section 276(7) of the SFA; or

 

  e)

as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

Switzerland

The common stock 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 document nor any other offering or marketing material relating to the common stock 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, the shares have 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 common stock will not be supervised by, the Swiss Financial Market Supervisory Authority and the offer of common stock 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 common stock.

 

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VALIDITY OF CLASS A COMMON STOCK

The validity of the shares of Class A common stock being offered by this prospectus will be passed upon for us by Sullivan & Cromwell LLP, Palo Alto, California. Certain legal matters in connection with this offering will be passed upon for the underwriters by Latham & Watkins LLP, Washington, D.C.

 

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EXPERTS

The financial statements as of September 30, 2019 and September 30, 2018 and for each of the two years in the period ended September 30, 2019 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.

 

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WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of Class A common stock offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our Class A common stock, we refer you to the registration statement, including the exhibits filed as a part thereof. 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.

Upon the completion of this offering, we will be subject to the information reporting requirements of the Exchange Act, and we will file reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be available on the website of the SEC referred to above.

We also maintain a website at www.AzekCo.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Information contained on, or that can be accessed through, our website is not incorporated by reference in this prospectus, and you should not consider information on our website to be part of this prospectus.

 

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

Unaudited financial statements

  

Condensed Consolidated Balance Sheets as of December 31, 2019 and September 30, 2019

     F-2  

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended December 31, 2019 and 2018

     F-3  

Condensed Consolidated Statements of Member’s Equity for the three months ended December 31, 2019 and 2018

     F-4  

Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2019 and 2018

     F-5  

Notes to Condensed Consolidated Financial Statements

     F-6  

Audited financial statements

  

Report of Independent Registered Public Accounting Firm

     F-25  

Consolidated Balance Sheets as of September 30, 2019 and 2018

     F-26  

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended September 30, 2019 and 2018

     F-27  

Consolidated Statements of Member’s Equity for the Years Ended September 30, 2019 and 2018

     F-28  

Consolidated Statements of Cash Flows for the Years Ended September 30, 2019 and 2018

     F-29  

Notes to Consolidated Financial Statements

     F-30  

 

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CPG Newco LLC

Condensed Consolidated Balance Sheets

(Unaudited)

 

(US dollars in thousands, except unit amounts)    December 31,
2019
    September 30,
2019
 
ASSETS:     

Current assets:

    

Cash and cash equivalents

   $ 22,468     $ 105,947  

Trade receivables, net of allowances

     55,546       52,623  

Inventories

     139,317       115,391  

Prepaid expenses

     8,147       6,037  

Other current assets

     11,817       10,592  
  

 

 

   

 

 

 

Total current assets

     237,295       290,590  

Property, plant and equipment, net

     216,227       208,694  

Goodwill

     944,298       944,298  

Intangible assets, net

     328,560       342,418  

Deferred financing costs, net

     775       865  

Other assets

     2,136       1,398  
  

 

 

   

 

 

 

Total assets

   $ 1,729,291     $ 1,788,263  
  

 

 

   

 

 

 
LIABILITIES AND MEMBER’S EQUITY:     

Current liabilities:

    

Accounts payable

   $ 20,780     $ 47,479  

Accrued rebates

     24,880       22,733  

Accrued interest

     7,294       13,578  

Current portion of long-term debt obligations

     8,304       8,304  

Accrued expenses and other liabilities

     35,064       47,903  
  

 

 

   

 

 

 

Total current liabilities

     96,322       139,997  

Deferred income taxes

     29,864       34,003  

Finance obligations—less current portion

     11,257       11,181  

Long-term debt—less current portion

     1,102,144       1,103,313  

Other non-current liabilities

     9,708       9,746  
  

 

 

   

 

 

 

Total liabilities

     1,249,295       1,298,240  

Commitments and contingencies (See Note 13)

    

Member’s equity:

    

1 common unit authorized, issued and outstanding at December 31, 2019 and September 30, 2019

     —         —    

Additional paid-in capital

     651,084       652,601  

Accumulated deficit

     (171,088     (162,578
  

 

 

   

 

 

 

Total member’s equity

     479,996       490,023  
  

 

 

   

 

 

 

Total liabilities and member’s equity

   $ 1,729,291     $ 1,788,263  
  

 

 

   

 

 

 

See Notes to Unaudited Condensed Consolidated Financial Statements.

 

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CPG Newco LLC

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

 

     Three months Ended
December 31,
 
(US dollars in thousands, except unit amounts)    2019     2018  

Net sales

   $ 166,043     $ 137,431  

Cost of sales

     (114,752     (96,525
  

 

 

   

 

 

 

Gross margin

     51,291       40,906  

Selling, general and administrative expenses

     (43,473     (42,467

Other general expenses

     (1,978     (1,810

Gain (loss) on disposal of property, plant and equipment

     73       (1,247
  

 

 

   

 

 

 

Operating income (loss)

     5,913       (4,618
  

 

 

   

 

 

 

Other expenses:

    

Interest expense

     (19,759     (20,490
  

 

 

   

 

 

 

Total other expenses

     (19,759     (20,490
  

 

 

   

 

 

 

Income (loss) before income taxes

     (13,846     (25,108

Income tax benefit (expense)

     4,000       5,837  
  

 

 

   

 

 

 

Net income (loss)

   $ (9,846   $ (19,271
  

 

 

   

 

 

 

Basic net income (loss) per common unit

   $ (9,846   $ (19,271
  

 

 

   

 

 

 

Weighted average common unit outstanding—basic

     1       1  
  

 

 

   

 

 

 

Comprehensive income (loss)

   $ (9,846   $ (19,271
  

 

 

   

 

 

 

See Notes to Unaudited Condensed Consolidated Financial Statements.

 

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CPG Newco LLC

Condensed Consolidated Statements of Member’s Equity

(US dollars in thousands, except unit amounts)

(Unaudited)

 

     Common Units      Additional
Paid-In
Capital
          Total
Member’s
Equity
 
     Units
Outstanding
     No Par
Value
    Accumulated
Deficit
 

Balance—September 30, 2018

     1        —        $ 648,129     $ (142,576   $ 505,553  

Adoption of ASU No. 2014-09

     —          —          —         194       194  

Net income (loss)

     —          —          —         (19,271     (19,271

Capital contribution

     —          —          1,181       —         1,181  

Share-based compensation

     —          —          903       —         903  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance—December 31, 2018

     1        —        $ 650,213     $ (161,653   $ 488,560  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance—September 30, 2019

     1        —        $ 652,601     $ (162,578   $ 490,023  

Adoption of ASU No. 2016-16

     —          —          —         1,336       1,336  

Net income (loss)

     —          —          —         (9,846     (9,846

Capital redemption

     —          —          (2,201     —         (2,201

Share-based compensation

     —          —          684       —         684  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance—December 31, 2019

     1        —        $ 651,084     $ (171,088   $ 479,996  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

See Notes to Unaudited Condensed Consolidated Financial Statements.

 

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CPG Newco LLC

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

     Three Months Ended
December 31,
 
(US dollars in thousands)    2019     2018  

Operating activities:

    

Net income (loss)

   $ (9,846   $ (19,271

Adjustments to reconcile net income (loss) to net cash flows provided by (used in) operating activities:

    

Depreciation

     10,283       7,219  

Amortization of intangibles

     13,858       15,240  

Non-cash interest expense

     997       997  

Deferred income tax benefit

     (2,653     (5,837

Non-cash compensation expense

     1,056       2,811  

Fair value adjustment for contingent consideration

     —         53  

(Gain) loss on disposition of property, plant and equipment

     (73     1,247  

Changes in certain assets and liabilities:

    

Trade receivables

     (2,923     (10,061

Inventories

     (23,926     (27,486

Prepaid expenses and other currents assets

     296       (2,260

Accounts payable

     (25,042     (10,768

Accrued expenses and interest

     (17,460     (5,109

Other assets and liabilities

     (928     2,787  
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (56,361     (50,438
  

 

 

   

 

 

 

Investing activities:

    

Purchases of property, plant and equipment

     (19,131     (12,943

Proceeds from the disposition of fixed assets

     113       —    
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (19,018     (12,943
  

 

 

   

 

 

 

Financing activities:

    

Payments of long-term debt obligations

     (2,076     (2,076

Proceeds (repayments) of finance obligations

     (193     (170

Payments of initial public offering related costs

     (3,630     —    

Payments of contingent consideration

     —         (2,000

Redemption of capital contribution by members

     (2,201     —    

Capital contribution from equity members

     —         1,181  
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (8,100     (3,065
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (83,479     (66,446

Cash and cash equivalents—Beginning of period

     105,947       82,283  
  

 

 

   

 

 

 

Cash and cash equivalents—End of period

   $ 22,468     $ 15,837  
  

 

 

   

 

 

 

Supplemental cash flow disclosure:

    

Cash paid for interest, net of amounts capitalized

   $ 25,045     $ 25,931  

Cash refunds for income taxes, net

     6       (56

Supplemental non-cash investing and financing disclosure:

    

Capital expenditures in accounts payable at end of period

   $ 2,007     $ 8,740  

Property, plant and equipment acquired under finance obligations

     446       325  

See Notes to Unaudited Condensed Consolidated Financial Statements.

 

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CPG Newco LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019

(Unaudited)

(US Dollars in thousands, unless otherwise specified)

 

1.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

a.

Organization

CPG Newco LLC (the “Company” or “CPG”) currently operates as a Delaware limited liability company, a holding company which holds all of the limited liability company interests in CPG International LLC, the entity which directly and indirectly holds all of the equity interests in our operating subsidiaries. The Company is a leading manufacturer of premium, low maintenance building products for residential, commercial and industrial markets. The Company’s products include trim, deck, porch, moulding, rail, pavers, bathroom and locker systems, as well as extruded plastic sheet products and other non-fabricated products for special applications in industrial markets. The Company operates in various locations throughout the United States.

The single common interest unit in the Company is held by CPG Holdco LLC and there are no potentially dilutive securities at the CPG Newco LLC level. Accordingly, there are no diluted earnings per unit presented on the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended December 31, 2019 and 2018.

Documentation was filed in Pennsylvania, Ohio, Delaware and Connecticut allowing CPG International LLC to conduct business as The AZEK Company LLC beginning on January 8, 2018. AZEK is a brand name for the residential products while the commercial products are branded under the brand names Celtec, Playboard, Seaboard, Flametec, Designboard, Cortec, Sanatec, Scranton Products, Aria Partitions, Eclipse Partitions, Hiny Hiders, Tufftec Lockers and Duralife Lockers. The Company’s legal name and tax identification number did not change. CPG was formed in Delaware on August 15, 2013.

 

b.

Summary of Significant Accounting Policies

Basis of Presentation

The Company operates on a fiscal year ending September 30. The accompanying unaudited Condensed Consolidated Financial Statements and notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with Article 10 of Regulation S-X promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The Condensed Consolidated Balance Sheet as of September 30, 2019 was derived from audited financial statements, but does not include all disclosures required by GAAP. These unaudited Condensed Consolidated Financial Statements reflect, in the opinion of management, all material adjustments (which include normal recurring adjustments) necessary to fairly state, in all material respects, the Company’s financial position as of December 31, 2019, its results of operations for the three months ended December 31, 2019 and 2018 and its cash flows for the three months ended December 31, 2019 and 2018.

The results of operations and cash flows for the three months ended December 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2020.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and

 

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liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Significant estimates include revenue recognition, reserves for excess inventory, inventory obsolescence, product warranties, customer rebates, equity-based compensation, litigation, income taxes, contingent consideration, goodwill and intangible asset valuation and accounting for long-lived assets. Management’s estimates and assumptions are evaluated on an ongoing basis and are based on historical experience, current conditions and available information. Actual results may differ from estimated amounts. Estimates are revised as additional information becomes available.

Accounting Policies

Refer to the Company’s September 30, 2019 audited Consolidated Financial Statements included in this Registration Statement for a discussion of the Company’s accounting policies.

Research and Development Costs

Research and development costs primarily relate to new product development, product claims support and manufacturing process improvements. Such costs are expensed as incurred and are included in selling, general and administrative expenses. Total research and development expenses were approximately $2.1 million and $1.7 million, respectively, for the three months ended December 31, 2019 and 2018.

Recently Adopted Accounting Pronouncements

The Company qualifies as an emerging growth company (“EGC”) and as such, has elected not to opt out of the extended transition period for complying with new or revised accounting pronouncements. During the extended transition period, the Company is not subject to new or revised accounting standards applicable to public companies. The accounting pronouncements pending adoption below reflect effective dates for the Company as an EGC with the extended transition period.

On October 1, 2018, the Company early adopted Accounting Standards Update (“ASU”) ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The update supersedes most current revenue recognition guidance. Under the new standard, entities are required to identify the contract with a customer; identify the separate performance obligations in the contract; determine the transaction price; allocate the transaction price to the separate performance obligations in the contract; and recognize the appropriate amount of revenue when (or as) the entity satisfies each performance obligation. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements. Refer to Note 2 for additional information.

On October 1, 2019, the Company adopted ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory. The standard amends several aspects of the tax accounting and recognition timing for intra-company transfers. The Company adopted the standard using a modified retrospective approach, with an adjustment to the beginning retained earnings of approximately $1.3 million, due to the cumulative impact of adopting the standard. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements. Refer to Note 12 for additional information.

Recently Issued Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases (Topic 842), and issued subsequent amendments to the initial guidance in January 2018 within ASU No. 2018-01, in July 2018 within ASU Nos. 2018-10 and 2018-11, in December 2018 within ASU No. 2018-20, in March 2019 within ASU No. 2019-01 and in November 2019 within ASU No. 2019-10. This standard requires lessees to present right-of-use assets and lease liabilities on the balance sheet. For public entities, the updated

 

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standard is effective for fiscal years beginning after December 15, 2018. This standard is effective for the Company as an EGC for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. Assuming the Company remains an EGC, it intends to adopt the updated standard during its fiscal year beginning October 1, 2021 and for interim periods within that fiscal year. This standard provides the option to adopt through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, instead of applying the new guidance retrospectively for each prior reporting period presented. The Company is currently evaluating the impact these ASU’s adoption will have on its Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326), and issued subsequent amendments to the initial guidance in May 2019 within ASU No. 2019-05 and in November 2019 within ASU Nos. 2019-10 and 2019-11. This standard sets forth an expected credit loss model, which requires the measurement of expected credit losses for financial instruments based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost, and certain off-balance sheet credit exposures. For public entities, the updated standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. This standard is effective for the Company as an EGC for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. Early adoption is permitted, and the standard is adopted using a modified retrospective transition method through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently evaluating the impact adoption of this standard will have on its Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which amends Topic 820, Fair Value Measurement. This standard modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. For all entities, this standard is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company intends to adopt the updated standard during its fiscal year beginning October 1, 2020 and for interim periods within fiscal years beginning in that fiscal year. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company is currently evaluating the impact adoption of this standard will have on its Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. For public entities, the updated standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The amendments in this ASU are effective for the Company, as an EGC, for annual periods beginning after December 15, 2020 and interim periods within annual periods beginning after December 15, 2021. This standard can be adopted either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. Assuming the Company remains an EGC, it intends to adopt the updated standard during its fiscal year beginning October 1, 2021 and for interim periods within fiscal year beginning October 1, 2022. The Company is currently evaluating the impact adoption of this standard will have on its Consolidated Financial Statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes. This standard simplifies the accounting for income taxes by removing certain exceptions to general principles in Topic 740 and clarifying and amending existing guidance. For public entities, the amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. For all other entities, the amendments are effective for fiscal years beginning

 

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after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption of the amendments is permitted, including adoption in any interim period for (1) public business entities for periods for which financial statements have not yet been issued and (2) all other entities for periods for which financial statements have not yet been made available for issuance. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The amendments are applied on a prospective or retrospective basis, depending upon the amendment adopted within this ASU. The amendments in this ASU are effective for the Company, as an EGC, for annual periods beginning after December 15, 2021 and interim periods within annual periods beginning after December 15, 2022. The Company is currently evaluating the impact adoption of these amendments will have on its Consolidated Financial Statements.

 

2.

REVENUE

The Company sells its products to residential and commercial markets. The Company’s Residential Segment principally generates revenue from the manufacture and sale of its premium, low maintenance composite decking, railing, trim, moulding, pavers products and accessories. The Company’s Commercial Segment generates revenue from the sale of its partition and locker systems along with plastic sheeting and other non-fabricated products for special applications in industrial markets.

The Company recognizes revenues when control of the promised goods is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods, at a point in time, when shipping occurs. Each product the Company transfers to the customer is considered one performance obligation. The Company has elected to account for shipping and handling costs as activities to fulfill the promise to transfer the goods. As a result of this accounting policy election, the Company does not consider shipping and handling activities as promised services to its customers.

Customer contracts are typically fixed price and short-term in nature. The transaction price is based on the product specifications and is determined at the time of order. The Company may offer various sales incentive programs throughout the year. It estimates the amount of sales incentive to allocate to each performance obligation, or product shipped, using the most-likely-amount method of estimation, based on sales to the direct customer or sell-through customer. The estimate is updated each reporting period and any changes are allocated to the performance obligations on the same basis as at inception. Changes in estimate allocated to a previously satisfied performance obligation are recognized as part of net revenue in the period in which the change occurs under the cumulative catch-up method. In addition to sales incentive programs, the Company may offer a payment discount, if payments are received within 30 days. The Company estimates the payment discount that it believes will be taken by the customer based on prior history and using the most-likely-amount method of estimation. The Company believes the most-likely-amount method best predicts the amount of consideration to which it will be entitled. The payment discounts are also reflected as part of net revenue.

The Company records deferred revenue when cash payments are received or due in advance of the Company’s performance.

 

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3.

INVENTORIES

Inventories are valued at the lower of cost or net realizable value, and are reduced for slow-moving and obsolete inventory. The inventories cost is recorded at standard cost, which approximates actual cost, on a first-in first-out “FIFO”) basis. Inventories consisted of the following:

 

(US dollars in thousands)    December 31,
2019
     September 30,
2019
 

Raw materials

   $ 31,355      $ 36,855  

Work in process

     20,025        19,514  

Finished goods

     87,937        59,022  
  

 

 

    

 

 

 

Total inventories

   $ 139,317      $ 115,391  
  

 

 

    

 

 

 

 

4.

PROPERTY, PLANT AND EQUIPMENT—NET

 

(US dollars in thousands)    December 31,
2019
     September 30,
2019
 

Land and improvements

   $ 2,758      $ 2,758  

Buildings and improvements

     67,890        67,770  

Capital lease—building

     2,021        2,021  

Capital lease—manufacturing equipment

     1,026        1,026  

Capital lease—vehicles

     3,878        3,835  

Manufacturing equipment

     262,634        254,570  

Computer equipment

     23,081        22,733  

Furniture and fixtures

     5,442        5,409  

Vehicles

     341        339  
  

 

 

    

 

 

 

Total property, plant and equipment

     369,071        360,461  

Construction in progress

     24,393        16,453  
  

 

 

    

 

 

 
     393,464        376,914  

Accumulated depreciation

     (177,237      (168,220
  

 

 

    

 

 

 

Total property, plant and equipment—net

   $ 216,227      $ 208,694  
  

 

 

    

 

 

 

The Company is considered the owner, for accounting purposes only, of leased office space, as it had taken on certain risks of construction build cost overages above normal tenant improvement allowances. Accordingly, the estimated fair value of the leased property was $9.2 million at both December 31, 2019 and September 30, 2019. The corresponding lease financing obligation was $7.9 million at both December 31, 2019 and September 30, 2019. The lease financing obligation was recorded in Finance obligations—less current portion in the Condensed Consolidated Balance Sheets. Refer to Note 13 for additional information.

Depreciation expense was approximately $10.3 million and $7.2 million in the three months ended December 31, 2019 and 2018, respectively. During the three months ended December 31, 2019 and 2018, $0.2 million and $0.4 million of interest was capitalized, respectively. Accumulated amortization for assets under capital leases was $3.7 million as of both December 31, 2019 and September 30, 2019. Accumulated amortization for assets under the build-to-suit lease was $0.3 million as of both December 31, 2019 and September 30, 2019.

 

5.

GOODWILL AND INTANGIBLE ASSETS—NET

Goodwill

As of both December 31, 2019 and September 30, 2019, the Company had goodwill of $944.3 million, with carrying amounts for Residential of $903.9 million and Commercial of $40.4 million. As of December 31, 2019,

 

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total accumulated goodwill impairments were $32.2 million, all attributable to the Company’s Commercial segment.

Intangible assets, net

The Company does not have any indefinite lived intangible assets other than goodwill as of December 31, 2019 and September 30, 2019. Finite-lived intangible assets consisted of the following:

 

            As of December 31, 2019  
(US dollars in thousands)    Lives in
Years
     Gross Carrying
Value
     Accumulated
Amortization
    Net Carrying
Value
 

Proprietary knowledge

     10 – 15      $ 289,300      $ (177,620   $ 111,680  

Trademarks

     5 – 20        223,140        (112,221     110,919  

Customer relationships

     15 – 19        142,270        (42,299     99,971  

Patents

     10        7,000        (2,418     4,582  

Other intangibles

     3 – 15        4,076        (2,668     1,408  
     

 

 

    

 

 

   

 

 

 
      $ 665,786      $ (337,226   $ 328,560  
     

 

 

    

 

 

   

 

 

 

 

            As of September 30, 2019  
(US dollars in thousands)    Lives in
Years
     Gross Carrying
Value
     Accumulated
Amortization
    Net Carrying
Value
 

Proprietary knowledge

     10 – 15      $ 289,300      $ (171,686   $ 117,614  

Trademarks

     5 – 20        223,140        (108,096     115,044  

Customer relationships

     15 – 19        142,270        (39,084     103,186  

Patents

     10        7,000        (2,132     4,868  

Other intangibles

     3 – 15        4,076        (2,370     1,706  
     

 

 

    

 

 

   

 

 

 
      $ 665,786      $ (323,368   $ 342,418  
     

 

 

    

 

 

   

 

 

 

Amortization expense was approximately $13.9 million and $15.2 million in the three months ended December 31, 2019 and 2018, respectively. As of December 31, 2019, the remaining weighted-average amortization period for acquired intangible assets is 13.5 years.

Amortization expense relating to these amortizable intangible assets as of December 31, 2019 is expected to be as follows:

 

(US dollars in thousands)       

Remaining period of 2020

   $ 40,834  

2021

     49,157  

2022

     43,752  

2023

     38,674  

2024

     33,732  

Thereafter

     122,411  
  

 

 

 

Total

   $ 328,560  
  

 

 

 

 

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6.

COMPOSITION OF CERTAIN BALANCE SHEET ACCOUNTS

Allowance for Doubtful Accounts

 

     Three Months Ended
December 31,
 
(US dollars in thousands)        2019              2018      

Beginning balance

   $ 904      $ 1,230  

Adjustment to reserve

     54        (5
  

 

 

    

 

 

 

Ending balance

   $ 958      $ 1,225  
  

 

 

    

 

 

 

Customer Rebate Accrual

Customer rebates are presented in Net Sales in the Condensed Consolidated Statements of Comprehensive Income (Loss) and in the Condensed Consolidated Balance Sheets as Accrued rebates of $24.9 million and $22.5 million as of December 31, 2019 and 2018, respectively, and $2.2 million and $2.5 million presented as contra-accounts receivable as of December 31, 2019 and 2018, respectively.

The rebate accrual activity was as follows:

 

     Three Months Ended
December 31,
 
(US dollars in thousands)    2019      2018  

Beginning balance

   $ 24,858      $ 21,914  

Rebate expense

     10,314        8,117  

Rebate payments

     (8,023      (5,056
  

 

 

    

 

 

 

Ending balance

   $ 27,149      $ 24,975  
  

 

 

    

 

 

 

Accrued Expenses and Other Liabilities

 

(US dollars in thousands)   December 31,
2019
    September 30,
2019
 

Employee related liabilities

  $ 10,826     $ 17,202  

Professional fees

    9,461       14,160  

Warranty

    3,001       2,543  

Freight

    2,512       4,158  

Marketing

    2,402       2,026  

Contingent consideration

    1,675       1,303  

Construction in progress

    897       903  

Capital lease

    851       721  

Other

    3,439       4,887  
 

 

 

   

 

 

 

Total accrued expenses and other current liabilities

  $ 35,064     $ 47,903  
 

 

 

   

 

 

 

 

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7.

DEBT

Debt consisted of the following:

 

(US dollars in thousands)    December 31,
2019
    September 30,
2019
 

Term Loan Agreement due May 5, 2024—LIBOR + 3.75% (5.93% and 5.93% at December 31, 2019 and September 30, 2019) (includes a discount of $1,045 and $1,105 at December 31, 2019 and September 30, 2019, respectively)

   $ 806,491     $ 808,507  

Revolving Credit Facility through March 9, 2022—LIBOR + 1.50%

     —         —    

Senior Notes due October 1, 2021—Fixed at 8%

     315,000       315,000  
  

 

 

   

 

 

 

Total

     1,121,491       1,123,507  

Less: unamortized deferred financing fees

     (11,043     (11,890

Less: current portion

     (8,304     (8,304
  

 

 

   

 

 

 

Long-term debt—less current portion and unamortized deferred financing fees

   $ 1,102,144     $ 1,103,313  
  

 

 

   

 

 

 

As of December 31, 2019, the Company has scheduled fiscal year debt payments on the Term Loan Agreement, Revolving Credit Facility and Senior Notes (excluding interest and debt discount) as follows:

 

(US dollars in thousands)       

Remaining period of 2020

   $ 6,228  

2021

     8,304  

2022

     323,304  

2023

     8,304  

2024

     776,396  

Thereafter

     —    
  

 

 

 

Total

   $ 1,122,536  
  

 

 

 

Term Loan Credit Agreement

On September 30, 2013, CPG International LLC refinanced its then outstanding long-term debt and entered into (i) a new senior secured revolving credit facility (the “Revolving Credit Facility”) among CPG International LLC (as successor-in-interest to CPG Merger Sub LLC, a limited liability company formed to effect the acquisition of CPG International LLC), Deutsche Bank AG New York Branch (“Deutsche Bank”), as administrative agent and collateral agent (the “Revolver Administrative Agent”), and the lenders party thereto, (ii) a new secured term loan agreement (the “Term Loan Agreement”) among CPG International LLC (as successor-in-interest to CPG Merger Sub LLC), as the initial borrower; the Lenders Party thereto; Deutsche Bank and JPMorgan Chase Bank, N.A., as co-syndication agents; Citibank, N.A., the Royal Bank of Scotland PLC and UBS Securities LLC, as co-documentation agents; and Barclays Bank PLC, as administrative agent and collateral agent, (iii) an indenture (the “Indenture”) in respect of 8.000% senior notes due October 1, 2021 (the “Senior Notes”) between CPG International LLC and Wilmington Trust, National Association, as trustee.

The proceeds from borrowings under the amended Term Loan Agreement and the Senior Notes were used to (i) fund the acquisition of CPG International LLC and (ii) repay all amounts outstanding under the Company’s prior term loan agreement, prior notes and related fees.

During the year ended September 30, 2017, CPG International LLC amended and extended the maturity of the Term Loan Agreement. Financing fees of $3.3 million were incurred for the transaction, $1.5 million of which were capitalized and $1.8 million of which were recognized in interest expense. On June 18, 2018, in conjunction with the acquisition of Versatex, the Term Loan Agreement was amended to increase the borrowing outstanding by $225.0 million. This amendment was accounted for as a modification. Financing fees of

 

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$6.7 million were incurred for the transaction, $5.7 million were capitalized and $1.0 million were recognized in “Interest expense”. Included in the $5.7 million of financing fees capitalized was an original issue discount of $0.6 million.

The Term Loan Agreement matures on the earlier of (i) May 5, 2024 and (ii) 181 days prior to the maturity of the Senior Notes. The Term Loan Agreement provides for interest on outstanding principal thereunder at a fluctuating rate, at CPG International LLC’s option, for (i) alternative base rate (“ABR”) borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime commercial lending rate announced as of such day by the Administrative Agent as defined in the Term Loan Agreement, as the “prime rate” as in effect on such day and (c) the LIBOR as of such day for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, provided that in no event shall the ABR be less than 200 basis points, plus the applicable margin of 275 basis points per annum; or (ii) for Eurocurrency borrowings, the adjusted LIBOR of (a) the LIBOR in effect for such interest period divided by one, minus the statutory reserves applicable to such Eurocurrency borrowing, if any, and (b) 100 basis points, plus the applicable margin of 375 basis points per annum.

As of December 31, 2019 and September 30, 2019, unamortized deferred financing fees related to the Term Loan Agreement consisted of $8.6 million and $9.1 million, respectively. The Term Loan Agreement may be voluntarily prepaid in whole, or in part, in each case without premium or penalty (other than the Prepayment Premium (as defined in the Term Loan Agreement), if applicable), subject to certain customary conditions.

The obligations under the Term Loan Agreement are secured by a first priority security interest in the membership interests of CPG International LLC owned by CPG Newco LLC and substantially all of the present and future assets of the borrowers and guarantors including equity interests of their domestic subsidiaries, subject to certain exceptions, (the “Term Loan Priority Collateral”) and a second priority lien on current assets. The obligations under the Term Loan Agreement are guaranteed by the Company and the wholly owned domestic subsidiaries of CPG International LLC other than certain immaterial subsidiaries and other excluded subsidiaries.

The Term Loan Agreement requires mandatory prepayments of the term loans thereunder from certain debt issuances, certain asset dispositions (subject to certain reinvestment rights) and a percentage of excess cash flow (subject to step-downs upon CPG International LLC achieving certain leverage ratios). The estimated prepayment of excess cash flow was $6.4 million at September 30, 2019. The lenders do have the option to decline any prepayment based on excess cash flows. CPG International LLC is required to repay the outstanding principal amount under the Term Loan Agreement in quarterly installments equal to 0.25253% of the aggregate principal amount under the Term Loan Agreement outstanding on the amendment date of June 18, 2018 and such quarterly payments may be reduced as a result of prepayments. The Term Loan Agreement restricts payments of dividends unless certain conditions are met, as defined in the Term Loan Agreement.

Revolving Credit Facility Agreement

On March 9, 2017, CPG International LLC amended and restated and extended the maturity of the Revolving Credit Facility. The Revolving Credit Facility matures on the earlier of (i) March 9, 2022 and (ii) 91 days prior to the maturity of the Term Loan Agreement, or the maturity of the Senior Notes, whichever occurs first. The Revolving Credit Facility provides for maximum aggregate borrowings of up to $150 million, subject to an asset-based borrowing base. The borrowing base is limited to a set percentage of eligible accounts receivable and inventory, less reserves that may be established by the administrative agent and the collateral agent in the exercise of their reasonable credit judgment. At December 31, 2019 and September 30, 2019, CPG International LLC had no outstanding borrowings under the Revolving Credit Facility and had $3.0 million and $3.0 million of outstanding letters of credit held against the Revolving Credit as of December 31, 2019 and September 30, 2019, respectively. Deferred financing costs, net of accumulated amortization, related to the Revolving Credit Facility at December 31, 2019 and September 30, 2019 were $0.8 million and $0.9 million, respectively. CPG International LLC had approximately $113.7 million available under the borrowing base for future borrowings as of September 30, 2019. CPG International LLC also has the option to increase the commitments under the Revolving Credit Agreement by up to $100.0 million, subject to certain conditions.

 

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The Revolving Credit Facility provides for an interest rate on outstanding principal thereunder at a fluctuating rate, at CPG International LLC’s option, at (i) for ABR borrowings, the highest of (a) the Federal Funds Rate plus 50 basis points, (b) the prime rate and (c) the LIBOR as of such date for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, plus, in each case, a spread of 50 to 100 basis points, based on average historical availability, or (ii) for Eurocurrency borrowings, adjusted LIBOR plus a spread of 150 to 200 basis points, based on average historical availability. A “commitment fee” accrues on any unused portion of the commitments under the Revolving Credit Facility during the preceding three calendar month period. If the average daily used percentage is greater than 50%, the commitment fee equals 25 basis points, and if the average daily used percentage is less than or equal to 50%, the commitment fee equals 37.5 basis points. The commitment fees expenses were $0.1 million and $0.1 million for the three months ended December 31, 2019 and 2018, respectively.

The obligations under the Revolving Credit Facility are guaranteed by CPG Newco LLC and its wholly owned domestic subsidiaries other than certain immaterial subsidiaries and other excluded subsidiaries. The obligations under the Revolving Credit Facility are secured by a first priority security interest in substantially all of the accounts receivable, inventory, deposit accounts, securities accounts and cash assets of CPG Newco LLC, CPG International LLC and the subsidiaries of CPG International LLC that are guarantors under the Revolving Credit Agreement, and the proceeds thereof (subject to certain exceptions) (the “Revolver Priority Collateral”), plus a second priority security interest in all of the Term Loan Priority Collateral. The Revolving Credit Facility may be voluntarily prepaid in whole, or in part, in each case without premium or penalty. CPG International LLC is also required to make mandatory prepayments (i) when aggregate borrowings exceed commitments or the applicable borrowing base and (ii) during “cash dominion,” which occurs if (a) the availability under the Revolving Credit Agreement is less than the greater of (i) $12.5 million and (ii) 10% of the lesser of (x) $150.0 million and (y) the borrowing base, for five consecutive business days or (b) certain events of default have occurred and are continuing.

The Revolving Credit Facility contains affirmative covenants that are customary for financings of this type, including allowing the Revolver Administrative Agent to perform periodic field exams and appraisals to evaluate the borrowing base. The Revolving Credit Facility contains various negative covenants, including limitations on, subject to certain exceptions, the incurrence of indebtedness, the incurrence of liens, dispositions, investments, acquisitions, restricted payments, transactions with affiliates, as well as other negative covenants customary for financings of this type. The Revolving Credit Facility also includes a financial maintenance covenant, applicable only when the excess availability is less than the greater of (i) 10% of the lesser of the aggregate commitments under the Revolving Credit Facility and the borrowing base, and (ii) $12.5 million. In such circumstances, CPG International LLC would be required to maintain a minimum fixed charge coverage ratio (as defined in the Revolving Credit Facility) for the trailing four quarters equal to at least 1.0 to 1.0; subject to CPG International LLC’s ability to make an equity cure (no more than twice in any four quarter period and up to five times over the life of the facility). As of December 31, 2019, CPG International LLC was in compliance with the financial and nonfinancial covenants imposed by the Revolving Credit Facility. The Revolving Credit Facility also includes customary events of default, including the occurrence of a change of control.

Senior Notes

The Senior Notes were issued on September 30, 2013, in an aggregate principal amount of $315.0 million, and mature on October 1, 2021. The Senior Notes bear interest at the rate of 8.000% per annum payable in cash semi-annually in arrears on April 1 and October 1 of each year (computed based on a 360-day year of twelve 30-day months). The obligations under the Senior Notes are guaranteed by CPG International LLC and those of its subsidiaries that also guarantee the Revolving Credit Facility and the Term Loan Agreement. The redemption price of the Senior Notes (expressed as percentages of the principal amount to be redeemed) will decline to the par value of the Senior Notes, plus accrued and unpaid interest based on the schedule below. The Senior Notes

 

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may be redeemed in whole or in part, at any time after October 1, 2016 at the following redemption prices, if redeemed during the 12-month period beginning on October 1 of the years indicated below:

 

2016

     106.0

2017

     104.0

2018

     102.0

2019 and thereafter

     100.0

The Indenture relating to the Senior Notes contains negative covenants that are customary for financings of this type. The Indenture does not contain any financial maintenance covenants. As of September 30, 2019, CPG International LLC was in compliance with the negative covenants imposed by the Senior Notes and the Indenture. As of December 31, 2019 and September 30, 2019, the unamortized deferred financing fees related to the Senior Notes consisted of $2.5 million and $2.8 million, respectively.

The following table provides the detail of interest expense for the respective periods.

 

     For the Three Months Ended  

(US dollars in thousands)

   December 31,
2019
     December 31,
2018
 

Interest expense

     

Senior Notes

   $ 6,300      $ 6,300  

Term Loan

     12,143        13,074  

Revolving Credit Facility

     153        156  

Other

     385        324  

Amortization

     

Debt issue costs

     

Senior Notes

     352        352  

Term Loan

     495        495  

Revolving Credit Facility

     89        89  

Original issue discounts

     60        60  

Capitalized interest

     (218      (360
  

 

 

    

 

 

 

Interest expense

   $ 19,759      $ 20,490  
  

 

 

    

 

 

 

See Note 9 for information pertaining to the fair value of the Company’s debt as of December 31, 2019 and September 30, 2019.

 

8.

PRODUCT WARRANTIES

The Company provides product assurance warranties of various lengths ranging from 5 years to lifetime for limited coverage for a variety of material and workmanship defects based on standard terms and conditions between the Company and its customers. Warranty coverage depends on the product involved.

 

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Warranty reserve activity was as follows:

 

     Three Months Ended
December 31,
 
(US dollars in thousands)    2019      2018  

Beginning balance

   $ 11,133      $ 9,304  

Additions

     1,372        478  

Warranty claims payment

     (950      (524

Accretion—purchase accounting valuation

     33        75  
  

 

 

    

 

 

 

Ending balance

     11,588        9,333  

Current portion of accrued warranty

     (3,001      (2,134
  

 

 

    

 

 

 

Accrued warranty—less current portion

   $ 8,587      $ 7,199  
  

 

 

    

 

 

 

TimberTech Warranties and Related Indemnification

In connection with the acquisition of TimberTech on September 21, 2012 and the acquisition of CPG International LLC on September 30, 2013, the Company recognized the fair value of the related warranty liabilities calculated as the net present value of the expected costs to settle all future warranty claims for products sold prior to the acquisition dates. The Company records accretion expense in Cost of sales in the Condensed Consolidated Statement of Comprehensive Income (Loss) in order to increase the value of the liability to reflect the future value of the warranty claims when they are actually settled. In addition, the Company records estimated warranty claims obligations related to current sales on an ongoing basis for the TimberTech product line.

Pursuant to the TimberTech purchase agreement, the seller, Crane Group Companies Limited (“Crane”), also agreed to indemnify the Company for claims made up to seven years after the acquisition date for the majority of the costs to settle warranty claims for certain identified problems related to two products which have exhibited a high number of claims related to scorching and fading defects. The products were produced between 2010 and 2011 and have not been sold by the Company since 2011. Similar to its recognition of the warranty liability, the Company recorded an indemnification receivable from Crane on the acquisition date equal to the fair value of the indemnification calculated as the net present value of the expected indemnification payments to be received in the future. At December 31, 2019, $1.9 million was classified as Other Current Assets. As of September 30, 2019, $1.3 million was classified as Other Current Assets and $0.5 million was classified as Other Assets (non-current). Due to a dispute by Crane of its ongoing obligations, the Company has a full reserve recorded against the amount receivable. The Company will continue to monitor the actual cost to settle warranty claims in the future and will make adjustments to the warranty liability and indemnification receivable if needed. The indemnification period expired on September 21, 2019. Crane disputes the scope of its past indemnification obligations and the Company cannot predict the outcome of the dispute. The Company may need to record additional charges to the Condensed Consolidated Statements of Comprehensive Income (Loss) and the Condensed Consolidated Balance Sheets related to the reserve and any obligations as a result of the indemnification dispute in future periods.

 

9.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment.

Financial instruments with a fair value that approximates carrying value

The carrying amounts of cash and cash equivalents, trade receivables and payables, as well as financial instruments included in other current assets and other current liabilities, approximate fair values because of their short-term maturities.

 

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Financial instruments with a fair value different from carrying value

The Company has, where appropriate, estimated the fair value of financial instruments for which the amortized cost carrying value may be significantly different than the fair value. As of December 31, 2019, and September 30, 2019, these instruments include the Company’s outstanding debt. As described in Note 7 Debt, the Company records debt at amortized cost. The carrying values and the estimated fair values of our debt financial instruments (Level 2 measurements) were as follows:

 

     December 31, 2019      September 30, 2019  
(US dollars in thousands)    Carrying
Value
     Estimated
Fair Value
     Carrying
Value
     Estimated
Fair Value
 

Term loan due May 5, 2024

   $ 806,491      $ 808,507      $ 808,507      $ 804,464  

Notes due October 1, 2021

     315,000        316,181        315,000        315,000  

The fair values of our debt instruments were determined using trading prices between qualified institutional buyers; therefore, the Notes are classified as Level 2.

Financial instrument remeasured at fair value on a recurring basis

In connection with the acquisition of Ultralox on December 20, 2017, the Company provided a contingent payment to the employees of Ultralox. The contingent payment was based on achievement of a minimum EBITDA amount and a multiple of EBITDA, for EBITDA exceeding a higher threshold for calendar year 2018. Based on the formula, the potential minimum of the contingent payment was zero and the potential maximum was $30.0 million. During the three months ended December 31, 2018, the Company paid the former owners of Ultralox $2.0 million as partial settlement of the original contingent liability. At the acquisition date, the fair value was estimated to be $5.3 million. Of the fair value, $2.8 million is accounted for as contingent consideration in conjunction with the acquisition related to the non-employee owners, and the remaining $2.5 million (which was subsequently adjusted downward to $0.9 million due to changes in the estimated fair value of the contingent payment) was recognized as compensation expense from date of acquisition through June 30, 2018 related to the employee owners, who forfeit their share of the contingent payment if not employed through that date.

The contingent payment made was based on achievement of a minimum EBITDA amount and a multiple of EBITDA, for EBITDA exceeding a higher threshold for calendar 2018. The Company classified the contingent liability as Level 3, due to the lack of observable inputs. Significant assumptions made by the Company included a central estimate of EBITDA and EBITDA volatility of 39%. Changes in assumptions could have an impact on the payout of the contingent consideration payout amount.

 

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During the three months ended December 31, 2018, the Company amended the earnout agreement to include two additional payments totaling $3.4 million to the former owners of Ultralox that are contingent upon the employee owners continued employment through December 31, 2018 and 2019. These additional earnout payments will be recognized as compensation expense over the required employment periods, because they are contingent upon future service from the date of the amendment. At December 31, 2019 and September 30, 2019, the contingent payment liability of $1.7 million and $1.3 million, respectively, is recorded in Accrued expenses and other liabilities in the Condensed Consolidated Balance Sheets. The following table provides a roll-forward of the aggregate fair value of the contingent consideration and compensation categorized as Level 3 for the three months ended December 31, 2019 and 2018: 

 

(US dollars in thousands)    Three Months
Ended
December 31,
2019
     Three Months
Ended
December 31,
2018
 

Beginning balance

   $ 1,303      $ 1,900  

Change in fair value of contingent consideration

     —          53  

Less: contingent payments

     —          (2,000

Compensation expense recognized

     372        1,908  
  

 

 

    

 

 

 

Ending balance

   $ 1,675      $ 1,861  
  

 

 

    

 

 

 

For the three months ended December 31, 2019 and 2018, the estimated contingent payment recognized as compensation expense was $0.4 and $1.9 million, respectively, and was included in Non-cash compensation expense in the Condensed Consolidated Statements of Cash Flows. In addition, the Company remitted $1.7 million in contingent consideration payment to the former owners of Ultralox. Refer to Note 15.

 

10.

SEGMENTS

Operating segments for the Company are determined based on information used by the chief operating decision maker (“CODM”) in deciding how to evaluate performance and allocate resources to each of the segments. The CODM reviews Adjusted EBITDA and Adjusted EBITDA Margin as the key segment measures of performance. Adjusted EBITDA is defined as segment operating income (loss) plus depreciation and amortization, adjusted by adding thereto or subtracting therefrom share-based compensation costs, business transformation costs, acquisition costs, and certain other costs. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by net sales.

The Company has two reportable segments, Residential and Commercial. The reportable segments were determined primarily based on products and end markets as follows:

 

   

Residential—The Residential segment manufactures and distributes decking, rail, trim and accessories through a national network of dealers and distributors and multiple home improvement retailers providing extensive geographic coverage and enabling the Company to effectively serve contractors. The recent addition of Ultalox and Versatex are complementary to the Residential segment railing and trim businesses, respectively. This segment is impacted by trends in and the strength of home repair and remodel activity.

 

   

Commercial—The Commercial segment manufactures, fabricates and distributes resin based extruded sheeting products for a variety of commercial and industrial applications through a widespread distribution network as well as directly to original equipment manufacturers. This segment includes Scranton Products which manufactures lockers and partitions and Vycom which manufactures resin based sheeting products. This segment is impacted by trends in and the strength of the new construction sector.

 

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The segment data below includes data for Residential and Commercial for the three months ended December 31, 2019 and 2018:

 

(US dollars in thousands)    Three Months
Ended
December 31,
2019
    Three Months
Ended
December 31,
2018
 

Net sales to customers

    

Residential

   $ 135,668     $ 108,374  

Commercial

     30,375       29,057  
  

 

 

   

 

 

 

Total

   $ 166,043     $ 137,431  
  

 

 

   

 

 

 

Adjusted EBITDA

    

Residential

   $ 38,915     $ 30,624  

Commercial

     3,023       3,375  
  

 

 

   

 

 

 

Total Adjusted EBITDA for reporting segments

     41,938       33,999  

Unallocated net expenses

     (8,132     (6,624

Adjustments to Income (loss) before income tax provision

    

Depreciation and amortization

     (24,141     (22,459

Share-based compensation costs

     (1,046     (982

Business transformation costs(1)

     (163     (3,833

Acquisition costs(2)

     (565     (2,521

Initial public offering costs

     (1,978     (1,810

Other costs(3)

     —         (388

Interest expense, net

     (19,759     (20,490
  

 

 

   

 

 

 

Income (loss) before income tax provision

   $ (13,846   $ (25,108
  

 

 

   

 

 

 

 

(1)

Business transformation costs reflect consulting and other costs relating to repositioning of our brands of $0.0 million and $0.4 million for the three months ended December 31, 2019 and 2018, respectively, compensation costs related to the transformation of the senior management team of $0.2 million and $0.6 million for the three months ended December 31, 2019 and 2018, respectively and other integration related costs of $0.0 million and $2.8 million for the three months ended December 31, 2019 and 2018, respectively.

(2)

Acquisition costs reflect costs directly related to completed acquisitions $0.6 million and $2.5 million for the three months ended December 31, 2019 and 2018, respectively.

(3)

Other costs reflect costs for legal defense of $0.0 million and $0.4 million for the three months ended December 31, 2019 and 2018, respectively.

 

11.

SHARE BASED COMPENSATION

AOT Building Products, L.P. (the “Partnership”) has granted profits interests to employees and certain directors of the Company (“Management Limited Partners”) through an LP Interest Agreement in accordance with the Limited Partnership Agreement of the Partnership dated September 30, 2013 (the “Limited Partnership Agreement”). The Limited Partnership Agreement allows the board of directors of the general partner of the Partnership to grant interests in the Partnership to eligible individuals. Awards that may be issued include common partnership interests, time vested Profits Interests and performance vested Profits Interests.

The Partnership interests enhance the Company’s ability to attract, retain, incentivize and motivate employees and to promote the success of the Company’s business by providing such participating individuals with a proprietary interest in the appreciation of value of the Partnership. The total number of Profit Interests that may be awarded under the Partnership agreement was 77,027 as of December 31, 2019. The Profit Interests are classified as equity awards in accordance with ASC 718 “Compensation—Stock Compensation.”

 

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The Plan provides for half of the grants as time vested Profits Interests and the other half as performance vested Profits Interests. In the case of the performance vested Profits Interests, this is further delineated into two tranches with individual performance criteria.

Profits Interests compensation expense related to the time vested Profits Interests awards was $0.7 million and $0.9 million for the three months ended December 31, 2019 and 2018, respectively. As of December 31, 2019, unrecognized compensation related to non-vested time vested Profits Interests was $6.8 million and expense will be recognized over the remaining weighted-average vesting period of 2.9 years.

As there has been no change in control of the Company, there have been no profits interests-based compensation expense recorded related to the performance vested profits interests. As of December 31, 2019, unrecognized compensation related to non-vested performance vested profits interests was $11.0 million.

Additionally, during the three months ended December 31, 2019 the Company granted certain awards that have similar performance criteria to the performance vested profits interest. As the performance criteria were not met, compensation expense was not recognized. The aggregate value as of December 31, 2019 of these awards was $4.1 million.

 

12.

INCOME TAXES

The Company calculates the interim tax provision in accordance with the provisions of Accounting Standards Codification (“ASC”) 740-270, “Income Taxes; Interim Reporting”, specifically ASC-740-270-25-2. For interim periods, the Company estimates the annual effective income tax rate (“AETR”) and applies the estimated rate to the year-to-date income or loss before income taxes. The effective income tax rates for the three months ended December 31, 2019 and 2018 was 28.9% and 23.2%, respectively.

The Company adopted ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, on October 1, 2019. The updated guidance requires companies to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Income tax effects of intra-entity transfers of inventory will continue to be deferred until the inventory has been sold to a third party. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements.

 

13.

COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases vehicles, machinery and a manufacturing facility under various capital leases. The Company also leases office equipment, vehicles and manufacturing and office facilities under various operating leases.

In 2018, the Company entered into a lease agreement for its corporate headquarters in Chicago, IL. The Company was responsible for costs to build out the office space and spent approximately $3.4 million in improvements to meet the Company’s needs. Based on the lease agreement and the changes made to the office space the Company concluded that it was the “deemed owner” of the building (for accounting purposes only) during the construction period. The Company recorded the build out costs as an asset with a corresponding build-to-suit liability while the building was under construction. Upon completion of the improvements to the building, the Company evaluated the derecognition of the asset and liability under the provisions of ASC 840-40, Leases—Sale-Leaseback Transactions. The Company determined that the lease does not meet the criteria for sale-leaseback accounting treatment, due to the Company’s continuing involvement in the project. As a result, the building is being accounted for as a financing obligation. The underlying assets amount to approximately $9.2 million. The Company determined its incremental borrowing rate for the purpose of calculating the interest and principal components of each lease payment was 8.4%.

 

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Future minimum annual payments under noncancelable leases with initial or remaining noncancelable lease terms as of December 31, 2019 were as follows:

 

(US dollars in thousands)    Capital     Financing      Operating  

Remaining period of 2020

   $ 1,204     $ 453      $ 936  

2021

     1,570       769        1,042  

2022

     1,396       788        662  

2023

     971       808        426  

2024

     627       827        54  

Thereafter

     2,789       4,607        —    
  

 

 

   

 

 

    

 

 

 

Total Payments

     8,557     $ 8,252      $ 3,120  
    

 

 

    

 

 

 

Less: amount representing interest

     (4,391     
  

 

 

      

Present value of minimum capital lease payments

   $ 4,166       
  

 

 

      

Total rent expense was approximately $0.3 million and $0.4 million for the three months ended December 31, 2019 and 2018, respectively. The future minimum sublease income under a noncancelable sublease was $1.1 million at December 31, 2019.

Legal Proceedings

In the normal course of the Company’s business, it is at times subject to pending and threatened legal actions, in some cases for which the relief or damages sought may be substantial. Although the Company is not able to predict the outcome of such actions, after reviewing all pending and threatened actions with counsel and based on information currently available, management believes that the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the Company’s results of operations or financial position. However, it is possible that the ultimate resolution of such matters, if unfavorable, may be material to the Company’s results of operations in a particular future period as the time and amount of any resolution of such actions and its relationship to the future results of operations are not currently known. The Company accrues for losses when they are probable of occurrence and such losses are reasonably estimable. Legal costs expected to be incurred are accounted for as they are incurred.

Loss Contingencies

On June 18, 2018, the Company acquired Versatex. In connection with a contingent liability assumed by the Company in the acquisition, the Company recorded a contingent liability of $5.8 million as a measurement period adjustment to the opening balance sheet related to the assumption of a contingency related to an automobile accident involving a Versatex employee prior to the acquisition. During 2019, the case was in discovery and has progressed to settlement discussions. As such, the Company recorded a $5.8 million accrual and a $5.8 million contingent insurance recovery as the insurance carrier verified the loss was covered under the related automobile insurance policy. Both the reserve and the recovery receivable were recorded in the opening balance sheet, as the liability and recovery was known at the date of the acquisition. There was no impact to the Consolidated Statement of Comprehensive Income (Loss) during the year ended September 30, 2018. The contingent liability is classified as Accrued expenses and other liabilities, and the contingent receivable is classified as Other current assets in the Condensed Consolidated Balance Sheets as of December 31, 2019 and September 30, 2019.

During the year ended September 30, 2019, the Company was made aware of a workers compensation case that became reasonably possible to incur a liability. The case is in discovery as the nature and extent of the Company’s exposure is currently being determined. The Company expects a range of loss of $0.4 million to $0.5 million. As of December 31, 2019, there are various other worker’s compensation and personal injury

 

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claims that have been made against the Company. All such claims are being contested and the Company does not believe a loss is probable; therefore, no reserve has been recorded related to these matters. In addition, the Company carries insurance for these types of matters and is expecting to recover thereon.

The Company is a party to various legal proceedings and claims, which arise in the ordinary course of business. As of December 31, 2019, the Company determined that there was not at least a reasonable possibility that it had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such proceedings.

14. CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)

CPG Newco LLC (parent company only)

Condensed Balance Sheets

 

(US dollars in thousands, except unit amounts)    December 31,
2019
    September 30,
2019
 
ASSETS:     

Non-current assets:

    

Investment in subsidiaries

   $ 479,996     $ 490,023  
  

 

 

   

 

 

 

Total non-current assets

     479,996       490,023  
  

 

 

   

 

 

 

Total assets

   $ 479,996     $ 490,023  
  

 

 

   

 

 

 
LIABILITIES AND MEMBER’S EQUITY:     

Total liabilities

   $ —       $ —    
  

 

 

   

 

 

 

Member’s equity:

    

1 Class A Common unit authorized, issued and outstanding at December 31, 2019 and September 30, 2019

     —         —    

Additional paid-in capital

     651,084       652,601  

Accumulated deficit

     (171,088     (162,578
  

 

 

   

 

 

 

Total member’s equity

     479,996       490,023  
  

 

 

   

 

 

 

Total liabilities and member’s equity

   $ 479,996     $ 490,023  
  

 

 

   

 

 

 

CPG Newco LLC (parent company only)

Condensed Statements of Comprehensive Income (Loss)

 

(US dollars in thousands)    Three Months Ended
December 31,
 
   2019     2018  

Net income (loss) of subsidiaries

   $ (9,846   $ (19,271
  

 

 

   

 

 

 

Net income (loss) of subsidiaries

   $ (9,846   $ (19,271
  

 

 

   

 

 

 

Comprehensive income (loss)

   $ (9,846   $ (19,271
  

 

 

   

 

 

 

CPG Newco LLC did not have any cash as of December 31, 2019 or September 30, 2019, accordingly a Statement of Cash Flows has not been presented.

Basis of Presentation

The parent company financial statements should be read in conjunction with the Company’s Consolidated Financial Statements and the accompanying notes thereto. For purposes of this condensed financial information, the Company’s wholly owned and majority owned subsidiaries are recorded based upon its proportionate share of the subsidiaries’ net assets (similar to presenting them on the equity method).

 

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Since the restricted net assets of CPG Newco LLC and its subsidiaries exceed 25% of the consolidated net assets of the Company and its subsidiaries, the accompanying condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule 1 of Regulation S-X. This information should be read in conjunction with the accompanying Consolidated Financial Statements.

Dividends from Subsidiaries

There were no cash dividends paid to CPG Newco LLC from the Company’s consolidated subsidiaries during the three months ended December 31, 2019 and 2018.

Restricted Payments

CPG International LLC is party to the Revolving Credit Facility and Term Loan Agreement originally executed on September 30, 2013, both of which have been amended and extended from time to time. The obligations under the Revolving Credit Facility and Term Loan Agreement are secured by substantially all of the present and future assets of the borrowers and guarantors, including equity interests of their domestic subsidiaries, subject to certain exceptions.

The obligations under the Revolving Credit Facility and Term Loan Agreement are guaranteed by the Company and its wholly owned domestic subsidiaries other than certain immaterial subsidiaries and other excluded subsidiaries. CPG International LLC is not permitted to make certain payments unless those payments are consistent with exceptions outlined in the agreements. These payments include repurchase of equity interests, fees associated with a public offering, income taxes due and other applicable payments. Further, the payments are only permitted if certain conditions are met related to availability and fixed charge coverage as defined in the Revolving Credit Facility and described in Note 7 to these Condensed Consolidated Financial Statements.

 

15.

SUBSEQUENT EVENTS

The Company has evaluated transactions for consideration as recognized subsequent events through February 7, 2020, the date these Consolidated Financial Statements were issued. In January 2020, the Company remitted $1.7 million in contingent consideration payment to the former owners of Ultralox.

Additionally, on January 31, 2020, the Company acquired Return Polymers, Inc. Return Polymers is located in Ashland, Ohio and is a provider of full-service recycled PVC material processing, compounding, sourcing, logistical support, and scrap management programs. The acquisition of Return Polymers allows the Company to further strengthen its commitment to sustainability in manufacturing.

 

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Member of CPG Newco LLC

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CPG Newco LLC and its subsidiaries (the “Company”) as of September 30, 2019 and 2018, and the related consolidated statements of comprehensive income (loss), of member’s equity and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2019 and 2018, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated 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 consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP

Chicago, Illinois

December 23, 2019

We have served as the Company or its predecessor’s auditor since 2010.

 

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CPG Newco LLC

Consolidated Balance Sheets

(In thousands, except number of common units)

 

     As of September 30,  
     2019     2018  

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 105,947     $ 82,283  

Trade receivables, net of allowances

     52,623       43,992  

Inventories

     115,391       110,899  

Prepaid expenses

     6,037       5,206  

Other current assets

     10,592       6,289  
  

 

 

   

 

 

 

Total current assets

     290,590       248,669  

Property, plant and equipment, net

     208,694       180,821  

Goodwill

     944,298       944,298  

Intangible assets, net

     342,418       402,622  

Deferred financing costs, net

     865       1,222  

Other assets

     1,398       1,548  
  

 

 

   

 

 

 

Total assets

   $ 1,788,263     $ 1,779,180  
  

 

 

   

 

 

 

LIABILITIES AND MEMBER’S EQUITY

    

Current liabilities:

    

Accounts payable

   $ 47,479     $ 35,877  

Accrued rebates

     22,733       19,756  

Accrued interest

     13,578       13,166  

Current portion of long-term debt

     8,304       8,304  

Accrued expenses and other liabilities

     47,903       32,696  
  

 

 

   

 

 

 

Total current liabilities

     139,997       109,799  

Deferred income taxes, net

     34,003       39,474  

Finance obligations—less current portion

     11,181       8,405  

Long-term debt—less current portion

     1,103,313       1,107,989  

Other non-current liabilities

     9,746       7,960  
  

 

 

   

 

 

 

Total liabilities

     1,298,240       1,273,627  

Commitments and contingencies (Note 15)

    

Member’s equity:

    

1 common unit authorized, issued and outstanding at September 30, 2019 and 2018

   $ —       $ —    

Additional paid-in capital

     652,601       648,129  

Accumulated deficit

     (162,578     (142,576
  

 

 

   

 

 

 

Total member’s equity

     490,023       505,553  
  

 

 

   

 

 

 

Total liabilities and member’s equity

   $ 1,788,263     $ 1,779,180  
  

 

 

   

 

 

 

See the accompanying notes which are an integral part of these Consolidated Financial Statements.

 

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CPG Newco LLC

Consolidated Statements of Comprehensive Income (Loss)

(In thousands, except common unit amounts and number of common units)

 

     Years Ended September 30,  
             2019                     2018          

Net sales

   $ 794,203     $ 681,805  

Cost of sales

     (541,006     (479,769
  

 

 

   

 

 

 

Gross profit

     253,197       202,036  

Selling, general and administrative expenses

     (183,572     (144,688

Other general expenses

     (9,076     (4,182

Loss on disposal of property, plant and equipment

     (1,495     (791
  

 

 

   

 

 

 

Operating income (loss)

     59,054       52,375  
  

 

 

   

 

 

 

Other expenses:

    

Interest expense

     (83,205     (68,742
  

 

 

   

 

 

 

Total other expenses

     (83,205     (68,742
  

 

 

   

 

 

 

Income (loss) before income taxes

     (24,151     (16,367

Income tax benefit

     3,955       23,112  
  

 

 

   

 

 

 

Net income (loss)

   $ (20,196   $ 6,745  
  

 

 

   

 

 

 

Basic and diluted net income (loss) per common unit

   $ (20,196   $ 6,745  
  

 

 

   

 

 

 

Basic and diluted weighted average common units outstanding

     1       1  
  

 

 

   

 

 

 

Comprehensive income (loss)

   $ (20,196   $ 6,745  
  

 

 

   

 

 

 

See the accompanying notes which are an integral part of these Consolidated Financial Statements.

 

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CPG Newco LLC

Consolidated Statements of Member’s Equity

(In thousands, except number of common units)

 

     Common Units              
     Units
Outstanding
     No
Par
Value
     Additional
Paid-In
Capital
    Accumulated
Deficit
    Total
Member’s
Equity
 

Balance—September 30, 2017

     1        —        $ 605,694     $ (149,321   $ 456,373  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Net income (loss)

     —          —          —         6,745       6,745  

Capital contribution

     —          —          40,000       —         40,000  

Non-cash equity contribution

     —          —          2,475       —         2,475  

Capital redemption

           (2,694     —         (2,694

Share-based compensation

     —          —          2,654       —         2,654  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance—September 30, 2018

     1        —        $ 648,129     $ (142,576   $ 505,553  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Adoption of ASU 2014-09

     —          —          —         194       194  

Net income (loss)

     —          —          —         (20,196     (20,196

Capital contribution

     —          —          1,311       —         1,311  

Capital redemption

     —          —          (101     —         (101

Share-based compensation

     —          —          3,262       —         3,262  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance—September 30, 2019

     1        —        $ 652,601     $ (162,578   $ 490,023  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

See the accompanying notes which are an integral part of these Consolidated Financial Statements.

 

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CPG Newco LLC

Consolidated Statements of Cash Flows

(In thousands)

 

     Year Ended September 30,  
             2019                     2018          

Operating activities:

    

Net income (loss)

   $ (20,196   $ 6,745  

Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:

    

Depreciation

     33,703       26,293  

Amortization of intangibles

     60,226       51,372  

Non-cash interest expense

     3,986       3,339  

Deferred income tax benefit

     (5,321     (24,125

Non-cash compensation expense

     4,564       3,542  

Fair value adjustment for contingent consideration

     53       (1,810

Loss on disposition of property, plant and equipment

     1,495       791  

Changes in certain assets and liabilities:

    

Trade receivables

     (8,632     2,387  

Inventories

     (4,492     953  

Prepaid expenses and other current assets

     (4,550     3,460  

Accounts payable

     11,679       4,398  

Accrued expenses and interest

     20,376       (12,839

Other assets and liabilities

     1,981       2,796  
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     94,872       67,302  
  

 

 

   

 

 

 

Investing activities:

    

Purchases of property, plant and equipment

     (63,006     (42,758

Proceeds from sale of property, plant and equipment

     71       60  

Acquisitions, net of cash received

     —         (292,984
  

 

 

   

 

 

 

Net cash provided by (used in) investing activities

     (62,935     (335,682
  

 

 

   

 

 

 

Financing activities:

    

Proceeds under revolving credit facility

     40,000       30,000  

Payments under revolving credit facility

     (40,000     (30,000

Proceeds from long-term debt

     —         224,438  

Payments on long-term debt

     (8,304     (7,167

Payments of financing fees

     —         (5,179

Proceeds (repayments) of financing obligations

     1,405       (656

Payments of IPO related costs

     (584     —    

Payment of contingent consideration

     (2,000     —    

Redemption of capital contribution by member

     (101     (2,694

Capital contribution from equity member

     1,311       40,000  
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (8,273     248,742  
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     23,664       (19,638

Cash and cash equivalents—beginning of period

     82,283       101,921  
  

 

 

   

 

 

 

Cash and cash equivalents—end of period

   $ 105,947     $ 82,283  
  

 

 

   

 

 

 

Supplemental cash flow disclosure:

    

Cash paid for interest, net of amounts capitalized

   $ 78,807     $ 65,050  

Cash paid for income taxes, net of refunds

     1,252       622  

Supplemental non-cash investing and financing disclosure:

    

Capital expenditures in accounts payable at end of period

   $ 3,674     $ 4,983  

Non-cash equity contribution

     —         2,475  

Property, plant and equipment acquired under finance obligations

     1,637       7,045  

See the accompanying notes which are an integral part of these Consolidated Financial Statements.

 

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CPG Newco LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

1.

DESCRIPTION OF BUSINESS

We currently operate as a Delaware limited liability company under the name CPG Newco LLC, a holding company which holds all of the limited liability company interests in CPG International LLC, the entity which directly and indirectly holds all of the equity interests in our operating subsidiaries. The Company is a leading manufacturer of premium, low-maintenance building products for residential and commercial markets. The Company’s products include trim, deck, porch, moulding, rail, pavers, bathroom and locker systems, as well as extruded plastic sheet products and other non-fabricated products for special applications. The Company operates in various locations throughout the United States.

The single common interest unit in the Company is held by CPG Holdco LLC and there are no potentially dilutive securities at the CPG Newco LLC level. Accordingly, basic and diluted earnings per unit presented on the Consolidated Statements of Comprehensive Income (Loss) as of September 30, 2019 and 2018 are the same. References to “CPG”, “the Company”, “we”, “our” and “us” refer to CPG Newco LLC and its consolidated subsidiaries as a whole.

Documentation was filed in Pennsylvania, Ohio, Delaware and Connecticut allowing CPG International LLC to conduct business as The AZEK Company LLC beginning on January 8, 2018. AZEK is a brand name for the Company’s residential products, while the commercial products are branded under the brand names Celtec, Playboard, Seaboard, Flametec, Designboard, Cortec, Sanatec, Scranton Products, Aria Partitions, Eclipse Partitions, Hiny Hiders, Tufftec Lockers and Duralife Lockers. The Company’s legal name and tax identification number did not change. The Company was formed in Delaware on August 15, 2013.

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company operates on a fiscal year ending September 30. The accompanying Consolidated Financial Statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The Company’s Consolidated Financial Statements include all of the assets, liabilities and results of operations of the Company’s subsidiaries. All inter-company balances and transactions have been eliminated in the Consolidated Financial Statements.

Revision of Previously Reported Financial Information

In connection with the preparation of the Consolidated Financial Statements for the years ended September 30, 2019, and 2018, the Company identified errors in the previously issued Consolidated Financial Statements related to the accounting for the timing of the recognition of a build-to-suit lease, builder rewards and rebate expenses.

The Company believes that the errors are not material to any prior annual or interim periods and have revised the previously issued Consolidated Financial Statements and other consolidated financial information included herein. See Note 18 in these accompanying notes for additional information.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include revenue recognition, reserves for excess inventory, inventory obsolescence, product warranties, customer rebates, equity-based compensation, litigation, income taxes, contingent consideration, goodwill and intangible asset valuation, and accounting for long-lived assets. Management’s estimates and assumptions are evaluated on an ongoing basis and are based on historical

 

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experience, current conditions and available information. It is at least reasonably possible that actual results may differ from estimated amounts. Estimates are revised as additional information becomes available.

Seasonality

Although the Company generally has demand for its products throughout the year, its sales have historically experienced some seasonality. The Company has typically experienced higher levels of sales of its residential products in the second fiscal quarter of the year as a result of its “early buy” sales, which encourages dealers to stock its residential products. The Company has generally experienced lower levels of sales of residential products in the first fiscal quarter due to adverse weather conditions in certain markets during the winter season. Although its products can be installed year-round, weather conditions can impact the timing of the sales of certain products. In addition, the Company has experienced higher levels of sales of its bathroom partition products and its locker products during the second half of its fiscal year, which includes the summer months when schools are typically closed and therefore are more likely to undergo remodel activities.

Change in Accounting Principle—Revenue Recognition

The Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (referred to herein as “Accounting Standards Codification (“ASC”) 606”, “ASC 606” or “Topic 606”) in May 2014. The standard includes a five-step model for contracts with customers as follows:

 

   

Identify the contract with a customer;

 

   

Identify the performance obligations in the contract;

 

   

Determine the transaction price, which is the total consideration provided by the customer;

 

   

Allocate the transaction price among the separate performance obligations within the contract; and

 

   

Recognize revenue when the performance obligations are satisfied.

On October 1, 2018, the Company early adopted ASC 606, using the modified retrospective method with an adjustment to the opening balance of equity of $0.2 million, due to the cumulative impact of adopting Topic 606. The adoption of ASC 606 did not have a material impact on the Consolidated Financial Statements, and the Company did not restate comparative period amounts. Therefore, the comparative information continues to be reported under ASC 605, Revenue Recognition.

The Company sells its products to residential and commercial markets. The Company’s Residential segment principally generates revenue from the manufacture and sale of its premium, low-maintenance composite decking, railing, trim, moulding, pavers products and accessories. The Company’s Commercial segment generates revenue from the sale of its partition and locker systems along with plastic sheeting and other non-fabricated products for special applications in industrial markets.

The Company recognizes revenues when control of the promised goods is transferred to the Company’s customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods, at a point in time, when shipping occurs. Each product the Company transfers to the customer is considered one performance obligation. The Company has elected to account for shipping and handling costs as activities to fulfill the promise to transfer the goods. As a result of this accounting policy election, the Company does not consider shipping and handling activities as promised services to its customers. Shipping and handling costs billed to customers are recorded in net sales. The Company includes all shipping and handling costs as “Cost of sales”.

Customer contracts are typically fixed price and short-term in nature. The transaction price is based on the product specifications and is determined at the time of order. The Company does not engage in contracts greater

 

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than one year, and therefore does not have any incremental costs capitalized as of September 30, 2019. The Company may offer various sales incentive programs throughout the year. It estimates the amount of sales incentive to allocate to each performance obligation, or product shipped, using the most-likely-amount method of estimation, based on sales to the direct customer or sell-through customer. The estimate is updated each reporting period and any changes are allocated to the performance obligations on the same basis as at inception. Changes in estimate allocated to a previously satisfied performance obligation are recognized as part of net revenue in the period in which the change occurs under the cumulative catch-up method. In addition to sales incentive programs, the Company may offer a payment discount, if payments are received within 30 days. The Company estimates the payment discount that it believes will be taken by the customer based on prior history and using the most-likely-amount method of estimation. The Company believes the most-likely-amount method best predicts the amount of consideration to which it will be entitled. The payment discounts are also reflected as part of net revenue. The total amount of incentives was $50.8 million and $42.4 million for the years ended September 30, 2019 and 2018, respectively.

The Company records deferred revenue when cash payments are received or due in advance of the Company’s performance.

Change in Accounting Principle—Measurement Date for Conducting Annual Goodwill Impairment Test

During fiscal 2019, the Company changed the annual impairment assessment date as a result of management’s improvements to the budgeting process from August 1st from September 30th. This change was determined to be immaterial to the financial statements.

Advertising Costs

Advertising costs primarily relate to trade publication advertisements, cooperative advertising, product brochures and samples. Such costs are expensed as incurred and are included in “Selling, general and administrative expenses”. Total advertising expenses were approximately $41.7 million and $31.7 million for the years ended September 30, 2019 and 2018, respectively.

Research and Development Costs

Research and development costs primarily relate to new product development, product claims support and manufacturing process improvements. Such costs are expensed as incurred and are included in “Selling, general and administrative expenses”. Total research and development expenses were approximately $8.0 million and $6.5 million for the years ended September 30, 2019 and 2018, respectively.

Cash and Cash Equivalents

The Company considers cash and highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. Cash and cash equivalents are stated at cost, which approximates or equals fair value due to their short-term nature.

Concentrations and Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. As of September 30, 2019, cash and cash equivalents were maintained at major financial institutions in the United States, and current deposits are in excess of insured limits. The Company believes these institutions have sufficient assets and liquidity to conduct their operations in the ordinary course of business with little or no credit risk to the Company. The Company has not experienced any losses in such accounts.

 

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Sales to certain Residential segment distributors accounted for 10% or more of the Company’s total net sales in 2019 and 2018 as follows:

 

     Percent of Consolidated Net Sales  
     Years Ended September 30,  
     2019     2018  

Distributor A

     19.8     21.2
  

 

 

   

 

 

 

At September 30, 2019 and 2018, no customers accounted for 10% or more of gross trade receivables.

For each year ended September 30, 2019 and 2018 approximately 17% and 14%, respectively, of the Company’s materials purchases were purchased from its largest supplier.

Allowance for Doubtful Accounts

The Company routinely assesses the financial strength of its customers and believes that its trade receivables credit risk exposure is limited. An allowance for doubtful accounts is provided for known and anticipated credit losses and disputed amounts, as determined by management in the course of regularly evaluating individual customer receivables. This evaluation takes into consideration a customer’s financial condition and credit history, as well as current economic conditions. Amounts are written-off if and when they are determined to be uncollectible. The allowance for doubtful accounts activity for the years ended September 30, 2019 and 2018, was as follows:

 

     As of September 30,  
(In thousands)    2019      2018  

Beginning balance

   $ 1,230      $ 1,048  

Bad debt expense

     383        176  

Decrease due to write-offs

     (709      (89

Addition related to acquisitions

     —          95  
  

 

 

    

 

 

 

Ending balance

   $ 904      $ 1,230  
  

 

 

    

 

 

 

Inventories

Inventories (mainly petrochemical resin in raw materials and finished goods), are valued at the lower of cost or net realizable value and are reduced for slow-moving and obsolete inventory. Management assesses the need for, and the amount of, obsolescence write-down based on customer demand of the item, the quantity of the item on hand and the length of time the item has been in inventory. Further, management also considers net realizable value in assessing inventory balances.

Inventory costs include those costs directly attributable to products, including all manufacturing overhead but excluding costs to distribute. The inventories cost is recorded at standard cost, which approximates actual cost, on the first-in first-out basis (“FIFO”).

Vendor Rebates

Certain vendor rebates and incentives are earned by the Company only when specified levels of periodic purchases are achieved. These vendor rebates are recognized based on a systematic and rational allocation of the cash consideration offered in respect of each of the underlying transactions, provided the amounts are probable and reasonably estimable. The Company records the incentives as a reduction in the cost of inventory. The Company records such incentives during interim periods based on actual results achieved on a year-to-date basis and its expectation that purchase levels will be obtained to earn the rebate.

 

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Customer Rebate Accrual

The Company offers rebates to customers based on total amounts purchased by each customer during each calendar year. The Company provides for the estimated cost of rebates at the time revenue is recognized based on rebate program rates and anticipated sales to each customer eligible for rebates and other available information. Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates. The customer rebates are presented in “Net Sales” in the Consolidated Statements of Comprehensive Income (Loss) and in the Consolidated Balance Sheets as “Accrued rebates” of $22.7 million and $19.7 million as of September 30, 2019 and 2018, respectively, and $2.1 million and $2.1 million presented as contra-accounts receivable as of September 30, 2019 and 2018, respectively. The rebate accrual activity for the years ended September 30, 2019 and 2018, was as follows:

 

     As of September 30,  
(In thousands)    2019      2018  

Beginning balance

   $ 21,914      $ 16,922  

Purchase accounting additions

     —          1,485  

Rebate expense

     50,847        42,400  

Rebate payments

     (47,903      (38,893
  

 

 

    

 

 

 

Ending balance

   $ 24,858      $ 21,914  
  

 

 

    

 

 

 

Product Warranties

The Company provides product assurance warranties of various lengths and terms to certain customers based on standard terms and conditions. The Company provides for the estimated cost of warranties at the time revenue is recognized based on management’s judgment, considering such factors as cost per claim, historical experience, anticipated rates of claims, and other available information. Management reviews and adjusts these estimates, if necessary, based on the differences between actual experience and historical estimates. See Note 9 for further discussion regarding coverage and term of the Company’s warranties as well as the warranty rollforward for the years ended September 30, 2019 and 2018.

Property, Plant and Equipment, Net

Property, plant and equipment (“PP&E”) is recorded at cost, net of accumulated depreciation. Major additions and betterments are capitalized while repair and/or maintenance expenses are charged to operations when incurred. Construction in progress is also recorded at cost and includes capitalized interest, if material.

Depreciation for financial reporting purposes is computed using the straight-line method over the following estimated useful lives of the assets:

 

Land improvements

     10 years  

Building and improvements

     7-40 years  

Manufacturing equipment

     1-15 years  

Office furniture and equipment

     3-12 years  

Vehicles

     5 years  

Computer equipment

     3-7 years  

Leasehold improvements are recorded at cost and depreciated over the standard life of the type of asset or the remaining life of the lease, whichever is shorter. Equipment held under capital leases is stated at the lower of the fair value of the asset or the net present value of the future minimum lease payments at the inception of the lease. For equipment held under capital leases, depreciation is computed using the straight-line method over the shorter of the estimated useful lives of the leased assets or the related lease term and is included within depreciation expense.

 

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PP&E is evaluated for impairment at the asset group level. If a triggering event suggests that a potential impairment has occurred, recoverability of these assets is assessed by evaluating whether or not future estimated undiscounted net cash flows are less than the carrying amount of the assets. If the estimated cash flows are less than the carrying amount, the assets are written down to their fair value through an impairment loss recognized as a non-cash component of “Operating income (loss)” within the Consolidated Statements of Comprehensive Income (Loss). The Company did not record an impairment charge for the years ended September 30, 2019 or 2018.

During the year ended September 30, 2019, the Company recognized a $1.5 million loss on disposal of fixed assets, $1.2 million related to corporate assets and $0.3 million related to assets in the Residential segment. During the year ended September 30, 2018, the Residential segment recognized a $0.8 million loss on disposal of fixed assets in the ordinary course of business. These losses are classified as “Loss on disposal of property, plant and equipment” in a separate caption within the Consolidated Statements of Comprehensive Income (Loss) within “Operating income (loss)”.

Build-to-Suit Leases

The Company establishes assets and liabilities for the fair value of the building and estimated construction costs incurred under lease arrangements when it is considered the owner (for accounting purposes only), or build-to-suit leases, to the extent it is involved in the construction of structural improvements or takes on construction risk. Upon completion of construction of facilities under build-to-suit leases, the Company assesses whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance, and if so, the leased facility and financing obligation are removed from the balance sheet. If the Company does not qualify for sale-leaseback accounting, then the facility is accounted for as a financing obligation.

Deferred Financing Costs, Net

The Company has recorded deferred financing costs incurred in conjunction with its debt obligations. The Company amortizes debt issuance costs over the remaining life of the related debt using the straight-line method for the Revolving Credit Facility and the effective interest method for other debt. Deferred financing costs, net of accumulated amortization, are presented as “Deferred financing costs, net” (non-current) in the Consolidated Balance Sheets, insofar as they relate to the revolving credit facility. Deferred financing costs related to the Term Loan Agreement and the Senior Notes are recorded as a reduction of “Long-term debt” in the Consolidated Balance Sheets. See Note 8 for additional detail.

Goodwill

The Company accounts for goodwill as the excess of the purchase price over the net amount of identifiable assets acquired and liabilities assumed in a business combination measured at fair value. The Company assigns goodwill to four reporting units based on which reporting unit is expected to benefit from the business combination as of the acquisition date. Goodwill is not subject to amortization; rather, the Company tests goodwill for impairment annually during the fourth fiscal quarter ended September 30 and whenever events occur or changes in circumstances indicate that impairment may have occurred. Impairment testing is performed for each of the reporting units by first assessing qualitative factors to see if further testing of goodwill is required. If the Company concludes that it is more likely than not that a reporting unit’s fair value is less than its carrying amount based on the qualitative assessment, then a quantitative test is required. The Company may also choose to bypass the qualitative assessment and perform the quantitative test.

If the estimated fair value of a reporting unit exceeds the carrying value, the Company considers that goodwill is not impaired. If the carrying value exceeds estimated fair value, there is an impairment of goodwill and an impairment loss is recorded. The Company calculates the impairment loss by comparing the fair value of the reporting unit less the carrying amount, including goodwill. Goodwill impairment would be limited to the carrying value of the goodwill.

 

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In performing the quantitative test, the Company measures the fair value of the reporting units to which goodwill is allocated using an income-based approach, a generally accepted valuation methodology, and relevant data available through and as of August 1, for the year ended September 30, 2019, and through and as of September 30, for the year ended September 30, 2018. Under the income approach, fair value is determined using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflects the relative risk of the cash flows. The key estimates and factors used in this approach include, but are not limited to, revenue growth rates and profit margins based on internal Company forecasts, discount rates, perpetuity growth rates, future capital expenditures, and working capital requirements, among others, and a review of comparable market multiples for the industry segment as well as historical operating trends for the Company.

The Company completed the annual goodwill impairment tests as of August 1, 2019 and September 30, 2018, respectively, using a quantitative assessment approach. As a result of these respective annual assessments, the Company noted that the fair value of each reporting unit was determined to be in excess of the carrying value and as such, there were no impairment charges for the years ended September 30, 2019 or 2018. See Note 6 for additional detail. 

Intangible Assets, Net

Amortizable intangible assets include proprietary knowledge, trademarks, customer relationships and other intangible assets. The Company does not have any indefinite lived intangible assets other than goodwill.

The intangible assets are being amortized on an accelerated basis using the sum of the years’ digits method over their estimated useful lives, which range from 3 to 20 years, reflecting the pattern in which the economic benefits are consumed or otherwise used up. The Company evaluates whether events or circumstances have occurred that warrant a revision to the remaining useful lives of intangible assets. In cases where a revision is deemed appropriate, the remaining carrying amounts of the intangible assets are amortized over the revised remaining useful lives.

The Company evaluates amortizable intangible assets for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable.

If a triggering event suggests that a potential impairment has occurred, recoverability of these assets is assessed by evaluating the probability that future estimated undiscounted net cash flows will be less than the carrying amount of the long-lived assets. If the estimated cash flows are less than the carrying amount of the long-lived assets, the assets are written down to their fair value through an impairment loss recognized as a non-cash component of “Operating income (loss)”. The Company did not record an impairment charge for the years ended September 30, 2019 or 2018. See Note 6 for additional detail on intangible assets.

Share-Based Compensation

Share-based compensation cost is determined based on the number of units awarded and the grant date fair value of the awards. The cost of time vested awards is recognized as expense on a straight-line basis over the employee’s requisite service period, which coincides with the vesting period of the award. For performance-based awards, if and when the achievement of the predetermined performance criteria become probable, expense will be recognized. Stock-based compensation expense is included in “Selling, general and administrative expenses” in the accompanying Consolidated Statements of Comprehensive Income (Loss). The Company accounts for forfeitures as they occur. See Note 11 for additional detail regarding share-based compensation.

Estimated Fair Value of Financial Instruments

The carrying amounts for the Company’s financial instruments classified as current assets and liabilities, including cash and cash equivalents, trade accounts receivable and accrued expenses and accounts payable, approximate fair value due to their short maturities.

 

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Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

See Note 10 for information pertaining to fair value of debt and other financial instruments.

Income Taxes

Income taxes are provided on income reported for financial statement purposes, adjusted for permanent differences between financial statement reporting and income tax regulations. A valuation allowance is established whenever management believes that it is more likely than not that deferred tax assets may not be realizable. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the deferred tax assets or liabilities are expected to be realized or settled.

The realization of the net deferred tax assets is primarily dependent on estimated future taxable income. A change in the Company’s estimate of future taxable income may require an increase or decrease in the valuation allowance.

A liability for uncertain tax positions is recorded whenever management believes it is not more-likely-than-not the position will be sustained on examination based solely on its technical merits. Interest and penalties related to underpayment of income taxes are classified as income tax expense. It is inherently difficult and subjective to estimate such amounts, as the Company has to determine the probability of various possible outcomes. The Company reevaluates these uncertain tax positions on a quarterly basis. This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, voluntary settlements and new audit activity. Such a change in recognition or measurement would result in the recognition of a tax benefit or an additional charge to the tax provision.

On December 22, 2017, the President of the United States signed and enacted comprehensive tax legislation into law in the form of H.R. 1, commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). Except for certain provisions, the Tax Act is effective for tax years beginning on or after January 1, 2018. As a fiscal year U.S. taxpayer, the majority of the provisions applied to the Company’s fiscal 2019, such as new limitations on certain business deductions, including the limitation on the Company’s interest expense deduction. For fiscal 2018 and effective in the three months ended December 31, 2017, the most significant impact included: lowering of the U.S. federal corporate income tax rate and remeasuring the Company’s deferred tax assets and liabilities. The phase in of the lower federal income tax rate resulted in a blended rate of 24.5% for fiscal 2018, as compared to the previous rate of 35%. The federal income tax rate was reduced to 21% in subsequent fiscal years. Because the Company has net operating loss carry-forwards and was not expected to owe federal tax in its fiscal year 2018 tax return, the remeasurement of deferred taxes recognized for the period was calculated using the future federal tax rate of 21%. During the year ended September 30, 2018, the Company recorded a $22.5 million net income tax benefit for the remeasurement of its deferred tax assets and liabilities. The Company’s effective tax rate was significantly impacted by the recognition of this remeasurement. See Note 13 for further information regarding the impact of this legislation.

 

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Recently Adopted Accounting Pronouncements

The Company qualifies as an emerging growth company (“EGC”) and as such, has elected not to opt out of the extended transition period for complying with new or revised accounting pronouncements. During the extended transition period, the Company is not subject to new or revised accounting standards applicable to public companies. The accounting pronouncements pending adoption below reflect effective dates for the Company as an EGC with the extended transition period.

On October 1, 2017, the Company adopted ASU No. 2015-11, Inventory—Simplifying the Measurement of Inventory. The update requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The adoption of this amendment did not have a material impact on the Consolidated Financial Statements.

On October 1, 2017, the Company adopted ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update clarifies the classification of certain cash receipts and payments in the statement of cash flows. Application of the new guidance required reclassification of certain cash flows within operating activities to investing and financing activities on the consolidated statement of cash flows. The adoption of this standard did not have a material impact on the Consolidated Financial Statements.

On October 1, 2018, the Company early adopted ASU No. 2014-09, Revenue from Contracts with Customers, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The update will supersede most current revenue recognition guidance. Under the new standard, entities are required to identify the contract with a customer; identify the separate performance obligations in the contract; determine the transaction price; allocate the transaction price to the separate performance obligations in the contract; and recognize the appropriate amount of revenue when (or as) the entity satisfies each performance obligation. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), and issued subsequent amendments to the initial guidance in January 2018 within ASU No. 2018-01, in July 2018 within ASU Nos. 2018-10 and 2018-11, in December 2018 within ASU No. 2018-20, and in March 2019 within ASU No. 2019-01 (collectively, the standard). In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), deferring the adoption date for private entities by an additional year. Therefore, the standard is effective for private entities for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. Early application continues to be allowed. The standard requires lessees to present right-of-use assets and lease liabilities on the balance sheet. For public entities, the updated standard is effective for fiscal years beginning after December 15, 2018. The standard is effective for the Company as an EGC for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. Assuming the Company remains an EGC, it intends to adopt the updated standard during its fiscal year beginning October 1, 2020 and for interim periods within that fiscal year. ASU No. 2018-11 provides the option to initially apply ASU No. 2016-02 at the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, instead of applying the new guidance retrospectively for each prior reporting period presented. The Company anticipates adopting the standard using the option provided by ASU 2018-11 and is evaluating the impact of the adoption of these ASU’s on its Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13- Financial Instruments—Credit Losses (Topic 326). This ASU sets forth an expected credit loss model which requires the measurement of expected credit losses for

 

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financial instruments based on historical experience, current conditions and reasonable and supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost, and certain off-balance sheet credit exposures. For public entities, the updated standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. This ASU is effective for the Company as an EGC for the fiscal year ending September 30, 2022 and interim reporting periods beginning October 1, 2022. Early adoption is permitted. Assuming the Company remains an EGC, it intends to adopt the updated standard during its fiscal year ending September 30, 2022 and for interim periods within fiscal year beginning October 1, 2022. Adoption will require a modified retrospective transition. The Company is currently evaluating the impact of this ASU on the Consolidated Financial Statements.

In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326), which provided certain improvements to ASU No. 2016-13. The amendments provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses— Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments—Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The fair value option election does not apply to held-to-maturity debt securities. An entity that elects the fair value option should subsequently apply the guidance in Subtopics 820-10, Fair Value Measurement—Overall, and 825-10. For entities that have adopted the amendments in ASU No. 2016-13, the amendments in ASU No. 2019-05 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted in any interim period after the issuance of ASU No. 2019-05 as long as an entity has adopted the amendments in ASU No. 2016-13. The amendments in ASU No. 2019-05 should be applied on a modified-retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings balance in the statement of financial position as of the date that an entity adopted the amendments in ASU No. 2016-13. For the Company, the standard is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years beginning after December 15, 2021. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other Than Inventory. The standard amends several aspects of the tax accounting and recognition timing for intra-company transfers. For public entities, the updated standard is effective for fiscal years beginning after December 15, 2017, including interim periods within that fiscal year. For the Company, as an EGC, the amendments are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual periods beginning after December 15, 2019. Early adoption is permitted for all entities as of the beginning of an annual reporting period for which financial statements (interim or annual) have not been issued. Assuming the Company remains an EGC, it intends to adopt the updated standard during its fiscal year beginning October 1, 2019 and for interim periods within fiscal year beginning October 1, 2020. The Company is currently in the process of evaluating the amendment and the impact it will have on the Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-13, Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement, which amends Topic 820, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. For all entities, this standard is effective for annual reporting periods beginning after December 15, 2019, and interim periods within those fiscal years. The Company intends to adopt the updated standard during its fiscal year beginning October 1, 2020 and for interim periods within fiscal year beginning in that fiscal year. The removed and modified disclosures will be adopted on a retrospective basis and the new disclosures will be adopted on a prospective basis. The Company is currently evaluating the impact this adoption will have on its Consolidated Financial Statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing

 

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Arrangement That is a Service Contract. This ASU aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. For public entities, the updated standard is effective for fiscal years beginning after December 15, 2019, including interim periods within that fiscal year. The amendments in this ASU are effective for the Company, as an EGC, for annual periods beginning after December 15, 2020 and interim periods within annual periods beginning after December 15, 2021. The standard can be adopted either retrospectively or prospectively to all implementation costs incurred after the date of adoption. Early adoption is permitted. Assuming the Company remains an EGC, it intends to adopt the updated standard during its fiscal year beginning October 1, 2021 and for interim periods within fiscal year beginning October 1, 2022. The Company is currently evaluating the impact this adoption will have on its Consolidated Financial Statements.

 

3.

ACQUISITIONS

During the year ended September 30, 2018, the Company acquired two businesses, Versatex Holdings, LLC and its wholly owned subsidiary Versatex Building Products, LLC (collectively “Versatex”) and WES, LLC and its wholly owned subsidiary Ultralox Technology, LLC (collectively “Ultralox”), for an aggregate consideration of $297.9 million, including $3.2 million for cash acquired. The consideration consisted primarily of $292.6 million of cash, a contribution of 1,546.9 common interests of AOT Building Products, L.P., the indirect parent of the Company, fair valued at $2.5 million, used as consideration and contingent consideration with a fair value of $2.8 million based on achievement of a minimum adjusted EBITDA amount and a multiple of adjusted EBITDA for adjusted EBITDA exceeding a higher threshold for calendar 2018. Adjusted EBITDA is defined as net income (loss) before interest expense, net, income tax (benefit) expense and depreciation and amortization, and by adding thereto or subtracting therefrom certain items of expense and income specifically related to the acquisition. The change in fair value of the contingent consideration liability due to events arising after the acquisition date were recorded in the Statement of Comprehensive Income (Loss), thereby increasing pretax income by $1.8 million during the year ended September 30, 2018. Total transaction costs for the acquisitions amounted to $4.2 million and are presented as “Other general expenses” within “Operating income (loss)” in the Consolidated Statement of Comprehensive Income (Loss) for the year ended September 30, 2018.

 

Acquisition Date

  

Type

  

Company/
Product

Line

  

Location

  

Segment

June 18, 2018

   100% of Membership Interests    Versatex    Aliquippa, Pennsylvania    Residential

December 20, 2017

   100% of Membership Interests    Ultralox    Eagan, Minnesota    Residential

Versatex is a leading producer of premium, low-maintenance material building products with a focus on trim and moulding products. Ultralox is a leader in the aluminum railing industry, which sells engineered railing systems and assembly machines.

Each acquisition has been accounted for as a business combination. Tangible and identifiable intangible assets acquired and liabilities assumed were recorded at their respective fair values. The excess of the consideration transferred over the fair value of the net assets received has been recorded as goodwill in the Residential segment. The factors that contributed to the recognition of goodwill primarily relate to future economic benefits arising from expected sales through the Company’s existing distribution channels.

 

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The following represents the final purchase price allocation of the assets acquired and the liabilities assumed based on their values:

 

(In thousands)    Versatex
Holdings,

LLC
    Ultralox     Total  

Cash and cash equivalents

   $ 2,623     $ 623     $ 3,246  

Trade receivables

     4,059       874       4,933  

Inventories

     9,826       3,166       12,992  

Other current assets

     6,518       138       6,656  

Property, plant and equipment

     21,969       366       22,335  

Intangible assets

     129,000       17,300       146,300  

Other assets

     —         7       7  

Accounts payable

     (1,723     (1,582     (3,305

Accrued expenses and other liabilities

     (8,811     (771     (9,582
  

 

 

   

 

 

   

 

 

 

Total identifiable assets

     163,461       20,121       183,582  

Goodwill

     110,355       3,935       114,290  
  

 

 

   

 

 

   

 

 

 

Net assets acquired/total consideration

     273,816       24,056       297,872  

Less: cash acquired

     (2,623     (623     (3,246
  

 

 

   

 

 

   

 

 

 

Total consideration, net of cash acquired

   $ 271,193     $ 23,433     $ 294,626  
  

 

 

   

 

 

   

 

 

 

Total intangibles and goodwill for the Versatex transaction amounted to $239.4 million, comprised of $93.0 million related to customer relationships, $23.0 million related to proprietary knowledge and $13.0 million related to trademarks, as well as $110.4 million in goodwill. It is expected that $110.4 million of the goodwill is deductible for tax purposes. The estimated useful life for customer relationships is 19 years and for proprietary knowledge and trademarks is 10 years. The weighted average useful life at the date of acquisition was 17.5 years.

Total intangibles and goodwill for the Ultralox transaction amounted to $21.2 million, comprised of $8.5 million related to customer relationships, $7.0 million related to patents and $1.8 million related to trademarks, as well as $3.9 million in goodwill. It is expected that $3.9 million of the goodwill is deductible for tax purposes. The estimated useful life for customer relationships is 15 years, for patents is 10 years and for trademarks is 5 years. The weighted average useful life at the date of acquisition was 12.9 years.

In addition to assets acquired and liabilities assumed in the Versatex and Ultralox acquisitions, the Company entered into non-compete agreements of $2.7 and $0.9 million, respectively, that are capitalized and accounted for as operating expense over the non-compete periods and are presented within “Intangible assets, net” in the Consolidated Balance Sheet as of September 30, 2018. In addition, the Company entered into certain contingent compensation arrangements with key executives of Ultralox. These arrangements are being expensed over the related service periods with changes in the fair value of the arrangement recorded as operating expenses as they occur.

The following are the net sales and net income (loss) from Versatex included in the Company’s results from the June 18, 2018 acquisition date through September 30, 2018:

 

(In thousands)    June 18, 2018
through
September 30,
2018
 

Net sales

   $ 21,134  

Net income (loss)

   $ (3,462

Included in the results of Versatex was a one-time increase in cost of sales of $1.8 million related to the revaluation of Versatex’s inventories as of June 18, 2018. Also included in the results is additional amortization

 

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of $4.9 million resulting from the recognition of identified finite-lived intangible assets resulting from the purchase price allocation.

The following are the net sales and net income (loss) from Ultralox included in the Company’s results from December 20, 2017 acquisition date through September 30, 2018:

 

(In thousands)    December 20, 2017
through
September 30,
2018
 

Net sales

   $ 13,717  

Net income (loss)

   $ (541

Included in the results of Ultralox was a one-time increase in cost of sales of $0.6 million related to the revaluation of Ultralox’s inventories as of December 20, 2017. Also included in the results is additional amortization of $2.4 million resulting from the recognition of identified finite-lived intangible assets resulting from the purchase price allocation.

Pro Forma Results (Unaudited)

The following represents the pro forma consolidated operations for the fiscal years ended September 30, 2018 as if Versatex had been acquired on October 1, 2016, in which case the amount of combined entity revenues and earnings included in the Company’s Consolidated Statement of Comprehensive Income (Loss) for the fiscal years ended September 30, 2018 would have been as follows:

 

     Year Ended
September 30,
 
(In thousands)    2018
(Unaudited)
 

Net sales

   $ 730,858  

Net income (loss)

   $ 5,775  

The unaudited pro forma consolidated results do not purport to reflect what the combined company’s results of operations would have been had the acquisition occurred on October 1, 2016, nor do they project the future results of operations of the combined company or reflect the expected realization of any operating efficiencies or cost savings associated with the acquisition. The actual results of operations of the combined company may differ significantly from the pro forma adjustments reflected here due to many factors. The unaudited supplemental pro forma financial information includes various assumptions, including those related to the preliminary purchase price allocation of the assets acquired and liabilities assumed.

The pre-tax adjustments increased expenses by a total of $1.1 million for the fiscal year ended September 30, 2018 and primarily relate to additional interest expense related to the acquisition financing, elimination of historical interest expense, intangible asset amortization expense for assets acquired, elimination of historical intangible amortization expense, a reduction in depreciation expense for fixed assets, adjustments for non-recurring costs directly attributable to the Versatex acquisition and adjustment to income tax expense for the impact of the pro forma adjustments at the statutory rate for each year. The unaudited pro forma consolidated results of operations are provided for illustrative purposes only and are not indicative of the Company’s actual consolidated results of operations or consolidated financial position. Pro forma results for Ultralox are not provided as they are not material to the Consolidated Financial Statements.

 

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4.

INVENTORIES

Inventories consisted of the following:

 

     As of September 30,  
(In thousands)    2019      2018  

Raw materials

   $ 36,855      $ 35,995  

Work in process

     19,514        16,009  

Finished goods

     59,022        58,895  
  

 

 

    

 

 

 

Total inventories

   $ 115,391      $ 110,899  
  

 

 

    

 

 

 

During the year ended September 30, 2018, the Company developed additional capabilities relating to the potential utilization or sale of off specification finished goods inventory and re-assessed the formulation of manufactured goods and the re-introduction rates of off specification finished goods, once reground into a usable production input. Based on these new manufacturing capabilities and decisions related to the formulations of the Company’s finished goods, the Company performed a review of its off specification finished goods inventory to determine the ability to sell the material based on market interest at the SKU level and volume of the associated SKU. Based on the review, it was determined that a portion of the off specification finished goods material was not salable or usable internally based on its color, dimension, density and/or magnitude of the off specification volume. The items determined not to be salable or usable were written off to zero value. The remaining SKU’s that were determined to be salable or usable internally were revalued down to net realizable value consistent with external market values. The net impact related to the revaluation of certain off specification finished goods inventory that required regrinding was $11.8 million, which was recorded within “Cost of sales” for the year ended September 30, 2018.

 

5.

PROPERTY, PLANT AND EQUIPMENT—NET

 

     As of September 30,  
(In thousands)    2019      2018  

Land and improvements

   $ 2,758      $ 2,758  

Buildings and improvements

     67,770        63,059  

Capital lease—building

     2,021        2,021  

Capital lease—manufacturing equipment

     1,026        1,023  

Capital lease—vehicles

     3,835        2,860  

Manufacturing equipment

     254,570        203,056  

Computer equipment

     22,733        14,891  

Furniture and fixtures

     5,409        4,807  

Vehicles

     339        372  
  

 

 

    

 

 

 

Total property, plant and equipment

     360,461        294,847  

Construction in progress

     16,453        24,684  
  

 

 

    

 

 

 
     376,914        319,531  

Accumulated depreciation

     (168,220      (138,710
  

 

 

    

 

 

 

Total property, plant and equipment, net

   $ 208,694      $ 180,821  
  

 

 

    

 

 

 

The Company is considered the owner, for accounting purposes only, of its leased headquarters office space, as it had taken on certain risks of construction build cost overages above normal tenant improvement allowances. Accordingly, the Company has capitalized $9.2 million at September 30, 2019, and $5.8 million at September 30, 2018, which represents the estimated fair value of the lease property. The Company also recognized a corresponding lease financing obligation of $7.9 million at September 30, 2019, and $5.8 million at September 30, 2018. Refer to Note 15 for additional information.

Depreciation expense was approximately $33.7 million and $26.3 million for the years ended September 30, 2019 and 2018, respectively. Accumulated amortization for assets under capital leases was $3.7 million and

 

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$3.3 million as of September 30, 2019 and 2018, respectively. Accumulated amortization for assets under the build-to-suit lease was $0.3 million as of September 30, 2019.

 

6.

GOODWILL AND INTANGIBLE ASSETS-NET

The following table provides the changes in the carrying amount of goodwill:

 

(In thousands)    Residential      Commercial     Total  

Goodwill as of September 30, 2017

   $ 789,619      $ 40,389     $ 830,008  

Acquisitions(a)

     114,290        —         114,290  
  

 

 

    

 

 

   

 

 

 

Goodwill as of September 30, 2018

   $ 903,909      $ 40,389     $ 944,298  
  

 

 

    

 

 

   

 

 

 

Goodwill as of September 30, 2019

   $ 903,909      $ 40,389     $ 944,298  
  

 

 

    

 

 

   

 

 

 

Accumulated impairment losses as of September 30, 2018

   $ —        $ (32,200   $ (32,200
  

 

 

    

 

 

   

 

 

 

Accumulated impairment losses as of September 30, 2019

   $ —        $ (32,200   $ (32,200
  

 

 

    

 

 

   

 

 

 

 

(a)

Additions relate to the acquisitions of Ultralox and Versatex. For additional information see Note 3— Acquisitions.

Intangible Assets, Net

The Company does not have any indefinite lived intangible assets other than goodwill as of September 30, 2019 and 2018. Finite-lived intangible assets consisted of the following:

 

          As of September 30, 2019  
(In thousands)    Lives in
Years
   Gross
Carrying
Value
     Accumulated
Amortization
     Net
Carrying
Value
 

Proprietary knowledge

   10 - 15    $ 289,300      $ (171,686    $ 117,614  

Trademarks

   5 - 20      223,140        (108,096      115,044  

Customer relationships

   15 - 19      142,270        (39,084      103,186  

Patents

   10      7,000        (2,132      4,868  

Other intangibles

   3 - 15      4,076        (2,370      1,706  
     

 

 

    

 

 

    

 

 

 

Intangible assets

      $ 665,786      $ (323,368    $ 342,418  
     

 

 

    

 

 

    

 

 

 

 

          As of September 30, 2018  
(In thousands)    Lives in
Years
   Gross
Carrying
Value
     Accumulated
Amortization
     Net
Carrying
Value
 

Proprietary knowledge

   10 - 15    $ 289,300      $ (145,430    $ 143,870  

Trademarks

   5 - 20      223,140        (90,408      132,732  

Customer relationships

   15 - 19      142,270        (25,516      116,754  

Patents

   10      7,000        (955      6,045  

Other intangibles

   3 - 15      4,054        (833      3,221  
     

 

 

    

 

 

    

 

 

 

Intangible assets

      $ 665,764      $ (263,142    $ 402,622  
     

 

 

    

 

 

    

 

 

 

Amortization expense was approximately $60.2 million and $51.4 million for the years ended September 30, 2019 and 2018, respectively. As of September 30, 2019, the remaining weighted-average amortization period for intangible assets was 13.7 years.

 

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Amortization expense relating to these amortizable intangible assets as of September 30, 2019 is expected to be as follows:

 

(In thousands)

Fiscal Year

   Amount  

2020

   $ 54,692  

2021

     49,157  

2022

     43,752  

2023

     38,674  

2024

     33,732  

Thereafter

     122,411  
  

 

 

 

Total

   $ 342,418  
  

 

 

 

 

7.

ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities are presented as current liabilities as they are expected to be paid within 12 months. Accrued expenses and other liabilities consisted of the following:

 

     As of September 30,  
(In thousands)    2019      2018  

Employee-related liabilities

   $ 17,202      $ 11,119  

Professional fees

     14,160        9,885  

Construction in progress

     903        2,098  

Warranty

     2,543        1,944  

Contingent consideration

     1,303        1,900  

Freight

     4,158        1,658  

Marketing

     2,026        1,184  

Capital lease

     721        648  

Other

     4,887        2,260  
  

 

 

    

 

 

 
   $ 47,903      $ 32,696  
  

 

 

    

 

 

 

 

8.

DEBT

Debt consisted of the following:

 

     As of September 30,  
(In thousands)    2019     2018  

Term Loan Agreement due May 5, 2024—LIBOR + 3.75% (5.93% and 6.25% at September 30, 2019 and September 30, 2018, respectively) (includes a discount of $1,105 and $1,346 at September 30, 2019 and 2018, respectively)

   $ 808,507     $ 816,570  

Revolving Credit Facility through March 9, 2022—LIBOR + 1.50%

     —         —    

Senior Notes due October 1, 2021—Fixed at 8.000%

     315,000       315,000  
  

 

 

   

 

 

 

Total

     1,123,507       1,131,570  

Less: unamortized deferred financing fees

     (11,890     (15,277

Less: current portion

     (8,304     (8,304
  

 

 

   

 

 

 

Long-term debt — less current portion and unamortized deferred financing fees

   $ 1,103,313     $ 1,107,989  
  

 

 

   

 

 

 

 

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As of September 30, 2019, CPG International LLC has scheduled fiscal year debt payments on the Term Loan Agreement and Senior Notes (excluding interest and debt discount) as follows:

 

 

     Year Ended
September 30,
(In thousands)
 

2020

   $ 8,304  

2021

     8,304  

2022

     323,304  

2023

     8,304  

2024

     776,396  

Thereafter

     —    
  

 

 

 

Total

   $ 1,124,612  
  

 

 

 

Term Loan Credit Agreement

On September 30, 2013, CPG International LLC refinanced its then outstanding long-term debt and entered into (i) a new senior secured revolving credit facility (the “Revolving Credit Facility”) among CPG International LLC (as successor-in-interest to CPG Merger Sub LLC, a limited liability company formed to effect the acquisition of CPG International LLC), Deutsche Bank AG New York Branch (“Deutsche Bank”), as administrative agent and collateral agent (the “Revolver Administrative Agent”), and the lenders party thereto, (ii) a new secured term loan agreement (the “Term Loan Agreement”) among CPG International LLC (as successor-in-interest to CPG Merger Sub LLC), as the initial borrower; the Lenders Party thereto; Deutsche Bank and JPMorgan Chase Bank, N.A., as co-syndication agents; Citibank, N.A., the Royal Bank of Scotland PLC and UBS Securities LLC, as co-documentation agents; and Barclays Bank PLC, as administrative agent and collateral agent, (iii) an indenture (the “Indenture”) in respect of 8.000% senior notes due October 1, 2021 (the “Senior Notes”) between CPG International LLC and Wilmington Trust, National Association, as trustee.

The proceeds from borrowings under the amended Term Loan Agreement and the Senior Notes were used to (i) fund the acquisition of CPG International LLC and (ii) repay all amounts outstanding under the Company’s prior term loan agreement, prior notes and related fees.

During the year ended September 30, 2017, CPG International LLC amended and extended the maturity of the Term Loan Agreement. Financing fees of $3.3 million were incurred for the transaction, $1.5 million of which were capitalized and $1.8 million of which were recognized in interest expense. On June 18, 2018, in conjunction with the acquisition of Versatex, the Term Loan Agreement was amended to increase the borrowing outstanding by $225.0 million. This amendment was accounted for as a modification. Financing fees of $6.7 million were incurred for the transaction, $5.7 million were capitalized and $1.0 million were recognized in “Interest expense”. Included in the $5.7 million of financing fees capitalized was an original issue discount of $0.6 million.

The Term Loan Agreement matures on the earlier of (i) May 5, 2024 and (ii) 181 days prior to the maturity of the Senior Notes. The Term Loan Agreement provides for interest on outstanding principal thereunder at a fluctuating rate, at CPG International LLC’s option, for (i) alternative base rate (“ABR”) borrowings, the highest of (a) the Federal Funds Rate as of such day plus 50 basis points, (b) the prime commercial lending rate announced as of such day by the Administrative Agent as defined in the Term Loan Agreement, as the “prime rate” as in effect on such day and (c) the LIBOR as of such day for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, provided that in no event shall the ABR be less than 200 basis points, plus the applicable margin of 275 basis points per annum; or (ii) for Eurocurrency borrowings, the adjusted LIBOR of (a) the LIBOR in effect for such interest period divided by one, minus the statutory reserves applicable to such Eurocurrency borrowing, if any, and (b) 100 basis points, plus the applicable margin of 375 basis points per annum.

 

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As of September 30, 2019, and 2018, unamortized deferred financing fees related to the Term Loan Agreement consisted of $9.1 million and $11.1 million, respectively. The Term Loan Agreement may be voluntarily prepaid in whole, or in part, in each case without premium or penalty (other than the Prepayment Premium (as defined in the Term Loan Agreement), if applicable), subject to certain customary conditions.

The obligations under the Term Loan Agreement are secured by a first priority security interest in the membership interests of CPG International LLC owned by CPG Newco LLC and substantially all of the present and future assets of the borrowers and guarantors including equity interests of their domestic subsidiaries, subject to certain exceptions, (the “Term Loan Priority Collateral”) and a second priority lien on current assets. The obligations under the Term Loan Agreement are guaranteed by the Company and the wholly owned domestic subsidiaries of CPG International LLC other than certain immaterial subsidiaries and other excluded subsidiaries.

The Term Loan Agreement requires mandatory prepayments of the term loans thereunder from certain debt issuances, certain asset dispositions (subject to certain reinvestment rights) and a percentage of excess cash flow (subject to step-downs upon CPG International LLC achieving certain leverage ratios). The estimated prepayment of excess cash flow was $6.4 million and zero at September 30, 2019 and 2018, respectively. The lenders do have the option to decline any prepayment based on excess cash flows. At the lenders’ option, the excess cash payment made in January 2018 was $0.9 million with the remaining prepayment declined by the lenders. CPG International LLC is required to repay the outstanding principal amount under the Term Loan Agreement in quarterly installments equal to 0.25253% of the aggregate principal amount under the Term Loan Agreement outstanding on the amendment date of June 18, 2018 and such quarterly payments may be reduced as a result of prepayments. The Term Loan Agreement restricts payments of dividends unless certain conditions are met, as defined in the Term Loan Agreement.

Revolving Credit Facility Agreement

On March 9, 2017, CPG International LLC amended and restated and extended the maturity of the Revolving Credit Facility. The Revolving Credit Facility matures on the earlier of (i) March 9, 2022 and (ii) 91 days prior to the maturity of the Term Loan Agreement, or the maturity of the Senior Notes, whichever occurs first. The Revolving Credit Facility provides for maximum aggregate borrowings of up to $150 million, subject to an asset-based borrowing base. The borrowing base is limited to a set percentage of eligible accounts receivable and inventory, less reserves that may be established by the administrative agent and the collateral agent in the exercise of their reasonable credit judgment. At September 30, 2019 and 2018, CPG International LLC had no outstanding borrowings under the Revolving Credit Facility and had $3.0 million and $3.1 million of outstanding letters of credit held against the Revolving Credit, respectively. Deferred financing costs, net of accumulated amortization, related to the Revolving Credit Facility at September 30, 2019 and 2018 were $0.9 million and $1.2 million, respectively. CPG International LLC had approximately $113.7 million available under the borrowing base for future borrowings as of September 30, 2019. CPG International LLC also has the option to increase the commitments under the Revolving Credit Agreement by up to $100.0 million, subject to certain conditions.

The Revolving Credit Facility provides for an interest rate on outstanding principal thereunder at a fluctuating rate, at CPG International LLC’s option, at (i) for ABR borrowings, the highest of (a) the Federal Funds Rate plus 50 basis points, (b) the prime rate and (c) the LIBOR as of such date for a deposit in U.S. dollars with a maturity of one month plus 100 basis points, plus, in each case, a spread of 50 to 100 basis points, based on average historical availability, or (ii) for Eurocurrency borrowings, adjusted LIBOR plus a spread of 150 to 200 basis points, based on average historical availability. A “commitment fee” accrues on any unused portion of the commitments under the Revolving Credit Facility during the preceding three calendar month period. If the average daily used percentage is greater than 50%, the commitment fee equals 25 basis points, and if the average daily used percentage is less than or equal to 50%, the commitment fee equals 37.5 basis points. The commitment fees expenses were $0.5 million and $0.6 million for years ended September 30, 2019 and 2018.

 

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The obligations under the Revolving Credit Facility are guaranteed by CPG Newco LLC and its wholly owned domestic subsidiaries other than certain immaterial subsidiaries and other excluded subsidiaries. The obligations under the Revolving Credit Facility are secured by a first priority security interest in substantially all of the accounts receivable, inventory, deposit accounts, securities accounts and cash assets of CPG Newco LLC, CPG International LLC and the subsidiaries of CPG International LLC that are guarantors under the Revolving Credit Agreement, and the proceeds thereof (subject to certain exceptions) (the “Revolver Priority Collateral”), plus a second priority security interest in all of the Term Loan Priority Collateral. The Revolving Credit Facility may be voluntarily prepaid in whole, or in part, in each case without premium or penalty. CPG International LLC is also required to make mandatory prepayments (i) when aggregate borrowings exceed commitments or the applicable borrowing base and (ii) during “cash dominion,” which occurs if (a) the availability under the Revolving Credit Agreement is less than the greater of (i) $12.5 million and (ii) 10% of the lesser of (x) $150.0 million and (y) the borrowing base, for five consecutive business days or (b) certain events of default have occurred and are continuing.

The Revolving Credit Facility contains affirmative covenants that are customary for financings of this type, including allowing the Revolver Administrative Agent to perform periodic field exams and appraisals to evaluate the borrowing base. The Revolving Credit Facility contains various negative covenants, including limitations on, subject to certain exceptions, the incurrence of indebtedness, the incurrence of liens, dispositions, investments, acquisitions, restricted payments, transactions with affiliates, as well as other negative covenants customary for financings of this type. The Revolving Credit Facility also includes a financial maintenance covenant, applicable only when the excess availability is less than the greater of (i) 10% of the lesser of the aggregate commitments under the Revolving Credit Facility and the borrowing base, and (ii) $12.5 million. In such circumstances, CPG International LLC would be required to maintain a minimum fixed charge coverage ratio (as defined in the Revolving Credit Facility) for the trailing four quarters equal to at least 1.0 to 1.0; subject to CPG International LLC’s ability to make an equity cure (no more than twice in any four quarter period and up to five times over the life of the facility). As of September 30, 2019, CPG International LLC was in compliance with the financial and nonfinancial covenants imposed by the Revolving Credit Facility. The Revolving Credit Facility also includes customary events of default, including the occurrence of a change of control.

Senior Notes

The Senior Notes were issued on September 30, 2013, in an aggregate principal amount of $315.0 million, and mature on October 1, 2021. The Senior Notes bear interest at the rate of 8.000% per annum payable in cash semi-annually in arrears on April 1 and October 1 of each year (computed based on a 360-day year of twelve 30-day months). The obligations under the Senior Notes are guaranteed by CPG International LLC and those of its subsidiaries that also guarantee the Revolving Credit Facility and the Term Loan Agreement. The redemption price of the Senior Notes (expressed as percentages of the principal amount to be redeemed) will decline to the par value of the Senior Notes, plus accrued and unpaid interest based on the schedule below. The Senior Notes may be redeemed in whole or in part, at any time after October 1, 2016 at the following redemption prices, if redeemed during the 12-month period beginning on October 1 of the years indicated below:

 

2016

     106.0

2017

     104.0

2018

     102.0

2019 and thereafter

     100.0

The Indenture relating to the Senior Notes contains negative covenants that are customary for financings of this type. The Indenture does not contain any financial maintenance covenants. As of September 30, 2019, CPG International LLC was in compliance with the negative covenants imposed by the Senior Notes and the Indenture. As of September 30, 2019, and 2018, the unamortized deferred financing fees related to the Senior Notes consisted of and $2.8 million and $4.2 million, respectively.

 

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The following table provides the detail of interest expense for the respective periods.

 

 

     Years Ended
September 30,
 
(In thousands)    2019      2018  

Interest expense

     

Term Loan

   $ 52,504      $ 38,285  

Revolving Credit Facility

     904        682  

Senior Notes

     25,200        25,200  

Other

     1,506        1,709  

Amortization

     

Debt issue costs

     

Term Loan

     1,980        1,397  

Revolving Credit Facility

     358        358  

Senior Notes

     1,407        1,407  

Original issue discounts

     241        178  

Capitalized interest

     (895      (474
  

 

 

    

 

 

 

Interest expense

   $ 83,205      $ 68,742  
  

 

 

    

 

 

 

See Note 10 for information pertaining to the fair value of the Company’s debt as of September 30, 2019 and 2018.

 

9.

PRODUCT WARRANTIES

The Company provides product assurance warranties of various lengths ranging from 5 years to lifetime for limited coverage for a variety of material and workmanship defects based on standard terms and conditions between the Company and its customers. Warranty coverage depends on the product involved.

The warranty reserve activity was as follows:

 

     As of September 30,  
(In thousands)    2019      2018  

Beginning balance

   $ 9,304      $ 7,783  

Additions

     4,509        4,315  

Reduction in accruals for pre-existing warranties

     (6      (3

Warranty claims payment

     (2,927      (3,106

Accretion—purchase accounting valuation

     253        315  
  

 

 

    

 

 

 

Ending balance

     11,133        9,304  

Current portion of accrued warranty

     (2,543      (1,944
  

 

 

    

 

 

 

Accrued warranty—less current portion

   $ 8,590      $ 7,360  
  

 

 

    

 

 

 

TimberTech Warranties and Related Indemnification

In connection with the acquisition of TimberTech on September 21, 2012 and the acquisition of CPG International LLC on September 30, 2013, the Company recognized the fair value of the related warranty liabilities calculated as the net present value of the expected costs to settle all future warranty claims for products sold prior to the acquisition date. The Company records accretion expense in Cost of Sales in the Consolidated Statement of Comprehensive Income (Loss) in order to increase the value of the liability to reflect the future value of the warranty claims when they are actually settled. In addition, the Company records estimated warranty claims obligations related to current sales on an ongoing basis for the TimberTech product line.

 

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Pursuant to the TimberTech purchase agreement, the seller, Crane Group Companies Limited (“Crane”), also agreed to indemnify the Company for claims made up to seven years after the acquisition date for the majority of the costs to settle warranty claims for certain identified problems related to two products which have exhibited a high number of claims related to scorching and fading defects. The products were produced between 2010 and 2011 and have not been sold by the Company since 2011. Similar to its recognition of the warranty liability, the Company recorded an indemnification receivable from Crane on the acquisition date equal to the fair value of the indemnification calculated as the net present value of the expected indemnification payments to be received in the future. At September 30, 2019, $1.3 million was classified as Other Current Assets and $0.5 million was classified as Other Assets (non-current). As of September 30, 2018, $1.3 million was classified as Other Current Assets and $0.3 million was classified as Other Assets (non-current). Due to a dispute by Crane of its ongoing obligations, the Company has a full reserve recorded against the amount receivable. The Company will continue to monitor the actual cost to settle warranty claims in the future and will make adjustments to the warranty liability and indemnification receivable if needed. The indemnification period expired on September 21, 2019. Crane disputes the scope of its past indemnification obligations and the Company cannot predict the outcome of the dispute. If the Company’s expectations with respect to the timing of claims payments changes, with additional payments expected to be made outside of the indemnification period, the Company may need to record additional charges to the Consolidated Statements of Comprehensive Income (Loss) and the Consolidated Balance Sheets related to this reserve in the future.

 

10.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are further described in Note 2—Summary of Significant Accounting Policies.

Financial instruments with a fair value that approximates carrying value—The carrying amounts of cash and cash equivalents, trade receivables and payables, as well as financial instruments included in other current assets and other current liabilities, approximate fair values because of their short-term maturities.

Financial instruments with a fair value different from carrying value—The Company has, where appropriate, estimated the fair value of financial instruments for which the amortized cost carrying value may be significantly different than the fair value. As of September 30, 2019, and 2018, these instruments include the Company’s outstanding debt.

As described in Note 8 Debt, the Company records debt at amortized cost. The carrying values and the estimated fair values of debt financial instruments (Level 2 measurements) as of September 30 are as follows:

 

     2019      2018  
(In thousands)    Carrying
Value
     Estimated
Fair Value
     Carrying
Value
     Estimated
Fair Value
 

Term loan due May 5, 2024

   $ 808,507      $ 804,464      $ 816,570      $ 821,306  

Senior Notes due October 1, 2021

   $ 315,000      $ 315,000      $ 315,000      $ 320,119  

The fair values of debt instruments were determined using trading prices between qualified institutional buyers; therefore, the debt instruments valuations are classified as Level 2.

Financial instrument remeasured at fair value on a recurring basis—In connection with the acquisition of Ultralox on December 20, 2017, the Company offered a contingent payment. The contingent payment was based on achievement of a minimum EBITDA amount and a multiple of EBITDA, for EBITDA exceeding a higher threshold for calendar year 2018. The potential minimum of the contingent payment would have been zero and the potential maximum would have been $30.0 million. During the fiscal year ended September 30, 2019, the Company paid the former owners of Ultralox $2.0 million as settlement of the contingent payment liability. At

 

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the date of acquisition (Note 3) the fair value was estimated to be $5.3 million. Of the fair value, $2.8 million is accounted for as contingent consideration in conjunction with the acquisition related to the non-employee owners, and the remaining $2.5 million (which was subsequently adjusted downward to $0.9 million due to changes in the estimated fair value of the contingent payment) has been recognized as compensation expense to the employee-owners from the date of acquisition through June 30, 2018 as the employee-owners forfeit their share of the contingent payment if they are not employed through that date.

The contingent payment made was based on achievement of a minimum EBITDA amount and a multiple of EBITDA, for EBITDA exceeding a higher threshold for calendar 2018. The Company classified the contingent liability as Level 3, due to the lack of observable inputs. The significant assumptions made by the Company included a central estimate of EBITDA and EBITDA volatility of 39%. Changes in assumptions could have an impact on the payout of the contingent consideration payout amount.

During the fiscal year ended September 30, 2019, the Company amended the earnout agreement to include two additional payments totaling $3.4 million to the former owners of Ultralox that are contingent upon the former owners continued employment through December 31, 2018 and 2019. These additional earnout payments are recognized as compensation expense over the required employment periods, since they are contingent upon future service from the date of the amendment. In addition, during the fiscal year ended September 30, 2019, the Company paid the former owners of Ultralox $1.7 million as partial settlement of the amended earnout agreement. At September 30, 2019 and 2018, the contingent payment liability of $1.3 million and $1.9 million, respectively was recorded in “Accrued expenses and other liabilities” in the Consolidated Balance Sheets.

 

    As of September 30,  
    2019     2018  
(In thousands)   Total     Level 1     Level 2     Level 3     Total     Level 1     Level 2     Level 3  

Liabilities:

               

Contingent compensation

  $ 1,303     $ —       $ —         1,303     $ 888     $ —       $ —       $ 888  

Contingent consideration

    —         —         —         —         1,012       —         —         1,012  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total contingent consideration and compensation

  $ 1,303     $ —       $ —       $ 1,303     $ 1,900     $ —       $ —       $ 1,900  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The following table provides a roll-forward of the aggregate fair value of the contingent consideration and compensation categorized as Level 3 for the years ended September 30, 2019 and 2018:

 

(US dollars in thousands)

   As of
September 30,
2019
    As of
September 30,
2018
 

Beginning balance

   $ 1,900     $ —    

Issuance of contingent consideration in connection with acquisition

     —         2,822  

Change in fair value of contingent consideration

     53       (1,810

Less contingent payments

     (3,675     —    

Compensation expense recognized

     3,025       888  
  

 

 

   

 

 

 

Ending balance

   $ 1,303     $ 1,900  
  

 

 

   

 

 

 

For the years ended September 30, 2019 and 2018, the estimated contingent payment recognized as compensation expense of $1.3 million and $0.9 million, respectively, is included in “Non-cash compensation expense” in the Consolidated Statements of Cash Flows.

 

11.

SHARE-BASED COMPENSATION

AOT Building Products, L.P. (the “Partnership”) has granted profits interests to employees and certain directors of the Company (“Management Limited Partners”) through an LP Interest Agreement in accordance

 

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with the Limited Partnership Agreement of the Partnership dated September 30, 2013 (the “Limited Partnership Agreement”). The Limited Partnership Agreement allows the board of directors of the general partner of the Partnership to make grant interests in the Partnership to eligible individuals. Awards that may be issued include common partnership interests, time vested Profits Interests and performance vested Profits Interests.

The Partnership interests enhance the Company’s ability to attract, retain, incentivize and motivate employees and to promote the success of the Company’s business by providing such participating individuals with a proprietary interest in the appreciation of value of the Partnership. The total number of Profit Interests that may be awarded under the Partnership agreement was 77,084 as of September 30, 2019. The Profit Interests are classified as equity awards in accordance with ASC 718 “Compensation—Stock Compensation.”

Awardees typically receive an equal number of time vested Profits Interests and performance vested Profits Interests. Profit Interests are awarded with a hurdle amount whereby, they do not participate in distributions to equity holders up to that hurdle amount, per the Limited Partnership Agreement. The hurdle amount for time vested and performance vested Profits Interests was $1,000 and increased to $1,740 for grants awarded after June 30, 2018.

The sole material asset of the Partnership is indirect ownership of the Company. Accordingly, the fair value of the Profits Interests was derived by reference to the value of the Company, which the Company estimated using a combination of the income approach and the market approach.

The estimated grant date fair values of both time vested and performance vested Profits Interests granted during 2019 and 2018, was derived using the option pricing method, which treats the various interests in the Partnership as call options with exercise prices determined based on their respective rights to participate in distributions by the Partnership. The values attributable to these implicit call options were determined using the Black-Scholes option pricing model.

The estimated grant date fair values of a time vested Profits Interests granted during 2019 and 2018, and the assumptions used for the Black-Scholes fair value model were as follows:

 

     2019    2018

Estimated weighted average grant date fair value per Profits Interests granted

  

$399

   $ 448

Assumptions:

     

Risk-free interest rate

   1.75 - 2.81%    0.88 - 2.81%

Expected term

   2 years    2 - 3 years

Expected volatility

   45.00% - 50.00%    45.00% - 55.00%

Dividend yield

   0.00%    0.00%

The expected term was based on the anticipated time to liquidity. The risk-free interest rate has been determined on the yields for U.S. Treasury securities for a period approximating the expected term. The expected volatility has been estimated based on the volatilities using a weighted peer group of companies that are deemed to be similar to the Company and is calculated using the expected term of the profit interests granted.

Time vested Profits Interests generally vest in 20% increments on each of the first five anniversaries following the vesting commencement date, subject to continued employment; provided that the time vested Profits Interests may be redeemed by the Partnership for no value in the event that the awardee’s employment is terminated for cause or the awardee resigns without good reason prior to the third anniversary of the award’s grant date. In the event of a change in control, the vesting of outstanding time vested Profits Interests is accelerated. The compensation cost of time vested Profits Interests is determined based on the number of units granted and the fair value of the units at the grant date. That cost is expensed on a straight-line basis over the requisite service period.

 

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Information on time vested Profit Interests activity is as follows:

 

     Number
of
Profits
Interests
    Weighted Average
Grant Date

Fair Value per
Profit Interest
 

Balance as of September 30, 2017

     24,911     $ 476  

Granted

     11,288       448  

Redeemed

     (660     498  

Forfeited

     (915     478  

Expired

     —         —    
  

 

 

   

 

 

 

Balance as of September 30, 2018

     34,624     $ 466  
  

 

 

   

 

 

 

Granted

     5,753       399  

Redeemed

     (35     481  

Forfeited

     (2,913     448  

Expired

     —         —    
  

 

 

   

 

 

 

Balance as of September 30, 2019

     37,429     $ 457  
  

 

 

   

 

 

 

Vested Profits Interests as of September 30, 2019

     17,905    

Vested Profits Interests as of September 30, 2018

     10,966    

Profits Interests compensation expense related to the time vested Profits Interests awards was $3.3 million and $2.5 million for the years ended September 30, 2019 and 2018, respectively. As of September 30, 2019, the unrecognized compensation expense related to unvested time vested Profits Interests was $7.2 million, which expense will be recognized over the remaining weighted-average vesting period of 3.0 years. During the 2018 fiscal year, certain Profits Interests were redeemed more than six months after each of the interests vested, in connection with terminations of employment, for a total of $0.4 million, as the redemption value per unit exceeded the hurdle amount.

The estimated fair values of performance vested Profits Interests granted and the assumptions used for the option pricing model were as follows:

 

    Tranche 1
2019
  Tranche 2
2019
  Tranche 1
2018
  Tranche 2
2018

Estimated weighted average grant date fair value per Profits Interest granted

  $389   $309   $396   $313

Assumptions:

       

Risk-free interest rate

  1.75% - 2.81%   1.75% - 2.81%   0.88% - 2.81%   0.88% - 2.81%

Expected term

  2 years   2 years   2 - 3 years   2 - 3 years

Expected volatility

  45.00% - 50.00%   45.00% - 50.00%   45.00% - 55.00%   45.00% - 55.00%

Dividend yield

  0.00%   0.00%   0.00%   0.00%

The fair market value of the Company’s underlying equity was derived using a combination of the income approach and the market approach. The income approach used a discounted cash-flow model. The market approach utilized the comparable company method by analyzing a group of companies that were considered to be comparable to the Company. The expected term represents the average of anticipated exit scenarios. The risk- free interest rate has been determined based on the yields for U.S. Treasury securities for a period approximating the expected term. The expected volatility has been estimated based on the volatilities of a peer group of companies that are deemed to be similar to the Company and is calculated using the expected term of the Profits Interests granted.

 

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Performance vested Profits Interests only vest upon meeting the applicable performance criteria which are linked to the level of return on investment for Ares Corporate Opportunities Fund IV, L.P. and Ontario Limited Teachers Pension Fund (the “Sponsors”) of the Partnership. One tranche of the performance vested Profits Interests vests when the cumulative return to each of the Sponsors exceeds 2 times the aggregate capital contributions made by the Sponsors or, upon a change in control of the Company, exceeds an internal rate of return greater than 25%. The other tranche vests when the cumulative return to each of the Sponsors exceeds 2.75 times the aggregate capital contributions made by the Sponsor or upon a change in control of the Company, exceeds an internal rate of return of 30%. These performance vested Profits Interests expire on the earlier of the tenth anniversary of the date of grant date or a change in control in which the performance criteria was not met, subject to potential earlier expiration upon the awardee’s termination of employment.

Information on performance vested Profits Interests activity is as follows:

 

     Tranche 1      Tranche 2  
     Number
of
Interests
    Weighted
Average
Grant Date
Fair Value
per Profit
Interest
     Number
of
Interests
    Weighted
Average
Grant Date
Fair Value
per Profit
Interest
 

Balance as of September 30, 2017

     10,703     $ 354        10,703     $ 286  

Granted

     5,644       396        5,644       313  

Redeemed

     —            —      

Forfeited

     (788     313        (788     265  

Expired

     —            —      
  

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of September 30, 2018

     15,559       371        15,559       296  
  

 

 

   

 

 

    

 

 

   

 

 

 

Granted

     2,876       389        2,876       309  

Redeemed

     —            —      

Forfeited

     (2,271     381        (2,271     301  

Expired

     —            —      
  

 

 

   

 

 

    

 

 

   

 

 

 

Balance as of September 30, 2019

     16,164     $ 373        16,164     $ 298  
  

 

 

   

 

 

    

 

 

   

 

 

 

As the performance criteria have not been achieved, and the achievement of the performance criteria has not been deemed to be probable at any time up to and including September 30, 2019, no Profits Interests-based compensation expense was recorded related to the performance vested Profit Interests awards. As of September 30, 2019 and 2018, unrecognized compensation related to non-vested Performance Vested Profits Interests was $10.8 million and $10.4 million, respectively.

Additionally, during the year ended September 30, 2019 the Company granted certain awards that have similar performance criteria to the performance vested profits interest. As those criteria have not been met no compensation expense has been recognized. As of September 30, 2019, unrecognized compensation related to these awards was $4.1 million.

The Company also granted 500 common interests with a fair value of $0.5 million to the Chief Executive Officer of the Company, with a vesting period of two years. The fair value was expensed over the related service period beginning in the third quarter of fiscal year ending September 30, 2016 and ending in the third quarter of fiscal year ending September 30, 2018. These common interests are fully vested as of September 30, 2018.

 

12.

EMPLOYEE BENEFIT PLANS

The Company has 401(k) defined contribution plan (the “401(k) Plans”) for the benefit of its employees who meet certain eligibility requirements. The Company does not offer a defined benefit plan (pension plan) nor does the Company offer any other post-retirement benefits. The 401(k) Plans cover substantially all of the

 

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Company’s full-time employees. Each participant may contribute up to 85% of his or her salary, within dollar limitations set forth by the ERISA guidelines. Effective January 1, 2018, the Company amended the 401(k) plan to increase the Company match to be 100% of the first 1% of employee contributions, plus 50% of the next 5% of employee contributions. Prior to January 1, 2018, the Company matched 50% of the first 5% of employee contributions.

The Company’s contributions to the plans totaled $2.7 million and $1.7 million, for the years ended September 30, 2019 and 2018, respectively.

 

13.

INCOME TAXES

The Company’s operations are substantially all domestic. Components of the income tax expense (benefit) for the periods ended:

 

     Years Ended September 30,  
(In thousands)          2019                  2018        

Current:

     

Federal

   $ (62    $ (41

State and local

     1,428        1,054  
  

 

 

    

 

 

 

Total current

     1,366        1,013  

Deferred:

     

Federal

     (3,128      (25,534

State and local

     (2,193      1,409  
  

 

 

    

 

 

 

Total deferred

     (5,321      (24,125
  

 

 

    

 

 

 

Income tax benefit

   $ (3,955    $ (23,112
  

 

 

    

 

 

 

The effective income tax rate was different from the statutory U.S. federal income tax rate of 21% and 21% for the years ended September 30, 2019 and 2018, respectively, due to the following:

 

(In thousands)

   Year Ended
September 30,
2019
    Rate     Year Ended
September 30,
2018
    Rate  

Income tax benefit / federal statutory rate

   $ (5,072     21.0   $ (3,437     21.0

State and local taxes—net of federal benefit

     (667     2.8       275       (1.7

Increase in valuation allowance

     20       (0.1     140       (0.9

Increase in valuation allowance—impact of US tax reform

     —         —         902       (5.5

Share based compensation

     685       (2.8     558       (3.4

State tax law change

     —         —         1,453       (8.9

Deferred impact of US tax reform rate change

     —         —         (23,409     143.0  

Nondeductible transaction costs

     407       (1.7     —         —    

Meals and entertainment

     350       (1.5     206       (1.3

Other

     322       (1.3     200       (1.2
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit / effective tax rate

     $(3,955)       16.4%       $(23,112)       141.2
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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Significant components of the deferred tax assets and liabilities were as follows:

 

     As of September 30,  
(In thousands)    2019     2018  

Deferred tax asset:

    

Federal net operating loss carryforwards

   $ 19,706     $ 17,366  

State loss carryforwards and other benefits

     8,866       7,352  

Inventory reserves

     7,867       9,418  

Warranty reserves

     2,819       2,366  

Legal reserves

     451       410  

Accrued expenses

     5,992       4,003  

Disallowed interest carryforward

     9,222       —    

Valuation allowance

     (5,250     (5,230
  

 

 

   

 

 

 

Total deferred tax assets

     49,673       35,685  
  

 

 

   

 

 

 

Deferred tax liabilities:

    

Intangibles—net

     (51,823     (56,439

Property, plant and equipment

     (31,332     (18,214

Indemnification receivable related to warranty reserves

     (521     (506
  

 

 

   

 

 

 

Total deferred tax liabilities

     (83,676     (75,159
  

 

 

   

 

 

 

Net deferred tax liability

   $ (34,003   $ (39,474
  

 

 

   

 

 

 

At September 30, 2019, the Company has approximately $81.9 million (gross of tax) of net operating loss carryforwards for federal income tax purposes which begin to expire after 2031 and $14.1 million of net operating loss carryforwards for federal income tax purposes that have an indefinite carry-forward period. Additionally, the Company has approximately $84.9 million of net operating loss carryforwards for state and local tax purposes, which expire in varying amounts beginning in 2020 and through 2037. The valuation allowance was determined in accordance with the provisions of ASC 740, which requires that a valuation allowance be established and maintained when management’s analysis indicates it is “not more likely than not” that all or a portion of deferred tax assets will be realized. The valuation allowance for certain net deferred tax assets of $5.3 million and $5.2 million at September 30, 2019 and 2018, respectively, is attributable to the uncertainty as to the realization of state deferred tax assets related to Pennsylvania state tax loss carryforwards at certain U.S. subsidiaries of the Company (CPG International LLC and Scranton Products, Inc.). The activity in the valuation allowance was as follows for the fiscal years ended September 30:

 

     Years Ended
September 30,
 
(In thousands)    2019      2018  

Beginning balance

   $ 5,230      $ 4,188  

Charged to expense

     20        140  

Impact of US Tax Reform

     —          902  
  

 

 

    

 

 

 

Ending balance

   $ 5,250      $ 5,230  
  

 

 

    

 

 

 

 

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A reconciliation of the beginning and ending balances for liabilities associated with unrecognized tax benefits is as follows:

 

     Years Ended
September 30,
 
(In thousands)    2019      2018  

Beginning balance

   $ 924      $ 1,156  

Unrecognized tax benefits related to prior years

     37        30  

Unrecognized tax benefits related to the current year

     —          —    

Settlements

     —          —    

Revaluation of prior year reserve at 21% rate

     —          (262
  

 

 

    

 

 

 

Ending balance

   $ 961      $ 924  
  

 

 

    

 

 

 

Unrecognized tax benefits of $0.5 million and $0.5 million are recorded as an offset to certain non-current deferred tax assets at September 30, 2019 and 2018, respectively. The total liabilities associated with the unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate were $1.0 million and $0.9 million at September 30, 2019 and 2018, respectively. It is not anticipated that the balance of unrecognized tax benefits will change significantly over the next twelve months.

When applicable, the Company’s practice is to recognize interest and penalties related to uncertain income tax positions in income tax expense. For the years ended September 30, 2019 and September 30, 2018 the amounts recognized by the Company for interest and penalties were not material. The corresponding liability recorded in the consolidated balance sheet as of September 30, 2019 and 2018 was also not material.

The Company and its subsidiaries file U.S. federal income tax returns. The Company and its subsidiaries’ federal income tax returns for tax years 2013 and beyond are open tax years subject to examination by the Internal Revenue Service (“IRS”). The Company also has net operating loss carry-forwards from prior to 2013, which are subject to examination upon future utilization of such losses. The Company and its subsidiaries also file income tax returns in various state jurisdictions, as appropriate, with varying statutes of limitation. Certain subsidiaries file federal and provincial income tax returns in Canada. These returns are not material to the consolidated income tax provision.

US Tax Reform Legislation

On December 22, 2017, the President of the United States signed into law H.R. 1, comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). Except for certain provisions, the Tax Act is effective for tax years beginning on or after January 1, 2018. As a fiscal year U.S. taxpayer, the majority of the provisions, such as new limitations on certain business deductions, including the limitation on the Company’s interest expense deduction, applied to the Company beginning in fiscal 2019. For fiscal 2018 and effective in the three months ended December 31, 2017, the most significant impact included: lowering of the U.S. federal corporate income tax rate and remeasuring certain net deferred tax assets and liabilities. The phase in of the lower corporate income tax rate resulted in a blended rate of 24.5% for fiscal 2018, as compared to the previous rate of 35%. The tax rate was reduced to 21% in subsequent fiscal years. Because the Company has net operating loss carry-forwards and was not expected to owe federal tax in the fiscal year 2018 tax return, the remeasurement of deferred taxes and the annual effective tax rate for the period are calculated using the future federal tax rate of 21%. In the year ended September 30, 2018, the Company recorded a $22.5 million net income tax benefit for the remeasurement of certain deferred tax assets and liabilities. The Company’s effective tax rate was significantly impacted by the recognition of this remeasurement.

In December 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) which provided guidance on how companies should account for the tax effects related to the Tax Act. According to SAB 118,

 

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companies were to make a good faith effort to compute the impact of the Tax Act in a timely manner once the company obtained, prepared, and analyzed the information needed to complete their accounting requirements under ASC 740. The measurement period for SAB 118 ended December 22, 2018, and companies are now required to report the impact of the Tax Act using existing tax law and other sources of authority. The Company was able to record the impact of the Tax Act without using the measurement period provisions of the Tax Act. The material elements of the Tax Act are reflected in the rate reconciliation as final.

Certain law changes from the Tax Act require the Company to analyze new items including, but not limited to, limitations on interest deductions and accelerated cost recovery of fixed assets. The Company has made policy decisions as to how to account for the tax effects of these items, as required by authoritative regulatory guidance, and will continue to analyze the impact as additional authoritative and technical guidance is issued and finalized at the federal and state levels.

The Tax Act also revised the definition of “covered employees” who are subject to the $1.0 million limitation imposed on deductions for executive compensation paid by publicly-traded corporations. As a result, the limitation now applies to the chief executive officer, the chief financial officer, the three other highest- compensated employees and any employee who was a covered employee for any taxable year beginning after 2016. The Tax Act also eliminated the exception to this rule for commission or performance-based compensation paid to these covered employees. This new provision generally does not apply to compensation paid pursuant to a written contract in effect on or before November 3, 2017 that is not materially modified or renewed. Based on this new provision, if and when the Company becomes publicly traded, it will adjust its Deferred Tax Asset related to future stock compensation deductions for amounts that it does not expect it will be able to deduct in the future. The Company will continue to analyze executive compensation in future periods and adjust the Deferred Tax Asset for limitations of estimated future compensation deductions as information becomes available.

 

14.

SEGMENTS

Operating segments for the Company are determined based on information used by the chief operating decision maker (“CODM”) in deciding how to evaluate performance and allocate resources to each of the segments. CPG’s CODM reviews Adjusted EBITDA and Adjusted EBITDA Margin as the key segment measures of performance. Adjusted EBITDA is defined as segment operating income (loss) plus depreciation and amortization, adjusted by adding thereto or subtracting therefrom share-based compensation, asset impairments and inventory revaluations, business transformation costs, acquisition costs and certain other costs. Adjusted EBITDA Margin is defined as Adjusted EBITDA divided by Net Sales.

The Company has two reportable segments, Residential and Commercial. The reportable segments were determined primarily based on products and end markets as follows:

 

   

Residential—The Residential segment manufactures and distributes decking, rail, trim and accessories through a national network of dealers and distributors and multiple home improvement retailers providing extensive geographic coverage enabling the Company to effectively serve contractors. The recent addition of Ultralox and Versatex are complementary to the Residential segment railing and trim businesses, respectively. This segment is impacted by trends in and the strength of home repair and remodel activity.

 

   

Commercial—The Commercial segment manufactures, fabricates and distributes resin based extruded sheeting products for a variety of commercial and industrial applications through a widespread distribution network as well as directly to original equipment manufacturers. This segment includes Scranton Products which manufactures lockers and partitions and Vycom which manufactures resin based sheeting products. This segment is impacted by trends in and the strength of the new construction sector.

The accounting policies of the operating segments are the same as those described in Note 2, “Summary of Significant Accounting Policies”. Intercompany transactions between segments are excluded as they are not

 

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included in management’s performance review of the segments. Currently our foreign revenue accounts for less than 10% of our consolidated revenue. We do not disclose assets outside of the United States as they totaled less than 10% of our consolidated assets as of September 30, 2019 and 2018.

The segment data below includes the following data for Residential and Commercial for the years ended September 30, 2019 and 2018:

 

    For the fiscal year ended September 30,  
    Residential     Commercial     Corporate and
Eliminations
    Total  
    2019     2018     2019     2018     2019     2018     2019     2018  

(us dollar in thousands)

               

Net Sales

  $ 655,445     $ 541,942     $ 138,758     $ 139,863     $ —       $ —       $ 794,203     $ 681,805  

Adjusted EBITDA

    188,742       168,438       21,493       21,669       (30,669     (25,693     179,566       164,414  

Capital Expenditures

    48,206       36,121       4,592       4,308       10,208       2,329       63,006       42,758  

Depreciation and Amortization

    81,716       66,396       8,845       8,961       3,368       2,308       93,929       77,665  

Goodwill

    903,909       903,909       40,389       40,389       —         —         944,298       944,298  

Total assets

    1,584,383       1,596,075       171,721       162,543       32,159       20,562       1,788,263       1,779,180  

 

     2019     2018  

Segment Adjusted EBITDA

    

Residential

   $ 188,742     $ 168,438  

Commercial

     21,493       21,669  
  

 

 

   

 

 

 

Segment Adjusted EBITDA for reportable segments

     210,235       190,107  

Unallocated net expenses

     (30,669     (25,693

Adjustments to Income (loss) before income tax benefit

    

Interest expense

     (83,205     (68,742

Depreciation and amortization

     (93,929     (77,665

Share-based compensation costs

     (3,682     (3,099

Asset impairment and inventory revaluation costs(1)

     —         (12,747

Restructuring and business transformation costs(2)

     (16,560     (5,822

Capital structure transaction costs(3)

     —         (367

Acquisition costs(4)

     (4,110     (7,361

Initial public offering costs

     (9,076     (789

Other costs(5)

     6,845       (4,189
  

 

 

   

 

 

 

Income (loss) before income taxes

   $ (24,151   $ (16,367
  

 

 

   

 

 

 

 

(1)

Asset impairment and inventory revaluation costs reflect tangible and intangible asset impairment costs of $0.0 million and $0.9 million for September 30, 2019 and 2018, respectively, and inventory revaluations of $0.0 million and $11.8 million for September 30, 2019 and 2018, respectively.

(2)

Restructuring and business transformation costs reflect consulting and other costs related to repositioning of brands of $4.3 million and $0.0 for September 30, 2019 and 2018, respectively, compensation costs related to the transformation of the senior management team of $2.3 million and $0.2 million for September 30, 2019 and 2018, respectively, costs related to the relocation of the Company’s corporate headquarters of $2.0 million in fiscal 2019, start up costs of the Company’s new recycling facility of $5.3 million in fiscal 2019, and other integration-related costs of $2.7 million and $5.6 million for September 30, 2019 and 2018, respectively.

(3)

Capital structure transaction costs include non-capitalizable debt and equity issuance costs.

(4)

Acquisition costs reflect costs directly related to completed acquisitions of $4.1 million and $4.9 million for September 30, 2019 and 2018, respectively and inventory step-up adjustments related to recording the inventory of acquired businesses at fair value on the date of acquisition of $0.0 million and $2.4 million for September 30, 2019 and 2018, respectively.

(5)

Other costs reflect costs for legal defense of $0.9 million and $1.5 million for September 30, 2019 and 2018, respectively, costs related to a change in the estimated warranty obligation based on a change in operational

 

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  policy on reimbursement of claims of $2.1 million in fiscal 2018, other miscellaneous adjustments of $0.0 million and $0.6 million for the September 30, 2019 and 2018, respectively, and income from an insurance recovery of legal loss of $7.7 million and $0.0 million for September 30, 2019 and 2018, respectively.

 

15.

COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases vehicles, machinery and a manufacturing facility under various capital lease agreements. The Company also leases office space, manufacturing facilities, vehicles and office equipment under various operating lease agreements. During the year ended September 30, 2018, the Company subleased its Skokie, Illinois Corporate office space to facilitate a move to a new leased space in Chicago, Illinois during December 2018. The future minimum operating lease payments outlined below have not been reduced for anticipated future minimum sublease rentals of $1.1 million at September 30, 2019.

The future minimum annual payments under noncancelable leases with initial or remaining noncancelable lease terms in excess of one year as of September 30, 2019 were as follows:

 

(US dollars in thousands)

   Capital     Financing      Operating  

2020

   $ 1,510     $ 459      $ 1,097  

2021

     1,454       769        848  

2022

     1,271       788        637  

2023

     841       808        417  

2024

     592       827        46  

Thereafter

     2,789       4,607        —    
  

 

 

   

 

 

    

 

 

 

Total Payments

     8,457     $ 8,258      $ 3,045  
  

 

 

   

 

 

    

 

 

 

Less amount representing interest

     (4,496     
  

 

 

      

Present value of minimum capital lease payments

   $ 3,961       
  

 

 

      

For operating leases, the related operating lease payments are expensed on a straight-line basis over the lease term, including, as applicable, any free-rent period during which the Company has the right to use the asset. For leases with renewal options where the renewal is reasonably assured, the lease term, including the renewal period, is used to determine the appropriate lease classification and to compute periodic rental expense. Total rent expense related to operating leases was approximately $1.3 million and $1.4 million for the years ended September 30, 2019 and 2018, respectively. Total future minimum sublease income under a noncancelable sublease was $1.1 million at September 30, 2019.

In 2018, the Company entered into a lease agreement for its corporate headquarters in Chicago, IL. The Company was responsible for costs to build out the office space and spent approximately $3.4 million in improvements to meet the Company’s needs. Based on the lease agreement and the changes made to the office space the Company concluded that it was the “deemed owner” of the building (for accounting purposes only) during the construction period. The Company recorded the build out costs as an asset with a corresponding build-to suit liability while the building was under construction. Upon completion of the improvements to the building, the Company evaluated the derecognition of the asset and liability under the provisions of ASC 840-40, Leases—Sale-Leaseback Transactions. The Company determined that the lease did not meet the criteria for sale-lease back accounting treatment, due to the Company’s continuing involvement in the project. As a result, the building is being accounted for as a financing obligation. The underlying assets amount to approximately $9.2 million. The Company determined that its incremental borrowing rate for the purpose of calculating the interest and principal components of each lease payment was 8.7%.

 

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Raw Material and Fixed Asset Purchase Commitments

The Company fulfills requirements for raw materials under both purchase orders and supply contracts. In the year ended September 30, 2019, the Company purchased substantially all of its raw materials, other than resins, under purchase orders which do not involve long-term supply commitments.

Substantially all of the Company’s resins are purchased under supply contracts that may average approximately one to two years, for which pricing is variable based on certain industry-based market indices. The resin supply contracts are negotiated annually and generally provide that the Company is obligated to purchase a minimum amount of resins from each supplier. As of September 30, 2019, the Company has purchase commitments under material supply contracts of $5.6 million for the calendar year ending December 31, 2019.

As of September 30, 2019, and 2018, the Company had committed to purchase $0.7 million and $1.2 of equipment, respectively.

Legal Proceedings

In the normal course of the Company’s business, it is at times subject to pending and threatened legal actions, in some cases for which the relief or damages sought may be substantial. Although the Company is not able to predict the outcome of such actions, after reviewing all pending and threatened actions with counsel and based on information currently available, management believes that the outcome of such actions, individually or in the aggregate, will not have a material adverse effect on the Company’s results of operations or financial position. However, it is possible that the ultimate resolution of such matters, if unfavorable, may be material to the Company’s results of operations in a particular future period as the time and amount of any resolution of such actions and its relationship to the future results of operations are not currently known. The Company accrues for losses when they are probable of occurrence and such losses are reasonably estimable. Legal costs expected to be incurred are accounted for as they are incurred.

During the year ended September 30, 2017 the Company recorded a $7.5 million reserve for a counterclaim brought by a competitor. During the year ended September 30, 2018, the Company paid $7.5 million related to this reserve. In connection with this legal matter the Company is pursuing potential coverage with its insurance carriers. The Company maintains specialty insurance policies. The Company filed claims under its insurance policies to recover the loss and legal defense costs. Subsequent to September 30, 2018, the Company received $7.7 million as settlement of its claims under the specialty insurance policies. The settlement of $7.7 million is included in operating income during the 2019 fiscal year.

An additional legal matter involved a class action settlement related to certain legacy products and their performance and the Company recorded a separate $7.5 million reserve in respect of this matter. During the year ended September 30, 2018, the Company paid settlements of $5.6 million related to this reserve. After settlement of both matters the remaining balance of $1.9 million was reversed, resulting in a reduction in “Selling, general and administrative expense” in the Consolidated Statement of Comprehensive Income (Loss) during the year ended September 30, 2018.

On June 18, 2018, the Company acquired Versatex. In connection with a contingent liability assumed by the Company in the acquisition, the Company recorded a contingent liability of $5.8 million as a measurement period adjustment to the opening balance sheet related to the assumption of a contingency related to an automobile accident involving a Versatex employee prior to the acquisition. The case is currently in discovery as the nature and extent of the injuries involved are currently being determined. The trial date is set for September 2019. The Company recorded a $5.8 million accrual and a $5.8 million contingent insurance recovery as the insurance carrier verified the loss was covered under the related automobile insurance policy. Both the reserve and the recovery receivable were recorded as measurement period adjustments to the opening balance sheet. There was no impact to the Consolidated Statement of Comprehensive Income (Loss) during the year ended

 

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September 30, 2018. The contingent liability is presented in “Accrued expenses and other liabilities,” and the contingent receivable is presented as “Other current assets” in the Consolidated Balance Sheets as of September 30, 2019 and 2018.

During the year ended September 30, 2019, the Company was made aware of a worker’s compensation case that became reasonably possible to give rise to a liability. The case is in discovery as the nature and extent of the Company’s exposure is currently being determined. The Company expects a range of loss of $0.4 million to $0.5 million. As of September 30, 2019, and September 30, 2018, there are other various worker’s compensation and personal injury claims that have been made against the Company. All such claims are being contested and the Company does not believe a loss is probable; therefore, no reserve has been recorded related to these matters. In addition, the Company carries insurance for these types of matters and is expecting to recover thereon.

The Company is a party to various legal proceedings and claims, which arise in the ordinary course of business. As of September 30, 2019, the Company determined that there was not at least a reasonable possibility that it had incurred a material loss, or a material loss in excess of a recorded accrual, with respect to such proceedings.

 

16.

RELATED PARTY TRANSACTIONS

On October 12, 2018, the Company entered into a consulting arrangement with the Hawksbill Group for a term of six months. The Hawksbill Group is 30% owned by Mr. Tim Lee, a member of the Board of Directors of CPG. Under the terms of the agreement, Hawksbill Group is to provide advisory services regarding operations and maintenance activities. The consulting agreement was approved by the Chief Executive Officer and the former Chief Financial Officer. The monthly fee under the arrangement is less than $0.1 million per month and the contract was canceled in June 2019 with fees totaling $0.5 million. Similar related party arrangements existed with Hawksbill during fiscal years ended September 30, 2018 and total fees expensed for the arrangement were $0.6 million. The amount payable to the Hawksbill Group as of September 30, 2018 was $0.1 million.

 

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17.

CONDENSED FINANCIAL INFORMATION OF REGISTRANT (PARENT COMPANY ONLY)

CPG Newco LLC

(parent company only)

Condensed Balance Sheets

(In thousands)

 

     As of September 30,  
     2019     2018  
ASSETS     

Non-current assets:

    

Investment in subsidiaries

   $ 490,023     $ 505,553  
  

 

 

   

 

 

 

Total non-current assets

     490,023       505,553  
  

 

 

   

 

 

 

Total assets

   $ 490,023     $ 505,553  
  

 

 

   

 

 

 
LIABILITIES AND MEMBER’S EQUITY     

Total liabilities

     —         —    
  

 

 

   

 

 

 

Member’s equity:

    

1 Class A Common unit authorized, issued and outstanding at September 30, 2019 and 2018

   $ —       $ —    

Additional paid-in capital

     652,601       648,129  

Accumulated deficit

     (162,578     (142,576
  

 

 

   

 

 

 

Total member’s equity

     490,023       505,553  
  

 

 

   

 

 

 

Total liabilities and member’s equity

   $ 490,023     $ 505,553  
  

 

 

   

 

 

 

CPG Newco LLC

(parent company only)

Condensed Statements of Comprehensive Income (Loss)

(In thousands)

 

     Years Ended September 30,  
             2019                      2018          

Net income (loss) of subsidiaries

   $ (20,196    $ 6,745  
  

 

 

    

 

 

 

Net income (loss)

   $ (20,196    $ 6,745  
  

 

 

    

 

 

 

Comprehensive income (loss)

   $ (20,196    $ 6,745  
  

 

 

    

 

 

 

CPG Newco LLC did not have any cash as of, or for the years ended September 30, 2019 or September 30, 2018, and accordingly a condensed statement of cash flows has not been presented.

Basis of Presentation

The parent company financial statements should be read in conjunction with the Company’s Consolidated Financial Statements and the accompanying notes thereto. For purposes of this condensed financial information, the Company’s wholly owned and majority owned subsidiaries are recorded based upon its proportionate share of the subsidiaries’ net assets (similar to presenting them on the equity method).

Since the restricted net assets of CPG Newco LLC and its subsidiaries exceed 25% of the consolidated net assets of the Company and its subsidiaries, the accompanying condensed parent company financial statements have been prepared in accordance with Rule 12-04, Schedule 1 of Regulation S-X. This information should be read in conjunction with the accompanying Consolidated Financial Statements.

 

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Dividends from Subsidiaries

There were no cash dividends paid to CPG Newco LLC from the Company’s consolidated subsidiaries during each of the years ended September 30, 2019 and 2018.

Restricted Payments

CPG International LLC is party to the Revolving Credit Facility and the Term Loan Agreement originally executed on September 30, 2013, both of which have been amended and extended from time to time. The obligations under the Revolving Credit Facility and Term Loan Agreement are secured by substantially all of the present and future assets of the borrowers and guarantors, including equity interests of their domestic subsidiaries, subject to certain exceptions.

The obligations under the Revolving Credit Facility and Term Loan Agreement are guaranteed by the Company and its wholly owned domestic subsidiaries other than certain immaterial subsidiaries and other excluded subsidiaries. CPG International LLC is not permitted to make certain payments unless those payments are consistent with exceptions outlined in the agreements. These payments include repurchase of equity interests, fees associated with a public offering, income taxes due and other applicable payments. Further, the payments are only permitted if certain conditions are met related to availability and fixed charge coverage as defined in the Revolving Credit Facility and described in Note 8 to these Consolidated Financial Statements.

 

18.

REVISION OF PREVIOUSLY REPORTED FINANCIAL INFORMATION

As described in Note 2, the Company corrected errors for all prior periods presented by revising the Consolidated Financial Statements and other financial information included herein. The Company believes that the errors are not material.

The following table represents the effect of the revision on the Consolidated Balance Sheet:

 

(In thousands)    September 30, 2018  
     As Reported     Adjustments      As Revised  

Trade receivables, net of allowances

   $ 44,520     $ (528    $ 43,992  

Inventories

     111,343       (444      110,899  

Total current assets

     249,641       (972      248,669  

Property, plant and equipment, net

     175,016       5,805        180,821  

Total assets

     1,774,347       4,833        1,779,180  

Accounts payable

     36,405       (528      35,877  

Accrued rebates

     19,284       472        19,756  

Accrued expenses and other liabilities

     33,168       (472      32,696  

Total current liabilities

     110,327       (528      109,799  

Finance obligations – less current portion

     2,600       5,805        8,405  

Total liabilities

     1,268,350       5,277        1,273,627  

Accumulated deficit

     (142,132     (444      (142,576

Total member’s equity

     505,997       (444      505,553  

Total liabilities and member’s equity

     1,774,347       4,833        1,779,180  

 

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The following table represents the effect of the revision on the Consolidated Statement of Comprehensive Income (Loss):

 

(In thousands)    Year Ended September 30, 2018  
     As Reported     Adjustments      As Revised  

Net sales

   $ 682,666     $ (861    $ 681,805  

Cost of sales

     (479,325     (444      (479,769

Gross profit

     203,341       (1,305      202,036  

Selling, general and administrative expenses

     (145,549     861        (144,688

Operating income (loss)

     52,819       (444      52,375  

Income (loss) before income taxes

     (15,923     (444      (16,367

Net income (loss)

     7,189       (444      6,745  

Basic and diluted net income (loss) per common unit

     7,189       (444      6,745  

Comprehensive income (loss)

     7,189       (444      6,745  

The following table represents the effect of the revision on the Consolidated Statement of Member’s Equity:

 

(In thousands)    Year Ended September 30, 2018  
     As Reported      Adjustments      As Revised  

Net income (loss)

   $ 7,189      $ (444    $ 6,745  

Balance – September 30, 2018

     505,997        (444      505,553  

The following table represents the effect of the revision on the Consolidated Statement of Cash Flow:

 

(In thousands)    Year Ended September 30, 2018  
     As Reported      Adjustments      As Revised  

Net income (loss)

   $ 7,189      $ (444    $ 6,745  

Trade receivables

     1,859        528        2,387  

Inventories

     509        444        953  

Accounts payable

     4,926        (528      4,398  

Supplemental non-cash investing and financing disclosure:

        

Property, plant and equipment acquired under finance obligations

     1,240        5,805        7,045  

 

19.

SUBSEQUENT EVENTS

The financial statements of CPG Newco LLC are substantially comprised of the financial statements of CPG International LLC, which issued its annual Consolidated Financial Statements on December 4, 2019. Accordingly, the Company has evaluated transactions for consideration as recognized subsequent events in the annual Consolidated Financial Statements through December 4, 2019. Additionally, the Company has evaluated transactions that occurred as of the issuance of these Consolidated Financial Statements, December 23, 2019, for the purpose of disclosure of unrecognized subsequent events and determined there were no other events or transactions that require recognition or disclosure in these financial statements.

 

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LOGO


Table of Contents

                     Shares

 

 

LOGO

 

Class A Common Stock

 

 

Prospectus

                    , 2020

 

 

Barclays

BofA Securities

Goldman Sachs & Co. LLC

Jefferies

 

 

Citigroup Global Markets Inc.

Credit Suisse Securities (USA) LLC

Deutsche Bank Securities Inc.

RBC Capital Markets, LLC

 

 

B. Riley FBR, Inc.

Robert W. Baird & Co. Incorporated

Stephens Inc.

Stifel, Nicolaus & Company, Incorporated

SunTrust Robinson Humphrey, Inc.

William Blair & Company, L.L.C.

 

 


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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth all costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of the Class A common stock being registered. All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the exchange listing fee.

 

     Amount to
be Paid
 

SEC registration fee

   $                     *  

FINRA filing fee

                         *  

Initial exchange listing fee

                         *  

Printing and engraving expenses

                         *  

Legal fees and expenses

                         *  

Accounting fees and expenses

                         *  

Transfer agent and registrar fees

                         *  

Miscellaneous fees and expenses

                         *  
  

 

 

 

Total

   $                     *  
  

 

 

 

 

*

To be provided by amendment.

Item 14. Indemnification of Directors and Officers.

Upon the completion of the offering contemplated by this registration statement, we will be incorporated under the laws of the State of Delaware. Section 102 of the DGCL, permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his or her 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 in violation of Delaware corporate law or obtained an improper personal benefit.

Section 145 of the DGCL provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he or she is or is threatened to be made a party by reason of such position, if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

As permitted by the DGCL, our certificate of incorporation and bylaws will provide that we will indemnify and advance expenses to our directors and officers, and may indemnify and advance expenses to our employees and other agents, to the fullest extent permitted by Delaware law. If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended.

We intend to enter into agreements with our directors and executive officers that will require us to indemnify them against expenses, judgments, fines, settlements and other amounts that any such person becomes

 

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legally obligated to pay in connection with any proceeding to which such person may be made a party by reason of the fact that such person is or was serving in such capacity, provided such person acted in good faith and in a manner such person reasonably believed to be in, or not opposed to, our best interests. These indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder. At present, no litigation or proceeding is pending that involves any of our directors or officers regarding which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.

Upon the completion of this offering, we will maintain a directors’ and officers’ liability insurance policy. The policy will insure directors and officers against unindemnified losses arising from certain wrongful acts in their capacities as directors and officers and reimburse us for those losses for which we lawfully indemnify the directors and officers. The policy will likely contain various exclusions.

In addition, the underwriting agreement filed as Exhibit 1.1 to this registration statement provides for indemnification by the underwriters of us and our officers and directors for certain liabilities arising under the Securities Act or otherwise.

Item 15. Recent Sales of Unregistered Securities.

Prior to the effectiveness of this registration statement, we will complete transactions pursuant to which a special purpose entity, CPG Holdco LLC, which was formed at the time of the acquisition of CPG Newco LLC solely for the purpose of holding membership interests in CPG Newco LLC and that will continue to hold such interests until the Corporate Conversion, will be merged with and into us, and we will then convert from a Delaware limited liability company into a Delaware corporation. We refer to this series of transactions as the Corporate Conversion. In connection with the Corporate Conversion, our sole outstanding unit will be converted into                      Class A units and                      Class B units, which, simultaneously with our conversion into a corporation, will then be converted into                      shares of Class A common stock and                      shares of Class B common stock on a one-for-one basis. AOT Building Products, L.P., as the sole owner of our equity interests following the merger with CPG Holdco LLC, will receive all of the Class A units and Class B units. AOT Building Products, L.P. will then liquidate and distribute the Class A units and Class B units to its equityholders. Following such liquidation and distribution, the former equityholders of AOT Building Products, L.P. will own all of our Class A units and Class B units, and, following the Corporate Conversion, will own all of the shares of Class A common stock and Class B common stock.

The issuance of CPG Newco LLC units in the merger with CPG Holdco LLC will not be registered under the Securities Act, and the units will be issued to AOT Building Products, L.P., as the sole member of CPG Holdco LLC prior to the merger, in reliance upon the exemption from the registration requirements of the Securities Act set forth in Section 4(a)(2) of the Securities Act. The conversion of our units held by AOT Building Products, L.P.’s former equityholders after the merger and the Corporate Conversion into shares of Class A common stock and Class B common stock will not be registered under the Securities Act, and the shares will be issued to AOT Building Products, L.P.’s former equityholders in reliance upon the exemption from the registration requirements of the Securities Act set forth in Section 3(a)(9) of the Securities Act.

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

The exhibits to this registration statement are listed in the Exhibit Index attached hereto and incorporated by reference herein.

(b) Financial Statement Schedules

Financial statement schedules are omitted because the required information is not applicable, not required or included in the financial statements or the notes thereto included in the prospectus that forms a part of this registration statement.

 

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Item 17. Undertakings.

Insofar as indemnification by the registrant 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 SEC 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 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
Number

   

Description of Document

  1.1     Form of Underwriting Agreement
  2.2     Form of Agreement and Plan of Merger between CPG Newco LLC and CPG Holdco LLC*
  2.3     Form of Certificate of Conversion of CPG Newco LLC*
  2.4     Membership Interest Purchase Agreement, dated as of May  11, 2018, by and among CPG International LLC d/b/a The AZEK Company LLC, Versatex Holdings, LLC, the members of Versatex Holdings, LLC and Highlander Partners Trim, LLC
  2.5     Amendment No. 1 to Membership Interest Purchase Agreement, dated as of June  15, 2018, by and among CPG International LLC d/b/a The AZEK Company LLC, Versatex Holdings, LLC, the members of Versatex Holdings, LLC and Highlander Partners Trim, LLC
  3.1     Certificate of Formation of CPG Newco LLC, as currently in effect
  3.2     Certificate of Amendment of Certificate of Formation of AOT Building Products Newco LLC, dated as of September 16, 2013
  3.3     Form of Certificate of Incorporation of The AZEK Company Inc. (to be effective upon completion of the Registrant’s conversion from a limited liability company to a corporation)
  3.4     Limited Liability Company Agreement of CPG Newco LLC, as currently in effect
  3.5     Amendment No. 1 to the Limited Liability Company Agreement of AOT Building Products Newco LLC, dated as of September 16, 2013
  3.6     Form of Bylaws of The AZEK Company Inc. (to be effective upon completion of the Registrant’s conversion from a limited liability company to a corporation)
  4.2     Form of Stockholders Agreement, by and among the Registrant and the other parties named therein
  4.3     Form of Registration Rights Agreement, by and among the Registrant and the other parties named therein
  4.4     Indenture in respect of the 8.000% Senior Notes due 2021, dated as of September  30, 2013, by and among CPG International LLC, Wilmington Trust, National Association, as trustee, and the Guarantors party thereto
  4.5     Supplemental Indenture, dated as of September 30, 2013, by and among CPG International LLC, Wilmington Trust, National Association, as trustee, the New Guarantors party thereto
  4.6     Second Supplemental Indenture, dated as of December 19, 2014, by and among CPG International LLC, Wilmington Trust, National Association, as trustee, the New Guarantors party thereto
  4.7     Third Supplemental Indenture, dated as of February 20, 2018, by and among WES, LLC and Ultralox Technology, LLC, CPG International LLC and Wilmington Trust, National Association, as trustee
  4.8     Fourth Supplemental Indenture, dated as of June  18, 2018, by and among Versatex Holdings, LLC, Versatex Buildings Products, LLC, CPG International LLC, the guarantor party thereto from time to time and Wilmington Trust, National Association, as trustee
  4.9     Form of 8.000% Senior Notes due 2021 (included in Exhibit 4.3)
  5.1     Opinion of Sullivan & Cromwell LLP*

 

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Exhibit
Number

   

Description of Document

  10.1     Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017, by and among CPG International LLC, Barclays Bank PLC, Bank of America, N.A. and JPMorgan Chase Bank, N.A., as co-syndication agents, TD Bank, N.A. and The Huntington National Bank, as co-documentation agents, Deutsche Bank AG New York Branch as administrative and collateral agent and the lenders party thereto
  10.2     ABL Guarantee and Collateral Agreement, dated as of September  30, 2013, by and among CPG Merger Sub LLC, each other subsidiary of CPG Newco LLC party thereto and Deutsche Bank AG New York Branch, as administrative agent and collateral agent
  10.3     ABL Guarantee and Collateral Agreement Supplement, dated as of January  29, 2018, by and among WES, LLC, UltraLox Technology, LLC and Deutsche Bank AG New York Branch, as administrative agent and collateral agent
  10.4     ABL Guarantee and Collateral Agreement Supplement, dated as of June  18, 2018, by and among Versatex Holdings, LLC, Versatex Building Products, LLC and Deutsche Bank AG New York Branch, as administrative agent and collateral agent
  10.5     Trademark Security Agreement, dated as of September  30, 2013, by AZEK Building products, Inc., Scranton Products Inc., TimberTech Limited, and Vast Enterprises, LLC, as pledgors, in favor of Deutsche Bank AG New York Branch, in its capacity as administrative agent and collateral agent
  10.6     Trademark Security Agreement, dated as of January 29, 2018, by WES, LLC, in favor of Deutsche Bank AG New York Branch, in its capacity as administrative agent
  10.7     Trademark Security Agreement, dated as of June 18, 2018, by Versatex Building Products, LLC, in favor of Deutsche Bank AG New York Branch, in its capacity as administrative agent
  10.8     Patent Security Agreement, dated as of September  30, 2013, by AZEK Building Products, Inc., Scranton Products Inc., TimberTech Limited, and Vast Enterprises, LLC, as pledgors, in favor of Deutsche Bank AG New York Branch, in its capacity as administrative agent and collateral agent
  10.9     Patent Security Agreement, dated as of January 29, 2018, by WES, LLC, in favor of Deutsche Bank AG New York Branch, in its capacity as administrative agent
  10.10     Copyright Security Agreement, dated as of September 30, 2013, by AZEK Building Products, Inc., as pledgor, in favor of Deutsche Bank AG New York Branch, in its capacity as administrative agent and collateral agent
  10.11     Amended and Restated Term Loan Agreement, dated as of June  18, 2018, by and among CPG International LLC, Jefferies Finance LLC, as administrative and collateral agent and the Lenders party thereto (included in Exhibit 10.12)
  10.12     Incremental Amendment No. 1 to Term Loan Credit Agreement, dated as of June  18, 2018, by and among CPG Newco LLC, CPG International LLC, Jefferies Finance LLC, as administrative agent, and the Lenders party thereto
  10.13     Term Loan Guarantee and Collateral Agreement, dated as of September  30, 2013, by and among CPG Merger Sub LLC, each other subsidiary of CPG Newco LLC party thereto and Barclays Bank PLC, as administrative agent and collateral agent
  10.14     Term Loan Guarantee and Collateral Agreement Supplement, dated as of January  29, 2018, by and among WES, LLC, UltraLox Technology, LLC and Jefferies Finance LLC, as administrative agent and collateral agent
  10.15     Term Loan Guarantee and Collateral Agreement Supplement, dated as of June  18, 2018, by and among Versatex Holdings, LLC, Versatex Building Products, LLC and Jefferies Finance LLC, as administrative agent and collateral agent

 

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Exhibit
Number

   

Description of Document

  10.16     Trademark Security Agreement, dated as of September  30, 2013, by and among AZEK Building Products, Inc., Scranton Products Inc., TimberTech Limited, and Vast Enterprises, LLC, as pledgors, in favor of Barclays Bank PLC, in its capacity as administrative agent and collateral agent
  10.17     Trademark Security Agreement, dated as of January 29, 2018, by WES, LLC, in favor of Jefferies Finance LLC, in its capacity as successor administrative agent and collateral agent
  10.18     Trademark Security Agreement, dated as of June  18, 2018, by Versatex Building Products, LLC, in favor of Jefferies Finance LLC, in its capacity as successor administrative agent and collateral agent
  10.19     Patent Security Agreement, dated as of September  30, 2013, by and among AZEK Building Products, Inc., Scranton Products Inc., TimberTech Limited, and Vast Enterprises, LLC, as pledgors, in favor of Barclays Bank PLC, in its capacity as administrative agent and collateral agent
  10.20     Patent Security Agreement, dated as of January 29, 2018, by WES, LLC, in favor of Jefferies Finance LLC, in its capacity as successor administrative agent and collateral agent
  10.21     Copyright Security Agreement, dated as of September  30, 2013, by AZEK Building Products, Inc., as pledgor, in favor of Barclays Bank PLC, in its capacity as administrative agent and collateral agent
  10.22     Intercreditor Agreement, dated as of September  30, 2013, by and among Deutsche Bank AG New York Branch, as ABL Agent, Barclays Bank PLC, as a Term Loan Agent, CPG Merger Sub LLC and each of subsidiary of CPG Newco LLC party thereto
  10.23     Form of Indemnification Agreement
  10.24     Employment Agreement, dated as of May 26, 2016, by and between CPG International LLC and Jesse Singh
  10.25     Non-Competition Agreement, dated as of May 26, 2016, by and between CPG International LLC and Jesse Singh
  10.26     Employment Agreement, dated as of July 15, 2017, by and between CPG International LLC and Joe Ochoa
  10.27     Employment Offer Letter, dated as of September 20, 2017, by and between CPG International LLC and Jonathan Skelly
  10.28     Confidentiality and Non-Competition Agreement, dated as of September 15, 2017, by and between CPG International LLC and Jonathan Skelly
  10.29     Employment Agreement, dated as of December 21, 2018, by and between CPG International LLC and Ralph Nicoletti
  10.31     Amended and Restated Industrial Lease, dated as of May 10, 2005, by and between North Keyser Partners, LLC and Vycom Corp.
  10.32     Lease Extension – 888 North Keyser Ave, dated as of August 2, 2013, by and between CPG International LLC and North Keyser Partners, LLC
  10.33     Lease Extension – 888 North Keyser Ave, dated as of October 21, 2016, by and between CPG International LLC and North Keyser Partners, LLC
  10.34     The AZEK Company Inc. 2020 Omnibus Incentive Compensation Plan
  10.35     Form of Restricted Stock Grant (Replacement Award for AOT Building Products, L.P. Profits Interests)
  10.36     Form of Nonqualified Stock Option Grant (Option Award for AOT Building Products, L.P. Profits Interests)
  10.37     Form of IPO Nonqualified Stock Option Award Agreement (Chair IPO Award)
  10.38     Form of Restricted Stock Unit Award Agreement for Non-Employee Directors

 

II-6


Table of Contents

Exhibit
Number

   

Description of Document

  10.39     Form of Restricted Stock Unit Award Agreement
  10.40     Form of Nonqualified Stock Option Award Agreement
  10.41     Chairman IPO Award Letter Agreement, dated February 5, 2020, between CPG Newco LLC and Gary Hendrickson
  21.1     Subsidiaries of the Registrant
  23.1     Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm
  23.2     Consent of Sullivan & Cromwell LLP (included in Exhibit 5.1)*
  24.1     Power of Attorney (included on signature page)

 

*

To be filed in a subsequent amendment to this registration statement.

+

Previously filed.

 

II-7


Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Chicago, Illinois, on February 7, 2020.

 

CPG Newco LLC
By:   CPG Holdco LLC, its member
By:   AOT Building Products, L.P., its member
By:   AOT Building Products GP Corp. its general partner
By:  

/s/ Jesse Singh

  Jesse Singh
  Chief Executive Officer, President and Director

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jesse Singh and Ralph Nicoletti, and each one of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him or her and in their name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by this registration statement that is to be effective on filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

      

Title

 

Date

/s/ Jesse Singh

     Chief Executive Officer, President and Director (Principal Executive Officer)   February 7, 2020
Jesse Singh  

/s/ Ralph Nicoletti

Ralph Nicoletti

     Senior Vice President and Chief Financial Officer (Principal Financial Officer)   February 7, 2020

/s/ Gregory Jorgensen

Gregory Jorgensen

     Vice President and Chief Accounting Officer (Principal Accounting Officer)   February 7, 2020

/s/ Gary Hendrickson

     Chairman of the Board of Directors   February 7, 2020
Gary Hendrickson       

/s/ Sallie B. Bailey

     Director   February 7, 2020
Sallie B. Bailey       

 

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Table of Contents

Signature

      

Title

 

Date

/s/ Russell Hammond

     Director   February 7, 2020
Russell Hammond       

/s/ James B. Hirshorn

     Director   February 7, 2020
James B. Hirshorn       

/s/ Brian Klos

     Director   February 7, 2020
Brian Klos       

/s/ Ronald A. Pace

     Director   February 7, 2020
Ronald A. Pace       

/s/ Ashfaq Qadri

     Director   February 7, 2020
Ashfaq Qadri       

/s/ Bennett Rosenthal

     Director   February 7, 2020
Bennett Rosenthal       

/s/ Blake Sumler

     Director   February 7, 2020

Blake Sumler

      

 

II-9

Exhibit 1.1

] shares of Class A Common Stock

THE AZEK COMPANY INC.

(SUCCESSOR TO CPG NEWCO LLC)

UNDERWRITING AGREEMENT

[ ● ], 2020

BARCLAYS CAPITAL INC.,

BOFA SECURITIES, INC.

GOLDMAN SACHS & CO. LLC

JEFFERIES LLC

As Representatives of the several

Underwriters named in Schedule I attached hereto,

c/o Barclays Capital Inc.

745 Seventh Avenue

New York, New York 10019

Ladies and Gentlemen:

The AZEK Company Inc. (successor to CPG Newco LLC), a Delaware corporation (the “Company”), proposes to sell [ ● ] shares (the “Firm Stock”) of the Company’s Class A common stock, par value $0.001 per share (the “Common Stock”). In addition, the Company proposes to grant to the underwriters named in Schedule I (the “Underwriters”) attached to this agreement (this “Agreement”) an option to purchase up to an aggregate of [ ● ] additional shares of the Common Stock on the terms set forth in Section 2 (the “Option Stock”). The Firm Stock and the Option Stock, if purchased, are hereinafter collectively called the “Stock”. This Agreement is to confirm the agreement concerning the purchase of the Stock from the Company by the Underwriters.

As the sole managing member of CPG International LLC, a Delaware limited liability company (“CPG International”), the Company will operate and control all of the business and affairs of CPG International and, through CPG International and its subsidiaries, conduct the Company’s business.

1. Representations, Warranties and Agreements of the Company. The Company represents, warrants and agrees that:

(a) A registration statement on Form S-1 (File No. 333-[ ● ]) relating to the Stock has (i) been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations of the Securities and Exchange Commission (the “Commission”) thereunder; (ii) been filed with the Commission under the


Securities Act; and (iii) become effective under the Securities Act. Copies of such registration statement and any amendment thereto have been delivered by the Company (or made available through the Commission’s Electronic Data Gathering Analysis Retrieval System (“EDGAR”)) to you upon request as the representatives (the “Representatives”) of the Underwriters. As used in this Agreement:

(i) “Applicable Time” means [•][P.M.] (New York City time) on [ 🌑 ], 2020;

(ii) “Effective Date” means the date and time at which such registration statement, or the most recent post-effective amendment thereto, if any, was declared effective by the Commission;

(iii) “Issuer Free Writing Prospectus” means each “issuer free writing prospectus” (as defined in Rule 433 under the Securities Act);

(iv) “Preliminary Prospectus” means any preliminary prospectus relating to the Stock included in such registration statement or filed with the Commission pursuant to Rule 424(b) under the Securities Act;

(v) “Pricing Disclosure Package” means, as of the Applicable Time, the most recent Preliminary Prospectus, together with the information included in Schedule III hereto, if any, and each Issuer Free Writing Prospectus filed or used by the Company at or before the Applicable Time, other than a road show, that is an Issuer Free Writing Prospectus but is not required to be filed under Rule 433 under the Securities Act;

(vi) “Prospectus” means the final prospectus relating to the Stock, as filed with the Commission pursuant to Rule 424(b) under the Securities Act;

(vii) “Registration Statement” means the registration statement, as amended as of the Effective Date, relating to the offer and sale of the Stock, including any Preliminary Prospectus or the Prospectus, all exhibits to such registration statement and including the information deemed by virtue of Rule 430A under the Securities Act to be part of such registration statement as of the Effective Date;

(viii) “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) or Rule 163B of the Securities Act; and

(ix) “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.

 

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(b) From the time of initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any Person authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”).

(c) The Company (i) has not engaged in any Testing-the-Waters Communication, other than Testing-the-Waters Communications with the consent of the Representatives, with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or with institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed or approved for distribution any Written Testing-the-Waters Communications other than those listed on Schedule VI hereto.

(d) The Company was not at the time of initial filing of the Registration Statement, and is not on the date hereof and will not be on the Initial Delivery Date (as defined herein), an “ineligible issuer” (as defined in Rule 405 under the Securities Act).

(e) The Registration Statement conformed and will conform in all material respects on the Effective Date and on the applicable Delivery Date, and any amendment to the Registration Statement filed after the date hereof will conform in all material respects when filed, to the requirements of the Securities Act and the rules and regulations thereunder. The most recent Preliminary Prospectus conformed, and the Prospectus will conform, in all material respects when filed with the Commission pursuant to Rule 424(b) under the Securities Act and on the applicable Delivery Date to the requirements of the Securities Act and the rules and regulations thereunder.

(f) The Registration Statement did not, as of the Effective Date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Registration Statement in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).

(g) The Prospectus will not, as of its date or as of the applicable Delivery Date, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Prospectus in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).

 

3


(h) The Pricing Disclosure Package did not, as of the Applicable Time, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Pricing Disclosure Package in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).

(i) Each Issuer Free Writing Prospectus listed in Schedule IV hereto, when taken together with the Pricing Disclosure Package, did not, as of the Applicable Time, contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from such Issuer Free Writing Prospectus listed in Schedule IV hereto in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e).

(j) No Written Testing-the-Waters Communication, as of the Applicable Time, when taken together with the Pricing Disclosure Package, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from such Written Testing-the-Waters Communication listed on Schedule VI hereto in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information is specified in Section 8(e) and the Company has filed publicly on EDGAR at least 15 calendar days prior to any “road show” (as defined in Rule 433 under the Securities Act), any confidentially submitted registration statement and registration statement amendments relating to the offer and sale of the Stock. Each Written Testing-the-Waters Communications did not include any information that conflicted or conflicts or will conflict with the information contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus.

(k) Each Issuer Free Writing Prospectus conformed or will conform in all material respects to the requirements of the Securities Act and the rules and regulations thereunder on the date of first use, and the Company has complied with all prospectus delivery and any filing requirements applicable to such Issuer Free

 

4


Writing Prospectus pursuant to the Securities Act and rules and regulations thereunder. The Company has not made any offer relating to the Stock that would constitute an Issuer Free Writing Prospectus without the prior written consent of the Representatives, except as set forth on Schedule V hereto. The Company has retained in accordance with the Securities Act and the rules and regulations thereunder all Issuer Free Writing Prospectuses that were not required to be filed pursuant to the Securities Act and the rules and regulations thereunder. The Company has taken all actions necessary so that any “road show” (as defined in Rule 433 under the Securities Act) in connection with the offering of the Stock will not be required to be filed pursuant to the Securities Act and the rules and regulations thereunder.

(l) The Company and each of its subsidiaries have been duly organized, are validly existing and in good standing as a corporation or other business entity under the laws of its jurisdiction of organization and are duly qualified to do business and in good standing as a foreign corporation or other business entity in each jurisdiction in which their ownership or lease of property or the conduct of its businesses requires such qualification, except where the failure to be so qualified or in good standing would not, in the aggregate, reasonably be expected to have a material adverse effect on the condition (financial or otherwise), results of operations, stockholders’ equity, properties or business or prospects of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”). The Company and each of its subsidiaries have all corporate or similar organizational power and authority necessary to own or hold its properties and to conduct the businesses in which they are engaged as described in the most recent Preliminary Prospectus. The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed on Schedule VI hereto. None of the subsidiaries of the Company (other than [•]) is a “significant subsidiary” (as defined in Rule 405 under the Securities Act).

(m) The Company has an authorized capitalization as set forth in each of the most recent Preliminary Prospectus and the Prospectus as of the date or dates set forth therein, and all of the issued shares of capital stock of the Company have been duly authorized and validly issued, are fully paid and non-assessable, conform in all material respects to the description thereof contained in the most recent Preliminary Prospectus and were issued in compliance with federal and state securities laws and not in violation of any preemptive right, resale right, right of first refusal or similar right. All of the Company’s options, warrants or other rights to purchase or exchange any securities for shares of the Company’s capital stock, if any, have been duly authorized and validly issued, conform in all material respects to the description thereof contained in the most recent Preliminary Prospectus and were issued in compliance with federal and state securities laws. All of the issued shares of capital stock or other ownership interest of each subsidiary of the Company have been duly authorized and validly issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims, except for such liens, encumbrances, equities or claims as described in the most recent Preliminary Prospectus or as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

5


(n) The shares of the Stock to be issued and sold by the Company to the Underwriters hereunder have been duly authorized and, upon payment and delivery in accordance with this Agreement, will be validly issued, fully paid and non-assessable, will conform in all material respects to the description thereof contained in the most recent Preliminary Prospectus, will be issued in compliance with federal and state securities laws and will be free of statutory and contractual preemptive rights, rights of first refusal and similar rights.

(o) The Company has all requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement. This Agreement has been duly and validly authorized, executed and delivered by the Company.

(p) The issuance and sale of the Stock by the Company, the execution, delivery and performance of this Agreement by the Company, the statutory conversion and conversion of membership interests into common stock described in the most recent Preliminary Prospectus under the caption “Corporate Conversion” (such actions are herein collectively called the “Reorganization”), the consummation of the transactions contemplated hereby and the application of the proceeds from the sale of the Stock as described under “Use of Proceeds” in the most recent Preliminary Prospectus, will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, impose any lien, charge or encumbrance upon any property or assets of the Company and its subsidiaries, or constitute a default under any indenture, mortgage, deed of trust, loan agreement, license, lease or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject; (ii) result in any violation of the provisions of the charter or by-laws (or similar organizational documents) of the Company or any of its subsidiaries; or (iii) result in any violation of any statute or any judgment, order, decree, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets, except in the case of clauses (i) and (iii), as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

(q) No consent, approval, authorization or order of, or filing, registration or qualification with, any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets is required for the issuance and sale of the Stock by the Company, the execution, delivery and performance of this Agreement by the Company, the consummation of the transactions contemplated hereby, the application of the proceeds from the sale of the Stock as described under “Use of Proceeds” in the most recent Preliminary Prospectus and the Reorganization, except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, orders, filings, registrations or qualifications as may be required

 

6


under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the approval for listing on the New York Stock Exchange (the “Exchange”), the approval of the Secretary of State of the State of Delaware with respect to certain documents required to be filed therewith in connection with the Reorganization and applicable state and foreign securities laws and/or the bylaws and rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”) in connection with the purchase and sale of the Stock by the Underwriters.

(r) The historical financial statements (including the related notes) included in the most recent Preliminary Prospectus comply as to form in all material respects with the requirements of Regulation S-X under the Securities Act and present fairly in all material respects the financial position, results of operations and cash flows of the entities purported to be shown thereby at the dates and for the periods indicated and have been prepared (subject to year-end audit adjustments in the case of unaudited financial statements) in conformity with accounting principles generally accepted in the United States applied on a consistent basis throughout the periods involved.

(s) To the Company’s knowledge and based in part on confirmations provided by PricewaterhouseCoopers LLP (“PWC”), PWC, who have certified certain financial statements of the Company and its consolidated subsidiaries, whose report appears in the most recent Preliminary Prospectus and who have delivered the initial letter referred to in Section 7(e) hereof, are independent public accountants as required by the Securities Act and the rules and regulations thereunder.

(t) Except as described in the most recent Preliminary Prospectus, the Company maintains internal accounting controls (applicable to its consolidated subsidiaries) sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States and to maintain accountability for its assets, (iii) access to the Company’s assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for the Company’s assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as described in the most recent Preliminary Prospectus, as of the date of the most recent balance sheet of the Company and its consolidated subsidiaries reviewed or audited by PWC and the audit committee of the board of directors of the Company (the “Audit Committee”), there were no material weaknesses in the Company’s internal controls. Nothing in this Section 1(t) shall require the Company to comply with Section 404 of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”) as of an earlier date than it would otherwise be required to do so under applicable law.

 

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(u) Except as described in the most recent Preliminary Prospectus, (i) the Company maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act and as applicable to its consolidated subsidiaries) that comply with the requirements of the Exchange Act applicable to the Company, (ii) such disclosure controls and procedures are designed to ensure that the information is accumulated and communicated to management of the Company and its subsidiaries, including their respective principal executive officers and principal financial officers, as appropriate and (iii) such disclosure controls and procedures are effective in all material respects to perform the functions for which they were established.

(v) Except as described in the most recent Preliminary Prospectus, since the date of the most recent balance sheet of the Company and its consolidated subsidiaries reviewed or audited by PWC and the Audit Committee, (i) the Company has not been advised of or become aware of (A) any significant deficiencies in the design or operation of internal controls that could adversely affect the ability of the Company or any of its subsidiaries to record, process, summarize and report financial data, except as disclosed to the Underwriters, or any material weaknesses in internal controls, or (B) any fraud, whether or not material, that involves management or other employees who have a significant role in the internal controls of the Company and each of its subsidiaries; and (ii) there have been no significant changes in internal controls or in other factors that would significantly affect internal controls, other than corrective actions with regard to significant deficiencies and material weaknesses that are consistent with the disclosure related to remediation of existing material weaknesses included in the most recent Preliminary Prospectus.

(w) The section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” set forth in the most recent Preliminary Prospectus accurately and fully describes (i) the accounting policies that the Company believes are the most important in the portrayal of the Company’s financial condition and results of operations and that require management’s most difficult, subjective or complex judgments (“Critical Accounting Policies”); and (ii) the judgments and uncertainties affecting the application of Critical Accounting Policies.

(x) There is and has been no failure on the part of the Company, or to the knowledge of the Company, any of the Company’s directors or officers, in their capacities as such, to comply with the applicable provisions of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith.

 

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(y) Since the date of the latest audited financial statements included in the most recent Preliminary Prospectus, (a) neither the Company nor any of its subsidiaries has (i) sustained any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree (whether domestic or foreign), (ii) issued or granted any securities, other than pursuant to equity incentive plans or similar arrangements described in the most recent Preliminary Prospectus, (iii) incurred any material liability or material obligation, direct or contingent, other than liabilities and obligations that were incurred in the ordinary course of business, (iv) entered into any material transaction not in the ordinary course of business, or (v) declared or paid any dividend on its capital stock, and (b) since such date, there has not been any change in the capital stock, partnership or limited liability interest, as applicable, other than (v) the issuance of the Stock pursuant to this Agreement, (w) the issuance of profits interests, shares of stock, shares of restricted stock, stock options or other awards under equity incentive plans or similar arrangements described in the most recent Preliminary Prospectus or pursuant to currently outstanding options, warrants or rights not issued under one of those plans, in each case to the extent such plans, arrangements, options, warrants or rights are described in the most recent Preliminary Prospectus, (x) any shares of Common Stock, Class B common stock or other awards issued in connection with the Reorganization, (y) the exchange of shares of Common Stock for shares of Class B common stock and the exchange of shares of Class B common stock for Common Stock (in each case, to the extent disclosed to the Representatives) or (z) the repurchase of capital stock from employees of the Company or its subsidiaries pursuant to equity award agreements or other contractual arrangements in connection with the termination of such Person’s employment with the Company or its subsidiaries, or long-term debt, other than as described under “Use of Proceeds” in the most recent Preliminary Prospectus and the Prospectus, of the Company or any of its subsidiaries or any adverse change, or any development involving a prospective adverse change, in or affecting the condition (financial or otherwise), results of operations, stockholders’ equity, properties, management, business or prospects of the Company and its subsidiaries taken as a whole, in the case of each of clauses (a) and (b) except as described in the most recent Preliminary Prospectus or as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

(z) Except as described in the most recent Preliminary Prospectus, the Company and each of its subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title to all personal property owned by them (other than with respect to intellectual property, title to which is addressed exclusively in Section 1(aa)), in each case free and clear of all liens, encumbrances and defects, except such liens, encumbrances and defects as (i) do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or (ii) would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect. All assets held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases, with such exceptions as (i) do not materially interfere with the use made and proposed to be made of such assets by the Company and its subsidiaries or (ii) would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

 

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(aa) The Company and each of its subsidiaries have such permits, licenses, franchises, certificates of need and other approvals or authorizations of governmental or regulatory authorities (“Permits”) as are necessary under applicable law to own their properties and conduct their businesses in the manner described in the most recent Preliminary Prospectus, except for any of the foregoing that would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company and each of its subsidiaries have fulfilled and performed all of their respective obligations with respect to the Permits, and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or results in any other impairment of the rights of the holder or any such Permits, except for any of the foregoing that would not reasonably be expected to have a Material Adverse Effect. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, neither the Company nor any of its subsidiaries has received written notice of any revocation or modification of any such Permits or has any reason to believe that any such Permits will not be renewed in the ordinary course.

(bb) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and each of its subsidiaries own or possess adequate rights to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, know-how, software, systems and technology (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) necessary for the conduct of their respective businesses in the manner described in the most recent Preliminary Prospectus without infringement or other violation of any such rights of others and have not received any written notice of any claim of infringement or other conflict with, any such rights of others.

(cc) Except as disclosed in the most recent Preliminary Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject that would, in the aggregate, reasonably be expected to have a Material Adverse Effect or would, in the aggregate, reasonably be expected to have a material adverse effect on the performance by the Company of this Agreement or the consummation of the transactions contemplated hereby; and to the Company’s knowledge, no such proceedings are threatened or contemplated by governmental authorities or others.

(dd) There are no contracts or other documents required to be described in the Registration Statement or the most recent Preliminary Prospectus or filed as exhibits to the Registration Statement that are not described and filed as required. The statements made in the most recent Preliminary Prospectus, insofar as they purport to constitute summaries of the terms of the contracts and other documents described and filed, constitute accurate summaries of the terms of such contracts and documents in all material respects.

 

10


(ee) The Company and each of its subsidiaries carry, or are covered by, insurance from insurers of recognized financial responsibility in such amounts and covering such risks as is reasonable for the conduct of their respective businesses as described in the most recent Preliminary Prospectus and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries. All policies of insurance of the Company and its subsidiaries are in full force and effect; the Company and each of its subsidiaries are in compliance with the terms of such policies in all material respects; and neither the Company nor any of its subsidiaries has received written notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance; except as disclosed in the most recent Preliminary Prospectus, there are no material claims by the Company or any of its subsidiaries under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; and neither the Company nor any such subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have a Material Adverse Effect.

(ff) No relationship, direct or indirect, exists between or among the Company, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, that is required to be described in the most recent Preliminary Prospectus which is not so described.

(gg) No labor disturbance by or dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent that would reasonably be expected to have a Material Adverse Effect.

(hh) Neither the Company nor any of its subsidiaries (i) is in violation of its charter or by-laws (or similar organizational documents), (ii) is in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant, condition or other obligation contained in any indenture, mortgage, deed of trust, loan agreement, license or other agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject, (iii) is in violation of any law, statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over it or its property or assets or its own privacy policies or (iv) has failed to obtain any license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business as described in the most recent Preliminary Prospectus, except in the case of clauses (ii), (iii) and (iv), to the extent any such conflict, breach, violation or default would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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(ii) Except as described in the most recent Preliminary Prospectus, the Company and each of its subsidiaries (i) are, and at all relevant times prior hereto have been, in compliance with all laws, regulations, ordinances, rules, orders, judgments, decrees, permits or other legal requirements of any governmental authority, including without limitation any international, foreign, national, state, provincial, regional, or local authority, relating to pollution, the protection of human health or safety, the environment, or natural resources, or to the use, handling, storage, manufacturing, transportation, treatment, discharge, disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants (“Environmental Laws”) applicable to such entity, which compliance includes, without limitation, obtaining, maintaining, and complying with all permits, approvals, and other authorizations required under Environmental Laws to conduct their respective businesses, and (ii) have not received written notice and do not otherwise have knowledge of any actual or alleged violation of Environmental Laws, or of any actual or potential liability for or obligation relating to the presence, disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, except in the case of clause (i) or (ii) where such non-compliance, violation, liability, or other obligation would not, in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as described in the most recent Preliminary Prospectus, (x) there are no proceedings that are pending, or known to be contemplated, against the Company or any of its subsidiaries under Environmental Laws in which a governmental authority is also a party, other than such proceedings regarding which it is reasonably believed no monetary sanctions, exclusive of interest and costs, of $100,000 or more will be imposed, (y) the Company and its subsidiaries are not aware of any issues regarding compliance with Environmental Laws, including any pending or proposed Environmental Laws, or liabilities or other obligations under Environmental Laws or concerning hazardous or toxic substances or wastes, pollutants or contaminants, that would reasonably be expected to have a material adverse effect on the capital expenditures, earnings or competitive position of the Company and its subsidiaries, and (z) neither the Company nor any of its subsidiaries anticipate material capital expenditures relating to Environmental Laws.

(jj) Except as would not, in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and each of its subsidiaries (i) have filed all federal, state, local and foreign income tax returns and other tax returns required to be filed through the date hereof, subject to permitted extensions and (ii) have paid all taxes which have become due and payable by the Company or its subsidiaries, except for taxes, if any, as are being contested in good faith by appropriate proceedings and for which an appropriate reserve has been established in accordance with GAAP. No tax deficiency has been determined adversely to the Company or any of its subsidiaries, nor does the Company have any knowledge of any tax deficiencies that have been, or would reasonably be expected to be asserted against the Company or any subsidiary, that would, in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

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(kk) Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, (i) each “employee benefit plan” (within the meaning of Section 3(3) of the Employee Retirement Security Act of 1974, as amended (“ERISA”)), whether or not subject to ERISA, for which the Company or any member of its “Controlled Group” (defined as any organization which is a member of a controlled group of corporations within the meaning of Section 414 of the Internal Revenue Code of 1986, as amended (the “Code”)) would have any liability (each a “Plan”) has been maintained in compliance with its terms and with the requirements of all applicable statutes, rules and regulations including ERISA and the Code; (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan excluding transactions effected pursuant to a statutory or administrative exemption; (iii) with respect to each Plan subject to Title IV of ERISA (A) no “reportable event” (within the meaning of Section 4043(c) of ERISA) has occurred or is reasonably expected to occur, (B) no Plan is or is reasonably expected to be “at risk” status (within the meaning of Section 430 of the Code or Section 303 of ERISA) (C) there has been no filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan or the receipt by the Company or any of its ERISA Affiliates (as defined below) from the PBGC or the plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, (D) no conditions contained in Section 303(k)(1)(A) of ERISA for imposition of a lien shall have been met with respect to any Plan and (E) neither the Company or any member of its Controlled Group has incurred, or reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guaranty Corporation in the ordinary course and without default) in respect of a Plan (including a “multiemployer plan”, within the meaning of Section 4001(c)(3) of ERISA) (“Multiemployer Plan”); (iv) no Multiemployer Plan is, or is expected to be, “insolvent” (within the meaning of Section 4245 of ERISA), in “reorganization” (within the meaning of Section 4241 of ERISA), or in “endangered” or “critical” status (within the meaning of Section 432 of the Code or Section 304 of ERISA); and (v) each Plan that is intended to be qualified under Section 401(a) of the Code has received a favorable determination letter from the Internal Revenue Service or is the subject of a favorable opinion letter from the Internal Revenue Service and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. “ERISA Affiliate” means, with respect to the Company or any of its subsidiaries, any member of any group of organizations described in Section 414(b), (c), (m) or (o) of the Code of which the Company or such subsidiary of the Company is a member.

(ll) The statistical and market-related data included in the most recent Preliminary Prospectus is based on or derived from sources that the Company believes to be reliable in all material respects.

 

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(mm) Neither the Company nor any of its subsidiaries is, and as of the applicable Delivery Date and, after giving effect to the offer and sale of the Stock and the application of the proceeds therefrom as described under “Use of Proceeds” in the most recent Preliminary Prospectus and the Prospectus, none of them will be, (i) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended (the “Investment Company Act”), and the rules and regulations of the Commission thereunder, or (ii) a “business development company” (as defined in Section 2(a)(48) of the Investment Company Act).

(nn) The statements set forth in each of the most recent Preliminary Prospectus and the Prospectus under the captions “Description of Capital Stock” and “Material U.S. Tax Consequences to Non-U.S. Holders of Common Stock” insofar as they purport to summarize provisions of the laws and documents referred to therein, are accurate summaries of the matters described therein in all material respects.

(oo) Except as described in the most recent Preliminary Prospectus, there are no contracts, agreements or understandings between the Company and any person granting such person the right to require the Company to file a registration statement under the Securities Act with respect to any securities of the Company owned or to be owned by such person or to require the Company to include such securities in the securities registered pursuant to the Registration Statement or in any securities being registered pursuant to any other registration statement filed by the Company under the Securities Act.

(pp) Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against any of them or the Underwriters for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Stock.

(qq) The Company has not sold or issued any securities that would be integrated with the offering of the Stock contemplated by this Agreement pursuant to the Securities Act, the rules and regulations thereunder or the interpretations thereof by the Commission.

(rr) The Company, its controlled affiliates and each of its stockholders named in the Preliminary Prospectus have not taken, directly or indirectly, any action designed to constitute, or that has constituted, or that would reasonably be expected to cause or result in the stabilization or manipulation of the price of any security of the Company in connection with the offering of the shares of the Stock.

(ss) The Stock has been approved for listing, subject to official notice of issuance and evidence of satisfactory distribution on, the Exchange.

(tt) The Company has not distributed and, prior to the later to occur of any Delivery Date and completion of the distribution of the Stock, will not distribute any offering material in connection with the offering and sale of the Stock other than any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus to which the Representatives have consented in accordance with Section 1(j) or 5(a)(vi) and any Issuer Free Writing Prospectus set forth on Schedule V hereto.

 

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(uu) Neither the Company nor any subsidiary is in violation of or has received written notice of any violation with respect to any federal or state law relating to discrimination in the hiring, promotion or pay of employees, nor any applicable federal or state wage and hour laws, nor any state law precluding the denial of credit due to the neighborhood in which a property is situated, the violation of any of which would reasonably be expected to have a Material Adverse Effect.

(vv) Neither the Company nor any of its subsidiaries, nor, to the knowledge of the Company, any of its or their directors, officers, employees, agents or other persons acting on behalf of the Company or any of its subsidiaries, has in the course of its actions for, or on behalf of, the Company or any of its subsidiaries: (i) used any corporate funds for any unlawful contribution, gift, or other unlawful expense relating to political activity; (ii) made any unlawful bribe, kickback, rebate, payoff, influence payment, or unlawfully provided anything of value using corporate funds, to any “foreign official” (as defined in the U.S. Foreign Corrupt Practices Act of 1977, as amended (collectively, the “FCPA”)) or domestic government official; or (iii) violated or is in violation of any provision of the FCPA, the Bribery Act 2010 of the United Kingdom, as amended (the “Bribery Act 2010”), or any other applicable anti-corruption or anti-bribery statute or regulation (“Anti-Corruption Laws). The Company and its subsidiaries have instituted and maintain policies and procedures designed to ensure compliance with the Anti-Corruption Laws.

(ww) The operations of the Company and its subsidiaries are and have been conducted at all times in material compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions in which the Company or its subsidiaries conduct business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, that have been issued, administered or enforced by any governmental agency having jurisdiction over the Company or such subsidiary (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

(xx) Neither the Company nor any of its subsidiaries, nor, to the knowledge of the Company, any of its or their directors, officers, employees or agents, is currently the target of any sanctions administered or enforced by the Office of Foreign Assets Control of the U.S. Treasury Department, the U.S. Department of State, the United Nations Security Council, the European Union

 

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(“EU”), Her Majesty’s Treasury, or other sanctions authority having jurisdiction over the Company or any of its subsidiaries (collectively, “Sanctions”). Neither the Company nor any of its subsidiaries is located in or organized under the laws of a country or territory that is the subject or target of Sanctions (including, without limitation, Cuba, Iran, North Korea, Syria and Crimea). The Company will not directly or indirectly use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of funding or financing the activities or business of any person that is the target of Sanctions, or in any country or territory that currently is the target of comprehensive Sanctions, or in any other manner that would reasonably be expected to result in a violation by any person (including any person participating in the transaction whether as an underwriter, advisor, investor or otherwise) of Sanctions. During the past five years, the Company and its subsidiaries have not engaged in and are not now engaged in any dealings or in any transactions with any individual or entity, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions; and the Company does not intend to engage in such dealings or transactions, except as permitted pursuant to a license or other authorization from OFAC, the U.S. Department of State or other U.S. Government agency and the Company has implemented compliance procedures reasonably designed to prevent the Company from engaging in dealings or transactions prohibited by applicable Sanctions.

(yy) Except as disclosed in the most recent Preliminary Prospectus or as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and its subsidiaries’ information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases (collectively, “IT Systems”) are adequate for, and operate and perform as required in connection with the operation of the business of the Company and its subsidiaries as currently conducted, free and clear, to the knowledge of the Company after reasonable inquiry, of all bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants. The Company and its subsidiaries have implemented and maintained commercially reasonable controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data (including all personal, personally identifiable, sensitive, confidential or regulated data (“Personal Data”)) used in connection with their businesses and, to the knowledge of the Company, there have been no breaches, violations, outages or unauthorized uses of or accesses to the same, except for those that have been remedied without material cost or liability or the duty to notify any other person and those that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and its subsidiaries are presently in material compliance with all applicable laws or statutes and all applicable judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, internal policies and contractual obligations relating to the privacy and security of IT Systems and Personal Data and to the protection of such IT Systems and Personal Data from unauthorized use, access, misappropriation or modification.

 

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(zz) The Company and each of its subsidiaries are, and at all times during the past five years, were, in compliance in all material respects with all applicable data privacy and security laws and regulations regarding the collection, use, transfer, storage, protection, disposal or disclosure of Personal Data (as defined below) collected from or provided by third parties (collectively, the “Privacy Laws”). “Personal Data” means “personal data” as defined by the EU General Data Protection Regulations (EU 2016 679) and any data concerning an identified natural person. The Company and its subsidiaries have in place, are in material compliance with, and take appropriate steps reasonably designed to (i) ensure compliance with its privacy policies on its website; and (ii) reasonably protect the security and confidentiality of all Personal Data (collectively, the “Policies”). To the knowledge of the Company, the execution, delivery and performance of this Agreement or any other agreement referred to in this Agreement will not result in a breach or violation of any Privacy Laws or Policies. Neither the Company nor any subsidiary has received notice of any actual or potential material liability under or relating to, or actual or potential violation of, any of the Privacy Laws.

There are no affiliations or associations between (i) any member of FINRA and (ii) the Company or, to the knowledge of the Company, any of the Company’s officers, directors or 5% or greater security holders or any beneficial owner of the Company’s unregistered equity securities that were acquired at any time on or after the 180th day immediately preceding the date the Registration Statement was initially filed with the Commission, except as disclosed in the Registration Statement (excluding the exhibits thereto), the Pricing Disclosure Package and the Prospectus or as otherwise disclosed to the Underwriters.

Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Underwriters in connection with the offering of the Stock shall be deemed to be a representation and warranty by the Company, as to matters covered thereby, to each Underwriter.

2. Purchase of the Stock by the Underwriters. On the basis of the representations, warranties and covenants contained in, and subject to the terms and conditions of, this Agreement, the Company agrees to sell [ ● ] shares of the Firm Stock to the several Underwriters, and each of the Underwriters, severally and not jointly, agrees to purchase the number of shares of the Firm Stock set forth opposite that Underwriter’s name in Schedule I hereto. The respective purchase obligations of the Underwriters with respect to the Firm Stock shall be rounded among the Underwriters to avoid fractional shares, as the Representatives may determine.

In addition, the Company grants to the Underwriters an option to purchase up to [ ● ] additional shares of Option Stock. Such option is exercisable in the event that the Underwriters sell more shares of Common Stock than the number of shares of Firm Stock in the offering and as set forth in Section 4 hereof. Each Underwriter agrees, severally and not jointly, to purchase the number of shares of Option Stock (subject to such adjustments to eliminate fractional shares as the Representatives may determine) that bears the same proportion to the total number of shares of Option Stock to be sold on such Delivery Date as the number of shares of Firm Stock set forth in Schedule I hereto opposite the name of such Underwriter bears to the total number of shares of Firm Stock.

 

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The purchase price payable by the Underwriters for the Firm Stock is $[ ● ] per share and the purchase price payable by the Underwriters for any Option Stock is the price paid for the Firm Stock less an amount per share equal to any dividends or distributions declared by the Company and payable on the Firm Stock but not payable on the Option Stock.

The Company is not obligated to deliver any of the Firm Stock or Option Stock to be delivered on the applicable Delivery Date, except upon payment for all such Stock to be purchased on such Delivery Date as provided herein.

3. Offering of Stock by the Underwriters. Upon authorization by the Representatives of the release of the Firm Stock, the several Underwriters propose to offer the Firm Stock for sale upon the terms and conditions to be set forth in the Prospectus.

4. Delivery of and Payment for the Stock. Delivery of and payment for the Firm Stock shall be made at [10:00] A.M., New York City time, on the second full business day following the date of this Agreement or at such other date or place as shall be determined by agreement between the Representatives and the Company. This date and time are sometimes referred to as the “Initial Delivery Date”. Delivery of the Firm Stock shall be made to the Representatives for the account of each Underwriter against payment by the several Underwriters through the Representatives and of the respective aggregate purchase prices of the Firm Stock being sold by the Company to or upon the order of the Company of the purchase price by wire transfer in immediately available funds to the accounts specified by the Company. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. The Company shall deliver the Firm Stock through the facilities of The Depository Trust Company (“DTC”) unless the Representatives shall otherwise instruct.

The option granted in Section 2 will expire 30 days after the date of this Agreement and may be exercised in whole or from time to time in part by written notice being given to the Company by the Representatives; provided that if such date falls on a day that is not a business day, the option granted in Section 2 will expire on the next succeeding business day. Such notice shall set forth the aggregate number of shares of Option Stock as to which the option is being exercised, the names in which the shares of Option Stock are to be registered, the denominations in which the shares of Option Stock are to be issued and the date and time, as determined by the Representatives, when the shares of Option Stock are to be delivered; provided, however, that this date and time shall not be earlier than the Initial Delivery Date nor earlier than the second business day after the date on which the option shall have been exercised nor later than the fifth business day after the date on which the option shall have been exercised. Each date and time the shares of Option Stock are delivered is sometimes referred to as an “Option Stock Delivery Date”, and the Initial Delivery Date and any Option Stock Delivery Date are sometimes each referred to as a “Delivery Date”.

 

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Delivery of the Option Stock by the Company and payment for the Option Stock by the several Underwriters through the Representatives shall be made at [10:00] A.M., New York City time, on the date specified in the corresponding notice described in the preceding paragraph or at such other date or place as shall be determined by agreement between the and the Company. On each Option Stock Delivery Date, the Company shall deliver, or cause to be delivered, the Option Stock, to the Representatives for the account of each Underwriter, against payment by the several Underwriters through the Representatives and of the respective aggregate purchase prices of the Option Stock being sold by the Company to or upon the order of the Company of the purchase price by wire transfer in immediately available funds to the accounts specified by the Company. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligation of each Underwriter hereunder. The Company shall deliver the Option Stock through the facilities of DTC unless the Representatives shall otherwise instruct.

5. Further Agreements of the Company and the Underwriters.

(a) The Company agrees:

(i) To prepare the Prospectus in a form approved by the Representatives and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission’s close of business on the second business day following the execution and delivery of this Agreement; to make no further amendment or any supplement to the Registration Statement or the Prospectus prior to the last Delivery Date except as provided herein; to advise the Representatives, promptly after it receives notice thereof, of the time when any amendment or supplement to the Registration Statement or the Prospectus has been filed and to furnish the Representatives with copies thereof in accordance with the Representative’s request; to advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus, of the suspension of the qualification of the Stock for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding or examination for any such purpose or of any request by the Commission for the amending or supplementing of the Registration Statement, the Prospectus or any Issuer Free Writing Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus or suspending any such qualification, to use promptly its reasonable best efforts to obtain its withdrawal.

(ii) Upon written request, to furnish promptly to the Representatives and to counsel for the Underwriters a signed copy of the Registration Statement as originally filed with the Commission, and each amendment thereto filed with the Commission, including conformed copies of all consents and exhibits filed therewith.

 

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(iii) To deliver promptly to the Representatives such number of the following documents as the Representatives shall reasonably request: (A) conformed copies of the Registration Statement as originally filed with the Commission and each amendment thereto (in each case excluding exhibits other than this Agreement), (B) during the period of time after the date hereof that a prospectus relating to the Stock is required by law to be delivered (or required to be delivered but for Rule 172 under the Act) in connection with the sales of the Stock by any Underwriter or dealer (the “Prospectus Delivery Period”) the Prospectus and any amended or supplemented Prospectus, and (C) during the Prospectus Delivery Period each Issuer Free Writing Prospectus; and, if, during the Prospectus Delivery Period, any events shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason during the Prospectus Delivery Period it shall be necessary to amend or supplement the Prospectus in order to comply with the Securities Act, to notify the Representatives and, upon their request, to file such document and to prepare and furnish without charge to each Underwriter and to any dealer in securities (whose name and address the Representative shall furnish to the Company) as many copies as the Representatives may from time to time reasonably request of an amended or supplemented Prospectus that will correct such statement or omission or effect such compliance.

(iv) During the Prospectus Delivery Period, to file as promptly as practicable with the Commission any amendment or supplement to the Registration Statement or the Prospectus that may, in the judgment of the Company or the Representatives, be required by the Securities Act or requested by the Commission in connection with the offering and sale of the Stock.

(v) Prior to filing with the Commission any amendment or supplement to the Registration Statement or the Prospectus, to furnish a copy thereof to the Representatives and counsel for the Underwriters and obtain the consent of the Representatives to the filing (such consent not to be unreasonably withheld, conditioned or delayed).

 

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(vi) Not to make any offer relating to the Stock that would constitute an Issuer Free Writing Prospectus without the prior written consent of the Representatives.

(vii) To comply with all applicable requirements of Rule 433 under the Securities Act with respect to any Issuer Free Writing Prospectus. If at any time during the Prospectus Delivery Period any events shall have occurred as a result of which any Issuer Free Writing Prospectus, as then amended or supplemented, would conflict with the information in the Registration Statement, the most recent Preliminary Prospectus or the Prospectus or would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or, if for any other reason it shall be necessary to amend or supplement any Issuer Free Writing Prospectus, to notify the Representatives and, upon their request, to file such document and to prepare and furnish without charge to each Underwriter (whose name and address the Representatives shall furnish to the Company) as many copies as the Representatives may from time to time reasonably request of an amended or supplemented Issuer Free Writing Prospectus that will correct such conflict, statement or omission or effect such compliance.

(viii) As soon as practicable after the Effective Date (it being understood that the Company shall have until at least 410 days or, if the fourth quarter following the fiscal quarter that includes the Effective Date is the last fiscal quarter of the Company’s fiscal year, 455 days after the end of the Company’s current fiscal quarter), to make generally available to the Company’s security holders (including by making available on EDGAR) and to deliver to the Representatives (or make available on EDGAR) an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Securities Act and the rules and regulations thereunder (including, at the option of the Company, Rule 158).

(ix) Promptly from time to time to take such action as the Representatives may reasonably request to qualify the Stock for offering and sale under the securities or Blue Sky laws of Canada and such other jurisdictions as the Representatives may reasonably request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Stock; provided, that in connection therewith the Company shall not be required to (A) qualify as a foreign corporation in any jurisdiction in which it would not otherwise be required to so qualify, (B) file a general consent to service of process in any such jurisdiction, or (C) subject itself to taxation in any jurisdiction in which it would not otherwise be subject.

 

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(x) For a period commencing on the date hereof and ending on the 180th day after the date of the Prospectus (the “Lock-Up Period”), not to, directly or indirectly, (A) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or would be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock (other than the Stock and shares issued pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof or pursuant to currently outstanding options, warrants or rights not issued under one of those plans), or sell, purchase or grant options, rights or warrants with respect to any shares of Common Stock or securities convertible into or exchangeable for Common Stock (other than the grant of options or other awards pursuant to plans existing on the date hereof and disclosed in the most recent Preliminary Prospectus), (B) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Common Stock, whether any such transaction described in clause (A) or (B) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, (C) file, confidentially submit or cause to be confidentially submitted or filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Common Stock or securities convertible, exercisable or exchangeable into Common Stock or any other securities of the Company (other than (i) any confidential or non-public submissions to the Commission of any registration statement under the Securities Act only if (w) no public announcement of such confidential or non-public submission shall be made, (x) if any demand was made for, or any right exercised with respect to, such registration of shares of Common Stock or securities convertible, exercisable or exchangeable into Common Stock, no public announcement of such demand or exercise of rights shall be made, (y) the Company shall provide written notice at least two business days prior to such confidential or non-public submission to the Representatives and (z) no such confidential or non-public submission shall become a publicly available registration statement during the Lock-Up Period; or (ii) any registration statement on Form S-8), or (D) publicly disclose the intention to do any of the foregoing, in each case without the prior written consent of Barclays Capital Inc. and BofA Securities, Inc., on behalf of the Underwriters, and to cause each officer, director and stockholder of the Company set forth on Schedule II hereto to furnish to the Representatives, prior to the Initial Delivery Date, a letter or letters, substantially in the form of Exhibit A hereto (the “Lock-Up Agreements”). The restrictions contained in the preceding sentence shall not apply to (i) any shares of Common Stock, Class B common stock or other awards issued in connection with the Reorganization, (ii) the exchange of shares of

 

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Common Stock for shares of Class B common stock and the exchange of shares of Class B common stock for shares of Common Stock, (iii) the issuance of securities in connection with the acquisition by the Company or any subsidiary of the securities, businesses, property or other assets of another person or entity or pursuant to any employee benefit plan assumed by the Company or any subsidiary in connection with any such acquisition or (iv) the issuance of securities in connection with joint ventures or acquisitions and other strategic transactions; provided that in the case of each of preceding clauses (iii) and (iv), the aggregate number of shares issued in all such acquisitions and transactions does not exceed 5.0% of the Company’s outstanding common stock following the offering of the Stock contemplated by this Agreement and each recipient of such shares that is a member of the Company’s board of directors, an executive officer of the Company or a beneficial holder of 5.0% of the fully-diluted capital stock (including holders of Class B Common Stock) of the Company executes a Lock-Up Agreement.

(xi) If Barclays Capital Inc. and BofA Securities, Inc., in their sole discretion, agrees to release or waive the restrictions set forth in a Lock-Up Agreement for an officer or director of the Company and provides the Company with notice of the impending release or waiver at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by issuing a press release substantially in the form of Exhibit B hereto, and containing such other information as Barclays Capital Inc. or BofA Securities, Inc. may require with respect to the circumstances of the release or waiver and/or the identity of the officer(s) and/or director(s) with respect to which the release or waiver applies, through a major news service at least two business days before the effective date of the release or waiver.

(xii) To apply the net proceeds from the sale of the Stock being sold by the Company substantially in accordance with the description as set forth in the Prospectus under the caption “Use of Proceeds.”

(xiii) To file with the Commission such information on Form 10-Q or Form 10-K as may be required by Rule 463 under the Securities Act.

(xiv) If the Company elects to rely upon Rule 462(b) under the Securities Act, the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) under the Securities Act by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing pay the Commission the filing fee for the Rule 462(b) Registration Statement.

(xv) The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (A) the time when a prospectus relating to the offering or sale of the Stock is not required by the Securities Act to be delivered (whether physically or through compliance with Rule 172 under the Securities Act or any similar rule) and (B) completion of the Lock-Up Period.

 

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(xvi) If at any time during the Prospectus Delivery Period there occurred or occurs an event or development as a result of which any Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Representatives and, if requested by the Representatives, will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission. The Company will promptly notify the Representatives of (A) any distribution by the Company of Written Testing-the-Waters Communications and (B) any request by the Commission for information concerning the Written Testing-the-Waters Communications.

(xvii) The Company and its affiliates will not take, directly or indirectly, any action designed to or that has constituted or that reasonably would be expected to cause or result in the stabilization or manipulation of the price of any security of the Company in connection with the offering of the Stock.

(xviii) The Company will do and perform all things required to be done and performed under this Agreement by it prior to each Delivery Date.

(xix) The Company will deliver to each Underwriter (or its agent), on or prior to the date of execution of this Agreement, a properly completed and executed Certification Regarding Beneficial Owners of Legal Entity Customers or applicable exemption certificate (the “FinCEN Certification”), together with copies of identifying documentation, of the Company and the Company undertakes to provide such additional supporting documentation as each Underwriter may reasonably request in connection with the verification of the FinCEN Certification.

(b) Each Underwriter severally agrees that such Underwriter shall not include any “issuer information” (as defined in Rule 433 under the Securities Act) in any “free writing prospectus” (as defined in Rule 405 under the Securities Act) used or referred to by such Underwriter without the prior consent of the Company (any such issuer information with respect to whose use the Company has given its consent, “Permitted Issuer Information”); provided that (i) no such consent shall be required with respect to any such issuer information contained in any document filed by the Company with the Commission prior to the use of such free writing prospectus, and (ii) “issuer information”, as used in this Section 5(b), shall not be deemed to include information prepared by or on behalf of such Underwriter on the basis of or derived from issuer information.

 

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6. Expenses. The Company agrees, whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, to pay all expenses, costs, fees and taxes incident to and in connection with (a) the authorization, issuance, sale and delivery of the Stock and any stamp duties or other taxes payable in that connection, and the preparation and printing of certificates for the Stock; (b) the preparation, printing and filing under the Securities Act of the Registration Statement (including any exhibits thereto), any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, and any amendment or supplement thereto; (c) the distribution of the Registration Statement (including any exhibits thereto), any Preliminary Prospectus, the Prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, and any amendment or supplement thereto, all as provided in this Agreement; (d) the production and distribution of this Agreement, any supplemental agreement among Underwriters, and any other related documents in connection with the offering, purchase, sale and delivery of the Stock; (e) any required review by FINRA of the terms of sale of the Stock (including related reasonable and documented fees and expenses of counsel to the Underwriters); (f) the listing of the Stock on the Exchange and/or any other exchange; (g) the qualification of the Stock under the securities laws of the several jurisdictions as provided in Section 5(a)(ix) and the preparation, printing and distribution of a Blue Sky Memorandum (including related reasonable and documented fees and expenses of counsel to the Underwriters); (h) the preparation, printing and distribution of one or more versions of the Preliminary Prospectus and the Prospectus for distribution in Canada, including in the form of a Canadian “wrapper” (including related reasonable and documented fees and expenses of Canadian counsel to the Underwriters, provided that the Company shall only be required to pay such fees and expenses of counsel to the Underwriters incurred in relation to subsections (e), (g) and (h) in an amount that is not greater than $50,000 in the aggregate); (i) the investor presentations on any “road show” or any Testing-the-Waters Communication undertaken in connection with the marketing of the Stock, including, without limitation, expenses associated with any electronic road show, travel and lodging expenses of the representatives and officers of the Company and the 50% of the cost of any aircraft chartered in connection with the road show; and (j) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement; provided that, except as provided in this Section 6 and in Section 11, the Underwriters shall pay their own costs and expenses, including the costs and expenses of their counsel, any transfer taxes on the resale of any Stock by them, the expenses of advertising any offering of the Stock made by the Underwriters and travel (provided that the Underwriters are responsible for 50% of the cost of any aircraft chartered in connection with the road show), lodging and other expenses of the Underwriters or any of their employees or representatives incurred by them in connection with any “road show” or any Testing-the-Waters Communications.

 

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7. Conditions of Underwriters’ Obligations. The respective obligations of the Underwriters hereunder are subject to the accuracy, when made and on each Delivery Date, of the representations and warranties of the Company contained herein, to the performance by the Company of its obligations hereunder in all material respects, and to each of the following additional terms and conditions:

(a) The Prospectus shall have been timely filed with the Commission in accordance with Section 5(a)(i). The Company shall have complied with all filing requirements applicable to any Issuer Free Writing Prospectus used or referred to after the date hereof; no stop order suspending the effectiveness of the Registration Statement or preventing or suspending the use of the Prospectus or any Issuer Free Writing Prospectus shall have been issued and no proceeding or examination for such purpose shall have been initiated or, to the knowledge of the Company, threatened by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus or otherwise shall have been complied with to the Representatives’ reasonable satisfaction. If the Company has elected to rely upon Rule 462(b) under the Securities Act, the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement.

(b) All corporate proceedings and other legal matters incident to the authorization, form and validity of this Agreement, the Stock, the Registration Statement, the Prospectus and any Issuer Free Writing Prospectus, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.

(c) Sullivan & Cromwell LLP shall have furnished to the Representatives its written opinion and disclosure letter, as counsel to the Company, addressed to the Underwriters and dated such Delivery Date, in form and substance reasonably satisfactory to the Representatives.

(d) The Representatives shall have received from Latham & Watkins LLP, counsel for the Underwriters, such opinion or opinions, dated such Delivery Date, with respect to the issuance and sale of the Stock, the Registration Statement, the Prospectus and the Pricing Disclosure Package and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they reasonably request for the purpose of enabling them to pass upon such matters.

(e) At the time of execution of this Agreement, the Representatives shall have received from PWC a letter, in form and substance reasonably satisfactory to the Representatives, addressed to the Underwriters and dated the date hereof (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, and (ii) stating, as of the date hereof (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the most recent Preliminary Prospectus, as of a date not more than three business days prior to the date hereof), the conclusions and findings of such firm with respect to the financial information and other matters ordinarily covered by accountants’ “comfort letters” to underwriters in connection with registered public offerings.

 

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(f) With respect to the letter of PWC referred to in the preceding paragraph and delivered to the Representatives concurrently with the execution of this Agreement (the “initial letter”), the Company shall have furnished to the Representatives a letter (the “bring-down letter”) of such accountants, addressed to the Underwriters and dated such Delivery Date (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating, as of the date of the bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial information is given in the Prospectus, as of a date not more than three business days prior to the date of the bring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by the initial letter, and (iii) confirming in all material respects the conclusions and findings set forth in the initial letter.

(g) The Company shall have furnished to the Representatives a certificate, dated such Delivery Date, of their Chief Executive Officer and Chief Financial Officer (solely in their capacities as such) as to such matters as the Representatives may reasonably request, including, without limitation, a statement:

(i) That the representations, warranties and agreements of the Company in Section 1 are true and correct on and as of such Delivery Date, and the Company has complied with all of its respective agreements contained herein and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to such Delivery Date;

(ii) That no stop order suspending the effectiveness of the Registration Statement has been issued; and no proceedings or examination for that purpose have been instituted or, to the knowledge of such officers, threatened;

(iii) At each Delivery Date, since the Effective Date or since the respective dates as to which information is given in the Registration Statement, the Pricing Disclosure Package or the Prospectus, no material adverse change, nor any development or event involving a prospective material adverse change, in the condition (financial or otherwise), results of operations, business, properties or prospects of the Company and its subsidiaries taken as a whole shall have occurred.

(iv) To the effect of Section 7(h) (provided that (A) no representation with respect to the judgment of the Representatives need be made and (B) such representation with respect to 7(h)(i) may be qualified by materiality) and Section 7(i).

 

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(h) Except as described in the most recent Preliminary Prospectus, (i) neither the Company nor any of its subsidiaries shall have sustained, since the date of the latest audited financial statements included in the most recent Preliminary Prospectus, any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, or (ii) since such date there shall not have been any change in the capital stock, other than (v) the issuance of the Stock pursuant to this Agreement, (w) the issuance of profits interests, shares of stock, shares of restricted stock, stock options or other awards under equity incentive plans or similar arrangements described in the most recent Preliminary Prospectus and the Prospectus or pursuant to currently outstanding options, warrants or rights not issued under one of those plans, in each case to the extent such plans, arrangements, options, warrants or rights are described in the most recent Preliminary Prospectus, (x) any shares of Common Stock, Class B common stock or other awards issued in connection with the Reorganization, (y) the exchange of shares of Common Stock for shares of Class B common stock and the exchange of shares of Class B common stock for Common Stock or (z) the repurchase of capital stock from employees of the Company or its subsidiaries pursuant to equity award agreements or other contractual arrangements in connection with the termination of such Person’s employment with the Company or its subsidiaries, or long-term debt, other than as described under “Use of Proceeds” in the most recent Preliminary Prospectus and the Prospectus, of the Company or any of its subsidiaries or any adverse change, or any development involving a prospective adverse change, in or affecting the condition (financial or otherwise), results of operations, stockholders’ equity, properties, management, business or prospects of the Company and its subsidiaries taken as a whole, the effect of which, in any such case described in clause (i) or (ii), is, individually or in the aggregate, in the judgment of the Representatives, so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Stock being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus.

(i) Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Company’s debt securities by any “nationally recognized statistical rating organization” (as defined by the Commission in Section 3(a)(62) of the Exchange Act), and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities.

(j) Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) (A) trading in securities generally on any securities exchange that has registered with the Commission under Section 6 of the Exchange Act (including the New York Stock Exchange, The Nasdaq Global Select Market, The Nasdaq Global Market or The Nasdaq Capital Market), or (B) trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or materially limited or the settlement of such trading generally shall have been materially disrupted or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental

 

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authority having jurisdiction, (ii) a general moratorium on commercial banking activities shall have been declared by federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States, or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions, including, without limitation, as a result of terrorist activities after the date hereof (or the effect of international conditions on the financial markets in the United States shall be such) or any other calamity or crisis either within or outside the United States, if the effect of any such event in clauses (iii) or (iv) makes it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the public offering or delivery of the Stock being delivered on such Delivery Date on the terms and in the manner contemplated in the Prospectus.

(k) The Exchange shall have approved the Stock for listing, subject only to official notice of issuance and evidence of satisfactory distribution.

(l) The Lock-Up Agreements between the Representative and the officers, directors and stockholders of the Company set forth on Schedule II, delivered to the Representatives on or before the date of this Agreement, shall be in full force and effect on such Delivery Date.

(m) The Representatives shall have received (i) on and as of the date hereof and (ii) on and as of each Delivery Date, as the case may be, a certificate of the Chief Financial Officer of the Company substantially in the form of Exhibit C hereto.

(n) On or prior to each Delivery Date, the Company shall have furnished to the Underwriters such further certificates and documents as the Representatives may reasonably request.

All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters.

8. Indemnification and Contribution.

(a) The Company hereby agrees to indemnify and hold harmless each Underwriter, its affiliates, directors, officers and employees and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Stock), to which that Underwriter, affiliate, director, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in (A) any Preliminary Prospectus, the Registration Statement, the Prospectus or in any amendment or supplement thereto, (B) any Issuer Free Writing Prospectus or in any amendment or supplement thereto, (C) any Permitted Issuer Information used or referred to in any “free writing prospectus” (as defined in Rule 405 under the Securities Act) used or referred to by any Underwriter, (D) any

 

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materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the offering of the Stock, including any “road show” (as defined in Rule 433 under the Securities Act) not constituting an Issuer Free Writing Prospectus and any Written Testing-the-Waters Communication (“Marketing Materials”) or (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Permitted Issuer Information or any Marketing Materials, any material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse each Underwriter and each such affiliate, director, officer, employee or controlling person promptly upon demand for any legal or other documented out-of-pocket expenses reasonably incurred by that Underwriter, affiliate, director, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any such amendment or supplement thereto or in any Permitted Issuer Information or any Marketing Materials, in reliance upon and in conformity with written information concerning such Underwriter furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein, which information consists solely of the information specified in Section 8(e). The foregoing indemnity agreement is in addition to any liability which the Company may otherwise have to any Underwriter or to any affiliate, director, officer, employee or controlling person of that Underwriter.

(b) Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company, its affiliates, directors, officers and employees, and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company or any such affiliate, director, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Marketing Materials, or (ii) the omission or alleged omission to state in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Marketing Materials, any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning such

 

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Underwriter furnished to the Company through the Representatives by or on behalf of that Underwriter specifically for inclusion therein, which information is limited to the information set forth in Section 8(e). The foregoing indemnity agreement is in addition to any liability that any Underwriter may otherwise have to the Company or any such affiliate, director, officer, employee or controlling person.

(c) Promptly after receipt by an indemnified party under this Section 8 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 8 except to the extent it has been materially prejudiced (through the forfeiture of substantive rights and defenses) by such failure and, provided, further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 8. If any such claim or action shall be brought against an indemnified party, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 8 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable and documented out-of-pocket costs of investigation; provided, however, that the indemnified party shall have the right to employ counsel to represent jointly the indemnified party and those other indemnified parties and their respective directors, officers, employees and controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought under this Section 8 if (i) the indemnified party and the indemnifying party shall have so mutually agreed; (ii) the indemnifying party has failed within a reasonable time to retain counsel reasonably satisfactory to the indemnified party; (iii) the indemnified party and its directors, officers, employees and controlling persons shall have reasonably concluded based on the advice of counsel that there may be legal defenses available to them that are different from or in addition to those available to the indemnifying party; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the indemnified parties or their respective directors, officers, employees or controlling persons, on the one hand, and the indemnifying party, on the other hand, and, based on the advice of counsel, representation of both sets of parties by the same counsel would be inappropriate due to actual or potential differing interests between them, and in any such event the reasonable and documented fees and expenses of such separate counsel shall be paid by the indemnifying party. It is understood and agreed that the indemnifying party shall not, in connection with any action or claim or related action or claim in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all indemnified parties. No indemnifying party shall (x) without the prior written consent of the

 

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indemnified parties (which consent shall not be unreasonably withheld, conditioned or delayed), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding and does not include a statement as to, or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party, or (y) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld, conditioned or delayed), but if settled with the consent of the indemnifying party or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment in accordance with this Agreement. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by Section 8(a) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request, and more than 30 days after receipt of the proposed terms of such settlement, and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request or disputed in good faith the indemnified party’s entitlement to such reimbursement prior to the date of such settlement.

(d) If the indemnification provided for in this Section 8 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 8(a) or 8(b) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other, from the offering of the Stock, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Stock purchased under this Agreement (before deducting expenses) received by the Company, as set forth in the table on the cover page of the Prospectus, on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the shares of the Stock purchased under this

 

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Agreement, as set forth in the table on the cover page of the Prospectus, on the other hand. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 8(d) were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 8(d) shall be deemed to include, for purposes of this Section 8(d), any documented out-of-pocket legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 8(d), in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the offering of the Stock exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute as provided in this Section 8(d) are several in proportion to their respective underwriting obligations and not joint.

(e) The Underwriters severally confirm and the Company acknowledges and agrees that the statements regarding delivery of shares by the Underwriters set forth on the cover page of the most recent Preliminary Prospectus and the Prospectus, the concession and reallowance figures in the second paragraph under the heading “Commissions and Expenses” in the “Underwriting” section of the most recent Preliminary Prospectus and the Prospectus, the information related to price stabilization and short positions under the heading “Stabilization, Short Positions and Penalty Bids” in the “Underwriting” section of the most recent Preliminary Prospectus and the Prospectus and the information in the first paragraph under the heading “Electronic Distribution” in the “Underwriting” section of the most recent Preliminary Prospectus and the Prospectus, are correct and constitute the only information concerning such Underwriters furnished in writing to the Company by or on behalf of the Underwriters specifically for inclusion in any Preliminary Prospectus, the Registration Statement, the Prospectus, any Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any Marketing Materials.

 

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9. Defaulting Underwriters.

(a) If, on any Delivery Date, any Underwriter defaults in its obligations to purchase the Stock that it has agreed to purchase under this Agreement, the remaining non-defaulting Underwriters may in their discretion arrange for the purchase of such Stock by the non-defaulting Underwriters or other persons satisfactory to the Company on the terms contained in this Agreement. If, within 36 hours after any such default by any Underwriter, the non-defaulting Underwriters do not arrange for the purchase of such Stock, then the Company shall be entitled to a further period of 36 hours within which to procure other persons satisfactory to the non-defaulting Underwriters to purchase such Stock on such terms. In the event that within the respective prescribed periods, the non-defaulting Underwriters notify the Company that they have so arranged for the purchase of such Stock, or the Company notifies the non-defaulting Underwriters that it has so arranged for the purchase of such Stock, either the non-defaulting Underwriters or the Company may postpone such Delivery Date for up to seven full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Underwriters may be necessary in the Registration Statement, the Prospectus or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Registration Statement, the Prospectus or in any such other document or arrangement that effects any such changes. As used in this Agreement, the term “Underwriter” includes, for all purposes of this Agreement unless the context requires otherwise, any party not listed in Schedule I hereto that, pursuant to this Section 9, purchases Stock that a defaulting Underwriter agreed but failed to purchase.

(b) If, after giving effect to any arrangements for the purchase of the Stock of a defaulting Underwriter or Underwriters by the non-defaulting Underwriters or the Company as provided in paragraph (a) above, the total number of shares of the Stock that remains unpurchased does not exceed one-eleventh of the total number of shares of all the Stock, then the Company shall have the right to require each non-defaulting Underwriter to purchase the total number of shares of Stock that such Underwriter agreed to purchase hereunder plus such Underwriter’s pro rata share (based on the total number of shares of Stock that such Underwriter agreed to purchase hereunder) of the Stock of such defaulting Underwriter or Underwriters for which such arrangements have not been made; provided that the non-defaulting Underwriters shall not be obligated to purchase more than 110% of the total number of shares of Stock that it agreed to purchase on such Delivery Date pursuant to the terms of Section 2.

(c) If, after giving effect to any arrangements for the purchase of the Stock of a defaulting Underwriter or Underwriters by the non-defaulting Underwriters and the Company as provided in paragraph (a) above, the total number of shares of Stock that remains unpurchased exceeds one-eleventh of the total number of shares of all the Stock, or if the Company shall not exercise the right described in paragraph (b) above, then this Agreement shall terminate without liability on the part of the non-defaulting Underwriters. Any termination of this Agreement pursuant to this Section 9 shall be without liability on the part of the Company, except that the Company will continue to be liable for the payment of expenses as set forth in Sections 6 and 11 and except that the provisions of Section 8 shall not terminate and shall remain in effect.

 

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(d) Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have to the Company or any non-defaulting Underwriter for damages caused by its default.

10. Termination. The obligations of the Underwriters hereunder may be terminated by the Representatives by notice given to and received by the Company prior to delivery of and payment for the Firm Stock if, prior to that time, any of the events described in Sections 7(h), 7(i) and 7(j) shall have occurred or if the Underwriters shall decline to purchase the Stock for any reason permitted under this Agreement.

11. Reimbursement of Underwriters Expenses. Except as set forth in the next sentence, if (a) the Company shall fail to tender the Stock for delivery to the Underwriters for any reason, or (b) the Underwriters shall decline to purchase the Stock for any reason permitted under this Agreement (except as a result of the occurrence of any of the events described in Section 7(j) (excluding clause (i)(B) thereof)), the Company will reimburse the Underwriters for all reasonable and documented out-of-pocket expenses (including the reasonable and documented fees and disbursements of counsel for the Underwriters) incurred by the Underwriters in connection with this Agreement and the proposed purchase of the Stock, and upon demand the Company shall pay the full amount thereof to the Representatives. If this Agreement is terminated pursuant to Section 9 (a) by reason of the default of one or more Underwriters or (b) as a result of the occurrence of any of the events described in Section 7(j) (excluding clause (i)(B) thereof), the Company shall not be obligated to reimburse (i) any defaulting Underwriter, in the case of clause (a) of this sentence, or (ii) any Underwriter, in the case of clause (b) of this sentence, for any expenses except as provided in Sections 6 and 9 hereof.

12. Research Analyst Independence. The Company acknowledges that the Underwriters’ research analysts and research departments are required to be independent from their respective investment banking divisions and are subject to certain regulations and internal policies, and that such Underwriters’ research analysts may hold views and make statements or investment recommendations and/or publish research reports with respect to the Company, CPG International and/or the offering that differ from the views of their respective investment banking divisions. The Company hereby waives and releases, to the fullest extent permitted by law, any claims that the Company may have against the Underwriters with respect to any conflict of interest that may arise from the fact that the views expressed by their independent research analysts and research departments may be different from or inconsistent with the views or advice communicated to the Company by such Underwriters’ investment banking divisions. The Company acknowledges that each of the Underwriters is a full service securities firm and as such from time to time, subject to applicable securities laws, may effect transactions for its own account or the account of its customers and hold long or short positions in debt or equity securities of the companies that may be the subject of the transactions contemplated by this Agreement.

13. No Fiduciary Duty. The Company acknowledges and agrees that in connection with this offering, sale of the Stock or any other services the Underwriters may be deemed to be providing hereunder, notwithstanding any preexisting relationship, advisory or otherwise, between the parties or any oral representations or assurances previously or subsequently made by the Underwriters: (a) no fiduciary or agency relationship between the Company and any other person, on the one hand, and the Underwriters, on the other, exists; (b) the Underwriters are not acting as

 

35


advisors, expert or otherwise, to the Company, including, without limitation, with respect to the determination of the public offering price of the Stock, and such relationship between the Company, on the one hand, and the Underwriters, on the other, is entirely and solely commercial, based on arms-length negotiations; (c) any duties and obligations that the Underwriters may have to the Company shall be limited to those duties and obligations specifically stated herein; and (d) the Underwriters and their respective affiliates may have interests that differ from those of the Company. The Company hereby waives any claims that the Company may have against the Underwriters with respect to any breach of fiduciary duty in connection with this offering.

14. Notices, etc. All statements, requests, notices and agreements hereunder shall be in writing, and:

(a) if to the Underwriters, shall be delivered or sent by mail or facsimile transmission to Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019, Attention: Syndicate Registration (Fax: (646) 834-8133), with a copy, in the case of any notice pursuant to Section 8(c), to the Director of Litigation, Office of the General Counsel, Barclays Capital Inc., 745 Seventh Avenue, New York, New York 10019; and

(b) if to the Company, shall be delivered by mail to the address of the Company set forth in the Registration Statement, Attention: Jonathan Skelly, Senior Vice President of Execution and Strategy and Paul Kardish, Senior Vice President and Chief Legal Officer, with a copy to Sullivan & Cromwell LLP, 1870 Embarcadero Road, Palo Alto, CA 94303, Attention: John L. Savva (Fax: (650) 461-5761).

Any such statements, requests, notices or agreements shall take effect at the time of receipt thereof. The Company shall be entitled to act and rely upon any request, consent, notice or agreement given or made on behalf of the Underwriters by Barclays Capital Inc.

15. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the Underwriters, the Company, and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (a) the representations, warranties, indemnities and agreements of the Company contained in this Agreement shall also be deemed to be for the benefit of the affiliates, directors, officers and employees of the Underwriters and each person or persons, if any, who control any Underwriter within the meaning of Section 15 of the Securities Act, and (b) the indemnity agreement of the Underwriters contained in Section 8(b) of this Agreement shall be deemed to be for the benefit of the affiliates, directors, officers, employees of the Company and any person controlling the Company within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section 15, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

16. Survival. The respective indemnities, representations, warranties and agreements of the Company and the Underwriters contained in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Stock and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them.

 

36


17. Definition of the Terms “Business Day”, “Affiliate” and “Subsidiary”. For purposes of this Agreement, (a) “business day” means each Monday, Tuesday, Wednesday, Thursday or Friday that is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close, and (b) “affiliate” and “subsidiary” have the meanings set forth in Rule 405 under the Securities Act.

18. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to conflict of laws principles (other than Section 5-1401 of the General Obligations Law).

19. Waiver of Jury Trial. The Company and the Underwriters hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

20. Counterparts. This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument.

21. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

22. Recognition of the U.S. Special Resolution Regimes.

(a) In the event that any of the Underwriters that are a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.

(b) In the event that any of the Underwriters that are a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.

 

37


(c) As used in this Agreement:

(i) “BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).

(ii) “Covered Entity” means any of the following:

 

  (x)

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

 

  (y)

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

 

  (z)

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

(iii) “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.

(iv) “U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.

 

38


If the foregoing correctly sets forth the agreement among the Company and the Underwriters, please indicate your acceptance in the space provided for that purpose below.

 

Very truly yours,
THE AZEK COMPANY INC.
By:  

 

  Name:
  Title:

[Signature Page to Underwriting Agreement]


Accepted:
BARCLAYS CAPITAL INC.
For itself and as Representative
of the several Underwriters named
in Schedule I hereto
By:  

 

  Authorized Representative
BOFA SECURITIES, INC.
For itself and as Representative
of the several Underwriters named
in Schedule I hereto
By:  

 

  Authorized Representative
GOLDMAN SACHS & CO. LLC
For itself and as Representative
of the several Underwriters named
in Schedule I hereto
By:  

 

  Authorized Representative

[Signature Page to Underwriting Agreement]


JEFFERIES LLC
For itself and as Representative
of the several Underwriters named
in Schedule I hereto
By:  

 

  Authorized Representative

[Signature Page to Underwriting Agreement]

 

41


SCHEDULE I

 

Underwriters

   Number of Shares of
Firm Stock

Barclays Capital Inc.

   [ ● ]

BofA Securities, Inc.

   [ ● ]

Goldman Sachs & Co. LLC

   [ ● ]

Jefferies LLC

   [ ● ]

Citigroup Global Markets Inc.

   [ ● ]

Credit Suisse Securities (USA) LLC

   [ ● ]

Deutsche Bank Securities Inc.

   [ ● ]

RBC Capital Markets, LLC

   [ ● ]

B. Riley FBR, Inc.

   [ ● ]

Robert W. Baird & Co. Incorporated

   [ ● ]

Stephens Inc.

   [ ● ]

Stifel, Nicolaus & Company, Incorporated

   [ ● ]

SunTrust Robinson Humphrey, Inc.

   [ ● ]

William Blair & Company, L.L.C.

   [ ● ]
  

 

Total

   [ ● ]
  

 


SCHEDULE II

PERSONS DELIVERING LOCK-UP AGREEMENTS


SCHEDULE III

ORALLY CONVEYED PRICING INFORMATION

1. The public offering price for the Stock is $[ ● ] per share.

2. [ ● ] shares of Firm Stock and [ ● ] shares of Option Stock.


SCHEDULE IV

ISSUER FREE WRITING PROSPECTUSES – ROAD SHOW MATERIALS

Electronic Roadshow as made available on http://www.netroadshow.com.


SCHEDULE V

ISSUER FREE WRITING PROSPECTUS


SCHEDULE VI

WRITTEN TESTING-THE-WATERS COMMUNICATIONS


LOCK-UP LETTER AGREEMENT

BARCLAYS CAPITAL INC.

BOFA SECURITIES, INC.

GOLDMAN SACHS & CO. LLC

JEFFERIES LLC

As Representatives of the several

Underwriters named in Schedule I of the Underwriting Agreement,

c/o Barclays Capital Inc.

745 Seventh Avenue

New York, New York 10019

Ladies and Gentlemen:

The undersigned understands that you and certain other firms (the “Underwriters”) propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) providing for the purchase by the Underwriters of shares (the “Stock”) of Class A Common Stock, par value $0.001 per share (the “Common Stock”), of The AZEK Company Inc., a Delaware corporation (the “Company”), and that the Underwriters propose to reoffer the Stock to the public (the “Offering”).

In consideration of the execution of the Underwriting Agreement by the Underwriters, and for other good and valuable consideration, the undersigned hereby irrevocably agrees that, without the prior written consent of Barclays Capital Inc. and BofA Securities, Inc., on behalf of the Underwriters, the undersigned will not, directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or would be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of Common Stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of Common Stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Common Stock, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, (3) make any demand for or exercise any right or cause to be publicly filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock or any other securities of the Company, or (4) publicly disclose the intention to do any of the foregoing for a period commencing on the date hereof and ending on the 180th day after the date of the Prospectus relating to the Offering (such 180-day period, the “Lock-Up Period”).

 

Exhibit A-1


The foregoing paragraph shall not apply to (a) shares of Common Stock acquired from the Underwriters in the Offering or transactions relating to shares of Common Stock or other securities acquired in the open market after the completion of the Offering, (b) transfers of shares of Common Stock or any security convertible into Common Stock as a bona fide gift or gifts, (c) sales or other dispositions of shares of any class of the Company’s capital stock, in each case that are made exclusively between and among the undersigned or members of the undersigned’s family (including to any trust, limited partnership, limited liability company or other entity for the direct or indirect benefit of the undersigned or any members of the undersigned’s family), or affiliates of the undersigned, including its subsidiaries, partners (if a partnership), members (if a limited liability company), stockholders (if a corporation) or any investment fund or other entity controlling, controlled by, managing, or managed by or under common control with the undersigned or affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), (d) transfers of shares of Common Stock or any security convertible into Common Stock by will, testamentary document or intestate succession upon the death of the undersigned; provided that it shall be a condition to any transfer (i) pursuant to clauses (b)-(d) that the transferee/donee agrees to be bound by the terms of this Lock-Up Letter Agreement (including, without limitation, the restrictions set forth in the preceding sentence) to the same extent as if the transferee/donee were a party hereto, (ii) pursuant to clauses (b)-(d) that each party (donor, donee, transferor or transferee) shall not be required by law (including without limitation the disclosure requirements of the Securities Act of 1933, as amended (the Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to make, and shall agree to not voluntarily make, any filing or public announcement of the transfer or disposition prior to the expiration of the 180-day period referred to above (other than any required filed on Form 5), and (iii) pursuant to clauses (b) and (c) that the undersigned notifies Barclays Capital Inc. and BofA Securities, Inc. at least two business days prior to the proposed transfer or disposition, (f) the exercise (including cashless exercise) of warrants or the exercise of stock options granted pursuant to the Company’s stock option/incentive plans or otherwise outstanding on the date hereof; provided, that the restrictions shall apply to shares of Common Stock issued upon such exercise or conversion, (g) the establishment of any contract, instruction or plan that satisfies all of the requirements of Rule 10b5-1 (a “Rule 10b5-1 Plan”) under the Exchange Act; provided, however, that no sales of Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock, shall be made pursuant to a Rule 10b5-1 Plan prior to the expiration of the Lock-Up Period; provided further, that the Company is not required to report the establishment of such Rule 10b5-1 Plan in any public report or filing with the Commission under the Exchange Act during the lock-up period and does not otherwise voluntarily effect any such public filing or report regarding such Rule 10b5-1 Plan, (h) any demands or requests for, the exercise of any right with respect to, or the taking of any action in preparation of, the registration by the Company under the Securities Act of the undersigned’s shares of Common Stock, provided that no transfer of the undersigned’s shares of Common Stock registered pursuant to the exercise of any such right and no registration statement shall be publicly filed under the Securities Act with respect to any of

 

Exhibit A-2


the undersigned’s shares of Common Stock during the Lock-Up Period, (i) any transfer pursuant to a bona fide third party tender or exchange offer made to all holders of the Common Stock, merger, consolidation or other similar transaction involving a change of control (as defined below) of the Company, including voting in favor of any such transaction or taking any other action in connection with such transaction, (provided that in the event that such tender offer, merger, consolidation or other such transaction is not completed, the undersigned shall remain subject to the restrictions contained in this Lock-Up Letter Agreement), (j) transfers to the Company for the purpose of satisfying any tax withholding obligations (including estimated taxes) due as a result of the exercise of options or as a result of the vesting of or upon the receipt of equity awards held by the undersigned, (k) the repurchase of Common Stock or securities convertible into Common Stock by the Company pursuant to equity award agreements or other contractual arrangements providing for the right of said repurchase in connection with the termination of the undersigned’s employment or service with the Company (l) the exchange of shares of Common Stock for shares of Class B common stock or the exchange of shares of Class B common stock for Common Stock (provided that the Common Stock or Class B common stock issued as a result of such exchange is subject to this Lock-Up Letter Agreement) and (m) transfers of shares of Common Stock or any security convertible into Common Stock by operation of law or pursuant to an order of a court or regulatory agency, provided, however, that for purposes of clauses (j) through (m), if the undersigned is legally required during the Lock-Up Period to file a report under the Exchange Act reporting a reduction in beneficial ownership of shares of Common Stock to the Company, the undersigned shall include a statement in such report clearly indicating the nature and conditions of such transfer. For purposes of clause (i) above, “change of control” shall mean the consummation of any bona fide third party tender or exchange offer, merger, purchase, consolidation or other similar transaction the result of which is that any “person” (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a majority of total voting power of the voting stock of the Company.

If the undersigned is an officer or director of the Company, (i) the undersigned agrees that the foregoing provisions shall be equally applicable to any issuer-directed Stock, as referred to in FINRA Rule 5131(d)(2)(A) that the undersigned may purchase in the Offering pursuant to an allocation of Stock that is directed in writing by the Company, (ii) Barclays Capital Inc. and BofA Securities, Inc., agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, Barclays Capital Inc. or BofA Securities, Inc. will notify the Company of the impending release or waiver and (iii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by issuing a press release through a major news service (as referred to in FINRA Rule 5131(d)(2)(B)) at least two business days before the effective date of the release or waiver. Any release or waiver granted by Barclays Capital Inc. and BofA Securities, Inc. hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if both (a) the release or waiver is effected solely to permit a transfer not for consideration, and (b) the transferee has agreed in writing to be bound by the same terms described in this letter that are applicable to the transferor, to the extent and for the duration that such terms remain in effect at the time of the transfer.

 

Exhibit A-3


In furtherance of the foregoing, the Company and its transfer agent are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Letter Agreement.

It is understood that, if the Company notifies the Underwriters that it does not intend to proceed with the Offering, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Stock, the undersigned will be released from its obligations under this Lock-Up Letter Agreement.

The undersigned understands that the Company and the Underwriters will proceed with the Offering in reliance on this Lock-Up Letter Agreement.

Whether or not the Offering actually occurs depends on a number of factors, including, without limitation, market conditions. Any Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.

The undersigned hereby consents to receipt of this Lock-Up Letter Agreement in electronic form and understands and agrees that this Lock-Up Letter Agreement may be signed electronically. In the event that any signature is delivered by facsimile transmission, electronic mail or otherwise by electronic transmission evidencing an intent to sign this Lock-Up Letter Agreement, such facsimile transmission, electronic mail or other electronic transmission shall create a valid and binding obligation on the undersigned with the same force and effect as if such signature were an original execution, and delivery of this Lock-Up Letter Agreement by facsimile transmission, electronic mail or other electronic transmission is legal, valid and binding for all purposes.

This Lock-Up Letter Agreement shall automatically terminate upon the earliest to occur, if any, of (1) the termination of the Underwriting Agreement before the sale of any Stock to the Underwriters, (2) [•], in the event that the Underwriting Agreement has not been executed by that date, provided that the Company may, by written notice to the undersigned prior to such date, extend such date for a period of up to three additional months, (3) the filing by the Company of an application to withdraw the registration statement related to the Offering and (4) the Underwriters notifying the Company, or the Company notifying the Underwriters, in writing, prior to the execution of the Underwriting Agreement, that it has determined not to proceed with the Offering.

[Signature page follows]

 

Exhibit A-4


The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Letter Agreement and that, upon request, the undersigned will execute any additional documents necessary in connection with the enforcement hereof. Any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.

 

Very truly yours,
By:  

 

  Name:
  Title:

Dated:                         

 

Exhibit A-5


EXHIBIT B

FORM OF PRESS RELEASE

The AZEK Company Inc.

[Insert date]

The AZEK Company Inc., (the “Company”) announced today that Barclays Capital Inc. and BofA Securities, Inc., the lead book-running managers in the Company’s recent public sale of [ ● ] shares of Class A common stock are [waiving] [releasing] a lock-up restriction with respect to [ ● ] shares of the Company’s Class A common stock held by [certain officers or directors] [an officer or director]1 of the Company. The [waiver] [release] will take effect on [insert date], and the shares may be sold or otherwise disposed of on or after such date.

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

 

1 

If either Barclays Capital Inc. of BofA Securities, Inc. so requests in writing (either in or accompanying the notice to the Company about the impending release or waiver), the Company will include in the press release such other information as Barclays Capital Inc. or BofA Securities, Inc. may require regarding the circumstances of the release or waiver and/or the identity of the officer(s) or director(s) with respect to which the release or waiver applies.

Exhibit 2.4

MEMBERSHIP INTEREST PURCHASE AGREEMENT

by and among

CPG International LLC d/b/a The AZEK Company LLC,

VERSATEX HOLDINGS, LLC,

THE MEMBERS OF VERSATEX HOLDINGS, LLC,

and

THE SELLER REPRESENTATIVE NAMED HEREIN

dated as of

May 11, 2018


TABLE OF CONTENTS

 

ARTICLE I    DEFINITIONS

     1  

ARTICLE II    PURCHASE AND SALE

     12  
  Section 2.01   Purchase and Sale      12  
  Section 2.02   Purchase Price      12  
  Section 2.03   Payment of the Purchase Price      12  
  Section 2.04   Estimated Working Capital and Indebtedness      13  
  Section 2.05   Final Working Capital and Indebtedness      14  
  Section 2.06   Transactions to be Effected at the Closing      16  
  Section 2.07   Closing      17  

ARTICLE III    REPRESENTATIONS AND WARRANTIES OF SELLERS

     17  
  Section 3.01   Ownership of Membership Interests      17  
  Section 3.02   Seller Authority      18  
  Section 3.03   No Seller Conflicts; Consents      18  
  Section 3.04   Brokers      18  
  Section 3.05   Legal Proceedings      18  
  Section 3.06   No Other Representations and Warranties      18  

ARTICLE IV    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     19  
  Section 4.01   Organization and Authority of the Company      19  
  Section 4.02   Execution and Enforceability      19  
  Section 4.03   Qualification of the Company      19  
  Section 4.04   Capitalization      19  
  Section 4.05   No Subsidiaries      20  
  Section 4.06   No Conflicts; Consents      20  
  Section 4.07   Financial Statements      20  
  Section 4.08   Undisclosed Liabilities      21  
  Section 4.09   Absence of Certain Changes, Events and Conditions      21  
  Section 4.10   Material Contracts      22  
  Section 4.11   Title to Assets; Real Property      24  
  Section 4.12   Intellectual Property      25  
  Section 4.13   Insurance      26  
  Section 4.14   Legal Proceedings; Governmental Orders      26  
  Section 4.15   Compliance with Laws; Permits      26  
  Section 4.16   Environmental Matters      27  
  Section 4.17   Employee Benefit Matters      28  
  Section 4.18   Employment Matters      29  
  Section 4.19   Taxes      30  
  Section 4.20   Related Party Transactions      31  
  Section 4.21   Customers and Suppliers      32  
  Section 4.22   Brokers      32  
  Section 4.23   Products and Product Liability      32  
  Section 4.24   Anti-Corruption and Anti-Bribery Laws      32  
  Section 4.25   No Other Representations and Warranties      33  

 

i


ARTICLE V    REPRESENTATIONS AND WARRANTIES OF BUYER

     34  
  Section 5.01   Organization and Authority of Buyer      34  
  Section 5.02   Execution and Enforceability      34  
  Section 5.03   No Conflicts; Consents      34  
  Section 5.04   Investment Purpose      34  
  Section 5.05   Brokers      35  
  Section 5.06   Financing      35  
  Section 5.07   Solvency      36  
  Section 5.08   Legal Proceedings      36  
  Section 5.09   Independent Investigation; No Reliance      36  

ARTICLE VI     COVENANTS

     36  
  Section 6.01   Conduct of Business Prior to the Closing      36  
  Section 6.02   Employees; Benefit Plans      38  
  Section 6.03   Taxes      39  
  Section 6.04   Financing Related Cooperation; Debt Financing      42  
  Section 6.05   Non-Competition; Non-Solicitation      44  
  Section 6.06   Plant Closings and Mass Layoffs      46  
  Section 6.07   Director and Officer Indemnification and Insurance      46  
  Section 6.08   Confidentiality      47  
  Section 6.09   Governmental Approvals and Other Third-party Consents      47  
  Section 6.10   Books and Records      49  
  Section 6.11   Public Announcements      50  
  Section 6.12   Conversion to Member-Managed LLC      50  
  Section 6.13   Disclaimers      50  
  Section 6.14   Payoff Letter      51  
ARTICLE VII    CONDITIONS TO CLOSING      51  
  Section 7.01   Conditions to Obligations of All Parties      51  
  Section 7.02   Conditions to Obligations of Buyer      52  
  Section 7.03   Conditions to Obligations of Sellers      53  
ARTICLE VIII    INDEMNIFICATION      53  
  Section 8.01   Survival      53  
  Section 8.02   Indemnification for Benefit of Buyer      53  
  Section 8.03   Indemnification For Benefit of Sellers      54  
  Section 8.04   Certain Limitations      54  
  Section 8.05   Exclusive Remedies      55  
ARTICLE IX     TERMINATION      55  
  Section 9.01   Termination      55  
  Section 9.02   Effect of Termination      56  
  Section 9.03   Fees and Expenses Following Termination      56  

 

ii


ARTICLE X     MISCELLANEOUS      57  
  Section 10.01   Expenses      57  
  Section 10.02   Notices      58  
  Section 10.03   Interpretation      59  
  Section 10.04   Headings      59  
  Section 10.05   Severability      59  
  Section 10.06   Entire Agreement      59  
  Section 10.07   Successors and Assigns      60  
  Section 10.08   No Third-Party Beneficiaries      60  
  Section 10.09   Amendment and Modification; Waiver      60  
  Section 10.10   Governing Law; Submission to Jurisdiction; Waiver of Jury Trial      60  
  Section 10.11   Specific Performance      61  
  Section 10.12   Financing Sources; No Recourse      62  
  Section 10.13   Counterparts      63  
  Section 10.14   Non-Recourse      63  
  Section 10.15   Conflicts      63  
  Section 10.16   Release      64  
ARTICLE XI     THE SELLER REPRESENTATIVE      65  
  Section 11.01   Authorization of the Seller Representative      65  
  Section 11.02   Compensation; Exculpation; Indemnity      67  

EXHIBITS AND SCHEDULES

Exhibit A – Escrow Agreement

Exhibit B – Working Capital

Exhibit C – Tax Allocation Statement

Schedule I – List of Members

Schedule II – List of Reinvesting Sellers

 

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MEMBERSHIP INTEREST PURCHASE AGREEMENT

This Membership Interest Purchase Agreement (this “Agreement”), dated as of May 11, 2018, is entered into by and among VERSATEX HOLDINGS, LLC, a Delaware limited liability company (the “Company”), the members of the Company listed on Schedule I hereto (collectively, “Sellers”), CPG International LLC d/b/a The AZEK Company LLC, a Delaware limited liability company (“Buyer”), and, solely for the limited purposes described herein, Highlander Partners Trim, LLC, in its capacity as Seller Representative (as hereinafter defined).

RECITALS

WHEREAS, Sellers collectively own all of the Series A Units and Series B Incentive Units of the Company (the “Membership Interests”);

WHEREAS, the Sellers wish to sell to Buyer, and Buyer wishes to purchase from the Sellers, all of the Membership Interests, subject to the terms and conditions set forth herein;

WHEREAS, concurrently with the execution of this Agreement, Buyer has delivered to the Company executed limited guarantees of Ontario Teachers’ Pension Plan Board and Ares Corporate Opportunities Fund IV, L.P. (in such capacity, each a “Guarantor” and, such limited guarantees (the “Guarantees”), and pursuant to which each Guarantor has guaranteed certain of Buyer’s obligations under this Agreement, subject to the terms and conditions set forth in the Limited Guarantees; and

WHEREAS, concurrently with the execution of this Agreement, the Sellers listed on Schedule II hereto have executed and delivered employment agreements which include commitments to reinvest, immediately following the Closing, the amount of proceeds received at Closing as set forth opposite such Seller’s name on Schedule II attached hereto in exchange for limited liability company interests in Buyer, as contemplated by and in accordance with the letter agreements entered into by and between such Sellers listed on Schedule II and Buyer.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

The following terms have the meanings specified or referred to in this Article I:

Acquired Company” and “Acquired Companies” have the meaning set forth in Section 4.03.

Action” means any action, suit, claim, complaint, litigation, investigation, audit, legal proceeding or other similar dispute.

Adjustment Cap” means $2,000,000.


Affiliate” of a Person means any other Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. The term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

Agreement” has the meaning set forth in the preamble.

Audited Financial Statements” has the meaning set forth in Section 4.07.

Balance Sheet” has the meaning set forth in Section 4.07.

Balance Sheet Date” means the date of the Balance Sheet.

Base Purchase Price” has the meaning set forth in Section 2.02.

BBA” means P.L. 114-74, the Bipartisan Budget Act of 2015 (including any Treasury Regulations and other guidance promulgated thereunder).

Benefit Plan” has the meaning set forth in Section 4.17(a).

Business Day” means any day except Saturday, Sunday or any other day on which commercial banks located in Dallas, Texas or Pittsburgh, Pennsylvania are required by Law to be closed for business.

Buyer” has the meaning set forth in the preamble.

Buyer 401(k) Plan” has the meaning set forth in Section 6.02(c).

Buyer Benefit Plans” has the meaning set forth in Section 6.02(a).

Buyer Related Parties” has the meaning set forth in Section 9.03(d).

Buyer Releasees” has the meaning set forth in Section 10.16(b).

Buyer Termination Fee” has the meaning set forth in Section 9.03(a).

Cash” means cash and cash equivalents of any Acquired Company, including, without duplication, cash, deposits in transit (including uncashed incoming checks), money orders, marketable securities, all deposits with equipment vendors and other cash equivalents, excluding the amount of any outstanding outgoing checks.

Claim” has the meaning set forth in Section 10.16(a).

Closing” has the meaning set forth in Section 2.07.

Closing Balance Sheet” has the meaning set forth in Section 2.04.

 

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Closing Cash” has the meaning set forth in Section 2.05(a).

Closing Company Transaction Costs” has the meaning set forth in Section 2.05(a).

Closing Date” has the meaning set forth in Section 2.07.

Closing Indebtedness” has the meaning set forth in Section 2.05(a).

Closing Payment” has the meaning set forth in Section 2.03(a).

Closing Working Capital Deficiency” has the meaning set forth in Section 2.05(a).

Closing Working Capital Surplus” has the meaning set forth in Section 2.05(a).

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

Company” has the meaning set forth in the preamble.

Company 401(k) Plan” has the meaning set forth in Section 6.02(c).

Company Continuing Employee(s)” has the meaning set forth in Section 6.02(a).

Company Intellectual Property” has the meaning set forth in Section 4.12(a).

Company Related Parties” has the meaning set forth in Section 9.03(d).

Company Releasees” has the meaning set forth in Section 10.16(b).

Company Releasor Parties” has the meaning set forth in Section 10.16(a).

Company Transaction Costs” means (i) all fees, costs and expenses of any brokers, investment bankers, financial advisors, consultants, accountants, attorneys or other professionals engaged by or paid by any Acquired Company or Sellers in connection with the structuring, negotiation or consummation of the transactions contemplated by this Agreement and the other agreements entered into as contemplated hereby, (ii) transaction bonuses, discretionary bonuses, change-of-control payments, phantom equity payouts, “stay put” or other compensatory amounts payable to any Employee or director of any Acquired Company as a result of the acquisition of the Membership Interests, and (iii) any fees, costs and expenses (including the employer portion of any employment taxes) relating to any amounts under (i) and/or (ii), in each case to the extent not paid as of the Closing.

Competitive Business” has the meaning set forth in Section 6.05(a)(i).

Confidentiality Agreement” means the Confidentiality Agreement, dated as of March 13, 2018, between Buyer and the Company.

Contractual Representations” has the meaning set forth in Section 6.13.

 

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Current Assets” means, as of 11:59 p.m. on the Closing Date, the sum of all current assets of the Acquired Companies, as determined in accordance with this Agreement and GAAP applied on a basis consistent with the preparation of the Balance Sheet and the historical accounting policies, assumptions and practices of the Acquired Companies; provided, however, that Current Assets shall not include (a) intercompany accounts and obligations owed among any of the Acquired Companies to another Acquired Company, (b) Cash (other than restricted cash), (c) deferred Tax assets, and (d) prepaid management fees.

Current Liabilities” means, as of 11:59 p.m. on the Closing Date, the sum of all current liabilities of the Acquired Companies as determined in accordance with this Agreement and GAAP applied on a basis consistent with the preparation of the Balance Sheet and the historical accounting policies, assumptions and practices of the Acquired Companies plus the amount of outstanding checks; provided, however, that Current Liabilities shall not include, in whole or in part, any (i) Company Transaction Costs, (ii) Indebtedness, including the current portion of Indebtedness, and accrued and unpaid interest on Indebtedness, or any costs associated with any refinancing thereof by Buyer, (iii) intercompany accounts and obligations owed among any of the Acquired Companies to another Acquired Company, and (iv) deferred Tax liabilities.

D&O Provisions” has the meaning set forth in Section 6.07(a).

Data Room” means the electronic documentation site established by Merrill Corporation’s Merrill DataSite on behalf of the Company in connection with the transactions contemplated by this Agreement.

Debt Commitment Letter” has the meaning set forth in Section 5.06.

Debt Financing” has the meaning set forth in Section 5.06.

Debt Financing Sources” has the meaning set forth in Section 5.06.

Disclosure Schedules” means the Disclosure Schedules delivered by Sellers and Buyer concurrently with the execution and delivery of this Agreement.

Dollars” or “$” means the lawful currency of the United States.

Employees” means those individuals employed by any Acquired Company immediately prior to the Closing.

Encumbrance” means any lien, pledge, mortgage, deed of trust, security interest, lease, license, charge, option, right of first refusal or first offer, claim, easement, servitude, encroachment or other similar encumbrance.

Environmental Claim” means any Action by any Person alleging liability resulting from: (a) the presence, Release of, or exposure to, any Hazardous Materials; or (b) any non-compliance with, or liability relating to, any Environmental Law or any Environmental Permit.

 

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Environmental Law” means any applicable Law, and any Governmental Order or binding agreement with any Governmental Authority: (a) relating to pollution (or the cleanup thereof) or the protection of natural resources, or the environment (including ambient air, soil, surface water or groundwater, or subsurface strata); or (b) concerning the presence of, exposure to, or the management, manufacture, use, containment, storage, recycling, reclamation, reuse, treatment, generation, discharge, transportation, processing, production, disposal or remediation of any Hazardous Materials. The term “Environmental Law” includes, but is not limited to the following (including their implementing regulations and any state analogs): the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; and the Clean Air Act of 1970, as amended by the Clean Air Act Amendments of 1977 and 1990, 42 U.S.C. §§ 7401 et seq.

Environmental Notice” means any written directive, notice of violation, citation, or notice respecting any Environmental Claim relating to actual or alleged non-compliance or liability under any Environmental Law or any Environmental Permit.

Environmental Permit” means any Permit required under Environmental Law.

Equity Commitment Letters” has the meaning set forth in Section 5.06.

Equity Financing” has the meaning set forth in Section 5.06.

Equity Financing Source” has the meaning set forth in Section 5.06.

ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

ERISA Affiliate” means all employers (whether or not incorporated) that would be treated together with the Acquired Companies as a “single employer” within the meaning of Section 414 of the Code.

Escrow Account” means the account maintained pursuant to the Escrow Agreement, into which the Escrow Amount will be deposited at Closing.

Escrow Agent” means Citibank, National Association.

Escrow Agreement” means the agreement entered into at the Closing in the form of Exhibit A, by and among Buyer, Escrow Agent and the Seller Representative, on behalf of the Sellers.

Escrow Amount” has the meaning set forth in Section 2.03(b).

Estimated Cash” has the meaning set forth in Section 2.04.

Estimated Company Transaction Costs” has the meaning set forth in Section 2.04.

Estimated Indebtedness” has the meaning set forth in Section 2.04.

 

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Estimated Purchase Price” means an amount equal to (i) the Base Purchase Price, minus (ii) the amount of Estimated Indebtedness, if any, minus (iii) the Estimated Company Transaction Costs, minus (iv) the Estimated Working Capital Deficiency, if any, plus (v) the Estimated Working Capital Surplus, if any, plus (vi) the amount of Estimated Cash.

Estimated Working Capital Deficiency” has the meaning set forth in Section 2.04.

Estimated Working Capital Surplus” has the meaning set forth in Section 2.04.

Existing Credit Agreement” means the Credit and Security Agreement by and among Versatex Building Products, LLC, and Versatex Holdings, LLC, the Lenders and Regions Bank, dated September 28, 2016, as amended by that First Amendment to Credit and Security Agreement, dated September 26, 2017.

Extra-Contractual Information” has the meaning set forth in Section 6.13.

Final Adjustment Deficiency” has the meaning set forth in Section 2.05(d).

Final Adjustment Surplus” has the meaning set forth in Section 2.05(d).

Final Balance Sheet” has the meaning set forth in Section 2.05(a).

Final Cash” has the meaning set forth in Section 2.05(c).

Final Company Transaction Costs” has the meaning set forth in Section 2.05(c).

Final Indebtedness” has the meaning set forth in Section 2.05(c).

Final Purchase Price” means an amount equal to (i) the Base Purchase Price, minus (ii) the amount of Final Indebtedness, if any, minus (iii) the Final Company Transaction Costs, minus (iv) the Final Working Capital Deficiency, if any, plus (v) the Final Working Capital Surplus, if any, plus (vi) the amount of Final Cash.

Final Working Capital Deficiency” has the meaning set forth in Section 2.05(c).

Final Working Capital Surplus” has the meaning set forth in Section 2.05(c).

Financial Statements” has the meaning set forth in Section 4.07.

Financing” has the meaning set forth in Section 5.06.

Fraud” means, with respect to a Person, common law liability for fraud, as limited by this definition and specifically excluding constructive and negligent fraud, and will only be found to exist if the Person subject to the claim of fraud is finally determined by a court of competent jurisdiction to have, with a bad faith or malicious intent or intent to deceive, made an intentional or willful misrepresentation (or misleading omission) with respect to a representation or warranty in Article III or Article IV of this Agreement, based on the actual knowledge of such Person that such representation or warranty was untrue, and the Person claiming fraud actually relied on such representation or warranty to such Person’s detriment.

 

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GAAP” means United States generally accepted accounting principles in effect from time to time.

General Enforceability Exceptions” has the meaning set forth in Section 3.02.

Governmental Authority” means any federal, state, local or foreign government, or any agency or instrumentality of such government, or any court or tribunal of competent jurisdiction.

Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by any Governmental Authority.

Guarantee” has the meaning set forth in the recitals.

Guarantor” has the meaning set forth in the recitals.

Hazardous Materials” means: (a) any material, substance, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, that is hazardous, acutely hazardous, toxic, or words of similar import or is otherwise regulated under Environmental Laws; and (b) any petroleum or petroleum-derived products, radon, radioactive materials or wastes, asbestos in any form, lead or lead-containing materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Indebtedness” means, without duplication, except for intercompany accounts and obligations owed among any of the Acquired Companies to another Acquired Company, (a) all indebtedness of any Acquired Company for the repayment of borrowed money, whether or not represented by bonds, debentures, notes or similar instruments, (b) all other indebtedness of the Acquired Companies evidenced by bonds, debentures, notes or similar instruments, (c) any indebtedness guaranteed in any manner by any Acquired Company (including guarantees in the form of an agreement to repurchase or reimburse and obligations with respect to letters of credit (to the extent drawn)), (d) any liabilities under leases that would be required to be capitalized leases under GAAP, (e) all obligations for any interest rate swaps, forward contracts or other hedging arrangements, (f) any accrued and unpaid interest on, and any prepayment premiums, penalties, expenses, breakage costs, fees or similar contractual charges in respect of, any of the foregoing obligations computed as though payment is being made in respect thereof on the Closing Date, (g) any liabilities included in accounts payable related to capital expenditures or management fees (or Board fees), (h) any obligations for payment of incentive compensation related to performance for any period prior to 2018 and (i) unpaid distributions or dividends to members with respect to the equity ownership in the Company.

Indemnified Party” has the meaning set forth in Section 8.04.

Indemnifying Party” has the meaning set forth in Section 8.04.

Insurance Policies” has the meaning set forth in Section 4.13.

 

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Intellectual Property” means any and all of the following in any jurisdiction throughout the world whether registered or not: (i) trademarks and service marks, including all applications and registrations and the goodwill connected with the use of and symbolized by the foregoing; (ii) copyrights, including all applications and registrations related to the foregoing; (iii) trade secrets, confidential know-how and other business information including without limitation information relating to products, operations, finances and marketing processes, formulae, methods, strategies, plans, supplier and customer lists, and the like; (iv) patents and patent applications including all continuations, renewals and extensions of such rights or applications as well as rights to derivatives and improvements of the same; (v) internet domain name registrations, social media identifications (such as “Twitter” name) and all other indicia of origin; (vi) rights in computer software and programs, desktop and mobile applications and all similar rights of whatever nature; (vii) design rights; and (viii) other intellectual property and related proprietary rights, interests and protections.

Interim Financial Statements” has the meaning set forth in Section 4.07.

IT Assets” means the computers, software, firmware, middleware, databases, servers, workstations, routers, hubs, switches, data communications lines, and all other information technology equipment, and all associated documentation used by or on behalf of any of the Acquired Companies in the business of the Acquired Companies.

Katten” means Katten Muchin Rosenman LLP.

Key Employee” means John Pace, Rick Kapres, Evan Kaffenes, Josh Pace, Joseph Ferrese and Shawn Petras.

Knowledge of the Company” or “the Company’s Knowledge” or any other similar knowledge qualification, means the actual (and not constructive or imputed, except as otherwise expressly set forth in this definition) knowledge of John Pace, Evan Kaffenes, Joseph Ferrese and Rick Kapres (the “Knowledge Group”) or such other knowledge as the Knowledge Group would have following a reasonable investigation under the circumstances. For the purposes of the foregoing definition, the parties agree that a “reasonable investigation under the circumstances” will be deemed to have occurred if the member of the Knowledge Group inquires of his or her direct reports having responsibility over the subject matter relating to the particular Section(s) of this Agreement so referenced.

Law” means, as established by a Governmental Authority, any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, judgment, decree, other requirement or rule of law.

Losses” means liabilities, losses, damages, costs or expenses, including reasonable attorneys’ fees and expenses; provided, however, that “Losses” shall not include punitive or exemplary damages except to the extent paid to a third party.

Material Adverse Effect” means any event, occurrence, fact, condition, circumstance, development, change or effect that, individually or in the aggregate, is or would reasonably expected to be materially adverse to the business, results of operations, financial condition or assets of the Acquired Companies, taken as a whole; provided, however, that “Material Adverse Effect”

 

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shall not include any event, occurrence, fact, condition, circumstance, development, change or effect directly or indirectly, arising out of or attributable to: (i) general economic or political conditions; (ii) conditions generally affecting the industries in which the Acquired Companies operate; (iii) any changes in financial, banking or securities markets in general, including any disruption thereof and any decline in the price of any security or any market index or any change in prevailing interest rates; (iv) acts of war (whether or not declared), armed hostilities or terrorism, or the escalation or worsening thereof; (v) any action required by this Agreement or any action taken (or omitted to be taken) with the consent of or at the request of Buyer; (vi) any changes in applicable Laws or accounting rules (including GAAP) or the enforcement, implementation or interpretation thereof; (vii) the announcement, pendency or completion of the transactions contemplated by this Agreement, including losses or threatened losses of employees, customers, suppliers, distributors or others having relationships with any Acquired Company; (viii) any natural or man-made disaster or acts of God; or (ix) any failure by any Acquired Company to meet any internal or published projections, forecasts or revenue or earnings predictions (provided that the underlying causes of such failures (subject to the other provisions of this definition) shall not be excluded), unless in the case of each of clauses (i)-(iii) and (vi), such changes would reasonably be expected to have a materially disproportionate impact on the financial condition, business or results of operations of the Acquired Companies, taken as a whole, relative to other affected participants in the industries in which the Acquired Companies conduct business (in which case, only the incremental disproportionate impact shall be taken into account in determining whether there has been a Material Adverse Effect).

Material Contracts” has the meaning set forth in Section 4.10(a).

Membership Interests” has the meaning set forth in the recitals.

Organizational Documents” means (a) in the case of any Person organized as a corporation, the certificate or articles of incorporation of such corporation and the bylaws of such corporation, (b) in the case of any Person organized as a limited liability company, the certificate of formation or organization and the limited liability company agreement or operating agreement, (c) in the case of any Person organized as a limited partnership, the certificate of limited partnership and partnership agreement of such limited partnership, (d) in the case of any other Person, all constitutive or organizational documents of such Person which address matters relating to the business and affairs of such Person similar to the matters addressed by the documents referred to in clauses (a) through (c) above in the case of Persons organized as corporations, limited liability companies or limited partnerships and (e) any amendment to any of the foregoing.

Outside Date” means, initially, July 25, 2018 (the “Initial Outside Date”), as such date may be extended pursuant to the terms of this definition. The Initial Outside Date may be extended by mutual agreement of the Company and the Buyer to January 22, 2019 (the “Second Outside Date”) if by 5:00 p.m., central time, on the Initial Outside Date, all of the conditions set forth in Article VII other than the condition set forth in Section 7.01(a) have been satisfied (except for those conditions which, by their nature, are to be satisfied on the Closing Date). Notwithstanding the foregoing, the Initial Outside Date and the Second Outside Date shall each be extended by five (5) Business Days following the satisfaction of the condition set forth in Section 7.01(a).

Payoff Amount” has the meaning set forth in Section 6.15.

 

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Payoff Letter” has the meaning set forth in Section 6.15.

Permits” means all permits, licenses, and franchises required to be obtained from Governmental Authorities.

Permitted Encumbrances” has the meaning set forth in Section 4.11(a).

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

Personal Information” means any information that identifies or could reasonably be used to identify an individual.

Post-Closing Covenants” means any covenants, promises, commitments or other obligations (or any portion thereof) made or undertaken in this Agreement or in any other Transaction Document, to, or in favor of, a party hereto, to the extent performance or fulfillment thereof is required by its terms to be accomplished after the Closing including, without limitation, those covenants included in Articles II and VI hereof.

Pre-Closing Conversion” has the meaning set forth in Section 6.12.

Privileged Materials” has the meaning set forth in Section 10.15.

Purchase Price” has the meaning set forth in Section 2.02.

Qualified Benefit Plan” has the meaning set forth in Section 4.17(b).

R&W Insurance Policy” has the meaning set forth in Section 8.01(a).

Real Property” means the real property owned, leased or subleased by any Acquired Company.

Referee” has the meaning set forth in Section 2.05(c).

Release” means any actual release, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, abandonment, disposing or allowing to escape or migrate into or through the environment (including surface water, groundwater, land surface or subsurface strata).

Restricted Sellers” means each Seller other than Highlander Partners Trim, LLC, AEA Mezzanine Fund III LP, and Wolfpac Holdings, Inc.

Restricted Term” has the meaning set forth in Section 6.05(a).

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

Seller Group” has the meaning set forth in Section 10.15.

Seller Payout Spreadsheet” has the meaning set forth in Section 2.03(a).

 

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Seller Releasees” has the meaning set forth in Section 10.16(a).

Seller Releasor Parties” has the meaning set forth in Section 10.16(b).

Seller Representative” means Highlander Partners Trim, LLC and any successor representative appointed pursuant to the provisions of Article XI hereof.

Sellers” has the meaning set forth in the preamble.

Statement of Objections” has the meaning set forth in Section 2.05(c).

Subsidiary” means, with respect to any Person, another Person in which such first Person owns, directly or indirectly, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, fifty percent (50%) or more of the equity interests of such Person).

Tax Allocation Statement” has the meaning set forth in Section 6.03(c)(i).

Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document filed or required to be filed with a Governmental Authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

Taxes” means all federal, state, local, foreign and other income, gross receipts, sales, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges in the nature of a tax, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

Territory” has the meaning set forth in Section 6.05(a).

Top Customers” has the meaning set forth in Section 4.21.

Top Suppliers” has the meaning set forth in Section 4.21.

Total Tax Consideration” has the meaning set forth in Section 6.03(c)(i).

Transaction Documents” means this Agreement, the Escrow Agreement, and each other agreement, document, certificate and instrument being executed and delivered pursuant to this Agreement, including the documents and agreements to be delivered pursuant to Article VII.

VBP” means Versatex Building Products, LLC, a Pennsylvania limited liability company.

 

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WARN Act” means the federal Worker Adjustment and Retraining Notification Act of 1988, as amended, and similar state, local and foreign laws related to plant closings, relocations, mass layoffs and employment losses.

Waterfall” means the provisions providing for distributions to the members of the Company set forth in Section 5.01 of the Company’s currently effective limited liability company agreement.

Working Capital” means Current Assets minus Current Liabilities calculated utilizing only the line items set forth on Exhibit B. Working Capital will be determined without giving effect to the transactions contemplated by this Agreement.

Working Capital Deficiency” means the amount by which the Working Capital Target exceeds Working Capital.

Working Capital Surplus” means the amount by which Working Capital exceeds the Working Capital Target.

Working Capital Target” means $5,205,490

ARTICLE II

PURCHASE AND SALE

Section 2.01    Purchase and Sale. Subject to the terms and conditions set forth herein, at the Closing, Sellers shall sell to Buyer, and Buyer shall purchase from Sellers, the Membership Interests for the consideration specified in Section 2.02.

Section 2.02    Purchase Price. The aggregate purchase price for the Membership Interests shall be $270,000,000 (the “Base Purchase Price”), minus (i) the amount of Closing Indebtedness, minus (ii) the Company Transaction Costs, minus (iii) the Closing Working Capital Deficiency, if any, plus (iv) the Closing Working Capital Surplus, if any, plus (v) the amount of Closing Cash (the “Purchase Price”).

Section 2.03    Payment of the Purchase Price.

(a)    At Closing, Buyer shall pay to each Seller a portion of the Closing Payment equal to the portion that such Seller would receive if the Closing Payment was distributed pursuant to the Waterfall. For purposes of this Agreement, the “Closing Payment” shall mean an aggregate amount of cash equal to (i) the Estimated Purchase Price, minus (ii) the Escrow Amount. At least three (3) Business Days prior to the Closing, the Company shall deliver to Buyer (i) a spreadsheet detailing the allocation of the Closing Payment among the Sellers together with an allocation of any subsequent payments to the Sellers (the “Seller Payout Spreadsheet”) and (ii) a certificate for the Sellers and signed by the Seller Representative, certifying that the Seller Payout Spreadsheet accurately reflects the amount of the Closing Payment that each Seller is entitled to receive pursuant to the Waterfall.

 

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(b)    At Closing, as security for Sellers’ obligations with respect to adjustments to the Purchase Price under Section 2.05 of this Agreement, Buyer shall remit to the Escrow Agent an amount of cash equal to $2,000,000 (the “Escrow Amount”) to be held and disbursed by the Escrow Agent pursuant to the Escrow Agreement.

(c)    On the Closing Date, Buyer shall pay the Estimated Indebtedness to the applicable holder thereof by wire transfer to the account or accounts as directed by the Company in writing at least three (3) Business Days prior to the Closing, other than any such Indebtedness that is capital lease Indebtedness.

(d)    On the Closing Date, Buyer shall pay the Company Transaction Costs that remain unpaid to the applicable payee by wire transfer to the account or accounts, as directed by the Company in writing at least three (3) Business Days prior to the Closing, except that, with respect to any Company Transaction Costs that consist of payments to employees, including related payroll Taxes, Buyer shall remit funds necessary to pay such Company Transaction Costs, to the applicable Acquired Company which shall then be paid by such Acquired Company.

(e)    By execution hereof, each Seller hereby expressly acknowledges and agrees (i) that he, she or it understands the purchase price mechanics set forth herein (including the manner in which his, her or its portion of the Purchase Price will be calculated) and (ii) to the deductions from the Estimated Purchase Price for the items referenced herein, as applicable to such Seller, including the establishment of the Escrow Account, the retention of the funds for such accounts and the distribution and use of those funds pursuant to the terms of this Agreement and the Escrow Agreement. Each Seller releases Buyer for any liability for the allocation of the Closing Payment and the Purchase Price that are set forth in the Seller Payout Spreadsheet.

Section 2.04    Estimated Working Capital and Indebtedness. No later than three (3) Business Days before the Closing Date, the Seller Representative shall have delivered to Buyer an estimated balance sheet of the Company and its Subsidiaries as of 11:59 p.m. on the Closing Date (the “Closing Balance Sheet”), which sets forth a good faith estimate of the following: (i) the amount of unpaid Indebtedness as of immediately preceding the Closing as set forth in the payoff letters received from each holder of Indebtedness, or, in the case of capital lease Indebtedness, as determined in good faith by the Company and its Subsidiaries (“Estimated Indebtedness”), (ii) the amount of Cash as of 11:59 p.m. on the Closing Date (“Estimated Cash”), (iii) the amount of Working Capital Surplus or Working Capital Deficiency, as the case may be, as of 11:59 p.m. on the Closing Date (the “Estimated Working Capital Surplus” or “Estimated Working Capital Deficiency,” respectively) and (iv) the amount of Company Transaction Costs as of 11:59 p.m. on the Closing Date (the “Estimated Company Transaction Costs”). The Closing Balance Sheet shall be prepared in accordance with this Agreement and GAAP applied in a manner consistent with the preparation of the Balance Sheet, except as otherwise contemplated by this Agreement. For the avoidance of doubt, only the categories and line items set forth on Exhibit B shall be taken into account in preparing the Closing Balance Sheet, notwithstanding that GAAP may require additional categories of current liabilities or current assets to be included in a GAAP presentation of current assets and current liabilities.

 

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Section 2.05    Final Working Capital and Indebtedness.

(a)    As promptly as practicable after the Closing Date (but in no event later than sixty (60) days after the Closing Date), Buyer shall prepare, in good faith, and deliver to the Seller Representative a balance sheet of the Company and its Subsidiaries (the “Final Balance Sheet”), which shall set forth the following: (i) the amount of unpaid Indebtedness as of immediately preceding the Closing (“Closing Indebtedness”), (ii) the amount of Cash as of 11:59 p.m. on the Closing Date (“Closing Cash”), (iii) the amount of Working Capital Surplus or Working Capital Deficiency, as the case may be, as of 11:59 p.m. on the Closing Date (“Closing Working Capital Surplus” or “Closing Working Capital Deficiency,” respectively) and (iv) the amount of Company Transaction Costs as of 11:59 p.m. on the Closing Date (the “Closing Company Transaction Costs”). The Final Balance Sheet shall be prepared in accordance with this Agreement and GAAP applied in a manner consistent with the preparation of the Balance Sheet, except as otherwise contemplated by this Agreement. For the avoidance of doubt, only the categories and line items set forth on Exhibit B shall be taken into account in preparing the Final Balance Sheet, notwithstanding that GAAP may require additional categories of current liabilities or current assets to be included in a GAAP presentation of current assets and current liabilities.

(b)    After receipt of the Final Balance Sheet, the Seller Representative and its representatives shall have forty-five (45) days (the “Review Period”) to review the Final Balance Sheet, together with the supporting schedules, analyses, workpapers, including the accounting workpapers, and other underlying records or documentation as are reasonably requested by the Seller Representative and its representatives. In connection with such review of the Final Balance Sheet, Buyer shall, and shall cause each Acquired Company to, cooperate with the Seller Representative and its representatives, including providing answers to reasonable questions asked by the Seller Representative and its representatives, and Buyer shall, and shall cause each Acquired Company to, upon reasonable notice, promptly provide to the Seller Representative and its representatives reasonable access during normal business hours to any books, records and other materials of any Acquired Company and the personnel of, and workpapers prepared by or for, Buyer, any Acquired Company and their respective representatives, including such historical financial information relating to any Acquired Company as the Seller Representative and its representatives may reasonably request, in each case, in order to permit the timely review of the Final Balance Sheet in accordance with this Section 2.05(b).

(c)    On or prior to the last day of the Review Period, the Seller Representative may object to the Final Balance Sheet by delivering to Buyer a written statement (the “Statement of Objections”) setting forth the Seller Representative’s objections to the Final Balance Sheet and specifying in reasonable detail those items or amounts as to which the Seller Representative disagrees and the basis for the Seller Representative’s objections. If the Seller Representative fails to deliver the Statement of Objections before the expiration of the Review Period, then Closing Indebtedness, Closing Cash, Closing Working Capital Surplus or Closing Working Capital Deficiency, as applicable, and the Closing Company Transaction Costs as set forth in such Final Balance Sheet, shall be deemed final and conclusive and shall be “Final Indebtedness,” “Final Cash,” “Final Working Capital Surplus” or “Final Working Capital Deficiency,” and “Final Company Transaction Costs,” respectively. If the Seller Representative delivers the

 

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Statement of Objections before the expiration of the Review Period, then Buyer and the Seller Representative shall endeavor in good faith to resolve the objections for a period not to exceed fifteen (15) days from the date of delivery of the Statement of Objections. If at the end of such fifteen (15) day period there are any objections that remain in dispute, then the remaining objections in dispute shall be submitted for resolution to KPMG. If KPMG is unwilling or unable to resolve the dispute, the Seller Representative and Buyer will jointly select a nationally recognized accounting firm, within five (5) Business Days of learning that KPMG is unwilling or unable to resolve the dispute, to resolve any objections that remain in dispute (KPMG or such jointly selected accounting firm, the “Referee”). Any retainer required to be paid to the Referee to settle the dispute will be paid fifty percent (50%) by Buyer and fifty percent (50%) by the Sellers, subject to adjustment as set forth in the antepenultimate sentence of this Section 2.05(c). The Seller Representative and Buyer agree to request that the Referee determine the disputed portions of Final Indebtedness, Final Cash, Final Working Capital Surplus or Final Working Capital Deficiency and Final Company Transaction Costs within thirty (30) days after the objections that remain in dispute are submitted to it. If any remaining objections are submitted to the Referee for resolution, (i) each party shall furnish to the Referee a report with respect to such party’s positions with respect to the issues in the Statement of Objections, a copy of which shall be delivered to the other party hereto, and no ex parte conferences, oral examinations, testimony, depositions, discovery or other form of evidence gathering or hearings shall be conducted or allowed, provided, that, at the Referee’s request, or as mutually agreed by the parties, Buyer and the Seller Representative may meet with the Referee as long as representatives of both are present; (ii) to the extent that a value has been assigned to any objection that remains in dispute, the Referee shall not assign a value to such objection that is greater than the greatest value for such objection claimed by either party or less than the smallest value for such objection claimed by either party; (iii) the determination by the Referee of Final Indebtedness, Final Cash, Final Working Capital Surplus or Final Working Capital Deficiency and Final Company Transaction Costs, as set forth in a written notice delivered to both parties by the Referee, shall be made solely in accordance with the written reports (i.e., not on independent review) and in accordance with this Agreement and shall be binding and conclusive on the parties absent manifest error and shall constitute an arbitral award that is final, binding and unappealable and upon which a judgment may be entered by a court having jurisdiction thereof; and (iv) the fees and expenses (including any retainer paid by the parties hereto) of the Referee shall be allocated to be paid by Buyer, on the one hand, and/or Sellers, on the other hand, based upon the percentage that the portion of the contested amount not awarded to each side bears to the amount actually contested by such side. Buyer and Seller Representative will request that the Referee determine, in writing, the allocation of its fees (including any retainers paid) in accordance with the immediately preceding sentence. Buyer and Sellers agree that any fees or expenses, as finally allocated pursuant to this Section 2.05(c) may be offset, as appropriate, by any adjustments required pursuant to Section 2.05(d).

 

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(d)    To the extent that the Final Purchase Price exceeds the Estimated Purchase Price, Buyer shall pay such excess (the “Final Adjustment Surplus”) up to an amount not to exceed the Adjustment Cap to the Seller Representative (for further credit to Sellers in accordance with the amount each Seller would receive if such payment was made at such time pursuant to the Waterfall) and Buyer and Seller Representative shall deliver joint written instructions authorizing the distribution of all of the funds from the Escrow Account to the Seller Representative (for further credit to Sellers in accordance with the amount each Seller would receive if such payment was made at such time pursuant to the Waterfall), within five (5) Business Days of any such final determination. To the extent that the Final Purchase Price is less than the Estimated Purchase Price (such deficiency, the “Final Adjustment Deficiency”), Buyer and the Seller Representative will deliver to the Escrow Agent joint written instructions authorizing the distribution of funds from the Escrow Account (i) to Buyer in an amount equal to the Final Adjustment Deficiency and (ii) to Sellers (for further credit to Sellers in accordance with the amount each Seller would receive if such payment was made at such time pursuant to the Waterfall) any amount remaining in the Escrow Account after payment of the Final Adjustment Deficiency to Buyer, within five (5) Business Days of any such final determination. Notwithstanding anything to the contrary, the maximum liability of the Sellers to the Buyer under this Section 2.05 shall not exceed the funds in the Escrow Account; the maximum liability of the Buyer to the Sellers under this Section 2.05 shall not exceed the Adjustment Cap; and the Buyer’s sole recourse with respect to any such liability shall be to such Escrow Account.

(e)    Notwithstanding anything in this Agreement to the contrary, Buyer shall be entitled to deduct and withhold from the Purchase Price and any other payments otherwise payable pursuant to this Agreement such amounts (or portions thereof) as Buyer is legally required to deduct and withhold with respect to the making of such payment under the Code, the rules and regulations promulgated thereunder or any applicable Law. To the extent that amounts are so deducted or withheld and properly paid over to the appropriate Governmental Authority by Buyer such amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

Section 2.06    Transactions to be Effected at the Closing.

(a)    At the Closing, Buyer shall deliver to Sellers:

(i)    the portion of the Closing Payment to be paid to Sellers under the terms hereof by wire transfer of immediately available funds to an account or accounts designated in writing by the Company no later than one (1) Business Day prior to the Closing Date;

(ii)    the Escrow Agreement, duly executed by Buyer and the Escrow Agent; and

(iii)    all other agreements, documents, instruments or certificates required to be delivered by Buyer at or prior to the Closing pursuant to Section 7.03 of this Agreement.

 

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(b)    At the Closing, Sellers or the Acquired Companies (or any one of them), as appropriate, shall deliver to Buyer:

(i)    a certificate of good standing of the Company certified by the Secretary of State of the State of Delaware issued not more than five (5) Business Days prior to the Closing Date;

(ii)    evidence that each of the Buy-Sell and Vesting Agreements listed in Section 4.04(b) of the Disclosure Schedules have been terminated and cease to be in full force and effect;

(iii)    the Escrow Agreement, duly executed by the Seller Representative;

(iv)    evidence that the management agreement between the Company and Highlander Partners, L.P. has been terminated and ceases to be in full force and effect; and

(v)    all other agreements, documents, instruments or certificates required to be delivered by Sellers at or prior to the Closing pursuant to Section 7.02 of this Agreement.

Section 2.07    Closing. Subject to the terms and conditions of this Agreement, the purchase and sale of the Membership Interests contemplated hereby shall take place at a closing (the “Closing”) to be held at 10:00 a.m., central time, no later than two (2) Business Days after the last of the conditions to Closing set forth in Article VII have been satisfied or waived (other than conditions which, by their nature, are to be satisfied on the Closing Date). The Closing shall take place by the electronic exchange of executed documents by PDF at such time, or at such other time or on such other date or at such other place as Sellers and Buyer may mutually agree upon in writing. Notwithstanding the foregoing, in no event shall the Closing be required to occur prior to the date that is forty-five (45) days following the date of this Agreement (the day on which the Closing takes place being the “Closing Date”). The effective time of the Closing for Tax, accounting, operational and all other matters will be deemed to be 11:59 p.m., central time, on the Closing Date.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLERS

Except as set forth in the Disclosure Schedules, each Seller represents and warrants (severally with respect to himself, herself or itself, as the case may be, and not jointly and severally with others), to Buyer that:

Section 3.01    Ownership of Membership Interests. Such Seller owns of record all of the Membership Interests opposite such Seller’s name in Section 3.01 of the Disclosure Schedules, free and clear of any Encumbrances other than any restrictions on transfer arising under state or federal securities laws or any Encumbrances pursuant to the Company’s limited liability company agreement or any other agreement terminating as of the Closing Date and identified in Section 4.04(b) of the Disclosure Schedules.

 

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Section 3.02    Seller Authority. Such Seller has the requisite power and authority to execute and deliver this Agreement and to perform his, her or its obligations hereunder and consummate the transactions contemplated herein. This Agreement has been duly and validly executed and delivered by such Seller and, assuming that this Agreement constitutes the valid and binding agreement of the other parties hereto, constitutes the valid and binding obligations of such Seller, enforceable against such Seller in accordance with their respective terms and conditions, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally (regardless of whether enforcement is sought in a proceeding at law or in equity) (the “General Enforceability Exceptions”).

Section 3.03    No Seller Conflicts; Consents. The execution, delivery and performance by such Seller of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not: (a) result in a violation or breach of any provision of the Organizational Documents of such Seller, if any; (b) result in a violation or breach of any provision of any Law or Governmental Order applicable to such Seller; (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of a material contract or other obligation of such Seller; or (d) result in the imposition or creation of any Encumbrances other than Permitted Encumbrances or Encumbrances arising from any contract or agreement entered into by Buyer upon or with respect to any of the assets owned or used by the Company.

Section 3.04    Brokers. Except as set forth on Section 3.04 of the Disclosure Schedules, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Sellers.

Section 3.05    Legal Proceedings. There are no Actions pending or, to any Seller’s knowledge, threatened against or by such Seller or any Affiliate of Seller that: (a) relate to such Seller’s Membership Interests; (b) challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement; or (c) would, individually or in the aggregate, reasonably be expected to prevent, materially delay or materially impair such Seller’s ability to consummate the transactions contemplated by this Agreement.

Section 3.06    No Other Representations and Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE III (INCLUDING THE RELATED PORTIONS OF THE DISCLOSURE SCHEDULES), NO SELLER HAS MADE OR MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF ANY SELLER OR ANY OF THEIR RESPECTIVE BUSINESSES OR ANY OF THEIR RESPECTIVE ASSETS, LIABILITIES, OPERATIONS OR PROSPECTS, INCLUDING WITH RESPECT TO (A) MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, (B) ACCURACY AND COMPLETENESS OF ANY INFORMATION PROVIDED TO BUYER AND ITS REPRESENTATIVES (INCLUDING, FOR THIS PURPOSE, ANY INFORMATION PROVIDED BY KATTEN OR ROTHSCHILD, INC. AND ANY INFORMATION, DOCUMENTS OR MATERIAL MADE AVAILABLE TO BUYER IN ANY DATA ROOM, MANAGEMENT PRESENTATION OR THE LIKE), AND (C) ANY ESTIMATES, PROJECTIONS OR OTHER FORECASTS AND PLANS (INCLUDING THE REASONABLENESS OF THE ASSUMPTIONS UNDERLYING SUCH ESTIMATES, PROJECTIONS AND FORECASTS), AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. TO THE EXTENT ANY SUCH REPRESENTATION OR WARRANTY IS OR HAS BEEN MADE WHICH IS NOT EXPRESSLY SET FORTH IN THIS AGREEMENT (AS MODIFIED BY THE DISCLOSURE SCHEDULES), SUCH ARE HEREBY DISCLAIMED.

 

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth in the Disclosure Schedules, the Company and each Seller, jointly and severally, represent and warrant to Buyer that:

Section 4.01    Organization and Authority of the Company. The Company is a limited liability company duly organized, validly existing and in good standing under the Laws of the state of Delaware. Each other Acquired Company is a limited liability company duly organized, validly existing and in good standing under the Laws of the state of such Acquired Company’s organization. The Company has all necessary company power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by the Company of this Agreement, the performance by the Company of its obligations hereunder and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all requisite company action on the part of the Company. The Company is not in default under or in violation of any provision of its Organizational Documents except for violations that would not be material to the Company.

Section 4.02    Execution and Enforceability. This Agreement has been duly executed and delivered by the Company, and, assuming that this Agreement constitutes the valid and binding agreement of the other parties hereto, this Agreement constitutes a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by the General Enforceability Exceptions.

Section 4.03    Qualification of the Company. The Company and VBP (the “Acquired Companies” and each, an “Acquired Company”) have all necessary corporate power and authority to own, operate or lease the properties and assets now owned, operated or leased by each Acquired Company and to carry on their respective businesses as currently conducted. Each of the Acquired Companies is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the properties owned or leased by it or the operation of its business as currently conducted makes such licensing or qualification necessary, except where the failure to be so licensed, qualified or in good standing would not be material to the Acquired Companies.

Section 4.04    Capitalization.

(a)    All of the issued and outstanding membership interests of the Company are described on Section 4.04(a) of the Disclosure Schedules, all of which constitute the Membership Interests. All of the Membership Interests have been duly authorized, validly issued and are fully paid as non-assessable membership units in the capital of the Company.

(b)    Except as set forth in Section 4.04(b) of the Disclosure Schedules, there are no outstanding or authorized options, warrants, calls, convertible securities or other rights, agreements, arrangements or commitments of any character relating to the membership interests of any Acquired Company or obligating any Acquired Company to issue or sell

 

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any membership interests of, or any other interest in, any Acquired Company. Except as set forth in Section 4.04(b) of the Disclosure Schedules, no Acquired Company has outstanding or authorized any membership interest appreciation, phantom membership interest, profit participation or similar rights. Except as set forth in Section 4.04(b) of the Disclosure Schedules, there are no voting trusts, proxies or other agreements or understandings in effect with respect to the voting or transfer of any of the Membership Interests. The Company has no authorized or outstanding bonds, debentures, notes or other Indebtedness the holders of which have the right to vote (or are convertible into, exchangeable for or evidencing the right to subscribe for or acquire securities having the right to vote).

Section 4.05    No Subsidiaries. Except for VBP, none of the Acquired Companies owns any ownership interest in any other Person or has any right to acquire any equity securities or other securities of any Person. VBP is a wholly owned Subsidiary of the Company and all of the outstanding membership interests or other equity interests in VBP are owned by the Company.

Section 4.06    No Conflicts; Consents. The execution, delivery and performance of this Agreement by the Company, and the consummation of the transactions contemplated hereby, do not and will not: (a) result in a violation or breach of any provision of the Organizational Documents of the Company; (b) result in a violation or breach of any provision of any Law or Governmental Order applicable to the Company in any material respect; (c) except as set forth in Section 4.06 of the Disclosure Schedules, require the consent of, or notice to any Person; (d) result in a material violation or breach of, or constitute a material default under any Material Contract; or (e) result in the imposition or creation of any Encumbrances other than Permitted Encumbrances or Encumbrances arising from any contract or agreement entered into by Buyer upon or with respect to any of the assets owned or used by the Company. No consent of, approval from, filing with, or notice to, any Governmental Authority is required by or with respect to the Company in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for such filings as may be required under the HSR Act and any other consents, approvals, Permits, Governmental Orders, declarations, filings or notices that, if not obtained, made or given, would not be material to the Acquired Companies or their business.

Section 4.07    Financial Statements. Copies of the audited financial statements of the Company consisting of the consolidated balance sheet of the Acquired Companies as at December 31, 2015, 2016 and 2017 and the related statements of income, members’ equity and cash flows for the years then ended (the “Audited Financial Statements”), and the unaudited consolidated financial statements consisting of the consolidated balance sheet of the Acquired Companies as at March 31, 2018 (the “Balance Sheet”) and the related statements of income, and cash flows for the three (3) -month period then ended (together with the Balance Sheet, the “Interim Financial Statements” and together with the Audited Financial Statements, the “Financial Statements”) have been delivered or made available to Buyer in the Data Room. The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to year-end adjustments and the absence of notes. The Financial Statements fairly present in all material respects the consolidated financial condition of the Acquired Companies as of the respective dates they were prepared and the results of the operations of the Acquired Companies for the periods indicated, all in accordance with GAAP.

 

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Section 4.08    Undisclosed Liabilities. No Acquired Company has any liabilities, obligations or commitments (whether absolute, accrued, contingent or otherwise), except (i) those which are adequately reflected or reserved against in the Financial Statements; (ii) those which have been incurred in the ordinary course of business consistent with past practice since the Balance Sheet Date; (iii) those which are disclosed in Section 4.08 of the Disclosure Schedules; (iv) those which are not in excess of $250,000 and (v) those which consist of ordinary course future performance obligations under any contract to which an Acquired Company is a party.

Section 4.09    Absence of Certain Changes, Events and Conditions. Except as expressly contemplated by this Agreement or as set forth in Section 4.09 of the Disclosure Schedules, from December 31, 2017 until the date of this Agreement, (a) the Acquired Companies have operated in the ordinary course of business in all material respects and (b) there has not been, with respect to the Acquired Companies, any:

(a)    (i) payment or increase of any bonuses, salaries, consulting fees, pension, welfare, fringe or other benefits, severance or termination pay or other compensation to any director, officer or employee, other than any such payments or increases in the ordinary course of business consistent with past practices, (ii) grant of new awards or amendment or modification of the terms of any outstanding awards under any Benefit Plan, (iii) action taken to accelerate the vesting or lapsing of restrictions or payment, or funding or other way of securing the payment of compensation or benefits under any Benefit Plan, (iv) change in actuarial or other assumptions used to calculate funding obligations with respect to any Benefit Plan that is required by applicable Law to be funded or change the manner in which contributions to such plans are made or the basis on which such contributions are determined, except as may be required by GAAP, (v) forgiveness of any loans or issuance of any loans other than in the ordinary course of business consistent with past practice, (vi) adoption or commencement of participation in any labor or collective bargaining agreement (in each case other than as required pursuant to the terms of any Benefit Plan in effect as of the date hereof, or as otherwise required by applicable Law);

(b)    adoption of any Benefit Plan, establishment, amendment, or termination of, or increase in benefits under, any Benefit Plan, except as required by the terms thereof;

(c)    damage to or destruction or loss of any asset or property of the Acquired Companies, whether or not covered by insurance, which has been material to the Acquired Companies, taken as a whole;

(d)    sale (other than sales in the ordinary course of business consistent with past practice), lease, transfer, license, sublicense, abandonment or other disposition of any material asset or property of the Acquired Companies or mortgage, pledge or imposition of any material lien or other Encumbrance on any such asset or property of the Acquired Companies;

 

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(e)     payment of any dividend or other distribution other than distributions to members for tax purposes under the Company’s currently effective limited liability company agreement;

(f)      material strike, slowdown, work stoppage, lockout or other similar labor activity or dispute (whether or not covered by insurance);

(g)     capital expenditure or commitment of addition to property, plant or equipment used in the business having a value in excess of $250,000;

(h)     except as may be required by Law or GAAP, change in any material respect to any method, policy, practice procedure or principle of financial accounting;

(i)      material Tax election or any change to any material Tax election, settlement or compromise of any claim for a material Tax refund or any other audit or other proceeding in respect of material Taxes, filing of any material amended Tax Return or consent to any extension or waiver of any statute of limitations period in respect of a material amount of Taxes or material change to any method of accounting for Tax purposes;

(j)      transfer, pledge, grant issuance, sell, encumbrance or disposal of any membership interests or other securities or grant of any options, warrants, calls or other rights to purchase or otherwise acquire membership interests or other securities, except for the exercise of options;

(k)     additional Indebtedness, other than in the ordinary course of business consistent with past practice;

(l)      event, occurrence, fact, condition or change that has had a Material Adverse Effect; or

(m)    agreement by the Acquired Companies to do any of the foregoing.

Section 4.10    Material Contracts.

(a)    Section 4.10(a) of the Disclosure Schedules lists, and the Acquired Companies have delivered or made available to Buyer true and complete copies of, each of the following contracts of the Acquired Companies (collectively, the “Material Contracts”):

(i)        each agreement involving aggregate consideration in excess of $250,000 that cannot be cancelled by any Acquired Company without penalty upon ninety (90) days’ notice or less;

(ii)       all agreements that relate to the sale of any of the Acquired Companies’ assets, other than in the ordinary course of business, for consideration in excess of $250,000;

 

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(iii)    all agreements for the purchase of goods or services, other than in the ordinary course of business, for consideration in excess of $250,000;

(iv)    all agreements entered into during the preceding three (3) years that relate to the acquisition of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise), other than in the ordinary course of business consistent with past practices, in each case involving amounts in excess of $250,000;

(v)    any written employment, non-competition, severance or termination agreements with any Employee, in each case involving the payment of more than $150,000 per year and which cannot be cancelled by any Acquired Company without penalty on thirty (30) days’ notice or less;

(vi)    any contract to which an Acquired Company is a party that provides for any joint venture, partnership or other similar agreement involving an Acquired Company;

(vii)    any contract prohibiting or materially limiting any Acquired Company’s ability to engage in any business, solicit or hire employees or compete anywhere in the world;

(viii)    any contract containing a “most favored nation” provision;

(ix)    each agreement with a Top Customer or Top Supplier that does not terminate or is not terminable prior to the date that is twelve (12) months within the date hereof;

(x)    each licensing agreement or other contract (other than “off-the-shelf,” “packaged,” “click-wrap,” or “shrink-wrap” license agreement) pursuant to which any Acquired Company uses any Intellectual Property, receives rights in any Intellectual Property or pursuant to which any Acquired Company has granted a third party any right in or to any Intellectual Property of any Acquired Company;

(xi)    each contract relating to Indebtedness of any Acquired Company;

(xii)    any contract which involves an agreement to make capital expenditures in excess of $250,000;

(xiii)    all collective bargaining agreements or similar agreements with any labor organization, union or association to which any Acquired Company is a party; and

(xiv)    All agreements relating to the incurrence or guarantee of Indebtedness or the making of any loans by the Company or any of its Subsidiaries, in each case, in excess of $250,000.

 

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(b)    Except as set forth in Section 4.10(b) of the Disclosure Schedules, each of the Material Contracts and each lease (other than any office lease) is valid and binding on the Acquired Company party thereto, and, to the Knowledge of the Company, each other party thereto and is in full force and effect. No Acquired Company is in material breach of, or material default under, any Material Contract, nor, to the Knowledge of the Company, is any other party thereto.

Section 4.11    Title to Assets; Real Property.

(a)    Each of the Acquired Companies, as applicable, has good and valid (and, in the case of owned Real Property, good and fee simple) title to, or a valid leasehold interest in, all Real Property and tangible personal property reflected in the Balance Sheet or acquired after the Balance Sheet Date, other than properties and assets sold or otherwise disposed of in the ordinary course of business since the Balance Sheet Date. All such properties and assets (including leasehold interests) are free and clear of Encumbrances except for the following (collectively referred to as “Permitted Encumbrances”):

(i)        those items set forth in Section 4.11(a) of the Disclosure Schedules;

(ii)       liens for Taxes (A) not yet due and delinquent or (B) being contested in good faith by appropriate procedures and for which appropriate reserves have been established in the applicable financial statements in accordance with GAAP;

(iii)      liens arising under purchase money and capital lease arrangements arising or incurred in the ordinary course of business;

(iv)      mechanics, carriers’, workmen’s, repairmen’s, materialmen’s, warehousemen’s or other like liens arising or incurred in the ordinary course of business;

(v)       easements, rights of way, zoning ordinances and other similar encumbrances of record affecting Real Property;

(vi)      all matters of record affecting any Real Property that would be shown on current surveys of the real estate or any standard printed exceptions as would otherwise appear on a title insurance policy;

(vii)     other than with respect to owned Real Property, liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the ordinary of business;

(viii)    Encumbrances incurred or deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations;

(ix)       statutory landlords’ or warehouse liens;

 

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(x)       non-exclusive licenses of Intellectual Property disclosed to Buyer in the Data Room; or

(xi)      Encumbrances for Indebtedness to be paid at the Closing or otherwise taken into account in the calculation of the Purchase Price.

(b)    Section 4.11(b) of the Disclosure Schedules lists the street address of each parcel of owned Real Property and such owned Real Property constitutes all of the real property used in the operation of the business of the Acquired Companies. The Acquired Companies do not lease any Real Property and the Acquired Companies have not currently leased or otherwise granted to any Person the right to use or occupy any Real Property or any portion thereof. No condemnation proceeding is pending or, to the Knowledge of the Company, threatened as to any Real Property. Each of the Acquired Companies is in peaceful and undisturbed possession of each parcel of owned Real Property and there is no contractual or legal restriction that precludes or restricts the ability to use the owned Real Property for the purposes for which it is currently being used. To the Knowledge of the Company, all buildings, fixtures and improvements attached or joined to the owned Real Property were constructed and built in compliance with all then-applicable Laws.

Section 4.12    Intellectual Property.

(a)    Section 4.12(a) of the Disclosure Schedules lists all patents, patent applications, trademark registrations and pending applications for registration, copyright registrations and pending applications for registration and domain names and applications therefor owned by or licensed exclusively to any Acquired Company (collectively, the “Company Intellectual Property”. Other than the Intellectual Property identified as licensed to the Acquired Companies, the Acquired Companies together own and possess all rights, title and interest (free of any joint ownership interest) in and to such Company Intellectual Property, free and clear of any Encumbrance except for Permitted Encumbrances.

(b)    Except as set forth in Section 4.12(b) of the Disclosure Schedules, (i) each Acquired Company’s conduct of its business is currently conducted, and has since September 2, 2014 been conducted, in a manner that does not infringe, violate or misappropriate the Intellectual Property of any Person, (ii) no Acquired Company has, since January 1, 2016, received any written claim or notice from any Person that it is engaging in any activity that infringes upon, violates or misappropriates any Intellectual Property right of such Person that has not been resolved and (iii) to the Knowledge of the Company, no Person is materially infringing, violating or misappropriating any Intellectual Property owned by or exclusively licensed to any Acquired Company.

(c)    Assuming the validity of ownership of Intellectual Property by all Persons from whom an Acquired Company licenses Intellectual Property, the Acquired Companies together own and possess or have the right to use pursuant to a valid license, sublicense, agreement, or permission all Intellectual Property necessary for or material to the operation of the business of the Acquired Companies as presently conducted.

 

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(d)    The IT Assets are sufficient for and operate and perform in all material respects as required by the Acquired Companies to conduct the business of the Acquired Companies as conducted as of the date of this Agreement. Except as set forth in Section 4.12(d) of the Disclosure Schedules, to the Knowledge of the Company, during the prior three (3) years, no Person has gained unauthorized access to or use of any IT Assets or any data stored on any IT Asset, nor any Personal Information maintained by or on behalf of the Acquired Companies on any IT Asset.

Section 4.13    Insurance. Section 4.13 of the Disclosure Schedules sets forth a list, as of the date hereof, of all insurance policies maintained by an Acquired Company (excluding such policies that constitute or provide compensation or benefits with respect to a Benefit Plan) (collectively, the “Insurance Policies”). Such Insurance Policies are in full force and effect on the date of this Agreement and all premiums due on such Insurance Policies have been paid when due in all material respects. The Company has not received any written notice of cancellation or termination other than in connection with ordinary renewals.

Section 4.14    Legal Proceedings; Governmental Orders.

(a)    Except as set forth in Section 4.14(a) of the Disclosure Schedules, there are no Actions pending or, to the Knowledge of the Company, threatened against any of the Acquired Companies or affecting any of their properties or assets.

(b)    Except as set forth in Section 4.14(b) of the Disclosure Schedules, there are no outstanding Governmental Orders or, to the Knowledge of the Company, no Governmental Orders threatened against any of the Acquired Companies, and no unsatisfied judgments, penalties or awards against or affecting any of the Acquired Companies or any of their respective properties or assets.

Section 4.15    Compliance with Laws; Permits.

(a)    Except as set forth in Section 4.15(a) of the Disclosure Schedules, each of the Acquired Companies is in material compliance with all Laws applicable to it or its business, properties or assets, including applicable privacy Laws. To the Knowledge of the Company, the Company has not received any notice of violation of any Laws, except as would not individually or in the aggregate, reasonably be expected to result in a material liability to the Acquired Companies, taken as a whole.

(b)    All Permits required for the Acquired Companies to conduct their business have been obtained by them and are, to the Knowledge of the Company, valid and in full force and effect. A correct and complete list of such Permits is set forth in Section 4.15(b) of the Disclosure Schedules. To the Knowledge of the Company, no event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any such Permit.

(c)    None of the representations and warranties contained in this Section 4.15 shall be deemed to relate to environmental matters (which are governed by Section 4.16) or Tax matters (which are governed by Section 4.19).

 

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Section 4.16    Environmental Matters. Except as set forth in Section 4.16 of the Disclosure Schedules:

(a)    Each of the Acquired Companies is, and since September 2, 2014 has been, in compliance in all material respects with all Environmental Laws. No Acquired Company has received, in writing, from any Person any (i) Environmental Notice or Environmental Claim, or (ii) request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date. To the Knowledge of the Company, no Environmental Notice, Environmental Claim, or request for information pursuant to Environmental Law has been threatened in writing against any of the Acquired Companies.

(b)    Each of the Acquired Companies has obtained, maintained and is in material compliance with all Environmental Permits necessary for the ownership, lease, operation or use of the business or assets of the Acquired Companies. All of the Acquired Companies’ Environmental Permits are in full force and effect, and none of the Acquired Companies have received any written notice of any proposal to amend, revoke, or replace any Environmental Permit or requiring the issuance of any additional Environmental Permit to operate the business or assets of the Acquired Companies as presently conducted.

(c)    There has been no Release of Hazardous Materials by the Acquired Companies at any Real Property currently or formerly owned, operated or leased by the Acquired Companies, or any Real Property where Hazardous Materials generated by the Acquired Companies has come to be located, which could reasonably be expected to result in liability to the Acquired Companies under Environmental Law, and none of the Acquired Companies has received an Environmental Notice that any Real Property currently or formerly owned, operated or leased in connection with the business of the Acquired Companies has been contaminated with any Hazardous Material which would reasonably be expected to result in an Environmental Claim against, or a violation of or liability under Environmental Laws or any Environmental Permit by, any of the Acquired Companies.

(d)    None of the following exists on, at or under any of the Real Property except as in compliance, in all material respects, with Environmental Laws: (i) underground storage tanks, (ii) materials or equipment containing polychlorinated biphenyls, (iii) materials or equipment containing asbestos-containing material in any form or condition, or (iv) landfills or surface impoundments.

(e)    The Acquired Companies have delivered to Buyer true, correct, and complete copies of all Phase I Environmental Site Assessment reports or Phase II reports in the possession or control of the Acquired Companies.

(f)    The representations and warranties set forth in this Section 4.16 are the Company’s sole and exclusive representations and warranties regarding environmental matters and liabilities related thereto.

 

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Section 4.17    Employee Benefit Matters.

(a)    Section 4.17(a) of the Disclosure Schedules contains a list of each retirement, employment, incentive, stock option, restricted stock, stock appreciation right, phantom equity, equity-based, change in control, severance, vacation, paid time off, welfare and fringe-benefit agreement, plan, policy and program, including “employee benefits plans” within the meaning of Section 3(3) of ERISA, currently in effect and covering current or former Employees of the Acquired Companies, current or former directors of the Acquired Companies, or the beneficiaries or dependents of any such Persons, and is maintained, sponsored, or contributed to by the Acquired Companies, or with respect to which any potential liability is borne by the Acquired Companies (each, a “Benefit Plan”).

(b)    Each Benefit Plan has been operated and administered in accordance with its terms and complies with all applicable Laws (including ERISA and the Code) in all material respects. Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code (a “Qualified Benefit Plan”) (i) has received a favorable determination letter from the Internal Revenue Service, or (ii) with respect to a master/prototype or volume submitter plan, can rely on an opinion or advisory letter from the Internal Revenue Service to the master/prototype or volume submitter plan sponsor, to the effect that such Qualified Benefit Plan, in form, is in its standard form so qualified and that such master/prototype or volume submitter plan and the trust related thereto are exempt from federal income Taxes under Sections 401(a) and 501(a), respectively, of the Code.

(c)    None of the Acquired Companies nor any ERISA Affiliate sponsors, and none of the Acquired Companies nor any ERISA Affiliate has sponsored within the last six (6) years, a “defined benefit plan” (as defined in Section 3(35) of ERISA) subject to Section 412 of the Code or Section 302 or Title IV of ERISA.

(d)    No non-exemptprohibited transaction,” (as defined in Section 4975 of the Code) or other transaction has occurred with respect to any of the Benefit Plans that would subject the Acquired Companies to any material Tax or penalty imposed by Section 409 or 502(i) of ERISA or Section 4975 or 4976 of the Code.

(e)    None of the Acquired Companies or any ERISA Affiliate maintains, contributes to or has any obligation to contribute to, or, in the last six (6) years has maintained, contributed to, or been obligated to contribute to any “multiemployer plan” (as defined in Section 3(37) of ERISA) subject to Title IV or ERISA. No Benefit Plan is a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA).

(f)    Copies of the most recent versions of each of the Benefit Plans and related trust documents, summary plan description, a written description of the Benefit Plan if such plan is not set forth in a written document, and favorable Internal Revenue Service determination, opinion and advisory letters, if applicable, have been furnished or made available to Buyer or its representatives in the Data Room or otherwise, along with the most recent report filed on Form 5500 and most recent actuarial report.

 

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(g)    Other than as required under Section 4980B of the Code or other applicable Law, no Benefit Plan provides retiree or post-employment medical, disability or life insurance benefits or coverage.

(h)    Except as set forth in Section 4.17(h) of the Disclosure Schedules: (i) there is no pending or, to the Knowledge of the Company, threatened action relating to a Benefit Plan (other than routine claims for benefits); and (ii) no Benefit Plan has, within the three (3) years prior to the date hereof, been the subject of an audit by a Governmental Authority.

(i)    Except as set forth in Section 4.17(i) of the Disclosure Schedules, neither the execution and delivery of this Agreement or approval of this Agreement nor the consummation of the transactions contemplated by this Agreement could, either alone or in combination with another event, (i) entitle any current or former employee, director, officer or independent contractor of the Acquired Companies to severance pay or any material increase in severance pay, (ii) accelerate the time of payment or vesting, or materially increase the amount of compensation due to any such employee, director, officer or independent contractor, or (iii) result in the payment of any amount that could, individually or in combination with any other such payment, constitute an “excess parachute payment” as defined in Section 280G(b)(1) of the Code.

(j)    None of the Acquired Companies has any obligation to provide, and no Company Plan or other agreement provides any individual with the right to, a gross up, indemnification, reimbursement or other payment for any excise or additional Taxes, interest or penalties incurred pursuant to Section 409A or Section 4999 of the Code or due to the failure of any payment to be deductible under of Section 280G of the Code.

(k)    The representations and warranties set forth in this Section 4.17 are the Company’s sole and exclusive representations and warranties regarding employee benefit matters and liabilities related thereto.

Section 4.18    Employment Matters.

(a)    No Acquired Company is a party to, or bound by, any collective bargaining or other agreement with a labor organization representing any of its Employees. In the last three (3) years, there has not been, nor, to the Knowledge of the Company, has there been any threat of, any strike, slowdown, work stoppage, lockout, concerted refusal to work overtime or other similar labor activity or dispute affecting any of the Acquired Companies. No union, collective bargaining representative, labor organization or works council has been certified as representing the Employees of any Acquired Company, and, to the Company’s Knowledge, no organizational attempt has been made or threatened by or on behalf of any labor union, collective bargaining unit, labor organization, works council or similar organization with respect to any Employees of an Acquired Company.

(b)    Each of the Acquired Companies is in compliance in all material respects with all applicable Laws pertaining to labor, employment and employment practices, wages and hours and occupational safety and health to the extent they relate to Employees of the Acquired Companies. Except as set forth in Section 4.18(b) of the Disclosure Schedules,

 

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there are no Actions against any of the Acquired Companies pending, or to the Knowledge of the Company, threatened to be brought or filed, by or with any Governmental Authority or arbitrator in connection with the employment of any current or former employee of the Acquired Companies, including any claim relating to unfair labor practices, employment discrimination, harassment, retaliation, equal pay or any other employment-related matter arising under applicable Laws.

(c)    The representations and warranties set forth in this Section 4.18 are the Company’s sole and exclusive representations and warranties regarding labor and employment matters and liabilities related thereto.

Section 4.19    Taxes.

(a)    Except as set forth in Section 4.19 of the Disclosure Schedules:

(i)    The Acquired Companies have timely filed with the applicable Governmental Authority (taking into account any valid extensions) all material Tax Returns required to have been filed by the Acquired Companies. Such Tax Returns are true, complete and correct in all material respects. All Taxes due and owing by the Acquired Companies have been paid or accrued, and all estimated Taxes necessary for the Acquired Companies to avoid any underpayment penalties or interest have been timely paid.

(ii)    No Acquired Company has executed any outstanding waiver of any statute of limitations for, or extension of, the period for the assessment or collection of any material Tax, in each case, which period has not yet expired.

(iii)    There are no ongoing or, to the Company’s Knowledge, threatened, Actions or audits, examinations, investigations or other proceedings concerning Taxes by any Governmental Authority against any of the Acquired Companies. No written claim has been received by any of the Acquired Companies from any Governmental Authority in a jurisdiction where such Acquired Company does not file Tax Returns that such Acquired Company is or may be subject to taxation by that jurisdiction.

(iv)    No Acquired Company is a party to any Tax sharing agreement, Tax indemnity or similar agreement (other than any agreement entered into in the ordinary course of business, the principal purpose of which is not related to Taxes).

(v)    All Taxes which any of the Acquired Companies is obligated to withhold from amounts paid to any employee, creditor or third party have been paid to the applicable Governmental Authority or accrued.

(vi)    No Acquired Company is liable for (A) Taxes of any predecessor or (B) Taxes of any other Person (except for the Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign Law) or as a transferee.

 

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(vii)    No Acquired Company has been a party to a transaction that is classified as a “reportable transaction,” within the meaning of Treasury Regulations Section 1.6011-4(b).

(viii)    There are no Encumbrances for Taxes (other than Encumbrances for Taxes not yet due and payable or for Taxes that are being contested in good faith and for which appropriate provision has been made on the Financial Statements) on any assets of the Acquired Companies.

(ix)    The Acquired Companies will not be required to include any material item of income in, or exclude any material item of deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (i) change in method of accounting for a taxable period (or portion thereof) ending on or before the Closing Date and made prior to the Closing, (ii) closing agreement described in Section 7121 of the Code (or any similar provision of state, local or foreign Tax Law) entered into with any Tax authority prior to Closing, (iii) prepaid amount received on or prior to the Closing Date, (iv) installment sale or other open transaction disposition made on or prior to the Closing Date or (v) election by an Acquired Company under Section 108(i) of the Code (or any similar provision of state, local or foreign Tax Law).

(x)    None of the Sellers (or such Seller’s disregarded parent if such Seller is a disregarded entity) is a foreign person under Section 1445 of the Code.

(xi)    No Acquired Company has made an election under Treasury Regulations Section 301.7701-3 or any similar provision of applicable state, local or foreign Tax law.

(xii)    No election has been made with respect to the Company under Section 1101(g)(4) of the BBA to apply Subchapter C of Chapter 63 of the Code (Sections 6221 et seq. as enacted by the BBA) to any taxable year beginning before January 1, 2017, and no similar election has been made with respect to the Acquired Companies under any corresponding provisions of state or local law.

(b)    Notwithstanding anything to the contrary contained in this Agreement, the representations and warranties set forth in Section 4.07, Section 4.17 (to the extent related to Taxes) and this Section 4.19 are the Company’s sole and exclusive representations and warranties regarding Taxes, Tax Returns and other Tax matters and liabilities related thereto.

Section 4.20    Related Party Transactions. Except as set forth in Section 4.20 of the Disclosure Schedules, no employee, officer, director, holder of securities or Affiliate of any of the Acquired Companies, and no entity in which any such Person or individual owns any beneficial interest, is a party to any agreement, contract, commitment or transaction with any of the Acquired Companies or has any interest in any property, tangible or intangible, used by any of the Acquired Companies (except that nothing contained in this Section 4.20 will be breached by, or require disclosure in the Disclosure Schedules related to, any Person’s ownership of any passive investment of three percent (3%) or less of the outstanding shares of capital stock of any publicly traded corporation).

 

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Section 4.21    Customers and Suppliers. Section 4.21 of the Disclosure Schedules sets forth a true and complete list of the top ten (10) customers by revenue (the “Top Customers”) and top ten (10) suppliers by amount spent (the “Top Suppliers”) of the Acquired Companies, taken as a whole, each for calendar year 2017. Since January 1, 2017, no such Top Customer or Top Supplier has canceled or, to the Knowledge of the Company, has threatened to cancel, materially modify or otherwise terminate its relationship with the applicable Acquired Company.

Section 4.22    Brokers. Except as set forth on Section 4.22 of the Disclosure Schedules, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Sellers or the Company.

Section 4.23    Products and Product Liability.

(a)    There are no written statements, citations or decisions by any Governmental Authority specifically stating that any product produced and sold or distributed by or on behalf of any Acquired Company on or before the effective date of this Agreement is defective or unsafe or fails to meet any standard promulgated by any such Governmental Authority in any material respect. For the past 5 years there have been no recalls ordered by any such Governmental Authority or any voluntary recalls by any Acquired Company with respect to any such product.

(b)    All products produced and sold or distributed by or on behalf of any Acquired Company are (i) free from defects in design, materials and workmanship, (ii) in conformity with the specifications therefor, and (iii) of merchantable quality and fit for their intended purpose, in each case, except as would not result in a material liability to the Acquired Companies taken as a whole.

Section 4.24    Anti-Corruption and Anti-Bribery Laws.

(a)    During the three (3) years preceding the date of this Agreement, none of the Acquired Companies nor, to the Knowledge of the Company, any of their respective directors, officers, or employees acting for or on behalf of the Acquired Companies has, directly or indirectly, in connection with the business of the Acquired Companies:

(i)    improperly made, offered or promised to make or offer any payment, loan or transfer of anything of value, including any reward, advantage or benefit of any kind, to or for the benefit of any government official, candidate for public office, political party or political campaign, for the purpose of (A) influencing any act or decision of such government official, candidate, party or campaign, (B) inducing such government official, candidate, party or campaign to do or omit to do any act in violation of a lawful duty, (C) obtaining or retaining business for or with any person, (D) expediting or securing the performance of official acts of a routine nature, or (E) otherwise securing any improper advantage;

 

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(ii)    paid, offered, or promised to pay or offer any unlawful payment of any nature; or

(iii)    otherwise violated any provision of the U.S. Foreign Corrupt Practices Act of 1977, 15 U.S.C. §§ 78dd-1, et seq., or any other applicable anti-bribery law in any material respect.

For purposes of this Section 4.24, “government official” includes any officer or employee of a government or any department, agency or instrumentality thereof (including wholly or partially owned enterprises or institutions), or of a public international organization, or any person acting in an official capacity for or on behalf of any such government or department, agency or instrumentality, or for or on behalf of any such public international organization.

(b)    No investigation or review by any Governmental Authority with respect to the Acquired Companies, in each case in respect of the business of the Company, is pending or, to the Knowledge of the Company, threatened. None of the Acquired Companies has received any written notice or communication of any currently existing noncompliance by any of the Acquired Companies in any material respect with any applicable Law that has not been cured as of the date of this Agreement except with respect to such noncompliance which would not reasonably be expected to be, individually or in the aggregate, result in a material liability to the Acquired Companies, taken as a whole, or otherwise reasonably be expected to interfere in any material respect with the conduct of business of the Acquired Companies, as presently conducted.

Section 4.25    No Other Representations and Warranties. EXCEPT AS EXPRESSLY SET FORTH IN THIS ARTICLE IV (INCLUDING THE RELATED PORTIONS OF THE DISCLOSURE SCHEDULES), NO ACQUIRED COMPANY NOR ANY SELLER HAS MADE OR MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF ANY ACQUIRED COMPANY OR ANY OF THEIR RESPECTIVE BUSINESSES OR ANY OF THEIR RESPECTIVE ASSETS, LIABILITIES, OPERATIONS OR PROSPECTS, INCLUDING WITH RESPECT TO (A) MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, (B) ACCURACY AND COMPLETENESS OF ANY INFORMATION PROVIDED TO BUYER AND ITS REPRESENTATIVES (INCLUDING, FOR THIS PURPOSE, ANY INFORMATION PROVIDED BY KATTEN OR ROTHSCHILD, INC. AND ANY INFORMATION, DOCUMENTS OR MATERIAL MADE AVAILABLE TO BUYER IN ANY DATA ROOM, MANAGEMENT PRESENTATION OR THE LIKE), AND (C) ANY ESTIMATES, PROJECTIONS OR OTHER FORECASTS AND PLANS (INCLUDING THE REASONABLENESS OF THE ASSUMPTIONS UNDERLYING SUCH ESTIMATES, PROJECTIONS AND FORECASTS), AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED. TO THE EXTENT ANY REPRESENTATION OR WARRANTY IS OR HAS BEEN MADE WHICH IS NOT EXPRESSLY SET FORTH IN THIS AGREEMENT (AS MODIFIED BY THE DISCLOSURE SCHEDULES), SUCH ARE HEREBY DISCLAIMED.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to the Company and Sellers that:

Section 5.01    Organization and Authority of Buyer. Buyer is a limited liability company duly organized, validly existing and in good standing under the Laws of the state of Delaware. Buyer has all necessary limited liability company power and authority to enter into this Agreement, to carry out its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery by Buyer of this Agreement, the performance by Buyer of its obligations hereunder and the consummation by Buyer of the transactions contemplated hereby have been duly authorized by all requisite limited liability company action on the part of Buyer.

Section 5.02    Execution and Enforceability. This Agreement has been duly executed and delivered by Buyer, and, assuming that this Agreement constitutes a valid and binding agreement of the other parties hereto, this Agreement constitutes a legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by the General Enforceability Exceptions.

Section 5.03    No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement, and the consummation of the transactions contemplated hereby, do not and will not: (a) result in a violation or breach of any provision of the Organizational Documents of Buyer; (b) result in a violation or breach of any provision of any Law or Governmental Order applicable to Buyer; or (c) require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or result in the acceleration of any agreement to which Buyer is a party, except in the cases of clauses (b) and (c), where the violation, breach, conflict, default, acceleration or failure to give notice would not have a material adverse effect on Buyer’s ability to consummate the transactions contemplated hereby. No consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, except for such filings as may be required under the HSR Act and such consents, approvals, Permits, Governmental Orders, declarations, filings or notices that, if not obtained, made or given, would not reasonably be expected to have a material effect on Buyer’s ability to consummate the transactions contemplated hereby.

Section 5.04    Investment Purpose. Buyer is acquiring the Membership Interests solely for its own account for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof. Buyer acknowledges that the Membership Interests are not registered under the Securities Act of 1933, as amended, or any other applicable securities Laws, and that the Membership Interests may not be transferred or sold except pursuant to the registration provisions of the Securities Act of 1933, as amended or pursuant to an applicable exemption therefrom and subject to applicable securities Laws and regulations. Buyer is able to bear the economic risk of holding the Membership Interests for an indefinite period (including total loss of its investment), and has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risk of its investment.

 

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Section 5.05    Brokers. No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Buyer or an Affiliate of Buyer.

Section 5.06    Financing. Concurrently with the execution of this Agreement, Buyer has delivered to the Company correct and complete copies of (a) executed equity commitment letters addressed to Buyer, dated as of the date hereof (the “Equity Commitment Letters”), from Ontario Teachers’ Pension Plan Board and Ares Corporate Opportunities Fund IV, L.P. (the “Equity Financing Sources”) to provide equity financing in an aggregate amount to fund the Purchase Price (the “Equity Financing”), and (b) an executed debt commitment letter, dated as of the date hereof (the “Debt Commitment Letter”), from Jefferies Finance LLC and Barclays Bank PLC (the “Debt Financing Sources”) providing the terms and conditions upon which the Debt Financing Sources have committed to provide debt financing in amount set forth in the Debt Commitment Letter, to fund a portion of the Purchase Price (the “Debt Financing,” and together with the Equity Financing, the “Financing”). The Company and the Sellers are express third-party beneficiaries of the Equity Commitment Letter. The Equity Commitment Letters and the Debt Commitment Letter in the form so delivered are, as to Buyer, and to the knowledge of Buyer, the other parties thereto, in full force and effect and constitutes a legal, valid and binding obligation, enforceable in accordance with its terms, except as such enforceability may be limited by the General Enforceability Exceptions. Such Equity Commitments and Debt Commitments have not been withdrawn, terminated or otherwise amended or modified in any respect. Assuming the accuracy of the representations and warranties set forth in Article III and Article IV, no event has occurred that, with or without notice, lapse of time or both, constitutes a default or breach on the part of Buyer under any term or condition of the Equity Commitment Letters or the Debt Commitment Letter. The Equity Commitment Letters and the Debt Commitment Letter (together with the fee letter referred to therein) constitute, as of the date hereof, the entire and complete agreement between the parties thereto with respect to the financings contemplated thereby, and, except as set forth, described or provided for in the Equity Commitment Letters and the Debt Commitment Letter, (i) there are no (A) conditions precedent to the obligation of the Equity Financing Source to fund the Equity Financing or (B) conditions precedent to the obligation of the Debt Financing Sources to provide the Debt Financing, and (ii) there are no contractual contingencies or other provisions under any agreement (including any side letters) relating to the transactions contemplated by this Agreement to which Buyer or any of its Affiliates is a party that would permit the Equity Financing Source or the Debt Financing Sources to reduce the total amount of the Equity Financing or the Debt Financing, respectively, or impose any additional conditions precedent to the availability of the Equity Financing or Debt Financing, respectively. Buyer has fully paid any and all commitment fees, if any, or other fees required by the Debt Commitment Letter to be paid as of the date hereof. As of the date hereof, assuming the accuracy of the representations and warranties set forth in Article III and Article IV, Buyer has no reason to believe that any of the conditions to the Financing will not be satisfied on a timely basis or that the funding contemplated in the Financing will not be made available to Buyer on a timely basis in order to consummate the transactions contemplated by this Agreement. Assuming the accuracy of the representations and warranties set forth in Article III and Article IV, the Financing will be sufficient to (a) pay the Purchase Price in accordance with the terms hereof; (b) refinance or repay in full the Estimated Indebtedness; and (c) pay in full all fees, costs and expenses payable by Buyer in connection with this Agreement and the consummation of the transactions contemplated hereby.

 

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Section 5.07    Solvency. Immediately after giving effect to the transactions contemplated hereby, assuming the accuracy of the representations and warranties set forth in Article III and Article IV and the reasonableness of the assumptions used to prepare the Company’s most recent projections and forecasts made available to Buyer, Buyer and its Subsidiaries (including the Acquired Companies) on a consolidated basis shall: (a) be able to pay its debts as they become due; (b) own property that has a fair saleable value greater than the amounts required to pay its debts (including a reasonable estimate of the amount of all contingent liabilities); and (c) have adequate capital to carry on its business. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated hereby with the intent to hinder, delay or defraud either present or future creditors of any of Buyer and the Company. In connection with the transactions contemplated hereby, Buyer has not incurred, nor plans to incur, debts beyond its ability to pay as they become absolute and matured. For the purposes of this Section 5.07, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.

Section 5.08    Legal Proceedings. There are no Actions pending or, to Buyer’s knowledge, threatened against or by Buyer or any Affiliate of Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement.

Section 5.09    Independent Investigation; No Reliance. In connection with its investment decision, Buyer or its representatives have inspected and conducted such reasonable independent review, investigation and analysis (financial and otherwise) of the Acquired Companies as desired by Buyer and has evaluated such documents and information as it has deemed necessary to enable it to make an informed decision with respect to the transactions contemplated by this Agreement. The purchase of the Membership Interests by Buyer and the consummation of the transactions contemplated hereby by Buyer are not done in reliance upon any Buyer’s use of or reliance on any Extra-Contractual Information, including any implied warranty of merchantability or of fitness for a particular purpose. Buyer has been given the opportunity to ask questions of the Acquired Companies in connection with its due diligence investigation, and, to Buyer’s knowledge, such questions have been answered to Buyer’s satisfaction.

ARTICLE VI

COVENANTS

Section 6.01    Conduct of Business Prior to the Closing.

(a)    From the date hereof until the Closing, except as otherwise required by this Agreement or consented to in writing by Buyer, Sellers shall, and shall cause the Company to: (i) conduct the business of the Company in all material respects in the ordinary course of business; and (ii) use commercially reasonable efforts to maintain and preserve intact the current organization and business of the Company, including the relationships with customers, suppliers, distributors, creditors and others having significant business relationships with the Company. From the date hereof until the Closing, except as otherwise required by this Agreement, set forth in Section 6.01 of the Disclosure Schedules or consented to in writing by Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), Sellers shall not, and shall cause the Company not to take any action that would cause the representation contained in Section 4.09 not to be true at any time between the date of this Agreement and the Closing Date.

 

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(b)    From the date hereof until the Closing, except as otherwise required by this Agreement, set forth in Section 6.01 of the Disclosure Schedules or consented to in writing by Buyer (which consent shall not be unreasonably withheld, conditioned or delayed), Sellers shall not, and shall cause the Company not to:

(i)        transfer, pledge, grant issue, sell, encumber or dispose, or authorize the issuance, sale, pledge, disposition, grant or transfer of any membership interests or other securities of the Company or any of the Subsidiaries or grant options, warrants, calls or other rights to purchase or otherwise acquire membership interests or other securities of the Acquired Companies, except for the exercise of options;

(ii)       effect a recapitalization, reclassification or like change in capitalization;

(iii)      amend the Organizational Documents;

(iv)      acquire assets outside of the ordinary course of business from any other Person for consideration in excess of $250,000 in a single transaction or $2,000,000 in the aggregate;

(v)       other than in the ordinary course of business consistent with past practice, cancel or compromise any material Indebtedness or claim owing to the Acquired Companies or waiver of any material rights;

(vi)      make any loans, advances, guarantees or capital contributions to or investment in any Person (other than any Acquired Company) in excess of $1,000 with respect to any Person and $50,000 in the aggregate;

(vii)     subject any of the properties or assets (whether tangible or intangible) of the Acquired Companies to any Encumbrance, except for Permitted Encumbrances and in the ordinary course of business consistent with past practice;

(viii)    other than in the ordinary course of business consistent with past practice, enter into any contract that would have been a Material Contract or lease for Real Property had it been entered into prior to the date of this Agreement or materially amend, materially modify or terminate (prior to its expiration) any Material Contract or lease for Real Property;

(ix)      settle any Action for an amount in excess of $250,000 in the aggregate;

(x)       merge or consolidate with any Person; or

(xi)      agree to do any of the foregoing.

 

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(c)    Nothing contained in this Agreement shall give Buyer, directly or indirectly, any rights to control or direct the Company’s operations prior to the Closing. Prior to the Closing, the Company shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its business, assets and operations.

Section 6.02    Employees; Benefit Plans.

(a)    With respect to any employee benefit plan sponsored, maintained, contributed to or otherwise made available by Buyer or its Subsidiaries to their respective employees (collectively, “Buyer Benefit Plans”) in which any Employee who remains employed by an Acquired Company immediately after the Closing (“Company Continuing Employees”) will be eligible to participate after the Closing, Buyer shall, and shall cause its Subsidiaries to, recognize all service of the Company Continuing Employees with the Acquired Companies or any of their Subsidiaries, as the case may be, as if such service were with Buyer, for all purposes in any Buyer Benefit Plan in which such Company Continuing Employees may be eligible to participate after the Closing Date; provided, however, such service shall not be recognized for benefit accrual under defined benefit pension plans, for purposes of qualifying for subsidized early retirement benefits or to the extent that such recognition would result in a duplication of benefits.

(b)    Buyer shall, and shall cause its Subsidiaries to, (a) cause to be waived any waiting periods, evidence of insurability requirements, or pre-existing condition limitations and similar limitations under Buyer Benefit Plans to the extent waived or satisfied by a Company Continuing Employee under any Benefit Plan and (b) give (or cause to be given) credit for amounts paid by a Company Continuing Employee and his or her dependents under a corresponding Benefit Plan prior to the Closing Date and in the same plan year as that in which the Closing Date occurs for purposes of applying deductibles, co-payments and out-of-pocket maximums under Buyer Benefit Plans as though such amounts had been paid in accordance with the terms and conditions of such Buyer Benefit Plan. Buyer shall, and shall cause the Company to, honor all periods of vacation leave, sick leave, personal days, holidays and other similar periods of leave of Company Continuing Employees as of the Closing Date to the extent accrued on the Closing Balance Sheet.

(c)    Prior to the Closing Date, if requested by Buyer in writing, to the extent permitted by applicable Law and the terms of the applicable plan or arrangement, the Company shall resolve to terminate the Company’s 401(k) Savings Plan (the “Company 401(k) Plan”) effective immediately prior to the Closing Date. In the event that Buyer requests that the Company 401(k) Plan be terminated, (i) the Company shall provide Buyer with duly adopted resolutions providing for such termination not later than the day immediately preceding the Closing Date, and (ii) the Buyer shall, to the Company’s reasonable satisfaction, take any and all actions as may be required, including amending the Company 401(k) Plan and/or the defined contribution plan maintained by Buyer that is intended to comply with Code Section 401(k) (the “Buyer 401(k) Plan”), to permit each Company Continuing Employee to make rollover contributions of “eligible rollover distributions” (within the meaning of Section 401(a)(31) of the Code) in an amount equal to the full account balance distributed or distributable to such Company Continuing Employee from the Company 401(k) Plan to the Buyer 401(k) Plan, including any outstanding plan loans.

 

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(d)    This Section 6.02 shall be binding upon and inure solely to the benefit of each of the parties to this Agreement, and nothing in this Section 6.02, express or implied, shall confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Section 6.02. Nothing contained herein, express or implied, shall be construed to establish, amend or modify any benefit plan, program, agreement or arrangement. The parties hereto acknowledge and agree that the terms set forth in this Section 6.02 shall not create any right in any Employee or any other Person to any continued employment with the Company, Buyer or any of their respective Affiliates or compensation or benefits of any nature or kind whatsoever.

Section 6.03    Taxes.

(a)    Responsibility for Filing Tax Returns

(i)    Between the date of this Agreement and the Closing Date, Sellers shall, or shall cause each of the Acquired Companies to, prepare and file, on a timely basis, all Tax Returns that are required to be filed by such Acquired Company (taking account of extensions) prior to the Closing Date and shall cause the Acquired Companies to timely pay all Taxes required to be paid by the Acquired Companies (and Sellers shall be entitled to any Tax refunds) with respect thereto.

(ii)    The Seller Representative shall prepare or cause to be prepared and timely file or cause to be timely filed all income Tax Returns of the Acquired Companies for all taxable periods ending on or prior to the Closing Date that are required to be filed after the Closing Date (including, for the avoidance of doubt, IRS Form 1065 and any corresponding state and local tax forms required to be filed by the Company with respect to the taxable period ending on the Closing Date). To the extent such Tax Returns are legally required to be filed by any of the Acquired Companies or Buyer, Buyer shall, or shall cause, such Tax Returns to be timely filed as prepared by the Seller Representative.

(iii)    With respect to Tax Returns filed or required to be filed by the Acquired Companies after the date hereof for taxable periods ending on or prior to the Closing Date with respect to which Buyer or the Acquired Companies may reasonably be expected (directly or indirectly) to have liability (including as a result of any adjustments to such Tax Returns) following the Closing, (A) such Tax Returns shall be prepared on a basis consistent with existing procedures and practices and accounting methods of the Acquired Companies (unless otherwise required by applicable Law), (B) the Sellers or Seller Representative, as applicable, shall provide Buyer at least thirty (30) days to review and comment on each such Tax Return prior to it being filed and (C) the Sellers or Seller Representative, as applicable, shall incorporate reasonable comments from Buyer on such Tax Returns and (D) no such Tax Return shall be filed without Buyer’s prior written consent (not to be unreasonably withheld, conditioned or delayed). Notwithstanding anything to the contrary in this Section 6.03(a)(iii), Buyer shall have none of the rights set forth in this Section 6.03(a)(iii) with respect to the U.S. Federal income Tax Returns of the Acquired Companies.

 

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(b)    Tax Treatment. Buyer and Sellers acknowledge that the purchase and sale of the Membership Interests pursuant to this Agreement shall be treated for U.S. federal income Tax purposes (and applicable state and local income Tax purposes, to the extent permitted by applicable Law) as a transaction described in Revenue Ruling 99-6 (Situation 2). No party shall take any position inconsistent with such treatment on any Tax Return, in any audit or proceeding before any Governmental Authority, in any report made for Tax purposes, or otherwise, unless required to do so by a final “determination” (within the meaning of Section 1313(a) of the Code). As a result, Sellers and the Seller Representative agree and acknowledge that the federal income Tax Return of the Company for the taxable period ending on the Closing Date shall be filed as “final”.

(c)    Tax Allocation

(i)    The sum of the Purchase Price and all other items required to be taken into account for U.S. federal income tax purposes with respect to the purchase and sale of the Membership Interests pursuant to this Agreement (including, without limitation, the liabilities of the Acquired Companies) (collectively, the “Total Tax Consideration”) shall be allocated among the assets of the Acquired Companies as set forth on Exhibit C, which is intended to be in accordance with Section 751, 755 and 1060 of the Code and the applicable Treasury Regulations, and any applicable state, local and foreign Tax Law (the “Tax Allocation Statement”). The Tax Allocation Statement as attached hereto shall be final and binding on the parties hereto, other than for those components which are finally determined in the final determination of Final Working Capital Surplus or Final Working Capital Deficiency, which such amounts, as so finally determined, shall be final and binding upon the parties hereto. In the event that any adjustment to the aggregate purchase price is paid between the parties pursuant to the terms of this Agreement (or there is otherwise an adjustment to the Total Tax Consideration hereunder), Buyer shall promptly provide the Seller Representative a revised Tax Allocation Statement and the principles of this Section 6.03(c) shall apply to each revised Tax Allocation Statement. In the event that any adjustment to the aggregate purchase price is paid between the parties pursuant to the terms of this Agreement (or there is otherwise an adjustment to the Total Tax Consideration hereunder), Buyer shall promptly provide the Seller Representative a revised Tax Allocation Statement and the principles of this Section 6.03(c) shall apply to each revised Tax Allocation Statement.

(ii)    Buyer, Sellers and their respective Affiliates shall, unless otherwise required by a final “determination” (within the meaning of Section 1313(a) of the Code), (A) prepare and file all Tax Returns, including all IRS Forms 8594 and any other appropriate Tax Returns or forms, in a manner consistent with the Tax Allocation Statement, as finally determined pursuant to this Section 6.03(c) and (B) take no position in any Tax Return, proceeding, audit or otherwise that is inconsistent with the Tax Allocation Statement, as finally determined pursuant to this Section 6.03(c) (in each case, subject to adjustment in accordance with this

 

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Section 6.03(c) in the event of any adjustment to the Total Tax Consideration). In the event that any of the allocations set forth in the Tax Allocation Statements are disputed by any Governmental Authority, the party receiving notice of such dispute shall promptly notify and consult with the other party concerning the resolution of such dispute.

(d)    Transfer Taxes. All transfer, documentary, sales, use, stamp, registration, value added and other similar Taxes and fees (including any penalties and interest) incurred in connection with this Agreement (including any real property transfer Tax and any other similar Tax) shall be borne and paid by Buyer when due. Buyer shall, at its own expense, timely file any Tax Return or other document with respect to such Taxes or fees.

(e)    Cooperation on Tax Matters. Sellers and Buyer shall (and Buyer shall cause the Acquired Companies to) (i) reasonably assist in the preparation and timely filing of any Tax Return of the Acquired Companies, (ii) reasonably assist in any audit or other proceeding with respect to the Tax Returns or Taxes of the Acquired Companies, (iii) make available any information, records or other documents relating to any Taxes or Tax Returns of the Acquired Companies reasonably requested in writing, and (iv) provide any information reasonably required and reasonably requested in writing to allow Sellers, Buyer, and the Acquired Companies to comply with any information reporting contained in the Code or other applicable Laws.

(f)    Treatment of Certain Payments. To the extent permitted by applicable Law, for income tax purposes, the parties agree that all deductions with respect to (i) the Company Transaction Costs, (ii) all other deductible expenses of any of the Acquired Companies that are related to the transactions contemplated by this Agreement, but solely to the extent paid or accrued (and included in the calculation of the Final Purchase Price) on or before the Closing and (iii) without duplication, capitalized debt acquisition costs in respect of Indebtedness of the Company that is repaid on or prior to the Closing, shall be treated as deductions of the Acquired Companies allocable to the period ending on the Closing Date. The parties agree to prepare and file all Tax Returns in a manner consistent with such treatment and take no position in any Tax Return, proceeding, audit or otherwise that is inconsistent with such treatment.

(g)    Alternative Procedure for Pre-Closing Audits. With respect to any Action, audit or examination with respect to a taxable period ending on or before the Closing Date, Buyer shall have the right to cause the Company to elect the application of Section 6226 of the Code (as enacted by the BBA, including any amended or successor version thereof and any regulations or guidance promulgated thereunder) including the right to cause the Company to provide the statements to former members of the Company and to the IRS provided for in Section 6226(a)(2) of the Code, and Buyer shall have the right to make or cause the Company to make any similar elections available under applicable state or local Tax Law, and Sellers shall take all actions and provide all information reasonably requested by Buyer in order for any such election to be effective, including provision of information for preparation of the statements provided for by Section 6226(a)(2) (or any similar requirement under applicable state or local Tax Law); provided, however, that in any case where Buyer exercise any rights under this Section 6.03(g), the Seller Representative shall have the right to control the defense of such Action, audit or examination.

 

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(h)    Survival. For the avoidance of doubt, the covenants of Sellers (including any obligations of the Seller Representative) in this Section 6.03 shall survive the Closing until ninety (90) days following the expiration of all relevant statutes of limitations.

(i)    Purchase Price Adjustment. Buyer and Seller agree to treat any amounts payable after the Closing by Sellers to Buyer (or by Buyer to Sellers) pursuant to this Agreement (including, for the avoidance of doubt, adjustment payments made pursuant to Section 2.05(d) and any indemnification and other payments made pursuant to Article VIII) as an adjustment to the Total Tax Consideration, unless otherwise required by applicable Laws.

Section 6.04    Financing Related Cooperation; Debt Financing.

(a)    Prior to the Closing Date, the Company will, and will cause each other Acquired Company and its and their officers, directors, employees, accountants, consultants, investment bankers, agents and other non-legal advisors and representatives to use its and their reasonable best efforts to provide, upon the reasonable request of Buyer, cooperation that is reasonably requested by Buyer in connection with the arrangement, obtaining and syndication of the Debt Financing by Buyer in respect of the transactions contemplated by this Agreement. Such cooperation shall include without limitation: (i) causing the senior officers of the Acquired Companies to participate in a reasonable number of meetings with prospective lenders and investors, presentations, sessions with rating agencies or and other customary syndication activities; (ii) assisting with the preparation of appropriate and customary materials for rating agency presentations, bank information memoranda and similar customary documents reasonably required in connection with the Debt Financing; (iii) to the extent not prohibited or restricted under applicable Law or any contract of the Company, facilitating the pledging of collateral, provided that no pledge shall be effective until the effective time of the Closing; (iv) furnishing on a confidential basis to Buyer and its financing sources as promptly as reasonably practicable, such historical financial and other customary documents reasonably required in connection with the Debt Financing and providing customary representation and authorization letters in connection with the marketing materials; (v) executing and delivering any credit agreements, pledge and security documents, guarantees, hedging agreements, certificates of the chief financial officer of any of the Acquired Companies with respect to solvency matters, customary closing certificates and any other certificates, letters and documents as may be reasonably requested by Buyer to be effective at Closing; (vi) assisting in the negotiation of any credit or other agreements, pledge or security documents, or other certificates, legal opinions or documents in connection with the Debt Financing, including those set forth under clause (v) above; (vii) cooperating with Buyer’s legal counsel in connection with any legal opinions that such legal counsel may be required to deliver in connection with the Debt Financing, including coordinating with any local or internal counsel of the Acquired Companies; (vii) (A) permitting the Debt Financing Sources and other prospective lenders involved in the Debt Financing to conduct collateral audits and appraisals and evaluate the Acquired

 

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Companies’ current assets, receivables, inventory, cash management and accounting systems, and policies and procedures relating thereto for the purposes of establishing collateral arrangements as of the Closing (and providing all relevant information or documentation reasonably requested in connection therewith) and (B) assisting Buyer to establish or maintain, for the Acquired Companies, in connection with the delivery of a “borrowing” base certificate and the Debt Financing cash management procedures and bank accounts; (ix) furnishing to Buyer and its Financing Sources (i) unaudited financial statements for the fiscal quarter ended March 31, 2018 and unaudited financial statements for each subsequent fiscal quarter ended at least forty-five (45) days prior to the Closing Date and (ii) as promptly as reasonably practicable any financial statements identified the Debt Commitment Letter and such other financial and other pertinent information regarding the Acquired Companies as may be reasonably requested by Buyer (it being understood and agreed that the Company shall not be required to provide any information regarding any post-Closing or pro forma cost savings, synergies, capitalization, ownership or other post-Closing pro forma adjustments (or otherwise prepare pro forma financial information or post-Closing financial information)); (x) requesting that the administrative agent and/or collateral agent under the Existing Credit Agreement provide a payoff letter in respect thereof and related lien terminations and instruments of discharge in respect thereof; (xi) assisting Buyer in obtaining corporate or credit facility ratings from rating agencies; (xii) taking all corporate actions, subject to the occurrence of the Closing, reasonably requested by Buyer to permit the consummation of the Debt Financing and to permit the proceeds thereof to be made available on the Closing Date; and (xiii) not less than three (3) Business Days prior to the Closing Date, providing Buyer all documentation and other information with respect to the Acquired Companies as shall have been reasonably requested in writing by Buyer at least nine (9) Business Days prior to the Closing Date that is required in connection with the Debt Financing by U.S. regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the U.S.A. Patriot Act of 2001; provided, that, notwithstanding anything in this Agreement to the contrary, no Acquired Company shall be required to provide cooperation under this Section 6.04 that: (i) unreasonably interferes with the ongoing business of the Acquired Companies; (ii) causes any representation or warranty of the Company or Sellers in this Agreement to be breached; (iii) causes any closing condition set forth in Article VII to fail to be satisfied or otherwise causes the breach of this Agreement or any Material Contract by the applicable Acquired Company party thereto; (iv) be required to commit to taking any action that is not contingent upon the Closing and (v) be required to take any action that would conflict with, violate or result in a breach of or default under any organizational documents of any of the Acquired Companies or any Law.

(b)    In no event shall any Acquired Company be required to pay any commitment or similar fee or incur any liability or expense in connection with assisting Buyer in arranging the Debt Financing or as a result of any information (excluding historical information referenced in clause (ii)(B) of this Section 6.04(b)) provided by the Acquired Companies or any of their Affiliates or representatives in connection therewith, except to the extent required to be indemnified or reimbursed by Buyer pursuant to this Section 6.04(b). Buyer shall, from and after the Closing or after the termination of this Agreement pursuant to Section 9.01, (i) promptly upon request by the Company reimburse

 

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the Company for all reasonably and documented out of pocket costs incurred in good faith by the Acquired Companies in connection with such cooperation and (ii) indemnify and hold harmless the Acquired Companies and their Affiliates and representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them in connection with the arrangement of the Debt Financing or providing any of the information utilized in connection therewith. Notwithstanding the foregoing, Buyer shall not be obligated to indemnify the Acquired Companies and their Affiliates and representatives for any liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties arose out of or result from: (A) the gross negligence, bad faith or willful misconduct of any of the Acquired Companies; or (B) historical information furnished by or on behalf of the Acquired Companies, including financial statements. The Company hereby consents to the use of the logos of the Acquired Companies in connection with the Debt Financing contemplated by the Debt Commitment Letter; provided, that such logos are used solely in a manner that is not intended to or reasonably likely to harm or disparage the Acquired Companies.

(c)    Buyer shall obtain the Equity Financing contemplated by the Equity Commitment Letter upon satisfaction or waiver of the conditions to the Closing set forth in Article VII. Buyer shall not permit any amendment or modification to be made to, or grant any waiver of any provision or remedy under, the Equity Commitment Letter without the prior written consent of the Company. For purposes of this Section 6.04, the definitions of “Debt Commitment Letter,” “Equity Commitment Letters,” “Debt Financing,” “Equity Financing,” and “Financing” shall include the commitments in respect of any alternative financing or the documents related thereto, as applicable. Buyer shall keep the Company informed on a reasonably current basis in reasonable detail of the status of its efforts to arrange the Debt Financing. Buyer shall provide notice to the Company promptly upon receiving the Debt Financing and shall furnish correct and complete copies of the definitive agreements with respect thereto to the Company promptly upon their execution.

(d)    Buyer shall, and shall cause its Affiliates to, refrain from taking, directly or indirectly, any action that is reasonably likely to result in the failure of any of the conditions contained in the Debt Commitment Letter or the Equity Commitment Letters or in any definitive agreement related to the financings contemplated therein.

Section 6.05    Non-Competition; Non-Solicitation.

(a)    Subject to Section 6.05(e), each of the Restricted Sellers shall not, on their own behalf or on behalf of or in connection with any other Person, as principal, agent, shareholder, lender, investor, advisor, employee or consultant, during the period commencing on the Closing Date and ending three (3) years after the Closing Date (the “Restricted Term”) and within all or any part of the United States and Canada (the “Territory”):

(i)    directly or indirectly carry on, engage in or participate in the business of producing, selling or distributing any products which are in competition with those produced, sold or distributed by any Acquired Company determined as of the Closing Date, including, without limitation, trim, fascia, soffit, column wraps, decorative moulding and other similar building and surface applications composed or made from cellular pvc or any material that competes with cellular pvc during the Restricted Term (a “Competitive Business”), in all or any part of the Territory; or

 

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(ii)       have any direct or indirect interest in or with any Person, including any partnership or joint venture, if any part of the activities of such Person consists of carrying on, engaging in or participating in a Competitive Business.

(b)    Subject to Section 6.05(e), each of the Sellers shall not, during the Restricted Term, directly or indirectly, on its or their own behalf or on behalf of or in connection with any other Person, in any capacity whatsoever:

(i)        offer employment to or solicit the employment or engagement of or otherwise entice away from employment with any Acquired Company any Key Employee whether or not any such Key Employee would commit any breach of his or her contract or terms of employment by leaving the employ of any Acquired Company; or

(ii)       procure or assist any Person to offer employment or solicit the employment or engagement of or otherwise entice away from employment with any Acquired Company any such Key Employee,

provided, that the foregoing restrictions shall not apply to prohibit any advertisement for employment that is available to the public in general, whether by publication in the printed media or otherwise, that is not specifically directed or targeted at any Key Employee (but shall apply in respect of any Key Employee responding to any such advertisement).

(c)    Each of the Restricted Sellers shall not, during the Restricted Term, directly or indirectly, on its or their own behalf or on behalf of or in connection with any other Person, in any capacity whatsoever, call on or solicit any of the customers, suppliers, designers or clients of any Acquired Company for the purpose of competing with any Acquired Company.

(d)    The Sellers agree that:

(i)        the covenants in this Section 6.05 are reasonable in the circumstances and are necessary to protect the Buyer;

(ii)       any breach or threatened breach by the Sellers of any of the applicable provisions of this Section 6.05 would cause serious and irreparable harm to the Buyer which could not adequately be compensated for in damages, as a result, in addition to any other remedies at law or in equity, the Buyer shall be entitled to seek equitable relief, including injunctive relief and specific performance for any such breach or threatened breach without the requirement of posting a bond or other security; and

 

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(iii)    the principles of law to be applied to the interpretation of this Section 6.05 are those that apply to restrictive covenants given by a seller on the sale of a business.

(e)    Notwithstanding the foregoing provisions of this Section 6.05, the Sellers shall not be in default under this Agreement by virtue of holding as a passive investor not more than five percent (5%) (including shares held by any Persons acting jointly or in concert with the Sellers) of the issued and outstanding shares or equity interests (determined, in the case of any convertible debt or equity investment, on an “as converted” basis) of a corporation or other Person, the shares or equity interests of which are listed on a recognized stock exchange. Notwithstanding the foregoing, no Seller shall be in violation of the provisions of this Section 6.05 by virtue of performing duties for any Acquired Company as an employee, consultant or agent.

Section 6.06    Plant Closings and Mass Layoffs. Buyer shall not, and shall cause the Acquired Companies not to, take any action following the Closing that could result in WARN Act liability for Sellers.

Section 6.07    Director and Officer Indemnification and Insurance.

(a)    Buyer agrees that all rights to indemnification, advancement of expenses and exculpation by the Acquired Companies now existing in favor of each Person who is now, or has been at any time prior to the date hereof or who becomes prior to the Closing Date, an officer or director of any of the Acquired Companies, as provided in the Organizational Documents of the applicable Acquired Company, in each case as in effect on the date of this Agreement, or pursuant to any other agreements in effect on the date hereof and disclosed in Section 6.07(a) of the Disclosure Schedules (the “D&O Provisions”), shall survive the Closing Date and shall continue in full force and effect in accordance with their respective terms.

(b)    The Company shall, and Buyer shall cause the Acquired Companies to (i) maintain in effect for a period of six (6) years after the Closing Date the current policies of directors’ and officers’ liability insurance maintained by the Company immediately prior to the Closing Date (provided that the Company may substitute therefor policies, of at least the same coverage and amounts and containing terms and conditions that are not less advantageous to the directors and officers of the Acquired Companies when compared to the insurance maintained by the Acquired Companies as of the date hereof), or (ii) obtain as of the Closing Date “tail” insurance policies with a claims period of six (6) years from the Closing Date with at least the same coverage and amounts, and containing terms and conditions that are not less advantageous to the directors and officers of the Acquired Companies, in each case with respect to claims arising out of or relating to events which occurred on or prior to the Closing Date (including in connection with the transactions contemplated by this Agreement). The cost of securing such “tail” insurance policy shall be borne and paid exclusively by Buyer. Notwithstanding the foregoing, in no event shall Buyer be required to expend an amount in excess of 300% of the annual premium currently paid by the Company for such insurance; and provided, further, that if the annual premiums of such insurance coverage exceed such amount, Buyer shall be obligated to obtain a “tail” insurance policy with the greatest coverage available for a cost not exceeding such amount.

 

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(c)    Effective as of the Closing, Buyer and the Acquired Companies waive any claim relating to and agree not to and to not permit any of their respective Affiliates to bring any action asserting, any breach of fiduciary duty, professional malpractice, or any breach of any other duty owed to any of the Acquired Companies against any former director or officer in their capacity as such, whether such action is filed derivatively on behalf of the Acquired Companies or otherwise, in each case, at or prior to Closing, except in the event of such director’s or officer’s fraud, willful misconduct or bad faith.

(d)    The obligations of Buyer and the Acquired Companies under this Section 6.07 shall not be terminated or modified in such a manner as to adversely affect any director or officer to whom this Section 6.07 applies without the consent of such affected director or officer (it being expressly agreed that the directors and officers to whom this Section 6.07 applies shall be third-party beneficiaries of this Section 6.07, each of whom may enforce the provisions of this Section 6.07).

(e)    In the event Buyer, any Acquired Company or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in either such case, proper provision shall be made so that the successors and assigns of Buyer or the Acquired Companies, as the case may be, shall assume all of the obligations set forth in this Section 6.07.

Section 6.08    Confidentiality. No party hereto or its respective Affiliates, employees, agents and representatives shall disclose to any third party the existence of this Agreement or the subject matter or terms hereof without the prior consent of the other parties hereto; provided, however, that the parties hereto shall be permitted to disclose such information (i) to their attorneys, advisors, representatives, stockholders or investors who are reasonably required to receive such information, (ii) in connection with enforcing their rights under this Agreement or any other agreement entered into in connection with this Agreement, (iii) as required by Law or this Agreement and (iv) that becomes publicly available without breach of this Section 6.08 (e.g., by a mutually agreeable press release). In addition to, and without limiting the generality of, the foregoing, Buyer acknowledges and agrees that the Confidentiality Agreement remains in full force and effect through the Closing, at which time the parties hereto acknowledge and agree that the Confidentiality Agreement shall terminate. If this Agreement is, for any reason, terminated prior to the Closing, the Confidentiality Agreement and the provisions of this Section 6.08 shall nonetheless continue in full force and effect.

Section 6.09    Governmental Approvals and Other Third-party Consents.

(a)    Each party hereto shall, as promptly as possible, use its reasonable best efforts to obtain, or cause to be obtained, all consents, authorizations, orders and approvals from all Governmental Authorities that may be or become necessary for its execution and delivery of this Agreement and the performance of its obligations pursuant to this

 

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Agreement. Each party shall cooperate fully with the other party and its Affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. The parties hereto shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals. Each party hereto agrees to make an appropriate filing pursuant to the HSR Act with respect to the transactions contemplated by this Agreement within ten (10) Business Days after the date hereof and to supply as promptly as practicable to the appropriate Governmental Authority any additional information and documentary material that may be requested pursuant to the HSR Act. Buyer agrees that all filing fees under the HSR Act (whether imposed on Buyer, Sellers or any other Persons pursuant to the HSR Act) shall be borne and paid exclusively by Buyer.

(b)    Without limiting the generality of Buyer’s undertaking pursuant to this Section 6.09, Buyer agrees to use its best efforts and to take any and all steps reasonably necessary to avoid or eliminate each and every impediment under any antitrust, competition or trade regulation Law that may be asserted by any Governmental Authority or any other party so as to enable the parties hereto to close the transactions contemplated by this Agreement as promptly as possible; provided, however, that nothing in this Agreement, including this Section 6.09, shall require, or be construed to require, Buyer to proffer to, or agree to, sell, divest, lease, license, transfer, dispose of or otherwise encumber or hold separate and agree to sell, divest, lease, license, transfer, dispose of or otherwise encumber before or after the Closing, any assets, licenses, operations, rights, product lines, businesses or interest therein of Buyer, the Company or any of their respective Affiliates (or to consent to any sale, divestiture, lease, license, transfer, disposition or other encumbrance by the Company of any of its assets, licenses, operations, rights, product lines, businesses or interest therein or to any agreement by the Company to take any of the foregoing actions) or to agree to any material changes (including, without limitation, through a licensing arrangement) or restriction on, or other impairment of Buyer’s ability to own or operate, any of any such assets, licenses, operations, rights, product lines, businesses or interests therein or Buyer’s ability to vote, transfer, receive dividends or otherwise exercise full ownership rights with respect to the equity interests of the Company and (ii) nothing in this Agreement shall require, or be construed to require, Buyer or any of its Affiliates to take any other action under this Section 6.09 if the United States Department of Justice or the United States Federal Trade Commission authorizes its staff to seek a preliminary injunction or restraining order to enjoin consummation of the transactions contemplated by this Agreement. The Company and Buyer will each request early termination of the waiting period with respect to the transactions contemplated by this Agreement under the HSR Act.

(c)    Subject to applicable Laws relating to the exchange of information, Buyer shall have the right to direct all matters with any Governmental Authority consistent with its obligations hereunder; provided that all analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals made by or on behalf of either party before any Governmental Authority or the staff or regulators of any Governmental Authority, in connection with the transactions contemplated hereunder (but, for the avoidance of doubt, not including any interactions between Sellers or any of the Acquired Companies and Governmental Authorities in the ordinary course of business, any

 

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disclosure which is not permitted by Law or any disclosure containing confidential information) shall be disclosed to the other party hereunder in advance of any filing, submission or attendance, it being the intent that the parties will consult and cooperate with one another, and consider in good faith the views of one another, in connection with any such analyses, appearances, meetings, discussions, presentations, memoranda, briefs, filings, arguments, and proposals. Each party shall give notice to the other party with respect to any meeting, discussion, appearance or contact with any Governmental Authority or the staff or regulators of any Governmental Authority, with such notice being sufficient to provide the other party with the opportunity to attend and participate in such meeting, discussion, appearance or contact.

(d)    The Company shall use commercially reasonable efforts to give all notices to, and obtain all consents from, all third parties that are described in Section 4.06 (with respect to the Company) of the Disclosure Schedules; provided, however, that no Acquired Company nor any Seller shall be obligated to pay any consideration therefor to any third party from whom consent or approval is requested unless such consideration is set forth in the applicable agreement.

Section 6.10    Books and Records.

(a)    From and after the Closing Date, Buyer shall (and shall cause the Acquired Companies to), during normal business hours and upon reasonable notice, make available and provide the Seller Representative and its representatives (including counsel and independent auditors) with reasonable access to the facilities and properties of the Acquired Companies and to all information, files, documents and records (written and computer) relating to the Acquired Companies or any of their respective businesses or operations for any and all periods prior to and including the Closing Date that they may require (i) for the preparation of Tax Returns of the Sellers or their Affiliates for a period of seven (7) years following Closing or (ii) in connection with any claim, dispute, action, cause of action, investigation or proceeding of any kind by or against any Person for a period of two (2) years following Closing (except that in the case of any claim, dispute, action, cause of action, investigation or proceeding relating to Taxes with respect to any Tax period (or portion thereof) ending on or prior to the Closing Date, Buyer’s obligations under this clause (ii) shall extend until the expiration of the applicable statute of limitations), and shall (and shall cause the Acquired Companies to) cooperate with the Seller Representatives and its representatives (including counsel and independent auditors) in connection with the foregoing, at the sole cost and expense of Sellers, as applicable, including by making Tax, accounting and financial personnel and other appropriate employees and officers of the Acquired Companies available to the Seller Representative and its respective representatives (including counsel and independent auditors). Notwithstanding the foregoing, the Seller Representative and its representatives shall not have access to personnel records of the Acquired Companies relating to individual performance or evaluation records, medical histories or other information that in Buyer’s good faith opinion is sensitive or the disclosure of which could subject any Acquired Company to liability; provided that the Seller Representative and its representatives shall not be prohibited from accessing such information pursuant to a valid court order. The Seller Representative and its representatives shall cooperate with the Company and its representatives and shall use their reasonable best efforts to minimize any disruption to the business.

 

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(b)    For a period of seven (7) years after the Closing Date or such other longer period as required by applicable Laws, Buyer shall preserve and retain, all corporate, accounting, legal, auditing, human resources and other books and records of the Acquired Companies relating to the conduct of the business and operations of the Acquired Companies prior to the Closing Date. Notwithstanding the foregoing, during such seven (7) year period, Buyer may dispose of any such books and records which are offered to, but not accepted by, the Seller Representative.

Section 6.11    Public Announcements. Buyer and the Company shall cooperate prior to the Closing to prepare a mutually agreeable press release to be issued upon the Closing by Buyer and the Seller Representative.

Section 6.12    Conversion to Member-Managed LLC. Immediately prior to the Closing, the Company shall, and shall cause each of the other Acquired Companies to convert the Acquired Companies from manager-managed limited liability companies into member-managed limited liability companies in accordance with all applicable Laws, in each case, pursuant to documentation that is form and substance reasonably acceptable to Buyer (the “Pre-Closing Conversion”).

Section 6.13    Disclaimers. Buyer specifically acknowledges and agrees to the terms of Section 3.06 and Section 4.25. Buyer has only relied on the representations and warranties specifically and expressly set forth in Article III and Article IV (in each case, as modified by the Disclosure Schedules) (the “Contractual Representations”), and Buyer specifically acknowledges and agrees that Sellers and the Acquired Companies have not made any other representations or warranties nor has Buyer relied on any representations or warranties regarding information from, any Seller or any Acquired Company or any of their respective Affiliates, employees or representatives, including (1) information, documents, materials or inducements furnished or omitted by or on behalf of a Seller or an Acquired Company or any of their respective representatives, agents or advisors (including Katten or Rothschild, Inc.) relating in any way to an Acquired Company, any statements or omissions of Katten or Rothschild, Inc., whether oral or written, express or implied, including any implied warranty of merchantability or of fitness for a particular purpose, or accuracy or completeness of any of the foregoing (“Extra-Contractual Information”), and (2) the accuracy or completeness of any Extra-Contractual Information so supplied, furnished or conveyed, including any information regarding any Acquired Company or the transactions contemplated by this Agreement. For the avoidance of doubt, the term “Extra-Contractual Information” includes any information, documents, materials or inducements supplied, furnished or conveyed (A) in the Data Room (except to the extent specifically and expressly set forth in the Contractual Representations), (B) in connection with fulfillment of Buyer’s due diligence requests, (C) as a part of any management presentations, or (D) otherwise in advance of or in expectation of the transactions contemplated hereby. Buyer expressly acknowledges that (a) no Seller, nor any Affiliate of Seller, shall have or be subject to any liability to any Indemnified Party with respect to or relating to any Extra-Contractual Information and (b) none of the Sellers, any Acquired Company nor any other Person will have or be subject to any liability to Buyer or any other Person resulting from the distribution to Buyer or its representatives

 

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or Buyer’s use of or reliance on any Extra-Contractual Information. Notwithstanding the foregoing, the limitation set forth in the preceding sentence shall not limit the ability of any other Person in respect of any claim or cause of action based on or arising out of Fraud. Such purchase and consummation are instead done on the basis of Buyer’s own investigation, analysis, judgment and assessment of the present and potential value and earning power of the Acquired Companies as well as the Contractual Representations. Without limiting the foregoing, Buyer understands, acknowledges and agrees (i) that no Seller and no Acquired Company has made any representations or warranties to Buyer regarding the probable success or profitability of any Acquired Company and (ii) that, to the extent any estimates, projections and other forecasts or plans have been provided to Buyer, (a) there are uncertainties inherent in attempting to make such estimates, projections and other forecasts or plans, (b) Buyer is familiar with such uncertainties and (c) Buyer takes full responsibility for making its own evaluation of the adequacy and accuracy of all estimates, projections and other forecasts or plans (including the reasonableness of any of the assumptions underlying such estimates, projections and other forecasts or plans).

Section 6.14    Payoff Letter. On or prior to the Closing, the Company will use cause the administrative agent under the Existing Credit Agreement to deliver a copy of an executed payoff letter (the “Payoff Letter”) with respect to the Existing Credit Agreement, in customary form. Such Payoff Letter shall (i) indicate the total amount required to be paid to fully satisfy all principal, interest, prepayment premiums, penalties, breakage costs and any other monetary obligations then due and payable under the Existing Credit Agreement as of the anticipated Closing Date (and the daily accrual thereafter) (the “Payoff Amount”), (ii) state that upon receipt of the Payoff Amount under such Payoff Letter, the Existing Credit Agreement and all related loan documents shall be terminated, as applicable and (iii) provide that all liens and all guarantees in connection therewith relating to the assets and properties of the Company or any of its Subsidiaries securing such obligations shall be, released and terminated upon the payment of the Payoff Amount. Prior to Closing, Company shall take all actions including delivering all notices, necessary so that all indebtedness and other obligations of the Acquired Companies under the Existing Credit Agreement may be prepaid by the Buyer at Closing and upon such payment at Closing by Buyer the actions set forth in clauses (ii) and (iii) of the preceding sentence shall automatically occur at the Closing.

ARTICLE VII

CONDITIONS TO CLOSING

Section 7.01    Conditions to Obligations of All Parties. The obligations of each party to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

(a)    The filings of Buyer and the Company pursuant to the HSR Act, if any, shall have been made and the applicable waiting period and any extensions thereof (including pursuant to any timing agreements not to close mutually agreed upon by the parties) shall have expired or been terminated.

(b)    No Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Governmental Order which is in effect and has the effect of making the transactions contemplated by this Agreement illegal, otherwise restraining or prohibiting consummation of such transactions or causing any of the transactions contemplated hereunder to be rescinded following completion thereof.

 

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Section 7.02    Conditions to Obligations of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Buyer’s waiver, at or prior to the Closing, of each of the following conditions:

(a)    The representations and warranties of the Company and Sellers contained in Section 3.01 (Ownership of Membership Interests), Section 3.02 (Seller Authority), Section 4.01 (Organization and Authority of the Company), Section 4.02 (Execution and Enforceability), Section 4.04 (Capitalization), and Section 4.22 (Brokers), shall be true and correct in all material respects as of the date of this Agreement and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all material respects as of that specified date). All other representations and warranties of the Company and Sellers contained in Article III and Article IV, without giving effect to any materiality, Material Adverse Effect or similar qualifiers contained therein, shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date), except where the failure of such other representations and warranties to be true and correct would not have a Material Adverse Effect.

(b)    The Company and Sellers shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date.

(c)    Buyer shall have received the Escrow Agreement, executed by each of the Seller Representative and the Escrow Agent.

(d)    Buyer shall have received all of the documents and other items described in Section 2.06(b) hereof.

(e)    Buyer shall have received a certificate for the Company, dated as of the Closing Date and signed by a duly authorized officer of the Company, certifying that each of the conditions set forth in Section 7.02(a) and Section 7.02(b) has been satisfied.

(f)    There shall not have occurred a Material Adverse Effect, and Buyer shall have received a certificate signed for the Company, dated as of the Closing Date and signed by a duly authorized officer of the Company, certifying to the foregoing effect.

(g)    The Pre-Closing Conversion shall have been completed.

 

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Section 7.03    Conditions to Obligations of Sellers. The obligations of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or Sellers’ waiver, at or prior to the Closing, of each of the following conditions:

(a)    The representations and warranties of Buyer contained in Article V shall be true and correct in all material respects as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, which shall be true and correct in all respects as of that specified date).

(b)    Buyer shall have duly performed and complied in all material respects with all agreements, covenants and conditions required by this Agreement to be performed or complied with by it prior to or on the Closing Date.

(c)    The Seller Representative shall have received the Escrow Agreement, executed by each of Buyer and the Escrow Agent.

(d)    Sellers shall have received a certificate, dated as of the Closing Date and signed by a duly authorized officer of Buyer, certifying that each of the conditions set forth in Section 7.03(a) and Section 7.03(b) has been satisfied.

ARTICLE VIII

INDEMNIFICATION

Section 8.01    Survival.

(a)    None of the representations and warranties of the Acquired Companies or the Sellers contained in, or arising out of, any Transaction Document shall survive the Closing, and following the Closing, Buyer shall not be entitled to any recovery in respect thereof or make any claim whatsoever for any inaccuracy or breach of any representation or warranty; provided that this shall not limit any claim or recovery available to Buyer under any buyer-side representations and warranties insurance policy that Buyer may acquire (the “R&W Insurance Policy”). None of the covenants or other agreements of any Seller contained in this Agreement or any other Transaction Document shall survive the Closing Date other than the Post-Closing Covenants of the Sellers (including, for the avoidance of doubt, the Post-Closing Covenants contained in Section 6.05), which shall survive the Closing for the period contemplated by their respective terms.

(b)    None of the representations and warranties of the Buyer contained in, or arising out of, any Transaction Document shall survive the Closing, and following the Closing, Sellers shall not be entitled to any recovery in respect thereof or make any claim whatsoever for any inaccuracy or breach of any representation or warranty. None of the covenants or other agreements of the Buyer or the Acquired Companies contained in this Agreement or any other Transaction Document shall survive the Closing Date other than the Post-Closing Covenants of the Buyer and the Acquired Companies, which shall survive the Closing for the period contemplated by their respective terms.

Section 8.02    Indemnification for Benefit of Buyer. Subject to the other terms and conditions of this Article VIII, each Seller (on an individual basis, and not jointly and severally with others) shall indemnify Buyer against, and shall hold Buyer harmless from and against, any and all Losses incurred or sustained by, or imposed upon, Buyer based upon, arising out of, with respect to or by reason of, a breach of such Seller’s Post-Closing Covenants.

 

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Section 8.03    Indemnification For Benefit of Sellers. Subject to the other terms and conditions of this Article VIII, Buyer shall indemnify Sellers against, and shall hold Sellers harmless from and against, any and all Losses incurred or sustained by, or imposed upon, Sellers based upon, arising out of, with respect to or by reason of any breach of any Post-Closing Covenant by Buyer or the Company.

Section 8.04    Certain Limitations. The party making a claim under this Article VIII is referred to as the “Indemnified Party”, and the party against whom such claims are asserted under this Article VIII is referred to as the “Indemnifying Party”. The indemnification obligations set forth in this Article VIII shall be subject to the following limitations:

(a)    No Seller shall have any obligation to directly satisfy any claim by an Indemnified Party for Losses as a result of any breach of any of the representations or warranties of the Company or the Sellers set forth herein. If Buyer has obtained the R&W Insurance Policy, a Buyer Indemnified Party may proceed against the R&W Insurance Policy for recovery of any such Losses described in the immediately preceding sentence (subject to the terms of the R&W Insurance Policy).

(b)    Notwithstanding anything in this Agreement to the contrary, Buyer understands, acknowledges and agrees that (i) each Seller’s maximum liability hereunder for any indemnification claims under Section 8.02 (other than claims constituting Fraud) shall not exceed the net proceeds of the Purchase Price actually received by such Seller and (ii) the aggregate total liability of the Sellers hereunder for any indemnification claims under Section 8.02 (other than claims constituting Fraud) shall not, when aggregated with all other indemnification obligations hereunder, exceed the Purchase Price.

(c)    Each Indemnified Party shall take, and cause its Affiliates to take, all reasonable steps to mitigate any Loss upon becoming aware of any event or circumstance that would be reasonably expected to, or does, give rise thereto, including incurring costs only to the minimum extent necessary to remedy the breach that gives rise to such Loss.

(d)    Except as expressly provided in Section 8.02, no claim shall be brought or maintained by Buyer or any Acquired Company, or their respective successors or permitted assigns against any officer, director, manager, equityholder or employee (present or former) of any Seller, or any officer, director, manager or employee (present or former) of any Acquired Company, and no recourse shall be brought or granted against any of them, by virtue of or based upon any alleged misrepresentation or inaccuracy in or breach of any of the representations or warranties of any Acquired Company or Seller set forth or contained in this Agreement or any Exhibit or Schedule hereto, except to the extent that the same shall have been the result of Fraud by any such Person (and in the event of such Fraud, such recourse shall be brought or granted solely against the Person or Persons committing such Fraud), and provided that, without limiting the foregoing, in no event shall Buyer, its successors or permitted assigns be entitled to claim or seek any rescission of the transactions consummated under this Agreement or other remedy at Law or in equity.

 

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Section 8.05    Exclusive Remedies. The parties acknowledge and agree that their sole and exclusive remedy following the Closing with respect to any and all claims (other than claims constituting Fraud) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or in the other Transaction Documents or otherwise arising out of or relating to the subject matter of this Agreement (other than Buyer’s recourse under the R&W Insurance Policy, if obtained by Buyer), shall be pursuant to the indemnification provisions set forth in this Article VIII, except for claims for equitable relief under Sections 6.05 and 6.08. In furtherance of the foregoing, following the Closing, each party hereby waives, to the fullest extent permitted under Law, any and all rights, claims and causes of action for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other parties hereto and their Affiliates and each of their respective representatives arising under or based upon any Law, except pursuant to Sections 6.05, 6.08, 10.11 and this Article VIII. Without limiting the generality of the preceding sentence, no legal action sounding in tort, statute or strict liability (other than Fraud) may be maintained by any party. Nothing in this Section 8.05 shall limit the recourse of Sellers pursuant to Section 10.11, Buyer’s recourse under Section 6.05 or any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled pursuant to Sections 6.05, 6.08 or 10.11.

ARTICLE IX

TERMINATION

Section 9.01    Termination. This Agreement may be terminated at any time prior to the Closing:

(a)    by the mutual written consent of the Company and Buyer;

(b)    by Buyer, by written notice to the Seller Representative, if:

(i)    Buyer is not then in material breach of any provision of this Agreement and there has been a material breach of any representation or warranty or a material failure to perform any covenant or agreement made by any Seller, the Seller Representative or the Company pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach or failure cannot be cured by such Seller, the Seller Representative or the Company within ten (10) Business Days of receiving notice of such breach by Buyer; or

(ii)    any of the conditions set forth in Section 7.01 or Section 7.02 shall not have been fulfilled by the Outside Date (other than those conditions which, by their nature, are to be satisfied on the Closing Date), unless such failure shall be due to the failure of Buyer to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing;

(c)    by the Company or the Seller Representative, by written notice to Buyer, if:

(i)    the Company, the Seller Representative and Sellers are not then in material breach of any provision of this Agreement and there has been a material breach of any representation or warranty or a material failure to perform any covenant or agreement made by Buyer pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VII and such breach or failure cannot be or has not been cured by Buyer within ten (10) Business Days of receiving notice of such breach by the Seller Representative; or

 

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(ii)    any of the conditions set forth in Section 7.01 or Section 7.03 shall not have been fulfilled by the Outside Date (other than those conditions which, by their nature, are to be satisfied on the Closing Date), unless such failure shall be due to the failure of the Company, the Seller Representative or any Seller to perform or comply with any of the covenants, agreements or conditions hereof to be performed or complied with by it prior to the Closing; or

(d)    by Buyer or the Company, by written notice to the other parties hereto, if:

(i)    there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited; or

(ii)    any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable.

Section 9.02    Effect of Termination. In the event of the termination of this Agreement in accordance with this Article IX, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto except:

(a)    as set forth in this Article IX and Section 6.08 and Article X hereof; and

(b)    that nothing herein shall impair the right of any party hereto to compel specific performance by the other party or parties, as the case may be, of such party’s obligations under this Agreement.

Section 9.03    Fees and Expenses Following Termination.

(a)    In the event that this Agreement is terminated by Buyer pursuant to Section 9.01(b)(ii) and the condition set forth in Section 7.01(a) has not been fulfilled by the Initial Outside Date, then Buyer shall pay, or cause to be paid, to the Company an amount equal to $25,000,000. In the event that this Agreement is terminated by the Company or the Seller Representative pursuant to Section 9.01(c)(ii) and the condition set forth in Section 7.01(a) has not been fulfilled by the Initial Outside Date, then Buyer shall pay, or cause to be paid, to the Company an amount equal to $7,500,000. In the event that this Agreement is terminated (i) by Buyer pursuant to Section 9.01(b)(ii) and the condition set forth in Section 7.01(a) has not been fulfilled by the Second Outside Date, (ii) by the Company or the Seller Representative pursuant to Section 9.01(c)(ii) and the condition set forth in Section 7.01(a) has not been fulfilled by the Second Outside Date or (iii) by either the Company or Buyer pursuant to Section 9.01(d)(ii) at any time, then Buyer shall pay, or cause to be paid, to the Company an amount equal to $25,000,000. Any such fee payable by Buyer to the Company pursuant to this Section 9.03(a) is referred to as the “Buyer Termination Fee”. Payment of the Buyer Termination Fee shall be made by wire transfer of immediately available funds within two (2) Business Days following such termination of the Agreement.

 

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(b)    In the event the Buyer breaches Section 6.09, willfully and in bad faith with the knowledge that such breach would preclude or delay beyond the Outside Date approval of the transactions contemplated by this Agreement under the HSR Act, the Company will be permitted to seek monetary damages for Losses in an amount not to exceed $40 million.

(c)    The parties acknowledge and agree that (i) the fees and other provisions of this Section 9.03 are an integral part of the transactions contemplated by this Agreement, (ii) the Buyer Termination Fee shall constitute liquidated damages and not a penalty and (iii) without these agreements, the parties would not enter into this Agreement.

(d)    Notwithstanding anything to the contrary set forth in this Agreement, but subject to Section 10.11 and this Section 9.03(d), each of the parties hereto expressly acknowledges and agrees that the Company’s right to receive payment of the Buyer Termination Fee pursuant to Section 9.03(a) or to seek damages for Losses pursuant to Section 9.03(b) shall constitute the sole and exclusive remedy of the Seller Representative, the Company, the Company’s Affiliates (including Sellers) and any of their respective former, current or future general or limited partners, stockholders, members, managers, directors, officers, employees, agents or Affiliates (collectively, the “Company Related Parties”) against Buyer and its Affiliates, the Debt Financing Sources and any of their respective former, current or future general or limited partners, stockholders, members, managers, directors, officers, employees, agents or Affiliates (collectively, the “Buyer Related Parties”) for all losses and damages in respect of this Agreement or the transactions contemplated by this Agreement, and upon payment of the Buyer Termination Fee to the Company pursuant to Section 9.03(a) or any damages for Losses pursuant to Section 9.03(b), none of the Buyer Related Parties shall have any further liability or obligation to any of the Company Related Parties relating to or arising out of this Agreement or the transactions contemplated by this Agreement (except that Buyer shall continue to be obligated to the Company for any of its expense reimbursement and indemnification obligations contained in Section 6.04(b)).

(e)    The parties acknowledge and agree that under no circumstances shall Sellers and the Company be permitted or entitled to receive more than one of the following remedies: (i) a grant of specific performance, (ii) payment of the Buyer Termination Fee or (iii) recovery for Losses for damages pursuant to Section 9.03(b).

ARTICLE X

MISCELLANEOUS

Section 10.01    Expenses. Except as otherwise expressly provided herein, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses, whether or not the Closing shall have occurred; provided, however, that (i) Buyer shall be responsible for all filing and other similar fees payable in connection with any filings or submissions under the HSR Act, (ii) Buyer shall be responsible

 

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for paying or reimbursing the Company for the cost of the “tail” insurance policy described in Section 6.07(b), (iii) Buyer’s expenses may, at Buyer’s election, if the Closing occurs, be paid by the Company following the Closing and (iv) any unpaid Company Transaction Costs as of the Closing shall be paid by Buyer upon the Closing but such payments described in this subsection (iv) shall be taken into account in the calculation of the Closing Payment.

Section 10.02    Notices. All notices, requests, consents, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by e-mail of a PDF document (with confirmation of transmission) if sent prior to 5:00 pm (local time) on a Business Day, and on the next Business Day if sent after 5:00 pm on a Business Day; or (d) on the third day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 10.02):

 

If to the Company before the Closing to:   

Versatex Holdings, LLC

c/o Highlander Partners L.P.

300 Crescent Court, Suite 550

Dallas, TX 75201

Attention: Christopher McRorie

Email: cmcrorie@highlander-partners.com

with a copy (which shall not constitute notice) before the Closing to:   

Katten Muchin Rosenman LLP

1717 Main Street, Suite 3750

Dallas, TX 75201

Attention: Mark S. Solomon, Esq.

Email: mark.solomon@kattenlaw.com

If to Buyer or, after the Closing, the Company to:   

CPG International LLC

5215 Old Orchard Road, Suite 725

Skokie, Illinois 60077

E-mail: bcooper@cpgint.com

Attention: Brian E. Cooper

with a copy (which shall not constitute notice) to:   

Sullivan & Cromwell LLP

1888 Century Park East, 21st Floor

Los Angeles, CA 90067

Attention: Alison S. Ressler; Rita-Anne O’Neill

Email: resslera@sullcrom.com; oneillr@sullcrom.com

If to the Seller Representative or Sellers:   

c/o Highlander Partners L.P.

300 Crescent Court, Suite 550

Dallas, TX 75201

Attention: Christopher McRorie

Email: cmcrorie@highlander-partners.com

with a copy (which shall not constitute notice) to:   

Katten Muchin Rosenman LLP

1717 Main Street, Suite 3750

Dallas, TX 75201

Attention: Mark S. Solomon, Esq.

Email: mark.solomon@kattenlaw.com

 

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Section 10.03    Interpretation. For purposes of this Agreement: (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole; (d) words in the singular include the plural and vice versa; (e) the use in this Agreement of a pronoun in reference to a party hereto includes the masculine, feminine or neuter, as the context may require; and (f) the term “material” and the concept of the “material” nature of an effect upon the Acquired Companies or their business shall be measured relative to the entire business of the Acquired Companies, taken as a whole, and the Acquired Companies, taken as a whole, as the business of the Acquired Companies is currently being conducted. Unless the context otherwise requires, references herein: to Articles, Sections, the Disclosure Schedules and Exhibits mean the Articles and Sections of, and the Disclosure Schedules delivered with and Exhibits attached to, this Agreement, respectively. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

Section 10.04    Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

Section 10.05    Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

Section 10.06    Entire Agreement. This Agreement, including the Exhibits hereto and the Disclosure Schedules, and the Confidentiality Agreement constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein, and supersedes all prior and contemporaneous representations, warranties, understandings and agreements, both written and oral, with respect to such subject matter. Buyer acknowledges and agrees that there are no warranties, representations or other agreements between the parties in connection with the subject matter hereof, except as specifically set forth herein. Each party expressly confirms to the others that it has not relied upon any Extra-Contractual Information. In the event of any inconsistency between the statements in the body of this Agreement, the Exhibits and the Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.

 

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Section 10.07    Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign its rights or obligations hereunder without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.

Section 10.08    No Third-Party Beneficiaries. This Agreement is for the sole benefit of the parties hereto and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, except (i) as provided in Section 6.08 and Article VIII, and (ii) the Financing Sources, as set forth in Section 6.04, Section 10.09 and Section 10.12.

Section 10.09    Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement set forth in writing and signed by Buyer, the Company, Seller Representative and Sellers, including the Seller Representative, who held a majority of the Membership Interests prior to the Closing. No waiver by any party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the party so waiving, except that the Seller Representative may waive provisions of this Agreement on behalf of all Sellers. Notwithstanding anything to the contrary contained in this Agreement, Section 9.02, Section 10.08, this Section 10.09 and Section 10.12 may not be amended or modified in whole or in part in a manner that impacts or is adverse in any respect to any Debt Financing Source under the Debt Commitment Letter without the written consent of such Debt Financing Source. No waiver by any party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

Section 10.10    Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

(a)    This Agreement shall be governed by and construed in accordance with the internal Laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule and all claims or causes of action (whether in contract or in tort, in Law or in equity) that may be based upon, arise out of or relate to this Agreement, or the negotiation, execution or performance of this Agreement (including any representation or warranty made in or in connection with this Agreement or as an inducement to enter into this Agreement) shall be determined and adjudicated under the Laws of the State of Delaware.

(b)    ANY LEGAL ACTION ARISING OUT OF, RELATING TO OR BASED UPON THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER IN CONTRACT OR IN TORT, IN LAW OR IN EQUITY) SHALL BE HEARD IN THE CHANCERY COURT OF THE STATE OF DELAWARE. EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE

 

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CHANCERY COURT OF THE STATE OF DELAWARE IN ANY SUCH ACTION. SERVICE OF PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY ACTION BROUGHT IN THE CHANCERY COURT OF THE STATE OF DELAWARE. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY ACTION IN SUCH COURT AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

(c)    EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY KNOWINGLY, INTENTIONALLY, VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 10.10(c).

Section 10.11    Specific Performance. The parties acknowledge that irreparable damages would occur if any of the provisions of this Agreement were not performed, or threatened not to be performed, by Buyer in accordance with their specific terms or were otherwise breached and that money damages or other legal remedies would not be adequate for any such damages. It is accordingly agreed that prior to the termination of this Agreement pursuant to Section 9.01, or after the Closing solely with respect to the Post-Closing Covenants, the Company and Sellers (acting through the Seller Representative) shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement. Notwithstanding anything to the contrary herein, it is explicitly agreed that prior to the termination of this Agreement pursuant to Section 9.01, or after the Closing solely with respect to the Post-Closing Covenants, the Company and Sellers (acting through the Seller Representative) shall be entitled to specific performance of the Closing, Buyer’s obligation to cause the transactions contemplated hereby to be fully and timely funded and the other transactions contemplated hereby if (i) the conditions precedent to Buyer’s obligations in Section 7.01 and Section 7.02 have been satisfied (other than those that, by their nature, are to be satisfied at the Closing or the failure of which to be satisfied is due in any material part to a breach by Buyer of any of its representations, warranties, covenants or agreements contained in this Agreement) at the time the Closing is required to have occurred pursuant to Section 2.07 and (ii) Sellers (acting through the Seller Representative) have irrevocably confirmed to Buyer in writing that Sellers are

 

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prepared to consummate the Closing and, if specific performance is granted, then the Closing will occur. The parties hereto further agree that no party shall be required to obtain, furnish or post any bond or similar instrument in connection with or as a condition to obtaining any remedy referenced in this Section 10.11 and the parties waive any objection to the imposition of such relief or any right it may have to require the obtaining, furnishing or posting of any such bond or similar instrument; provided, however, to the extent any such bond or similar instrument is required by applicable Law or Governmental Order, the parties expressly agree and intend that a bond or similar instrument in the amount of $100 shall be sufficient and reasonable.

Section 10.12    Financing Sources; No Recourse. Notwithstanding anything to the contrary contained in this Agreement, each of the parties hereto: (i) agrees that it will not bring or support any Person in any action, suit, proceeding, cause of action, claim, cross-claim or third-party claim of any kind or description, whether at Law or in equity, whether in contract or in tort or otherwise, against any of the Debt Financing Sources in any way relating to this Agreement or any of the transactions contemplated by this Agreement, including, but not limited to, any dispute arising out of or relating in any way to the Debt Commitment Letter and/or the performance thereof or the Debt Financing contemplated thereby, in any forum other than the federal and New York state courts located in the Borough of Manhattan within the City of New York; (ii) agrees that, except as specifically set forth in the Debt Commitment Letter, all claims or causes of action (whether at Law, in equity, in contract, in tort or otherwise) against any of the Debt Financing Sources in any way relating to the Debt Commitment Letter or the performance thereof or the Debt Financing contemplated thereby, shall be exclusively governed by, and construed in accordance with, the internal Laws of the State of New York, without giving effect to principles or rules or conflict of Laws to the extent such principles or rules would require or permit the application of Laws of another jurisdiction; and (iii) hereby irrevocably and unconditionally waives any right such party may have to a trial by jury in respect of any litigation (whether at Law or in equity, whether in contract or in tort or otherwise) directly or indirectly arising out of or relating in any way to the Debt Commitment Letter or the performance thereof or the Debt Financing contemplated thereby. For purposes of this Section 10.12, “Debt Financing Sources” shall include Jefferies Finance LLC and Barclays Bank PLC (in their capacity, as applicable, as a lender and as administrative agent for the financial institutions providing funding under Buyer’s or its affiliate’s credit facility, and their respective affiliates, equityholders, members, partners, officers, directors, employees, agents, advisors and representatives involved in the financing contemplated by the Debt Commitment Letter), and any and all other entities that have committed to provide or otherwise entered into agreements to provide any Debt Financing (including the Debt Commitment Letter). Notwithstanding anything to the contrary contained in this Agreement, (a) the Acquired Companies, the Sellers, the Seller Representative and their respective subsidiaries, affiliates, directors, officers, employees, agents, partners, managers, members or stockholders shall not have any rights or claims against any Debt Financing Source, in any way relating to this Agreement or any of the transactions contemplated by this Agreement, or in respect of any oral representations made or alleged to have been made in connection herewith or therewith, including any dispute arising out of or relating in any way to the Debt Commitment Letter or the performance thereof or the Debt Financing contemplated thereby, whether at Law or equity, in contract, in tort or otherwise and (b) no Debt Financing Source shall have any liability (whether in contract, in tort or otherwise) to any of the Acquired Companies, the Sellers, the Seller Representative and their respective subsidiaries, affiliates, directors, officers, employees, agents, partners, managers, members or stockholders for any obligations or liabilities of any party hereto under this Agreement

 

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or for any claim based on, in respect of, or by reason of, the transactions contemplated hereby and thereby or in respect of any oral representations made or alleged to have been made in connection herewith or therewith, including any dispute arising out of or relating in any way to the Debt Commitment Letter or the performance thereof or the financings contemplated thereby, whether at Law or equity, in contract, in tort or otherwise. Notwithstanding anything to the contrary contained in this Agreement, the Debt Financing Sources are intended third-party beneficiaries of, and shall be entitled to the protections of this provision. Nothing contained in this Section 10.12 shall limit the rights the Company or the Sellers may have against the Buyer under this Agreement.

Section 10.13    Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument. The signature of any party hereto to any counterpart hereof shall be deemed a signature to, and may be appended to, any other counterpart hereof. In the event that any signature to this Agreement or any other agreement, certificate or instrument delivered in connection herewith is delivered by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such “.pdf” signature page were an original thereof. Once signed, this Agreement may be delivered by “.pdf” format, and any reproduction of this Agreement made by reliable means (e.g., photocopy, facsimile or portable document format) is considered an original.

Section 10.14    Non-Recourse. Except as set forth in Section 10.12, this Agreement may only be enforced against, and any Action based upon, arising out of, or related to this Agreement, or the negotiation, execution or performance of this Agreement, may only be brought against the Persons that are expressly named as parties hereto and then only with respect to the specific obligations set forth herein with respect to such party. No past, present or future director, officer, employee, incorporator, manager, member, partner, stockholder, Affiliate, agent, attorney or other representative of any party hereto or of any Affiliate of any party hereto, or any of their successors or permitted assigns, shall have any liability for any obligations or liabilities of any party hereto under this Agreement or for any claim or action based on, in respect of or by reason of the transactions contemplated hereby.

Section 10.15    Conflicts. Each of the parties hereto acknowledges and agrees, on its own behalf and on behalf of its representatives and Affiliates, that the Acquired Companies are the client of Katten and that Katten has jointly represented the Acquired Companies and Sellers in connection with this Agreement and the transactions contemplated hereby. After the Closing, it is possible that Katten will represent one or more of such Sellers, the Seller Representative and/or their respective representatives and Affiliates (individually and collectively, the “Seller Group”) in connection with a variety of matters, including matters adverse or potentially adverse to the interests of Buyer and/or the Acquired Companies. Each of the parties to this Agreement hereby agrees that Katten (or any successor) may serve as counsel to all or a portion of the Seller Group, in connection with any matter relating to the transactions contemplated by this Agreement arising after the date of this Agreement. Each of the parties hereto consents to such representation, and waives any conflict of interest arising therefrom. Each of the parties hereto acknowledges that such consent and waiver is voluntary, that it has been carefully considered, and that the parties have consulted with counsel or have been advised they should do so in connection herewith. Each of the parties further agrees that all communications or privileged materials between Katten, on

 

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the one hand, and the Acquired Companies (or any representative of the Acquired Companies), the Seller Representative or a Seller, on the other hand, prior to the Closing (together with any other legally protected or privileged communications or materials including those between members of the Seller Group) as well as any privileged communications between Christopher McRorie and the Acquired Companies and/or any member of the Seller Group, in each case, solely with respect to and to the extent related to the transactions contemplated by this Agreement (collectively, “Privileged Materials”) are the property of Sellers (as a group) and that Buyer and the Acquired Companies cannot obtain copies of, or access to, any such Privileged Materials without a waiver from the Seller Representative. Each of the parties expressly agrees that, at and after the Closing (and continuing indefinitely thereafter), any privilege related to any of the Privileged Materials shall be solely controlled by Sellers acting collectively through the Seller Representative. Buyer further agrees that it will not, and that it will not permit the Acquired Companies to, seek to obtain any such Privileged Materials, including by way of review of any electronic communications or documents or by seeking to have Sellers and/or the Seller Representative waive the attorney-client or other privilege, or by otherwise asserting that Buyer has the right to waive the attorney-client or other privilege. In the event that any of Buyer or the Acquired Companies is required by Governmental Order or otherwise to access or obtain a copy of such Privileged Materials, Buyer shall immediately (and, in any event, within two (2) Business Days) notify the Seller Representative in writing (including by making specific reference to this Section 10.15) so that the Seller Representative can seek a protective order and Buyer agrees to use all commercially reasonable efforts to assist therewith at the sole cost of the Seller Representative.

Section 10.16    Release.

(a)    For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, effective as of the Closing, each Acquired Company, on its own behalf, and on behalf of its Subsidiaries and any successors, assigns and Affiliates (collectively, the “Company Releasor Parties”), hereby fully releases, remises, acquits and discharges forever, irrevocably and unconditionally, each Seller and the Seller Representative and each of their respective parents, Subsidiaries, divisions, Affiliates, predecessors, successors and assigns, and their present and former directors, officers, shareholders, members, employees, agents, attorneys, representatives, successors, beneficiaries, heirs and assigns (collectively, the “Seller Releasees”) from, against and with respect to any and all actions, accounts, agreements, causes of action, complaints, charges, claims, covenants, contracts, costs, damages, demands, debts, defenses, duties, expenses, executions, fees, injuries, interest, judgments, liabilities, losses, obligations, penalties, promises, reimbursements, remedies, suits, sums of money, and torts of any kind and nature whatsoever, whether in law, equity or otherwise, direct or indirect, fixed or contingent, foreseeable or unforeseeable, liquidated or unliquidated, known or unknown, matured or unmatured, absolute or contingent, determined or determinable (collectively, the “Claims” and each individually, a “Claim”), which any of the Company Releasor Parties, their respective successors, Affiliates and assigns, or anyone claiming through or under any of the Company Releasor Parties, ever had or now has, or may hereafter have or acquire, against the Seller Releasees for or by reason of any matter, cause or thing whatsoever (i) arising out of, or relating to, the Seller Releasees’ prior ownership interest in an Acquired Company or (ii) occurring at any time on or prior to the Closing Date, but only to the extent that such matter, cause or thing does not constitute Fraud and provided that, the release provided under this Section 10.16(a) will not be construed to release the Seller Releasees from any of their obligations under the Agreement.

 

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(b)    For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, effective as of the Closing, each Seller, on its own behalf, the Seller Representative and (prior to the Closing) the Company on behalf of itself and each of its pre-Closing parents, Subsidiaries, divisions, Affiliates, predecessors, successors and assigns, and their present and former directors, officers, shareholders, members, employees, agents, attorneys, representatives, successors, beneficiaries, heirs and assigns (collectively, the “Seller Releasor Parties”), hereby fully releases, remises, acquits and discharges forever, irrevocably and unconditionally, Buyer and each of its parents, Subsidiaries, divisions, Affiliates, predecessors, successors and assigns, and their present and former directors, officers, shareholders, members, employees, agents, attorneys, representatives, successors, beneficiaries, heirs and assigns (collectively, the “Buyer Releasees”) and Company Releasor Parties from, against and with respect to any and all Claims, which any of the Seller Releasor Parties, their respective successors, Affiliates and assigns, or anyone claiming through or under any of the Seller Releasor Parties, ever had or now has, or may hereafter have or acquire, against the Acquired Companies and each of their respective parents, Subsidiaries, divisions, Affiliates, predecessors, successors and assigns, and their present and former directors, officers, shareholders, members, employees, agents, attorneys, representatives, successors, beneficiaries, heirs and assigns (the “Company Releasees”) and the Buyer Releasees for or by reason of any matter, cause or thing whatsoever occurring at any time on or prior to the Closing Date but only to the extent that such matter, cause or thing does not constitute Fraud and provided that, the release provided under this Section 10.16(b) will not be construed to release the Company Releasees or the Buyer Releasees from (i) any of their obligations under the Agreement or (ii) with respect to an employee of any Acquired Company, from any consideration owing on the date hereof by an Acquired Company solely in respect of such employee’s employment with such Acquired Company, rights under any Benefit Plans and any D&O Provisions.

ARTICLE XI

THE SELLER REPRESENTATIVE

Section 11.01    Authorization of the Seller Representative. Each Seller, by his, her or its acceptance of the Purchase Price, hereby appoints, authorizes and empowers the Seller Representative to act as the agent of Sellers for the purposes and with the powers and authority hereinafter set forth in this Article XI and in the Escrow Agreement, which shall include the full power and authority:

(a)    to execute and deliver the Escrow Agreement (with such modifications or changes thereto as to which the Seller Representative, in its reasonable discretion, shall have consented to);

 

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(b)    as the Seller Representative, to enforce and protect the rights and interests of Sellers arising out of or under or in any manner relating to this Agreement and the Escrow Agreements and, in connection therewith, to (i) resolve all questions, disputes, conflicts and controversies concerning (A) the determination of amounts pursuant to Article II, (B) matters relating to Taxes pursuant to Section 6.03 and (C) calculations pursuant to the Waterfall; (ii) employ such agents, consultants and professionals, to delegate authority to its agents, to take such actions and to execute such documents on behalf of Sellers in connection with Article II and Article VIII as the Seller Representative, in its reasonable discretion, deems to be in the best interest of Sellers; (iii) assert or institute any claim, action, proceeding or investigation pursuant to Article VIII; (iv) investigate, defend, contest or litigate any claim, action, proceeding or investigation initiated by Buyer, or any other Person, against all Sellers, and receive process on behalf of all Sellers in any such claim, action, proceeding or investigation and compromise or settle on such terms as the Seller Representative shall determine to be appropriate, give receipts, releases and discharges on behalf of all Sellers with respect to any such claim, action, proceeding or investigation pursuant to Article VIII (v) file any proofs, debts, claims and petitions as the Seller Representative may deem advisable or necessary; (vi) prepare and file any Tax Returns; (vii) settle or compromise any claims asserted under Article VIII; and (viii) file and prosecute appeals from any decision, judgment or award rendered in any of the foregoing claims, actions, proceedings or investigations pursuant to Article VIII, it being understood that the Seller Representative shall not have any obligation to take any such actions, and shall not have liability for any failure to take such any action;

(c)    to authorize and cause to be paid out of the Escrow Amount the full amount of any Closing Working Capital Deficiency or any indemnification claims under Article VIII; and

(d)    to make, execute, acknowledge and deliver all such other agreements, guarantees, orders, receipts, endorsements, notices, requests, instructions, certificates, stock powers, letters and other writings, and, in general, to do any and all things and to take any and all action that the Seller Representative, in its sole and absolute direction, may consider necessary or proper or convenient in connection with or to carry out the activities described in paragraph (a) above and the transactions contemplated by this Agreement and the Escrow Agreement.

(e)    Buyer and the Company after the Closing shall be entitled to rely exclusively upon the communications of the Seller Representative, but only as it relates to the foregoing, as the communications of Sellers. Neither Buyer nor the Company (a) need be concerned with the authority of the Seller Representative to act on behalf of all Sellers hereunder, or (b) shall be held liable or accountable in any manner for any act or omission of the Seller Representative in such capacity. In the event that any Seller commences any Action arising out of, relating to or in connection with the non-fulfillment or breach of any covenant, agreement or obligation required to be performed by the Seller Representative in its capacity as such and for the benefit of Sellers, then the Seller Representative shall indemnify Buyer against, and shall hold Buyer harmless from and against, any and all Losses incurred or sustained by, or imposed upon, Buyer based upon, arising out of, with respect to or by reason of such Action. Buyer agrees that the Seller Representative shall have the right to control the defense of any Action described in the immediately preceding sentence.

 

66


(f)    The agency established hereby may be changed from time to time upon not less than five days’ prior written notice to Buyer by the written consent of Sellers that held a majority of the Membership Interests prior to the Closing. The Seller Representative, or any successor hereafter appointed, may resign at any time by written notice to the Sellers (with a copy to Buyer). A successor Seller Representative will be named by the written consent of Sellers holding a majority of the Membership Interests prior to the Closing. All power, authority, rights and privileges conferred in this Agreement to Highlander Partners L.P. will apply to any successor Seller Representative.

(g)    The grant of authority provided for in this Section 11.01 is coupled with an interest and is being granted, in part, as an inducement to the Company, Sellers and Buyer to enter into this Agreement and shall be irrevocable and survive the death, incompetency, bankruptcy or liquidation of any Seller and shall be binding on any successor thereto.

Section 11.02    Compensation; Exculpation; Indemnity.

(a)    The Seller Representative shall not be entitled to any fee, commission or other compensation for the performance of its service hereunder.

(b)    In dealing with this Agreement and any instruments, agreements or documents relating thereto, and in exercising or failing to exercise all or any of the powers conferred upon the Seller Representative hereunder or thereunder, (i) the Seller Representative shall not assume any, and shall incur no, responsibility whatsoever to any Seller by reason of any error in judgment or other act or omission performed or omitted hereunder or in connection with this Agreement or the Escrow Agreement, unless by the Seller Representative’s gross negligence or willful misconduct, and (ii) the Seller Representative shall be entitled to rely on the advice of counsel, public accountants or other independent experts experienced in the matter at issue, and any error in judgment or other act or omission of the Seller Representative pursuant to such advice shall in no event subject the Seller Representative to liability to any Seller unless by the Seller Representative’s gross negligence or willful misconduct. Except as set forth in the previous sentence, notwithstanding anything to the contrary contained herein, the Seller Representative, in its role as Seller Representative, shall have no liability whatsoever to the Acquired Companies, Buyer or any other Person.

(c)    Each Seller, severally, shall indemnify the Seller Representative up to, but not exceeding, an amount equal to such Seller’s pro rata portion of the total amount, as determined in accordance with such Seller’s percentage of the Purchase Price received and in no event exceeding such Seller’s pro rata portion of the Final Purchase Price, against all damages, liabilities, claims, obligations, costs and expenses, including reasonable attorneys’, accountants’ and other experts’ fees and the amount of any judgment against it, of any nature whatsoever, arising out of or in connection with any claim or in connection with any appeal thereof, relating to the acts or omissions of the Seller Representative hereunder, except for such damages, liabilities, claims, obligations, costs and expenses,

 

67


including reasonable attorneys’, accountants’ and other experts’ fees and the amount of any judgment against the Seller Representative that arise from the Seller Representative’s gross negligence or willful misconduct, including the willful breach of this Agreement. The foregoing indemnification shall not be deemed exclusive of any other right to which the Seller Representative may be entitled apart from the provisions hereof. In the event of any indemnification under this Section 11.02, each Seller shall promptly deliver to the Seller Representative full payment of his, her or its ratable share of such indemnification claim.

(d)    All of the indemnities, immunities and powers granted to the Seller Representative under this Agreement shall survive the Closing and/or any termination of this Agreement.

[SIGNATURE PAGE FOLLOWS]

 

68


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

 

COMPANY:
VERSATEX HOLDINGS, LLC
By:   /s/ Christopher McRorie
Name:  Christopher McRorie
Title:  Vice President, General Counsel & Secretary

 

SELLERS:
HIGHLANDER PARTNERS TRIM, LLC
By:   /s/ Christopher McRorie
Name:  Christopher McRorie
Title:  Vice President, General Counsel & Secretary

 

WOLFPAC HOLDINGS, INC.
By:   /s/ James Wolf
Name:  James Wolf
Title:  CEO

 

AEA MEZZANINE FUND III LP
By:   AEA MEZZANINE PARTNERS III LP, its general partner
By:   AEA MEZZANINE MANAGEMENT III GP LLC, its general partner
By:   /s/ Scott Zoellner
Name:  Scott Zoellner
Title:  Vice President


J PACE, INC
By:   /s/ John Pace
Name:  John Pace
Title:  President

 

R KAPRES, INC
By:   /s/ Rick Kapres
Name:  Rick Kapres
Title:  President

 

J FERRESE, INC
By:   /s/ Joseph Ferrese
Name:  Joseph Ferrese
Title  President

 

J.D. PACE, INC
By:   /s/ Josh Pace
Name:  Josh Pace
Title:  President

 

S PETRAS, INC
By:   /s/ Shawn Petras
Name:  Shawn Petras
Title:  President

 

B NAUMANN, INC
By:   /s/ William Naumann
Name:  William Naumann
Title:  President

 

EM KAFFENES, INC
By:   /s/ Evan Kaffenes
Name:  Evan Kaffenes
Title:  President


BUYER:
CPG INTERNATIONAL LLC
By:   /s/ Jesse Singh
Name:  Jesse Singh
Title:  C.E.O.


SELLER REPRESENTATIVE:
HIGHLANDER PARTNERS TRIM, LLC
By:   /s/ Christopher McRorie
Name:  Christopher McRorie
Title:  Vice President, General Counsel & Secretary

Exhibit 2.5

AMENDMENT NO. 1 TO MEMBERSHIP INTEREST PURCHASE AGREEMENT

This Amendment No. 1 to Membership Interest Purchase Agreement, dated as of June 15, 2018 (this “Amendment”), is entered into by and among CPG International LLC d/b/a The AZEK Company LLC, a Delaware limited liability company (“Buyer”), Versatex Holdings, LLC, a Delaware limited liability company (the “Company”), the undersigned members of the Company (the “Sellers”) and, solely in its capacity as Seller Representative, Highlander Partners Trim, LLC. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Purchase Agreement (as defined below).

RECITALS

WHEREAS, Buyer, the Company, the members of the Company listed on Schedule I thereto and the Seller Representative are party to that certain Membership Interest Purchase Agreement, dated as of May 11, 2018 (the “Purchase Agreement”);

WHEREAS, Buyer, the Company, the Sellers and the Seller Representative now desire to amend the Purchase Agreement to provide for a tax-efficient rollover (the “Rollover Transaction”) of a portion of the membership interests (the “Rollover Interests”) held by each of J Pace, Inc., R Kapres, Inc. and EM Kaffenes, Inc. (the “Rollover Sellers”);

WHEREAS, prior to the Closing, in connection with the transactions contemplated by the Purchase Agreement, AOT Building Products, L.P. (“AOT”) will contribute certain cash to CPG Holdco LLC, a direct wholly-owned subsidiary of AOT (“Holdco”) (such contribution, the “AOT Contribution”), which will then be contributed by Holdco to CPG Newco LLC, a direct wholly-owned subsidiary of Holdco (“Newco”) and which will be further contributed by Newco to Buyer, a direct wholly-owned subsidiary of Newco, to fund a portion of the Purchase Price;

WHEREAS, pursuant to Section 10.09 of the Purchase Agreement, the Purchase Agreement may only be amended, modified or supplemented by an agreement set forth in writing and signed by Buyer, the Company, the Seller Representative and Sellers, including the Seller Representative, who hold a majority of the Membership Interests prior to the Closing (the “Requisite Parties”); and

WHEREAS, the parties to this Amendment represent the Requisite Parties.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and by their signatures to this Amendment, Buyer, the Company, the undersigned Sellers and the Seller Representative hereby amend the Purchase Agreement in the following manner:

 

  1.

Rollover Transaction. The parties hereto agree that the Rollover Transaction will be consummated as follows:

 

  (a)

Contemporaneously and in connection with the AOT Contribution, the Rollover Sellers will contribute their respective Rollover Interests all as set forth on Annex I hereto to Holdco in exchange for membership interests in Holdco.


  (b)

Prior to the Closing, Holdco will contribute the Rollover Interests received pursuant to clause (a) to Newco, and immediately thereafter Newco will contribute such Rollover Interests to Buyer.

 

  (c)

Thereafter, and contemporaneously with Closing, the Rollover Sellers will contribute their membership interests in Holdco to AOT in exchange for membership interests in AOT all as set forth on Annex I hereto.

 

  2.

Recitals. The fourth recital is hereby amended and restated in its entirety to read as follows:

“WHEREAS, concurrently with the execution of this Agreement, the Sellers listed on Schedule II hereto (collectively, the “Executives” and each, an “Executive”) have executed and delivered employment agreements, and each of the Rollover Sellers and Buyer have agreed that, in connection with the Closing, they will cause a tax-efficient rollover of a portion of such Rollover Sellers’ membership interests in the Company, pursuant to which the Rollover Sellers will receive interests in AOT Building Products, L.P., the indirect parent of Buyer;”

 

  3.

Purchase and Sale. The parties hereto agree that at the Closing, Sellers shall sell to Buyer, and Buyer shall purchase from Sellers, the Membership Interests other than the Rollover Interests held by the Rollover Sellers, which Rollover Interests shall be acquired by Buyer prior to the Closing in connection with the Rollover Transaction. Notwithstanding the foregoing, none of the mechanics for (i) the payment of the Closing Payment to the Sellers pursuant to the terms of the Waterfall, (ii) the payment of any Final Adjustment Surplus by Buyer to the Seller Representative (for credit to each of the Sellers in accordance with the Waterfall) and (iii) the release of any Escrow Funds in the Escrow Account to the Seller Representative (for credit to each of the Sellers in accordance with the Waterfall) shall be amended in any way as a result of the Rollover Transaction or the terms of this Amendment and such mechanics shall be determined as if the Rollover Transaction has not occurred; provided, that with respect to clause (i), the actual cash payments made to the Sellers listed on Schedule II of the Purchase Agreement shall be reduced by the Rollover Amount set forth opposite such Rollover Sellers’ name on Annex I, (the aggregate value for such membership interests in Holdco held by all of the Rollover Sellers, the “Total Rollover Amount”). Buyer acknowledges and agrees that the Seller Payout Spreadsheet shall not be required to make the adjustments referred to in the preceding sentence. The parties further agree that, (i) for purposes of Section 6.03(c)(i) of the Purchase Agreement, the Total Tax Consideration shall be reduced by the Total Rollover Amount and other amounts required that would have been required to be taken into account for U.S. federal income tax purposes with respect to the Rollover Interests had the Rollover Transaction not occurred, and all amounts referred to in Exhibit C of the Purchase Agreement shall be proportionately reduced in determining the allocation of the Total Tax Consideration with respect to the Membership Interests other than the Rollover Interests and (ii) the pro rata obligations of the Sellers under Article XI of the Purchase Agreement shall be determined as if the Rollover Transaction has not occurred.


  4.

Representations and Warranties; Interim Operating Covenants. The parties hereto agree that the representations and warranties of the Sellers or the Seller Representative or the Company contained in the Purchase Agreement (as modified by the Disclosure Schedules) and any interim operating covenants set forth in Section 6.01 of the Purchase Agreement shall be deemed to be made or given as if the Rollover Transaction has not occurred, and, to the extent any breach of such provisions occurs, Buyer hereby waives all claims for breach of (i) any representation or warranty of the Sellers or the Seller Representative or the Company contained in the Purchase Agreement (as modified by the Disclosure Schedules) and (ii) any interim operating covenants set forth in Section 6.01 of the Purchase Agreement, in each case, solely to the extent that such breach occurs as a result of the consummation of the Rollover Transaction.

 

  5.

Continued Validity of Purchase Agreement. Unless otherwise modified or supplemented by the terms of this Amendment, all terms and conditions of the Purchase Agreement shall continue in full force and effect.

 

  6.

Successors and Assigns. This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. No party may assign its rights or obligations hereunder without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning party of any of its obligations hereunder.

 

  7.

Governing Law. This Amendment will be governed by and construed in accordance with the internal Laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule and all claims or causes of action (whether in contract or in tort, in Law or in equity) that may be based upon, arise out of or relate to this Amendment or the negotiation, execution or performance of this Amendment (including any representation or warranty made in or in connection with this Amendment or as an inducement to enter into this Amendment) shall be determined and adjudicated under the Laws of the State of Delaware.

 

  8.

Headings. The headings in this Amendment are for reference only and shall not affect the interpretation of this Amendment.

 

  9.

Counterparts; Facsimile or Electronic Signature. This Amendment may be executed in several counterparts, each of which shall be deemed an original and all of which shall together constitute one and the same instrument. The signature of any party hereto to any counterpart hereof shall be deemed a signature to, and may be appended to, any other counterpart hereof. In the event that any signature to this Amendment or any other agreement, certificate or instrument delivered in connection herewith is delivered by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding


  obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such “.pdf” signature page were an original thereof. Once signed, this Amendment may be delivered by “.pdf” format, and any reproduction of this Amendment made by reliable means (e.g., photocopy, facsimile or portable document format) is considered an original.

 

  10.

Severability. If any term or provision of this Amendment is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Amendment or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good faith to modify this Amendment so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

[SIGNATURE PAGE FOLLOWS]


IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Amendment No. 1 to Membership Interest Purchase Agreement on the date first above written.

 

BUYER:
CPG INTERNATIONAL LLC

/s/ Jesse Singh

Name:   Jesse Singh
Title:   C.E.O.

 

 

[Signature Page to Amendment No. 1 to Membership Interest Purchase Agreement]


IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Amendment No. 1 to Membership Interest Purchase Agreement on the date first above written.

 

THE COMPANY:
VERSATEX HOLDINGS, LLC
By:   /s/ Christopher McRorie
Name:  Christopher McRorie
Title:  Vice President, General Counsel & Secretary

 

SELLER REPRESENTATIVE:
HIGHLANDER PARTNERS TRIM, LLC
By:   /s/ Christopher McRorie
Name:  Christopher McRorie
Title:  Vice President, General Counsel & Secretary

 

 

[Signature Page to Amendment No. 1 to Membership Interest Purchase Agreement]


IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Amendment No. 1 to Membership Interest Purchase Agreement on the date first above written.

 

SELLERS:
HIGHLANDER PARTNERS TRIM, LLC
By:   /s/ Christopher McRorie
Name:  Christopher McRorie
Title:  Vice President, General Counsel & Secretary

 

WOLFPAC HOLDINGS, INC.
By:   /s/ James Wolf
Name:  James Wolf
Title:  CEO

 

AEA MEZZANINE FUND III LP
By: AEA MEZZANINE PARTNERS III LP, its general partner
By: AEA Mezzanine MANAGEMENT III GP LLC, its general partner
By:   /s/ Scott E. Zoellner
Name:  Scott E. Zoellner
Title:  Vice President

 

[Signature Page to Amendment No. 1 to Membership Interest Purchase Agreement]


IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Amendment No. 1 to Membership Interest Purchase Agreement on the date first above written.

 

EM KAFFENES, INC.
By:   /s/ Evan Kaffenes
Name:   Evan Kaffenes
Title:   President

 

R KAPRES, INC.
By:   /s/ Rick Kapres
Name:   Rick Kapres
Title:   President

 

J FERRESE, INC.
By:   /s/ Joseph Ferrese
Name:   Joseph Ferrese
Title:   President

 

S PETRAS, INC.
By:   /s/ Shawn Petras
Name:   Shawn Petras
Title:   President

 

J PACE, INC.
By:   /s/ John Pace
Name:   John Pace
Title:   President

 

J.D. PACE, INC.
By:   /s/ Josh Pace
Name:   Josh Pace
Title:   President

 

 

[Signature Page to Amendment No. 1 to Membership Interest Purchase Agreement]


IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Amendment No. 1 to Membership Interest Purchase Agreement on the date first above written.

 

B NAUMANN, INC.
By:   /s/ William Naumann
Name:   William Naumann
Title:   President

 

 

[Signature Page to Amendment No. 1 to Membership Interest Purchase Agreement]

Exhibit 3.1

CERTIFICATE OF FORMATION

OF

AOT BUILDING PRODUCTS NEWCO LLC

This Certificate of Formation of AOT Building Products Newco LLC, dated as of August 15, 2013, is being duly executed and filed by the undersigned, as an authorized person of AOT Building Products Newco LLC, to form a limited liability company under the Delaware Limited Liability Company Act (6 Del. C. §18-101, et seq).

1. Name. The name of the limited liability company formed hereby is AOT Building Products Newco LLC (the “LLC”).

2. Registered Office. The address of the registered office of the LLC in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, Delaware 19801 (County of New Castle).

3. Registered Agent. The name and address of the registered agent for service of process on the LLC in the State of Delaware is The Corporation Trust Company, 1209 Orange Street in the City of Wilmington, Delaware 19801 (County of New Castle).

4. Management. The business and affairs of the LLC shall be managed by the sole member, AOT Building Products Holdco LLC.


IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation as of the date first above written.

 

By  

/s/ Matthew C. Barnett

  Name: Matthew C. Barnett
  Title: Authorized Person

Exhibit 3.2

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF FORMATION

OF

AOT BUILDING PRODUCTS NEWCO LLC

This Certificate of Amendment, dated as of September 16, 2013, of the Certificate of Formation of AOT Building Products Newco LLC, dated as of August 15, 2013 (the “Certificate of Formation”), is being duly executed and filed by Dan Lukas, as an Authorized Person of AOT Building Products Newco LLC, pursuant to the Delaware Limited Liability Company Act (6 Del. C. §18-101, et seq.).

1.    Name. The name of the limited liability company immediately prior to this filing is AOT Building Products Newco LLC. Upon the filing of this Certificate of Amendment the name of the limited liability company shall be changed to CPG Newco LLC.

2.    The first section of the Certificate of Formation is hereby amended and restated in its entirety as follows:

Name. The name of the limited liability company formed hereby is CPG Newco LLC (the “LLC”).”

3.    The fourth section of the Certificate of Formation is hereby amended and restated in its entirety as follows:

Management. The business and affairs of the LLC shall be managed by the sole member, CPG Holdco LLC.”

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Amendment as of the date first above written.

 

By:  

/s/ Dan Lukas

Name:   Dan Lukas
Title:   Authorized Person

Exhibit 3.3

CERTIFICATE OF INCORPORATION

OF

THE AZEK COMPANY INC.

FIRST. The name of the corporation is The AZEK Company Inc. (the “Corporation”).

SECOND. The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.

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

FOURTH. The total number of shares of all classes of stock which the Corporation shall have authority to issue is [●], of which [●] shares of the par value of $0.001 per share shall be designated as Class A Common Stock, [●] shares of the par value of $0.001 per share shall be designated as Class B Common Stock and [●] shares of the par value of $0.001 per share shall be designated as Preferred Stock. The Class A Common Stock and Class B Common Stock are collectively referred to as Common Stock.

FIFTH. The following is a statement of the designations, preferences, qualifications, limitations, restrictions and the special or relative rights granted to or imposed upon the shares of each class of Common Stock. Except as otherwise provided in this Certificate of Incorporation, all shares of Class A Common Stock and Class B Common Stock shall be identical and shall entitle the holders of the shares to the same rights and privileges. The terms of the Common Stock set forth below shall be subject to the express terms of any series of Preferred Stock then outstanding.


(a) Dividends. Subject to the prior rights of all classes or series of stock at the time outstanding having prior rights as to dividends or other distributions, or as otherwise provided in this Certificate of Incorporation, holders of Common Stock shall be entitled to receive ratably on a per share basis such dividends (payable in cash, shares of stock of the Corporation, property or assets of the Corporation or otherwise) as may be declared by the board of directors of the Corporation (the “Board of Directors”). If dividends are declared that are payable in shares of Class A Common Stock or Class B Common Stock, such dividends shall be declared payable at the same rate on each class of Common Stock, with dividends payable in shares of Class A Common Stock payable to holders of Class A Common Stock, and dividends payable in shares of Class B Common Stock payable to holders of Class B Common Stock.

(b) Conversion.

(i)

(A) Shares of Class A Common Stock shall be convertible at any time into an equal number of shares of Class B Common Stock at the option of the holder of such shares of Class A Common Stock, but only at such time that such holder is, without giving effect to the applicable conversion in question, the record owner of shares of Class B Common Stock. Shares of Class B Common Stock shall be convertible at any time into an equal number of shares of Class A Common Stock at the option of the holder of such shares of Class B Common Stock.

(B) Upon any transfer (excluding the grant of a pledge, lien, charge or grant of a security interest, except as provided in the next succeeding sentence) of shares of Class B Common Stock by Ontario Teachers’ Pension Plan Board (“OTPP”) to any person other than OTPP, unless OTPP shall otherwise elect with respect to a specific transfer by written notice delivered to the Corporation at its principal office prior to such transfer, such shares of Class B Common Stock shall automatically convert into shares of Class A Common Stock, effective immediately after such transfer to the transferee thereof. OTPP may elect for the automatic transfer provisions of this subsection (B) to apply to: (i) any pledge, lien, charge or grant of a security interest; or (ii) any transfer to a person included in the definition of OTPP as provided for in Article THIRTEENTH subsection (C)(xi), in each case by written notice delivered to the Corporation at its principal office prior to such pledge, lien, charge, grant of a security interest or transfer, as applicable.

 

-2-


(ii) In the case of certificated shares, each conversion of shares pursuant to subsection (b)(i)(A) shall be effected by the surrender of the certificate or certificates representing the shares to be converted at the principal office of the Corporation at any time during normal business hours, and, in the case of both certificated and uncertificated shares, by delivery to the Corporation at its principal office, of a written notice by the holder of such shares stating the number of shares that any such holder desires to so convert. Such conversion shall be deemed to have been effected as of the close of business on the date on which such certificate or certificates, if applicable, have been surrendered and such notice has been received by the Corporation, and at such time the rights of any such holder with respect to the converted class of Common Stock shall cease. In the case of any conversion pursuant to subsection (b)(i)(B), such conversion shall be deemed to occur automatically, and without any further action by the holder of the shares of Class B Common Stock effecting such transfer, such transferee or the Corporation, immediately following the transfer of the relevant shares of Class B Common Stock to the transferee thereof. Simultaneously with the conversion, the person or persons in whose name or names the new shares of Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of such new shares.

(iii) In the case of certificated shares, promptly after such surrender and the receipt by the Corporation of the written notice from such holder, the Corporation shall issue and deliver, in accordance with the surrendering holder’s instructions, the certificate or certificates for the Common Stock issuable upon such conversion and a certificate representing any shares of Common Stock that were represented by the certificate or certificates delivered to the Corporation in connection with such conversion but that were not converted. The issuance of certificates for the Common Stock upon conversion shall be made without charge to the holder or holders of such shares. Notwithstanding the previous sentence, the holder shall pay (or reimburse the Corporation for) any and all documentary, stamp or similar issue or transfer taxes in respect of the conversion or other cost incurred by the Corporation or the holder in connection with such conversion.

 

-3-


(iv) Notwithstanding anything contained in this Certificate of Incorporation to the contrary, this subsection (b) of this Article FIFTH may be amended, altered, repealed or rescinded, in whole or in part, or any provision inconsistent with this subsection (b) of this Article FIFTH may be adopted, only by the affirmative vote of the holders of at least a majority of the shares of Class B Common Stock then outstanding.

(c) Transfers. The Corporation shall not close its books against the transfer of any share of Common Stock, or of any share of Common Stock issued or issuable upon conversion of shares of Common Stock, in any manner that would interfere with the timely conversion of such shares of Common Stock.

(d) Subdivisions and Combinations of Shares. If the Corporation in any manner subdivides or combines the outstanding shares of any class of Common Stock, the outstanding shares of the other classes of Common Stock shall be proportionately subdivided or combined.

(e) Distribution of Assets. Upon the occurrence of the voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, holders of all classes of Common Stock shall be entitled to receive all of the remaining assets of the Corporation available after payments to creditors and to the holders of any Preferred Stock of the Corporation having prior rights as to distributions upon the liquidation, dissolution or winding up of the affairs of the Corporation that may at the time be outstanding, in proportion to the number of shares held by them.

(f) Voting Rights.

(i) Generally. The holders of Class A Common Stock shall have the general right to vote for all purposes, including the election, removal or replacement of directors, as provided by law. The holders of Class B Common Stock shall have the general right to vote for all purposes except, solely with respect to the shares of Class B Common Stock held by them, the election, removal or replacement of directors. Subject to the foregoing limitation on the voting rights attaching to the Class B Common Stock, each holder of Class A Common Stock

 

-4-


and each holder of Class B Common Stock shall be entitled to one vote for each share of Common Stock held. The affirmative vote of the holders of a majority of the Class B Common Stock then outstanding, voting separately as a class, shall be required to make any amendments or alterations to the Certificate of Incorporation that adversely affect the rights and preferences of the Class B Common Stock as compared to the Class A Common Stock. There shall be no cumulative voting.

(ii) Class Voting. Except as required by the DGCL or as set forth in the Certificate of Incorporation, including, but not limited to, the limitation on the voting rights attaching to the Class B Common Stock pursuant to clause (i) of this subsection (f) of this Article FIFTH:

(A) holders of shares of Class B Common Stock shall be entitled to vote on all matters submitted for a vote or the consent of Class A Common Stock, whether pursuant to law or otherwise;

(B) holders of shares of Class A Common Stock shall be entitled to vote on all matters submitted for a vote or the consent of Class B Common Stock, whether pursuant to law or otherwise; and

(C) the Class A Common Stock and the Class B Common Stock shall vote together as a single class, and not separately as multiple classes, at any annual meeting or special meeting of the stockholders of the Corporation, or in connection with any action taken by written consent.

(g) Merger, etc. In connection with any merger, consolidation or recapitalization, holders of Class A Common Stock and holders of Class B Common Stock shall receive or be given the opportunity to receive the same form of consideration for their shares in the same amount per share.

(h) No Preemptive or Subscription Rights. No holder of shares of Common Stock shall be entitled to preemptive or subscription rights.

 

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SIXTH. Shares of Preferred Stock may be issued in one or more series from time to time by the Board of Directors. The Board of Directors is expressly authorized to fix by resolution or resolutions the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions of such powers, preferences and rights, of the shares of each series of Preferred Stock, including without limitation the following:

(a) the distinctive serial designation of such series which shall distinguish it from other series;

(b) the number of shares included in such series;

(c) the dividend rate (or method of determining such rate) payable to the holders of the shares of such series, any conditions upon which such dividends shall be paid and the date or dates upon which such dividends shall be payable;

(d) whether dividends on the shares of such series shall be cumulative and, in the case of shares of any series having cumulative dividend rights, the date or dates or method of determining the date or dates from which dividends on the shares of such series shall be cumulative;

(e) the amount or amounts which shall be payable out of the assets of the corporation to the holders of the shares of such series upon voluntary or involuntary liquidation, dissolution or winding up the corporation, and the relative rights of priority, if any, of payment of the shares of such series;

(f) the price or prices at which, the period or periods within which and the terms and conditions upon which the shares of such series may be redeemed, in whole or in part, at the option of the corporation or at the option of the holder or holders of the shares of Preferred Stock or upon the happening of a specified event or events;

 

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(g) the obligation, if any, of the corporation to purchase or redeem shares of such series pursuant to a sinking fund or otherwise and the price or prices at which, the period or periods within which and the terms and conditions upon which the shares of such series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;

(h) whether or not the shares of such series shall be convertible into, or exchangeable for, at any time or times at the option of the holder or holders of the shares of Preferred Stock or at the option of the corporation or upon the happening of a specified event or events, shares of any other class or classes or any other series of Preferred Stock or any other class or classes of stock of the corporation, and the price or prices or rate or rates of exchange or conversion and any adjustments applicable to such exchange or conversion;

(i) whether or not the holders of the shares of such series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; and

(j) any other powers, preferences and rights and qualifications, limitations and restrictions not inconsistent with the DGCL.

Unless otherwise provided in the resolution or resolutions of the Board of Directors or a duly authorized committee of the Board of Directors establishing the terms of a series of Preferred Stock, no holder of any share of Preferred Stock shall be entitled as of right to vote on: (i) any amendment or alteration of the Certificate of Incorporation to authorize or create, or increase the authorized amount of, any other class or series of Preferred Stock; or (ii) any alteration, amendment or repeal of any provision of any other series of Preferred Stock that does not adversely affect in any material respect the rights of the series of Preferred Stock held by such holder.

Except as otherwise required by the DGCL or provided in the resolution or resolutions of the Board of Directors or a duly authorized committee of the Board of Directors establishing the terms of a series of Preferred Stock, no holder of Common Stock, as such, shall be entitled to vote on any amendment or alteration of the Certificate of Incorporation that exclusively alters, amends or changes the powers, preferences, rights or other terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other series of Preferred Stock, to vote on the applicable amendment or alteration pursuant to the Certificate of Incorporation or pursuant to the DGCL.

 

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Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any class or series of Preferred Stock may be increased or decreased (but not below the number of shares of the applicable class or series then outstanding) by the affirmative vote of the holders of a majority of the outstanding shares of such class or series, voting together as a single class, irrespective of the provisions of Section 242(b)(2) of the DGCL or any corresponding provision enacted after the effectiveness of this Certificate of Incorporation.

SEVENTH. The Board of Directors is expressly authorized to adopt, amend, alter or repeal the bylaws of the Corporation. By affirmative vote of the holders of a majority of the shares of Common Stock then outstanding, Stockholders may adopt, amend, alter or repeal the bylaws of the Corporation. Notwithstanding the previous sentence, following the Trigger Date (as defined below), any amendment, alteration or repeal of Sections 2.2, 2.9, 2.10, 3.4 and 8.6 and Article VII of the Corporation’s bylaws shall require the affirmative vote of the holders of at least two-thirds of the shares of Common Stock then outstanding. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, and in addition to any specific requirements contained in this Certificate of Incorporation with respect to any particular Article or provision of this Certificate of Incorporation, at any time following the Trigger Date, Articles SEVENTH, NINTH, TENTH, ELEVENTH, TWEFLTH, THIRTEENTH and FIFTEENTH may be amended, altered, repealed or rescinded, in whole or in part, or any provision inconsistent with those provisions or this provision may be adopted, only by the affirmative vote of the holders of at least two-thirds of the voting power of the shares of capital stock of the Corporation entitled to vote on such amendment, alteration, repeal, rescission or adoption, voting together as a single class.

EIGHTH. Elections of directors need not be by written ballot except and to the extent provided in the bylaws of the Corporation.

NINTH. 

 

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(a) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.

(b) Subject to the rights granted to holders of any one or more series of Preferred Stock then outstanding or the rights granted pursuant to the Stockholders Agreement, dated on or about the date of this Certificate of Incorporation (as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Stockholders Agreement”), by and among the Corporation, Ares and OTPP, the Board of Directors shall consist of not less than three nor more than thirteen members. Subject to the Certificate of Incorporation, the Corporation’s bylaws and the Stockholders Agreement, the exact number of directors of the corporation shall be fixed from time to time pursuant to resolution or resolutions of the Board of Directors. Subject to: (i) the previous sentence, (ii) the rights of the holders of any series of stock with respect to such series of stock and (iii) the rights granted to the Sponsors pursuant to the Stockholders Agreement, except as otherwise required by law and unless the Board of Directors otherwise determines, newly created directorships resulting from any increase in the authorized number of directors or any vacancies on the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled only by a majority vote of the directors then in office, though less than a quorum, or by a sole remaining director, and not by the stockholders. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor.

(c) Upon the effectiveness of this Certificate of Incorporation, the directors of the Corporation shall be divided into three classes, as nearly equal in number as reasonably possible, as determined by the Board of Directors. The initial term of office for the first class of such directors shall expire at the first annual meeting of stockholders. The initial term of office for the second class of such directors shall expire at the second annual meeting of stockholders, while the initial term of office for the third class of such directors shall expire at the third annual meeting of stockholders. The directors of each class shall hold office until their successors have been duly elected and qualified. At each annual meeting of stockholders following such initial classification and election, directors elected to succeed the directors whose terms expire at such annual meeting shall be elected to hold office for a term of three years following their election

 

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and until their successors have been duly elected and qualified. No change in the date of any annual meeting shall shorten the term of any incumbent director. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain or attain a number of directors in each class as nearly equal as reasonably possible. In no event shall a decrease in the number of directors shorten the term of any incumbent director. Prior to such date when the Sponsors cease to collectively own at least a majority of the outstanding shares of Common Stock (such date, the “Trigger Date”), and subject to the rights of any class or series of Preferred Stock to elect and remove directors, any director or the entire Board of Directors may be removed, with or without cause, by the affirmative vote of the holders of a majority of the shares of Common Stock then outstanding entitled to vote at an election of directors. Following the Trigger Date, directors or the entire Board of Directors may only be removed for cause by an affirmative vote of the holders of at least two-thirds of the shares of Common Stock then outstanding entitled to vote at an election of directors. Following the Trigger Date, this Article NINTH may not be amended, modified or repealed, except by the affirmative vote of the holders of at least two-thirds of the shares of Common Stock then outstanding.

(d) In the event that the holders of any class or series of stock of the Corporation shall be entitled, voting separately as a class, to elect any directors of the Corporation, then the number of directors that may be elected by such holders shall be in addition to the number fixed pursuant to the bylaws. Except as otherwise expressly provided in the terms of such class or series, the terms of the directors elected by such holders shall expire at the annual meeting of stockholders next succeeding their election without regard to the classification of the remaining directors.

(e) Definitions. Solely for purposes of Articles NINTH and TWELFTH:

(i) “Affiliate” shall mean: (a) with respect to Ares, any person or entity that, directly or indirectly, is controlled by Ares, controls Ares or is under common control with Ares, and (b) with respect to OTPP, any person or entity that, directly or indirectly, is controlled by OTPP, controls OTPP or is under common control with OTPP. With respect to each of Ares and OTPP, “Affiliate” shall exclude (x) the Corporation and (y) any entity that is controlled by the Corporation (including its direct and indirect subsidiaries). “Affiliate” shall also mean, with respect to the Corporation, any person or entity that, directly or indirectly, is controlled by the Corporation.

 

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(ii) “Ares” shall mean Ares Corporate Opportunities Fund IV, L.P.

(iii) “OTPP” shall mean Ontario Teachers’ Pension Plan Board.

(iv) “Sponsors” shall mean (a) Ares and OTPP, (b) each of their respective Affiliates, and (c) any successor by operation of law (including, without limitation, by merger or otherwise) of each of the foregoing or any such successor.

TENTH. 

(a) Prior to the Trigger Date, any action required or permitted to be taken by stockholders, including but not limited to the election of directors, may be taken by written consent or consents of the stockholders. Stockholders may only take action by written consent if: (i) such consent or consents are signed by or on behalf of the holders of outstanding shares of 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 on the action were present and voted; and (ii) such consent or consents are delivered to the Corporation in accordance with the DGCL. Following the Trigger Date, subject to the rights of the holders of any series of Preferred Stock, any action required or permitted to be taken by stockholders must be effected at a duly called annual or special meeting of stockholders.

(b) Prior to the Trigger Date, special meetings of stockholders shall be called by the Secretary of the Corporation at the written request of the holders of a majority of the shares of Common Stock then outstanding. Following the Trigger Date, except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock, special meetings of stockholders may be called only by: (i) the Chairman of the Board of Directors; or (ii) the Secretary of the Corporation at the direction of a majority of the directors then in office; and (iii) special meetings of stockholders may not be called by any other person or persons.

 

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ELEVENTH. A director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation is not permitted under the DGCL as currently in effect or as the same may be amended after the effectiveness of this Certificate of Incorporation. If the DGCL is amended after the effectiveness of this Certificate of Incorporation to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent authorized by the DGCL, as so amended. No amendment, modification or repeal of this Article ELEVENTH or the adoption of any provision of the Certificate of Incorporation inconsistent with this Article ELEVENTH shall adversely affect any right or protection of a director that exists at the time of such amendment, modification, repeal or adoption.

TWELFTH. 

(a) Recognition of Corporate Opportunities. The Corporation recognizes and anticipates that: (i) certain directors, officers, principals, partners, members, managers, employees, agents and/or other representatives of the Sponsors may serve as directors, officers or agents of the Corporation and its Affiliates; and (ii) the Sponsors may now engage and may continue to engage in (x) the same or similar activities or related lines of business as those in which the Corporation and its Affiliates, directly or indirectly, may engage and/or (y) other business activities that overlap with or compete with those in which the Corporation and its Affiliates, directly or indirectly, may engage. The provisions of this Article TWELFTH are set forth to regulate and define the conduct of certain affairs of the Corporation and its Affiliates with respect to certain classes or categories of business opportunities as they may involve the Sponsors and any person or entity who, while a stockholder, director, officer or agent of the Corporation or any of its Affiliates, is a director, officer, principal, partner, member, manager, employee, agent and/or other representative of any of the Sponsors (each, an “Identified Person”), on the one hand, and the powers, rights, duties and liabilities of the Corporation and its Affiliates and its and their respective stockholders, directors, officers, and agents, on the other. To the fullest extent permitted by law (including, without limitation, the DGCL), and notwithstanding any other duty (contractual, fiduciary or otherwise, whether at law or in equity),

 

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each Identified Person shall have the right to directly or indirectly, engage in and possess interests in other business ventures of every type and description, including those engaged in the same or similar business activities or lines of business as the Corporation or any of its Affiliates or deemed to be competing with the Corporation or any of its Affiliates. In addition, no Identified Person shall have any duty, whether contractual, fiduciary or otherwise, whether at law or in equity, not to engage in any of the foregoing activities, interests, ventures or opportunities, whether competitive or otherwise. The scope of activities permitted or otherwise authorized by this ARTICLE TWELFTH shall apply without regard to whether the Identified Person pursues such activities, interests, ventures or opportunities on its own account, or in partnership with, or as a direct or indirect equity holder, controlling person, stockholder, director, officer, employee, agent, Affiliate (including any portfolio company), member, financing source, investor, director or indirect manager, general or limited partner or assignee of any other person or entity. Under no circumstances shall any Identified Person have an obligation to offer to the Corporation or its subsidiaries or other Affiliates the right to participate in any of the activities, interests, ventures or opportunities described in this subsection (a). Each Identified Person shall also have the right to invest in, or provide services to, any person that is engaged in the same or similar business activities as the Corporation or its Affiliates or directly or indirectly competes with the Corporation or any of its Affiliates.

(b) Competitive Opportunities. In the event that any Identified Person acquires knowledge of a potential transaction or matter which may be an investment, corporate or business opportunity or prospective economic or competitive advantage in which the Corporation or its Affiliates could have an interest or expectancy (contractual, equitable or otherwise) (a “Competitive Opportunity”) or otherwise is then exploiting any Competitive Opportunity, to the fullest extent permitted under the DGCL and notwithstanding any other duty existing at law or in equity, the Corporation and its Affiliates will have no interest in, and no expectation (contractual, equitable or otherwise) that such Competitive Opportunity be offered to it. To the fullest extent permitted by law, any such interest or expectation (contractual, equitable or otherwise) is renounced so that such Identified Person shall:

(i) have no duty to communicate or present such Competitive Opportunity to the Corporation or its Affiliates;

 

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(ii) have the right to either hold any such Competitive Opportunity for such Identified Person’s own account and benefit or the account of the former, current or future direct or indirect equity holders, controlling persons, stockholders, directors, officers, employees, agents, Affiliates, members, financing sources, investors, direct or indirect managers, general or limited partners or assignees of any Identified Person or to direct, recommend, assign or otherwise transfer such Competitive Opportunity to persons or entities other than the Corporation or any of its subsidiaries, Affiliates or direct or indirect equity holders; and

(iii) notwithstanding any provision in the Certificate of Incorporation to the contrary, not be obligated or liable to the Corporation, any stockholder, director or officer of the Corporation or any other person or entity by reason of the fact that such Identified Person, directly or indirectly, took any of the actions noted in the immediately preceding clause (ii), pursued or acquired such Competitive Opportunity for itself or any other person or entity or failed to communicate or present such Competitive Opportunity to the Corporation or its Affiliates.

(c) Acknowledgement. Any person or entity purchasing or otherwise acquiring or holding any interest in any shares of capital stock of the Corporation or any other interest in the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article TWELFTH.

(d) Interpretation; Duties. In the event of a conflict or other inconsistency between this Article TWELFTH and any other Article or provision of the Certificate of Incorporation, this Article TWELFTH shall prevail under all circumstances. Notwithstanding anything to the contrary in this Certificate of Incorporation, under no circumstances shall the provisions of this Article TWELFTH limit or eliminate any duty (contractual, fiduciary or otherwise, whether at law or in equity) owed by any employee of the Corporation or any of its Affiliates to the Corporation, even if such employee is an Identified Person. Further, under no circumstances shall the Corporation be deemed to have renounced any Competitive Opportunity

 

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as to any employee of the Corporation or its Affiliates. The Corporation does not renounce its interest in any Competitive Opportunity offered to any non-employee director (including any non-employee director who serves as an officer of the Corporation) if such opportunity is expressly offered in writing to such person solely in his or her capacity as a director or officer of the Corporation, and the provisions of subsection (b) of this Article TWELFTH shall not apply to any such Competitive Opportunity.

(e) Section 122(17) of the DGCL. For the avoidance of doubt, subject to subsection (d) of this Article TWELFTH, this Article TWELFTH is intended to constitute, with respect to the Identified Persons, a disclaimer and renunciation, to the fullest extent permitted under Section 122(17) of the DGCL, of any right of the Corporation or any of its Affiliates with respect to the matters set forth in this Article TWELFTH. This Article TWELFTH shall be construed to effect such disclaimer and renunciation to the fullest extent permitted under the DGCL.

(f) Business Ventures. The Corporation and its Affiliates do not have any rights in and to the business ventures of any Identified Person, or the income or profits derived from those business ventures. The Corporation agrees that each of the Identified Persons may do business with any potential or actual customer or supplier of the Corporation or may employ or otherwise engage any officer or employee of the Corporation.

(h) No Competitive Opportunity. In addition to and notwithstanding the foregoing provisions of this Article TWELFTH, an investment, corporate or business opportunity shall not be deemed to be a Competitive Opportunity for the Corporation if it is an investment, corporate or business opportunity that: (i) the Corporation is neither financially or legally able, nor contractually permitted to undertake; (ii) from its nature, is not in the line of the Corporation’s business or is of no practical advantage to the Corporation; or (iii) is one in which the Corporation has no interest or reasonable expectancy.

(i) Amendments. For so long as either of the Sponsors own any shares of Common Stock, this Article TWELFTH may not be amended, modified or repealed, except with the written consent of each of the Sponsors that owns shares of Common Stock at such time.

 

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THIRTEENTH. 

(a) Section 203 of the DGCL. The Corporation expressly elects not to be governed by Section 203 of the DGCL.

(b) Notwithstanding the foregoing, the Corporation shall not engage in any business combination (as defined below), at any point in time at which the Common Stock is registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with any interested stockholder (as defined below) for a period of three (3) years following the time that such stockholder became an interested stockholder, unless:

(i) prior to such time, the Board of Directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;

(ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock (as defined below) of the Corporation outstanding 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) those shares owned (a) by persons who are directors and also officers of the Corporation and (b) employee stock plans of the Corporation in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

(iii) at or subsequent to such time, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock of the Corporation which is not owned by the interested stockholder.

 

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(c) Definitions. For the purposes of this Article THIRTEENTH only, references to:

(i) “affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, another person.

(ii) “Ares” means Ares Corporate Opportunities Fund IV, L.P. and its affiliates.

(iii) “Ares Direct Transferee” means any person that acquires (other than in a registered public offering) directly from Ares or any of its affiliates or successors or any “group”, or any member of any such group, of which such persons are a party under Rule 13d-5 of the Exchange Act, beneficial ownership of 15% or more of the then outstanding voting stock of the Corporation.

(iv) “Ares Indirect Transferee” means any person that acquires (other than in a registered public offering) directly from any Ares Direct Transferee or any other Ares Indirect Transferee beneficial ownership of 15% or more of the then outstanding voting stock of the Corporation.

(v) “associate”, when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a 20% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.

(vi) “business combination”, when used in reference to the Corporation and any interested stockholder of the Corporation, means:

(A) any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation (a) with the interested stockholder, or (b) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the interested stockholder, and, as a result of such merger or consolidation, this Article THIRTEENTH is not applicable to the surviving entity;

 

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(B) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the Corporation, to or with the interested stockholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the Corporation;

(C) any transaction which results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any stock of the Corporation or of such subsidiary to the interested stockholder, except: (a) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which securities were outstanding prior to the time that the interested stockholder became such; (b) pursuant to a merger under Section 251(g) of the DGCL; (c) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the Corporation subsequent to the time the interested stockholder became such; (d) pursuant to an exchange offer by the Corporation to purchase stock made on the same terms to all holders of said stock; or (e) any issuance or transfer of stock by the Corporation. In no case under items (c)-(e) of the preceding sentence shall there be an increase in the interested stockholder’s proportionate share of the stock of any class or series of the Corporation or of the voting stock of the Corporation (except as a result of immaterial changes due to fractional share adjustments);

(D) any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the Corporation or of any such subsidiary which is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or

 

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(E) any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges, or other financial benefits (other than those expressly permitted in subsections (A)-(D) above) provided by or through the Corporation or any direct or indirect majority-owned subsidiary.

(vii) “control”, including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of a corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this Article THIRTEENTH, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.

(viii) “controlled portfolio company” means any portfolio company that directly, or indirectly through one or more intermediaries, is controlled by or is under common control with: (A) Ares, an Ares Direct Transferee or an Ares Indirect Transferee or (B) OTPP, an OTPP Direct Transferee or an OTPP Indirect Transferee, as applicable.

(ix) “interested stockholder” means any person (other than the Corporation or any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of 15% or more of the outstanding voting stock of the Corporation, or (ii) is an affiliate or associate of the Corporation and was the owner of 15% or more of the outstanding voting stock of the Corporation at any time within the three-year period immediately prior to the date on

 

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which it is sought to be determined whether such person is an interested stockholder; and the affiliates and associates of such person. “Interested stockholder” shall not include (a) Ares, any Ares Direct Transferee, any Ares Indirect Transferee or any of their respective affiliates, controlled portfolio companies or successors or any “group”, or any member of any such group, to which such persons are a party under Rule 13d-5 of the Exchange Act, (b) OTPP, any OTPP Direct Transferee, any OTPP Indirect Transferee or any of their respective affiliates, controlled portfolio companies or successors or any “group”, or any member of any such group, to which such persons are a party under Rule 13d-5 of the Exchange Actor, or (c) any person whose ownership of shares in excess of the 15% limitation set forth in this Certificate of Incorporation is the result of any action taken solely by the Corporation, but such person shall be an interested stockholder if such person then acquires additional shares of voting stock of the Corporation, except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an interested stockholder, the voting stock of the Corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of the definition of “owner” below but shall not include any other unissued stock of the Corporation which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.

(x) “owner,” including the terms “own” and “owned,” when used with respect to any stock, means a person that individually or with or through any of its affiliates or associates:

(A) beneficially owns such stock, directly or indirectly;

(B) has the right to acquire such stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, except that a person shall not be deemed the owner of stock tendered pursuant to a tender or exchange offer made by such person or any of such person’s affiliates or associates until such tendered stock is accepted for purchase or exchange;

 

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(C) has the right to vote such stock pursuant to any agreement, arrangement or understanding, except that a person shall not be deemed the owner of any stock because of such person’s right to vote such stock if the agreement, arrangement or understanding to vote such stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten (10) or more persons; or

(D) has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in subsection (C) above), or disposing of such stock with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such stock.

(xi) “OTPP” means Ontario Teachers’ Pension Plan Board and its affiliates.

(xii) “OTPP Direct Transferee” means any person that acquires (other than in a registered public offering) directly from OTPP or any of its affiliates or successors or any “group”, or any member of any such group, of which such persons are a party under Rule 13d-5 of the Exchange Act, beneficial ownership of 15% or more of the then outstanding voting stock of the Corporation.

(xiii) “OTPP Indirect Transferee” means any person that acquires (other than in a registered public offering) directly from any OTPP Direct Transferee or any other OTPP Indirect Transferee beneficial ownership of 15% or more of the then outstanding voting stock of the Corporation.

(xiv) “person” means any individual, corporation, partnership, unincorporated association or other entity.

(xv) “stock” means, with respect to any corporation, capital stock and, with respect to any other entity, any equity interest.

 

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(xvi) “voting stock” means stock of any class or series entitled to vote generally in the election of directors.

FOURTEENTH. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by 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 or officer or other employee of the Corporation to the Corporation or its stockholders;

(c) any action asserting a claim against the Corporation or any director, officer or other employee of the Corporation arising pursuant to any provision of the DGCL, the Certificate of Incorporation or the bylaws of the Corporation (in each case, as they may be amended from time to time);

(d) any action asserting a claim against the Corporation or any director, officer or other employee of the Corporation governed by the internal affairs doctrine;

(e) any action or proceeding to interpret, apply, enforce or determine the validity of this Certificate of Incorporation or the bylaws of the Corporation (including any right, obligation or remedy under this Certificate of Incorporation or the bylaws of the Corporation); or

(f) any action or proceeding as to which the DGCL confers jurisdiction to the Court of Chancery of the State of Delaware.

This Article FOURTEENTH shall not apply to suits brought to enforce a duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. 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, subject to and contingent upon a final adjudication in the State of Delaware of the enforceability of this provision. Any person or entity that acquires any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article FOURTEENTH.

 

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FIFTEENTH. The Corporation shall indemnify its directors to the fullest extent authorized or permitted by Delaware law, as now or in effect after the effectiveness of this Certificate of Incorporation. Such right to indemnification shall continue as to a person who has ceased to be a director of the Corporation and shall inure to the benefit of his or her heirs, executors and personal and legal representatives. Notwithstanding the previous sentence, except for proceedings to enforce rights to indemnification, the Corporation shall not be obligated to indemnify any director (or his or her heirs, executors or personal or legal representatives) in connection with a proceeding (or part of a proceeding) initiated by such person unless such proceeding (or part of such proceeding) was authorized or consented to by the Board of Directors. The right to indemnification conferred by this Article FIFTEENTH shall include the right to be paid by the Corporation the expenses incurred in defending or otherwise participating in any proceeding in advance of its final disposition. To the extent authorized from time to time by the Board of Directors, the Corporation may provide rights to indemnification and to the advancement of expenses to officers, employees and agents of the Corporation similar to those conferred in this Article FIFTEENTH to the Board of Directors. The rights to indemnification and to the advancement of expenses conferred in this Article FIFTEENTH shall not be exclusive of any other right which any person may have or acquire under the Certificate of Incorporation, the bylaws of the Corporation, any statute, agreement, vote of stockholders or disinterested directors or otherwise. Any repeal or modification of this Article FIFTEENTH by the stockholders of the Corporation shall not adversely affect any rights to indemnification and to the advancement of expenses of a director or officer of the Corporation existing at the time of such repeal or modification with respect to any acts or omissions occurring prior to such repeal or modification.

SIXTEENTH. The incorporator of the Corporation is Paul J. Kardish, whose mailing address is c/o The AZEK Company Inc., 1330 W Fulton Street, #350, Chicago, IL 60607.

 

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SEVENTEENTH. The names of the persons who are to serve as the initial directors of the Corporation are:

Initial Class I Directors

[●]

[●]

[●]

Initial Class II Directors

[●]

[●]

[●]

Initial Class III Directors

[●]

[●]

[●]

[●]

The mailing address of each such director is: c/o The AZEK Company Inc., 1330 W Fulton Street, #350, Chicago, IL 60607.

 

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IN WITNESS WHEREOF, I have signed this Certificate of Incorporation this [●] day of [●], 2020.

 

 

    Name: [●]
    Title:

 

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Exhibit 3.4

LIMITED LIABILITY COMPANY AGREEMENT

OF

AOT BUILDING PRODUCTS NEWCO LLC

This Limited Liability Company Agreement (this “Agreement”) of AOT BUILDING PRODUCTS NEWCO LLC (the “Company”) is entered into as of August 16, 2013, by the undersigned as its sole member (the “Member”).

WHEREAS, the Company was formed on August 15, 2013 as a limited liability company under the Delaware Limited Liability Company Act, 6 Del. C. §18-101, et seq., as it may be amended from time to time and any successor to such statute (the “Act”), and

WHEREAS, the Member desires to enter into this Agreement in order to provide for the governance of the Company and the conduct of its business.

NOW, THEREFORE, the Member hereby agrees as follows:

1. Name. The name of the limited liability company is AOT Building Products Newco LLC. The Company was formed pursuant to and in accordance with the Act by the filing of a Certificate of Formation dated August 15, 2013.

2. Purpose and Powers. The Company is formed for the object and purpose of, and the nature of the business to be conducted and promoted by the Company is, engaging in any lawful act or activity for which limited liability companies may be formed under the Act. The Company shall have the power and authority to take any and all actions necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the aforesaid purposes.

3. Registered Office. The address of the registered office of the Company in the State of Delaware is c/o The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801.

4. Registered Agent. The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801.

5. Member. The name and the mailing address of the Member is set forth on Schedule A hereto. To the extent any additional or substitute members are hereafter admitted to the Company, the Member shall revise Schedule A accordingly.

6. Units. Interests in the Company shall be represented by units, which shall be reflected on Schedule A and will not be evidenced by certificates. Immediately upon the effectiveness of this agreement the Member shall be issued one unit. The Company shall be entitled to treat a member as the owner of the units registered in such member’s name on the books and records of the Company for all purposes, and accordingly, shall not be bound to recognize any equitable or other claim to or interest in such units on the part of any other person regardless of whether the Company shall have actual or other notice thereof.

 

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7. Management. The business and affairs of the Company shall be managed exclusively by the Member (who also shall be the “Managing Member” of the Company, as defined in the Act) and not by any board of managers. The Member shall have the power to do any and all acts necessary or convenient to or for the furtherance of the purposes described herein, including all powers, statutory or otherwise, possessed by members under the laws of the State of Delaware. The Member is authorized to execute and deliver any document on behalf of the Company without any vote or consent of any other person. Notwithstanding any other provision of this Agreement, in no event shall the Company establish or appoint a board of directors or any comparable body to control or manage its business or affairs.

8. Authorized Person. The Member may from time to time designate one or more individuals as an “authorized person,” within the meaning of the Act, to execute, deliver and cause to be filed any certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in a jurisdiction in which the Company may wish to conduct business, any documents required to obtain a U.S. taxpayer identification number and any documents otherwise required in order for the Company to conduct business. The Member hereby appoints each of Dan Lukas and Russell Hammond as authorized persons to act on behalf of the Company and each such person is individually authorized, empowered and directed to execute and deliver such agreement, consent, instrument or document and to incur such expenses and to take such other and further actions as they may deem necessary or appropriate or convenient and proper in the name and on behalf of the Company, the necessity or desirability of each such agreement, consent, instrument or document to be conclusively established by the execution and delivery thereof by such authorized persons.

9. Distributions. The Company may make distributions to the Member, in cash or in other property.

10. Dissolution.

(a) The Company shall dissolve, and its affairs shall be wound up upon the first to occur of the following: (i) the written consent of the Member and (ii) the entry of a decree of judicial dissolution under Section 18-802 of the Act.

(b) The bankruptcy (as defined in Section 18-101(1) and 18-304 of the Act) of the Member shall not cause the Member to cease to be a member of the Company and, upon the occurrence of such an event, the business of the Company shall continue without dissolution.

(c) In the event of dissolution, the Company shall conduct only such activities as are necessary to wind up its affairs (including the sale of the assets of the Company in an orderly manner), and the assets of the Company shall be applied in such manner, and in such order of priority, as determined by the Member, subject to any requirements of the Act.

 

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11. Capital Contributions. The Member has contributed the following amounts, in cash, and no other property, to the Company:

 

AOT Building Products Holdco LLC

   $ 1.00  

12. Additional Contributions. The Member is not and shall not be required to make any additional capital contribution to the Company. The Member may make capital contributions to the Company with the Company’s consent in the form of cash, services or otherwise, and upon such contribution the Member’s capital account balance shall be adjusted accordingly.

13. Elections. The Company shall elect pursuant to Treasury Regulation Section 301.7701-3 to be classified as a corporation for U.S. federal income tax purposes with effect as of the date hereof, and the Company will take any action required to effect such election. Neither the Company nor any Member shall take any action inconsistent with the classification contemplated by this Section 13 of this Agreement.

14. Assignments. The Member may not assign in whole or in part its limited liability company interest.

15. Admission of Additional Members. One or more additional individuals or entities may be admitted as members of the Company with the consent of the Member.

16. Liability of Members and Other Persons. Neither the Member, nor any of the officers of the Company, nor any “authorized person” (within the meaning of the Act) of the Company shall have any liability for the obligations or liabilities of the Company solely by reason of being a Member, officer or “authorized person”, as the case may be, except to the extent provided in the Act.

17. Amendments. The provisions of this Agreement may be amended, modified or waived only with the written consent of the Member.

18. Governing Law. This Agreement shall be governed by, and construed under, the laws of the State of Delaware, all rights and remedies being governed by said laws.

19. Severability. Each provision of this Agreement shall be considered severable and if for any reason any provision or provisions herein are determined to be invalid, unenforceable or illegal under any existing or future law, such invalidity, unenforceability or illegality shall not impair the operation of or affect those portions of this Agreement which are valid, enforceable and legal.

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

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IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby, has duly executed this Limited Liability Company Agreement as of the date and year first aforesaid.    

 

AOT BUILDING PRODUCTS HOLDCO LLC
By:  

/s/ Dan Lukas

  Name: Dan Lukas
  Title: Authorized Person


MEMBERS

 

Name

  

Ownership

  

Address

AOT Building Products Holdco LLC

   1 unit    2000 Avenue of the Stars, 12th Floor
   (100%)    Los Angeles, California 90067
      United States

Exhibit 3.5

AMENDMENT NO. 1

TO THE

LIMITED LIABILITY COMPANY AGREEMENT OF

AOT BUILDING PRODUCTS NEWCO LLC, A

DELAWARE LIMITED LIABILITY COMPANY

This AMENDMENT NO. 1 (this “Amendment”) to the LIMITED LIABILITY COMPANY AGREEMENT of AOT Building Products Newco LLC, a Delaware limited liability company (the “Company”), dated as of August 15, 2013 (the “LLC Agreement”), is dated as of September 16, 2013. Capitalized terms used but not defined herein have the meanings ascribed to such terms in the LLC Agreement.

WHEREAS, pursuant to Section 17 of the LLC Agreement, the Member may amend the LLC Agreement in writing.

WHEREAS, the Member has determined it is in the best interest of the Company to change the name of the Company to “CPG Newco LLC,” and has authorized the execution and delivery of this Amendment by the undersigned authorized person.

NOW, THEREFORE, the LLC Agreement shall be amended as follows:

1.    Amendments.

(a)    Section 1 of the LLC Agreement is amended and restated to read in its entirety as follows:

Name. The name of the limited liability company is CPG Newco LLC. The Company was formed pursuant to and in accordance with the Act by the filing of a Certificate of Formation dated August 15, 2013, as amended on September 16, 2013.”

(b)    All occurrences in the LLC Agreement of “AOT Building Products Newco LLC” shall be deleted and replaced with “CPG Newco LLC.”

(c)    All occurrences in the LLC Agreement of “AOT Building Products Holdco LLC” shall be deleted and replaced with “CPG Holdco LLC.”

2.    Miscellaneous. Except as expressly amended hereby, the LLC Agreement shall remain in full force and effect in accordance with the terms thereof. All references in the LLC Agreement to “this Agreement” shall be deemed to refer to the LLC Agreement as amended by this Amendment.

[Signature page follows.]


IN WITNESS WHEREOF, the undersigned has set his hand as of the date above written.

 

CPG HOLDCO LLC
By:   /s/ Dan Lukas
  Name:       Dan Lukas
  Title:   Authorized Person

 

 

[Signature Page to Amendment of LLC Agreement of CPG Newco LLC]

Exhibit 3.6

BYLAWS

OF

THE AZEK COMPANY INC.

(Adopted as of [•])

ARTICLE I

Offices

Section 1.1. Registered Office. The registered office of The AZEK Company Inc. (the “Corporation”) in the State of Delaware, and the name of its registered agent at such address, shall be as set forth in the certificate of incorporation of the Corporation, as the same may be amended and/or restated from time to time.

Section 1.2. Other Offices. The Corporation may have a principal or other office or offices at such other place or places, either within or without the State of Delaware, as the board of directors of the Corporation (the “Board of Directors” or the “Board”) may from time to time determine or as shall be necessary or appropriate for the conduct of the business of the Corporation.

ARTICLE II

Stockholders

Section 2.1. Annual Meetings. An annual meeting of stockholders shall be held for the election of directors at such date, time and place either within or without the State of Delaware. Alternatively, the annual meeting may not be held at any place, but may instead be held solely by means of remote communication, as may be designated by the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting.

Section 2.2. Special Meetings. Special meetings of stockholders may only be called in the manner provided in the certificate of incorporation. Special meetings of stockholders shall be held at such date, time and place either within or without the State of Delaware. Alternatively, the special meeting may not be held at any place, but may instead be held by means of remote communication, as may be stated in the notice of the meeting. At a special meeting of stockholders, only such business shall be conducted as shall be specified in the notice of meeting (or any supplement to the notice of meeting). Except in the case of a special meeting of stockholders called at the request of the stockholders pursuant to the express terms of the certificate of incorporation, the Board of Directors may postpone, reschedule or cancel any previously scheduled special meeting of stockholders.


Section 2.3. 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. The written notice shall state: (i) the place, if any, date and hour of the meeting; (ii) the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting; (iii) the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting; and (iv) 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 such stockholder’s address as it appears on the records of the Corporation. In addition, if stockholders have consented to receive notices by a form of electronic transmission, then such notice, by facsimile telecommunication, or by electronic mail, shall be deemed to be given when directed to a number or an electronic mail address, respectively, at which the stockholder has consented to receive notice. If such notice is transmitted by a posting on an electronic network together with separate notice to the stockholder of such specific posting, such notice shall be deemed to be given upon the later of (i) such posting, and (ii) the giving of such separate notice. If such notice is transmitted by any other form of electronic transmission, such notice shall be deemed to be given when directed to the stockholder. Notice shall be deemed to have been given to all stockholders of record who share an address if notice is given in accordance with the “householding” rules set forth in the rules of the Securities and Exchange Commission under the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 233 of the Delaware General Corporation Law. For purposes of these bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient of the communication, and that may be directly reproduced in paper form through an automated process.

Section 2.4. Adjournments. Subject to Section 2.2, any meeting of stockholders, annual or special, may be adjourned from time to time, to reconvene at the same or some other place. In such event, notice of the adjournment need not be given if the time, place, if any, and the means of remote communications, if any, of the adjourned meeting 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 meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 2.5. Quorum. Except where otherwise provided by law or the certificate of incorporation or these bylaws, at each meeting of stockholders, the holders of a majority of the outstanding shares of stock entitled to vote on a matter at the meeting, present in person or represented by proxy, shall constitute a quorum. For purposes of the foregoing, where a separate vote by class or classes is required for any matter, the holders of a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum to take action with respect to that vote on that matter. Two or more classes or series of stock shall be considered a single class if the holders of the classes or series of stock are entitled to vote together as a single class at the meeting. In the absence of a quorum of the holders of any

 

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class of stock entitled to vote on a matter, either: (i) by majority vote, the holders of such class so present or represented may adjourn the meeting of such class from time to time in the manner provided by Section 2.4 of these bylaws until a quorum of such class shall be so present or represented; or (ii) the Chairperson of the meeting may on his or her own motion adjourn the meeting from time to time in the manner provided by Section 2.4 of these bylaws until a quorum of such class shall be so present and represented without the approval of the stockholders who are present in person or represented by proxy and entitled to vote. If the Chairperson adjourns the meeting in accordance with clause (ii) of the preceding sentence, no notice of the adjournment need be given other than announcement at the meeting. If either: (i) the Corporation; or (ii) another corporation of which the Corporation owns, directly or indirectly, a majority of the shares entitled to vote in the election of such other corporation’s directors owns shares of the Corporation’s capital stock on the record date for determining stockholders entitled to vote at the meeting, those shares shall not be entitled to vote or counted for quorum purposes. The previous sentence shall not limit the right of the Corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.

Section 2.6. Organization. Meetings of stockholders shall be presided over by the Chairperson of the Board of Directors, if any. In the absence of the Chairperson of the Board of Directors, meetings of stockholders shall be presided over by a chairperson designated by the Board of Directors. In the absence of such chairperson or of such designation, meetings of stockholders shall be presided over by a chairperson chosen at the meeting by the holders of a majority of the shares entitled to vote who are present, in person or by proxy. The Secretary, or in the absence of the Secretary an Assistant Secretary, shall act as secretary of the meeting. In the absence of the Secretary and any Assistant Secretary, the chairperson of the meeting may appoint any person to act as secretary of the meeting.

The Board of Directors may adopt by resolution or resolutions such rules and regulations for the conduct of any meeting of the stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the order of business at each such meeting shall be as determined by the chairperson of the meeting. The chairperson of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts and things as are necessary or desirable for the proper conduct of the meeting. Without limitation with respect to other rules, regulations, procedures, actions or things with respect to the conduct of any stockholder meeting, the chairperson shall have the authority to: (i) establish procedures for the maintenance of order and safety; (ii) limit the time allotted to questions or comments on the affairs of the Corporation; and (iii) restrict entry to such meeting after the time prescribed for the commencement of the meeting and the opening and closing of the voting polls for each item on which a vote is to be taken. Unless and to the extent determined by the Board of Directors or the chairperson presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 2.7. Inspectors. Prior to any meeting of stockholders, the Board of Directors or the Chief Executive Officer: (i) shall appoint one or more inspectors to act at such meeting and make a written report of such meeting; and (ii) may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate

 

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inspector is able to act, the person presiding at the stockholders meeting shall appoint one or more inspectors to act at the meeting. Before entering upon the discharge of his or her duties, each inspector shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall: (i) ascertain the number of shares outstanding and the voting power of each; (ii) determine the shares represented at the meeting and the validity of proxies and ballots; (iii) count all votes and ballots; (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and (v) certify their determination of the number of shares represented at the meeting and their count of all votes and ballots. The inspectors may appoint or retain other persons to assist them in the performance of their duties.

The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxy or vote, nor any revocation of or change to a ballot, proxy or vote, shall be accepted by the inspectors after the closing of the polls. In determining the validity and counting of proxies and ballots, the inspectors shall be limited to: (i) an examination of the proxies, and any envelopes submitted with such proxies; (ii) any information provided by a stockholder who submits a proxy by telegram, cablegram, or other electronic transmission from which it can be determined that the proxy was authorized by the stockholder; (iii) any written ballot or, if authorized by the Board, a ballot submitted by electronic transmission together with any information from which it can be determined that the electronic transmission was authorized by the stockholder; (iv) any information provided in a record of a vote if such vote was taken at the meeting by means of remote communication along with any information used to verify that any person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder; and (v) the regular books and records of the Corporation. The inspectors may also consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for such purpose, at the time they make their certification, the inspectors shall specify (i) the precise information considered by them, including the person or persons from whom they obtained the information; (ii) when the information was obtained; (iii) the means by which the information was obtained; and (iv) the basis for the inspectors’ belief that such information is accurate and reliable.

Section 2.8. Voting; Proxies. Unless otherwise provided in the certificate of incorporation, each stockholder entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder which has voting power upon the matter in question. If the certificate of incorporation provides for more or less than one vote for any share on any matter, every reference in these bylaws to a majority or other proportion of stock shall refer to such majority or other proportion of the votes of such stock. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy. Notwithstanding the foregoing, no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable but only if the proxy is

 

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coupled with an interest sufficient in law to support an irrevocable power. Any such interest may be in the stock itself or an interest in the Corporation generally. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing a written instrument revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. Voting at stockholders meetings need not be by written ballot unless the holders of a majority of the outstanding shares of all classes of stock entitled to vote thereon present in person or represented by proxy at such meeting shall so determine. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. In all other matters, unless otherwise provided by law or by the certificate of incorporation or these bylaws, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders. Where a separate vote by class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class or classes, except as otherwise provided by law or by the certificate of incorporation or these bylaws. For purposes of this Section 2.8, votes cast “for” or “against” and “abstentions” with respect to such matter shall be counted as shares of stock of the Corporation entitled to vote on such matter, while “broker non-votes” (or other shares of stock of the Corporation similarly not entitled to vote) shall not be counted as shares entitled to vote on such matter.

Section 2.9. Notice of Stockholder Business and Nominations.

(a) Annual Meeting of Stockholders.

(i) At any annual meeting of the stockholders, only such nominations of persons for election to the Board of Directors and only other business shall be considered or conducted, as shall have been properly brought before the meeting. For nominations to be properly made at an annual meeting, and proposals of other business to be properly brought before an annual meeting, nominations and proposals of other business must be: (A) pursuant to the Corporation’s notice of meeting (or any supplement to the notice of meeting) delivered pursuant to Section 2.3 of these bylaws; (B) by or at the direction of the Board of Directors or any duly authorized committee of the Board of Directors; or (C) by any stockholder of the Corporation who (x) was a stockholder of record at the time of giving of notice provided for in these bylaws and at the time of the annual meeting, (y) is entitled to vote at the meeting and (z) complies with the notice procedures set forth in this bylaw as to such business or nomination. Subject to the Stockholders Agreement, dated on or about the date of these bylaws, by and among the Company, Ares Corporate Opportunities Fund IV, L.P., a Delaware limited partnership (“Ares”), and Ontario Teachers’ Pension Plan Board (“OTPP”, and, together with Ares, the “Sponsors”) (such agreement, the “Stockholders Agreement”), clause (C) of this Section 2.9(a)(i) shall be the exclusive means for a stockholder to make nominations or submit other business (other than matters properly brought under Rule 14a-8 under the Exchange Act and included in the Corporation’s notice of meeting) before an annual meeting of stockholders.

 

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(ii) Without qualification or limitation, for any nominations or any other business to be properly brought before an annual meeting by a stockholder pursuant to paragraph (a)(i)(C) of this bylaw, the stockholder must have given timely notice of the nominations or other business in writing to the Secretary, and such other business must otherwise be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth day and not later than the close of business on the ninetieth day prior to the first anniversary of the preceding year’s annual meeting (which date shall, for purposes of the Corporation’s first annual meeting of stockholders after its shares of common stock are first publicly traded, be deemed to have occurred on [•], 2020). Notwithstanding the previous sentence, in the event that the date of the annual meeting is more than thirty days before or more than sixty days after such anniversary date, or if no annual meeting was held in the preceding year, notice by the stockholder to be timely must be so delivered not earlier than the opening of business on the one hundred twentieth day prior to the date of such annual meeting and not later than the close of business on the later of the ninetieth day prior to the date of such annual meeting or, if the first public announcement of the date of such annual meeting is less than one hundred days prior to the date of such annual meeting, the tenth day following the day on which public announcement of the date of such meeting is first made by the Corporation. In no event shall any adjournment or postponement of an annual meeting or the announcement of any adjournment or postponement of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above. In addition, to be timely, a stockholder’s notice shall further be updated and supplemented, if necessary, so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is ten business days prior to the meeting or any adjournment or postponement of the meeting. Such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five business days after the record date for the meeting in the case of the update and supplement required to be made as of the record date, and not later than eight business days prior to the date for the meeting, any adjournment or postponement of the meeting in the case of the update and supplement required to be made as of ten business days prior to the meeting or any adjournment or postponement of the meeting. Whether given pursuant to this paragraph (a)(ii) or paragraph (b), to be in proper form, a stockholder’s notice to the Secretary must set forth, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made: (A) the name and address of such stockholder, as they appear on the Corporation’s books and records, of such beneficial owner, if any, and of their respective affiliates or associates or others acting in concert therewith; (B) the class or series and number of shares of the Corporation which are, directly or indirectly, owned beneficially and of record by such stockholder, such beneficial owner, and of their respective affiliates or associates or others acting in concert therewith; (C) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation directly or indirectly owned beneficially by such stockholder, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith; (D) any derivative or synthetic arrangement having the characteristics of a long position in any class or series of shares of the Corporation directly or indirectly owned beneficially by such stockholder, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith; (E) any contract, derivative, swap or other transaction or

 

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series of transactions designed to produce economic benefits and risks that correspond substantially to the ownership of any class or series of shares of the Corporation, including due to the fact that the value of such contract, derivative, swap or other transaction or series of transactions is determined by reference to the price, value or volatility of any class or series of shares of the Corporation, whether or not such instrument, contract or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise, through the delivery of cash or other property, or otherwise, and without regard of whether the stockholder of record, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith, may have entered into transactions that hedge or mitigate the economic effect of such instrument, contract or right, or any other direct or indirect opportunity to profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation (any of the foregoing, a “Derivative Instrument”) directly or indirectly owned beneficially by such stockholder, the beneficial owner, if any, or any affiliates or associates or others acting in concert therewith; (F) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder has a right to vote any shares of any security of the Corporation; (G) any contract, arrangement, understanding, relationship or otherwise, including any repurchase or similar so-called “stock borrowing” agreement or arrangement, engaged in, directly or indirectly, by such stockholder, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of the shares of the Corporation by, manage the risk of share price changes for, or increase or decrease the voting power of, such stockholder with respect to any class or series of the shares of the Corporation, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any security of the Corporation (any of the foregoing, a “Short Interest”); (H) any rights to dividends on the shares of the Corporation owned beneficially by such stockholder that are separated or separable from the underlying shares of the Corporation; (I) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder is a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership; (J) any performance-related fees (other than an asset-based fee) that such stockholder is directly or indirectly entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, including without limitation any such interests held by members of such stockholder’s immediate family sharing the same household; (K) any significant equity interests or any Derivative Instruments or Short Interests in any principal competitor of the Corporation held by such stockholder; and (L) any direct or indirect interest of such stockholder in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement). The notice described in the preceding sentence shall also set forth, as to each person, if any, whom the stockholder proposes to nominate for election or reelection to the Board of Directors (i) all information relating to such person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named in the Corporation’s proxy statement as a nominee and to serving as a director if elected) and (ii) a description of all direct and indirect

 

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compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among such stockholder and beneficial owner, if any, and their respective affiliates and associates, or others acting in concert with them, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, or others acting in concert the proposed nominee, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Rule 404 promulgated under Regulation S-K if the stockholder making the nomination and any beneficial owner on whose behalf the nomination is made, if any, or any affiliate or associate of them, or person acting in concert with them, were the “registrant” for purposes of such rule and the nominee were a director or executive officer of such registrant. In addition, with respect to each nominee for election or reelection to the Board of Directors, each such nomination must include, at the time made, a completed and signed questionnaire, representation and agreement required by Section 2.10 of these bylaws. At its sole discretion, the Corporation may also require any proposed nominee to furnish such information as may reasonably be required by the Corporation to determine: (x) the qualifications of such proposed nominee; (y) the eligibility of such proposed nominee to serve as an independent director of the Corporation; or (z) that could be material to a reasonable stockholder’s understanding of the qualifications and independence, or lack thereof, of such nominee. The Corporation may also require any proposed nominee to furnish such information as may reasonably be required, pursuant to applicable law, to be disclosed in the proxy materials concerning all persons nominated (by the Corporation or otherwise) for election as a director of the Corporation, whether or not the nominee is to be included in the Corporation’s proxy statement. The proposed nominee shall furnish to the Corporation the requested information pursuant to the preceding two sentences within ten days after receipt of any such request.

(iii) If the notice described in Section 2.9(a)(ii) relates to any business other than a nomination of a director or directors that the stockholder proposes to bring before the meeting, then, to be in proper form, the notice shall set forth: (i) a brief description of the business desired to be brought before the meeting; (ii) the reasons for conducting such business at the meeting and any material interest of such stockholder and beneficial owner, if any, in such business; (iii) the text of the proposal or business (including the text of any resolutions proposed for consideration, and, in the event that such business includes a proposal to amend the bylaws, the text of such proposed amendment); and (iv) a description of all agreements, arrangements and understandings between such stockholder and beneficial owner, if any, and any other person or persons (including their names) in connection with the proposal of such business by such stockholder. For the avoidance of doubt, if the notice described in Section 2.9(a)(ii) relates to both a nomination of a director or directors and other business, the notice shall set forth all of the required information pursuant to this paragraph and the immediately preceding paragraph.

(iv) Notwithstanding anything in the second sentence of paragraph (a)(ii) of this bylaw to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement by the Corporation naming all of the nominees for director or specifying the size of the increased Board of Directors at least one hundred days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this bylaw shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.

 

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(b) Special Meetings of Stockholders. The only business that shall be conducted at a special meeting of stockholders shall be as set forth in the Corporation’s notice of meeting, delivered prior to the special meeting in accordance with these bylaws. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting: (A) by or at the direction of the Board of Directors; or (B) as provided in the Stockholders Agreement. In addition, nominations for election of directors at a special meeting may be made by any stockholder of the Corporation who: (i) is a stockholder of record at the time of giving of notice provided for in this bylaw and at the time of the special meeting; (ii) is entitled to vote at the meeting, and (iii) complies with the notice procedures set forth in this bylaw as to such nomination. With respect to the immediately preceding sentence, however, such nominations by stockholders shall only be made where the Board of Directors or the Sponsors pursuant to Article TENTH subsection (b) of the certificate of incorporation have determined that directors will be elected at the meeting. The immediately preceding two sentences shall be the exclusive means by which a stockholder may make nominations before a special meeting of stockholders at which directors are to be elected or appointed. In the event that the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, other than with respect to any nomination made in the manner provided in the Stockholders Agreement, any stockholder may nominate a person or persons (as the case may be) for election to such position(s) as specified in the Corporation’s notice of meeting only if the stockholder’s notice required by paragraph (a)(ii) of this bylaw with respect to any nomination shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth day prior to the date of such special meeting and not later than the close of business on the later of the ninetieth day prior to the date of such special meeting. For the avoidance of doubt, the stockholder’s notice so delivered shall include the completed and signed questionnaire, representation and agreement required by Section 2.10 of these bylaws. If the first public announcement of the date of such special meeting is less than one hundred days prior to the date of such special meeting, such notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the tenth day following the day on which the Corporation first makes a public announcement of the date of the special meeting at which directors are to be elected. In no event shall any adjournment or postponement of a special meeting or the announcement of any adjournment or postponement of a special meeting commence a new time period for the giving of a stockholder’s notice as described in the immediately preceding sentence.

(c) General.

(i) Only such persons who are nominated in accordance with the procedures set forth in this bylaw or in the Stockholders Agreement shall be eligible to be elected as directors. Only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this bylaw. Except as otherwise provided by law, the certificate of incorporation or these bylaws, the chairperson of the

 

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meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this bylaw. In the event any proposed nomination or business is not in compliance with this bylaw, the chairperson shall declare the defective proposal or nomination to be invalid. Unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the Corporation’s annual or special meeting of stockholders to make a nomination or present a proposal of other business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this bylaw, to be considered a qualified representative of the stockholder, a person must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders. Such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

(ii) For purposes of this bylaw, “public announcement” shall mean disclosure in a press release reported by a national news service or in a document publicly filed or furnished by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(iii) Notwithstanding the foregoing provisions of this bylaw, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this bylaw. Notwithstanding the previous sentence, any references in these bylaws to the Exchange Act or the rules promulgated thereunder are not intended to and shall not limit the requirements applicable to nominations or proposals as to any other business to be considered pursuant to paragraph (a)(i)(C) or paragraph (b) of this bylaw. Nothing in this bylaw shall be deemed to affect any rights: (i) of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act; or (ii) of the holders of any series of Preferred Stock, if and to the extent provided for under law, the certificate of incorporation or these bylaws. Subject to Rule 14a-8 under the Exchange Act, nothing in these bylaws shall be construed to permit any stockholder, or give any stockholder the right, to include or have disseminated or described in the Corporation’s proxy statement any nomination of director or directors or any other business proposal.

(iv) Notwithstanding anything to the contrary contained in this Section 2.9 or in Section 2.10, at any time when the Stockholders Agreement remains in effect, the requirements of this Section 2.9 and of Section 2.10 shall not apply to the exercise by a Sponsor of its rights to designate persons for nomination for election to the Board of Directors pursuant to the Stockholders Agreement.

Section 2.10. Submission of Questionnaire, Representation and Agreement. To be eligible to be a nominee of any stockholder for election or reelection as a director of the Corporation and qualified to serve as a director, a person must deliver to the Secretary at the principal executive offices of the Corporation a written questionnaire with respect to the background and qualification of such person and the background of any other persons or entities

 

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on whose behalf the nomination is being made pursuant to paragraph (a)(1)(C) or paragraph (b) of Section 2.9 of these bylaws. In the case of a person nominated for election as a director of the Corporation, such delivery shall be made, pursuant to paragraph (a)(1)(C) or paragraph (b) of Section 2.9 of these bylaws, in accordance with the time periods prescribed for delivery of notice under Section 2.9 of these bylaws) The questionnaire shall be provided by the Secretary to the proposed nominee upon written request by the proposed nominee or the nominating stockholder on such person’s behalf. To be eligible to be a nominee of a stockholder for election or reelection as a director of the Corporation and qualified to serve as a director, a person must also deliver a written representation and agreement that such person: (A) is not and will not become a party to (1) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or (2) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law; (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director that has not been disclosed in the questionnaire; and (C) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the Corporation, and will comply with all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the Corporation. The form of written representation and agreement shall also be provided by the Secretary to the proposed nominee upon written request by the proposed nominee or the nominating stockholder on such person’s behalf.

Section 2.11. Fixing Date for Determination of Stockholders of Record. In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment of a meeting of stockholders, the Board of Directors may fix a record date. The record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and the record date shall not be more than sixty nor less than ten days before the meeting date. If the Board fixes a date, that date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of and 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. 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. Notwithstanding the previous sentence, the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting. In such case, the Board shall also fix the record date for stockholders entitled to notice of such adjourned meeting as the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting in accordance with this Section 2.11.

 

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In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the Board of Directors may fix a record date. The record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and the record date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the Board. If no record date has been fixed by the Board and when no prior action by the Board is required by law, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the Board and prior action by the Board 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 adopts the resolution taking such prior action.

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders 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 a record date. The record date shall not precede the date upon which the resolution fixing the record date is adopted, and the record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating to that purpose.

Section 2.12. List of Stockholders Entitled to Vote. At least ten days before every meeting of stockholders, the Secretary shall prepare and make a complete list of the stockholders entitled to vote at the meeting. Notwithstanding the previous sentence, if the record date for determining the stockholders entitled to vote is less than ten days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date. The list shall be arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Nothing in this Section shall require the Corporation to include electronic mail addresses or other electronic content information on such list. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting for a period of at least ten days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting; or (ii) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the entire meeting and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then such list shall also be open to the examination of any stockholder during the entire meeting on a reasonably accessible electronic network. The information required to access such list shall be provided with the notice of the meeting.

 

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ARTICLE III

Board of Directors

Section 3.1. Powers; Number; Qualifications. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, except as may be otherwise provided by law or in the certificate of incorporation. The Board shall consist of one or more members, each of whom shall be a natural person. From time to time, the Board shall determine the number of members.

Section 3.2. Election; Term of Office; Resignation; Removal; Vacancies. Each director shall hold office until the next election of the class for which such director shall have been chosen, and until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any director may resign at any time upon notice given in writing or by electronic transmission to the Board of Directors or to the Chief Executive Officer or the Secretary of the Corporation. Such resignation shall be effective upon delivery, unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. Unless otherwise specified in the resignation, no acceptance of such resignation shall be necessary to make the resignation effective. Any director or the entire Board may be removed in accordance with the certificate of incorporation. Unless otherwise provided in the certificate of incorporation or these bylaws, vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class or from any other cause may be filled by a majority of the directors then in office, although less than a quorum, or by the sole remaining director. Whenever the holders of any class or classes of stock or series of stock are entitled to elect one or more directors by the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series then in office, or by the sole remaining director so elected. Any director elected or appointed to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor.

Section 3.3. 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 may from time to time determine, and, if so determined, notice of the meetings need not be given.

Section 3.4. 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 the Chairperson of the Board, if any, the Chief Executive Officer or by any two or more directors. Special meetings of the Board of Directors may be also called by the Sponsors at any time when the Sponsors, together with their affiliates, beneficially own, in the aggregate, at least 35% of the common stock of the Corporation. Reasonable notice of special meetings shall be given by the person or persons calling the meeting.

 

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Section 3.5. Participation in Meetings by Conference Telephone Permitted. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of the Board or of such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this bylaw shall constitute presence in person at such meeting.

Section 3.6. Quorum; Vote Required for Action. At all meetings of the Board of Directors, a majority of the entire Board shall constitute a quorum for the transaction of business. 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 unless the certificate of incorporation or these bylaws shall require a vote of a greater number. If, at any meeting of the Board a quorum shall not be present, the members of the Board present may adjourn the meeting from time to time until a quorum shall be present.

Section 3.7. Organization. Meetings of the Board of Directors shall be presided over by the Chairperson of the Board, if any. In the absence of the Chairperson of the Board, meetings of the Board shall be presided over by the Chief Executive Officer, or, in his or her absence, by a chairperson chosen at the meeting. The Secretary, or in the absence of the Secretary, an Assistant Secretary, shall act as secretary of the meeting. In the absence of the Secretary and all Assistant Secretaries, the chairperson of the meeting may appoint any person to act as secretary of the meeting.

Section 3.8. Action by Directors Without a Meeting. Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee of the Board of Directors, may be taken without a meeting if all members of the Board or of such committee consent in writing or by electronic transmission, and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

Section 3.9. Compensation of Directors. Unless otherwise restricted by the certificate of incorporation or these bylaws, the Board of Directors shall have the authority to fix the compensation, including fees, reimbursement of expenses and equity compensation, of directors for services to the Corporation in any capacity, including for attendance of meetings of the Board or participation on any committees. Directors who are officers or employees of the Corporation may receive, if the Board desires, compensation for service as directors. Nothing in these bylaws shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation for such service.

 

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ARTICLE IV

Committees

Section 4.1. Committees. The Board of Directors may designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of an alternate member to replace the absent or disqualified member, the member or members of the committee present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent permitted by law and provided in the resolution of the Board establishing such committee or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. No committee shall have the power or authority in reference to the following matters: (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by law to be submitted to stockholders for approval; (ii) adopting, amending or repealing these bylaws; or (iii) indemnifying directors.

Section 4.2. Committee Rules. Unless the Board of Directors otherwise provides, each committee designated by the Board may adopt, amend and repeal rules for the conduct of its business. In the absence of a provision by the Board or a provision in the rules of such committee to the contrary, a majority of the entire authorized number of members of such committee shall constitute a quorum for the transaction of business. The vote of a majority of the members present at a meeting at the time of such vote if a quorum is then present shall be the act of such committee. In other respects, each committee shall conduct its business in the same manner as the Board conducts its business pursuant to Article III of these bylaws.

Section 4.3. Audit Committee. The Board of Directors shall have an Audit Committee composed of three (3) or more directors, each of whom shall satisfy any securities exchange independence requirements then in effect and applicable to the Corporation. The responsibilities of the Audit Committee shall be stated in the Audit Committee’s charter, as approved by the Board of Directors.

Section 4.4. Compensation Committee. The Board of Directors shall have a Compensation Committee composed of three (3) or more directors, each of whom shall satisfy any securities exchange independence requirements then in effect and applicable to the Corporation. The responsibilities of the Compensation Committee shall be stated in the Compensation Committee’s charter, as approved by the Board of Directors.

 

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Section 4.5. Nominating and Corporate Governance Committee. The Board of Directors shall have a Nominating and Corporate Governance Committee composed of three (3) or more directors, each of whom shall satisfy any securities exchange independence requirements then in effect and applicable to the Corporation. The responsibilities of the Nominating and Corporate Governance Committee shall be stated in the Nominating and Corporate Governance Committee’s charter, as approved by the Board of Directors.

ARTICLE V

Officers

Section 5.1. Officers; Election. As soon as practicable after the annual meeting of stockholders in each year, the Board of Directors shall elect a Chief Executive Officer and a Secretary, and it may, if it so determines, elect from among its members a Chairperson of the Board and a Vice Chairperson of the Board. The Board may also elect one or more Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, one or more Assistant Secretaries, a Chief Financial Officer, a Chief Legal Officer, a Chief Human Resource Officer, a Chief Marketing Officer, a Treasurer and one or more Assistant Treasurers and such other officers as the Board may deem desirable or appropriate and may give any of them such further designations or alternate titles as it considers desirable. Any number of offices may be held by the same person unless prohibited by law or the certificate of incorporation or these bylaws otherwise provide.

Section 5.2. Term of Office; Resignation; Removal; Vacancies. Unless otherwise provided in the resolution of the Board of Directors electing any officer, each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any officer may resign at any time upon written notice or electronic transmission to the Board or to the Chief Executive Officer or the Secretary of the Corporation. Such resignation shall be effective upon delivery, unless the resignation specifies a later effective date or an effective date determined upon the happening of an event or events. Unless otherwise specified in the resignation, no acceptance of such resignation shall be necessary to make it effective. The Board may remove any officer with or without cause at any time. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. The election of an officer shall not of itself create contractual rights. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, may be filled by the Board at any regular or special meeting.

Section 5.3. Chairperson of the Board. The Chairperson of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she is present. The Chairperson of the Board shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board or as may be provided by law.

Section 5.4. Vice Chairperson of the Board. In the absence of the Chairperson of the Board, the Vice Chairperson of the Board, if any, shall preside at all meetings of the Board of Directors and of the stockholders at which he or she is present. The Vice Chairperson shall have and may exercise such powers as may, from time to time, be assigned to him or her by the Board or as may be provided by law.

 

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Section 5.5. Chief Executive Officer. In the absence of the Chairperson of the Board and Vice Chairperson of the Board, the Chief Executive Officer shall preside at all meetings of the Board of Directors and of the stockholders at which he or she is present. The Chief Executive Officer shall be the chief executive officer and shall have general charge and supervision of the business of the Corporation. The Chief Executive Officer shall perform all duties incident to the office of president of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or as may be provided by law.

Section 5.6. President. Each President shall have such general powers and duties of supervision and management as shall be assigned to him or her by the Board of Directors.

Section 5.7. Vice Presidents. Each Vice President shall have such powers and shall perform such duties as shall be assigned to him or her by the Board of Directors.

Section 5.8. Chief Financial Officer. The Board of Directors shall appoint a Chief Financial Officer of the Corporation to serve at the pleasure of the Board of Directors. The Chief Financial Officer of the Corporation shall: (a) have the custody of the corporate funds and securities, except as otherwise provided by the Board of Directors; (b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation; (c) deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors; (d) disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements; and (e) render to the Chief Executive Officer and the Board of Directors, whenever they may require it, an account of all his or her transactions as Chief Financial Officer and of the financial condition of the Corporation.

Section 5.9. Secretary. The Secretary shall have the duty to record the proceedings of the meetings of the stockholders, the Board of Directors and any committees in a book to be kept for that purpose. The Secretary (a) shall see that all notices are given in accordance with the provisions of these bylaws or as required by law; (b) shall be custodian of the records of the Corporation; and (c) may affix the corporate seal to any document, the execution of which, on behalf of the Corporation, is duly authorized, and when so affixed may attest to that authorization. The Secretary shall perform all other duties incident to the office of secretary of a corporation and such other duties as may, from time to time, be assigned to him or her by the Board or the Chief Executive Officer or as may be provided by law.

Section 5.10. Other Officers. The Corporation’s other officers shall have such powers and duties in the management of the Corporation as shall be stated in a resolution of the Board of Directors. Any such resolution shall not be inconsistent with these bylaws and, to the extent not so stated, such other officers shall have such powers and duties as generally pertain to their respective offices and shall be subject to the Board’s control. The Board may require any officer, agent or employee to give security for the faithful performance of his or her duties.

Section 5.11. Salaries. The salaries of the officers shall be fixed from time to time by the Board of Directors or a committee of the Board of Directors appointed for such purpose.

 

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ARTICLE VI

Stock

Section 6.1. Stock Certificates and Uncertificated Shares. The shares of stock in the Corporation may be represented by certificates. The Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the Corporation’s stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate previously issued until such certificate is surrendered to the Corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairperson or Vice Chairperson of the Board, if any, the Chief Executive Officer, or a President or a Vice President, and by the Treasurer or an Assistant Treasurer, if any, or the Secretary or an Assistant Secretary, of the Corporation, representing the number of shares of stock registered in certificate form owned by such holder. Any or all of the signatures on a certificate may be a 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 such person were such officer, transfer agent or registrar at the date of issue. The Corporation may not issue stock certificates in bearer form.

If the Corporation is authorized to issue more than one class of stock or more than one series of any class, the powers, designations, preferences and relative, participating, optional or other special rights of each class or series of stock and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate which the Corporation shall issue to represent such class or series of stock. Except as otherwise provided by law, in lieu of the foregoing requirements, there may be set forth on the face or back of the certificate, which the Corporation shall issue to represent such class or series of stock, a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series of stock and the qualifications, limitations or restrictions of such preferences and/or rights. Within a reasonable time after the issuance or transfer of uncertificated shares, the Corporation shall send to the registered owner of the shares a written notice containing the information required by law to be set forth or stated on certificates or a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock or series of stock and the qualifications, limitations or restrictions of such preferences and/or rights.

Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares and the rights and obligations of the holders of certificates representing stock of the same class and series shall be identical.

 

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Section 6.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New Certificates. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate previously issued by it, alleged to have been lost, stolen or destroyed. The Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s 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 or uncertificated shares.

Section 6.3. Transfer. The shares of the stock of the Corporation shall be transferable in the manner prescribed by law and in these bylaws. In the case of certificated shares of stock, transfers shall be made on the books of the Corporation only by the holder of the shares or by such holder’s attorney duly authorized in writing, upon surrender for cancellation of certificate(s) for at least the same number of shares, with an assignment and power of transfer endorsed on or attached to the certificate, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. In the case of uncertificated shares of stock, transfers shall be made on the books of the Corporation only upon receipt of proper transfer instructions from the registered holder of the shares or by such person’s attorney duly authorized in writing, and upon compliance with appropriate procedures for transferring shares in uncertificated form. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing from and to whom transferred. Notwithstanding anything to the contrary in these bylaws, at all times that the Corporation’s stock is listed on a stock exchange, the shares of the stock of the Corporation shall comply with all direct registration system eligibility requirements established by such exchange, including any requirement that shares of the Corporation’s stock be eligible for issue in uncertificated or book-entry form. All issuances and transfers of shares of the Corporation’s stock shall be entered on the books of the Corporation with all information necessary to comply with such direct registration system eligibility requirements, including the name and address of the person to whom the shares of stock are issued, the number of shares of stock issued and the date of issue. The Board of Directors shall have the power and authority to make such rules and regulations as it may deem necessary or proper concerning the issue, transfer and registration of shares of stock of the Corporation in both the certificated and uncertificated form.

Section 6.4. Record Owners. The stock ledger shall be the only evidence as to who are the stockholders of the Corporation. The Corporation shall be entitled to recognize the exclusive right of a person registered on its stock ledger as the owner of shares to receive dividends, to vote and to receive notice, and otherwise to exercise all of the rights and powers of an owner of such shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice of the claim, except as otherwise required by law.

 

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ARTICLE VII

Indemnification

Section 7.1. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative ( a “proceeding”), by reason of the fact that he or she is or was a director or an officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee, agent or trustee of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an “indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, agent or trustee or in any other capacity while serving as a director, officer, employee, agent or trustee, shall be indemnified and held harmless by the Corporation to the fullest extent permitted by Delaware law, as the same exists or may be amended. In the case of any such amendment, the amendment shall, if permitted, be limited to the Corporation providing broader indemnification rights than such law permitted the Corporation to provide prior to such amendment. The right to indemnification shall cover any expense, liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such indemnitee in connection therewith. Notwithstanding anything to the contrary in this Section 7.1, except as provided in Section 7.3 with respect to proceedings to enforce rights to indemnification or advancement of expenses or with respect to any compulsory counterclaim brought by such indemnitee, the Corporation shall indemnify any such indemnitee in connection with a proceeding (or part of a proceeding) initiated by such indemnitee only if such proceeding (or part of such proceeding) was authorized by the Board of Directors.

Section 7.2. Right to Advancement of Expenses. In addition to the right to indemnification conferred in Section 7.1, an indemnitee shall also have the right to be paid by the Corporation for the expenses (including attorney’s fees) incurred in appearing at, participating in or defending any such proceeding referred to in Section 7.1 in advance of its final disposition or in connection with a proceeding brought to establish or enforce a right to indemnification or advancement of expenses under this Article VII (which shall be governed by Section 7.3 (an “advancement of expenses”). Notwithstanding the previous sentence, an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer shall be made solely upon delivery to the Corporation of an undertaking (an “undertaking”), by or on behalf of such indemnitee, if: (i) the General Corporation Law of the State of Delaware (the “DGCL”) requires; or (ii), in the case of an advance made in a proceeding brought to establish or enforce a right to indemnification or advancement. The undertaking required by the previous sentence shall not be required with respect to an advancement of expenses incurred by an indemnitee in any capacity other than as a director or officer. The indemnitee shall undertake to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a “final adjudication”) that such indemnitee is not entitled to be indemnified or entitled to advancement of expenses under Sections 7.1 and 7.2 or otherwise.

Section 7.3. Right of Indemnitee to Bring Suit. If a claim under Section 7.1 or 7.2 is not paid in full by the Corporation within (a) sixty days after a written claim for indemnification has been received by the Corporation or (b) twenty days after a claim for an advancement of expenses has been received by the Corporation, the indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim or to obtain advancement of expenses, as applicable. To the fullest extent permitted by law, if the indemnitee is successful in whole or in part in: (i) any suit to enforce his or her indemnification rights under these bylaws; or (ii) any suit brought by the Corporation to recover an advancement

 

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of expenses pursuant to the terms of an undertaking, the indemnitee shall be entitled to be reimbursed for all of the costs and expenses incurred in prosecuting or defending such suit, including, without limitation, reasonable attorneys’ fees. In any suit brought by the indemnitee to enforce a right to indemnification under these bylaws it shall be a defense that the indemnitee has not met any applicable standard for indemnification set forth in the DGCL. No such defense shall apply, however, with respect to a suit brought by the indemnitee to enforce a right to an advancement of expenses. In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation shall be entitled to recover such expenses upon a final adjudication that the indemnitee has not met any applicable standard for indemnification set forth in the DGCL. For the avoidance of doubt, such expenses shall include, without limitation, reasonable attorneys’ fees. Neither: (i) the failure of the Corporation to have made a determination prior to the commencement of such suit that indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the applicable standard of conduct set forth in the DGCL; nor (ii) an actual determination by the Corporation that the indemnitee has not met such applicable standard of conduct, shall create a presumption that the indemnitee has not met the applicable standard of conduct, or, in the case of such a suit brought by the indemnitee, be a defense to such suit. For the avoidance of doubt, the term Corporation as used in the immediately preceding sentence shall include the Corporation’s directors who are not parties to such action, a committee of such directors, independent legal counsel or the Corporation’s stockholders. Whether in an action brought by the indemnitee to enforce a right to indemnification or to an advancement of expenses under these bylaws, or in an action brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under this Article VII or otherwise shall be on the Corporation.

Section 7.4. Indemnification Not Exclusive.

(a) The provision of indemnification to or the advancement of expenses and costs to any indemnitee under this Article VII, or the entitlement of any indemnitee to indemnification or advancement of expenses and costs under this Article VII, shall not limit or restrict in any way the power of the Corporation to indemnify or advance expenses and costs to such indemnitee in any other way permitted by law. Nor shall the provision of such indemnification or advancement be deemed exclusive of, or invalidate, any right to which any indemnitee seeking indemnification or advancement of expenses and costs may be entitled under any law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such indemnitee’s capacity as an officer, director, employee or agent of the Corporation and as to action in any other capacity.

(b) Given that certain jointly indemnifiable claims (as defined below) may arise due to the service of the indemnitee as a director and/or officer of the Corporation at the request of the indemnitee-related entities (as defined below), the Corporation shall be fully and primarily responsible for the payment to the indemnitee in respect of indemnification or advancement of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of the certificate of incorporation or these bylaws of the Corporation (or any other agreement between the Corporation and such persons, including the

 

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Stockholders Agreement) in connection with any such jointly indemnifiable claims, pursuant to and in accordance with the terms of this Article VII, irrespective of any right of recovery the indemnitee may have from the indemnitee-related entities. Any obligation on the part of any indemnitee-related entities to indemnify or advance expenses to any indemnitee shall be secondary to the Corporation’s obligation and shall be reduced by any amount that the indemnitee may collect as indemnification or advancement from the Corporation. The Corporation irrevocably waives, relinquishes and releases the indemnitee-related entities from any and all claims it may have against the indemnitee-related entities for contribution, subrogation or any other recovery of any kind in respect of contribution or subrogation. Under no circumstance shall the Corporation be entitled to any right of subrogation or contribution by the indemnitee-related entities. No right of advancement or recovery the indemnitee may have from the indemnitee-related entities shall reduce or otherwise alter the rights of the indemnitee or the obligations of the Corporation regardless of source. In the event that any of the indemnitee-related entities shall make any payment to the indemnitee in respect of indemnification or advancement of expenses with respect to any jointly indemnifiable claim, the indemnitee-related entity making such payment shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnitee against the Corporation. The indemnitee shall execute all papers reasonably required and shall do all things that may be reasonably necessary to secure such rights, including the execution of such documents as may be necessary to enable the indemnitee-related entities effectively to bring suit to enforce such rights. Each of the indemnitee-related entities shall be third-party beneficiaries with respect to this Section 7.4(b), entitled to enforce this Section 7.4(b).

For purposes of this Section 7.4(b), the following terms shall have the following meanings:

(1) The term “indemnitee-related entities” means any corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (other than the Corporation or any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise for which the indemnitee has agreed, on behalf of the Corporation or at the Corporation’s request, to serve as a director, officer, employee or agent and which service is covered by the indemnity described in these bylaws) from whom an indemnitee may be entitled to indemnification or advancement of expenses with respect to which, in whole or in part, the Corporation may also have an indemnification or advancement obligation. For the avoidance of doubt, the Sponsors and their respective affiliates shall be indemnitee-related entities.

(2) The term “jointly indemnifiable claims” shall be broadly construed and shall include, without limitation, any action, suit or proceeding for which the indemnitee shall be entitled to indemnification or advancement of expenses from both the indemnitee-related entities and the Corporation pursuant to Delaware law, any agreement or certificate of incorporation, bylaws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership or comparable organizational documents of the Corporation or the indemnitee-related entities, as applicable.

 

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Section 7.5. Corporate Obligations; Reliance. The rights granted pursuant to the provisions of this Article VII shall vest at the time a person becomes a director or officer of the Corporation. Such vested rights shall be deemed to create a binding contractual obligation on the part of the Corporation to the persons who from time to time are elected as officers or directors of the Corporation. Persons acting in their capacities as officers or directors of the Corporation or any subsidiary shall be entitled to rely on such provisions of this Article VII without giving notice of their reliance to the Corporation. Such rights shall continue as to an indemnitee who has ceased to be a director or officer and shall inure to the benefit of the indemnitee’s heirs, executors and administrators. Any amendment, alteration or repeal of this Article VII that adversely affects any right of an indemnitee or its successors shall be prospective only. Any such amendment, alteration or repeal shall not limit, eliminate or impair any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.

Section 7.6. Insurance. At its expense, the Corporation may maintain insurance to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.

Section 7.7. Indemnification of Employees and Agents of the Corporation. To the extent authorized from time to time by the Board of Directors, the Corporation may grant rights to indemnification and to the advancement of expenses to any employee or agent of the Corporation to the fullest extent of the provisions of this Article VII with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.

ARTICLE VIII

Miscellaneous

Section 8.1. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors.

Section 8.2. Seal. The Corporation may have a corporate seal which shall have the name of the Corporation inscribed thereon. The seal shall be in such form as approved from time to time by the Board of Directors. The corporate seal may be used by causing it or a facsimile of the seal to be impressed or affixed or in any other manner reproduced.

Section 8.3. Waiver of Notice of Meetings of Stockholders, Directors and Committees. Whenever notice is required to be given by law or under any provision of the certificate of incorporation or these bylaws, a written waiver of the notice, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time that the notice is given or required to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at

 

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the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. 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 or any waiver by electronic transmission unless so required by the certificate of incorporation or these bylaws.

Section 8.4. Interested Directors; Quorum. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee of the Board of Directors which authorizes the contract or transaction, or solely because such director’s or officer’s votes are counted for such purpose, if: (1) the material facts as to director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the Board or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to director’s or officer’s relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board, a committee of the Board of Directors or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board or of a committee which authorizes the contract or transaction.

Section 8.5. Form of Records. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or by means of, or be in the form of, any information storage device, or method. Records so kept must be convertible into clearly legible paper form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect such records in accordance with law.

Section 8.6. Amendment of Bylaws. These bylaws may be amended, altered or repealed, and new bylaws adopted, only in the manner set forth in the certificate of incorporation.

 

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Exhibit 4.2

STOCKHOLDERS AGREEMENT

By and Among

THE AZEK COMPANY INC.,

ARES CORPORATE OPPORTUNITIES FUND IV, L.P.

AND

ONTARIO TEACHERS’ PENSION PLAN BOARD

 

 

Dated as of [], 2020

 

 


TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION

     1  

SECTION 1.01 Definitions

     1  

SECTION 1.02 Rules of Construction

     5  

ARTICLE II REPRESENTATIONS AND WARRANTIES

     5  

ARTICLE III BOARD OF DIRECTORS

     5  

SECTION 3.01 Size and Composition

     5  

SECTION 3.02 Sponsor Designees

     6  

ARTICLE IV MATTERS REQUIRING SPONSOR CONSENT

     7  

SECTION 4.01 Matters Requiring Sponsor Consent

     7  

SECTION 4.02 Controlled Company

     8  

SECTION 4.03 Permitted Disclosure

     9  

ARTICLE V SPONSOR TRANSFER RESTRICTIONS

     9  

SECTION 5.01 Rule 144 Transfer Restrictions

     9  

SECTION 5.02 Rule 144 Transfer Procedures

     9  

SECTION 5.03 Rule 144 Transfer Volume Limitations

     10  

SECTION 5.04 Coordination Period

     10  

ARTICLE VI INFORMATION

     10  

SECTION 6.01 Books and Records; Access

     10  

SECTION 6.02 Sharing of Information

     11  

SECTION 6.03 Certain Reports

     11  

ARTICLE VII MISCELLANEOUS

     11  

SECTION 7.01 Notices

     11  

SECTION 7.02 Binding Effect; Benefits

     13  

SECTION 7.03 Amendment

     13  

SECTION 7.04 Assignability

     13  

SECTION 7.05 Governing Law; Submission to Jurisdiction

     13  

SECTION 7.06 Enforcement

     14  

SECTION 7.07 Severability

     14  

SECTION 7.08 Additional Securities Subject to Agreement  

     14  

 

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SECTION 7.09 Section and Other Headings

     14  

SECTION 7.10 Counterparts

     14  

SECTION 7.11 Waiver of Jury Trial

     14  

SECTION 7.12 Entire Agreement

     14  

SECTION 7.13 Further Assurances

     15  

 

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STOCKHOLDERS AGREEMENT

THIS STOCKHOLDERS AGREEMENT (this “Agreement”), dated as of [•], 2020 (the “Effective Date”), is by and among The AZEK Company Inc. (successor to CPG Newco LLC), a Delaware corporation (the “Company”), Ares Corporate Opportunities Fund IV, L.P., a Delaware limited partnership (“Ares”), and Ontario Teachers’ Pension Plan Board (“OTPP”) (each of Ares and OTPP, individually, a “Sponsor” and, together, the “Sponsors”).

RECITALS

WHEREAS, the Company is currently contemplating an underwritten initial public offering of shares of its Class A Common Stock (as defined below); and

WHEREAS, in connection with, and effective upon, the date of the pricing of the IPO (as defined below), the Company and the Sponsors wish to set forth certain understandings between such parties, including with respect to certain governance matters.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties to this Agreement agree as follows:

ARTICLE I

DEFINITIONS; RULES OF CONSTRUCTION

SECTION 1.01 Definitions. The terms set forth below have the following meanings as used in this Agreement:

Affiliate” of any specified Person means any other Person directly or indirectly controlling, controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing. No Person shall be deemed to be an Affiliate of another Person solely by virtue of the fact that both Persons own shares of the Capital Stock of the Company.

Agreement” has the meaning set forth in the preamble.

Ares” has the meaning set forth in the preamble.

Board” means the Board of Directors of the Company.

Capital Stock” with respect to any Person means any and all shares, interests, participations, rights in or other equivalents (however designated) of such Person’s capital stock, and any rights, warrants or options exercisable or exchangeable for or convertible into such capital stock.

Change of Control” shall be deemed to occur if:


(i) at any time, the Company shall fail to own, directly or indirectly, beneficially and of record, 100% of the issued and outstanding equity interests of the Company’s wholly-owned, direct subsidiary, CPG International LLC, a Delaware limited liability company; or

(ii) any person or “group” other than the Permitted Holders or any underwriter participating in the IPO, shall have acquired beneficial ownership of more than 35% of the outstanding shares of Class A Common Stock and the percentage of the outstanding shares of Class A Common Stock so held by such person or “group” is greater than the percentage of the outstanding shares of Class A Common Stock beneficially owned, directly or indirectly, in the aggregate by the Permitted Holders. For purposes of determining the percentage of Class A Common Stock held by any person, group or the Permitted Holders (beneficially or otherwise) in the immediately preceding sentence, share count shall be calculated on a fully diluted basis but not giving effect to contingent voting rights that have not yet vested. Notwithstanding anything to the contrary in this definition, a Change of Control shall not be deemed to occur if, in the case of clause (ii) above, the Permitted Holders have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority of the Board. Notwithstanding the preceding sentence or any provision of Rule 13d-3 of the Exchange Act (as in effect on September 30, 2013), (i) a person or “group” shall not be deemed to beneficially own securities (1) subject to an equity or asset purchase agreement, merger agreement or similar agreement (or voting or option or similar agreement related thereto) until the consummation of the transactions contemplated by such agreement or (2) as a result of veto or approval rights in any joint venture agreement, shareholder agreement or other similar agreement and (ii) if any “group” includes one or more Permitted Holders, any issued and outstanding Class A Common Stock beneficially owned, directly or indirectly, by any Permitted Holders that are a part of such “group” shall not be treated as being beneficially owned by any other member of such “group” for purposes of determining whether a Change of Control has occurred. The terms “group”, “beneficially owned” and “beneficial ownership” for the purpose of this “Change of Control definition shall have the meanings given those terms in Rules 13d-3 and 13d-5 under the Exchange Act as in effect on September 30, 2013, and the term “person” shall not include any employee benefit plan of such person and its subsidiaries and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan.

Class A Common Stock” means the Class A Common Stock, par value $0.001 per share, of the Company.

Class B Common Stock” means the Class B Common Stock, par value $0.001 per share, of the Company.

Common Stock” means the Class A Common Stock and the Class B Common Stock.

Company” has the meaning set forth in the preamble.

Coordination Period” has the meaning set forth in Section 5.04.

Effective Date” has the meaning set forth in the preamble.

 

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IPO” means the Company’s underwritten public offering of Class A Common Stock that results in the shares of Class A Common Stock that are sold in such public offering being listed on the New York Stock Exchange, the NASDAQ Stock Market or any other securities exchange.

Law” means any law, statute, ordinance, rule, regulation, code, order, judgment, injunction or decree enacted, issued, promulgated, enforced or entered by any government entity, quasi-governmental entities or self-regulatory organization exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government or by any stock exchange authority.

Material Subsidiary” means each “Significant Subsidiary” of the Company, as defined in Rule 1-02 of Regulation S-X promulgated under the Securities Act.

Notified Sponsor” has the meaning set forth in Section 5.02.

Notifying Sponsor” has the meaning set forth in Section 5.02.

OTPP” has the meaning set forth in the preamble.

Permitted Holder” means any of: (a) the Sponsors and any of their Affiliates; (b) funds or partnerships managed or advised by either of the Sponsors and any of their Affiliates (but not including any of their portfolio companies); (c) the Sponsor Designees; (d) family members or trusts of any person listed in clauses (a) and (c); and (e) any person that forms a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) with any of the persons listed in clauses (a), (c) and (d) so long as the persons described in clauses (a), (c) and (d) form the majority in interest of any group formed in accordance with this clause (e).

Permitted Transferee” shall mean any Affiliate of Ares or OTPP, as the case may be. Any Permitted Transferee of Ares shall be bound by the terms of this Agreement and treated as Ares for all purposes of this Agreement. Any Permitted Transferee of OTPP shall also be bound by the terms of this Agreement and treated as OTPP for all purposes of this Agreement.

Person” means an individual, a corporation, a general or limited partnership, a limited liability company, a joint stock company, an association, a trust or any other entity or organization, including a government, a political subdivision or an agency or instrumentality of such government.

Private Block Transfer” means a Transfer of shares of Common Stock pursuant to Sections 4(a)(i) or 4(d) of the Securities Act or pursuant to any other exemption (other than Rule 144) under the Securities Act.

Related Person” with respect to any Person means: (a) an Affiliate of such Person; (b) any investment manager, investment advisor or general partner of such Person; (c) any investment fund, investment account or investment entity whose investment manager, investment advisor or general partner is such Person or a Related Person of such Person; and (d) any equity investor, partner, member or manager of such Person. Notwithstanding the previous sentence, no Person shall be deemed an Affiliate of another Person solely by virtue of the fact that both Persons own shares of the Capital Stock of the Company.

 

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Rule 144” means Rule 144 under the Securities Act (or any successor rule or regulation).

Rule 144 Transfer” means a Transfer of shares of Common Stock pursuant to Rule 144.

Sale Notice” has the meaning set forth in Section 5.02.

Securities Act” means the Securities Act of 1933.

Significant Action” has the meaning set forth in Section 4.01.

Sponsor” has the meaning set forth in the preamble.

Sponsor Designees” has the meaning set forth in Section 3.02(a).

Transfer” (including its correlative meanings, “Transferor,” “Transferee” and “Transferred”) shall mean, with respect to any security, directly or indirectly, to sell, contract to sell, give, assign, hypothecate, pledge, encumber, grant a security interest in, offer, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of any economic, voting or other rights in or to such security. When used as a noun, “Transfer” shall have such correlative meaning as the context may require.

SECTION 1.02 Rules of Construction. Any provision of this Agreement that refers to the words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation.” References to “dollars” or “$” shall mean dollars in lawful currency of the United States of America. References to numbered or letter articles, sections and subsections refer to articles, sections and subsections, respectively, of this Agreement unless expressly stated otherwise. References to a Section or paragraph shall be to a Section or paragraph of this Agreement unless otherwise indicated. Any agreement, instrument, law or statute defined or referred to in this Agreement or in any agreement or instrument that is referred to in this Agreement means such agreement, instrument, or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments to and instruments incorporated in such agreement, instrument, or statute, as applicable. References to a Person are also to its permitted successors and assigns. In the event that any claim is made by any Person relating to any conflict, omission or ambiguity in this Agreement, no presumption or burden of proof or persuasion shall be implied by virtue of the fact that this Agreement was prepared by or at the request of a particular Person or its counsel.

 

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ARTICLE II

REPRESENTATIONS AND WARRANTIES

Each of the parties severally represents and warrants to each of the other parties as follows:

(a) Authority; Enforceability. Such party: (i) has the legal capacity or organizational power and authority to execute, deliver and perform its obligations under this Agreement; and (ii) is duly organized and validly existing and in good standing under the Laws of its jurisdiction of organization. This Agreement has been duly executed and delivered by such party and constitutes a legal, valid and binding obligation of such party, enforceable against it in accordance with the terms of this Agreement, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other Laws affecting the rights of creditors generally and to the exercise of judicial discretion in accordance with general principles of equity (whether applied by a court of law or of equity).

(b) Consent. No consent, waiver, approval, authorization, exemption, registration, license or declaration is required to be made or obtained by such party, other than those that have been made or obtained on or prior to the date of this Agreement, in connection with (i) the execution or delivery of this Agreement or (ii) the consummation of any of the transactions contemplated by this Agreement.

ARTICLE III

BOARD OF DIRECTORS

SECTION 3.01 Size and Composition. From and after the Effective Date, (1) for so long as it owns more than 5% of the then outstanding shares of Common Stock, each Sponsor shall: (i) vote or otherwise give such Sponsor’s consent in respect of all shares of Common Stock (whether now owned or hereafter acquired) owned by such Sponsor, and (ii) take all other appropriate action; and (2) the Company shall take all necessary and desirable actions (subject to any applicable securities exchange or equivalent listing requirements), including at each annual or special meeting of the stockholders of the Company called for the election of directors, and whenever the stockholders of the Company act by written consent with respect to the election of directors, to cause:

(a) the bylaws of the Company to provide that the authorized number of directors on the Board shall be not less than three and not more than thirteen;

(b) the election to the Board of any Sponsor Designees designated by the Sponsors in accordance with Section 3.02; and

(c) the removal from the Board of any director elected in accordance with clause (b) above, with or without cause, upon the written request of the Sponsor that designated such director (or, in the case of a jointly nominated Sponsor Designee pursuant to Section 3.02(b)(i), upon the written request of each of the Sponsors).

 

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SECTION 3.02 Sponsor Designees.

(a) The Sponsors shall have the right, but not the obligation, to nominate to the Board (such nominees, the “Sponsor Designees”) (subject to their election by the stockholders of the Company):

(i) for so long as the Sponsors collectively own 50% or more of the then outstanding shares of Common Stock, the greater of up to (A) six directors and (B) the number of directors comprising a majority of the Board; and

(ii) for so long as the Sponsors collectively own less than 50% of the then outstanding shares of Common Stock, that number of directors (rounded up to the nearest whole number or, if such rounding would cause the Sponsors to have the right to elect a majority of the Board, rounded to the nearest whole number) equal to the product of (x) the authorized number of directors on the Board times (y) a fraction, the numerator of which is the total number of shares of Common Stock collectively owned by the Sponsors, and the denominator of which is the total number of shares of Common Stock then outstanding. Notwithstanding the previous sentence, in the event that any Sponsor ceases to own more than 5% of the then outstanding shares of Common Stock, (x) such Sponsor shall not have the right to nominate any Sponsor Designees; (y) the shares of outstanding Common Stock owned by such Sponsor shall be excluded from any numerator for purposes of calculating the amounts set forth in clauses (i) and (ii) of this Section 3.02(a); and (z) the right to nominate Sponsor Designees in accordance with this Section 3.02 shall only be available to the Sponsor that owns the applicable percentage of shares of Common Stock.

(b) For purposes of this Section 3.02, each Sponsor shall nominate one half of the aggregate number of Sponsor Designees. Notwithstanding the previous sentence, in the event that:

(i) the number of Sponsor Designees is odd, the Sponsors shall jointly nominate one Sponsor Designee, and each Sponsor shall nominate one half of the remainder of such Sponsor Designees, except that in the event that any Sponsor ceases to own more than 5% of the then outstanding shares of Common Stock, such Sponsor shall not have the right to nominate any Sponsor Designees; and

(ii) any Sponsor owns more than 5%, but less than or equal to 10%, of the then outstanding shares of Common Stock, one Sponsor Designee shall be nominated by such Sponsor, and the remainder of the Sponsor Designees shall be nominated by the other Sponsor.

(c) If any Sponsor has nominated less than the total number of Sponsor Designees such Sponsor is entitled to nominate pursuant to this Section 3.02, such Sponsor shall have the right, at any time, to nominate such additional number of Sponsor Designees to which it is entitled. In such event, the directors of the Company shall take all necessary action to: (i) increase the size of the Board as required to enable such Sponsor to so nominate such additional Sponsor Designees; and (ii) designate such additional Sponsor Designees nominated by such Sponsor to fill such newly-created vacancy or vacancies, as applicable.

 

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(d) For purposes of this Section 3.02 and Article IV below, each Sponsor shall be deemed to own all shares of Common Stock owned by such Sponsor’s Affiliates.

ARTICLE IV

MATTERS REQUIRING SPONSOR CONSENT

SECTION 4.01 Matters Requiring Sponsor Consent. For so long as the Sponsors collectively own at least thirty percent (30%) of the then outstanding shares of Common Stock, neither the Company nor any of its subsidiaries shall take, or be permitted to take, any of the actions enumerated in this Section 4.01 (each, a “Significant Action”) without the prior written approval of each of the Sponsors. Notwithstanding the previous sentence, in the event that either Sponsor owns less than ten percent (10%) of the then outstanding shares of Common Stock, (x) the shares of Common Stock owned by such Sponsor shall be excluded from the numerator for purposes of calculating the thirty percent (30%) threshold and (y) Significant Actions shall not require the prior written approval of such Sponsor owning less than ten percent (10%) of the then outstanding Common Stock:

(a) merging or consolidating with or into any other Person, or transferring all or substantially all assets of the Company and its subsidiaries, taken as a whole, to another entity, or undertaking any transaction that would constitute a Change of Control, other than, in each case, transactions among the Company and its wholly-owned subsidiaries;

(b) (i) entering into any joint venture, investment (other than an investment in, contract with or acquisition of any securities or assets of any of the Company’s wholly owned subsidiaries), recapitalization, reorganization or contract with any other Person (other than a wholly owned subsidiary), (ii) the acquisition of any securities or assets of another Person (other than a wholly owned subsidiary of the Company), in the case of any of the transactions set forth in clause (i) or (ii), whether in a single transaction or series of related transactions, with a fair market value, or for a purchase price, in excess of $75.0 million, or (iii) the exercise of any ownership rights in respect of any of the foregoing in this Section 4.01(b);

(c) Transferring assets of the Company or its subsidiaries in any transaction or series of related transactions (other than any Transfer of assets of any wholly owned subsidiary of the Company to the Company or any of the Company’s other wholly owned subsidiaries), in each case other than (i) inventory sold in the ordinary course of business, or (ii) any Transfer of assets in a single transaction or series of related transactions with a fair market value of less than or equal to $75.0 million;

(d) guaranteeing, assuming, incurring or refinancing indebtedness for borrowed money by the Company or any of its subsidiaries (including indebtedness of any other Person existing at the time such other Person merged with or into or became a subsidiary of, or substantially all of its business and assets were acquired by, the Company or such subsidiary, and indebtedness secured by a lien encumbering any asset acquired by the Company or any such subsidiary) or the pledge of, or granting of a security interest in, any of the assets of the Company or any of its subsidiaries in excess of $100.0 million in any 12-month period (other than trade indebtedness incurred in the ordinary course of business by the Company and its subsidiaries);

 

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(e) issuing Capital Stock of the Company or the Company’s subsidiaries other than (i) issuances to the Company or any of the Company’s wholly owned subsidiaries or (ii) pursuant to an equity compensation plan approved by the Company’s stockholders or a majority of the directors on the Board designated by the Sponsors pursuant to Section 3.02;

(f) terminating the employment of the Chief Executive Officer of the Company or hiring or designating a new Chief Executive Officer of the Company;

(g) entering into any transactions, agreements, arrangements or payments (including the purchase, sale, lease or exchange of any property, or rendering of any service or modification or amendment of any existing agreement or arrangement) with (i) either of the Sponsors (or their Affiliates or Related Persons) (other than transactions in which a Sponsor or an Affiliate or Related Person of a Sponsor becomes a lender under a credit facility, indenture or other form of indebtedness with institutional lenders of the Company or any of its subsidiaries, including replacements or refinancings of such indebtedness), (ii) any officer, director or employee of the Company or any subsidiary of the Company (other than in the ordinary course of business as part of travel advances, relocation advances or salary) or (iii) any other Person who beneficially owns greater than or equal to ten percent (10%) of the Common Stock then outstanding (including such Person’s Affiliates), in each case that are material or involve aggregate payments or receipts in excess of $500,000;

(h) amending, modifying, waiving or repealing (whether by merger, consolidation or otherwise) any provision of the certificate of incorporation, the bylaws or equivalent organizational documents of the Company or any of the Company’s subsidiaries in a manner that adversely affects either of the Sponsors;

(i) commencing any liquidation, dissolution or voluntary bankruptcy, administration, recapitalization or reorganization of the Company or any of its subsidiaries in any form of transaction, making arrangements with creditors, or consenting to the entry of an order for relief in any involuntary case, or taking the conversion of an involuntary case to a voluntary case, or consenting to the appointment or taking possession by a receiver, trustee or other custodian for all or substantially all of its property, or otherwise seeking the protection of any applicable bankruptcy or insolvency law, other than any such actions with respect to a non-Material Subsidiary where, in the good faith judgment of the Board, the maintenance or preservation of such subsidiary is no longer desirable in the conduct of the business of the Company or any of its Material Subsidiaries; and

(j) subject to Section 3.02, increasing or decreasing the size of the Board; and

(k) entering into of any agreement to do any of the foregoing.

SECTION 4.02 Controlled Company.

(a) The Sponsors acknowledge and agree that, (i) by virtue of this Agreement, they are acting as a “group” within the meaning of the New York Stock Exchange (the “NYSE”) rules as of the date hereof, and (ii) by virtue of the combined voting power of Class A Common Stock held by the Sponsors representing more than 50% of the total voting power of the Class A Common Stock outstanding as of the date of the pricing of the IPO (the “Pricing Date”), the Company qualifies as a “controlled company” within the meaning of NYSE rules as of the Pricing Date.

 

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(b) So long as the Company qualifies as a “controlled company” for purposes of NYSE rules, the Company will elect to be a “controlled company” for purposes of NYSE rules, and will disclose in its annual meeting proxy statement that it is a “controlled company” and the basis for that determination. If the Company ceases to qualify as a “controlled company” for purposes of NYSE rules, the Sponsors and the Company will take whatever action may be reasonably necessary in relation to such party, if any, to cause the Company to comply with NYSE rules as then in effect within the timeframe for compliance available under such rules.

SECTION 4.03 Permitted Disclosure.

(a) Each Sponsor Designee designated by Ares is permitted to disclose to Ares and its Affiliates information about the Company and its Affiliates that he or she receives as a result of being a director, subject to his or her fiduciary duties under Delaware law. Each Sponsor Designee designated by OTPP is permitted to disclose to OTPP and its Affiliates information about the Company and its Affiliates that he or she receives as a result of being a director, subject to his or her fiduciary duties under Delaware law.

ARTICLE V

SPONSOR TRANSFER RESTRICTIONS

SECTION 5.01 Rule 144 Transfer Restrictions. After the closing of the IPO, and prior to the expiration of the Coordination Period, no Sponsor shall Transfer any or all of its shares of Common Stock pursuant to Rule 144, other than in compliance with Sections 5.02 and 5.03. Notwithstanding anything to the contrary contained in this Agreement, either Sponsor may Transfer any of its shares of Common Stock to a Permitted Transferee without restriction or the consent of the other Sponsor.

SECTION 5.02 Rule 144 Transfer Procedures. Following the closing of the IPO, and prior to the expiration of the Coordination Period, either Sponsor intending to Transfer any of its shares of Common Stock in a Rule 144 Transfer or a Private Block Transfer (such Sponsor, the “Notifying Sponsor”) shall provide the other Sponsor (the “Notified Sponsor”) with at least five (5) business days’ prior written notice (via electronic mail, facsimile or otherwise in accordance with Section 7.01) (a “Sale Notice”) of the Notifying Sponsor’s intention to effect such a Transfer. Each Sale Notice shall specify the earliest time at which the Notifying Sponsor intends to commence such a Transfer and the number of shares of Common Stock proposed to be Transferred by the Notifying Sponsor in such Transfer. The Sale Notice is intended to permit the Sponsors electing to Transfer shares of Common Stock held by them at such time to coordinate the timing and process for Transferring such shares of Common Stock in an orderly fashion. Upon receipt of the Sale Notice by the Notified Sponsor, the Notified Sponsor shall have the right to participate in the contemplated Transfer by Transferring its shares of Common Stock up to a number equal to (x) the number of shares of Common Stock proposed to be Transferred by the Notifying Sponsor in such Transfer multiplied by (y) a fraction, the numerator of which shall be the number of shares of Common Stock owned by the Notified

 

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Sponsor immediately following the closing of the IPO and the denominator of which shall be the aggregate number of shares of Common Stock owned by both Sponsors immediately following the closing of the IPO; it being understood that if such product is fractional, it shall be rounded down to the nearest whole number. The Notified Sponsor must provide the Notifying Sponsor with written notice of the Notified Sponsor’s intention to participate in such Transfer within three (3) business days of receipt of the Sale Notice.

SECTION 5.03 Rule 144 Transfer Volume Limitations. For any given measurement period applicable to the measurement of the volume limitation applicable pursuant to Rule 144(e) under the Securities Act, no Sponsor shall be permitted to effect Rule 144 Transfers in excess of its pro rata share of all shares of Common Stock that may be Transferred pursuant to Rule 144 by the Sponsors in the aggregate during the applicable measurement period. Each Sponsor’s pro rata share shall be calculated as the number of shares of Common Stock owned by such Sponsor immediately following the closing of the IPO divided by the aggregate number of shares of Common Stock owned by both Sponsors immediately following the closing of the IPO. In the event either Sponsor wishes to Transfer shares of Common Stock pursuant to Rule 144 in excess of such number, such Sponsor must receive written consent from the other Sponsor prior to effecting such Transfer.

SECTION 5.04 Coordination Period. The restrictions set forth in this Article V shall terminate at such time when either Sponsor owns less than 5% of the then-outstanding shares of Common Stock (the “Coordination Period”).

ARTICLE VI

INFORMATION

SECTION 6.01 Books and Records; Access. The Company shall, and shall cause its subsidiaries to, keep proper books, records and accounts, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company and each of its subsidiaries in accordance with generally accepted accounting principles. For so long as a Sponsor has at least one of its respective Sponsor Designees serving as a director of the Board, the Company shall, and shall cause its subsidiaries to, permit such Sponsor whose Sponsor Designee is then serving as a director and such Sponsor Designee’s respective designated representatives, at reasonable times and upon reasonable prior notice to the Company, to inspect, review and/or make copies and extracts from the books and records of the Company or any of the Company’s subsidiaries and to discuss the affairs, finances and condition of the Company or any of the Company’s subsidiaries with the officers of the Company or any the Company’s subsidiaries. For the avoidance of doubt, each Sponsor shall lose the right to Company information granted under this Section 6.01 if such Sponsor owns less than five percent (5%) of the then-outstanding shares of Common Stock. Subject to Section 6.02, any Sponsor (and any party receiving information from a Sponsor) who shall receive information shall maintain the confidentiality of such information. Taking into account the “common interest” and joint defense doctrine as may be applicable that would permit the sharing of potentially privileged information without a resulting waiver, the Company shall not be required under this Section 6.01 to disclose any privileged information where such disclosure would result in a waiver of the applicable privilege so long as the Company has used its best efforts to enter into an arrangement pursuant to which it may provide such information to such Sponsor or Sponsors without the loss of any such privilege and has notified such Sponsor or Sponsors that such information has not been provided.

 

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SECTION 6.02 Sharing of Information. Individuals associated with the Sponsors may from time to time serve on the Board or the equivalent governing body of the Company’s subsidiaries. The Company, on its behalf and on behalf of its subsidiaries, recognizes that such individuals: (i) will from time to time receive non-public information concerning the Company and its subsidiaries; and (ii) may (subject to the obligation to maintain the confidentiality of such information in accordance with Section 6.01) share such information with other individuals associated with the applicable Sponsor. Such sharing will be for the dual purpose of facilitating support to such individuals in their capacity as directors (or members of the governing body of any subsidiary) and enabling the Sponsors, as equityholders, to better evaluate the Company’s performance and prospects. The Company, on behalf of itself and its subsidiaries, irrevocably consents to such sharing.

SECTION 6.03 Certain Reports. So long as a Sponsor Designee is then serving as a director, the Company shall deliver or cause to be delivered to the Sponsors whose Sponsor Designees are then serving as directors, as applicable, at their request: (i) to the extent otherwise prepared by the Company, operating and capital expenditure budgets and periodic information packages relating to the operations and cash flows of the Company and its subsidiaries, and (ii) such other reports and information as may be reasonably requested by the Sponsors, as applicable. Notwithstanding the previous sentence but taking into account both the common interest and joint defense doctrine that permits the sharing of privileged information without waiver, the Company shall not be required to disclose any privileged information of the Company where such disclosure would result in a waiver of the applicable privilege so long as the Company has used its best efforts to enter into an arrangement pursuant to which it may provide such information to such Sponsor or Sponsors without the loss of any such privilege and has notified such Sponsor or Sponsors that such information has not been provided.

ARTICLE VII

MISCELLANEOUS

SECTION 7.01 Notices. Except as otherwise specified in this Agreement, all notices and other communications required or permitted hereunder shall be in writing. Such notices and other communications shall be mailed by registered or certified mail, return receipt requested, postage prepaid or otherwise delivered by hand, messenger, facsimile transmission or electronic mail and shall be given to such party at its address or facsimile number set forth on the signature pages to this Agreement or such other address or facsimile number as such party may hereafter specify in writing in accordance with this Section 7.01. Notwithstanding the previous sentence:

(a) unless otherwise specified by Ares in a notice delivered by Ares in accordance with this Section 7.01, any notice required to be delivered to Ares shall be properly delivered if delivered to:

 

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Ares Corporate Opportunities Fund IV, L.P.

c/o ACOF Operating Manager IV, LLC

2000 Avenue of the Stars, 12th Floor

Los Angeles, CA 90067

Fax: (310) 201-4157

Attention: Eric Waxman, Brian Klos and Natasha Li

Email: ewaxman@aresmgmt.com; bklos@aresmgmt.com;

nli@aresmgmt.com

with a copy (which shall not constitute notice) to:

Sullivan & Cromwell LLP

1888 Century Park East

Los Angeles, CA 90067

Fax: 1-310-712-8800

Attention: Rita-Anne O’Neill

Email: oneillr@sullcrom.com

(b) unless otherwise specified by OTPP in a notice delivered by OTPP in accordance with this Section 7.01, any notice required to be delivered to OTPP shall be properly delivered if delivered to:

Ontario Teachers’ Pension Plan Board

5650 Yonge Street, 3rd Floor

Toronto, ON M2M 4H5

Fax: 416-730-5082

Attention: Ashfaq Qadri and Blake Sumler

Email: ashfaq_qadri@otpp.com; blake_sumler@otpp.com

with copies (which shall not constitute notice) to:

Ontario Teachers’ Pension Plan Board

5650 Yonge Street, 3rd Floor

Toronto, ON M2M 4H5

Fax: 416-730-3771

Attention: Legal Department

Email: law_investments@otpp.com

(c) unless otherwise specified by the Company in a notice delivered by the Company in accordance with this Section 7.01, any notice required to be delivered to the Company shall be properly delivered if delivered to:

The AZEK Company Inc.

1330 W Fulton Street, #350

Chicago, IL 60607

Attention: Chief Legal Officer

 

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with a copy (which shall not constitute notice) to:

Sullivan & Cromwell LLP

1888 Century Park East

Los Angeles, CA 90067

Fax: 1-310-712-8800

Attention: Rita-Anne O’Neill

Email: oneillr@sullcrom.com

SECTION 7.02 Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any Person other than the parties to this Agreement or their respective successors or permitted assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained in this Agreement.

SECTION 7.03 Amendment. This Agreement may not be amended, restated, modified or supplemented in any respect and the observance of any term of this Agreement may not be waived except by a written instrument executed by the Company and each Sponsor that owns more than 5% of the then outstanding shares of Common Stock. Notwithstanding the previous sentence, in the event any Sponsor ceases to own more than 5% of the then outstanding shares of Common Stock, no amendment, restatement, modification, supplement or waiver of this Agreement that uniquely and adversely affects such Sponsor shall be effective without the written consent of such Sponsor.

SECTION 7.04 Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising under or by reason of this Agreement shall be assignable by any party to this Agreement except as otherwise expressly stated in this Agreement.

SECTION 7.05 Governing Law; Submission to Jurisdiction.

(a) This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, applicable to contracts executed in and to be performed entirely within that State, without giving effect to principles or rules of conflict of laws.

(b) In any judicial proceeding involving any dispute, controversy or claim arising out of or relating to this Agreement, each of the parties unconditionally accepts the jurisdiction and venue of the Delaware Court of Chancery, or, but only in the event the Delaware Chancery Court declines jurisdiction, the Superior Court of the State of Delaware (Complex Commercial Division), or, if jurisdiction over the matter is vested exclusively in federal courts, the United States District Court for the District of Delaware, and the appellate courts to which orders and judgments thereof may be appealed. In any such judicial proceeding, the parties agree that in addition to any method for the service of process permitted or required by such courts, to the fullest extent permitted by Law, service of process may be made by delivery provided pursuant to the directions in Section 7.01.

 

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SECTION 7.06 Enforcement. The parties agree that irreparable damage (for which monetary damages, even if available, would not be an adequate remedy) would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms on a timely basis or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction, specific performance and other equitable relief to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court identified in Section 7.05 above without the need to post bond, this being in addition to any other remedy to which they are entitled at law or in equity.

SECTION 7.07 Severability. If any provision of this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 7.08 Additional Securities Subject to Agreement. All shares of Common Stock of the Company that any Sponsor hereafter acquires by means of a stock split, stock dividend, distribution, exercise of options or warrants or otherwise (other than pursuant to a public offering), whether by merger, consolidation or otherwise (including shares of a surviving corporation into which the shares of Common Stock are exchanged in such transaction) will be subject to the provisions of this Agreement to the same extent as if held on the date of the this Agreement.

SECTION 7.09 Section and Other Headings. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

SECTION 7.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which may be executed by less than all of the parties to this Agreement. Each such counterpart shall be enforceable against the parties actually executing such counterparts, and all of which together shall constitute one instrument.

SECTION 7.11 Waiver of Jury Trial. To the fullest extent permitted by applicable law, each party to this Agreement, for itself and its Related Persons, irrevocably and unconditionally waives all right to trial by jury in any action, proceeding or counterclaim arising out of or relating to the actions of the parties to this Agreement or their respective Related Persons pursuant to this Agreement or in the negotiation, administration, performance or enforcement of this Agreement. The foregoing waiver shall apply regardless of whether any such claim or counterclaim is based on contract, tort or otherwise.

SECTION 7.12 Entire Agreement. This Agreement supersedes all prior agreements, whether written or oral, between the parties with respect to its subject matter (including this Agreement). This Agreement constitutes a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter.

 

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SECTION 7.13 Further Assurances. The parties to this Agreement will sign such further documents, cause such meetings to be held, resolutions passed, exercise their votes and do and perform and cause to be done such further acts and things necessary, proper or advisable in order to give full effect to this Agreement and every provision of this Agreement. To the fullest extent permitted by law, the Company shall not directly or indirectly take any action that is intended to, or would reasonably be expected to result in, any Sponsor being deprived of the rights contemplated by this Agreement.

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the Company and each Sponsor have executed this Agreement as of the day and year first above written.

 

THE AZEK COMPANY INC.
By:    
  Name:
  Title:
ARES CORPORATE OPPORTUNITIES FUND IV, L.P.
By: ACOF Operating Manager IV, L.P., its manager
By:    
  Name:
  Title:
ONTARIO TEACHERS’ PENSION PLAN BOARD
By:    
  Name:
  Title:

Signature Page to Stockholders Agreement

Exhibit 4.3

 

 

REGISTRATION RIGHTS AGREEMENT

by and among

THE AZEK COMPANY INC.,

ARES CORPORATE OPPORTUNITIES FUND IV, L.P.,

ONTARIO TEACHERS’ PENSION PLAN BOARD,

and

THE OTHER STOCKHOLDERS PARTY HERETO

 

 

Dated as of [●]

 

 


TABLE OF CONTENTS

 

         Page  

Section 1.

 

Definitions

     1  

Section 2.

 

Demand Registrations

     5  

Section 3.

 

Inclusion of Other Securities; Priority

     7  

Section 4.

 

Piggyback Registrations

     8  

Section 5.

 

Holdback Agreements

     9  

Section 6.

 

Suspensions

     10  

Section 7.

 

Registration Procedures

     11  

Section 8.

 

Participation in Underwritten Offerings

     15  

Section 9.

 

Registration Expenses

     16  

Section 10.

 

Executive Officer Transfer Restrictions

     17  

Section 11.

 

Indemnification; Contribution

     18  

Section 12.

 

Rule 144 Compliance

     21  

Section 13.

 

Miscellaneous

     22  

Exhibit A

 

Form of Counterpart

 

Exhibit B

 

Schedule of Other Stockholders

 


THIS REGISTRATION RIGHTS AGREEMENT is made and entered into as of [●] by and among The AZEK Company Inc., a Delaware corporation (the “Company”), Ares Corporate Opportunities Fund IV, L.P., a Delaware limited partnership (Ares”), Ontario Teachers’ Pension Plan Board (“OTPP”), each of the other stockholders listed on Exhibit B (the “Other Stockholders”) and any transferee that becomes a party to this Agreement by executing and delivering a counterpart to this Agreement in the form attached as Exhibit A.

RECITALS

WHEREAS, in connection with the consummation of the IPO of the Company, the parties desire to enter into this Agreement in order to grant certain registration rights to the Holders of Registrable Securities as set forth below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement and other good and valid consideration, the receipt and sufficiency of which are acknowledged, the parties to this Agreement agree as follows:

Section 1. Definitions.

(a) As used in this Agreement, the following terms shall have the following meanings:

Affiliate” of a Person has the meaning set forth in Rule 12b-2 under the Exchange Act, and “Affiliated” shall have a correlative meaning. For purposes of this definition, the term “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, whether through the ownership of voting securities or by contract or otherwise. Notwithstanding anything to the contrary set forth in this Agreement: (a) the Company and Ares and their respective Affiliates shall not be deemed to be Affiliates of OTPP or the Other Stockholders; (b) the Company and OTPP and their respective Affiliates shall not be deemed to be Affiliates of Ares or the Other Stockholders; and (c) Ares, OTPP and the Other Stockholders and their respective Affiliates shall not be deemed to be Affiliates of the Company.

Agreement” means this Registration Rights Agreement, as amended, modified or supplemented from time to time, in accordance with the terms of this Registration Rights Agreement, together with any exhibits, schedules or other attachments to this Registration Rights Agreement.

Ares” has the meaning set forth in the Preamble.

Class A Common Stock” means shares of the Company’s Class A common stock.

Class B Common Stock” means shares of the Company’s Class B common stock.


Common Stock” means the common stock, par value $0.001 per share, of the Company, including Class A Common Stock and Class B Common Stock, and any other shares of stock issued or issuable with respect to the common stock of the Company (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other corporate reorganization or other similar event).

Company” has the meaning set forth in the Preamble and includes the Company’s successors by merger, acquisition, reorganization or otherwise.

Controlling Person” has the meaning set forth in Section 11(a).

Covered Person” has the meaning set forth in Section 11(a).

Demand Registration” has the meaning set forth in Section 2(a).

Demand Registration Request” has the meaning set forth in Section 2(a).

Equity Securities” means shares of Common Stock, shares of any other class of common or preferred stock of the Company and any options, warrants, rights or securities of the Company convertible into or exchangeable for common or preferred stock of the Company.

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

Executive Officer” has the meaning as set forth in Rule 16a-1(f) or any successor rule, as promulgated by the SEC under the Exchange Act.

Executive Officer Permitted Transferee” means, with respect to any Executive Officer, (i) any executor, administrator or testamentary trustee of that Executive Officer’s estate if that Executive Officer dies, (ii) any Person receiving Common Stock of that Executive Officer by will, intestacy laws or the laws of descent or survivorship, or (iii) any trustee (so long as the trustee agrees to be bound by the terms of Section 10 as though the trustee were an Executive Officer) of a trust (including an inter vivos trust) of which there are no principal beneficiaries other than that Executive Officer or one or more Family Members of that Executive Officer.

Family Member” means, with respect to any Person who is an individual, any spouse or lineal descendants, including adoptive relationships.

Governmental Entity” means any United States or foreign (i) federal, state, local, municipal or other government, (ii) governmental or quasi-governmental entity of any nature (including, without limitation, any governmental agency, branch, department, official or entity and any court or other tribunal) or (iii) body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature, including, without limitation, any arbitral tribunal.

Holder” means Ares, OTPP, the Other Stockholders and any direct or indirect transferee of Ares, OTPP or the Other Stockholders that has become a party to this Agreement by executing and delivering a counterpart to this Agreement in the form attached as Exhibit A, in each case to the extent such Person is a holder or beneficial owner of Registrable Securities.

 

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IPO” means the Company’s first underwritten public offering of its Class A Common Stock under the Securities Act occurring simultaneously with or after the date of this Agreement.

IPO Lock-Up Period” means the period ending 180 days after the date of the Prospectus relating to the IPO.

Other Stockholders” has the meaning set forth in the Preamble.

OTPP” has the meaning set forth in the Preamble.

Person” means any natural person, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, foundation, unincorporated organization or government or other agency or political subdivision of such government.

Piggyback Registration” has the meaning set forth in Section 4(a).

Piggyback Shelf Registration Statement” has the meaning set forth in Section 4(a).

Piggyback Shelf Takedown” has the meaning set forth in Section 4(a).

Prospectus” means the prospectus or prospectuses (whether preliminary or final) included in any Registration Statement and relating to Registrable Securities, as amended or supplemented and including all material incorporated by reference in such prospectus or prospectuses.

Registrable Securities” means, at any time, (i) any shares of Class A Common Stock held or beneficially owned by any Holder, (ii) any shares of Class A Common Stock issued or issuable to any Holder upon the conversion, exercise or exchange, as applicable, of any other Equity Securities held or beneficially owned by any Holder and (iii) any shares of Class A Common Stock issued or issuable to any Holder with respect to any shares described in clauses (i) and (ii) above by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or otherwise in connection with a combination of shares, distribution, recapitalization, merger, consolidation, other reorganization or other similar event (it being understood that, for purposes of this Agreement, a Person shall be deemed to be a Holder of Registrable Securities whenever such Person in its sole discretion has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected). As to any particular Registrable Securities, the shares described in the preceding sentence shall cease to constitute Registrable Securities when such shares become eligible for resale under Rule 144 without volume or manner-of-sale restrictions and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144(c)(1).

Registration Expenses” has the meaning set forth in Section 9(a).

 

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Registration Statement” means any registration statement of the Company under the Securities Act which covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus, all amendments and supplements to that Registration Statement, including post-effective amendments, all exhibits and all documents incorporated by reference in that Registration Statement.

Rule 144” means Rule 144 under the Securities Act or any successor rule.

SEC” means the Securities and Exchange Commission or any successor agency administering the Securities Act and the Exchange Act at the time.

Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated under the Securities Act of 1933.

Selling Expenses” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities.

Sponsor” means Ares or OTPP, and “Sponsors” means Ares and OTPP.

Sponsor Holder” means Ares or OTPP and any direct or indirect transferee of Ares or OTPP that has become a party to this Agreement by executing and delivering a counterpart to this Agreement in the form attached to this Agreement as Exhibit A, in each case to the extent that Person is a holder or beneficial owner of Registrable Securities.

Sponsor Permitted Transferee” shall mean any Affiliate of Ares or OTPP, as the case may be, and (i) any Sponsor Permitted Transferee of Ares shall be bound by the terms of this Agreement and treated as Ares for all purposes of this Agreement and (ii) any Sponsor Permitted Transferee of OTPP shall be shall be bound by the terms of this Agreement and treated as OTPP for all purposes of this Agreement.

“Suspension” has the meaning set forth in Section 6.

Transfer” means, when used as a noun, any direct or indirect, voluntary or involuntary, sale, disposition, hypothecation, mortgage, gift, pledge, assignment, attachment or other transfer (including the creation of any derivative or synthetic interest, including a participation or other similar interest) and, when used as a verb, voluntarily to directly or indirectly sell, dispose, hypothecate, mortgage, gift, pledge, assign, attach or otherwise transfer, in any case, whether by operation of law or otherwise.

underwritten offering” means a registered offering of securities conducted by one or more underwriters pursuant to the terms of an underwriting agreement.

(b) In addition to the above definitions, unless the context requires otherwise:

(i) any reference to any statute, regulation, rule or form as of any time shall mean such statute, regulation, rule or form as amended or modified and shall also include any successor statute, regulation, rule or form, as amended, from time to time;

 

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(ii) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, in each case notwithstanding the absence of any express statement to such effect, or the presence of such express statement in some contexts and not in others;

(iii) references to “Section” are references to Sections of this Agreement; and

(iv) references to “dollars” and “$” mean U.S. dollars.

Section 2. Demand Registrations.

(a) Right to Demand Registrations. At any time following the IPO Lock-Up Period, each of the Sponsors may, by providing written notice to the Company, request to sell all or part of its Registrable Securities pursuant to a Registration Statement (a “Demand Registration”) (such requesting Sponsor, a “Demand Holder”). Each request for a Demand Registration (a “Demand Registration Request”) shall specify the number of Registrable Securities intended to be offered and sold by that Demand Holder pursuant to the Demand Registration and the intended method of distribution of those Registrable Securities, including whether the offering is intended to be an underwritten offering. Notwithstanding the prior sentence, the Company may, if the Board of Directors of the Company so determines that, due to a pending or contemplated material acquisition or disposition or public offering or other material event involving the Company or any of its subsidiaries, it would be inadvisable to effect the requested Demand Registration at that time (but in no event after the related Registration Statement has become effective), the Company may, upon providing the Demand Holder written notice (the “Delay Notice”), defer the Demand Registration for a single period set forth in that Delay Notice not to exceed 120 days. The Company shall not postpone or delay a Demand Registration under this Section 2 more than once in any twelve (12) month period. Promptly (but in any event within three (3) business days) after receipt of a Demand Registration Request, the Company shall give written notice of the Demand Registration Request to all other Holders of Registrable Securities. As promptly as practicable and no later than ten (10) business days after receipt of a Demand Registration Request, the Company shall register all Registrable Securities (i) that have been requested to be registered in the Demand Registration Request and (ii) subject to Section 3, with respect to which the Company has received a written request for inclusion in the Demand Registration from a Holder no later than five (5) business days after the date on which the Company has given notice to Holders of the Demand Registration Request. The Company shall use its reasonable best efforts to cause the Registration Statement filed pursuant to this Section 2(a) to be declared effective by the SEC or otherwise become effective under the Securities Act as promptly as practicable after the filing of the Registration Statement. A Demand Registration may be effected by way of a Registration Statement on Form S-3 or any similar short-form registration statement to the extent the Company is permitted to use such form at such time. The Company shall not be required to effect a Demand Registration unless the expected aggregate gross proceeds from the offering of the Registrable Securities to be registered in connection with such Demand Registration are at least $50 million and shall not be required to effect more than two (2) Demand Registrations in any 12-month period.

 

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The Company shall not be obligated to maintain a Registration Statement pursuant to a Demand Registration effective for more than (x) 360 days or (y) a shorter period when all of the Registrable Securities covered by that Registration Statement have been sold pursuant to that Registration Statement(the “Effectiveness Period”).

(b) Number of Demand Registrations. Each of (x) Ares, together with any direct or indirect transferee of Ares that has become a Sponsor Holder, and (y) OTPP, together with any direct or indirect transferee of OTPP that has become a Sponsor Holder, shall be entitled to request up to four (4) Demand Registrations. However, at any time in which the Company is eligible to register Common Stock on Form S-3 (or any successor form), each Sponsor shall have an unlimited number of Demand Registrations on Form S-3. Notwithstanding anything in this Agreement to the contrary, a registration shall not count as a Demand Registration for purposes of this Section 2(b) unless and until the Sponsor Holders of Registrable Securities are able to register and sell at least 90% of the Registrable Securities requested to be included in such registration.

(c) Withdrawal. A Holder may, by written notice to the Company, withdraw its Registrable Securities from a Demand Registration at any time prior to the effectiveness of the applicable Registration Statement. Upon receipt of notices from all applicable Holders to that effect, the Company shall cease all efforts to seek effectiveness of the applicable Registration Statement, unless the Company intends to effect a primary offering of securities pursuant to such Registration Statement. In addition, a Demand Holder may, at any time prior to the effective date of the Registration Statement relating to a Demand Registration, revoke its request by providing a written notice of the revocation to the Company and only if that Demand Holder complies with this Section 2(c). Subject to Section 2(d), the Demand Holder revoking its request shall reimburse the Company for all its reasonable out-of-pocket expenses incurred in the preparation, filing and processing of the Registration Statement. If pursuant to the terms of this Section 2(c), the Demand Holder reimburses the Company for its reasonable out-of-pocket expenses incurred in the preparation, filing and processing of the Registration Statement or if the Demand Holder is not required to pay such expenses pursuant to Section 2(d), the attempted registration shall not be deemed to be a Demand Registration.

(d) Effective Registration. A registration will not count as a Demand Registration, and the Demand Holder shall not be required to reimburse the Company for its expenses incurred in the preparation, filing and processing of any Registration Statement pursuant to Section 2(c) if:

(i) the Demand Holder determines in its sole discretion to withdraw the proposed registration of any Registrable Securities requested to be registered by the Demand Holder due to a material adverse change in the Company’s business, financial condition, results of operations or prospects (other than as a result of any action by the Demand Holder);

(ii) such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court for any reason (other than as a result of any act by the Demand Holder) and the Company fails to have the stop order, injunction or other order or requirement removed, withdrawn or resolved to the Demand Holder’s satisfaction;

 

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(iii) the Demand Holder requests that the Company withdraw the registration at any time during the period specified in a Delay Notice or within ten days after the end of that period; or

(iv) the conditions to closing specified in the underwriting agreement or purchase agreement entered into in connection with the registration relating to the demand are not satisfied (other than as a result of a default or breach under that underwriting agreement or purchase agreement by the Demand Holder).

(e) Selection of Underwriters. If a Demand Registration is an underwritten offering, the Demand Holder requesting the Demand Registration shall have the right to select the investment banking firm(s) to act as the managing underwriter(s) in connection with the related offering, subject to the approval of (i) the other Sponsor, if such Sponsor has requested to participate in such Demand Registration (which approval shall not be unreasonably withheld, conditioned or delayed), and (ii) the Company (which approval shall not be unreasonably withheld, conditioned or delayed).

Section 3. Inclusion of Other Securities; Priority. The Company shall not include in any Demand Registration any securities that are not Registrable Securities without the prior written consent of the Holder(s) (which consent may not be unreasonably withheld or delayed) of the Registrable Securities participating in that Demand Registration. If a Demand Registration involves an underwritten offering and the managing underwriters of such offering advise the Company and the Holders in writing that, in their opinion, the number of Equity Securities proposed to be included in that Demand Registration, including all Registrable Securities and all other Equity Securities proposed to be included in such offering, exceeds the number of Equity Securities that can reasonably be expected to be sold in such offering without adversely affecting the success of the offering (including the price, timing or distribution of the securities to be sold in such offering), the Company shall include in such Demand Registration: (i) first, the Registrable Securities proposed to be sold by Sponsor Holders in the offering; and (ii) second, to the extent additional Equity Securities may, in the opinion of the managing underwriters, be included in the offering without reasonably being expected to adversely affect the success of the offering (including the price, timing or distribution of the securities to be sold in the offering), any Equity Securities proposed to be included in such Demand Registration by any other Persons (including Equity Securities to be sold for the account of the Company and/or any other holders of Equity Securities), allocated, in the case of this clause (ii), among such Persons in such manner as the Company may determine. If more than one Sponsor Holder is participating in such Demand Registration and the managing underwriters of such offering determine that a limited number of Registrable Securities held by the Sponsor Holders may be included in the offering without reasonably being expected to adversely affect the success of the offering (including the price, timing or distribution of the securities to be sold in the offering), then the Registrable Securities that are included in such offering shall be allocated pro rata among the participating Sponsor Holders on the basis of the number of Registrable Securities initially requested to be sold by each such Sponsor Holder in such offering.

 

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Section 4. Piggyback Registrations.

(a) Whenever the Company proposes to register any Equity Securities under the Securities Act (other than a registration (i) pursuant to a Registration Statement on Form S-8 (or other registration solely relating to an offering or sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit arrangement), (ii) pursuant to a Registration Statement on Form S-4 (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor rule to Rule 145) or (iii) in connection with any dividend or distribution reinvestment or similar plan), whether for its own account or for the account of one or more stockholders of the Company (other than a Demand Registration (for which participation is provided under Section 2)) (a “Piggyback Registration”), the Company shall give prompt written notice to each Holder of Registrable Securities of its intention to effect such a registration. The Company shall in no event give that notice in less than ten (10) business days prior to the proposed date of filing of the applicable Registration Statement. Subject to Sections 4(b) and 5(c), the Company shall include in the Registration Statement and in any offering of Equity Securities to be made pursuant to that Registration Statement that number of Registrable Securities requested to be sold in such offering by a Holder for the account of that Holder if the Company has received a written request for inclusion in the Registration Statement from that Holder no later than five (5) business days after the date on which the Company has given notice of the Piggyback Registration to Holders. The Company may terminate or withdraw a Piggyback Registration prior to the effectiveness of such registration at any time in its sole discretion. If a Piggyback Registration is effected pursuant to a Registration Statement on Form S-3 or the then appropriate form for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act or any successor rule to Rule 415 (a “Piggyback Shelf Registration Statement”), the Holders of Registrable Securities shall be notified by the Company of and shall have the right, but not the obligation, to participate in any offering pursuant to such Piggyback Shelf Registration Statement (a “Piggyback Shelf Takedown”), subject to the same limitations that are applicable to any other Piggyback Registration as set forth above.

(b) Priority on Primary Piggyback Registrations. If a Piggyback Registration or Piggyback Shelf Takedown is initiated as a primary underwritten offering on behalf of the Company and the managing underwriters of the offering advise the Company in writing that, in their opinion, the number of Equity Securities proposed to be included in that offering, including all Registrable Securities and all other Equity Securities proposed to be included in the offering, exceeds the number of Equity Securities that can reasonably be expected to be sold in the offering without adversely affecting the success of the offering (including the price, timing or distribution of the securities to be sold in the offering), the Company shall include in such Piggyback Registration or Piggyback Shelf Takedown: (i) first, the Equity Securities that the Company proposes to sell in the offering; (ii) second, any Equity Securities proposed to be included in the offering by Holders exercising their rights pursuant to this Section 4, allocated, in the case of this clause (ii), pro rata among those Holders on the basis of the number of Equity Securities initially proposed to be included by each Holder in the offering, up to the number of Equity Securities, if any, that the managing underwriters determine can be included in the offering without reasonably being expected to adversely affect the success of the offering (including the price, timing or distribution of the securities to be offered in the offering); and (iii) third, any Equity Securities proposed to be included in the offering by any other Person to whom the Company has a contractual obligation to facilitate such offering.

 

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(c) Priority on Secondary Piggyback Registrations. If a Piggyback Registration or a Piggyback Shelf Takedown is initiated as an underwritten offering on behalf of a holder of Equity Securities to whom the Company has a contractual obligation to facilitate such offering, other than Holders of Registrable Securities exercising rights pursuant to Section 2, for which the specified priorities are in Section 3, and the managing underwriters of the offering advise the Company in writing that, in their opinion, the number of Equity Securities proposed to be included in the offering, including all Registrable Securities and all other Equity Securities requested to be included in the offering, exceeds the number of Equity Securities which can reasonably be expected to be sold in the offering without adversely affecting the success of the offering (including the price, timing or distribution of the securities to be sold in the offering), the Company shall include in such Piggyback Registration or Piggyback Shelf Takedown: (i) first, the Equity Securities that the Person demanding the offering pursuant to such contractual right proposes to sell in the offering; and (ii) second, any Equity Securities requested to be included in the offering by a Holder exercising their rights pursuant to this Section 4, allocated, in the case of this clause (ii), pro rata among those Holders on the basis of the number of Equity Securities initially proposed to be included by each of those Holders in the offering, up to the number of Equity Securities, if any, that the managing underwriters determine can be included in the offering without reasonably being expected to adversely affect the success of the offering (including the price, timing or distribution of the securities to be offered in the offering); and (iii) third, any Equity Securities proposed to be included in the offering by any other Person to whom the Company has a contractual obligation to facilitate such offering.

(d) Selection of Underwriters. If a Piggyback Registration or Piggyback Shelf Takedown is initiated as a primary underwritten offering on behalf of the Company, the Company shall have the right to select the investment banking firm(s) to act as the managing underwriter(s) in connection with such offering.

Section 5. Holdback Agreements.

(a) Holders of Registrable Securities. Each Holder of Registrable Securities that holds or beneficially owns at least 10% of the outstanding Common Stock agrees that in connection with any registered underwritten offering of Common Stock, and upon request from the managing underwriter(s) for that offering, that Holder shall not, without the prior written consent of that managing underwriter(s), during such period as is reasonably requested by the managing underwriter(s) (which period shall in no event be longer than three (3) days prior to and ninety (90) days after the pricing of such offering), Transfer any Registrable Securities. The restrictions on Transfers in this Section 5(a) shall not apply to offers or sales of Registrable Securities that are included in an offering pursuant to Sections 2, 3 or 4 of this Agreement and shall be applicable to the Holders of Registrable Securities only if, for so long as and to the extent that the Company, the directors and Executive Officers of the Company, each selling stockholder included in such offering and each other Person holding or beneficially owning at least 10% of the outstanding Common Stock are subject to the same restrictions. Each Holder of Registrable Securities agrees to execute and deliver such other agreements as may be reasonably requested by the managing underwriter(s) that are consistent with the provisions of this

 

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Section 5(a) and are necessary to give further effect to those provisions. If the Company releases any Holder of Registration Securities from such a holdback agreement, it shall similarly release all other Holders of Registrable Securities on a pro rata basis. Notwithstanding anything to the contrary in this Section 5(a), no Holder shall be subject to a holdback arrangement in excess of 180 days in any calendar year due to the registration of any Registrable Securities pursuant to Section 3.

(b) The Company. To the extent requested by the managing underwriter(s) for the applicable offering, the Company shall not effect any sale registered under the Securities Act of Equity Securities during the period commencing three (3) days prior to and ending ninety (90) days after the pricing of an underwritten offering pursuant to Sections 2 or 4 of this Agreement, other than a registration (i) pursuant to a Registration Statement on Form S-8 (or other registration solely relating to an offering or sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit arrangement), (ii) pursuant to a Registration Statement on Form S-4 (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor rule to Rule 145), (iii) in connection with any dividend or distribution reinvestment or similar plan or (iv) as consideration to any third party seller in connection with the bona fide acquisition by the Company or any subsidiary of the Company of the assets or securities of any Person in any transaction approved by the Board of Directors of the Company. Notwithstanding the foregoing, the Company shall not be subject to a restriction in excess of 180 days in any calendar year due to the registration of any Registrable Securities pursuant to Section 3.

Section 6. Suspensions. Upon giving no less than five (5) days’ prior written notice to the Holders of Registrable Securities, the Company shall be entitled to delay or suspend the filing, effectiveness or use of a Registration Statement or Prospectus (a “Suspension”) if the board of directors of the Company determines in good faith that (i) proceeding with the filing, effectiveness or use of such Registration Statement or Prospectus would reasonably be expected to require the Company to disclose any information the disclosure of which would have a material adverse effect on the Company and that the Company would not otherwise be required to disclose at such time, (ii) the registration or offering proposed to be delayed or suspended would reasonably be expected to, if not delayed or suspended, have a material adverse effect on any pending negotiation or plan of the Company to effect a merger, acquisition, disposition, financing, reorganization, recapitalization or other similar transaction, in each case that, if consummated, would be material to the Company or (iii) due to any other material event involving the Company or any of its subsidiaries, it would be inadvisable to effect the filing or use such Registration Statement or Prospectus. The Company shall not be entitled to exercise a Suspension (i) more than twice during any 12-month period or (ii) for a period exceeding 60 (sixty) days on any one occasion. Each Holder who is notified by the Company of a Suspension pursuant to this Section 6 shall keep the existence of such Suspension confidential and shall immediately discontinue (and direct any other Person making offers or sales of Registrable Securities on behalf of such Holder to immediately discontinue) offers and sales of Registrable Securities pursuant to such Registration Statement or Prospectus until such time as it is advised in writing by the Company that the use of the Registration Statement or Prospectus may be resumed and, if applicable, is furnished by the Company with a supplemented or amended Prospectus as contemplated by Section 7(g). If the Company delays or suspends a Demand Registration, the Holder that initiated such Demand Registration shall be entitled to withdraw its Demand Registration Request and, if it does so, such Demand Registration Request shall not count against the limitation on the number of such Holder’s Demand Registrations set forth in Section 2(b).

 

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Section 7. Registration Procedures. If and whenever the Company is required to effect the registration of any Registrable Securities pursuant to this Agreement, the Company shall use its reasonable best efforts to effect and facilitate the registration, offering and sale of such Registrable Securities in accordance with the intended method of disposition of those Registrable Securities as promptly as is practicable, and, the Company shall as expeditiously as possible and as applicable:

(a) prepare and file with the SEC a Registration Statement with respect to those Registrable Securities, make all required filings required in connection with that Registration Statement and (if the Registration Statement is not automatically effective upon filing) use its reasonable best efforts to cause the Registration Statement to become effective as promptly as practicable. Before filing a Registration Statement or any amendments or supplements to that Registration Statement, the Company shall furnish to counsel to the Holders for such registration copies of all documents proposed to be filed, which documents shall be subject to review by counsel to the Holders at the Company’s expense, and give the Holders participating in such registration an opportunity to comment on such documents and keep such Holders reasonably informed as to the registration process. The Company shall not be obligated to maintain such registration effective for a period longer than the Effectiveness Period;

(b) prepare and file with the SEC such amendments and supplements to any Registration Statement and the Prospectus used in connection with that Registration Statement as may be necessary to keep the Registration Statement effective for a period of not less than the Effectiveness Period (but not prior to the expiration of the time period referred to in Section 4(3) of the Securities Act and Rule 174 under the Securities Act, if applicable) and comply with the applicable requirements of the Securities Act with respect to the disposition of the Registrable Securities covered by such Registration Statement in accordance with the intended method or methods of disposition by the sellers of such Registrable Securities set forth in such Registration Statement or supplement to the Prospectus;

(c) furnish to each Holder participating in the registration, without charge, such number of copies of the Registration Statement and any post-effective amendment to such Registration Statement and such number of copies of the Prospectus included in such Registration Statement (including each preliminary Prospectus) and any supplement to that Registration Statement (in each case including all exhibits in and all documents incorporated by reference in the Registration Statement and any supplement to the Registration Statement) and such other documents as such Holder may reasonably request, including in order to facilitate the disposition of the Registrable Securities owned by such Holder (it being understood that the Company consents to the use of the Prospectus and any amendment or supplement to the Prospectus by the Holders covered by the Registration Statement and the underwriter or underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendments or supplements to the Prospectus);

 

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(d) use its reasonable best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such U.S. jurisdiction(s) as any Holder participating in the registration or any managing underwriter reasonably requests and do any and all other acts and things that may be necessary or reasonably advisable to enable such Holder and each underwriter, if any, to consummate the disposition of that Holder’s Registrable Securities in such jurisdiction(s), except that the Company shall not be required to qualify generally to do business, subject itself to taxation or consent to general service of process in any jurisdiction where it would not otherwise be required to do so but for its obligations pursuant to this Section 7(d);

(e) use its reasonable best efforts to cause all Registrable Securities covered by any Registration Statement to be registered with or approved by such other Governmental Entities or self-regulatory bodies as may be necessary or reasonably advisable in light of the business and operations of the Company to enable each Holder participating in the registration to consummate the disposition of such Registrable Securities in accordance with the intended method or methods of disposition of such Registrable Securities;

(f) promptly notify each Holder participating in the registration and the managing underwriters of any underwritten offering:

(i) each time when the Registration Statement, any pre-effective amendment to the Registration Statement, the Prospectus or any Prospectus supplement or any post-effective amendment to the Registration Statement has been filed and, with respect to the Registration Statement or any post-effective amendment to the Registration Statement, when the same has become effective;

(ii) of any oral or written comments by the SEC or of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for any additional information regarding such Holder;

(iii) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or the initiation or threatening of any proceedings for any such purpose; and

(iv) of the receipt by the Company of any notification with respect to the suspension of the qualification of any Registrable Securities for sale under the applicable securities or blue sky laws of any jurisdiction;

(g) notify each Holder participating in such registration, at any time when a Prospectus relating to the registration is required to be delivered under the Securities Act, of the occurrence of any event that would cause the Prospectus included in the related Registration Statement to contain an untrue statement of a material fact or to omit any fact necessary to make the statements made in the Prospectus not misleading in light of the circumstances under which they were made, and, as promptly as practicable, prepare, file with the SEC and furnish to that Holder a reasonable number of copies of a supplement or amendment to the Prospectus so that, as thereafter delivered to the purchasers of the Registrable Securities, the Prospectus will not contain any untrue statement of a material fact or omit to state any fact necessary to make the statements made in the Prospectus not misleading in light of the circumstances under which they were made;

 

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(h) in the event of the issuance of any stop order suspending the effectiveness of a Registration Statement, any order suspending or preventing the use of any related Prospectus or any suspension of the qualification or exemption from qualification of any Registrable Securities for sale in any jurisdiction, use its reasonable best efforts to promptly obtain the withdrawal or lifting of any such order or suspension;

(i) not file or make any amendment to any Registration Statement with respect to any Registrable Securities, or any amendment of or supplement to the Prospectus used in connection such Registration Statement, that refers to any Holder covered by the Registration Statement by name or otherwise identifies that Holder as the holder of any securities of the Company without the consent of that Holder (which consent may not be unreasonably withheld or delayed), unless and to the extent that disclosure is required by law. Notwithstanding the previous sentence, (i) each Holder shall furnish to the Company in writing such information regarding itself and the distribution proposed by it as the Company may reasonably request for use in connection with a Registration Statement or Prospectus and (ii) each Holder agrees to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished to the Company by that Holder or of the occurrence of any event that would cause the Prospectus included in the Registration Statement to contain an untrue statement of a material fact regarding that Holder or the distribution of those Registrable Securities or to omit to state any material fact regarding that Holder or the distribution of those Registrable Securities required to be stated in the Prospectus or necessary to make the statements made in the Prospectus not misleading in light of the circumstances under which they were made. The Holder agrees to furnish to the Company, as promptly as practicable, any additional information required to correct and update the information previously furnished by that Holder such that the Prospectus shall not contain any untrue statement of a material fact regarding that Holder or the distribution of those Registrable Securities or omit to state a material fact regarding that Holder or the distribution of those Registrable Securities necessary to make the statements made in the Prospectus not misleading in light of the circumstances under which they were made;

(j) cause the Registrable Securities to be listed on each securities exchange on which the Common Stock is then listed or, if the Common Stock is not then listed on any securities exchange, use its reasonable best efforts to cause those Registrable Securities to be listed on a national securities exchange selected by the Company after consultation with the Holders participating in such registration;

(k) provide a transfer agent and registrar (which may be the same entity) for all the Registrable Securities not later than the effective date of the Registration Statement;

(l) make available for inspection by any Holder participating in the registration, any underwriter participating in any underwritten offering pursuant to the Registration Statement and any attorney, accountant or other agent retained by any Holder or underwriter, all corporate documents, financial and other records relating to the Company and its business reasonably requested by that Holder or underwriter, cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such Holder,

 

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underwriter, attorney, accountant or agent in connection with that registration or offering and make senior management of the Company and the Company’s independent accountants available for customary due diligence and drafting sessions. Any Person gaining access to information or personnel of the Company pursuant to this Section 7(l) shall (i) reasonably cooperate with the Company to limit any resulting disruption to the Company’s business and (ii) protect the confidentiality of any information regarding the Company which the Company determines in good faith to be confidential and of which determination the Person is notified, unless the information (A) is or becomes known to the public without a breach of this Agreement, (B) is or becomes available to the Person on a non-confidential basis from a source other than the Company, (C) is independently developed by the Person, (D) is requested or required by a deposition, interrogatory, request for information or documents by a Governmental Entity, subpoena or similar process or (E) is otherwise required to be disclosed by law;

(m) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC, and make available to its stockholders, as soon as reasonably practicable, an earnings statement (in a form that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 under the Securities Act or any successor rule to Rule 158) covering the period of at least 12 months beginning with the first day of the Company’s first full fiscal quarter after the effective date of the applicable Registration Statement. This requirement will be deemed satisfied if the Company timely files complete and accurate information on Forms 10-K, 10-Q and 8-K under the Exchange Act and otherwise complies with Rule 158 under the Securities Act or any successor rule to Rule 158;

(n) in the case of an underwritten offering of Registrable Securities, promptly incorporate in a supplement to the Prospectus or a post-effective amendment to the Registration Statement such information as is reasonably requested by the managing underwriter(s) or any Holder participating in such underwritten offering to be included in such Prospectus or post-effective amendment, the purchase price for the securities to be paid by the underwriters and any other applicable terms of such underwritten offering, and promptly make all required filings of such supplement or post-effective amendment after being notified of the matters to be incorporated in such supplement or amendment;

(o) in the case of an underwritten offering of Registrable Securities, enter into such customary agreements (including underwriting and lock-up agreements in customary form) and take all such other customary actions as any Holder participating in the offering or the managing underwriter(s) of the offering reasonably requests in order to expedite or facilitate the disposition of the Registrable Securities;

(p) furnish to each Holder and each underwriter, if any, participating in an offering of Registrable Securities (i) (A) all legal opinions of outside counsel to the Company required to be included in the Registration Statement and (B), in the case of an underwritten offering, a written legal opinion of outside counsel to the Company, dated the closing date of the offering, in form and substance as is customarily given in opinions of outside counsel to the Company to underwriters in underwritten registered offerings; and (ii) (A) obtain all consents of independent public accountants required to be included in the Registration Statement and (B), in the case of an underwritten offering, on the date of the applicable Prospectus, on the effective date of any post-effective amendment to the Registration Statement and at the closing of the offering, dated the respective dates of delivery of each of the foregoing, a “comfort letter” signed by the Company’s independent public accountants in form and substance as is customarily given in accountants’ letters to underwriters in underwritten registered offerings;

 

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(q) in the case of an underwritten offering of Registrable Securities, make senior management of the Company available, to the extent requested by the managing underwriter(s), to assist in the marketing of the Registrable Securities to be sold in such underwritten offering, including the participation of such members of senior management of the Company in “road show” presentations and other customary marketing activities, including “one-on-one” meetings with prospective purchasers of the Registrable Securities to be sold in such underwritten offering, and otherwise facilitate, cooperate with, and participate in such underwritten offering and customary selling efforts related to such underwritten offering, in each case to the same extent as if the Company were engaged in a primary underwritten registered offering of its Common Stock;

(r) cooperate with the Holders of the Registrable Securities to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold pursuant to such Registration Statement free of any restrictive legends and representing such number of shares of Common Stock and registered in such names as the Holders of the Registrable Securities may reasonably request a reasonable period of time prior to sales of Registrable Securities pursuant to such Registration Statement. Notwithstanding anything in this Agreement to the contrary, the Company may satisfy its obligations under this Agreement without issuing physical stock certificates through the use of The Depository Trust Company’s Direct Registration System;

(s) not later than the effective date of the Registration Statement, provide a CUSIP number for all Registrable Securities covered thereby and provide the applicable transfer agent with printed certificates for the Registrable Securities in a form eligible for deposit with The Depository Trust Company. Notwithstanding anything in this Agreement to the contrary, the Company may satisfy its obligations under this Agreement without issuing physical stock certificates through the use of The Depository Trust Company’s Direct Registration System; and

(t) otherwise use its reasonable best efforts to take or cause to be taken all other actions necessary or reasonably advisable to effect the registration, marketing and sale of such Registrable Securities contemplated by this Agreement.

Section 8. Participation in Underwritten Offerings. No Person may participate in any underwritten offering pursuant to this Agreement unless that Person (i) agrees to sell that Person’s securities on the basis provided in any underwriting arrangements in customary form approved by the Persons entitled under this Agreement to approve those arrangements and (ii) completes and executes all questionnaires, powers of attorney (subject to compliance with the applicable regulations and standard of care required under the Pension Benefits Act (Ontario) in the case of any power of attorney to be granted by OTPP), indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. No Holder of Registrable Securities included in any underwritten offering shall be required to make any representations or warranties to the Company or the underwriters (other than representations and warranties regarding (A) that Holder’s ownership of its Registrable Securities to be sold in

 

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the offering, (B) that Holder’s power and authority to effect the relevant Transfer and (C) such matters pertaining to compliance with securities laws as may be reasonably requested by the managing underwriter(s)). In addition, no Holder of Registrable Securities included in an underwritten offering will be required to undertake any indemnification obligations to the Company or the underwriters, except to the extent otherwise provided in Section 11. Any liability of any Holder under an underwriting agreement entered into pursuant to this Section 8 shall be limited to liability arising from the breach of its representations and warranties contained in that underwriting agreement and shall be limited to an amount equal to the net amount received by that Holder from the sale of Registrable Securities pursuant to such Registration Statement.

Section 9. Registration Expenses.

(a) Subject to Section 2(c), the Company shall pay directly or promptly reimburse all costs, fees and expenses (other than Selling Expenses) incident to the Company’s performance of or compliance with this Agreement, including, (i) all SEC, Financial Industry Regulation Authority and other registration and filing fees; (ii) all fees and expenses associated with filings to be made with, or the listing of any Registrable Securities on, any securities exchange or over-the-counter trading market on which the Registrable Securities are to be listed or quoted; (iii) all fees and expenses of complying with securities and blue sky laws (including fees and disbursements of counsel for the Company in connection with complying with securities and blue sky laws); (iv) all printing, messenger, telephone and delivery expenses (including the cost of distributing Prospectuses in preliminary and final form as well as any supplements to the Prospectuses); (v) all fees and expenses incurred in connection with any “road show” for underwritten offerings, including all costs of travel, lodging and meals; (vi) all transfer agent’s and registrar’s fees; (vii) all fees and expenses of counsel to the Company; (viii) all fees and expenses of the Company’s independent public accountants (including any fees and expenses arising from any special audits or “comfort letters”) and any other Persons retained by the Company in connection with or incident to any registration of Registrable Securities pursuant to this Agreement; and (ix) all fees and expenses of underwriters (other than Selling Expenses) customarily paid by the issuers or sellers of securities (all such costs, fees and expenses, “Registration Expenses”). In connection with each registration initiated pursuant to this Agreement (whether a Demand Registration or a Piggyback Registration), the Company shall reimburse the Holders covered by such registration for the reasonable fees and disbursements of one law firm chosen by a majority of the number of shares of Registrable Securities included in the Demand Registration Request, in the event of a Demand Registration, and, in the case of a Piggyback Registration, the Holders of a majority of the number of shares of Registrable Securities included in such registration. Each Holder shall pay the fees and expenses of any additional counsel engaged by that Holder and shall bear its respective Selling Expenses associated with a registered sale of its Registrable Securities pursuant to this Agreement.

(b) The obligation of the Company to bear and pay the Registration Expenses shall apply irrespective of whether a registration, once properly demanded or requested, becomes effective or is withdrawn or suspended. Notwithstanding the previous sentence, the Registration Expenses for any Registration Statement withdrawn solely at the request of one or more Holder(s) (unless withdrawn following commencement of a Suspension) shall be borne by such Holder(s) in accordance with Section 2(c).

 

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Section 10. Executive Officer Transfer Restrictions.

Notwithstanding anything in this Agreement to the contrary:

(a) Subject to applicable securities laws, rules and regulations and applicable Company policies as in effect from time to time, until the earlier of (i) such time as each of the Sponsors owns less than 17.5% of the Equity Securities owned by such Sponsor immediately following the IPO and (ii) the third anniversary of the IPO, no Executive Officer shall, without the prior written consent of each of the Sponsors, Transfer any Common Stock (other than to Executive Officer Permitted Transferees pursuant to Section 10(c)) to the extent that such Transfer would result in the Relative Ownership Percentage (as defined below) of such Executive Officer immediately following the effective time of such Transfer (the “Determination Time”) being less than the Relative Ownership Percentage of the Sponsors immediately following the Determination Time. For purposes of this Section 10(a), “Relative Ownership Percentage” means:

(i) with respect to an Executive Officer, a fraction (expressed as a percentage), (A) the numerator of which is the number of shares of vested and unvested Common Stock owned by such Executive Officer immediately following the Determination Time and (B) the denominator of which is the number of shares of vested and unvested Common Stock owned by such Executive Officer immediately following the IPO; and

(ii) with respect to the Sponsors, a fraction (expressed as a percentage), (A) the numerator of which is the aggregate number of Common Stock owned by the Sponsors immediately following the Determination Time and (B) the denominator of which is the aggregate number of Common Stock owned by the Sponsors immediately following the IPO.

(b) Any attempt by an Executive Officer to Transfer any Common Stock not in compliance with this Section 10 shall be null and void and have no force or effect, and the Company shall not, and shall cause any transfer agent not to, give any effect in the Company’s stock records to such attempted Transfer. The parties acknowledge that the transfer restrictions contained in this Agreement are reasonable and in the best interests of the Company.

(c) Executive Officer Permitted Transferees.

(i) Any Executive Officer may at any time Transfer any or all of his or her Common Stock to an Executive Officer Permitted Transferee without the consent of any Person and without compliance with Sections 10(a) or (b), so long as such Executive Officer Permitted Transferee shall have agreed in writing to be bound by the terms of this Agreement by executing a Joinder Agreement. Such Executive Officer must give prior written notice to the Company of any proposed Transfer to an Executive Officer Permitted Transferee, including the identity of such proposed Executive Officer Permitted Transferee and such other documentation reasonably requested by the Company, to ensure compliance with the terms of this Agreement.

 

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(ii) If, while an Executive Officer Permitted Transferee holds any Common Stock, such Executive Officer Permitted Transferee ceases to qualify as an Executive Officer Permitted Transferee in relation to the initial transferring Executive Officer from whom or which such Executive Officer Permitted Transferee or any previous Executive Officer Permitted Transferee of such initial transferring Executive Officer received such shares (an “Unwinding Event”), then:

(1) the relevant initial transferor Executive Officer shall forthwith notify the other Holders and the Company of the pending occurrence of such Unwinding Event; and

(2) immediately following such Unwinding Event, without limiting any other rights or remedies, such initial transferor Executive Officer shall take all actions necessary to effect a Transfer of all the Common Stock held by the relevant Executive Officer Permitted Transferee either back to such Executive Officer or, pursuant to this Section 10(c), to another Person that qualifies as an Executive Officer Permitted Transferee of such initial transferring Executive Officer.

Section 11. Indemnification; Contribution.

(a) The Company shall, to the fullest extent permitted by law, indemnify and hold harmless each Holder of Registrable Securities, any Person who is or might be deemed to be a “controlling person” of the Company or any of its subsidiaries within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (each such Person, a “Controlling Person”), their respective direct and indirect general and limited partners, advisory board members, directors, officers, trustees, managers, members, employees, agents, Affiliates and shareholders, and each other Person, if any, who acts on behalf of or controls any such Holder or Controlling Person (each of the foregoing, a “Covered Person”) against any losses, claims, actions, damages, liabilities and expenses, joint or several, to which such Covered Person may become subject under the Securities Act, the Exchange Act, any state blue sky securities laws, any equivalent non-U.S. securities laws or otherwise, insofar as such losses, claims, actions, damages, liabilities or expenses arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in or incorporated by reference in any Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 under the Securities Act or any successor rule to Rule 405) or any amendment or supplement to or any document incorporated by reference in the same, (ii) any omission or alleged omission of a material fact required to be stated in any such Registration Statement, Prospectus, preliminary Prospectus or free writing prospectus or necessary to make the statements made in the same not misleading or (iii) any violation or alleged violation by the Company of the Securities Act or any other similar federal or state securities laws or any rule or regulation promulgated under such federal or state securities laws applicable to the Company and relating to any action or inaction required of the Company in connection with any registration of securities. In addition, the Company shall reimburse each Covered Person for any legal or other expenses reasonably incurred by such Covered Person in connection with investigating, defending or settling any such loss, claim, action, damage or liability. Notwithstanding the previous sentence, the Company shall not be so liable in any such case to the extent that any loss, claim, action, damage, liability

 

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or expense arises out of or is based upon any such untrue statement or alleged untrue statement, or omission or alleged omission, made or incorporated by reference in any such Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus or any amendment or supplement to or any document incorporated by reference in the same in reliance upon, and in conformity with, written information prepared and furnished to the Company by such Covered Person expressly for use in such Registration Statement, Prospectus, preliminary Prospectus or free writing prospectus. This indemnity shall be in addition to any liability the Company may otherwise have.

(b) In connection with any registration in which a Holder of Registrable Securities is participating, each such Holder shall furnish to the Company in writing such information as the Company reasonably requests for use in connection with any such Registration Statement or Prospectus. Each Holder shall, to the fullest extent permitted by law, indemnify and hold harmless the Company, its directors and officers, employees, agents and any Person who is or might be deemed to be a Controlling Person against any losses, claims, actions, damages, liabilities and expenses, joint or several, to which they or any of them may become subject under the Securities Act, the Exchange Act, any state blue sky securities laws, any equivalent non-U.S. securities laws or otherwise, insofar as such losses, claims, actions, damages, liabilities or expenses arise out of or are based upon (i) any untrue or alleged untrue statement of a material fact contained in the Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus (as defined in Rule 405 under the Securities Act or any successor rule to Rule 405) or any amendment of or supplement to the same or (ii) any omission or alleged omission of a material fact required to be stated in such Registration Statement, Prospectus, preliminary Prospectus or free writing prospectus or necessary to make the statements made in the same not misleading, but, in the case of each of clauses (i) and (ii), only to the extent that such untrue statement or alleged untrue statement, or omission or alleged omission, is made in such Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus or any amendment or supplement to the same in reliance upon, and in conformity with, written information prepared and furnished to the Company by such Holder expressly for use in such Registration Statement, Prospectus, preliminary Prospectus or free writing prospectus. In addition, such Holder shall reimburse the Company, its directors and officers, employees, agents and any Person who is or might be deemed to be a Controlling Person for any legal or other expenses reasonably incurred by them in connection with investigating, defending or settling any such loss, claim, action, damage or liability. The obligation to indemnify pursuant to this Section 11(b) shall be individual and several, not joint and several, for each participating Holder and shall be proportional to and shall not exceed an amount equal to the net proceeds (after deducting Selling Expenses) actually received by such Holder in the sale of Registrable Securities to which such Registration Statement or Prospectus relates. The indemnity agreement contained in this Section 11(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, action or proceeding if such settlement is effected without the consent of such Holder. The Company and the Holders of the Registrable Securities hereby acknowledge and agree that, unless otherwise expressly agreed to in writing by such Holders, the only information furnished or to be furnished to the Company for use in any Registration Statement or Prospectus relating to the Registrable Securities or in any amendment, supplement or preliminary materials associated with the same are statements specifically relating to (a) the beneficial ownership of shares of Common Stock by such Holder and its Affiliates, (b) the name and address of such Holder and (c) any additional information about such Holder or the plan of distribution (other than for an underwritten offering) required by law or regulation to be disclosed in any such document. This indemnity shall be in addition to any liability which such Holder may otherwise have.

 

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(c) Any Person entitled to indemnification pursuant to this Agreement shall give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification. Notwithstanding the previous sentence, any failure or delay to so notify the indemnifying party shall not relieve the indemnifying party of its obligations under this Agreement, except to the extent that the indemnifying party is actually and materially prejudiced by reason of such failure or delay. In case a claim or an action that is subject or potentially subject to indemnification pursuant to this Agreement is brought against an indemnified party, the indemnifying party shall be entitled to participate in and shall have the right, exercisable by giving written notice to the indemnified party as promptly as practicable after receipt of written notice from such indemnified party of such claim or action, to assume, at the indemnifying party’s expense, the defense of any such claim or action, with counsel reasonably acceptable to the indemnified party. Notwithstanding the previous sentence, any indemnified party shall continue to be entitled to participate in the defense of such claim or action, with counsel of its own choice, but the indemnifying party shall not be obligated to reimburse the indemnified party for any fees, costs and expenses subsequently incurred by the indemnified party in connection with such defense unless (A) the indemnifying party has agreed in writing to pay such fees, costs and expenses, (B) the indemnifying party has failed to assume the defense of such claim or action within a reasonable time after receipt of notice of such claim or action, (C) having assumed the defense of such claim or action, the indemnifying party fails to employ counsel reasonably acceptable to the indemnified party or to pursue the defense of such claim or action in a reasonably vigorous manner, (D) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest or (E) the indemnified party has reasonably concluded that there may be one or more legal or equitable defenses available to it and/or other any other indemnified party which are different from or additional to those available to the indemnifying party. Subject to the foregoing sentence, no indemnifying party shall, in connection with any one claim or action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general circumstances or allegations, be liable for the fees, costs and expenses of more than one firm of attorneys (in addition to any local counsel) for all indemnified parties. The indemnifying party shall not have the right to settle a claim or action for which any indemnified party is entitled to indemnification pursuant to this Agreement without the consent of the indemnified party, The indemnifying party shall not consent to the entry of any judgment or enter into or agree to any settlement relating to such claim or action unless such judgment or settlement does not impose any admission of wrongdoing or ongoing obligations on any indemnified party and includes as an unconditional term of such judgment or settlement the giving by the claimant or plaintiff in such judgment or settlement to such indemnified party, in form and substance reasonably satisfactory to such indemnified party, of a full and final release from all liability in respect of such claim or action. The indemnifying party shall not be liable under this Agreement for any amount paid or payable or incurred pursuant to or in connection with any judgment entered or settlement effected with the consent of an indemnified party unless the indemnifying party has also consented to such judgment or settlement (such consent not to be unreasonably withheld, conditioned or delayed).

 

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(d) If the indemnification provided for in this Section 11 is held by a court of competent jurisdiction to be unavailable to, or unenforceable by, an indemnified party in respect of any loss, claim, action, damage, liability or expense referred to in this Section 11, then the applicable indemnifying party, in lieu of indemnifying such indemnified party under this Agreement, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, action, damage, liability or expense in such proportion as is appropriate to reflect the relative benefits received by the indemnified party and the indemnifying party. If the allocation provided by the preceding sentence is not permitted by applicable law, the indemnifying party shall contribute to such amount in such proportion as is appropriate to reflect not only the relative benefits referred to in the preceding sentence but also the relative fault of the indemnified party and the indemnifying party, as well as any other relevant equitable considerations. The relative fault of the indemnifying party, on the one hand, and of the indemnified party, on the other hand, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party, whether the violation of the Securities Act or any other federal or state securities law or rule or regulation promulgated under such federal or state securities law applicable to the Company, and, relating to any action or inaction required of the Company in connection with any registration of securities, whether such action or inaction was perpetrated by the indemnifying party or the indemnified party. The relative fault shall also be determined by reference to the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement, omission or violation. The parties agree that it would not be just and equitable if contribution pursuant to this Agreement were determined by pro rata allocation or by any other method or allocation that does not take into account the equitable considerations referred to in this Section 11(d). In no event shall the amount which a Holder of Registrable Securities may be obligated to contribute pursuant to this Section 11(d) exceed an amount equal to the net proceeds (after deducting Selling Expenses) actually received by such Holder in the sale of Registrable Securities that gives rise to such obligation to contribute. No indemnified party guilty or liable of fraudulent misrepresentation within the meaning of Section 11(f) of the Securities Act shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(e) The provisions of this Section 11 shall remain in full force and effect regardless of any investigation made by or on behalf of any indemnified party or any officer, director or controlling person of such indemnified party and shall survive the Transfer of any Registrable Securities by any Holder.

Section 12. Rule 144 Compliance. With a view to making available to the Holders of Registrable Securities the benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration, the Company shall:

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

(b) use reasonable best efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act; and

 

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(c) furnish to any Holder of Registrable Securities, promptly upon request, a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and of the Securities Act and the Exchange Act.

Section 13. Miscellaneous.

(a) No Inconsistent Agreements. The Company represents and warrants that it has not entered into, and agrees that it will not enter into, any agreement with respect to its securities that violates or subordinates or is otherwise inconsistent with the rights granted to the Holders of Registrable Securities under this Agreement.

(b) Adjustments Affecting Registrable Securities. The Company shall not take any action, or permit any change to occur, with respect to its Equity Securities which would materially and adversely affect the ability of the Holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement or which would materially and adversely affect the marketability of such Registrable Securities in any such registration (including effecting a stock split or a combination of shares that would reasonably be expected to have such an effect).

(c) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns and transferees. Other than with respect to Transfers of Equity Securities to Sponsor Permitted Transferees or Executive Officer Permitted Transferees, as applicable, neither this Agreement nor any right, benefit, remedy, obligation or liability arising under this Agreement may be assigned by any party without the prior written consent of the other parties, and any attempted assignment without such consent shall be null and void and of no effect, except that the Company may assign this Agreement at any time in connection with a sale or acquisition of the Company, whether by merger, consolidation, sale of all or substantially all of the Company’s assets, or similar transaction, without the consent of the Holders, so long as the successor or acquiring Person agrees in writing to assume all of the Company’s rights and obligations under this Agreement.

(d) No Third Party Beneficiaries. This Agreement is for the sole benefit of the parties and their respective successors and permitted assigns and transferees and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever, under or by reason of this Agreement Notwithstanding the previous sentence, the parties acknowledge that the Persons set forth in Section 11 shall be express third-party beneficiaries of the obligations of the parties set forth in Section 11.

(e) Remedies; Specific Performance. In the event of a breach or a threatened breach by any party to this Agreement of its obligations under this Agreement, any party injured or to be injured by such breach shall be entitled to specific performance of its rights under this Agreement or to injunctive relief, in addition to being entitled to exercise all rights provided in this Agreement and granted by law, it being agreed by the parties that the remedy at law, including monetary damages, for breach of any such provision will be inadequate compensation for any loss and that any defense or objection in any action for specific performance or injunctive relief for which a remedy at law would be adequate is hereby waived.

 

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(f) No Waivers. No failure or delay by any party in exercising any right, power or privilege under this Agreement shall operate as a waiver of such right, power or privilege nor shall any single or partial exercise of such right, power or privilege preclude any other or further exercise of the same or the exercise of any other right, power or privilege.

(g) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the law of any jurisdiction other than the State of New York.

(h) Jurisdiction and Venue. The parties irrevocably submit to the jurisdiction of the courts of the State of New York or, in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the Southern District of New York in respect of the interpretation and enforcement of the provisions of this Agreement and of the documents referred to in this Agreement, and in respect of the transactions contemplated hereby, and hereby waive, and agree not to assert, as a defense in any action, suit or proceeding for the interpretation or enforcement of this Agreement or of any such document, that it is not subject to such jurisdiction or that such action, suit or proceeding may not be brought or is not maintainable in the courts of the State of New York, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the Southern District of New York, or that this Agreement or any such document may not be enforced in or by such courts, and the parties irrevocably agree that all claims with respect to such action or proceeding shall be heard and determined in the courts of the State of New York, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the Southern District of New York. The parties hereby consent to and grant the courts of the State of New York, or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, the United States District Court for the Southern District of New York, jurisdiction over the person of such parties and, to the extent permitted by law, over the subject matter of such dispute and agree that mailing of process or other papers in connection with any such action or proceeding in the manner provided in Section 13(i) or in such other manner as may be permitted by law shall be valid and sufficient service of process. EACH OF THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN CONNECTION WITH ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

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(i) Notices. Any notice, demand, request, waiver, or other communication under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service, if personally served or sent by facsimile; on the business day after such communication is delivered to a courier or mailed by express mail, if sent by courier delivery service or express mail for next day delivery; and on the third day after mailing, if mailed to the party to whom notice is to be given by first class mail, registered, return receipt requested, postage prepaid and addressed as follows:

 

  If to the Company:
 

The AZEK Company Inc.

1330 W Fulton Street, #350

  Chicago, IL 60607
  Attention:    Chief Legal Officer
  Phone:    877-275-2935
  E-Mail:    paul.kardish@azekco.com
  with a copy (which shall not constitute notice) to:
 

Sullivan & Cromwell LLP

1888 Century Park East

  Los Angeles, CA 90067
  Attention:    Rita-Anne O’Neill
  Phone:    310-712-6698
  Facsimile:    310-712-8800
  E-Mail:    oneillr@sullcrom.com
  If to Ares:
 

Ares Corporate Opportunities Fund IV, L.P.

c/o ACOF Operating Manager IV, LLC

2000 Avenue of the Stars, 12th Floor

  Attention:    Eric Waxman, Brian Klos and Natasha Li
  Phone:    310-921-7252
  Facsimile:    310-201-4157
  E-Mail:    ewaxman@aresmgmt.com; bklos@aresmgmt.com; nli@aresmgmt.com
  with a copy (which shall not constitute notice) to:
 

Sullivan & Cromwell LLP

1888 Century Park East

  Los Angeles, CA 90067
  Attention:    Rita-Anne O’Neill
  Phone:    310-712-6698
  Facsimile:    310-712-8800
  E-Mail:    oneillr@sullcrom.com

 

-24-


  If to OTPP:
 

Ontario Teachers’ Pension Plan Board

5650 Yonge Street, 3rd Floor

  Toronto, ON M2M 4H5
  Attention:    Ashfaq Qadri and Blake Sumler
  Phone:    416-730-3513
  Facsimile:    416-730-5082
  E-Mail:    ashfaq_qadri@otpp.com; blake_sumler@otpp.com
  with a copy (which shall not constitute notice) to:
 

Ontario Teachers’ Pension Plan Board

5650 Yonge Street, 3rd Floor

  Toronto, ON M2M 4H5
  Fax: 416-730-3771
  Attention:    Legal Department
  E-Mail:    law_investments@otpp.com

If to any other Holder, to such address as is designated by such Holder in the counterpart to this Agreement in the form attached as Exhibit A.

(j) Headings. The headings and other captions in this Agreement are for convenience and reference only and shall not constitute a part of this Agreement, nor shall they affect its meaning, construction or effect.

(k) Counterparts. This Agreement may be signed in any number of identical counterparts, each of which shall be deemed an original instrument (including signatures delivered via facsimile or electronic mail) and all of which together shall constitute one and the same instrument. The parties may deliver this Agreement by facsimile or by electronic mail and each party shall be permitted to rely upon the signatures so transmitted to the same extent and effect as if they were original signatures.

(l) Entire Agreement. This Agreement, together with that certain Stockholders Agreement, by and between the Company, Ares and OTPP, dated as of the date of this Agreement, contains the entire agreement among the parties with respect to the subject matter of this Agreement and supersedes and replaces all other prior agreements, written or oral, among the parties with respect to the subject matter of this Agreement.

(m) Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

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(n) Amendments. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions of this Agreement may not be given, without the prior written consent of the Company and each Holder affected thereby.

(o) Further Assurances. Each party to this Agreement shall cooperate and take such action as may be reasonably requested by another party to this Agreement in order to carry out the provisions and purposes of this Agreement and the transactions contemplated hereby.

(p) Termination. This Agreement shall terminate with respect to any Holder upon such time as such Holder ceases to hold or beneficially own any Registrable Securities. Notwithstanding the previous sentence, the provisions of Sections 9, 11 and this Section 13 shall survive termination.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties to this Agreement have caused this Agreement to be duly executed as of the date and year first above written.

 

THE AZEK COMPANY INC.
By:  

             

  Name:
  Title:
ARES CORPORATE OPPORTUNITIES FUND IV, L.P.
By: ACOF Operating Manager IV, L.P., its manager
By:  

             

  Name:
  Title:
ONTARIO TEACHERS’ PENSION PLAN BOARD
By:  

             

  Name:
  Title:

[Signature Page to Registration Rights Agreement]


Exhibit A

Form of Counterpart

 

[NAME OF TRANSFEREE OR OTHER HOLDER]
By:  

         

  Name:
  Title:
Address for Notices:
[●]  
Attention:           [●]
Phone:           [●]
Facsimile:           [●]
E-Mail:           [●]
with a copy (which shall not constitute notice) to:
[●]  
Attention:           [●]
Phone:           [●]
Facsimile:           [●]
E-Mail:           [●]

[Signature Page to Registration Rights Agreement]


Exhibit B

Schedule of Other Stockholders

Exhibit 4.4

 

 

 

CPG MERGER SUB LLC,

(to be merged with and into CPG INTERNATIONAL INC.,

which will then convert into CPG INTERNATIONAL LLC)

AS ISSUER

THE GUARANTORS

AND

WILMINGTON TRUST, NATIONAL ASSOCIATION

AS TRUSTEE

8.000% Senior Notes due 2021

 

 

INDENTURE

Dated as of September 30, 2013

 

 

 

 

 


TABLE OF CONTENTS

 

          Page  

ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE

     1  

SECTION 1.1.

   Definitions      1  

SECTION 1.2.

   Other Definitions      37  

SECTION 1.3.

   Rules of Construction      40  

ARTICLE II THE NOTES

     40  

SECTION 2.1.

   Form, Dating and Terms      40  

SECTION 2.2.

   Execution and Authentication      49  

SECTION 2.3.

   Registrar and Paying Agent      50  

SECTION 2.4.

   Paying Agent to Hold Money in Trust      51  

SECTION 2.5.

   Holder Lists      51  

SECTION 2.6.

   Transfer and Exchange      51  

SECTION 2.7.

   Form of Certificate to be Delivered upon Termination of Restricted Period      56  

SECTION 2.8.

   Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors      57  

SECTION 2.9.

   Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S      58  

SECTION 2.10.

   Mutilated, Destroyed, Lost or Stolen Notes      60  

SECTION 2.11.

   Outstanding Notes      61  

SECTION 2.12.

   Temporary Notes      61  

SECTION 2.13.

   Cancellation      61  

SECTION 2.14.

   Payment of Interest; Defaulted Interest      62  

SECTION 2.15.

   CUSIP, Common Code and ISIN Numbers      63  

ARTICLE III COVENANTS

     63  

SECTION 3.1.

   Payment of Notes      63  

SECTION 3.2.

   Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock      64  

SECTION 3.3.

   Limitation on Restricted Payments      69  

SECTION 3.4.

   Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries      77  

SECTION 3.5.

   Limitation on Asset Sales      79  

SECTION 3.6.

   Liens      82  

SECTION 3.7.

   Transactions with Affiliates      82  

SECTION 3.8.

   Change of Control      85  

SECTION 3.9.

   Provision of Financial Information      88  

SECTION 3.10.

   Maintenance of Office or Agency      91  

SECTION 3.11.

   Corporate Existence      91  

SECTION 3.12.

   Payment of Taxes      92  

 

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SECTION 3.13.

   Compliance Certificate      92  

SECTION 3.14.

   Further Instruments and Acts      92  

SECTION 3.15.

   Statement by Officer as to Default      92  

SECTION 3.16.

   Future Guarantors      92  

SECTION 3.17.

   Suspension of Certain Covenants      92  

ARTICLE IV SUCCESSOR COMPANY

     94  

SECTION 4.1.

   Consolidation, Merger, Conveyance, Transfer or Lease      94  

ARTICLE V REDEMPTION OF SECURITIES

     96  

SECTION 5.1.

   Notices to Trustee      96  

SECTION 5.2.

   Selection of Notes to Be Redeemed or Purchased      97  

SECTION 5.3.

   Notice of Redemption      97  

SECTION 5.4.

   Effect of Notice of Redemption      98  

SECTION 5.5.

   Deposit of Redemption or Purchase Price      98  

SECTION 5.6.

   Notes Redeemed or Purchased in Part      99  

SECTION 5.7.

   Optional Redemption      99  

SECTION 5.8.

   Mandatory Redemption      100  

ARTICLE VI DEFAULTS AND REMEDIES

     100  

SECTION 6.1.

   Events of Default      100  

SECTION 6.2.

   Acceleration      102  

SECTION 6.3.

   Other Remedies      103  

SECTION 6.4.

   Waiver of Past Defaults      103  

SECTION 6.5.

   Control by Majority      103  

SECTION 6.6.

   Limitation on Suits      104  

SECTION 6.7.

   Rights of Holders to Receive Payment      104  

SECTION 6.8.

   Collection Suit by Trustee      104  

SECTION 6.9.

   Trustee May File Proofs of Claim      104  

SECTION 6.10.

   Priorities      105  

SECTION 6.11.

   Undertaking for Costs      105  

ARTICLE VII TRUSTEE

     105  

SECTION 7.1.

   Duties of Trustee      105  

SECTION 7.2.

   Rights of Trustee      107  

SECTION 7.3.

   Individual Rights of Trustee      108  

SECTION 7.4.

   Trustee’s Disclaimer      108  

SECTION 7.5.

   Notice of Defaults      109  

SECTION 7.6.

   Compensation and Indemnity      109  

SECTION 7.7.

   Replacement of Trustee      110  

SECTION 7.8.

   Successor Trustee by Merger      111  

SECTION 7.9.

   Eligibility; Disqualification      111  

SECTION 7.10.

   Preferential Collection of Claims Against the Issuer      111  

SECTION 7.11.

   Trustee’s Application for Instruction from the Issuer      111  

 

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ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE

     112  

SECTION 8.1.

   Option to Effect Legal Defeasance or Covenant Defeasance; Defeasance      112  

SECTION 8.2.

   Legal Defeasance and Discharge      112  

SECTION 8.3.

   Covenant Defeasance      112  

SECTION 8.4.

   Conditions to Legal or Covenant Defeasance      113  

SECTION 8.5.

   Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions      114  

SECTION 8.6.

   Repayment to the Issuer      115  

SECTION 8.7.

   Reinstatement      115  

ARTICLE IX AMENDMENTS

     115  

SECTION 9.1.

   Without Consent of Holders      115  

SECTION 9.2.

   With Consent of Holders      117  

SECTION 9.3.

   Revocation and Effect of Consents and Waivers      118  

SECTION 9.4.

   Notation on or Exchange of Notes      119  

SECTION 9.5.

   Trustee to Sign Amendments      119  

ARTICLE X GUARANTEE

     119  

SECTION 10.1.

   Guarantee      119  

SECTION 10.2.

   Limitation on Liability, Termination, Release and Discharge      122  

SECTION 10.3.

   Right of Contribution      123  

SECTION 10.4.

   No Subrogation      123  

SECTION 10.5.

   Release of Parent Company Guarantee      123  

ARTICLE XI SATISFACTION AND DISCHARGE

     123  

SECTION 11.1.

   Satisfaction and Discharge      123  

SECTION 11.2.

   Application of Trust Money      124  

ARTICLE XII MISCELLANEOUS

     125  

SECTION 12.1.

   Notices      125  

SECTION 12.2.

   Certificate and Opinion as to Conditions Precedent      126  

SECTION 12.3.

   Statements Required in Certificate or Opinion      127  

SECTION 12.4.

   When Notes Disregarded      127  

SECTION 12.5.

   Rules by Trustee, Paying Agent and Registrar      127  

SECTION 12.6.

   Business Days      127  

SECTION 12.7.

   GOVERNING LAW      127  

SECTION 12.8.

   USA Patriot Act      128  

SECTION 12.9.

   No Recourse Against Others      128  

SECTION 12.10.

   Successors      128  

SECTION 12.11.

   Multiple Originals      128  

SECTION 12.12.

   Table of Contents; Headings      128  

SECTION 12.13.

   WAIVERS OF JURY TRIAL      128  

SECTION 12.14.

   Force Majeure      128  

 

-iii-


SCHEDULE I Guarantors

EXHIBIT A     Form of Note

EXHIBIT B     Form of Indenture Supplement to Add Future Guarantors

 

-iv-


INDENTURE dated as of September 30, 2013 (as amended, restated or supplemented from time to time, this “Indenture”), among CPG MERGER SUB LLC, a Delaware limited liability company (which upon the consummation of the Merger will merge with and into CPG International Inc., with CPG International Inc. surviving the Merger, following which CPG International Inc. will convert into a limited liability company and will become CPG International LLC), the guarantors party hereto from time to time and Wilmington Trust, National Association (the “Trustee”), as Trustee.

WHEREAS, all things have been done to make this Indenture and the Notes (as defined below) legal, valid and binding obligations of the Issuer and the Guarantors.

Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of (i) the Issuer’s 8.000% Senior Notes due 2021, issued on the date hereof (the “Initial Notes”), (ii) if and when issued, an unlimited principal amount of additional 8.000% Senior Notes due 2021 that may be offered from time to time subsequent to the Issue Date, subject to Section 2.1 and Section 3.2, as part of the same series as the Initial Notes whether or not they bear the same “CUSIP” number (the “Additional Notes” and, together with the Initial Notes, the “Notes”) as provided in Section 2.1(a):

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.1. Definitions.

ABL Facility” means the ABL credit agreement, dated as of the Issue Date, among CPG Merger Sub LLC, as the initial borrower, CPG International Inc., CPG Newco LLC, the guarantors and lenders party thereto from time to time and Deutsche Bank AG, as administrative agent and as collateral agent, as amended, supplemented, modified, extended, renewed, restated, refinanced or refunded from time to time.

Accounting Change” shall mean any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants.

Acquired Indebtedness” means Indebtedness (1) of a Person existing at the time such Person is merged, consolidated or amalgamated with or into or became a Restricted Subsidiary, including Indebtedness Incurred in connection with, or in contemplation of, such other Person merging, consolidating or amalgamating with or into, or becoming a Restricted Subsidiary of such Person or (2) assumed in connection with the acquisition of assets from such Person. Acquired Indebtedness shall be deemed to have been Incurred, with respect to clause (1) of the preceding sentence, on the date such Person is merged, consolidated or amalgamated with or into or becomes a Restricted Subsidiary and, with respect to clause (2) of the preceding sentence, on the date of consummation of the acquisition of such assets.

Additional Notes” has the meaning ascribed to it in the third introductory paragraph of this Indenture.


Affiliate” of any Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such Person. For the purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings that correspond to the foregoing.

Applicable Premium

means, with respect to any Note on any Redemption Date, the greater of:

(1) 1.0% of the principal amount of the Note; or

(2) the excess, if any, of:

(a) the present value at such Redemption Date of (i) the redemption price of the Note at October 1, 2016 (such redemption price being set forth in the table appearing in Section 5.7(d)), plus (ii) all required interest payments due on the note through October 1, 2016 (excluding accrued and unpaid interest due on the Note to the Redemption Date), computed at a discount on the basis of semi-annual compounding using a discount rate equal to the Treasury Rate as of such Redemption Date plus 50 basis points; over

(b) the principal amount of such Note.

The Issuer shall calculate the Applicable Premium.

Asset Sale” means (1) any sale, conveyance, transfer or other disposition (including, without limitation, dispositions pursuant to any consolidation or merger) by the Issuer or any of its Restricted Subsidiaries to any Person in any single transaction or series of transactions of property or assets (including by way of a Sale and Leaseback Transaction) (each referred to in this definition as a “disposition”) or (2) the issuance or sale of equity interests (other than directors’ qualifying shares or shares or interests required to be held by foreign nationals or other third parties to the extent required by applicable law) of any Restricted Subsidiary of the Issuer (other than to the Issuer or another Restricted Subsidiary of the Issuer) in any single transaction or series of transactions;

provided, however, that the term “Asset Sale” shall exclude:

(a) any disposition permitted by the provisions described under Section 4.1 that constitutes a disposition of all or substantially all of the assets of the Issuer and its Restricted Subsidiaries taken as a whole;

(b) (i) any disposition of assets or property or sale of equity interests of any Restricted Subsidiary in any one or related series of transactions, in each case, with an aggregate Fair Market Value of less than $15.0 million or (ii) any issuance or sale of Capital Stock of any Restricted Subsidiary (x) to the Issuer or another Restricted Subsidiary or (y) to the Issuer or a Restricted Subsidiary of the Issuer or to other holders

 

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of Capital Stock of a Restricted Subsidiary that is not a Wholly-Owned Subsidiary so long as the Issuer or such Restricted Subsidiary (1) receives at least its pro rata share of such dividend or distribution (to the extent such issuance of Capital Stock is being received as a dividend or distribution) or (2) such transaction is made with all equity holders of such non-Wholly-Owned Subsidiary on a pro rata basis and the economic ownership interest of the Issuer and its Restricted Subsidiaries in such non-Wholly-Owned-Subsidiary is not reduced by such transaction;

(c) sales or other dispositions of cash or Cash Equivalents;

(d) any issuance or sale of equity interests in, or Indebtedness or other securities of, Unrestricted Subsidiaries;

(e) the sale in a Sale and Leaseback Transaction of any assets acquired within 90 days of the acquisition thereof;

(f) disposition of any unnecessary, obsolete, damaged or worn out assets or other assets that are no longer used or useful (including permanently retired property) or any disposition of inventory or goods held for sale, in each case, in the ordinary course of business;

(g) a Restricted Payment or Permitted Investment that is otherwise permitted by this Indenture;

(h) any trade-in of assets for Related Business Assets of comparable or greater market value, as determined in good faith by the Issuer or such Restricted Subsidiary or any direct or indirect parent company of such person on behalf of such person, which in the event of an exchange of assets with a Fair Market Value in excess of $25.0 million shall be evidenced by an Officers’ Certificate and a resolution approved in good faith by the majority of the Governing Persons of the Issuer, such Restricted Subsidiary, or any of such person’s direct or indirect parent company on behalf of such person;

(i) the concurrent purchase and sale or exchange or contribution of Related Business Assets to the extent the Related Business Assets received are of substantially equivalent or greater value than the assets transferred as determined in good faith by the Issuer or any of its direct or indirect parent companies on behalf of the Issuer;

(j) the creation or incurrence of any Liens permitted by this Indenture;

(k) leases, subleases, licenses and sublicenses of assets in the ordinary course of business (including relating to intellectual property);

(l) any disposition by a Restricted Subsidiary of the Issuer to the Issuer or by the Issuer or a Restricted Subsidiary of the Issuer to a Restricted Subsidiary of the Issuer;

(m) dispositions or forgiveness of accounts receivable in connection with the collection or compromise thereof in the ordinary course of business;

 

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(n) grants of credits or allowances in the ordinary course of business;

(o) the unwinding of any Hedging Obligation or obligation under any Hedging Agreement;

(p) the abandonment or other disposition of intellectual property that is no longer economically practicable to maintain or which in the good faith determination of the Issuer (or any of its direct or indirect parent companies on behalf of the Issuer) is not material to the conduct of the business of the Issuer and its Restricted Subsidiaries taken as a whole;

(q) any exchange of property pursuant to Section 1031 of the Code for use in a Permitted Business (excluding boot thereon);

(r) the issuance of Capital Stock by the Issuer;

(s) (i) dispositions required by court order or regulatory decree or otherwise compelled or required by regulatory authorities or (ii) any disposition of assets resulting from a casualty event or the taking thereof by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to sale thereof to a purchase with such power under an actual threat of such taking; and

(t) any surrender or waiver of contract rights or settlement, releases or surrender of contract rights or other litigation claims of any kind in the ordinary course of business.

In the event that a transaction (or any portion thereof) meets the criteria of a permitted Asset Sale and would also be a permitted Restricted Payment or Permitted Investment, the Issuer, in its sole discretion, will be entitled to divide and classify such transaction (or any portion thereof) as an Asset Sale and/or one or more of the types of permitted Restricted Payments or Permitted Investments.

Attributable Indebtedness” in respect of a Sale and Leaseback Transaction means, at the time of determination, the present value (discounted at the rate of interest implicit in such transaction) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale and Leaseback Transaction (including any period for which such lease has been or may be extended); provided that if such Sale and Leaseback Transaction results in a Capital Lease Obligation, the amount of Indebtedness represented thereby will be determined in accordance with the definition of “Capital Lease Obligation.”

Bankruptcy Code” means Title 11 of the United States Code, as amended.

Bankruptcy Law” means the Bankruptcy Code and any similar federal, state or foreign law for the relief of debtors.

Board Resolution” means a copy of a resolution certified by the Secretary or an Assistant Secretary of a Person to have been duly adopted by the Governing Persons of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

 

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Borrowing Base” means, as of the date of determination, an amount equal to the sum of (1) 85% of the book value of the eligible receivables of the Issuer and the Guarantors plus (2) the lesser of (a) 75% of the lower of cost or market of eligible inventory of the Issuer and the Guarantors and (b) 85% of the appraised net orderly liquidation value of eligible inventory of the Issuer and the Guarantors. Book value shall be determined in accordance with GAAP and shall be calculated using amounts reflected on the most recent available balance sheet (it being understood that the accounts receivable and inventories of an acquired business may be included if such acquisition has been completed on or prior to the date of determination).

Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York City or, with respect to any payments to be made under this Indenture, the place of payment, are authorized or required by law to close.

Capital Lease Obligation” means, at the time any determination thereof is to be made, the amount of the liability in respect of a capital lease that would at such time be required to be capitalized and reflected as a liability on a balance sheet (excluding the footnotes thereto) in accordance with GAAP (as in effect on the Issue Date).

Capital Stock” means:

(1) in the case of a corporation, shares in the capital of such corporation;

(2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of capital stock;

(3) in the case of a partnership or limited liability company, partnership or membership interests (whether general or limited);

(4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person; and

(5) any warrants, options or other rights to acquire Capital Stock, but excluding any debt security that is convertible into, or exchangeable for, Capital Stock.

Cash Equivalents” means any of the following:

(a) U.S. dollars, Canadian dollars, pounds sterling, euros or, in the case of any Foreign Subsidiary, such local currencies held by it from time to time in the ordinary course of business and not for speculation;

(b) direct obligations of the United States of America or any member of the European Union or any agency thereof or obligations guaranteed by the United States of America or any member of the European Union or any agency thereof, in each case, with maturities not exceeding two years;

 

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(c) time deposits, eurodollar time deposits, certificates of deposit and money market deposits, in each case, with maturities not exceeding one year from the date of acquisition thereof, and overnight bank deposits, in each case, with any commercial bank having capital, surplus and undivided profits of not less than $250.0 million and whose long term debt, or whose parent holding company’s long term debt, is rated at least “A-2” by Moody’s or at least “A” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

(d) repurchase obligations for underlying securities of the types described in clauses (b) and (c) above entered into with a bank meeting the qualifications described in clause (c) above;

(e) commercial paper maturing not more than one year after the date of acquisition issued by a corporation (other than an Affiliate of the Issuer) organized and in existence under the laws of the United States of America or in a currency of a country described in clause (b) above with a rating, at the time any investment therein is made, of at least “P-1” by Moody’s or at least “A-1” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

(f) securities with maturities of two years or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, having one of the two highest rating categories obtainable from either Moody’s or S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

(g) Indebtedness issued by persons (other than a Sponsor or any Sponsor Affiliates) with a rating of at least “A-2” by Moody’s or “A” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency), in each case, with maturities not exceeding one year from the date of acquisition;

(h) shares of, or interests in, mutual funds, the principal assets of which comprise investments satisfying any of the provisions of clauses (a) through (g) above;

(i) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated “Aaa” by Moody’s and “AAA” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency) and (iii) have portfolio assets of at least $250.0 million; and

(j) instruments equivalent to those referred to in clauses (a) through (i) above denominated in any foreign currency comparable in credit quality and tenor to those referred to above and commonly used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Subsidiary organized in such jurisdiction.

CFC” means a foreign corporation within the meaning of Section 957 of the Code.

 

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Change of Control” means:

(1) at any time prior to the consummation of a Qualified IPO, the Permitted Holders cease to beneficially own, in the aggregate, directly or indirectly, at least a majority of the aggregate ordinary voting power represented by the issued and outstanding equity interests of the Issuer (in each case, determined on a fully diluted basis but not giving effect to contingent voting rights that have not vested); or

(2) at any time upon or after the consummation of a Qualified IPO, (a) any Person (other than one or more Permitted Holders or any underwriter participating in a Qualified IPO) or (b) Persons (other than one or more Permitted Holders or any underwriter participating in a Qualified IPO) constituting a “group” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person and its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of such plan), becomes the beneficial owner, directly or indirectly, of equity interests representing more than 35.0% of the aggregate ordinary voting power represented by the issued and outstanding equity interests of the Issuer (in each case, determined on a fully diluted basis but not giving effect to contingent voting rights that have not vested) and the percentage of the aggregate ordinary voting power represented by the equity interests of the Issuer beneficially owned, directly or indirectly, in the aggregate by the Permitted Holders (in each case, determined on a fully diluted basis but not giving effect to contingent voting rights that have not vested);

unless, in the case of either clause (1) or (2) above, the Permitted Holders have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority of the people constituting the Governing Persons of the Issuer or any of its direct or indirect parent companies.

Code” means the Internal Revenue Code of 1986, as amended from time to time and the regulations promulgated thereunder.

Consolidated Depreciation and Amortization Expense” means, with respect to the Issuer and its Restricted Subsidiaries for any period, the total amount of depreciation and amortization expense, including the amortization of intangible assets and deferred financing fees and amortization of unrecognized prior service costs, of the Issuer and its Restricted Subsidiaries on a consolidated basis and otherwise determined in accordance with GAAP.

Consolidated Interest Expense” means, with respect to any Person for any period, the sum, without duplication, of

(1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers acceptances, (c) non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark-to-market

 

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valuation of Hedging Obligations or other derivative instruments pursuant to GAAP), (d) the interest component of Capital Lease Obligations, (e) net payments and receipts (if any) pursuant to interest rate Hedging Obligations with respect to Indebtedness, and (f) commissions, discounts, yield and other fees and charges (including any interest expense) related to any factoring transaction or receivables facility which are payable to Persons other than the Issuer and its Restricted Subsidiaries, and excluding (r) non-cash interest expense attributable to movement in mark-to-market valuation of Hedging Obligations or other derivatives (in each case permitted hereunder) under GAAP; (s) accretion or accrual of discounted liabilities not constituting Indebtedness, (t) interest expense attributable to a parent entity resulting from push-down accounting, (u) any expense resulting from the discounting of any Indebtedness in connection with the application of, recapitalization or purchase accounting in connection with the CPG Transactions, (v) any “additional interest” or “penalty interest” with respect to any securities, (w) any accretion of accrued interest of discounted liabilities not constituting Indebtedness, (x) amortization of deferred financing fees, indebtedness issuance costs, commissions, fees and expenses with respect to Indebtedness issued in connection with the CPG Transactions or any intercompany Indebtedness, (y) any expensing of bridge, commitment and other financing fees and (z) commissions, discounts, yield and other fees and charges (including any interest expense) related to any factoring transaction or receivables or securitization facility); plus

(2) consolidated capitalized interest of such Person and its Restricted Subsidiaries for such period, whether paid or accrued; less

(3) interest income for such period;

provided that, for purposes of calculating Consolidated Interest Expense, no effect shall be given to the discount and/or premium resulting from the bifurcation of derivatives under FASB ASC 815 and related interpretations as a result of the terms of the Indebtedness to which such Consolidated Interest Expense relates.

For purposes of this definition, interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Issuer (or any of its direct or indirect parent companies on behalf of the Issuer) to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP.

Consolidated Net Income” shall mean, with respect to the Issuer and its Restricted Subsidiaries for any period, Net Income for such period, determined on a consolidated basis in accordance with GAAP; provided that, without duplication:

(a) the cumulative effect of a change in accounting principles shall be excluded;

(b) the net after-tax effect of extraordinary, non-recurring and unusual gains, losses, charges, income and expenses shall be excluded (provided that such losses, charges or expenses shall not be of the type that may be excluded pursuant to clause (d) below);

 

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(c) the net after-tax effect of any charges and expenses recorded on or prior to December 31, 2014 related to the CPG Transactions (including any financial advisory fees, accounting fees, auditor fees, legal fees and other advisory and consulting fees and related out-of-pocket expenses and other fees, discounts and commissions, including with respect to underwriting, placement or syndication) shall be excluded;

(d) (1) business optimization expenses (including consolidation initiatives), relocation or integration; (2) expenses, costs and charges related to consolidation or closing of distribution centers or other facilities or existing lines of business; acquisitions and mergers after the Issue Date; initiatives aimed at profitability improvement; strategic initiatives; personnel relocation, and restructuring, redundancy, severance, termination, settlement or judgment; (3) one-time compensation charges; and (4) the amount of any signing, retention and completion bonuses; shall in each case be excluded in an aggregate amount not to exceed the greater of (x) $35.0 million and (y) 25.0% of Consolidated Net Income for such period;

(e) the net after-tax effect of gains, losses, charges and expenses attributable to asset dispositions or the sale or other disposition of any Capital Stock of any Person, in each case other than in the ordinary course of business, as determined in good faith by the Issuer or any of its direct or indirect parent companies on behalf of the Issuer, shall be excluded;

(f) the net after-tax effect of gains, losses, charges and expenses attributable to the early extinguishment or conversion of Indebtedness, Hedging Obligations or other derivative instruments, in each case entered into in the ordinary course of business (including deferred financing expenses written off and premiums paid) shall be excluded;

(g) the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Issuer shall be increased by the amount of dividends or distributions or other payments that are actually paid to Issuer or a Restricted Subsidiary of the Issuer thereof in respect of such period in cash;

(h) solely for the purpose of determining the amount set forth in Section 3.3(a)(C), the Net Income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by that Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior governmental approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement or instrument to which it is a party (other than any restriction permitted by Section 3.4) or any judgment, decree, order, statute, rule, or governmental regulation applicable to that Restricted Subsidiary, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of the Issuer will be increased by the amount of dividends or other distributions or other payments actually paid in cash to the Issuer or a Restricted Subsidiary of the Issuer in respect of such period, to the extent not already included therein;

 

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(i) the effects of adjustments (including the effects of such adjustments pushed down to the Issuer and its Restricted Subsidiaries) in any line item in the Issuer’s consolidated financial statements pursuant to GAAP resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in connection with the CPG Transactions, any acquisition or any joint venture investments or the amortization or write-off of any amounts thereof, net of taxes, shall be excluded;

(j) non-cash impairment charges, asset write-offs and write downs, including impairment charges, asset write-offs and write-downs related to goodwill, intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, but in each case excluding current assets, in each case pursuant to GAAP, shall be excluded;

(k) non-cash compensation charges and expenses, including any such charges and expenses arising from grants of stock appreciation or similar rights, phantom equity, stock options, restricted stock or other rights or equity incentive shall be excluded;

(l) (i) charges and expenses pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement, any stock subscription or shareholder agreement and (ii) charges, expenses, accruals and reserves in connection with the rollover, acceleration or payout of Capital Stock held by management of the Issuer or any of its Restricted Subsidiaries, in the case of each of (i) and (ii), to the extent that (in the case of any cash charges and expenses) such charges, expenses, accruals and reserves are funded with cash proceeds contributed to the capital of the Issuer or any direct or indirect parent company of the Issuer or Net Cash Proceeds of an issuance of Capital Stock (other than Disqualified Stock) of the Issuer or any direct or indirect parent company of the Issuer shall be excluded;

(m) charges, expenses and fees Incurred, including financial advisory, accounting, auditor, legal and other consulting and advisory fees and any SEC or other filling fees and expenses, or any amortization thereof, in connection with any equity offering, acquisition (including any Permitted Investment), merger, investment, recapitalization, asset disposition, incurrence or repayment of indebtedness (including, without limitation, deferred financing expenses), refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction consummated prior to the Issue Date and any transaction undertaken but not completed) and any non-recurring charges and expenses (including non-recurring merger expenses) Incurred as a result of any such transaction shall be excluded;

(n) accruals and reserves that are established or adjusted, in each case within 18 months of the subject transaction, including as a result of the CPG Transactions or any other acquisition, investment, asset disposition, write-down or write-off (including the related tax benefit) in accordance with GAAP (including any adjustment of estimated payouts on earn-outs) or charges as a result of the adoption or modification of accounting policies shall be excluded;

 

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(o) any charge or expense resulting from the application of FAS 141R relating to the incurrence of obligations in respect of an “earn out” or other similar contingent obligations, shall be excluded;

(p) to the extent covered by insurance and actually reimbursed, or, so long as the Issuer (or any of its direct or indirect parent companies on behalf of the Issuer) has made a good faith determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that (i) such coverage is not denied by the applicable carrier or indemnifying party in writing within 270 days and (ii) such amount is in fact reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within 365 days), losses, charges, expenses, accruals and reserves with respect to liability or casualty events or business interruption shall be excluded;

(q) losses, charges and expenses that are covered by indemnification or other reimbursement provisions in connection with any acquisition, investment or asset disposition, to the extent actually reimbursed, or, so long as the Issuer or any of its direct or indirect parent companies on behalf of the Issuer has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is in fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days), shall be excluded;

(r) (i) non-cash or unrealized gains or losses in respect of obligations under Hedging Agreements or any ineffectiveness recognized in earnings related to qualifying hedge transactions or the fair value of changes therein recognized in earnings for derivatives that do not qualify as hedge transactions, in each case, in respect of obligations under Hedging Agreements entered into in the ordinary course of business, and (ii) unrealized gains or losses resulting from currency translation gains or losses related to currency remeasurements of indebtedness (including gains or losses resulting from (A) Hedging Agreements entered into in the ordinary course of business for currency exchange risk and (B) intercompany Indebtedness) and all other unrealized foreign currency translation gains or losses to the extent such gains or losses are non-cash items shall be excluded;

(s) the net after-tax effect of gains, losses, charges and expenses attributable to disposed or discontinued operations and any net after-tax gains, losses, charges and expenses related to the disposal of disposed, abandoned or discontinued operations shall be excluded;

(t) non-cash interest charges on defined benefit plans, defined contribution plans or other pension plans shall be excluded;

(u) deferred tax expenses associated with tax deductions or net operating losses arising as a result of the CPG Transactions, or the release of any valuation allowance related to such item, shall be excluded (provided that they shall be deducted in any period in which such tax expense is Incurred);

 

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(v) any expenses or charges to the extent paid by a third party on behalf of the Issuer or a Restricted Subsidiary of the Issuer, shall be excluded to the extent the Issuer or its Restricted Subsidiaries are not obligated to reimburse such expenses or charges; and

(w) the amount of (i) cost savings and synergies, (ii) business optimization (including consolidation initiatives), relocation or integration expenses; (iii) cost savings from the consolidation or closing of distribution centers or other facilities or exiting lines of business; (iv) costs of initiatives aimed at profitability improvement; strategic initiatives; personnel relocation, restructuring, redundancy, severance, termination, settlement or judgment; and (v) one-time compensation charges, in each case, in connection with or related to the TimberTech Acquisition and actions by the Issuer or any Restricted Subsidiary in connection therewith, not to exceed $28,000,000.

Notwithstanding the foregoing, for the purpose of Section 3.3 only (other than Section 3.3(a)(C)(5)), there shall be excluded from Consolidated Net Income any income arising from any sale or other disposition of Restricted Investments made by the Issuer and its Restricted Subsidiaries, any repurchases and redemptions of Restricted Investments from the Issuer and its Restricted Subsidiaries, any repayments of loans and advances which constitute Restricted Investments by the Issuer or any of its Restricted Subsidiaries, any sale of the stock of an Unrestricted Subsidiary or any distribution or dividend from an Unrestricted Subsidiary, in each case, only to the extent such amounts increase the amount of Restricted Payments permitted by Section 3.3(a)(C)(5).

Consolidated Total Assets” means, as of any date of determination, the total amount of all assets on the most recent consolidated balance sheet of the Issuer and its Restricted Subsidiaries, determined on a Pro Forma Basis in accordance with GAAP as of such date.

Consolidated Total Indebtedness” means, as of any date of determination, without duplication, (1) the aggregate principal amount of Indebtedness for borrowed money, Capital Lease Obligations and indebtedness obligations evidenced by promissory notes or similar instruments of the Issuer and its Restricted Subsidiaries outstanding on such date, determined on a consolidated basis in accordance with GAAP (excluding for the avoidance of doubt all undrawn amounts under revolving credit facilities and letters of credit) and (2) the aggregate amount of all outstanding Disqualified Stock of the Issuer and its Restricted Subsidiaries and all Preferred Stock of the Issuer’s Non-Guarantor Restricted Subsidiaries on a consolidated basis, with the amount of such Disqualified Stock and Preferred Stock equal to the greater of their respective voluntary or involuntary liquidation preferences and maximum fixed repurchases prices, in each case, determined on a consolidated basis in accordance with GAAP. For purposes hereof, the “maximum fixed repurchase price” of any Disqualified Stock or Preferred Stock that does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock or Preferred Stock as if such Disqualified Stock or Preferred Stock were purchased on any date on which Consolidated Total Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Stock or Preferred Stock, such Fair Market Value shall be determined reasonably and in good faith by the Issuer, or any of its direct or indirect parent companies on behalf of the Issuer.

 

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Contingent Obligations” means, with respect to any Person, any obligation of such Person guaranteeing any leases, dividends or other obligations that do not constitute Indebtedness (“primary obligations”) of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, including any obligation of such Person, whether or not contingent:

(1) to purchase any such primary obligation or any property constituting direct or indirect security therefor,

(2) to advance or supply funds:

(a) for the purchase or payment of any such primary obligation, or

(b) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, or

(3) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation against loss in respect thereof.

Corporate Trust Office” means the office of the Trustee at which at any particular time this Indenture shall be principally administered, which office at the date of execution of this Indenture is located at Wilmington Trust, National Association, 1100 N. Market Street, Wilmington, DE 19890, Attention: Corporate Capital Markets – CPG International, or such other address as the Trustee may designate from time to time by notice to the Holders and the Issuer.

CPG” means (i) prior to the conversion of CPG International Inc. to a limited liability company, CPG International Inc., a Delaware corporation and (ii) upon and following the conversion of CPG International Inc. to a limited liability company, CPG International LLC, a Delaware limited liability company.

CPG Transactions” has the meaning set forth in the Offering Memorandum.

Debt Facilities” means, with respect to the Issuer or any of its Restricted Subsidiaries, one or more debt facilities, including the Senior Secured Credit Facilities, or other financing arrangements (including, without limitation, commercial paper facilities with banks or other institutional lenders or investors or indentures) providing for revolving credit loans, term loans, letters of credit or other long-term indebtedness, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed or issued in connection therewith, and any amendments, supplements, modifications, extensions, renewals, restatements or refundings thereof and any indentures or credit facilities or commercial paper facilities with banks or other lenders or investors that Refinance any part of the loans, notes or other securities, other credit facilities or commitments thereunder, including any such refinancing facility or

 

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indenture that increases the amount permitted to be borrowed thereunder or alters the maturity thereof (provided that such increase in borrowings is permitted under Section 3.2) or adds Restricted Subsidiaries as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender, investor or group of lenders or investors.

Default” means any event that is, or after notice or passage of time, or both, would be, an Event of Default.

Definitive Notes” means certificated Notes for which DTC is not the Holder.

Designated Non-cash Consideration” means the Fair Market Value of non-cash consideration received by the Issuer or a Restricted Subsidiary of the Issuer in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officers’ Certificate, setting forth the basis of such valuation less the amount of cash or Cash Equivalents received in connection with a subsequent sale of or collection on such Designated Non-cash Consideration.

Designated Preferred Stock” means Preferred Stock of the Issuer or any direct or indirect parent company of the Issuer (in each case other than Disqualified Stock) that is issued for cash (other than to a Restricted Subsidiary or an employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries) and is so designated as Designated Preferred Stock, pursuant to an Officers’ Certificate of the Issuer, on the issuance date thereof, the cash proceeds of which are excluded from the calculation set forth in Section 3.3(a)(C).

Disqualified Stock” means, with respect to any Person, any Capital Stock of such Person which, by its terms, or by the terms of any security into which it is convertible or for which it is convertible, putable or exchangeable, or upon the happening of any event, matures or is mandatorily redeemable (other than solely for Capital Stock that is not Disqualified Stock), other than solely as a result of a change of control or asset sale, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, other than solely as a result of a change of control or asset sale, in whole or in part, in each case prior to the date that is 91 days after the earlier of the maturity date of the Notes and the date the Notes are no longer outstanding; provided that only the portion of the Capital Stock that so matures or is mandatorily redeemable, are so convertible, putable or exchangeable or are so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Stock; provided, further, that if such Capital Stock is issued to any employee or to any plan for the benefit of employees of the Issuer or its Restricted Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Disqualified Stock solely because they may be required to be repurchased by the Issuer or any of its Restricted Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability; provided, further, that any class of Capital Stock of such person that by its terms authorizes such person to satisfy its obligations thereunder by delivery of Capital Stock that is not Disqualified Stock shall not be deemed to be Disqualified Stock.

Domestic Subsidiary” means any Restricted Subsidiary of the Issuer that is not a Foreign Subsidiary.

 

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DTC” means The Depository Trust Company, its nominees and their respective successors and assigns, or such other depository institution hereinafter appointed by the Issuer.

EBITDA” shall mean, with respect to any Person for any period, the Consolidated Net Income of such Person for such period:

(1) increased, without duplication, by:

(a) provision for taxes based on income or, profits or capital, including state, franchise, excise and similar taxes and foreign withholding taxes of such Person paid or accrued, including any penalties and interest relating to any tax examinations; plus

(b) Consolidated Interest Expense; plus

(c) extraordinary, non-recurring or unusual losses, charges or expenses; plus

(d) charges and expenses relating to the CPG Transactions (including any printer expenses, filing fees, financial advisory fees, accounting fees, auditor fees, legal fees and other advisory and consulting fees and related out-of-pocket expenses and other fees, discounts and commissions, including with respect to underwriting, placement, arranging or syndication) recorded on or prior to December 31, 2014; plus

(e) losses, charges and expenses attributable to abandoned, closed, disposed or discontinued operations and losses, charges and expenses related to the disposal of disposed, abandoned, closed or discontinued operations; plus

(f) the amount of management, monitoring, consulting, transaction and advisory fees (including (i) termination fees and (ii) distributions and dividends paid to Teachers to approximate management fees and transaction and advisory fees) and related indemnities, charges and expenses paid or accrued to or on behalf of the Issuer (or any of its direct or indirect parent companies on behalf of the Issuer) or any of the Permitted Holders; plus

(g) losses, charges and expenses related to internal software development that are expensed but could have been capitalized under alternative accounting policies in accordance with GAAP; plus

(h) the amount of cost savings and synergies projected by the Issuer (or any of its direct or indirect parent companies on behalf of the Issuer) in good faith to be realized as a result of specified actions taken or expected to be taken prior to or during such period (which cost savings or synergies shall be subject only to certification by an officer of the Issuer and shall be calculated on a Pro Forma Basis as though such cost savings or 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; provided that (A) such cost savings or synergies are

 

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reasonably identifiable and factually supportable and (B) such actions have been taken or are expected to be taken within 18 months after the date of determination to take such action; and provided, further, that the aggregate amount added back pursuant to this clause (h) in any four-fiscal quarter period shall not exceed the greater of (x) $35.0 million and (y) 25.0% of EBITDA for such period (calculated prior to giving effect to any increase pursuant to this clause (h)); plus

(i) charges and expenses related to payments made to option holders of the Issuer (or any of its direct or indirect parent companies on behalf of the Issuer) in connection with, or as a result of, any distribution being made to equity holders of such person or any of its direct or indirect parent companies, which payments are being made to compensate such option holders as though they were equity holders at the time of, and entitled to share in, such distribution; plus

(j) any other non-cash losses, charges and expenses, including any write-offs or write-downs, reducing Consolidated Net Income for such period, decreased by all cash payments during such period on account of accruals on or reserves added back to EBITDA pursuant to this clause (j) in prior periods, excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period; plus

(k) losses, charges and expenses attributable to the early extinguishment or conversion of Indebtedness or any Hedging Agreements or other derivative instruments, in each case entered into in the ordinary course of business (including deferred financing expenses written off and premiums paid); plus

(l) earn out obligations incurred in connection with the acquisition of any Permitted Business or other Investment and paid or accrued during the applicable period to the extent such earn-out is deducted from the calculation of Consolidated Net Income; plus

(m) business interruption insurance in an amount representing the earnings for the applicable period that such proceeds are intended to replace (whether or not received, so long as the Issuer or any of its direct or indirect parent companies expects the Issuer to receive the same in the next four fiscal quarters);

(2) decreased by (without duplication) (a) gains attributable to the early extinguishment or conversion of Indebtedness or any Hedging Agreements or other derivative instruments, in each case entered into in the ordinary course of business, (b) non-cash gains increasing Consolidated Net Income for such period, excluding any non-cash gains that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges that were deducted (and not added back) in the calculation of EBITDA for any prior period, (c) extraordinary, unusual or exceptional income or gains, (d) gains attributable to asset dispositions or the sale or other disposition of any equity interests of any person other than in the ordinary course of business, as determined in good faith by the Issuer (or any of its direct or indirect parent

 

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companies on behalf of the Issuer), (e) gains attributable to disposed or discontinued operations and gains related to the disposal of disposed, abandoned or discontinued operations and (f) gains attributable to the early extinguishment or conversion of Indebtedness or any swap contracts or other derivative instruments, in each case, entered into in the ordinary course of business.

Equity Offering” means any public or private sale of common stock or Preferred Stock of the Issuer or any direct or indirect parent company of the Issuer, as applicable (excluding Disqualified Stock), other than:

(1) public offerings with respect to the Issuer’s or any of its direct or indirect parent companies’ common stock registered on Form S-4 or Form S-8;

(2) issuances to the Issuer or any Subsidiary of the Issuer; and

(3) any such public or private sale that constitutes an Excluded Contribution.

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

Excluded Contributions” means the net cash proceeds or the Fair Market Value of Qualified Proceeds received by the Issuer after the Issue Date from:

(1) contributions to its common equity capital, or

(2) the sale (other than to a Subsidiary of the Issuer or to any management equity plan or stock option plan or any other management or employee benefit plan of the Issuer) of Capital Stock (other than Disqualified Stock) of the Issuer,

in each case, designated by the Issuer as “Excluded Contributions” in an Officers’ Certificate delivered to the Trustee. The net cash proceeds so designated will be excluded from the calculation set forth in Section 3.3(a)(C).

Excluded Equity” means (a) Capital Stock sold to any employee, manager, director or analogous position or consultant of the Issuer, any direct or indirect parent company of the Issuer and the Issuer’s Subsidiaries after the Issue Date to the extent such amounts have been applied to Restricted Payments made in accordance with Section 3.3(b)(4), (b) Designated Preferred Stock, (c) Refunding Capital Stock, (d) Capital Stock sold to a Restricted Subsidiary of the Issuer or Indebtedness that has been converted or exchanged for Capital Stock of the Issuer sold to a Restricted Subsidiary of the Issuer or the Issuer, as the case may be, (e) Disqualified Stock or Indebtedness that has been converted or exchanged into Disqualified Stock, (f) Excluded Contributions, (g) the sale of Capital Stock used to Incur Indebtedness or issue shares of Disqualified Stock pursuant to Section 3.2(b)(14), (h) Capital Stock issued or sold to any employee stock ownership plan or trust established by the Issuer or any of its Subsidiaries and (i) Capital Stock that has already been used or designated pursuant to clause (o) of the definition of “Permitted Investments.”

 

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Fair Market Value” means, with respect to any asset or property, the price of which could be negotiated in an arm’s length transaction, for cash, between a willing seller and a willing buyer, as determined in good faith by the Governing Persons of the Issuer.

Financial Officer” means, with respect to any person, the chief financial officer, principal accounting officer, director of financial services, treasurer, assistant treasurer or controller of such person.

Fixed Charge Coverage Ratio” means with respect to any specified Person for any period, the ratio of EBITDA of such Person for such period to the Fixed Charges of such Person for such period.

Fixed Charges” means with respect to any Person for any period, the sum of:

(1) Consolidated Interest Expense of such Person for such period paid or payable in cash (excluding (x) fees and expenses associated with the CPG Transactions and any annual agency fees on the Senior Secured Credit Facilities, (y) costs associated with obtaining, or breakage costs in respect of, obligations under Hedging Agreements, and (z) fees and expenses associated with debt issuances) and, for the avoidance of doubt, net of cash interest income paid in cash; plus

(2) all cash dividend payments (excluding items eliminated in consolidation) on any series of Preferred Stock or Disqualified Stock of such Person and its Restricted Subsidiaries.

Foreign Subsidiary” means any Restricted Subsidiary of the Issuer that (1) is not organized under the laws of the United States or any state thereof or the District of Columbia, (2) is a CFC or Qualified CFC Holding Company or (3) is a Subsidiary of a CFC or Qualified CFC Holding Company.

GAAP” means generally accepted accounting principles in the United States, consistently applied, as set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements (including the Accounting Standards Codification) of the Financial Accounting Standards Board, or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, as in effect from time to time.

Governing Persons” means (a) in the case of any corporation, the board of directors of such person or duly authorized committee thereof, (b) in the case of any limited liability company, the board of directors or managers, manager or managing member of such person or duly authorized committee thereof, (c) in the case of any partnership, the general partner of such person or duly authorized committee thereof and (d) in any other case, the functional equivalent of the foregoing or duly authorized committee thereof.

 

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Government Securities” means securities that are:

 

  (1)

direct obligations of the United States of America for the timely payment of which its full faith and credit is pledged; or

 

  (2)

obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the timely payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America,

which, in either case, are not callable or redeemable at the option of the issuers thereof, and shall also include a depository receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as custodian with respect to any such Government Securities or a specific payment of principal of or interest on any such Government Securities held by such custodian for the account of the holder of such depository receipt; provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depository receipt from any amount received by the custodian in respect of the Government Securities or the specific payment of principal of or interest on the Government Securities evidenced by such depository receipt.

Guarantee” means a guarantee (other than by endorsement of negotiable instruments for collection in the ordinary course of business), direct or indirect, in any manner (including by way of a pledge of assets or through letters of credit and reimbursement agreements in respect thereof), of all or any part of any Indebtedness or other obligations (and “Guaranteed” and “Guaranteeing” shall have meanings that correspond to the foregoing).

Guarantor” means each Restricted Subsidiary of the Issuer that provides a Guarantee of the Notes and its permitted successors and assigns.

Hedging Agreements” means any and all (a) rate swap transactions, currency and interest rate basis swaps, currency and interest rate credit derivative transactions, forward rate transactions, interest rate options, forward foreign exchange transactions, currency and interest rate cap transactions, currency and interest rate floor transactions, currency and interest rate collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options and (b) commodity swaps, commodity options, forward commodity contracts, basis differential swaps, spot contracts, fixed-price physical delivery contracts or other similar agreements, in each case whether or not exchange traded, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement.

For the avoidance of doubt, Hedging Agreements shall not be deemed speculative or entered into for speculative purposes if any Hedging Agreement is intended in good faith, at inception of execution, (A) to hedge or manage the interest rate exposure associated with any debt securities or debt facilities of the Issuer or its Restricted Subsidiaries, (B) for foreign exchange or currency exchange management or (C) to hedge any exposure that the Issuer or its Restricted Subsidiaries may have to counterparties under other Hedging Agreements such that the combination of such Hedging Agreements is not speculative taken as a whole.

 

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Hedging Obligations” of any Person means the obligations of such Person pursuant to any Hedging Agreement.

Holder” means a Person in whose name a Note is registered in the security register.

IAI” means an institutional “accredited investor” as described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.

Immaterial Subsidiary” means any Subsidiary of the Issuer that (a) did not, as of the last day of the fiscal year of the Issuer most recently ended, have assets with a value in excess of 5.0% of the Consolidated Total Assets or revenues representing in excess of 5.0% of total revenues of the Issuer and its Restricted Subsidiaries on a consolidated basis as of such date, and (b), when taken together with all Immaterial Subsidiaries as of the last day of the fiscal year of the Issuer most recently ended, have assets with a value in excess of 10.0% of Consolidated Total Assets or revenues representing in excess of 10.0% of EBITDA of the Issuer and its Restricted Subsidiaries as of such date; provided that the Issuer shall only be required to make such determination at the time it delivers annual financial statements pursuant to Section 3.9; provided that the requirements set forth in clause (b) shall only be tested at the time a Subsidiary is being designated as an Immaterial Subsidiary and no Subsidiary need be redesignated except in connection with the designation of a new Immaterial Subsidiary.

Immediate Family Members” means with respect to any individual, such individual’s child, stepchild, grandchild or more remote descendant, parent, stepparent, grandparent, spouse, former spouse, qualified domestic partner, sibling, mother-in-law, father-in-law, son-in-law and daughter-in-law (including adoptive relationships) and any trust, partnership, corporation or other bona fide estate planning vehicle the only beneficiaries or equity holders of which are any of the foregoing individuals or any private foundation or fund that is controlled by any of the foregoing individuals or any donor advised fund of which any such individual is the donor.

Incur” means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, Guarantee or otherwise become liable in respect of such Indebtedness. Indebtedness otherwise Incurred by a Person before it becomes a Subsidiary of the Issuer shall be deemed to be Incurred at the time at which such Person becomes a Subsidiary of the Issuer. “Incurrence,” “Incurred,” “Incurrable” and “Incurring” shall have meanings that correspond to the foregoing. A Guarantee by the Issuer or a Restricted Subsidiary of the Issuer of Indebtedness Incurred by the Issuer or a Restricted Subsidiary of the Issuer, as applicable, shall not be a separate Incurrence of Indebtedness. In addition, the following shall not be deemed a separate Incurrence of Indebtedness:

(1) amortization of debt discount or accretion of principal with respect to a non-interest bearing or other discount security;

(2) the payment of regularly scheduled interest in the form of additional Indebtedness of the same instrument or the payment of regularly scheduled dividends on Capital Stock in the form of additional Capital Stock of the same class and with the same terms;

 

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(3) the obligation to pay a premium in respect of Indebtedness arising in connection with the issuance of a notice of redemption or making of a mandatory offer to purchase such Indebtedness; and

(4) unrealized losses or charges in respect of Hedging Obligations or obligations under Swap Obligations.

Indebtedness” means (without duplication), with respect to any Person:

(1) any indebtedness (including principal and premium) of such Person, whether or not contingent:

(a) in respect of borrowed money;

(b) evidenced by bonds, debentures, notes or similar instruments or reimbursement obligations in respect of drawn letters of credit or drawn bankers’ acceptances (so long as such amount has not been repaid);

(c) representing the balance of the deferred and unpaid purchase price of property (including Capital Lease Obligations), to the extent the same would be required to be shown as a long-term liability on a balance sheet prepared in accordance with GAAP;

(d) all net payments that such person would have to make in the event of an early termination, on the date indebtedness of such person is being determined, in respect of outstanding Hedging Agreements; and

(e) the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) or the principal component or liquidation preference of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Non-Guarantor Restricted Subsidiary, any Preferred Stock (but excluding, in each case, any accrued dividends);

if and to the extent that any of the foregoing Indebtedness (other than Preferred Stock) would appear as a liability upon a balance sheet (excluding the footnotes thereto) of such Person prepared in accordance with GAAP;

(2) to the extent not otherwise included, any obligation by such Person to be liable for, or to pay, as obligor, guarantor or otherwise, on the obligations of the type referred to in clause (1) above of another Person (whether or not such items would appear upon the balance sheet of such obligor or guarantor), other than by endorsement of negotiable instruments for collection in the ordinary course of business; and

 

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(3) to the extent not otherwise included, the obligations of the type referred to in clause (1) above of another Person secured by a Lien on any asset owned by such first Person, whether or not such Indebtedness is assumed by such first Person;

provided, however, that notwithstanding the foregoing, Indebtedness shall be deemed not to include Contingent Obligations Incurred in the ordinary course of business.

Indenture” has the meaning ascribed in the first introductory paragraph hereto.

Initial Notes” has the meaning ascribed to it in the third introductory paragraph of this Indenture.

Interest Payment Date” means April 1 and October 1 of each year to the Stated Maturity of the Notes.

Investment” means, with respect to any Person, all investments by such Person in other Persons (including Affiliates) in the form of loans (including guarantees), advances or capital contributions (excluding accounts receivable, trade credit, advances to customers, commissions, travel and similar advances to officers and employees, in each case made in the ordinary course of business), purchases or other acquisitions for consideration of Indebtedness, Capital Stock or other securities issued by any other Person and investments that are required by GAAP to be classified on the balance sheet (excluding the footnotes) of the Issuer in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. For purposes of Section 3.3 and the definition of Unrestricted Subsidiary:

(1) “Investments” shall include the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of a Subsidiary of the Issuer at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Issuer shall be deemed to continue to have a permanent “Investment” in an Unrestricted Subsidiary in an amount (if positive) equal to:

(a) the Issuer’s “Investment” in such Subsidiary at the time of such redesignation; less

(b) the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the Fair Market Value of the net assets of such Subsidiary at the time of such redesignation; and

(2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its Fair Market Value at the time of such transfer.

The amount of any Investment outstanding at any time shall be the original cost of such Investment, reduced by any dividend, distribution, interest payment, return of capital, repayment or other amount received in cash by the Issuer or a Restricted Subsidiary of the Issuer in respect of such Investment.

 

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Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P, or any equivalent rating by any Rating Agency.

Issue Date” means September 30, 2013.

Issuer” means (i) prior to the consummation of the Merger, CPG Merger Sub LLC and (ii) upon and following the consummation of the Merger, CPG, and in each case, their permitted successors and assigns.

Lien” means, with respect to any property or other asset, any mortgage, deed of trust, deed to secure debt, pledge, hypothecation, assignment, deposit arrangement, security interest, lien (statutory or otherwise), charge, easement, encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property or other asset (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing); provided that in no event shall an operating lease be deemed to constitute a Lien.

Merger” means the merger of CPG Merger Sub LLC with and into CPG, with CPG surviving such merger, pursuant to the terms of the Merger Agreement.

Merger Agreement” means the Agreement and Plan of Merger, dated as of August 16, 2013, by and among CPG Newco LLC, CPG Merger Sub LLC, CPG International Inc. and CPG International Holdings LP, as amended up to and including the Issue Date.

Moody’s” means Moody’s Investors Service, Inc. or any successor to its rating agency business.

Net Cash Proceeds” means, with respect to Asset Sales of any Person, cash proceeds actually received by the Issuer or any of its Restricted Subsidiaries, net of (i) attorney, accountant, auditor, printer, SEC filing, brokerage, consultant, investment banking, advisory, placement, arranger or underwriting fees and expenses and any other customary fees and expenses actually incurred in connection therewith, (ii) search and recording charges, (iii) required indebtedness payments and required payments of other obligations in respect of Indebtedness secured by a Lien permitted under this Indenture on any asset that is the subject of such Asset Sale, (iv) other customary expenses and brokerage, consultant and other customary fees actually incurred in connection therewith, (v) taxes, including sales, transfer, deed or mortgage recording taxes, paid or payable as a result thereof, and any other payment required by applicable law as a result of such Asset Sale, (vi) any payment amounts required to be paid by law, rule or regulation upon receipt to a third party related to the transaction (including to labor unions and environmental trusts) and (vii) any reserve established in accordance with GAAP (provided that such reserved amounts shall be Net Cash Proceeds to the extent and at the time of any reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount)), in each case, as determined reasonably and in good faith by a Responsible Officer of the Issuer or any of its direct or indirect parent companies on behalf of the Issuer.

 

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Net Income” means, with respect to any Person, the net income (loss) of such Person, determined in accordance with GAAP and before any reduction in respect of Preferred Stock dividends.

Non-Guarantor Restricted Subsidiary” means any Restricted Subsidiary of the Issuer that does not guarantee the Notes.

Non-Guarantor Subsidiary” means any Subsidiary of the Issuer that does not guarantee the Notes.

Non-U.S. Person” means a Person who is not a U.S. Person (as defined in Regulation S).

Note Guarantees” means any guarantee of the obligations of the Issuer under this Indenture and the Notes by any Restricted Subsidiary of the Issuer in accordance with the provisions of this Indenture.

Notes” has the meaning ascribed to it in the third introductory paragraph of this Indenture.

Notes Custodian” means the custodian with respect to the Global Notes (as appointed by DTC), or any successor Person thereto and shall initially be the Trustee.

Obligations” means any principal, premium, interest (including any interest accruing subsequent to the filing of a petition in bankruptcy, reorganization or similar proceeding at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable state, federal or foreign law), penalties, fees, premium, indemnifications, reimbursements (including reimbursement obligations with respect to letters of credit and bankers’ acceptances), damages and other liabilities, and guarantees of payment of such principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, payable under the documentation governing any Indebtedness.

Offering Memorandum” means the offering memorandum dated September 24, 2013, pursuant to which the Notes were offered.

Officer” means, with respect to any Person, (a) the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Investment Officer, the Chief Financial Officer, any Vice President, any Director, the Treasurer, the Controller, any Managing Director, Executive Managing Director or Senior Managing Director (1) of such Person or (2) if such Person is owned or managed by a single entity, of such entity, or (b) any other individual designated as an “Officer” or “Authorized Signatory” for the purposes of this Indenture by the Board of Directors or member of such Person.

Officers’ Certificate” means a certificate signed by two officers of the Issuer or a Guarantor, as applicable, one of whom must be either the principal executive officer, the Financial Officer, the principal accounting officer or treasurer of the Issuer or such Guarantor, as applicable.

 

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Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee and that meets the requirements set forth in this Indenture. The counsel may be an employee of or counsel to the Issuer. Any such opinion may be subject to customary assumptions and exclusions.

Permitted Business” means any business engaged in by the Issuer and its Restricted Subsidiaries on the Issue Date and any business reasonably similar, ancillary, complementary or related to, or a reasonable extension, development or expansion of, the business conducted by the Issuer and its Restricted Subsidiaries on the Issue Date, in each case, as determined in good faith by the Issuer (or any of its direct or indirect parent companies on behalf of the Issuer).

Permitted Holder” means any of (a) the Sponsors and any of their Affiliates and funds or partnerships managed or advised by any of them or any of their Affiliates, but not including any portfolio company of any of the foregoing, (b) members of senior management and directors in place as of the Issue Date or appointed or elected by any of the persons described in clause (a) above after the Issue Date, and family members or trusts of any person listed in clause (a) above and this clause (b), and (c) any Person that forms a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) with any of the persons listed in subclauses (a) and (b); provided that the persons described in clauses (a) and (b) above shall form the majority of interest of any group pursuant to this clause (c).

Permitted Investments” means:

(a) Investments in existence on the Issue Date;

(b) Investments required pursuant to any agreement or obligation of the Issuer or a Restricted Subsidiary of the Issuer, in effect on the Issue Date, to make such Investments;

(c) Investments in cash and Cash Equivalents;

(d) Investments in property and other assets, owned or used by the Issuer or any Restricted Subsidiary of the Issuer in the ordinary course of business;

(e) Investments by the Issuer or any of its Restricted Subsidiaries in the Issuer or any Restricted Subsidiary of the Issuer;

(f) Investments by the Issuer or any Restricted Subsidiary of the Issuer in a Person, if as a result of such Investment (A) such Person becomes a Restricted Subsidiary of the Issuer or (B) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated or wound-up into, the Issuer or a Restricted Subsidiary of the Issuer;

(g) Hedging Obligations and Investments made pursuant to Hedging Agreements permitted under Section 3.2(b)(7);

 

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(h) receivables owing to the Issuer or any of its Subsidiaries and advances to suppliers, in each case if created, acquired or made in the ordinary course of business and payable or dischargeable in accordance with customary trade terms;

(i) any Investment acquired by the Issuer or any Restricted Subsidiary of the Issuer (A) in exchange for any other Investment or accounts receivable held by the Issuer or a Restricted Subsidiary of the Issuer in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the Person in which such other Investment is made or which is the obligor with respect to such accounts receivable, (B) as a result of a foreclosure by the Issuer or a Restricted Subsidiary with respect to any Investment or other transfer of title with respect to any Investment in default or (C) in compromise or resolution of any litigation, arbitration or other disputes with the obligor on an account receivable or any Persons that are not Affiliates of the Issuer;

(j) Investments in or repurchases of the Notes and Obligations under Debt Facilities (including the Senior Secured Credit Facilities);

(k) guarantees of operating leases or of other obligations that do not constitute Indebtedness, in each case, entered into by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;

(l) advances in the form of a prepayment of expenses, so long as such expenses are being paid in accordance with customary trade terms of the Issuer or any of its Restricted Subsidiaries;

(m) advances to, or guarantees of Indebtedness of, officers, directors, managers and employees not in excess of $15.0 million outstanding at any one time, in the aggregate;

(n) loans and advances to officers, directors, managers and employees for business-related travel expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or to fund such Person’s purchase of equity interests of the Issuer or any direct or indirect parent company thereof;

(o) Investments the payment for which consists solely of Capital Stock of the Issuer; provided that any Disqualified Stock issued pursuant to this clause (o) could be Incurred under Section 3.2;

(p) any Investment in any Person to the extent such Investment represents the non-cash portion of the consideration received in connection with an Asset Sale consummated in compliance with Section 3.5 or any other disposition of property not constituting an Asset Sale;

(q) Guarantees by the Issuer or any Restricted Subsidiary of the Issuer of Indebtedness of the Issuer or a Restricted Subsidiary of the Issuer otherwise permitted under Section 3.2;

 

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(r) Investments consisting of purchases and acquisitions of inventory, supplies, material or equipment or the licensing or contribution of intellectual property pursuant to joint marketing arrangements;

(s) extensions of trade credit or trade financing in the ordinary course of business;

(t) Investments consisting of earnest money deposits required in connection with a purchase agreement or other acquisition;

(u) Investments consisting of licensing or contribution of intellectual property pursuant to joint marketing arrangements with other Persons;

(v) Investments by the Issuer or any Restricted Subsidiary of the Issuer in joint ventures or Unrestricted Subsidiaries in an aggregate amount not to exceed the greater of (x) $45.0 million and (y) 2.5% of Consolidated Total Assets;

(w) Investments by the Issuer or any Restricted Subsidiary of the Issuer made after the Issue Date (measured on the date each such Investment was made), at any one time outstanding, in an aggregate amount not to exceed the greater of (x) $50.0 million and (y) 3.0% of Consolidated Total Assets; and

(x) any Investment (other than an Investment in an Unrestricted Subsidiary), so long as, after giving effect to such Investment the Total Leverage Ratio of the Issuer and its Restricted Subsidiaries (determined on a consolidated basis) for the most recently ended four full fiscal quarters for which internal financial statements are available on a Pro Forma Basis is no greater than 4.25:1.00.

Permitted Liens” means:

(a) Liens existing on the Issue Date (with the exception of Liens securing the Senior Secured Credit Facilities on the Issue Date, which will be deemed Incurred pursuant to clause (b) of this definition);

(b) Liens that secure Debt Facilities Incurred pursuant to Section 3.2(b)(1);

(c) any Lien for taxes, assessments or governmental charges or claims that are not yet overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings diligently conducted; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor;

(d) any Lien imposed by law, such as carriers’, warehousemen’s, material men’s, repairman’s, suppliers’, landlords’ and mechanics’ Liens, in each case, Incurred in the ordinary course of business or awards against such Person with respect to which such Person shall then be proceeding with an appeal or other proceedings for review if adequate reserves with respect thereto are maintained on the books of such Person in accordance with GAAP;

 

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(e) survey exceptions, encumbrances, easements or reservations of, or rights of others for, licenses, rights-of-way, sewers, electric lines, telegraph, telephone and cable television lines and other similar purposes, or zoning or other similar restrictions as to the use of real properties or Liens incidental to the conduct of the business of such Person or to the ownership of its properties which do not individually or in the aggregate materially adversely affect the value of, or materially impair the operation of the business of, the Issuer and its Restricted Subsidiaries, taken as a whole;

(f) pledges or deposits (i) in connection with workers’ compensation, unemployment insurance and other types of statutory obligations or the requirements of any official body; (ii) to secure the performance of tenders, bids, surety or performance bonds, leases, purchase, construction, sales or servicing contracts (including utility contracts) and other similar obligations Incurred in the normal course of business; (iii) to obtain or secure obligations with respect to letters of credit, Guarantees, bonds or other sureties or assurances given in connection with the activities described in clauses (i) and (ii) above, in each case not Incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property or services; or (iv) arising in connection with any attachment pursuant to a judgment, unless such Liens shall not be satisfied or discharged or stayed pending appeal within 60 days after the entry thereof or the expiration of any such stay;

(g) Liens on shares of Capital Stock or property or assets of a Person existing at the time such Person is merged with or into or consolidated with the Issuer or a Restricted Subsidiary of the Issuer, or becomes a Restricted Subsidiary of the Issuer or at the time the Issuer or a Restricted Subsidiary of the Issuer acquires such property or assets (and not created or Incurred in anticipation of such transaction); provided that such Liens are not extended to the property and assets of the Issuer and its Restricted Subsidiaries other than the property or assets acquired;

(h) Liens securing Indebtedness of a Restricted Subsidiary owed to and held by the Issuer or a Restricted Subsidiary of the Issuer;

(i) Liens to secure any permitted extension, renewal, refinancing or refunding (or successive extensions, renewals, refinancings or refundings), in whole or in part, of any Indebtedness secured by Liens referred to in clauses (a) and (g) above and this clause (i); provided, however, that (a) such new Lien shall be limited to all or part of the same property that secured the original Lien (plus improvements on such property) and (b) the Indebtedness secured by such Lien at such time is not increased to any amount greater than the sum of (1) the outstanding principal amount or, if greater, committed amount of the Indebtedness described under clauses (a) and (g) above at the time the original Lien became a Permitted Lien under this Indenture, plus accrued interest and (2) an amount necessary to pay any fees and expenses, including premiums, related to such extension, renewal, refinancing or refunding;

(j) Liens in favor of customs or revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods Incurred in the ordinary course of business;

 

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(k) Liens on the Capital Stock of an Unrestricted Subsidiary to secure Indebtedness of an Unrestricted Subsidiary;

(l) Liens to secure Capital Lease Obligations, Synthetic Lease Obligations and Purchase Money Indebtedness permitted to be Incurred pursuant to Section 3.2(b)(9); provided that such Liens do not extend to or cover any assets other than such assets acquired or constructed after the Issue Date with the proceeds of such Capital Lease Obligation, Synthetic Lease Obligation or Purchase Money Indebtedness;

(m) Liens in favor of the Issuer or any Guarantor;

(n) Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligation in respect of banker’s acceptances issued or created in the ordinary course of business for the account of such Person to facilitate the purchase, shipment, or storage of such inventory or other goods;

(o) Liens (i) that are contractual rights of set-off (A) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (B) relating to pooled deposit or sweep accounts of the Issuer or any of its Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations and other cash management activities Incurred in the ordinary course of business of the Issuer or any of its Restricted Subsidiaries or (C) relating to purchase orders and other agreements entered into with customers of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business, (ii) in favor of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (iii) encumbering reasonable customary initial deposits and margin deposits and attaching to commodity trading accounts or other brokerage accounts Incurred in the ordinary course of business, and (iv) in favor of banking institutions arising as a matter of law or pursuant to customary account agreements encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry;

(p) Liens securing judgments for the payment of money not constituting an Event of Default under clause (7) of Section 6.1 so long as such Liens are adequately bonded and any appropriate legal proceedings that may have been duly initiated for the review of such judgment have not been finally terminated or the period within which such proceedings may be initiated has not expired;

(q) leases, subleases, licenses or sublicenses (including intellectual property) granted in the ordinary course of business which do not materially interfere with the ordinary conduct of the business of the Issuer and its Restricted Subsidiaries taken as a whole;

(r) any interest of title of an owner of equipment or inventory on loan or consignment to any Restricted Subsidiaries and Liens arising from Uniform Commercial Code financing statement or similar filings regarding operating leases entered into by the Issuer or any Restricted Subsidiary of the Issuer in the ordinary course of business;

 

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(s) deposits in the ordinary course of business to secure liability to insurance carriers;

(t) Liens securing the Notes and the Note Guarantees;

(u) Liens securing Hedging Obligations and obligations under Hedging Agreements so long as such Hedging Obligations or obligations under such Hedging Agreements are permitted to be Incurred under this Indenture;

(v) options, put and call arrangements, rights of first refusal and similar rights relating to Investments in joint ventures, limited liability companies, partnerships and the like permitted to be made under this Indenture;

(w) Liens attaching to earnest money deposits (or equivalent deposits otherwise named) made in connection with proposed acquisitions permitted under this Indenture;

(x) Liens securing Indebtedness of Foreign Subsidiaries on assets of Foreign Subsidiaries and Incurred pursuant to Section 3.2(b);

(y) Liens on assets directly related to a Sale and Leaseback Transaction to secure related Attributable Indebtedness;

(z) Liens arising by operation of law under Article 2 of the Uniform Commercial Code in favor of a reclaiming seller of goods or buyer of goods; and

(aa) Liens not otherwise permitted under this Indenture in an aggregate amount not to exceed the greater of (x) $15.0 million and (y) 1.0% of Consolidated Total Assets.

Person” means any individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization or government or any agency or political subdivision thereof.

Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 2.10 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Note.

Preferred Stock” as applied to the Capital Stock in any Person, means Capital Stock in such Person of any class or classes (however designated) that rank prior, as to the payment of dividends or as to the distribution of assets upon any voluntary or involuntary liquidation, dissolution or winding up of such Person, to shares of common stock in such Person.

Pro Forma Basis” means, with respect to any person, for any events described below that occur subsequent to the commencement of a period for which the financial effect of such events is being calculated, and giving effect to the events for which such calculation is being made, such calculation as will give pro forma effect to such events as if such events

 

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occurred on the first day of the four consecutive fiscal quarter period ended on or before the occurrence of such event (the “Reference Period”): (i) in making any determination of EBITDA or Consolidated Total Assets, effect shall be given to any Asset Sale or other disposition, acquisition, Investment, merger, amalgamation, consolidation (including the CPG Transactions), any Restricted Payment, any designation of any Subsidiary as an Unrestricted Subsidiary or a Restricted Subsidiary, and any other adjustments set forth in the definition of “EBITDA” (the foregoing, together with any transactions related thereto or in connection therewith, the “relevant transactions”), in each case, that occurred during the Reference Period or thereafter and through and including the date upon which the applicable Restricted Payment or the incurrence of the applicable Indebtedness or Liens is consummated), (ii) in making any determination on a Pro Forma Basis, (A) all Indebtedness (including Indebtedness issued, Incurred or assumed as a result of, or to finance, any relevant transactions and for which the financial effect is being calculated, but excluding normal fluctuations in revolving Indebtedness Incurred for working capital purposes and not to finance any acquisition) issued, incurred, assumed or permanently repaid during the Reference Period or thereafter and through and including the date upon which the applicable Restricted Payment or the incurrence of the applicable Indebtedness or Liens is consummated) shall be deemed to have been issued, incurred, assumed or permanently repaid at the beginning of such period and (B) Consolidated Interest Expense of such person attributable to interest on any Indebtedness, for which pro forma effect is being given as provided in preceding clause (A), bearing floating interest rates shall be computed on a Pro Forma Basis as if the rates that would have been in effect during the period for which pro forma effect is being given had been actually in effect during such periods and (iii) any designation of a Subsidiary as an Unrestricted Subsidiary or Restricted Subsidiary shall be given effect as of the first day of the relevant Reference Period.

Pro forma calculations made pursuant to the definition of the term “Pro Forma Basis” shall be determined in good faith by the Issuer and may include adjustments to reflect the full effect of any operating expense reductions and other operating improvements, synergies or cost savings reasonably expected to result from such relevant pro forma event (including, to the extent applicable, the CPG Transactions), subject in the case of any calculation of EBITDA to the maximum addbacks under clause (h) of the definition of “EBITDA” and as set forth in the definition of Consolidated Net Income. The Issuer shall deliver to the Trustee a certificate of a Financial Officer of the Issuer setting forth such demonstrable or additional operating expense reductions and other operating improvements, synergies or cost savings and information and calculations supporting them in reasonable detail (it being understood that pro forma adjustments need not be prepared in compliance with Regulation S-X of the Exchange Act).

Purchase Money Indebtedness” means Indebtedness:

(i) Incurred to finance the purchase or construction (including additions and improvements thereto) of any assets (other than Capital Stock) of such Person or any Restricted Subsidiary; and

(ii) that is secured by a Lien on such assets where the lender’s sole security is to the assets so purchased or constructed; and

 

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in either case does not exceed 100% of the cost and to the extent the purchase or construction prices for such assets are or should be included in “addition to property, plant or equipment” in accordance with GAAP.

QIB” means any “qualified institutional buyer” as such term is defined in Rule 144A.

Qualified CFC Holding Company” means any Subsidiary the primary assets of which consist of capital interests in (i) one or more CFCs or (ii) one or more Qualified CFC Holding Companies.

Qualified IPO” means (i) an underwritten primary or secondary (or combination of primary or secondary) public offering of the equity interests of the Issuer or any direct or indirect parent company of the Issuer that generates gross cash proceeds of (primary or secondary) at least $100.0 million or (ii) any merger, consolidation or amalgamation following which the Issuer or any of its direct or indirect parent companies merges with or into or becomes, directly or indirectly, a wholly-owned subsidiary of another person, where such person has equity securities listed on a national securities exchange, regardless of whether such Person is the surviving entity.

Qualified Proceeds” means assets that are used or useful in, or Capital Stock of any Person engaged in, a Permitted Business; provided that the Fair Market Value of any such assets or Capital Stock shall be determined in good faith by the Issuer.

Rating Agency” means each of S&P and Moody’s or if S&P or Moody’s or both shall not make a rating on the Notes publicly available, a nationally recognized statistical rating agency or agencies, as the case may be, selected by the Issuer (as certified by a resolution of the Governing Persons of the Issuer or any of its direct or indirect parent entities) which shall be substituted for S&P or Moody’s or both, as the case may be.

Refinance” means, in respect of any Indebtedness, to refinance, extend, renew, refund, replace, repay, prepay, purchase, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. “Refinanced” and “Refinancing” shall have correlative meanings.

Refinancing Indebtedness” means Indebtedness, Disqualified Stock or, with respect to any Non-Guarantor Restricted Subsidiary, any Preferred Stock that refunds, refinances, renews, replaces or extends any Indebtedness, Disqualified Stock or, with respect to any Non-Guarantor Restricted Subsidiary, any Preferred Stock permitted to be Incurred by the Issuer or any Restricted Subsidiary of the Issuer pursuant to the terms of this Indenture, whether involving the same or any other lender or creditor or group of lenders or creditors, but only to the extent that such Refinancing Indebtedness:

(i) has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is Incurred that is not less than the remaining Weighted Average Life to Maturity of the Indebtedness, Disqualified Stock or Preferred Stock being refunded, refinanced, renewed, replaced or extended;

 

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(ii) has a Stated Maturity which is no earlier than the Stated Maturity of the Indebtedness being refunded, refinanced, renewed, replaced or extended;

(iii) to the extent that such Refinancing Indebtedness refinances (i) Subordinated Indebtedness, such Refinancing Indebtedness is Subordinated Indebtedness or (ii) Disqualified Stock or Preferred Stock, such Refinancing Indebtedness must be Disqualified Stock or Preferred Stock, respectively;

(iv) is incurred in an aggregate principal amount (or if issued with original issue discount, an aggregate issue price) that is equal to or less than the sum of (x) the aggregate principal amount (or if issued with original issue discount, the aggregate accreted value) then outstanding of the Indebtedness being refinanced, plus (y) accrued and unpaid interest plus (z) the amount of premium, defeasance costs and fees and expenses incurred in connection with such refinancing; and

(v) shall not include (x) Indebtedness, Disqualified Stock or Preferred Stock of a Non-Guarantor Subsidiary that refinances Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or a Guarantor or (y) Indebtedness or Disqualified Stock of the Issuer or Indebtedness, Disqualified Stock or Preferred Stock of a Restricted Subsidiary of the Issuer that refinances Indebtedness, Disqualified Stock or Preferred Stock of an Unrestricted Subsidiary.

Regulation S” means Regulation S under the Securities Act.

Regulation S-X” means Regulation S-X under the Securities Act.

Related Business Assets” means assets (other than cash or Cash Equivalents) used or useful in a Permitted Business; provided that any assets received by the Issuer or any of its Restricted Subsidiaries in exchange for assets transferred by the Issuer or any of its Restricted Subsidiaries will not be deemed to be Related Business Assets if they consist of securities of a Person, unless upon receipt of the securities of such Person, such Person would become a Restricted Subsidiary of the Issuer.

Restricted Investment” means an Investment other than a Permitted Investment.

Restricted Notes” means the Initial Notes and any Additional Notes bearing one of the restrictive legends described in Section 2.1(d).

Restricted Notes Legend” means the legend set forth in Section 2.1(d)(1) and, in the case of the Temporary Regulation S Global Note, the legend set forth in Section 2.1(d)(2).

Restricted Subsidiary” means any Subsidiary that has not been designated as an Unrestricted Subsidiary in accordance with this Indenture. Unless otherwise indicated, when used herein the term “Restricted Subsidiary” shall refer to a Restricted Subsidiary of the Issuer.

Rule 144A” means Rule 144A under the Securities Act.

S&P” means Standard & Poor’s Ratings Services or any successor to its rating agency business.

 

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Sale and Leaseback Transaction” means any direct or indirect arrangement pursuant to which property is sold or transferred by the Issuer or a Restricted Subsidiary of the Issuer and is thereafter leased back as a capital lease by the Issuer or a Restricted Subsidiary of the Issuer.

SEC” means the U.S. Securities and Exchange Commission.

Secured Indebtedness” means any Indebtedness that is secured by a Lien.

Secured Leverage Ratio” means, as of any date of determination, the ratio of (1) Consolidated Total Indebtedness of the Issuer and its Restricted Subsidiaries that is secured by Liens as of the end of the most recent fiscal quarterly period for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur to (2) the Issuer’s EBITDA for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such event for which such calculation is being made shall occur, in each case, on a Pro Forma Basis.

Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder.

Senior Secured Credit Facilities” means the (i) ABL Facility and (ii) First Lien Term Loan Credit Agreement, dated as of September 16, 2013, among CPG Merger Sub LLC, as the initial borrower, CPG International Inc., CPG Newco LLC, the guarantors and lenders party thereto from time to time and Barclays Bank plc, as administrative agent and as collateral agent, in each case, together with all related notes, letters of credit bankers acceptances, collateral documents, guarantees, and any other related agreements and instruments executed and delivered in connection therewith, in each case as amended, modified, supplemented, restated, replaced, refunded or Refinanced in whole or in part from time to time prior to or after the Issue Date including by or pursuant to any agreement or instrument that extends the maturity of any Indebtedness thereunder, or increases the amount of available borrowings thereunder (provided that such increase in borrowings is permitted under Section 3.2(b)(1)), or adds Subsidiaries of the Issuer as additional borrowers or guarantors thereunder, in each case with respect to such agreement or any successor or replacement agreement and whether by the same or any other agent, lender, purchasers, investors, or indebtedness holders or any group of any of the foregoing.

Significant Subsidiary” has the meaning set forth in Rule 1-02 of Regulation S-X under the Securities Act and Exchange Act, but shall not include any Unrestricted Subsidiary.

Sponsor Affiliate” means each Affiliate of a Sponsor and each individual who is a partner or employee of Sponsor.

Sponsors” means collectively, Ares Management LLC (“Ares”) and Teachers. Each such entity is, individually, a “Sponsor.”

 

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Stated Maturity” means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency beyond the control of the issuer unless such contingency has occurred).

Subordinated Indebtedness” means:

(a) with respect to the Issuer, any Indebtedness of the Issuer which is by its terms subordinated in right of payment to the Notes, and

(b) with respect to any Guarantor, any Indebtedness of such Guarantor which is by its terms subordinated in right of payment to the Note Guarantee of such Guarantor under this Indenture.

Subsidiary” of any Person means (1) any corporation, association or other business entity (other than a partnership joint venture, limited liability company or similar entity) of which more than 50% of the total ordinary voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof (or Persons performing similar functions) or (2) any partnership, joint venture, limited liability company or similar entity of which more than 50% of the capital accounts, distribution rights, total equity and voting interests or general or limited partnership interests, as applicable, is, in the case of clauses (1) and (2), at the time owned or controlled, directly or indirectly, by (a) such Person, (b) such Person and one or more Subsidiaries of such Person or (c) one or more Subsidiaries of such Person. Unless otherwise indicated, when used herein the term “Subsidiary” shall refer to a Subsidiary of the Issuer.

Swap Obligations” means, with respect to any Guarantor, 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.

Synthetic Lease Obligations” means any monetary obligation of a Person under (i) a so-called synthetic, off-balance sheet or tax retention lease, or (ii) an agreement for the use or possession of property (including Sale and Leaseback Transactions), in each case, creating obligations that do not appear on the balance sheet of such Person but that, upon the application of any bankruptcy or insolvency laws to such Person, would be characterized as the indebtedness of such Person (without regard to accounting treatment).

Teachers” means Ontario Teachers’ Pension Plan Board.

TimberTech Acquisition” means the acquisition of TimberTech Limited, an Ohio limited liability company, by CPG International Inc., which was consummated on September 21, 2012.

Total Leverage Ratio” shall mean the ratio of Consolidated Total Indebtedness to EBITDA for the trailing four fiscal quarter period.

 

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Treasury Rate” means, as of any Redemption Date, the yield to maturity as of such Redemption Date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the Redemption Date to October 1, 2016; provided, however, that if the period from the Redemption Date to October 1, 2016 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.

Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939, as amended (15 U.S.C. §§ 77aaa-777bbbb).

Trust Officer” shall mean, when used with respect to the Trustee, any corporate trust officer or any other officer or assistant officer of the Trustee customarily performing functions similar to those performed by the persons who at the time shall be such corporate trust officers who shall have direct responsibility for the administration of this Indenture at the Corporate Trust Office, or any other officer of the Trustee to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

Trustee” means the party named as such in this Indenture until a successor replaces it in accordance with the terms of this Indenture and, thereafter, means the successor.

Unrestricted Subsidiary” means:

(1) any Subsidiary of the Issuer which at the time of determination is an Unrestricted Subsidiary (as designated by the Issuer, as provided below); and

(2) any Subsidiary of an Unrestricted Subsidiary.

The Issuer may designate any Subsidiary of the Issuer (including any existing “Subsidiary and any newly-acquired or newly-formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any equity interests or Indebtedness of, or owns or holds any Lien on, any property of, the Issuer or any Subsidiary of the Issuer (other than solely any Subsidiary of the Subsidiary to be so designated); provided that:

(1) any Unrestricted Subsidiary must be an entity of which the equity interests entitled to cast at least a majority of the votes that may be cast by all equity interests having ordinary voting power for the election of directors of Persons performing a similar function are owned, directly or indirectly, by the Issuer;

(2) such designation complies with Section 3.3; and

(3) each of:

(a) the Subsidiary to be so designated; and

(b) its Subsidiaries,

 

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has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Issuer or any Restricted Subsidiary of the Issuer.

The Issuer may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that, immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing and the Issuer or the relevant Restricted Subsidiary would be able to incur such Indebtedness pursuant to Section 3.2, on a Pro Forma Basis taking into account such designation.

Any such designation by the Issuer shall be notified by the Issuer to the Trustee by promptly filing with the Trustee a copy of the resolution of the Governing Persons of the Issuer or any committee thereof giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing provisions.

Weighted Average Life to Maturity” means, as of any date of determination, with respect to any Indebtedness or Disqualified Stock, as the case may be, the quotient obtained by dividing (i) the sum of the products of (x) the number of years (calculated to the nearest one-twelfth) from the date of determination to the date of each successive scheduled principal payment (including any sinking fund or mandatory redemption payment requirements) of such Indebtedness or redemption or similar payment with respect to such Disqualified Stock multiplied by (y) the aggregate amount of scheduled principal payments by (ii) the sum of all such payments.

Wholly-Owned Subsidiary” of any Person means a Subsidiary of such Person, 100% of the outstanding equity interests of which (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly-Owned Subsidiaries of such Person.

SECTION 1.2. Other Definitions.

 

Term

  

Defined in

Section

Additional Restricted Notes    2.1(b)
Affiliate Transaction    3.7(a)
Agent Members    2.1(e)(iii)
Asset Sale Offer    3.5(c)
Authenticating Agent    2.2
Automatic Exchange    2.6(e)

 

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Automatic Exchange Date    2.6(e)
Automatic Exchange Notice    2.6(e)
Automatic Exchange Notice Date    2.6(e)
Change of Control Offer    3.8(a)
Change of Control Payment    3.8(a)
Change of Control Payment Date    3.8(a)(2)
Clearstream    2.1(b)
Covenant Defeasance    8.3
Covenant Suspension Event    3.17
Defaulted Interest    2.14
Discharge    11.1
Euroclear    2.1(b)
Event of Default    6.1
Excess Proceeds    3.5(c)
Global Notes    2.1(b)
Guaranteed Obligations    10.1
Guarantor Surviving Entity    4.1(e)
Initial Lien    3.6
Institutional Accredited Investor Global Note    2.1(b)
Institutional Accredited Investor Notes    2.1(b)
Issuer Order    2.2
Legal Defeasance    8.2
Notes Register    2.3
Pari Passu Indebtedness    3.5(b)
Paying Agent    2.3

 

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Permanent Regulation S Global Note    2.1(b)
Permitted Indebtedness    3.2(b)
protected purchaser    2.10
Purchase Agreement    2.1(b)
Redemption Date    5.7(a)
Refunding Capital Stock    3.3(b)(2)
Registrar    2.3
Regulation S Global Note    2.1(b)
Regulation S Notes    2.1(b)
Reinstatement Date    3.17
Resale Restriction Termination Date    2.6(b)
Restricted Global Note    2.6(e)
Restricted Payment    3.3(a)
Restricted Period    2.1(b)
Restricted Capital Stock    3.3(b)(2)
Rule 144A Global Note    2.1(b)
Rule 144A Notes    2.1(b)
Special Interest Payment Date    2.14(a)
Special Record Date    2.14(a)
Surviving Entity    4.1(a)
Suspended Covenants    3.17
Suspension Date    3.17
Suspension Period    3.17
Tax Group    3.3(b)(15)(B)
Temporary Regulation S Global Note    2.1(b)
Trustee    8.5
Unrestricted Global Note    2.6(e)

 

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SECTION 1.3. Rules of Construction. Unless the context otherwise requires:

(1) a term has the meaning assigned to it;

(2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(3) “or” is not exclusive;

(4) “including” means including without limitation;

(5) words in the singular include the plural and words in the plural include the singular;

(6) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP;

(7) the principal amount of any preferred stock shall be (i) the maximum liquidation value of such preferred stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such preferred stock, whichever is greater;

(8) all amounts expressed in this Indenture or in any of the Notes in terms of money refer to the lawful currency of the United States of America;

(9) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision; and

(10) unless otherwise specifically indicated, the term “consolidated” with respect to any Person refers to such Person on a consolidated basis in accordance with GAAP, but excluding from such consolidation any Unrestricted Subsidiary as if such Unrestricted Subsidiary were not an Affiliate of such Person.

ARTICLE II

THE NOTES

SECTION 2.1. Form, Dating and Terms.

(a) The aggregate principal amount of Notes that may be authenticated and delivered under this Indenture is unlimited. The Initial Notes issued on the date hereof shall be in an aggregate principal amount of $315,000,000. In addition, the Issuer may issue, from time to time in accordance with the provisions of this Indenture, Additional Notes (as provided herein). Furthermore, Notes may be authenticated and delivered upon registration of transfer, exchange or in lieu of, other Notes pursuant to Section 2.2, 2.6, 2.10, 2.12, 5.6, 5.7 or 9.4, in connection with an Asset Sale Offer pursuant to Section 3.5 or in connection with a Change of Control Offer pursuant to Section 3.8.

 

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Notwithstanding anything to the contrary contained herein, the Issuer may not issue any Additional Notes, unless such issuance is in compliance with Sections 3.2 and 3.6.

The Initial Notes, and any Additional Notes that may be issued, shall be known and designated as “8.000% Senior Notes due 2021” of the Issuer.

With respect to any Additional Notes, the Issuer shall set forth in (a) a Board Resolution and (b)(i) an Officers’ Certificate or (ii) one or more indentures supplemental hereto, the following information:

(1) the aggregate principal amount of such Additional Notes to be authenticated and delivered pursuant to this Indenture; and

(2) the issue price and the issue date of such Additional Notes, including the date from which interest shall accrue.

In authenticating and delivering Additional Notes, the Trustee shall be entitled to receive and shall be fully protected in relying upon, in addition to the Opinion of Counsel and Officers’ Certificate required by Section 12.2, an Opinion of Counsel, subject to customary assumptions and exclusions, as to the due authorization, execution, delivery, validity and enforceability of such Additional Notes.

The Initial Notes and the Additional Notes shall be considered collectively as a single class for all purposes of this Indenture. Holders of the Initial Notes and the Additional Notes shall vote and consent together on all matters to which such Holders are entitled to vote or consent as one class, and none of the Holders of the Initial Notes and the Additional Notes shall have the right to vote or consent as a separate class on any matter to which such Holders are entitled to vote or consent.

If any of the terms of any Additional Notes are established by action taken pursuant to Board Resolutions of the Issuer (or any of its direct or indirect parent companies on behalf of the Issuer), a copy of an appropriate record of such action shall be certified by the Secretary or any Assistant Secretary of the Issuer and delivered to the Trustee at or prior to the delivery of the Officers’ Certificate or the indenture supplemental hereto setting forth the terms of the Additional Notes.

(b) The Initial Notes are being offered and sold by the Issuer pursuant to a Purchase Agreement, dated September 24, 2013 (the “Purchase Agreement”), among the Issuer and J.P. Morgan Securities LLC as representative of the other initial purchasers named therein. The Initial Notes and any Additional Notes (if issued as Restricted Notes) (the “Additional Restricted Notes”) shall be resold initially only to (A) QIBs in reliance on Rule 144A and (B) Non-U.S. Persons in reliance on Regulation S. Such Initial Notes and Additional Restricted Notes may thereafter be transferred to, among others, QIBs, purchasers in reliance on Regulation S and IAIs in accordance with Rule 501 of the Securities Act, in each case, in accordance with the procedure described herein. Additional Notes offered after the date hereof may be offered and sold by the Issuer from time to time pursuant to one or more purchase agreements in accordance with applicable law.

 

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Initial Notes and Additional Restricted Notes offered and sold to QIBs in the United States of America in reliance on Rule 144A (the “Rule 144A Notes”) shall be issued in the form of a permanent global Note substantially in the form of Exhibit A, which is hereby incorporated by reference and made a part of this Indenture, including appropriate legends as set forth in Section 2.1(d) (the “Rule 144A Global Note”), deposited with the Trustee, as custodian for DTC, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided. The Rule 144A Global Note may be represented by more than one certificate, if so required by DTC’s rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Rule 144A Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided.

Initial Notes and any Additional Restricted Notes offered and sold outside the United States of America (the “Regulation S Notes”) in reliance on Regulation S shall initially be issued in the form of a temporary global Note (the “Temporary Regulation S Global Note”), without interest coupons. Beneficial interests in the Temporary Regulation S Global Note shall be exchanged for beneficial interests in a corresponding permanent global Note, without interest coupons, substantially in the form of Exhibit A including appropriate legends as set forth in in Section 2.1(d) (the “Permanent Regulation S Global Note” and, together with the Temporary Regulation S Global Note, each a “Regulation S Global Note”) within a reasonable period after the expiration of the Restricted Period (as defined below) upon delivery of the certification contemplated by Section 2.7. Each Regulation S Global Note shall be deposited upon issuance with, or on behalf of, the Trustee as custodian for DTC in the manner described in this Article II for credit to the respective accounts of the purchasers (or to such other accounts as they may direct), including, but not limited to, accounts at Euroclear Bank S.A./N.V. (“Euroclear”) or Clearstream Banking, société anonyme (“Clearstream”). Prior to the 40th day after the later of the commencement of the offering of the Initial Notes and the Issue Date (such period through and including such 40th day, the “Restricted Period”), interests in the Temporary Regulation S Global Note may only be transferred to non-U.S. persons pursuant to Regulation S, to QIBs under Rule 144A or IAIs in accordance with the transfer and certification requirements described herein for exchanges of interests in a Global Note.

Investors may hold their interests in the Regulation S Global Note directly through Euroclear or Clearstream, if they are participants in such systems, or indirectly through organizations which are participants in such systems. After the Restricted Period ends, investors may also hold their interests in the Regulation S Global Note through organizations other than Euroclear or Clearstream that are DTC participants. If such interests are held through Euroclear or Clearstream, Euroclear and Clearstream shall hold such interests in the applicable Regulation S Global Note on behalf of their participants through customers’ securities accounts in their respective names on the books of their respective depositaries. Such depositaries, in turn, shall hold such interests in the applicable Regulation S Global Note in customers’ securities accounts in the depositaries’ names on the books of DTC.

 

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The Regulation S Global Note may be represented by more than one certificate, if so required by DTC’s rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Regulation S Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided.

Initial Notes and Additional Restricted Notes resold to IAIs (the “Institutional Accredited Investor Notes”) in the United States of America shall be issued in the form of a permanent global Note substantially in the form of Exhibit A including appropriate legends as set forth in Section 2.1(d) (the “Institutional Accredited Investor Global Note”) deposited with the Trustee, as custodian for DTC, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided. The Institutional Accredited Investor Global Note may be represented by more than one certificate, if so required by DTC’s rules regarding the maximum principal amount to be represented by a single certificate. The aggregate principal amount of the Institutional Accredited Investor Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC or its nominee, as hereinafter provided.

The Rule 144A Global Note, the Regulation S Global Note and the Institutional Accredited Investor Global Note are sometimes collectively herein referred to as the “Global Notes.”

The principal of (and premium, if any) and interest on the Notes shall be payable at the office or agency of Paying Agent or Registrar designated by the Issuer maintained for such purpose in the United States or at such other office or agency of the Issuer as may be maintained for such purpose pursuant to Section 2.3 of this Indenture; provided, however, that, at the option of the Issuer, each installment of interest may be paid by (i) check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Notes Register or (ii) wire transfer to an account located in the United States maintained by the payee, subject to the last sentence of this paragraph. Payments in respect of Notes represented by a Global Note (including principal, premium, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by DTC. Payments in respect of Notes represented by Definitive Notes (including principal, premium, if any, and interest) held by a Holder of at least $1,000,000 aggregate principal amount of Notes represented by Definitive Notes shall be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 15 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion).

The Notes may have notations, legends or endorsements required by law, stock exchange rule or usage, in addition to those set forth on Exhibit A and in Section 2.1(d). The Issuer shall approve any notation, endorsement or legend on the Notes. Each Note shall be dated the date of its authentication. The terms of the Notes set forth in Exhibit A are part of the terms of this Indenture and, to the extent applicable, the Issuer, the Guarantors and the Trustee, by their execution and delivery of this Indenture, expressly agree to be bound by such terms.

 

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(c) Denominations. The Notes shall be issuable only in fully registered form, without coupons, and only in minimum denominations of $1,000 and any integral multiple of $1,000 in excess thereof.

(d) Restrictive Legends. Unless and until (i) an Initial Note or an Additional Note issued as a Restricted Note is sold under an effective registration statement or (ii) the Trustee receives an Opinion of Counsel, subject to customary assumptions and exclusions, reasonably satisfactory to the Issuer and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act:

(1) the Rule 144A Global Note, the Regulation S Global Note and the Institutional Accredited Investor Global Note shall bear the following legend on the face thereof:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT HAS PURCHASED SECURITIES, TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”) THAT IS [IN THE CASE OF RULE 144A NOTES: ONE YEAR AFTER THE LATEST OF THE ORIGINAL ISSUE DATE HEREOF, THE ORIGINAL ISSUE DATE OF THE ISSUANCE OF ANY ADDITIONAL NOTES AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY),] [IN THE CASE OF REGULATION S NOTES: 40 DAYS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF, THE ORIGINAL ISSUE DATE OF THE ISSUANCE OF ANY ADDITIONAL NOTES AND THE DATE ON WHICH THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY) WAS FIRST OFFERED TO PERSONS OTHER THAN DISTRIBUTORS (AS DEFINED IN RULE 902 OF REGULATION S) IN RELIANCE ON REGULATION S], ONLY (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE 144A”), TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO NON-

 

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U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS NOT A QUALIFIED INSTITUTIONAL BUYER AND THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF SECURITIES OF $250,000 OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER’S AND THE TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. [IN THE CASE OF REGULATION S NOTES: BY ITS ACQUISITION HEREOF, THE HOLDER HEREOF REPRESENTS THAT IT IS NOT A U.S. PERSON NOR IS IT PURCHASING FOR THE ACCOUNT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT.]

BY ITS ACQUISITION OF THIS SECURITY THE HOLDER HEREOF WILL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT EITHER (1) NO PORTION OF THE ASSETS USED BY SUCH HOLDER TO ACQUIRE OR HOLD THIS SECURITY CONSTITUTES THE ASSETS OF AN EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO TITLE I OF THE U.S. EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OF A PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER ARRANGEMENT THAT IS SUBJECT TO SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), OR PROVISIONS UNDER ANY OTHER FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SIMILAR TO SUCH PROVISIONS OF ERISA OR THE CODE (“SIMILAR LAWS”), OR OF AN ENTITY WHOSE UNDERLYING ASSETS ARE CONSIDERED TO INCLUDE “PLAN ASSETS” OF ANY SUCH PLAN, ACCOUNT OR ARRANGEMENT, OR (2) THE ACQUISITION AND HOLDING OF THIS SECURITY WILL NOT CONSTITUTE A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR A SIMILAR VIOLATION UNDER ANY APPLICABLE SIMILAR LAWS.

(2) the Temporary Regulation S Global Note shall bear the following additional legend on the face thereof:

THIS SECURITY IS A TEMPORARY GLOBAL NOTE. PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD APPLICABLE HERETO, BENEFICIAL INTERESTS HEREIN MAY NOT BE HELD BY ANY PERSON OTHER THAN (1) A NON-U.S. PERSON OR (2) A U.S. PERSON THAT PURCHASED SUCH INTEREST IN A TRANSACTION EXEMPT FROM

 

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REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). BENEFICIAL INTERESTS HEREIN ARE NOT EXCHANGEABLE FOR PHYSICAL NOTES OTHER THAN A PERMANENT GLOBAL NOTE IN ACCORDANCE WITH THE TERMS OF THE INDENTURE. TERMS IN THIS LEGEND ARE USED AS USED IN REGULATION S UNDER THE SECURITIES ACT.

(3) Each Global Security, whether or not an Initial Security, shall bear the following legend on the face thereof:

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), NEW YORK, NEW YORK, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO DTC, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.

(4) Each Note issued hereunder that has more than a de minimis amount of original issue discount for U.S. federal income tax purposes shall bear a legend in substantially the following form:

THIS SECURITY IS ISSUED WITH “ORIGINAL ISSUE DISCOUNT” WITHIN THE MEANING OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. A HOLDER MAY OBTAIN THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE DISCOUNT, ISSUE DATE AND YIELD TO MATURITY FOR SUCH NOTE BY SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO: ATTENTION: CHIEF FINANCIAL OFFICER, CPG MERGER SUB LLC, 888 NORTH KEYSER AVENUE, SCRANTON, PA 18504, FAX NUMBER 570-558-8201.

(e) Book-Entry Provisions.

(i) This Section 2.1(e) shall apply only to Global Notes deposited with the Trustee, as custodian for DTC.

 

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(ii) Each Global Note initially shall (x) be registered in the name of DTC or the nominee of DTC, (y) be delivered to the Trustee as custodian for DTC and (z) bear legends as set forth in Section 2.1(d). Transfers of a Global Note (but not a beneficial interest therein) shall be limited to transfers thereof in whole, but not in part, to the DTC, its successors or its respective nominees, except as set forth in Section 2.1(e)(v) and 2.1(f). If a beneficial interest in a Global Note is transferred or exchanged for a beneficial interest in another Global Note, the Trustee shall (x) record a decrease in the principal amount of the Global Note being transferred or exchanged equal to the principal amount of such transfer or exchange and (y) record a like increase in the principal amount of the other Global Note. Any beneficial interest in one Global Note that is transferred to a Person who takes delivery in the form of an interest in another Global Note, or exchanged for an interest in another Global Note, shall, upon transfer or exchange, cease to be an interest in such Global Note and become an interest in the other Global Note and, accordingly, shall thereafter be subject to all transfer and exchange restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest.

(iii) Members of, or participants in, DTC (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by DTC or by the Trustee as the custodian of DTC or under such Global Note, and DTC may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by DTC or impair, as between DTC and its Agent Members, the operation of customary practices of DTC governing the exercise of the rights of a Holder of a beneficial interest in any Global Note.

(iv) In connection with any transfer of a portion of the beneficial interest in a Global Note pursuant to Section 2.1(f) to beneficial owners who are required to hold Definitive Notes, the Notes Custodian shall reflect on its books and records the date and a decrease in the principal amount of such Global Note in an amount equal to the principal amount of the beneficial interest in the Global Note to be transferred, and the Issuer shall execute, and the Trustee shall authenticate upon receipt of an Issuer Order and make available for delivery, one or more Definitive Notes of like tenor and amount.

(v) In connection with the transfer of an entire Global Note to beneficial owners pursuant to Section 2.1(f), such Global Note shall be deemed to be surrendered to the Trustee for cancellation, and the Issuer shall execute, and the Trustee shall authenticate upon receipt of an Issuer Order and make available for delivery, to each beneficial owner identified by DTC in exchange for its beneficial interest in such Global Note, an equal aggregate principal amount of Definitive Notes of authorized denominations.

(vi) The registered Holder of a Global Note may grant proxies and otherwise authorize any person, including Agent Members and persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

 

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(vii) Any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Note may be effected only through a book-entry system maintained by (a) the Holder of such Global Note (or its agent) or (b) any Holder of a beneficial interest in such Global Note, and that ownership of a beneficial interest in such Global Note shall be required to be reflected in a book entry.

(f) Definitive Notes. Except as provided below, owners of beneficial interests in Global Notes shall not be entitled to receive Definitive Notes. If required to do so pursuant to any applicable law or regulation, beneficial owners may obtain Definitive Notes in exchange for their beneficial interests in a Global Note upon written request in accordance with DTC’s and the Registrar’s procedures. In addition, Definitive Notes shall be transferred to all beneficial owners in exchange for their beneficial interests in a Global Note if (A) DTC notifies the Issuer that it is unwilling or unable to continue as depositary for such Global Note or DTC ceases to be a clearing agency registered under the Exchange Act, at a time when DTC is required to be so registered in order to act as depositary, and in each case a successor depositary is not appointed by the Issuer within 90 days of such notice or, (B) the Issuer in its sole discretion executes and delivers to the Trustee and Registrar an Officers’ Certificate stating that such Global Note shall be so exchangeable or (C) an Event of Default has occurred and is continuing and the Registrar has received a request from DTC. In the event of the occurrence of any of the events specified in the second preceding sentence or in clause (A), (B) or (C) of the preceding sentence, the Issuer shall promptly make available to the Trustee a reasonable supply of Definitive Notes.

(i) Any Definitive Note delivered in exchange for an interest in a Global Note pursuant to Section 2.1(e)(iii) or (e)(iv) shall, except as otherwise provided by Section 2.6(d), bear the applicable legend regarding transfer restrictions applicable to the Definitive Note set forth in Section 2.1(d).

(ii) If a Definitive Note is transferred or exchanged for a beneficial interest in a Global Note, the Trustee shall (x) cancel such Definitive Note, (y) record an increase in the principal amount of such Global Note equal to the principal amount of such transfer or exchange and (z) in the event that such transfer or exchange involves less than the entire principal amount of the canceled Definitive Note, the Issuer shall execute, and the Trustee shall authenticate and make available for delivery, to the transferring Holder a new Definitive Note representing the principal amount not so transferred.

(iii) If a Definitive Note is transferred or exchanged for another Definitive Note, (x) the Trustee shall cancel the Definitive Note being transferred or exchanged, (y) the Issuer shall execute, and the Trustee shall authenticate and make available for delivery, one or more new Definitive Notes in authorized denominations having an aggregate principal amount equal to the principal amount of such transfer or exchange to the transferee (in the case of a transfer) or the Holder of the canceled Definitive Note (in the case of an exchange), registered in the name of such transferee or Holder, as applicable, and (z) if such transfer or exchange involves less than the entire

 

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principal amount of the canceled Definitive Note, the Issuer shall execute, and the Trustee shall authenticate and make available for delivery to the Holder thereof, one or more Definitive Notes in authorized denominations having an aggregate principal amount equal to the untransferred or unexchanged portion of the canceled Definitive Notes, registered in the name of the Holder thereof.

(iv) Notwithstanding anything to the contrary in this Indenture, in no event shall a Definitive Note be delivered upon exchange or transfer of a beneficial interest in the Temporary Regulation S Global Note prior to the end of the Restricted Period.

SECTION 2.2. Execution and Authentication. One Officer shall sign the Notes for the Issuer by manual or facsimile signature. If the Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

A Note shall not be valid until an authorized officer of the Trustee manually authenticates the Note. The signature of the Trustee on a security shall be conclusive evidence that such Note has been duly and validly authenticated and issued under this Indenture. A Note shall be dated the date of its authentication.

At any time and from time to time after the execution and delivery of this Indenture, the Trustee shall authenticate and make available for delivery: (1) Initial Notes for original issue on the Issue Date in an aggregate principal amount of $315,000,000, (2) subject to the terms of this Indenture, Additional Notes for original issue in an unlimited principal amount, and (3) under the circumstances set forth in Section 2.6(e), Initial Notes in the form of an Unrestricted Global Note, in each case upon a written order of the Issuer signed by one Officer of the Issuer (the “Issuer Order”). Such Issuer Order shall specify whether the Notes shall be in the form of Definitive Notes or Global Notes, the amount of the Notes to be authenticated and the date on which the original issue of Notes is to be authenticated, whether the Notes are to be Initial Notes or Additional Notes and to whom such Notes should be delivered (which in the case of Global Notes, shall be the Notes Custodian).

The Trustee may appoint an agent (the “Authenticating Agent”) reasonably acceptable to the Issuer to authenticate the Notes. Any such instrument shall be evidenced by an instrument signed by a Trust Officer, a copy of which shall be furnished to the Issuer. Unless limited by the terms of such appointment, any such Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by the Authenticating Agent. An Authenticating Agent has the same rights as any Registrar, Paying Agent or agent for service of notices and demands.

In case the Issuer or any Guarantor, pursuant to Article IV or Section 10.2, as applicable, shall be consolidated or merged with or into any other Person or shall convey, transfer, lease or otherwise dispose of its properties and assets substantially as an entirety to any Person, and the successor Person resulting from such consolidation, or surviving such merger, or into which the Issuer or any Guarantor shall have been merged, or the Person which shall have received a conveyance, transfer, lease or other disposition as aforesaid, shall have executed an

 

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indenture supplemental hereto with the Trustee pursuant to Article IV or Section 10.2, as applicable, any of the Notes authenticated or delivered prior to such consolidation, merger, conveyance, transfer, lease or other disposition may (but shall not be required), from time to time, at the request of the successor Person, be exchanged for other Notes executed in the name of the successor Person with such changes in phraseology and form as may be appropriate, but otherwise in substance of like tenor as the Notes surrendered for such exchange and of like principal amount; and the Trustee, upon the Issuer Order of the successor Person, shall authenticate and make available for delivery Notes as specified in such order for the purpose of such exchange. If Notes shall at any time be authenticated and delivered in any new name of a successor Person pursuant to this Section 2.2 in exchange or substitution for or upon registration of transfer of any Notes, such successor Person, at the option of the Holders but without expense to them, shall provide for the exchange of all Notes at the time outstanding for Notes authenticated and delivered in such new name.

SECTION 2.3. Registrar and Paying Agent.

The Issuer shall maintain one or more offices or agencies where Notes may be presented for registration of transfer or for exchange (the “Registrar”) and an office or agency where Notes may be presented for payment (the “Paying Agent”). The Registrar shall keep a register of the Notes and of their transfer and exchange (the “Notes Register”). The Issuer may have one or more co-registrars and one or more additional paying agents. The term “Paying Agent” includes any additional paying agent and the term “Registrar” includes any co-registrar.

The Issuer shall notify the Trustee of the name and address of each such agent, if not the Trustee. If the Issuer fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.6. The Issuer or any Guarantor may act as Paying Agent, Registrar or transfer agent.

The Issuer initially appoints the Trustee as Registrar and Paying Agent for the Notes. The Issuer may change any Registrar or Paying Agent without prior notice to the Holders, but upon written notice to such Registrar or Paying Agent and to the Trustee; provided, however, that no such removal shall become effective until (i) acceptance of any appointment by a successor as evidenced by an appropriate agreement entered into by the Issuer and such successor Registrar or Paying Agent, as the case may be, and delivered to the Trustee or (ii) notification to the Trustee that the Trustee shall serve as Registrar or Paying Agent until the appointment of a successor in accordance with clause (i) above. The Registrar or Paying Agent may resign at any time upon written notice to the Issuer and the Trustee.

The Issuer will be responsible for making calculations called for under the Notes, including but not limited to determination of redemption price, premium, if any, and any additional amounts or other amounts payable on the Notes. The Issuer will make the calculations in good faith and, absent manifest error, its calculations will be final and binding on the Holders and the Trustee. The Issuer will provide a schedule of its calculations to the Trustee when requested by the Trustee, and the Trustee is entitled to rely conclusively on the accuracy of the Issuer’s calculations without independent verification.

 

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SECTION 2.4. Paying Agent to Hold Money in Trust.

By no later than 11:00 a.m. (New York City time) on the date on which any principal of, premium, if any, or interest on any Note is due and payable, the Issuer shall deposit with the Paying Agent a sum sufficient in immediately available funds to pay such principal, premium or interest when due. The Issuer shall require each Paying Agent (other than the Trustee) to agree in writing that such Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by such Paying Agent for the payment of principal of, premium, if any, or interest on the Notes (whether such assets have been distributed to it by the Issuer or other obligors on the Notes), shall notify the Trustee in writing of any default by the Issuer or any Guarantor in making any such payment and shall during the continuance of any default by the Issuer (or any other obligor upon the Notes) in the making of any payment in respect of the Notes, upon the written request of the Trustee, forthwith deliver to the Trustee all sums held in trust by such Paying Agent for payment in respect of the Notes together with a full accounting thereof. If the Issuer or a Subsidiary of the Issuer acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Issuer at any time may require a Paying Agent (other than the Trustee) to pay all money held by it to the Trustee and to account for any funds or assets disbursed by such Paying Agent. Upon complying with this Section 2.4, the Paying Agent (if other than the Issuer or a Subsidiary of the Issuer) shall have no further liability for the money delivered to the Trustee. Upon any bankruptcy, reorganization or similar proceeding with respect to the Issuer, the Trustee shall serve as Paying Agent for the Notes.

SECTION 2.5. Holder Lists. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Issuer, on its own behalf and on behalf of each of the Guarantors, shall furnish or cause the Registrar to furnish to the Trustee, in writing at least five Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders and the Issuer.

SECTION 2.6. Transfer and Exchange.

(a) A Holder may transfer a Note (or a beneficial interest therein) to another Person or exchange a Note (or a beneficial interest therein) for another Note or Notes of any authorized denomination by presenting to the Trustee a written request therefor stating the name of the proposed transferee or requesting such an exchange, accompanied by any certification, opinion or other document required by this Section 2.6. The Trustee shall promptly register any transfer or exchange that meets the requirements of this Section 2.6 by noting the same in the register maintained by the Trustee for the purpose, and no transfer or exchange shall be effective until it is registered in such register. The transfer or exchange of any Note (or a beneficial interest therein) may only be made in accordance with this Section 2.6 and Section 2.1(e) and 2.1(f), as applicable, and, in the case of a Global Note (or a beneficial interest therein), the applicable rules and procedures of DTC, Euroclear and Clearstream. The Trustee shall refuse to register any requested transfer or exchange that does not comply with this paragraph.

 

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(b) Transfers of Rule 144A Notes and Institutional Accredited Investor Notes. The following provisions shall apply with respect to any proposed registration of transfer of a Rule 144A Note or an Institutional Accredited Investor Note prior to the date which is one year after the later of the date of its original issue and the last date on which the Issuer or any Affiliate of the Issuer was the owner of such Notes (or any predecessor thereto) (the “Resale Restriction Termination Date”):

(i) a registration of transfer of a Rule 144A Note or an Institutional Accredited Investor Note or a beneficial interest therein to a QIB shall be made upon receipt by the Trustee or its agent of the representation of the transferee in the form as set forth on the reverse of the Note that it is purchasing for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; provided that no such written representation or other written certification shall be required in connection with the transfer of a beneficial interest in the Rule 144A Global Note to a transferee in the form of a beneficial interest in that Rule 144A Global Note in accordance with this Indenture and the applicable procedures of DTC.

(ii) a registration of transfer of a Rule 144A Note or an Institutional Accredited Investor Note or a beneficial interest therein to an IAI shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.8 from the proposed transferee and, if requested by the Issuer or the Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to it; and

(iii) a registration of transfer of a Rule 144A Note or an Institutional Accredited Investor Note or a beneficial interest therein to a Non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.9 from the proposed transferee and, if requested by the Issuer, the delivery of an opinion of counsel, certification and/or other information satisfactory to it.

(c) Transfers of Regulations S Notes. The following provisions shall apply with respect to any proposed transfer of a Regulation S Note prior to the expiration of the Restricted Period:

(i) a transfer of a Regulation S Note or a beneficial interest therein to a QIB shall be made upon receipt by the Trustee or its agent of the representation of the transferee, in the form of assignment on the reverse of the certificate, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A, is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A;

 

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(ii) a transfer of a Regulation S Note or a beneficial interest therein to an IAI shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.8 from the proposed transferee and, if requested by the Issuer or the Trustee, the delivery of an opinion of counsel, certification and/or other information satisfactory to it; and

(iii) a transfer of a Regulation S Note or a beneficial interest therein to a Non-U.S. Person shall be made upon receipt by the Trustee or its agent of a certificate substantially in the form set forth in Section 2.9 hereof from the proposed transferee and, if requested by the Issuer or the Trustee, receipt of an opinion of counsel, certification and/or other information satisfactory to it.

After the expiration of the Restricted Period, interests in the Regulation S Note may be transferred in accordance with applicable law without requiring the certification set forth in Section 2.8, Section 2.9 or any additional certification.

(d) Restricted Notes Legend. Upon the transfer, exchange or replacement of Notes not bearing a Restricted Notes Legend, the Registrar shall deliver Notes that do not bear a Restricted Notes Legend. Upon the transfer, exchange or replacement of Notes bearing a Restricted Notes Legend, the Registrar shall deliver only Notes that bear a Restricted Notes Legend unless (i) Initial Notes are being exchanged for Notes that do not bear the Restricted Notes Legend in accordance with Section 2.6(e) or (ii) there is delivered to the Registrar an opinion of counsel reasonably satisfactory to the Issuer and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. Any Additional Notes sold in a registered offering shall not be required to bear the Restricted Notes Legend.

(e) Automatic Exchange from Global Note Bearing Restricted Notes Legend to Global Note Not Bearing Restricted Notes Legend. Upon the Issuer’s satisfaction that the Restricted Notes Legend shall no longer be required in order to maintain compliance with the Securities Act, beneficial interests in a Global Note bearing the Restricted Notes Legend (a “Restricted Global Note”) may be automatically exchanged into beneficial interests in a Global Note not bearing the Restricted Notes Legend (an “Unrestricted Global Note”) without any action required by or on behalf of the Holder (the “Automatic Exchange”) at any time on or after the date that is the 366th calendar day after (A) with respect to the Notes issued on the Issue Date, the Issue Date or (B) with respect to Additional Notes, if any, the issue date of such Additional Notes, or, in each case, if such day is not a Business Day, on the next succeeding Business Day (the “Automatic Exchange Date”). Upon the Issuer’s satisfaction that the Restricted Notes Legend shall no longer be required in order to maintain compliance with the Securities Act, the Issuer may pursuant to the rules and procedures of DTC (i) provide written notice to DTC at least 15 calendar days prior to the Automatic Exchange Date, instructing DTC to exchange all of the outstanding beneficial interests in a particular Restricted Global Note to the Unrestricted Global Note, which the Issuer shall have previously otherwise made eligible for

 

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exchange with the DTC, (ii) provide prior written notice (the “Automatic Exchange Notice”) to each Holder at such Holder’s address appearing in the register of Holders at least 15 calendar days prior to the Automatic Exchange Date (the “Automatic Exchange Notice Date”), which notice must include (w) the Automatic Exchange Date, (x) the section of this Indenture pursuant to which the Automatic Exchange shall occur, (y) the “CUSIP” number of the Restricted Global Note from which such Holder’s beneficial interests shall be transferred and (z) the “CUSIP” number of the Unrestricted Global Note into which such Holder’s beneficial interests shall be transferred, and (iii) on or prior to the Automatic Exchange Date, deliver to the Trustee for authentication one or more Unrestricted Global Notes, duly executed by the Issuer, in an aggregate principal amount equal to the aggregate principal amount of Restricted Global Notes to be exchanged. At the Issuer’s request on no less than five calendar days’ notice prior to the Automatic Exchange Notice Date, the Trustee shall deliver, in the Issuer’s name and at its expense, the Automatic Exchange Notice to each Holder at such Holder’s address appearing in the register of Holders. Notwithstanding anything to the contrary in this Section 2.6(e), during the 15-day period prior to the Automatic Exchange Date, no transfers or exchanges other than pursuant to this Section 2.6(e) shall be permitted without the prior written consent of the Issuer. Upon such exchange of beneficial interests pursuant to this Section 2.6(e), the aggregate principal amount of the Global Notes shall be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depositary, to reflect the relevant increase or decrease in the principal amount of such Global Note resulting from the applicable exchange. The Restricted Global Note from which beneficial interests are transferred pursuant to an Automatic Exchange shall be canceled following the Automatic Exchange.

(f) Retention of Written Communications. The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.1 or this Section 2.6. The Issuer shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable prior written notice to the Registrar.

(g) Obligations with Respect to Transfers and Exchanges of Notes.

(i) To permit registrations of transfers and exchanges, the Issuer shall, subject to the other terms and conditions of this Article II, execute and the Trustee shall authenticate Definitive Notes and Global Notes at the Registrar’s request.

(ii) No service charge shall be made to a Holder for any registration of transfer or exchange, but the Issuer may require the Holder to pay a sum sufficient to cover any transfer tax assessments or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charges payable upon exchange or transfer pursuant to Section 2.2, 2.6, 2.10, 2.12, 3.5, 3.8, 5.6, 5.7 or 9.4).

(iii) The Issuer (and the Registrar) shall not be required to register the transfer of or exchange of any Note (A) for a period beginning (1) 15 days before the mailing of a notice of an offer to repurchase or redeem Notes and ending at the close of business on the day of such mailing or (2) 15 days before an Interest Payment Date and ending on such Interest Payment Date or (B) called for redemption, except the unredeemed portion of any Note being redeemed in part.

 

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(iv) Prior to the due presentation for registration of transfer of any Note, the Issuer, the Trustee, the Paying Agent or the Registrar may deem and treat the person in whose name a Note is registered as the owner of such Note for the purpose of receiving payment of principal of, premium, if any, and (subject to paragraph 2 of the form of Note attached hereto as Exhibit A) interest on such Note and for all other purposes whatsoever, including without limitation the transfer or exchange of such Note, whether or not such Note is overdue, and none of the Issuer, the Trustee, the Paying Agent or the Registrar shall be affected by notice to the contrary.

(v) Any Definitive Note delivered in exchange for an interest in a Global Note pursuant to Section 2.1(f) shall, except as otherwise provided by Section 2.6(d), bear the applicable legend regarding transfer restrictions applicable to the Definitive Note set forth in Section 2.1(d).

(vi) All Notes issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Notes surrendered upon such transfer or exchange.

(h) No Obligation of the Trustee. (i) None of the Trustee, the Registrar or the Paying Agent shall have any responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in, DTC or other Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice (including any notice of redemption or purchase) or the payment of any amount or delivery of any Notes (or other security or property) under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Notes shall be given or made only to or upon the order of the registered Holders (which shall be DTC or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Trustee, the Registrar and the Paying Agent each may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners.

(ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among DTC participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. Neither the Trustee, the Registrar and the Paying Agent nor any of their agents shall have any responsibility for any actions taken or not taken by DTC.

 

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SECTION 2.7. Form of Certificate to be Delivered upon Termination of Restricted Period.

[Date]

CPG International LLC

888 North Keyser Ave.

Scranton, PA 18504

Wilmington Trust, National Association

1100 North Market Street,

Wilmington, DE 19890

Attention: Corporate Capital Markets – CPG International

 

  Re:

CPG International LLC (the “Issuer”)

8.000% Senior Notes due 2021 (the “Notes”)

Ladies and Gentlemen:

This letter relates to Notes represented by a temporary global Note (the “Temporary Regulation S Global Note”). Pursuant to Section 2.1 of the Indenture dated as of September 30, 2013 relating to the Notes (as amended or supplemented, the “Indenture”), we hereby certify that the persons who are the beneficial owners of $[            ] principal amount of Notes represented by the Temporary Regulation S Global Note are persons outside the United States to whom beneficial interests in such Notes could be transferred in accordance with Rule 904 of Regulation S promulgated under the Securities Act of 1933, as amended. Accordingly, you are hereby requested to issue a Permanent Regulation S Global Note representing the undersigned’s interest in the principal amount of Notes represented by the Temporary Regulation S Global Note, all in the manner provided by the Indenture. We certify that we [are][are not] an Affiliate of the Issuer.

You and the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this letter have the meanings set forth in Regulation S.

 

  Very truly yours,
  [Name of Transferor]
  By:  

                     

 

 

  Authorized Signature

 

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SECTION 2.8. Form of Certificate to be Delivered in Connection with Transfers to Institutional Accredited Investors.

[Date]

CPG International LLC

888 North Keyser Ave.

Scranton, PA 18504

Wilmington Trust, National Association

1100 North Market Street,

Wilmington, DE 19890

Attention: Corporate Capital Markets – CPG International

Ladies and Gentlemen:

This certificate is delivered to request a transfer of $[            ] principal amount of the 8.000% Senior Notes due 2021 (the “Notes”) of CPG Merger Sub LLC (the “Issuer”).

Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows:

Name:                                                                           

Address:                                                                       

Taxpayer ID Number:                                                  

The undersigned represents and warrants to you that:

1. We are an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the “Securities Act”)) purchasing for our own account or for the account of such an institutional “accredited investor” at least $250,000 principal amount of the Notes, and we are acquiring the Notes not with a view to, or for offer or sale in connection with, any distribution in violation of the Securities Act. We have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risk of our investment in the Notes and we invest in or purchase securities similar to the Notes in the normal course of our business. We and any accounts for which we are acting are each able to bear the economic risk of our or its investment.

2. We understand that the Notes have not been registered under the Securities Act and, unless so registered, may not be sold except as permitted in the following sentence. We agree on our own behalf and on behalf of any investor account for which we are purchasing Notes to offer, sell or otherwise transfer such Notes prior to the date that is one year after the later of the date of original issue and the last date on which the Issuer or any affiliate of the Issuer was the owner of such Notes (or any predecessor thereto) (the “Resale Restriction Termination Date”) only (a) to the Issuer or any Subsidiary thereof, (b) pursuant to an effective registration statement under the Securities Act, (c) in a transaction complying with the requirements of Rule 144A under the Securities Act, to a person we reasonably believe is a “qualified institutional buyer” under Rule 144A of the Securities Act (a “QIB”) that is purchasing for its own account or for the account of a QIB and to whom notice is given that the

 

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transfer is being made in reliance on Rule 144A, (d) pursuant to offers and sales to non-U.S. persons that occur outside the United States within the meaning of Regulation S under the Securities Act, (e) to an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing for its own account or for the account of such an institutional “accredited investor,” in each case in a minimum principal amount of Notes of $250,000 for investment purposes and not with a view to or for offer or sale in connection with any distribution in violation of the Securities Act or (f) pursuant to any other available exemption from the registration requirements of the Securities Act, subject in each of the foregoing cases to any requirement of law that the disposition of our property or the property of such investor account or accounts be at all times within our or their control and in compliance with any applicable state securities laws. The foregoing restrictions on resale shall not apply subsequent to the Resale Restriction Termination Date. If any resale or other transfer of the Notes is proposed to be made pursuant to clause (e) above prior to the Resale Restriction Termination Date, the transferor shall deliver a letter from the transferee substantially in the form of this letter to the Issuer and the Trustee, which shall provide, among other things, that the transferee is an institutional “accredited investor” (within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and that it is acquiring such Notes for investment purposes and not for distribution in violation of the Securities Act. Each purchaser acknowledges that the Issuer and the Trustee reserve the right prior to any offer, sale or other transfer prior to the Resale Termination Date of the Notes pursuant to clause (d), (e) or (f) above to require the delivery of an opinion of counsel, certifications and/or other information satisfactory to the Issuer and the Trustee.

3. We [are][are not] an Affiliate of the Issuer.

 

TRANSFEREE:                                                                       
BY:  

                              

SECTION 2.9. Form of Certificate to be Delivered in Connection with Transfers Pursuant to Regulation S.

[Date]

CPG Merger Sub LLC

888 North Keyser Ave.

Scranton, PA 18504

Wilmington Trust, National Association

1100 North Market Street,

Wilmington, DE 19890

Attention: Corporate Capital Markets – CPG International

 

  Re:

CPG Merger Sub LLC (the “Issuer”)

8.000% Senior Notes due 2021 (the “Notes”)

 

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Ladies and Gentlemen:

In connection with our proposed sale of $[            ] aggregate principal amount of the Notes, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the United States Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, we represent that:

(a) the offer of the Notes was not made to a person in the United States;

(b) either (i) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (ii) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States;

(c) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(a)(2) or Rule 904(a)(2) of Regulation S, as applicable; and

(d) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act.

In addition, if the sale is made during a restricted period and the provisions of Rule 903(b)(2), Rule 903(b)(3) or Rule 904(b)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(b)(2), Rule 903(b)(3) or Rule 904(b)(1), as the case may be.

We also hereby certify that we [are][are not] an Affiliate of the Issuer and, to our knowledge, the transferee of the Notes [is][is not] an Affiliate of the Issuer.

You and the Issuer are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S.

 

  Very truly yours,
  [Name of Transferor]
  By:  

                              

 

 

  Authorized Signature

 

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SECTION 2.10. Mutilated, Destroyed, Lost or Stolen Notes.

If a mutilated Note is surrendered to the Registrar or if the Holder of a Note claims that the Note has been lost, destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall authenticate a replacement Note if the requirements of Section 8-405 of the Uniform Commercial Code are met, such that the Holder (a) satisfies the Issuer or the Trustee that such Note has been lost, destroyed or wrongfully taken within a reasonable time after such Holder has notice of such loss, destruction or wrongful taking and the Registrar has not registered a transfer prior to receiving such notification, (b) makes such request to the Issuer or Trustee prior to the Note being acquired by a protected purchaser as defined in Section 8-303 of the Uniform Commercial Code (a “protected purchaser”) and (c) satisfies any other reasonable requirements of the Trustee; provided, however, if after the delivery of such replacement Note, a protected purchaser of the Note for which such replacement Note was issued presents for payment or registration such replaced Note, the Trustee or the Issuer shall be entitled to recover such replacement Note from the Person to whom it was issued and delivered or any Person taking therefrom, except a protected purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Trustee in connection therewith. If required by the Trustee or the Issuer, such Holder shall furnish an indemnity bond sufficient in the judgment of the Issuer and the Trustee to protect the Issuer, the Trustee, the Paying Agent and the Registrar from any loss which any of them may suffer if a Note is replaced, and, in the absence of notice to the Issuer, any Guarantor or the Trustee that such Note has been acquired by a protected purchaser, the Issuer shall execute, and upon receipt of an Issuer Order, the Trustee shall authenticate and make available for delivery, in exchange for any such mutilated Note or in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount, bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Issuer in its discretion may, instead of issuing a new Note, pay such Note.

Upon the issuance of any new Note under this Section 2.10, the Issuer may require that such Holder pay a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of counsel and of the Trustee and its counsel) in connection therewith.

Subject to the proviso in the initial paragraph of this Section 2.10, every new Note issued pursuant to this Section in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Issuer, any Guarantor (if applicable) and any other obligor upon the Notes, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

The provisions of this Section 2.10 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

 

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SECTION 2.11. Outstanding Notes.

Notes outstanding at any time are all Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Note does not cease to be outstanding in the event the Issuer or an Affiliate of the Issuer holds the Note; provided, however, that (i) for purposes of determining which are outstanding for consent or voting purposes hereunder, the provisions of Section 12.4 shall apply and (ii) in determining whether the Trustee shall be protected in making a determination whether the Holders of the requisite principal amount of outstanding Notes are present at a meeting of Holders of Notes for quorum purposes or have consented to or voted in favor of any request, demand, authorization, direction, notice, consent, waiver, amendment or modification hereunder, or relying upon any such quorum, consent or vote, only Notes which a Trust Officer of the Trustee actually knows to be held by the Issuer or an Affiliate of the Issuer shall not be considered outstanding.

If a Note is replaced pursuant to Section 2.10 (other than a mutilated Note surrendered for replacement), it ceases to be outstanding unless the Trustee and the Issuer receive proof satisfactory to them that the replaced Note is held by a protected purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement pursuant to Section 2.10.

If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a Redemption Date or maturity date money sufficient to pay all principal, premium, if any, and accrued interest payable on that date with respect to the Notes (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Holders on that date pursuant to the terms of this Indenture, then on and after that date such Notes (or portions thereof) cease to be outstanding and interest on them ceases to accrue.

SECTION 2.12. Temporary Notes.

In the event that Definitive Notes are to be issued under the terms of this Indenture, until such Definitive Notes are ready for delivery, the Issuer may prepare and the Trustee shall authenticate temporary Notes. Temporary Notes shall be substantially in the form, and shall carry all rights, of Definitive Notes but may have variations that the Issuer considers appropriate for temporary Notes. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate Definitive Notes. After the preparation of Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes upon surrender of the temporary Notes at any office or agency maintained by the Issuer for that purpose and such exchange shall be without charge to the Holder. Upon surrender for cancellation of any one or more temporary Notes, the Issuer shall execute, and the Trustee shall authenticate and make available for delivery in exchange therefor, one or more Definitive Notes representing an equal principal amount of Notes. Until so exchanged, the Holder of temporary Notes shall in all respects be entitled to the same benefits under this Indenture as a Holder of Definitive Notes.

SECTION 2.13. Cancellation.

The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment or cancellation and dispose of such Notes in accordance with its internal policies and customary procedures including delivery of a

 

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certificate describing such Notes disposed (subject to the record retention requirements of the Exchange Act) to the Issuer pursuant to written request by one Officer of the Issuer. If the Issuer or any Guarantor acquires any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.13. The Issuer may not issue new Notes to replace Notes it has paid or delivered to the Trustee for cancellation for any reason other than in connection with a transfer or exchange.

At such time as all beneficial interests in a Global Note have either been exchanged for Definitive Notes, transferred, redeemed, repurchased or canceled, such Global Note shall be returned by DTC to the Trustee for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Note is exchanged for Definitive Notes, transferred in exchange for an interest in another Global Note, redeemed, repurchased or canceled, the principal amount of Notes represented by such Global Note shall be reduced and an adjustment shall be made on the Schedule of Increases and Decreases to such Global Note and on the books and records of the Trustee (if it is then the Notes Custodian for such Global Note) with respect to such Global Note, by the Trustee or the Notes Custodian, to reflect such reduction.

SECTION 2.14. Payment of Interest; Defaulted Interest.

Interest on any Note which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business on the regular record date for such payment at the office or agency of the Issuer maintained for such purpose pursuant to Section 2.3.

Any interest on any Note which is payable, but is not paid when the same becomes due and payable and such nonpayment continues for a period of 30 days shall forthwith cease to be payable to the Holder on the regular record date, and such defaulted interest and (to the extent lawful) interest on such defaulted interest at the rate borne by the Notes (such defaulted interest and interest thereon herein collectively called “Defaulted Interest”) shall be paid by the Issuer, at its election in each case, as provided in clause (a) or (b) below:

(a) The Issuer may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective predecessor Notes) are registered at the close of business on a Special Record Date (as defined below) for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Issuer shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note and the date (not less than 30 days after such notice) of the proposed payment (the “Special Interest Payment Date”), and at the same time the Issuer shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Section 2.14(a). Thereupon the Issuer shall fix a record date (the “Special Record Date”) for the payment of such Defaulted Interest, which date shall be not more than 15) days and not less than ten days prior to the Special Interest Payment Date and not

 

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less than ten days after the receipt by the Trustee of the notice of the proposed payment. The Issuer shall promptly notify the Trustee of such Special Record Date, and in the name and at the expense of the Issuer, the Trustee shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor to be given in the manner provided for in Section 12.1, not less than ten days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date and Special Interest Payment Date therefor having been so given, such Defaulted Interest shall be paid on the Special Interest Payment Date to the Persons in whose names the Notes (or their respective predecessor Notes) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the provisions in Section 2.14(b).

(b) The Issuer may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Issuer to the Trustee of the proposed payment pursuant to this Section 2.14(b), such manner of payment shall be deemed practicable by the Trustee.

Subject to the foregoing provisions of this Section 2.14, each Note delivered under this Indenture upon registration of, transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.

SECTION 2.15. CUSIP, Common Code and ISIN Numbers. The Issuer in issuing the Notes may use “CUSIP”, “Common Code” and “ISIN” numbers and, if so, the Trustee shall use “CUSIP”, “Common Code” and “ISIN” numbers in notices, including notices of redemption or purchase, as a convenience to Holders; provided, however, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of a redemption or purchase and that reliance may be placed only on the other identification numbers printed on the Notes, and any such notice, redemption or purchase shall not be affected by any defect in or omission of such CUSIP, Common Code and ISIN numbers. The Issuer shall promptly notify the Trustee in writing of any change in the CUSIP, Common Code and ISIN numbers.

ARTICLE III

COVENANTS

SECTION 3.1. Payment of Notes.

The Issuer shall pay the principal of, premium, if any, and interest on the Notes on the dates and in the manner provided in the Notes and in this Indenture. Principal, premium, if any, and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal, premium, if any, and interest then due.

 

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The Issuer shall pay interest on overdue principal at the rate specified therefor in the Notes, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful.

Notwithstanding anything to the contrary contained in this Indenture, the Issuer and Paying Agent may, to the extent it is required to do so by law, deduct or withhold income or other similar taxes imposed by the United States of America from principal or interest payments hereunder.

SECTION 3.2. Limitation on Incurrence of Indebtedness and Issuance of Disqualified Stock.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, Incur any Indebtedness (including Acquired Indebtedness) or issue any Disqualified Stock; provided that the Issuer and any of its Restricted Subsidiaries may Incur Indebtedness (including Acquired Indebtedness) or issue Disqualified Stock if, immediately after giving effect to the Incurrence of such Indebtedness or issuance of such Disqualified Stock and the receipt and application of the proceeds therefrom, the Fixed Charge Coverage Ratio of the Issuer and its Restricted Subsidiaries (on a consolidated basis), for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date on which such Indebtedness is Incurred or Disqualified Stock is issued for which such calculation is being made would be at least 2.00 to 1.00, determined on a Pro Forma Basis; provided that the aggregate amount of Indebtedness Incurred or Disqualified Stock issued pursuant to this
Section 3.2(a)
by Non-Guarantor Restricted Subsidiaries shall not exceed in the aggregate $35.0 million at any one time outstanding.

(b) Notwithstanding Section 3.2(a), the Issuer and its Restricted Subsidiaries may Incur the following Indebtedness or issue the following Disqualified Stock (the “Permitted Indebtedness”):

(1) Indebtedness Incurred pursuant to (and Guarantees in respect of) Debt Facilities in an aggregate principal amount at any one time outstanding not to exceed (x) $775.0 million plus (y) the greater of $225.0 million and the Borrowing Base plus (z) an additional amount of Indebtedness or Disqualified Stock at any one time that does not cause the Secured Leverage Ratio of the Issuer and its Restricted Subsidiaries (on a consolidated basis) for the most recently ended four fiscal quarters for which internal financial statements are available immediately preceding the date for which such Indebtedness is Incurred or Disqualified Stock is issued for which such calculation is being made does not exceed 5.00:1.00 determined on a Pro Forma Basis (provided that any Indebtedness Incurred or Disqualified Stock issued pursuant to this clause (y) shall be deemed to be Secured Indebtedness solely for purposes of such calculation) minus (z) any amount used to permanently repay such Obligations (or permanently reduce commitments with respect thereto) pursuant to Section 3.5;

(2) Indebtedness under the Notes issued on the Issue Date and any Note Guarantee;

 

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(3) Indebtedness of the Issuer or any Restricted Subsidiary of the Issuer outstanding on the Issue Date (other than Indebtedness referenced in clause (1) or (2) above);

(4) (i) any Guarantee by the Issuer or a Guarantor of Indebtedness or other obligations of any Restricted Subsidiary of the Issuer so long as the Incurrence of such Indebtedness is permitted under the terms of this Indenture; provided that if such Indebtedness is by its express terms subordinated in right of payment to the Note Guarantee of such Restricted Subsidiary, any such Guarantee of the Issuer or such Guarantor with respect to such Indebtedness shall be subordinated in right of payment to the Notes or such Note Guarantee with respect to the Notes substantially to the same extent as such Indebtedness is subordinated to the Note Guarantee of such Restricted Subsidiary, as applicable;

(ii) any Guarantee by a Guarantor of Indebtedness of the Issuer; provided that if such Indebtedness is by its express terms subordinated in right of payment to the Notes, any such guarantee of such Guarantor with respect to such Indebtedness shall be subordinated in right of payment to such Note Guarantee with respect to the Notes substantially to the same extent as such Indebtedness is subordinated to the Notes, as applicable, or

(iii) any Guarantee Incurred by a Non-Guarantor Restricted Subsidiary of Indebtedness of another Non-Guarantor Restricted Subsidiary Incurred in accordance with the terms of this Indenture;

(5) Indebtedness (including in respect of letters of credit, bank guarantees or similar instruments) Incurred by the Issuer or any Restricted Subsidiary of the Issuer in respect of workers’ compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other Indebtedness with respect to reimbursement type obligations regarding workers’ compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance;

(6) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion guarantees and similar obligations, in each case, provided in the ordinary course of business;

(7) Indebtedness (i) Incurred in respect of Hedging Obligations entered into in the ordinary course of business and not for speculative purposes and (ii) in respect of deposit accounts, securities accounts, cash pooling, and cash management and treasury services, including netting services, overdraft protection, credit cards, debit cards, P-cards and other similar arrangements;

(8) Indebtedness owed by the Issuer to any Restricted Subsidiary of the Issuer, or by any Restricted Subsidiary of the Issuer to the Issuer or to any other Restricted Subsidiary of the Issuer; provided that if for any reason such Indebtedness ceases to be held by the Issuer or a Restricted Subsidiary of the Issuer, as applicable, such Indebtedness shall cease to be Permitted Indebtedness under this clause (8) and shall be deemed Incurred as Indebtedness of the Issuer or such Restricted Subsidiary for purposes of this Indenture;

 

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(9) Indebtedness of the Issuer or any Restricted Subsidiary of the Issuer pursuant to Capital Lease Obligations, Synthetic Lease Obligations and Purchase Money Indebtedness and any Refinancing Indebtedness that Refinances any Indebtedness Incurred pursuant to this clause (9), including any additional Indebtedness Incurred to pay premiums, fees and expense in connection therewith; provided that the aggregate principal amount of all Indebtedness Incurred under this clause (9) and outstanding at any time shall not exceed the greater of (x) $50.0 million and (y) 3.0% of Consolidated Total Assets; provided, further, that Capital Lease Obligations Incurred by the Issuer or any Restricted Subsidiary of the Issuer pursuant to this clause (9) in connection with a Sale and Lease Back Transaction shall not be subject to the foregoing limitation so long as the proceeds of such Sale and Lease Back Transaction are used by the Issuer or such Restricted Subsidiary to permanently repay outstanding Indebtedness of the Issuer and its Restricted Subsidiaries;

(10) Indebtedness arising from agreements of the Issuer or a Restricted Subsidiary of the Issuer providing for indemnification, contribution, earn-out, adjustment of purchase price or similar obligations, in each case, Incurred or assumed in connection with the acquisition or disposition of any business, assets or Capital Stock otherwise permitted under this Indenture;

(11) Indebtedness arising by virtue of the issuance by any of the Issuer’s Restricted Subsidiaries to the Issuer or to any of its Restricted Subsidiaries of shares of Preferred Stock or Disqualified Stock; provided, however, that any subsequent issuance or transfer of any Capital Stock or any other event which results in any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or any other subsequent transfer of any such shares of Preferred Stock or Disqualified Stock (except to the Issuer or another of its Restricted Subsidiaries) shall be deemed in each case to be an issuance of such shares of Preferred Stock or Disqualified Stock not permitted by this clause (11);

(12) Indebtedness 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; provided that such Indebtedness is extinguished within ten days of its incurrence;

(13) Refinancing Indebtedness that Refinances Indebtedness Incurred pursuant to the provisions of Section 3.2(a) or Indebtedness Incurred pursuant to clauses (2), (3), this clause (13), (14) and (15) of this Section 3.2(b), including any additional Indebtedness Incurred to pay premiums, fees and expenses in connection therewith;

(14) Indebtedness or Disqualified Stock of the Issuer or any of its Restricted Subsidiaries in an aggregate principal amount or liquidation preference up to 100% of the net cash proceeds received by the Issuer since immediately after the Issue Date from the issue or sale of Capital Stock of the Issuer or cash contributed to the capital of the Issuer (in each case, other than Capital Stock or Disqualified Stock issued or sold or cash contributed to the capital of the Issuer that is Excluded Equity pursuant to clauses (a) through (f) and (h) through (i) of the definition of Excluded Equity) as determined pursuant to Section 3.3(a)(iv)(3) and Section 3.3(a)(iv)(4) to the extent such net cash proceeds or cash have not been applied pursuant to such clauses to make Restricted Payments or to make other Investments, payments or exchanges pursuant to
Section
 3.3(b) or to make Permitted Investments (other than Permitted Investments specified in clauses (e) and (f) of the definition thereof);

 

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(15) Indebtedness or Disqualified Stock (i) of the Issuer or any of its Restricted Subsidiaries (other than Non-Guarantor Restricted Subsidiaries) Incurred or issued to finance an acquisition and (ii) of Persons that are acquired by the Issuer or any of its Restricted Subsidiaries (other than Non-Guarantor Restricted Subsidiaries) or merged into the Issuer or a Restricted Subsidiary of the Issuer (other than a Non-Guarantor Restricted Subsidiary) in accordance with the terms of this Indenture; provided, however, that after giving effect to such acquisition and the incurrence of such Indebtedness or issuance of such Disqualified Stock, either:

(i) the Issuer could Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions described in
Section
 3.2(a) or

(ii) the Fixed Charge Coverage Ratio of the Issuer and its Restricted Subsidiaries determined on both a consolidated basis and Pro Forma Basis would be equal to or higher than immediately prior to such acquisition;

(16) Indebtedness Incurred or Disqualified Stock issued by the Issuer or any of its Restricted Subsidiaries to the extent that the net proceeds thereof are promptly deposited to defease or to satisfy and discharge the Notes in accordance with this Indenture;

(17) Indebtedness issued by the Issuer or any of its Restricted Subsidiaries to current or former employees, directors, officers, managers and consultants thereof or their respective Immediate Family Members, in each case, to finance the purchase or redemption of Capital Stock of the Issuer or any direct or indirect parent company of the Issuer to the extent described in clause (4) of Section 3.3(b);

(18) Indebtedness representing deferred compensation to directors, managers, officers or employees of the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;

(19) Indebtedness of the Issuer or any of its Restricted Subsidiaries (A) arising from customer deposits and advance payments received in the ordinary course of business from customers for goods purchased in the ordinary course of business or (B) in respect of obligations to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services so long as such obligations are Incurred in connection with open accounts extended by suppliers on customary trade terms (which require that all such payments be made within 60 days after the incurrence of the related obligations) in the ordinary course of business;

(20) Indebtedness of the Issuer or any of its Restricted Subsidiaries consisting of (i) financing of insurance premiums or (ii) take-or-pay obligations in supply arrangements, in each case, in the ordinary course of business;

 

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(21) Indebtedness of the Issuer or any of its Restricted Subsidiaries supported by a letter of credit issued pursuant to any Debt Facility otherwise permitted to be Incurred under Section 3.2; provided that for purposes of determining the availability of Permitted Indebtedness such letter of credit shall be treated as an Incurrence of Indebtedness under one or more clauses of this Section 3.2(b) (such clauses to be selected by the Issuer), in a principal amount equal to the amount drawn and, in any event, not in excess of the stated amount of such letter of credit;

(22) Indebtedness or Disqualified Stock of Restricted Subsidiaries that are Foreign Subsidiaries; provided that the aggregate principal amount of Indebtedness Incurred or Disqualified Stock issued pursuant to this clause (22) shall not exceed the greater of (x) $45.0 million and (y) 2.5% of Consolidated Total Assets; provided, further, that any Indebtedness Incurred pursuant to subclause (23) below shall be included in such calculation;

(23) Indebtedness Incurred on behalf of (or Disqualified Stock issued on behalf of), or representing Guarantees of Indebtedness of, joint ventures; provided that the aggregate principal amount of Indebtedness Incurred pursuant to this clause (23) shall not exceed the greater of (x) $45.0 million and (y) 2.5% of Consolidated Total Assets; provided, further, that any Indebtedness Incurred pursuant to subclause (22) above shall be included in such calculation;

(24) Indebtedness in respect of letters of credit, bank guarantees, warehouse receipts or similar instruments issued to support performance obligations and trade letters of credit (other than obligations in respect of other Indebtedness) in the ordinary course of business; provided that the related reimbursement obligations are satisfied within 30 days of incurrence;

(25) Guarantees by the Issuer or any Restricted Subsidiary of the Issuer of any lease or sublease permitted by this Indenture of real property entered into by the Issuer or any Restricted Subsidiary of the Issuer; and

(26) Indebtedness of, or Disqualified Stock issued by, the Issuer or any Restricted Subsidiary of the Issuer not otherwise permitted pursuant to this definition, in an aggregate principal amount not to exceed the greater of (x) $50.0 million and (y) 3.0% of Consolidated Total Assets at any time outstanding.

(c) Accrual of interest, the accretion of accreted value, the amortization of original issue discount, the payment of interest in the form of additional Indebtedness with the same terms, the payment of dividends on Disqualified Stock or Preferred Stock in the form of additional shares of Disqualified Stock or Preferred Stock of the same class, the accretion of liquidation preference and increases in the amount of Indebtedness outstanding solely as a result of fluctuations in the exchange rate of currencies will not be deemed to be an Incurrence of Indebtedness, Disqualified Stock or Preferred Stock for purposes of this Section 3.2.

 

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(d) For purposes of determining compliance with any U.S. dollar-denominated restriction on the Incurrence of Indebtedness or issuance of Disqualified Stock, the U.S. dollar-equivalent principal amount of Indebtedness denominated in another currency shall be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was Incurred, in the case of term indebtedness, or first committed, in the case of revolving credit indebtedness; provided that if such Indebtedness is Incurred to Refinance other Indebtedness denominated in another currency, and such Refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such Refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such Refinancing Indebtedness does not exceed (i) the principal amount of such Indebtedness being Refinanced plus (ii) the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses Incurred in connection with such Refinancing.

(e) For purposes of this Indenture, (1) unsecured Indebtedness will not be treated as subordinated or junior to Secured Indebtedness merely because it is unsecured or (2) senior Indebtedness will not be treated as subordinated or junior to any other senior Indebtedness merely because it has a junior priority with respect to the same collateral.

(f) The Issuer shall not and shall not permit any Guarantor to, directly or indirectly, incur any Indebtedness that is subordinated or junior in right of payment to any Indebtedness of the Issuer or such Guarantor, as the case may be, unless such Indebtedness is expressly subordinated in right of payment to the Notes or such Guarantor’s Note Guarantee to the extent and in the same manner as such Indebtedness is subordinated to other Indebtedness of the Issuer or such Guarantor, as the case may be.

SECTION 3.3. Limitation on Restricted Payments.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly (each, a “Restricted Payment”):

(i) declare or pay any dividend or other distribution on Capital Stock of the Issuer, or on Capital Stock of any Restricted Subsidiary of the Issuer that are held by, or declared and paid to, any Person other than the Issuer or a Restricted Subsidiary of the Issuer (other than (a) dividends, distributions or payments made solely in Capital Stock of the Issuer (other than Disqualified Stock) and (b) dividends or distributions payable to the Issuer or a Restricted Subsidiary of the Issuer or to other holders of Capital Stock of a Restricted Subsidiary that is not a Wholly-Owned Subsidiary so long as the Issuer or such Restricted Subsidiary receives at least its pro rata share of such dividend or distribution in accordance with its Capital Stock in such class or series of securities);

(ii) purchase, redeem, acquire or retire any Capital Stock of the Issuer or any direct or indirect parent company of the Issuer, including in connection with any merger or consolidation involving the Issuer;

(iii) redeem, repurchase, defease or otherwise acquire or retire for value, prior to any scheduled maturity, scheduled sinking fund or mandatory redemption payment, Indebtedness of the Issuer or any Guarantor that is subordinate in right of payment to the Notes or Note Guarantees (excluding any Indebtedness owed to the Issuer or any Restricted Subsidiary of the Issuer); except (A) a payment payable solely in

 

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Capital Stock (other than Disqualified Stock) and (B) payments of principal and interest in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case, within one year of the due date thereof; provided for the avoidance of doubt, regularly scheduled payments of principal and interest on subordinated Indebtedness shall not be deemed to be a Restricted Payment; and

(iv) make any Investment in any Person, other than a Permitted Investment;

unless, at the time of and after giving effect to the proposed Restricted Payment:

(A) no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof;

(B) after giving effect to such Restricted Payment on a Pro Forma Basis, the Issuer would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the provisions described in Section 3.2(a); and

(C) after giving effect to such Restricted Payment on a Pro Forma Basis, the aggregate amount expended or declared for all Restricted Payments made on or after the Issue Date (including Restricted Payments permitted by clauses (1) and (2) (with respect to payments of dividends on Refunding Capital Stock pursuant to clause (B) only), (4) (without giving effect to the increase due to clauses (A) and (B) thereof), (5) (to the extent such dividends did not reduce Consolidated Net Income), 6(C), (8), (11) and (15) of Section 3.3(b) (but in the case of Restricted Payments made pursuant to Section 3.3(b)(15), such payments shall be excluded only to the extent that the amount available for Restricted Payments under this clause (C) would be reduced to less than $0 as a result of payments made under Section 3.3(b)(15)), but excluding all other Restricted Payments under Section 3.3(b)) shall not exceed the sum (without duplication) of:

(1) $40,000,000, plus

(2) 50% of the Consolidated Net Income of the Issuer and its Restricted Subsidiaries for the period (taken as one accounting period) from the first day of the fiscal quarter during which the Issue Date occurs to the end of the Issuer’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment, or, in the case such Consolidated Net Income for such period is a deficit, minus 100% of such deficit, plus

(3) 100% of the aggregate net cash proceeds and the Fair Market Value of other property received by the Issuer (other than Excluded Equity) since immediately after the Issue Date from the issue or sale of:

(x) Capital Stock of the Issuer, including Retired Capital Stock (other than Excluded Equity);

 

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(y) to the extent such net cash proceeds are actually contributed to the Issuer, Capital Stock of any direct or indirect parent company of the Issuer (other than Excluded Equity or contributions to the extent such amounts have been applied to Restricted Payments made in accordance with clause (4) of Section 3.3(b)) or

(z) Indebtedness of the Issuer or a Restricted Subsidiary of the Issuer (other than Indebtedness or Disqualified Stock issued to a Restricted Subsidiary of the Issuer or to an employee stock ownership plan or trust that has been established by the Issuer or any of its Restricted Subsidiaries) issued after the Issue Date that, in each case, has been converted into or exchanged for Capital Stock of the Issuer or any direct or indirect parent company of the Issuer (other than Excluded Equity), plus

(4) 100% of the aggregate amount of cash and the Fair Market Value of other property contributed to the capital of the Issuer following the Issue Date (other than Excluded Equity), plus

(5) 100% of the aggregate amount received by the Issuer or any of its Restricted Subsidiaries in cash and the Fair Market Value of other property received by means of:

(x) the sale or other disposition (other than to the Issuer or a Restricted Subsidiary of the Issuer) of Restricted Investments made by the Issuer and its Restricted Subsidiaries and repurchases and redemptions of such Restricted Investments from the Issuer and its Restricted Subsidiaries and repayments of loans or advances, and releases of guarantees, which constitute Restricted Investments made by the Issuer or its Restricted Subsidiaries, in each case, after the Issue Date; or

(y) the sale (other than to the Issuer or a Restricted Subsidiary of the Issuer) of the stock of an Unrestricted Subsidiary or a distribution from an Unrestricted Subsidiary (other than in each case to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary of the Issuer pursuant to Section 3.3(b)(15) or (b)(16) or to the extent such Investment constituted a Permitted Investment) or a dividend from an Unrestricted Subsidiary after the Issue Date, plus

(6) in the case of the redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary or the merger or consolidation of an Unrestricted Subsidiary into the Issuer or a Restricted Subsidiary of the Issuer or the transfer of all or substantially all of the assets of an Unrestricted Subsidiary to the Issuer or a Restricted Subsidiary of the Issuer after the Issue Date, the Fair Market Value of the Investment in such Unrestricted Subsidiary at the time of such redesignation of such Unrestricted Subsidiary as a Restricted Subsidiary (or such merger, consolidation or transfer), after deducting any Indebtedness associated with the Unrestricted Subsidiary so designated or combined or any Indebtedness with the assets so transferred or conveyed, other than to the extent the Investment in such Unrestricted Subsidiary was made by the Issuer or a Restricted Subsidiary of the Issuer pursuant to Section 3.3(b)(15) or (b)(16) or to the extent such Investment constituted a Permitted Investment.

 

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(b) Notwithstanding whether the foregoing provisions of Section 3.3(a) would prohibit the Issuer and its Restricted Subsidiaries from making a Restricted Payment, the Issuer and its Restricted Subsidiaries may make the following Restricted Payments:

(1) the payment of any dividend or distribution within 60 days after the date of declaration thereof, if at the date of declaration such payment would have complied with the provisions of this Indenture;

(2) (a) the redemption, repurchase, retirement or other acquisition of any Capital Stock (“Retired Capital Stock”) or Subordinated Indebtedness of the Issuer or any Guarantor, or any Capital Stock of any direct or indirect parent company of the Issuer, in exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Issuer or any direct or indirect parent company of the Issuer to the extent contributed to the Issuer (in each case, other than any Excluded Equity) (“Refunding Capital Stock”) and (b) if immediately prior to the retirement of Retired Capital Stock, the declaration and payment of dividends thereon was permitted under Section 3.3(b)(6), the declaration and payment of dividends on the Refunding Capital Stock (other than Refunding Capital Stock the proceeds of which were used to redeem, repurchase, retire or otherwise acquire any Capital Stock of any direct or indirect parent company of the Issuer) in an aggregate amount per year no greater than the aggregate amount of dividends per annum that was declarable and payable on such Retired Capital Stock immediately prior to such retirement;

(3) the prepayment, redemption, defeasance, repurchase or other acquisition or retirement for value of Subordinated Indebtedness of the Issuer or a Guarantor made by exchange for, or out of the proceeds of the substantially concurrent sale of, new Indebtedness of the Issuer, or such Guarantor, as the case may be, which is Incurred in compliance with Section 3.2 so long as:

(A) the principal amount (or accreted value, if applicable) of such new Indebtedness does not exceed the principal amount of (or accreted value, if applicable), plus any accrued and unpaid interest on the Subordinated Indebtedness being so redeemed, defeased, repurchased, exchanged, acquired or retired for value, plus the amount of any premium (including reasonable tender premiums), defeasance costs and any reasonable fees and expenses Incurred in connection with the issuance of such new Indebtedness;

(B) such new Indebtedness is subordinated to the Notes or the applicable Note Guarantees at least to the same extent as such Subordinated Indebtedness so purchased, exchanged, redeemed, defeased, repurchased, acquired or retired for value;

(C) such new Indebtedness has a final scheduled maturity date equal to or later than the final scheduled maturity date of the Subordinated Indebtedness being so redeemed, defeased, repurchased, exchanged, acquired or retired, and

 

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(D) such new Indebtedness has a Weighted Average Life to Maturity equal to or greater than the remaining Weighted Average Life to Maturity of the Subordinated Indebtedness being so redeemed, defeased, repurchased, exchanged, acquired or retired;

(4) a Restricted Payment to pay for the repurchase, retirement or other acquisition or retirement for value of Capital Stock (other than Disqualified Stock) of the Issuer or any direct or indirect parent company of the Issuer held by any future, present or former employee, director, manager or consultant (or any of their Immediate Family Members) of the Issuer, any of its Subsidiaries or any direct or indirect parent company of the Issuer pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement, or any stock subscription or shareholder agreement (including, for the avoidance of doubt, any principal and interest payable on any promissory notes issued by the Issuer or any direct or indirect parent company of the Issuer in connection with such repurchase, retirement or other acquisition), including any Capital Stock rolled over by management of the Issuer or any direct or indirect parent company of the Issuer in connection with the CPG Transactions; provided that the aggregate Restricted Payments made under this clause (4) do not exceed $10.0 million in the aggregate in any fiscal year (with any unused amounts in any fiscal year being carried over to the immediately succeeding fiscal year); provided, further, that such amount in any fiscal year may be increased by an amount not to exceed:

(A) the cash proceeds from the sale of Capital Stock (other than Disqualified Stock) of the Issuer and, to the extent contributed to the Issuer, the cash proceeds from the sale of Capital Stock of any direct or indirect parent company of the Issuer, in each case to any future, present or former employees, directors, managers or consultants (or any of their Immediate Family Members) of the Issuer, any of its Subsidiaries, or any direct or indirect parent company of the Issuer that occurs after the Issue Date, to the extent the cash proceeds from the sale of such Capital Stock have not otherwise been applied to the payment of Restricted Payments by virtue of Section 3.3(a)(C), plus

(B) the cash proceeds of key man life insurance policies received by the Issuer and its Restricted Subsidiaries after the Issue Date, less

(C) the amount of any Restricted Payments previously made with the proceeds set forth in subclauses (A) and (B) of this clause (4);

and provided, further, that cancellation of Indebtedness owing to the Issuer or any Restricted Subsidiary of the Issuer from any future, present or former employees, directors, managers or consultants (or any of their Immediate Family Members) of the Issuer, any direct or indirect parent company of the Issuer or any Restricted Subsidiary of the Issuer in connection with a repurchase of Capital Stock of the Issuer or any direct or indirect parent company of the Issuer shall not be deemed to constitute a Restricted Payment for purposes of this Section 3.3 or any other provision of this Indenture;

 

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(5) the declaration and payment of dividends to holders of any class or series of Disqualified Stock of the Issuer or any Restricted Subsidiary of the Issuer or any class or series of Preferred Stock of any Non-Guarantor Restricted Subsidiary, in each case, issued in accordance with Section 3.2 to the extent such dividends are included in the definition of “Fixed Charges”;

(6) (A) the declaration and payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) issued by the Issuer after the Issue Date; (B) the declaration and payment of dividends to any direct or indirect parent company of the Issuer, the proceeds of which will be used to fund the payment of dividends to holders of any class or series of Designated Preferred Stock (other than Disqualified Stock) of such parent company issued after the Issue Date; provided that the amount of dividends paid pursuant to this clause (B) shall not exceed the aggregate amount of cash actually contributed to the Issuer from the sale of such Designated Preferred Stock or (C) the declaration and payment of dividends on Refunding Capital Stock in excess of the dividends declarable and payable thereon pursuant to Section 3.3(b)(2); provided that, in the case of clauses (A), (B) and (C), for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date of issuance of such Designated Preferred Stock or the declaration of such dividends on Refunding Capital Stock, after giving effect to such issuance or declaration on a Pro Forma Basis, the Issuer and its Restricted Subsidiaries on a consolidated basis would have had a Fixed Charge Coverage Ratio of at least 2.00 to 1.00;

(7) payments made or expected to be made by the Issuer or any Restricted Subsidiary of the Issuer in respect of withholding or similar taxes payable upon exercise of Capital Stock by any future, present or former employee, director, manager or consultant (or any of their Immediate Family Members) and repurchases of Capital Stock deemed to occur upon exercise of stock options or warrants if such Capital Stock represent a portion of the exercise price of such options or warrants;

(8) the declaration and payment of dividends on the Issuer’s or any direct or indirect parent company of the Issuer’s common stock (or the payment of dividends to any direct or indirect parent company of the Issuer to fund a payment of dividends on such company’s common stock), following consummation of a Qualified IPO in an amount equal up to 6% per annum of all cash proceeds received by the Issuer or contributed to the Issuer from a Qualified IPO;

(9) Restricted Payments in an amount that does not exceed the amount of Excluded Contributions made since the Issue Date;

(10) Restricted Payments to any direct or indirect parent company of the Issuer (i) not to exceed $2.0 million in any fiscal year to pay, or to pay to any parent company for the purpose of paying to any other parent company to pay, monitoring, consulting, management, transaction, advisory, termination or similar fees payable to a Sponsor or any Sponsor Affiliate (or, in the case of Teachers, distributions or dividends in lieu of such fees) (it being understood that any amounts that are not paid due to the existence of an Event of Default shall accrue and may be paid when the applicable Event of Default ceases to exist or

 

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is otherwise waived), (ii) for any financial advisory, transaction advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with the CPG Transactions and other acquisitions or divestitures (or, in the case of Teachers, distributions or dividends in lieu of such fees) and (iii) indemnities, reimbursements and reasonable and documented out-of-pocket fees and expenses of a Sponsor or any Sponsor Affiliate in connection therewith; provided that with respect to clauses (ii) and (iii), such payments shall be on terms reasonably consistent with arrangements entered into between similar financial sponsors and portfolio companies as determined in good faith by the Issuer or any of its direct or indirect parent companies on behalf of the Issuer;

(11) the repurchase, redemption, defeasance or other acquisition or retirement for value of any Subordinated Indebtedness in accordance with the provisions similar to those described under Section 3.5 and Section 3.8; provided that all Notes tendered by Holders in connection with a Change of Control Offer or an Asset Sale Offer, as the case may be, have been repurchased, redeemed, defeased or acquired or retired for value;

(12) the declaration and payment of dividends by the Issuer to, or the making of loans to, any direct or indirect parent company of the Issuer in amounts required for any direct or indirect parent company to pay, in each case, without duplication:

(A) franchise and excise taxes, and other fees and expenses, required to maintain its corporate or other entity existence,

(B) for any taxable period in which the Issuer or any of its Subsidiaries is a member of a consolidated, combined or similar income tax group (the “Tax Group”), to pay foreign, federal, state and local taxes of the Tax Group, to the extent such taxes are directly attributable to the Issuer or its Restricted Subsidiaries, or, to the extent attributable to its Unrestricted Subsidiaries, to the extent of the amount actually received from its Unrestricted Subsidiaries; provided that in each case the amount of such payments in any fiscal year does not exceed the amount that the Issuer, its Restricted Subsidiaries and its Unrestricted Subsidiaries (to the extent described above) would have been required to pay in respect of such foreign, federal, state or local taxes for such fiscal year had the Issuer, its Restricted Subsidiaries and its Unrestricted Subsidiaries (to the extent described above) been a standalone taxpayer (separate from any such direct or indirect parent company of the Issuer) for all fiscal years ending after the Issue Date (reduced by any portion of such taxes directly paid by the Issuer or its Subsidiaries),

(C) customary salary, bonus and other benefits payable to officers, employees, directors and managers of any direct or indirect parent company of the Issuer to the extent such salaries, bonuses and other benefits are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries, including the Issuer’s proportionate share of such amount relating to such parent company being a public company,

 

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(D) general corporate or other operating (including, without limitation, expenses related to auditing or other accounting matters) and overhead costs and expenses (but excluding costs described in clause (10) above) of any direct or indirect parent company of the Issuer to the extent such costs and expenses are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries, including the Issuer’s proportionate share of such amount relating to such parent company being a public company,

(E) amounts required for any direct or indirect parent company of the Issuer to pay fees and expenses Incurred by any direct or indirect parent company of the Issuer related to transactions of such parent company of the Issuer of the type described in clause (m) of the definition of “Consolidated Net Income” to the extent such transaction is for the direct benefit of the Issuer and its Restricted Subsidiaries, and

(F) cash payments in lieu of issuing fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Capital Stock of the Issuer or any such direct or indirect parent company of the Issuer (provided that any such payment is not for the purpose of evading the limitations of this Section 3.3);

(13) the repurchase, redemption or other acquisition for value of Capital Stock of the Issuer deemed to occur in connection with paying cash in lieu of fractional shares of such Capital Stock in connection with a share dividend, distribution, share split, reverse share split, merger, consolidation, amalgamation or other business combination of the Issuer, in each case, permitted under this Indenture (provided that any such payment is not for the purpose of evading the limitations of this Section 3.3);

(14) the distribution, by dividend or otherwise, of shares of Capital Stock of, or Indebtedness owed to the Issuer or a Restricted Subsidiary of the Issuer by, Unrestricted Subsidiaries (other than Unrestricted Subsidiaries, the primary assets of which are cash and/or Cash Equivalents);

(15) other Restricted Payments, so long as the Total Leverage Ratio of the Issuer and its Restricted Subsidiaries on a consolidated basis is no greater than 4.25:1.00 determined on a Pro Forma Basis for the most recently ended four full fiscal quarters for which internal financial statements are available immediately preceding the date for which such Investment is being made; and

(16) other Restricted Payments in an aggregate amount not to exceed $12.5 million;

provided, however, that at the time of, and after giving effect to, any Restricted Payment permitted under clauses (8) (at the time of declaration only), (10), (14), (15) and (16) of this Section 3.3(b), no Default or Event of Default shall have occurred and be continuing or would occur as a consequence thereof.

 

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(c) If any Person in which an Investment is made, which Investment constitutes a Restricted Payment when made, thereafter becomes a Restricted Subsidiary in accordance with this Indenture, all such Investments previously made in such Person shall be Permitted Investments, and for the avoidance of doubt all such Investments shall no longer be counted as Restricted Payments for purposes of calculating the aggregate amount of Restricted Payments pursuant to Section 3.3(a)(C) in each case to the extent such Investments would otherwise be so counted.

(d) For purposes of this Section 3.3, if a particular Restricted Payment involves a non-cash payment, including a distribution of assets, then such Restricted Payment shall be deemed to be an amount equal to the cash portion of such Restricted Payment, if any, plus an amount equal to the Fair Market Value of the non-cash portion of such Restricted Payment.

(e) The Issuer (or any of its direct or indirect parent companies on behalf of the Issuer), in their sole discretion, may classify or reclassify (x) any Permitted Investment as being made in whole or in part as a permitted Restricted Payment and (y) Restricted Payment as being made in whole or in part as a Permitted Investment (to the extent such Restricted Payment qualifies as a Permitted Investment).

SECTION 3.4. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, cause or suffer to exist or become effective or enter into any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary of the Issuer to (i) pay dividends or make any other distributions on its Capital Stock (or with respect to any other interest or participation in, or measured by, its profits) owned by the Issuer or any Restricted Subsidiary of the Issuer or pay any Indebtedness or other obligation owed to the Issuer or any Restricted Subsidiary of the Issuer, (ii) make loans or advances to the Issuer or any Restricted Subsidiary of the Issuer or (iii) sell, lease or transfer any of its property or assets to the Issuer or any Restricted Subsidiary of the Issuer.

(b) The preceding provisions of Section 3.4(a) will not apply to the following encumbrances or restrictions existing under or by reason of:

(1) any encumbrance or restriction in existence on the Issue Date, including those required by the Senior Secured Credit Facilities or by any other agreement or documents entered into in connection with the Senior Secured Credit Facilities;

(2) any encumbrance or restriction pursuant to an agreement relating to an acquisition of property, so long as the encumbrances or restrictions in any such agreement relate solely to the property so acquired (and are not or were not created in anticipation of or in connection with the acquisition thereof);

 

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(3) any encumbrance or restriction which exists with respect to a Person that becomes a Restricted Subsidiary of the Issuer or merges, consolidates or amalgamates with or into a Restricted Subsidiary of the Issuer on or after the Issue Date, which is in existence at the time such Person becomes a Restricted Subsidiary of the Issuer, but not created in connection with, or in anticipation of, such Person becoming a Restricted Subsidiary of the Issuer, and which is not applicable to any Person or the property or assets of any Person other than such Person or the property or assets of such Person becoming a Restricted Subsidiary of the Issuer;

(4) other Indebtedness, Disqualified Stock or Preferred Stock of the Issuer or its Restricted Subsidiaries permitted to be Incurred subsequent to the Issue Date pursuant Section 3.2 and either (A) the provisions relating to such encumbrance or restriction contained in such Indebtedness are no less favorable to the Issuer, taken as a whole, as determined by the Issuer or any of its direct or indirect parent companies on behalf of the Issuer in good faith and such determination conclusively evidenced by a certificate of the Issuer or any of its direct or indirect parent companies on behalf of the Issuer to that effect, than the provisions contained in the Senior Secured Credit Facilities as in effect on the Issue Date or (B) any such encumbrance or restriction contained in such Indebtedness, Disqualified Stock or Preferred Stock does not prohibit (except upon a default or an event of default thereunder) the payment of dividends in a manner that, as determined by the Issuer in good faith would result in the Issuer being unable to, to make principal and interest payments on the Notes as and when they come due;

(5) customary provisions in any lease, sub-lease contract, license, sublicense or similar agreement of the Issuer or any Restricted Subsidiary of the Issuer or provisions in agreements that restrict the assignment of such agreement or any rights thereunder, in each case, entered into in the ordinary course of business;

(6) any encumbrance or restriction by reason of applicable law, rule, regulation or order;

(7) any encumbrance or restriction under this Indenture, the Notes and the Note Guarantees;

(8) any encumbrance or restriction under an agreement relating to a disposition of assets or Capital Stock, including, without limitation, any agreement for the sale or other disposition of or by a Subsidiary that restricts distributions by that Subsidiary pending its sale or other disposition;

(9) restrictions on cash, Cash Equivalents and other deposits or net worth imposed by customers or suppliers under contracts entered into in the ordinary course of business;

(10) customary provisions with respect to the disposition or distribution of assets or property in joint venture agreements, joint venture arrangements, limited liability company agreements, partnership agreements, shareholder agreements and other similar arrangements; provided that with respect to such agreements relating to a Restricted Subsidiary of the Issuer, such provisions will not materially affect the Issuer’s ability to make scheduled principal or interest payments on the Notes (as determined in good faith by the Issuer or any of its direct or indirect parent companies on behalf of the Issuer);

 

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(11) purchase money obligations (including Capital Lease Obligations) for property acquired in the ordinary course of business that impose restrictions on that property so acquired of the nature described in clause (iii) of Section 3.4(a);

(12) Liens securing Indebtedness otherwise permitted to be Incurred under this Indenture, including the provisions described in Section 3.6 that limit the right of the debtor to dispose of the assets subject to such Liens;

(13) encumbrances or restrictions in connection with any receivables or factoring transaction that in the good faith judgment of the Governing Persons of such person (or any direct or indirect parent company of such person) is necessary or advisable to effectuate such transaction; and

(14) any encumbrances or restrictions of the type referred to in clauses (i), (ii) and (iii) of Section 3.4(a) imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or Refinancings of the contracts, instruments or obligations referred to in clauses (1) through (13) above; provided that such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or Refinancings are, in the good faith judgment of the Issuer (or any of its direct or indirect parent companies on behalf of the Issuer), (i) no more restrictive in any material respect with respect to such encumbrances and other restrictions taken as a whole than those prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or Refinancing or (ii) do not prohibit (except upon a default or an event of default thereunder) the payment of dividends in an amount sufficient, as determined by the Issuer or any of its direct or indirect parent companies in good faith, to make scheduled payments of principal and interest on the Notes when due.

(c) Nothing contained in this Section 3.4 shall prevent the Issuer or any Restricted Subsidiary of the Issuer from (i) creating, Incurring, assuming or suffering to exist any Liens in compliance with Section 3.6 or (ii) restricting the sale or other disposition of property or assets of the Issuer or any of its Restricted Subsidiaries that secure Indebtedness of the Issuer or any of its Restricted Subsidiaries Incurred in accordance with Section 3.2 and Section 3.6.

SECTION 3.5. Limitation on Asset Sales.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale, unless:

(1) the Issuer or such Restricted Subsidiary, as the case may be, receives consideration at least equal to the Fair Market Value (as determined at the time of contractually agreeing to such Asset Sale) of the assets or Capital Stock issued or sold or otherwise disposed of; and

(2) at least 75% of the aggregate consideration received from such Asset Sale by the Issuer or such Restricted Subsidiary, as the case may be, is in the form of cash or Cash Equivalents; provided that for purposes of this clause (2) only and no other purpose, each of the following will be deemed to be Cash Equivalents:

 

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(A) any liabilities, as shown on the most recent consolidated balance sheet of the Issuer or any Restricted Subsidiary of the Issuer or the footnotes thereto or if incurred or accrued subsequent to the date of such balance sheets such liabilities as would have been reflected in the Issuer’s consolidated balance sheet or the footnotes thereto if such incurrence or accrual had been put in place on or prior to the date of such balance sheet as determined in good faith by the Issuer or any of its direct or indirect parent companies on behalf of the Issuer (other than contingent liabilities and liabilities that are by their terms subordinated to the Notes or any Note Guarantee) that are assumed by the transferee of any such assets and for which the Issuer and its Restricted Subsidiaries are released from further liability or such liabilities are otherwise extinguished with such Asset Sale;

(B) any securities, notes or other obligations received by the Issuer or any such Restricted Subsidiary from such transferee that are converted by the Issuer or such Restricted Subsidiary into cash or Cash Equivalents within 180 days of the later of their receipt and the day of the Asset Sale to the extent of the cash received in that conversion; and

(C) any Designated Non-cash Consideration received by the Issuer or any such Restricted Subsidiary in such Asset Sale having an aggregate Fair Market Value, taken together with all other Designated Non-cash Consideration received pursuant to this clause (C) that is at that time outstanding, not to exceed the greater of (x) $35.0 million and (y) 2.0% of Consolidated Total Assets at the time of the receipt of such Designated Non-cash Consideration, with the Fair Market Value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value.

(b) Within 365 days after the receipt of any Net Cash Proceeds, the Issuer or any of its Restricted Subsidiaries may apply such Net Cash Proceeds at its option:

(i) to permanently repay or reduce (A) Indebtedness that is secured by a Lien, which Lien is permitted by this Indenture or (B) Indebtedness of a Non-Guarantor Restricted Subsidiary (other than Indebtedness owed to the Issuer or another Restricted Subsidiary of the Issuer) and, in each case, to correspondingly reduce commitments with respect thereto;

(ii) to permanently repay or reduce other Indebtedness that is pari passu with the Notes (“Pari Passu Indebtedness”), other than Indebtedness owed to the Issuer or another Restricted Subsidiary of the Issuer; provided that if the Issuer shall so reduce any such Pari Passu Indebtedness, the Issuer shall equally and ratably reduce (or offer to reduce) Obligations under the Notes as provided either, at the Issuer’s option, under Section 5.7 through open-market purchases (to the extent such purchases are at or above 100% of the principal amount thereof) or by making an offer (in accordance with the procedures set forth below for an Asset Sale Offer) to all Holders to purchase their Notes at 100% of the principal amount thereof, plus the amount of accrued but unpaid interest, if any, on the amount of Notes that would otherwise be prepaid;

 

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(iii) to acquire all or substantially all of the assets of, or a division or line of business of, any Person engaged in a Permitted Business, or any Capital Stock of such Person, if, after giving effect to any such acquisition of Capital Stock, such entity is or becomes a Restricted Subsidiary of Issuer;

(iv) to make capital expenditures or to make other expenditures for maintenance, repair or improvement of existing properties and assets;

(v) to acquire other long-term assets or assets incidental to the acquisition of such long-term assets that are used or useful in a Permitted Business; or

(vi) any combination of the foregoing;

provided that in the case of clauses (iii), (iv) and (v) above, a binding commitment to make such acquisitions or expenditures are entered into within 365 days of the consummation of the Asset Sale that generated the Net Cash Proceeds shall be treated as a permitted application of the Net Cash Proceeds from the date of such commitment so long as the Issuer or such Restricted Subsidiary enters into such commitment with the good faith expectation that such Net Cash Proceeds will be applied to satisfy such commitment within 545 days after the consummation of the Asset Sale that generated such Net Cash Proceeds and, in the event such commitment is later cancelled or terminated for any reason before the Net Cash Proceeds are applied in connection therewith, then such Net Cash Proceeds shall constitute “Excess Proceeds.”

(c) Any Net Cash Proceeds from Asset Sales that are not applied or invested as provided in Section 3.5(b) shall constitute “Excess Proceeds.” When the aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuer shall, within 30 days, make an offer to all Holders, and, if required by the terms of other Pari Passu Indebtedness, to all holders of such other Pari Passu Indebtedness (an “Asset Sale Offer”) to purchase Notes and/or such Pari Passu Indebtedness. The offer price in any Asset Sale Offer will be equal to 100% of the principal amount plus accrued and unpaid interest, to, but excluding, the date of purchase, and shall be payable in cash.

If the aggregate principal amount of Notes and other Pari Passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the Excess Proceeds shall be allocated between the Notes and such other Pari Passu Indebtedness based on the principal amount (or accreted value, if applicable) of the Notes and such other Pari Passu Indebtedness tendered and the Trustee shall select the Notes to be purchased in the manner described below. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.

Pending the final application of any Net Cash Proceeds pursuant to this Section 3.5, the holder of such Net Cash Proceeds may apply such Net Cash Proceeds temporarily to reduce Obligations under a revolving credit facility or otherwise invest such Net Cash Proceeds in any manner not prohibited by this Indenture. If any Excess Proceeds remain after consummation of the Asset Sale Offer, the Issuer may use those funds for any purpose not otherwise prohibited by this Indenture and they will no longer constitute Excess Proceeds.

 

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(d) The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other applicable securities laws and regulations thereunder to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to an offer to purchase. To the extent that the provisions of any securities laws or regulations conflict with the Asset Sale provisions of this Indenture, the Issuer shall comply with the applicable securities laws and regulations and will be deemed to have complied with its obligations under the Asset Sale provisions of this Indenture by virtue of such compliance.

(e) If more Notes are tendered pursuant to an Asset Sale Offer than the Issuer is required to purchase, selection of such Notes for purchase will be made in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed (so long as the Trustee knows of such listing) or if such Notes are not listed, on a pro rata basis, by lot or by such other method as the Trustee shall deem fair and appropriate (and in such manner as complies with applicable legal requirements and applicable procedures of DTC); provided that the selection of notes for purchase shall not result in a Holder with a principal amount of Notes less than the minimum denomination to the extent practicable.

SECTION 3.6. Liens.

The Issuer shall not, and shall not permit any of its Restricted Subsidiaries, directly or indirectly, to enter into, create, incur, assume or suffer to exist any Liens of any kind, other than Permitted Liens, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom, which Liens secure Indebtedness or any related Guarantee (the “Initial Lien”), without securing the Notes and the applicable Note Guarantee, as the case may be, equally and ratably with (or prior to) the Indebtedness secured by such Lien until such time as such Indebtedness or any related Guarantee is no longer secured by such Lien; provided that if the Indebtedness so secured is subordinated by its terms to the Notes or such Note Guarantee, the Lien securing such Indebtedness will also be so subordinated by its terms to the Notes and such Note Guarantees at least to the same extent. Any such Lien thereby created to secure the Notes or any such Note Guarantee will be automatically and unconditionally released and discharged upon (i) the release and discharge of the Initial Lien to which it relates or (ii) any sale, exchange or transfer to any Person not an Affiliate of the Issuer of the property or assets secured by such Initial Lien, or of all of the Capital Stock held by the Issuer or any Restricted Subsidiary of the Issuer in, or all or substantially all the assets of, any Restricted Subsidiary of the Issuer creating such Initial Lien, in each case, in accordance with the provisions of this Indenture.

SECTION 3.7. Transactions with Affiliates.

(a) The Issuer shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction or series of related transactions, contract, agreement, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer (each of the foregoing, an “Affiliate Transaction”) involving aggregate consideration in excess of $2.5 million, unless:

 

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(i) such Affiliate Transaction is on terms that are not materially less favorable to the Issuer or the relevant Subsidiary than those that could reasonably have been obtained in a comparable arm’s-length transaction by the Issuer or such Subsidiary with an unaffiliated party; and

(ii) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $25.0 million, the Issuer delivers to the Trustee a resolution adopted by the majority of its or any of its direct or indirect parent companies’ Governing Persons on behalf of the Issuer approving such Affiliate Transaction and set forth in an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (i) above.

(b) The foregoing provisions shall not apply to the following:

(1) Restricted Payments that are permitted by Section 3.3 and Permitted Investments permitted under this Indenture;

(2) the payment of reasonable and customary compensation and indemnities and other benefits (including severance, retirement, health, option, deferred compensation and other benefit plans) to, for the benefit of, former or current officers, directors, managers, employees, or consultants of the Issuer or any Restricted Subsidiary of the Issuer;

(3) transactions between or among the Issuer and/or its Restricted Subsidiaries or any entity that will become a Restricted Subsidiary of the Issuer as part of such transaction;

(4) (i) the payment of (or, in the case of Teachers, distributions or dividends by the Issuer in lieu of such fees) management, consulting, monitoring and advisory fees and related expenses (including indemnification and other similar amounts) to the Sponsors (plus any unpaid management, consulting, monitoring, advisory and other fees and related expenses (including indemnification and other similar amounts) accrued in any prior year) and the termination fees in accordance with the terms of the any management or similar agreement with terms reasonably consistent with the terms of similar agreements entered into by similar financial sponsors and portfolio companies as determined in good faith by the Issuer or any of its direct or indirect parent companies on behalf of the Issuer at the time such management or similar agreement is entered into by the Sponsors and the Issuer and (ii) payments (or Restricted Payments) by the Issuer or any of its Restricted Subsidiaries to any of the Sponsors or Sponsor Affiliates for any financial advisory, financing, underwriting or placement services or in respect of other investment banking activities, including in connection with acquisitions or divestitures, which payments are approved by the Governing Persons of the Issuer (or any of its direct or indirect parent companies on behalf of the Issuer) in good faith;

 

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(5) any agreement or arrangement as in effect as of the Issue Date, or any amendment thereto (so long as any such amendment is not disadvantageous in any material respect to the Holders when taken as a whole as compared to the applicable agreement as in effect on the Issue Date);

(6) the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under the terms of, the Merger Agreement, any stockholders or similar agreement (including any registration rights agreement or purchase agreement related thereto) to which it is a party as of the Issue Date or similar transactions, arrangements or agreements which it may enter into thereafter; provided, however, that the existence of, or the performance by the Issuer or any of its Restricted Subsidiaries of its obligations under, any future amendment to any such existing transaction, arrangement or agreement or under any similar transaction, arrangement or agreement entered into after the Issue Date shall only be permitted by this clause (6) to the extent that the terms of any such existing transaction, arrangement or agreement together with all amendments thereto, taken as a whole, or new agreement are not otherwise disadvantageous to the Holders in any material respect when taken as a whole as compared with the original transaction, arrangement or agreement as in effect on the Issue Date;

(7) any contribution of capital to the Issuer or any Restricted Subsidiary of the Issuer;

(8) any transaction with a joint venture, partnership, limited liability company or other entity in the ordinary course of business that would constitute an Affiliate transaction solely because the Issuer or a Restricted Subsidiary of the Issuer owns an equity interest in such joint venture, partnership, limited liability company or other entity;

(9) transactions with customers, clients, suppliers or purchasers or sellers or licensors or licensees of goods or services, licenses or sublicenses of intellectual property or lease or sublease of assets, in each case, in the ordinary course of business and on terms that are not materially less favorable to the Issuer or such Restricted Subsidiary, as the case may be, as determined in good faith by the Issuer, than those that could be obtained in a comparable arm’s-length transaction with a Person that is not an Affiliate of the Issuer;

(10) transactions in which the Issuer or any Restricted Subsidiary of the Issuer, as the case may be, delivers to the Trustee a letter from a nationally recognized investment bank or accounting firm stating to the effect that such transaction is fair to the Issuer or such Restricted Subsidiary from a financial point of view or stating that the terms are not materially less favorable to the Issuer or such Restricted Subsidiary than those that would have been obtained in a comparable transaction by the Issuer or such Restricted Subsidiary with an unrelated Person on an arm’s-length basis;

(11) the CPG Transactions and the payment of all fees and expenses related to the CPG Transactions, in each case, as contemplated in the Offering Memorandum;

 

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(12) investments by the Sponsors, Sponsor Affiliates and members of management, officers, employees and directors in securities of the Issuer or any Restricted Subsidiary of the Issuer (and payment of reasonable out-of-pocket expenses Incurred by the Sponsors, Sponsor Affiliates and members of management, officers, employees and directors in connection therewith) so long as (i) the investment is being generally offered to other existing investors in such entity on the same or more favorable terms and (ii) the investment constitutes less than 5% of the proposed or outstanding issue amount of such class of securities;

(13) the issuance or transfer of Capital Stock (other than Disqualified Stock) of the Issuer to any direct or indirect parent company of the Issuer or to any Sponsor or Sponsor Affiliates or to any director, manager, officer, employee or consultant (or their Immediate Family Members) of the Issuer, any the direct or indirect parent company of the Issuer or any of its Subsidiaries;

(14) payments or loans (or cancellation of loans) to employees, directors, officers, managers or consultants of the Issuer or any Restricted Subsidiary of the Issuer, or any direct or indirect parent company of the Issuer or any Restricted Subsidiary of the Issuer and employment agreements, stock option plans and other similar arrangements with such employees, directors, managers or consultants which, in each case, are approved by the Governing Persons of the Issuer in good faith;

(15) payments by the Issuer (and any direct or indirect parent company of the Issuer) and its Subsidiaries pursuant to tax sharing agreements among the Issuer (and any direct or indirect parent company of the Issuer) and its Subsidiaries; provided that in each case the amount of such payments in any fiscal year does not exceed the amount that the Issuer (or any of its direct or indirect parent companies), its Restricted Subsidiaries and its Unrestricted Subsidiaries (to the extent of the amounts received from Unrestricted Subsidiaries) would be required to pay in respect of foreign, federal, state and local taxes for such fiscal year were the Issuer, its Restricted Subsidiaries and its Unrestricted Subsidiaries (to the extent described above) to pay such taxes separately from any such direct or indirect parent company of the Issuer; and

(16) pledges of Capital Stock of Unrestricted Subsidiaries.

SECTION 3.8. Change of Control.

(a) If a Change of Control occurs after the Issue Date, unless the Issuer has, prior to or concurrently with the time the Issuer is required to make a Change of Control Offer, delivered electronically or mailed a redemption notice with respect to all the outstanding Notes as described under Section 5.7, the Issuer shall make an offer to purchase all of the Notes pursuant to the offer described below (the “Change of Control Offer”) at a price in cash (the “Change of Control Payment”) equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest to, but excluding, the date of purchase, subject to the right of Holders on the relevant regular record date to receive interest due on an Interest Payment Date that is prior to the Redemption Date; provided that to the extent any transmitted redemption notice includes a condition that is not satisfied or waived and the redemption referenced therein does

 

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not occur, the obligation to make a Change of Control Offer will be reinstated to the extent a Change of Control occurs thereafter. No later than 30 days following any Change of Control, the Issuer shall send notice of such Change of Control Offer by first-class mail, with a copy to the Trustee, to each Holder to the address of such Holder appearing in the security register with a copy to the Trustee or, while Notes are in global form, in accordance with the procedures of DTC, with the following information:

(1) that a Change of Control Offer is being made pursuant to this Section 3.8, and that all Notes properly tendered pursuant to such Change of Control Offer will be accepted for payment by the Issuer;

(2) the purchase price and the purchase date, which will be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”);

(3) that any Note not properly tendered will remain outstanding and continue to accrue interest;

(4) that, unless the Issuer defaults in the payment of the Change of Control Payment, all Notes accepted for payment pursuant to the Change of Control Offer will cease to accrue interest on the Change of Control Payment Date;

(5) that Holders electing to have any Notes purchased pursuant to a Change of Control Offer will be required to surrender such Notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of such Notes completed, to the paying agent specified in the notice at the address specified in the notice prior to the close of business on the third Business Day preceding the Change of Control Payment Date;

(6) that Holders will be entitled to withdraw their tendered Notes and their election to require the Issuer to purchase such Notes; provided that the paying agent receives, not later than the expiration time of the Change of Control Offer, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of Notes tendered for purchase, and a statement that such Holder is withdrawing its tendered Notes and its election to have such Notes purchased;

(7) if such notice is delivered prior to the occurrence of a Change of Control, stating that the Change of Control Offer is conditional on the occurrence of such Change of Control; and

(8) the other instructions, as determined by us, consistent with this Section 3.8, that a Holder must follow.

(b) On the Change of Control Payment Date, the Issuer shall, to the extent permitted by law,

(1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer;

 

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(2) deposit with the Paying Agent an amount equal to the aggregate Change of Control Payment in respect of all Notes or portions thereof so tendered; and

(3) deliver, or cause to be delivered, to the Trustee for cancellation the Notes so accepted together with an Officers’ Certificate stating that all Notes or portions thereof have been tendered to and purchased by the Issuer.

(c) In the event that the Issuer makes a Change of Control Payment, the Paying Agent will promptly mail to each Holder the Change of Control Payment for such Notes, and the Trustee will promptly authenticate a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a minimum principal amount of $1,000 or an integral multiple of $1,000 in excess thereof. The Issuer shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(d) While the Notes are in global form and if the Issuer makes an offer to purchase all of the Notes pursuant to the Change of Control Offer, a Holder may exercise its option to elect for the purchase of the Notes through the facilities of DTC, subject to its rules and regulations.

(e) The Issuer shall comply with the requirements of Rule 14e-1 under the Exchange Act and any other securities laws and regulations thereunder to the extent such laws or regulations are applicable in connection with the repurchase of the Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Indenture, the Issuer shall comply with the applicable securities laws and regulations and will be deemed to have complied with its obligations under the Change of Control provisions of this Indenture by virtue of such compliance.

(f) The Issuer shall not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuer and purchases all such Notes validly tendered and not withdrawn under such Change of Control Offer. Notwithstanding anything to the contrary herein, a Change of Control Offer may be made in advance of a Change of Control or conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of the making of such Change of Control Offer.

(g) If Holders of not less than 95% in aggregate principal amount of the outstanding Notes validly tender and do not withdraw such Notes in a Change of Control Offer and the Issuer, or any other Person making a Change of Control Offer in lieu of the Issuer as described in this Section 3.8, purchases all of the Notes validly tendered and not withdrawn by such Holders, the Issuer or such Person will have the right, upon not less than 30 nor more than 60 days’ prior notice, given not more than 30 days following such purchase pursuant to the Change of Control Offer to redeem all Notes that remain outstanding following such purchase at a redemption price in cash equal to the applicable Change of Control Payment plus, to the extent not included in the Change of Control Payment, accrued and unpaid interest, if any, to, but excluding, the date of redemption.

 

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SECTION 3.9. Provision of Financial Information.

(a) So long as any Notes are outstanding, the Issuer shall furnish to the Holders and the Trustee:

(1) at any time that the Issuer (and a direct or indirect parent company of the Issuer that has guaranteed the Notes) is not subject to the reporting requirements of the Exchange Act:

(i) within 120 days after the end of the fiscal year ending December 31, 2013 and within 90 days after the end of each other fiscal year of the Issuer ending thereafter, (A) a consolidated balance sheet and related statements of operations, cash flows and owners’ equity showing the financial position of the Issuer and its subsidiaries as of the close of such fiscal year and the consolidated results of its operations during such fiscal year; provided that if the Issuer includes the financial results of any person that is an Unrestricted Subsidiary of the Issuer in such annual financial statements and such Unrestricted Subsidiary would not be considered an Immaterial Subsidiary were it subject to such definition, the Issuer shall also provide a supplement showing consolidating information for the Issuer and its Restricted Subsidiaries, (B) a narrative discussion of results for such fiscal year (which need not be compliant with Regulation S-K of the Securities Act) but shall be comparable in form with respect to such year to the “Management’s discussion and analysis of financial condition and results of operations” included in the Offering Memorandum and (C) setting forth in comparative form the corresponding figures for the prior fiscal year, which consolidated balance sheet and related statements of operations, cash flows and owners’ equity shall be audited by independent public accountants of recognized national standing and accompanied by an opinion of such accountants;

(ii) within 45 days (except 90 days in the case of the fiscal quarter ending September 30, 2013) following the end of each of the first three fiscal quarters of each fiscal year, (A) a consolidated balance sheet and related statements of operations, cash flows and owner’s equity showing (x) the financial position of the Issuer and its subsidiaries as of the close of such fiscal quarter and the consolidated and consolidating results of its operations during such fiscal quarter and (y) the then-elapsed portion of the fiscal year; provided that if the Issuer includes the financial results of any person that is an Unrestricted Subsidiary of the Issuer in such interim financial statements and such Unrestricted Subsidiary would not be considered an Immaterial Subsidiary were it subject to such definition, the Issuer shall also provide a supplement showing consolidating information for the Issuer and its Restricted Subsidiaries, (B) a narrative discussion of results (which need not be compliant with Regulation S-K of the Securities Act) but shall be comparable in form with respect to such interim periods to the “Management’s discussion and analysis of financial condition and results of operations” included in the Offering Memorandum (but need not include any pro forma financial information or pro forma financial statements for any prior period) and (C) setting forth in comparative form the corresponding figures for the corresponding periods of the prior fiscal year; provided that any prior periods need not be shown on a pro forma basis;

 

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(iii) within 15 Business Days after the occurrence of each event that would require a filing of a Form 8-K under Items 1.01 (including furnishing any material debt agreements that would be required to be described in such Form 8-K), 1.02, 1.03, 2.01, 2.05, 2.06, 4.01, 4.02, 5.01, 5.02(a)(1)(i)-(ii), 5.02(b), 5.02(c) (other than with respect to information otherwise required or contemplated by Item 402 of Regulation S-K) and 9.01 ((but no later than the time required by Item 9.01 and limited only to the financial statements of business acquisitions, divestitures and other pro forma financial information required to be requested pursuant to Item 9.01); provided that instead of providing such information pursuant to this clause (iii), the Issuer shall be deemed to have satisfied this requirement by providing the information in its subsequent annual or quarterly report delivered pursuant to clauses (1)(i) and (1)(ii), in each case as in effect on the Issue Date if the Issuer were a reporting company under the Exchange Act;

provided, however, that such reports (A) will not be required to comply with Section 302 or Section 404 of the Sarbanes-Oxley Act of 2002, or related Items 307 and 308 of Regulation S-K promulgated by the SEC, Regulation G promulgated by the SEC or Item 10(e) of Regulation S-K (with respect to any non-GAAP financial measures contained therein), (B) will not be required to contain the separate financial information for Guarantors contemplated by Rule 3-09, 3-10 or 3-16 of Regulation S-X promulgated under the Exchange Act (except narrative disclosure of the assets, liabilities, revenues and operating income of the Non-Guarantor Subsidiaries shall be included) and (C) will not be required to include as an exhibit, or to include a summary of the terms of, any employment or compensatory arrangement agreement, plan or understanding between the Issuer (or any of its Subsidiaries) and any director, manager or executive officer, of the Issuer (or any of its Subsidiaries); and

(2) if at any time that the Issuer (or any direct or indirect parent company of the Issuer that guarantees the Notes) becomes subject to the reporting requirements of the Exchange Act or is required to file (or furnish, as applicable) reports on EDGAR, as applicable, within the time periods specified by the Exchange Act, all reports and financial information required to be filed thereunder; provided that such financial information shall include quarterly financial information (excluding the fourth fiscal quarter) and annual financial statements, in each case including a “Management’s discussion and analysis of financial condition and results of operations” and, with respect to annual information only, a report on the annual financial statements by the Issuer’s (or such direct or indirect parent company’s) independent registered accounting firm as applicable.

(b) So long as any Notes are outstanding, the Issuer shall also:

(A) within ten Business Days after furnishing to the Trustee and the Holders the reports required by clauses (a)(1)(i) or (a)(1)(ii) above, hold a conference call for all Holders and securities analysts to discuss such reports and the results of operations for the relevant annual or quarterly reporting period; and

(B) issue a notice in accordance with Section 3.9(d), no fewer than three Business Days prior to the date of the conference call required to be held in accordance with clause (A) above, announcing the time and date of such conference call and either including all information necessary to access the call or directing Holders to contact the appropriate person at the Issuer to obtain such information.

 

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(c) In addition, to the extent not satisfied by the foregoing, the Issuer shall, for so long as any Notes remain outstanding, furnish to Holders thereof and prospective investors in such Notes, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act (as in effect on the Issue Date).

(d) The Issuer shall make available such information and such reports (as well as the details regarding the conference call described in Section 3.9(b)) to the Trustee, to any Holder and to any beneficial owner of the Notes, in each case by posting such information on Intralinks or any comparable password-protected online data system which shall require a confidentiality acknowledgment, and shall make such information readily available to any prospective investor, any securities analyst or any market maker in the Notes who (i) agrees to treat such information as confidential or (ii) accesses such information on Intralinks or any comparable password protected online data system which will require a confidentiality acknowledgment; provided that the Issuer shall post such information thereon and make readily available any password or other login information to any such prospective investor, securities analyst or market maker.

Any person who requests or accesses such financial information or seeks to participate in any conference calls required by this Section 3.9 shall be required to represent to the Issuer (to the Issuer’s reasonable good faith satisfaction) that:

(1) it is a Holder, a beneficial owner of the Notes, a prospective investor in the Notes or a market maker;

(2) it will not use the information in violation of applicable securities laws or regulations;

(3) it will keep such provided information confidential and will not communicate the information to any Person; and

(4) it is not a Person (which includes such Person’s Affiliates) that (i) is principally engaged in a Permitted Business or (ii) derives a significant portion of its revenues from operation of a Permitted Business.

(e) If the Issuer has designated any Subsidiary as Unrestricted Subsidiary, then the quarterly and annual financial information required by Section 3.9(a) shall include a reasonably detailed presentation, either in a schedule to the financial statements, in the footnotes thereto, or in narrative report, of the financial condition and results of operations of the Issuer and its Restricted Subsidiaries separate from the financial condition and results of operations of the Unrestricted Subsidiaries.

(f) Notwithstanding the foregoing, the financial statements, information and other documents required to be provided pursuant to this Section 3.9, may be those of (i) the Issuer or (ii) any direct or indirect parent company of the Issuer that becomes a guarantor of the Notes rather than those of the Issuer; provided that the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such parent company, on the one hand, and the information relating to the Issuer and the Restricted Subsidiaries on a standalone basis, on the other hand.

 

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(g) The Issuer shall be deemed to have furnished the reports referred to in clauses (1) and (2) of Section 3.9(a) if the Issuer or any direct or indirect parent company of the Issuer that becomes a guarantor of the Notes has filed reports containing such information with the SEC (including in the case of a parent company that becomes a guarantor of the Notes, the consolidating financial statements references above).

(h) Delivery of the reports and documents described in this Section 3.9 to the Trustee is for informational purposes only and the receipt by the Trustee of any such document or report will not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of the covenants contained in this Indenture (as to which the Trustee is entitled to conclusively rely on an Officers’ Certificate).

(i) For the avoidance of doubt, the Issuer shall not be required to comply with the reporting requirements of the Exchange Act.

SECTION 3.10. Maintenance of Office or Agency. The Issuer shall maintain an office or agency where the Notes may be presented or surrendered for payment, where, if applicable, the Notes may be surrendered for registration of transfer or exchange. The Corporate Trust Office of the Trustee shall be such office or agency of the Issuer, unless the Issuer shall designate and maintain some other office or agency for one or more of such purposes. The Issuer shall give prompt written notice to the Trustee of any change in the location of any such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations and surrenders may be made or served at the Corporate Trust Office of the Trustee, and the Issuer hereby appoints the Trustee as its agent to receive all such presentations and surrenders.

The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind any such designation. The Issuer shall give prompt written notice to the Trustee of any such designation or rescission and any change in the location of any such other office or agency.

SECTION 3.11. Corporate Existence. Except as otherwise provided in this Article III and Article IV, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect its respective corporate or limited liability company existence and the corporate, partnership, limited liability company or other existence of each Restricted Subsidiary and the rights (charter and statutory), licenses and franchises of the Issuer and each Restricted Subsidiary; provided, however, that the Issuer shall not be required to preserve any such right, license or franchise or the corporate, partnership, limited liability company or other existence of any Restricted Subsidiary if the respective Governing Person of such person or the Issuer (or any direct or indirect parent company on behalf of the Issuer) or senior management of the Issuer (or any direct or indirect parent company on behalf of the Issuer) determines that the preservation thereof is no longer desirable in the conduct of the business of the Issuer and its Restricted Subsidiaries, taken as a whole.

 

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SECTION 3.12. Payment of Taxes. The Issuer shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, all material taxes, assessments and governmental charges levied or imposed upon the Issuer or any Subsidiary; provided, however, that the Issuer shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which appropriate reserves, if necessary (in the good faith judgment of management of the Issuer or any of its direct or indirect parent companies on behalf of the Issuer), are being maintained in accordance with GAAP or where the failure to effect such payment shall not be materially disadvantageous to the Holders.

SECTION 3.13. Compliance Certificate. The Issuer shall deliver to the Trustee within 120 days after the end of each fiscal year of the Issuer beginning with the fiscal year ending December 31, 2013, an Officers’ Certificate stating that in the course of the performance by the signer of his or her duties as an Officer of the Issuer he or she would normally have knowledge of any Default or Event of Default and whether or not the signer knows of any Default or Event of Default that occurred during the previous fiscal year; provided that no such Officers’ Certificate shall be required for any fiscal year ended prior to the Issue Date.

SECTION 3.14. Further Instruments and Acts. Upon request of the Trustee, the Issuer shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

SECTION 3.15. Statement by Officer as to Default. The Issuer shall deliver to the Trustee, within ten Business Days after the Issuer becomes aware of the occurrence of any Event of Default or Default, an Officers’ Certificate setting forth the details of such Event of Default or Default, its status and the actions which the Issuer is taking or proposes to take with respect thereto.

SECTION 3.16. Future Guarantors. Each Restricted Subsidiary that is a Domestic Subsidiary that is a Wholly-Owned Subsidiary (other than any Immaterial Subsidiary) that Incurs or Guarantees any Indebtedness for borrowed money (other than intercompany debt) of the Issuer or any Guarantor will become a Guarantor within 30 days of the date on which it Incurred or Guaranteed such Indebtedness by entering into a supplemental indenture substantially in the form of Exhibit B hereto.

SECTION 3.17. Suspension of Certain Covenants. If on any date following the Issue Date (a) the Notes have an Investment Grade Rating from both of the Rating Agencies; and (b) no Default or Event of Default has occurred and is continuing under this Indenture (the occurrence of the events described in clauses (a) and (b) being collectively referred to as a “Covenant Suspension Event”), the Issuer and its Restricted Subsidiaries shall not be subject to Sections 3.2, 3.3, 3.4, 3.5, 3.7 and clause (iii) of Section 4.1(a) (collectively, the “Suspended Covenants”).

 

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Upon the occurrence of a Covenant Suspension Event (the date of such occurrence, a “Suspension Date”), the amount of Excess Proceeds from any Net Cash Proceeds shall be set at zero under this Indenture. In the event that the Issuer and its Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the foregoing and on any subsequent date (the “Reinstatement Date”) one or both of the Rating Agencies withdraws its Investment Grade Rating or downgrades the rating assigned to the Notes below an Investment Grade Rating or if a Default or Event of Default occurs and is continuing, then the Suspended Covenants shall thereafter be reinstated as if such covenants had never been suspended and be applicable pursuant to the terms of this Indenture (including in connection with performing any calculation or assessment to determine compliance with the terms of this Indenture) and the Issuer and its Restricted Subsidiaries will thereafter be subject to the Suspended Covenants under this Indenture with respect to future events unless and until a subsequent Covenant Suspension Event occurs. Notwithstanding that the Suspended Covenants may be reinstated, no Default, Event of Default or breach of any kind shall be deemed to exist under this Indenture or the Notes with respect to the Suspended Covenants based on, and none of the Issuer or any of its Subsidiaries shall bear any liability for, any actions taken or events occurring during the Suspension Period (as defined below), regardless of whether such actions or events would have been permitted if the applicable Suspended Covenants remained in effect during such period (or after the Suspension Period based solely on contractual obligations or other events arising prior to the Reinstatement Date). The period of time between the Suspension Date and the Reinstatement Date is referred to as the “Suspension Period.” The Issuer shall notify the Trustee of the commencement or termination of any Suspension Period.

On the Reinstatement Date, (i) all Indebtedness Incurred, or Disqualified Stock or Preferred Stock issued, during the Suspension Period shall be classified to have been Incurred or issued pursuant to Section 3.2(b)(3) and (ii) all Liens Incurred during the Suspension Period shall be classified to have been Incurred under clause (a) of the definition of “Permitted Liens.” Calculations made after the Reinstatement Date of the amount available to be made as Restricted Payments under Section 3.3 shall be made as though the covenants set forth in Section 3.3 had been in effect since the Issue Date and throughout the Suspension Period. Accordingly, Restricted Payments made during the Suspension Period shall reduce the amount available to be made as Restricted Payments under Section 3.3(a).

The Issuer, in an Officers’ Certificate, shall promptly provide notice to the Trustee of the commencement and termination of any Suspension Period. The Trustee shall have no obligation to (i) independently determine or verify if any Suspension Date or Reinstatement Date shall have occurred, (ii) make any determination regarding the impact of actions taken during any Suspension Period or the Issuer’s future compliance with any covenants or (iii) notify the Holders of the commencement or termination of any Suspension Period.

During any period when the Suspended Covenants are suspended, the Issuer may not designate any of the Issuer’s Subsidiaries as Unrestricted Subsidiaries pursuant to this Indenture.

 

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ARTICLE IV

SUCCESSOR COMPANY

SECTION 4.1. Consolidation, Merger, Conveyance, Transfer or Lease.

(a) The Issuer shall not, in any transaction or series of transactions, consolidate or amalgamate with or merge into any other Person (other than a merger of a Restricted Subsidiary of the Issuer into the Issuer in which the Issuer is the continuing Person), or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its assets (determined on a consolidated basis), taken as a whole, to any other Person, unless:

(i) either: (a) the Issuer shall be the continuing Person or (b) the Person (if other than the Issuer) formed by such consolidation or into which the Issuer is merged, consolidated or amalgamated, or the Person that acquires, by sale, assignment, conveyance, transfer, lease or other disposition, all or substantially all of the property and assets of the Issuer (such Person, the “Surviving Entity”), (1) shall be a corporation, partnership, limited liability company or similar entity organized and validly existing under the laws of the United States, any political subdivision thereof or any state thereof or the District of Columbia and (2) shall expressly assume all of the obligations of the Issuer under this Indenture and the Notes pursuant to a supplemental indenture substantially in the form of Exhibit B hereto;

(ii) immediately after giving effect to such transaction or series of transactions on a Pro Forma Basis (including, without limitation, any Indebtedness Incurred or anticipated to be Incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing or would result therefrom;

(iii) immediately after giving effect to any such transaction or series of transactions on a Pro Forma Basis (including, without limitation, any Indebtedness Incurred or anticipated to be Incurred in connection with or in respect of such transaction or series of transactions) as if such transaction or series of transactions had occurred on the first day of the determination period, the Issuer (or the Surviving Entity if the Issuer is not continuing) (a) could Incur $1.00 of additional Indebtedness (other than Permitted Indebtedness) under the provisions described in Section 3.2(a) or (b) would have had a Fixed Charge Coverage Ratio not less than the actual Fixed Charge Coverage Ratio for the Issuer for such four-quarter period;

(iv) each Guarantor shall have by supplemental indenture substantially in the form of Exhibit B hereto confirmed that its Note Guarantee shall apply to such Person’s obligations under this Indenture and the Notes; and

(v) the Issuer delivers, or causes to be delivered, to the Trustee an Officers’ Certificate and an Opinion of Counsel, subject to customary assumptions and exclusions, to the effect that such consolidation, merger, amalgamation, sale, conveyance, assignment, transfer, lease or other disposition complies with the requirements of this Indenture.

 

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(b) The Surviving Entity shall succeed to, and be substituted for, the Issuer, as the case may be, under this Indenture and the Notes, as applicable. Section 4.1(a)(ii) through (v) shall not apply to the transactions contemplated by the Merger Agreement, including the Merger.

(c) Notwithstanding Section 4.1(a)(ii) and (iii),

(1) any Restricted Subsidiary may consolidate with or merge into or transfer all or part of its properties and assets to the Issuer, and

(2) the Issuer may consolidate with or merge into or transfer all or part of its properties and assets to a Guarantor.

(d) For all purposes of this Indenture and the Notes, Subsidiaries of any Surviving Entity of a merger with the Issuer shall, upon such transaction or series of transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant to this Indenture and all Indebtedness, and all Liens on property or assets, of such Surviving Entity and its Subsidiaries that was not Indebtedness, or were not Liens on property or assets, of the Issuer and its Subsidiaries immediately prior to such transaction or series of transactions shall be deemed to have been Incurred upon such transaction or series of transactions.

Upon any transaction or series of transactions that are of the type described in, and are effected in accordance with, conditions described in this Section 4.1, the Surviving Entity shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture and the Notes with the same effect as if such Surviving Entity had been named as the Issuer; and when a Surviving Entity duly assumes all of the obligations and covenants of the Issuer pursuant to this Indenture and the Notes, except in the case of a lease, the predecessor Person shall be relieved of such obligations.

(e) No Guarantor shall, and the Issuer shall not permit any Guarantor to, in any transaction or series of transactions, consolidate or amalgamate with or merge into any other Person (other than a merger of a Restricted Subsidiary of the Issuer into the Guarantor in which the Guarantor is the continuing Person), or sell, assign, convey, transfer, lease or otherwise dispose of all or substantially all of its assets (determined on a consolidated basis), taken as a whole, to any other Person, unless:

(i) either: (a) such Guarantor shall be the continuing Person or (b) the Person (if other than such Guarantor) formed by such consolidation or into which such Guarantor is merged, consolidated or amalgamated, or the Person that acquires, by sale, assignment, conveyance, transfer, lease or other disposition, all or substantially all of the property and assets of such Guarantor (such Person, the “Guarantor Surviving Entity”) (1) shall be a corporation, partnership, limited liability company or similar entity organized and validly existing under the laws of the United States, any political subdivision thereof or any state thereof or the District of Columbia and (2) shall expressly assume all of the obligations of such Guarantor under this Indenture and such Guarantor’s related Note Guarantee pursuant to a supplemental indenture substantially in the form of Exhibit B hereto;

 

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(ii) immediately after giving effect to such transaction or series of transactions on a Pro Forma Basis (including, without limitation, any Indebtedness Incurred or anticipated to be Incurred in connection with or in respect of such transaction or series of transactions), no Default or Event of Default shall have occurred and be continuing or would result therefrom; and

(iii) the Guarantor delivers, or causes to be delivered, to the Trustee an Officers’ Certificate and an Opinion of Counsel, subject to customary assumptions and exclusions, to the effect that such consolidation, merger, amalgamation, sale, conveyance, assignment, transfer, lease or other disposition complies with the requirements of this Indenture;

provided that the foregoing paragraph shall not apply to a Guarantor if such Guarantor is no longer a Restricted Subsidiary of the Issuer after giving effect to such transaction and such transaction is made in compliance with Section 3.5.

Except as set forth in this Section 4.1, the Guarantor Surviving Entity shall succeed to, and be substituted for, such Guarantor under this Indenture and such Guarantor’s Note Guarantee. Notwithstanding the foregoing, any Guarantor may (i) merge into or with or transfer all or part of its properties and assets to a Guarantor or the Issuer or (ii) merge with an Affiliate of the Issuer solely for the purpose of reincorporating or reorganizing the Guarantor in the United States, any state thereof, the District of Columbia or any territory thereof.

(f) Notwithstanding the foregoing, any Restricted Subsidiary of the Issuer may liquidate or dissolve if the Issuer or any of its direct or indirect parent companies on behalf of the Issuer determines in good faith that such liquidation or dissolution is in the best interests of the Issuer and is not materially disadvantageous to the Holders.

(g) For purposes of this Section 4.1, the sale, lease, conveyance, assignment, transfer or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Issuer or a Guarantor, which properties and assets, if held by the Issuer or such Guarantor, as the case may be, instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Issuer or such Guarantor on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer or such Guarantor, as the case may be.

ARTICLE V

REDEMPTION OF SECURITIES

SECTION 5.1. Notices to Trustee.

If the Issuer elects to redeem Notes pursuant to the optional redemption provisions of Section 5.7 hereof, it must furnish to the Trustee, at least 30 days but not more than 60 days before a redemption date, an Officers’ Certificate setting forth:

(1) the clause of this Indenture pursuant to which the redemption shall occur;

 

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(2) the redemption date;

(3) the principal amount of Notes to be redeemed; and

(4) the redemption price.

Any redemption referenced in such Officers’ Certificate may be cancelled by the Issuer at any time prior to notice of redemption being delivered to any Holder and thereafter shall be null and void.

If the redemption price is not known at the time such notice is to be given, the actual redemption price, calculated as described in the terms of the Notes, will be set forth in an Officers’ Certificate of the Issuer delivered to the Trustee no later than two Business Days prior to the redemption date.

SECTION 5.2. Selection of Notes to Be Redeemed or Purchased.

With respect to any partial redemption or repurchase of any Notes made pursuant to this Indenture, if less than all of the Notes are to be redeemed, or purchased pursuant to an offer to purchase in respect of a Change of Control or Asset Sale, at any given time, selection of such Notes for redemption will be made by the Trustee (a) on a pro rata basis to the extent practicable or (b) by lot or such other similar method in accordance with the procedures of DTC; provided that no Notes of $1,000 or less shall be redeemed or repurchased in part. In the event of partial redemption, the particular Notes to be redeemed or purchased shall be selected, unless otherwise provided herein, not less than 30 nor more than 60 days prior to the redemption or purchase date from the outstanding Notes not previously called for redemption or purchase.

The Trustee shall promptly notify the Issuer in writing of the Notes selected for redemption or purchase and, in the case of any Note selected for partial redemption or purchase, the principal amount thereof to be redeemed or purchased. Notes and portions of Notes selected shall be in amounts of $1,000 or an integral multiple of $1,000 in excess thereof; except that if all of the Notes of a Holder are to be redeemed or purchased, the entire outstanding amount of Notes held by such Holder, even if not a multiple of $1,000, shall be redeemed or purchased. Except as provided in the preceding sentence, provisions of this Indenture that apply to Notes called for redemption or purchase also apply to portions of Notes called for redemption or purchase.

SECTION 5.3. Notice of Redemption. Notices of purchase or redemption shall be delivered electronically or mailed by first-class mail, postage prepaid, at least 30 days but not more than 60 days before the purchase or redemption date to each applicable Holder at such Holder’s registered address or otherwise in accordance with the procedures of DTC, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a defeasance of any Notes or a satisfaction and discharge of this Indenture. If any Note is to be purchased or redeemed in part only, any notice of purchase or redemption that relates to such Note shall state the portion of the principal amount thereof that has been or is to be purchased or redeemed.

 

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The notice shall identify the Notes (including the CUSIP number) to be redeemed and shall state:

(1) the redemption date;

(2) the redemption price (or manner of calculation if not then known);

(3) if any Note is being redeemed in part, the portion of the principal amount of such Note to be redeemed and that, after the redemption date upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion shall be issued upon cancellation of the original Note;

(4) the name and address of the Paying Agent;

(5) that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price;

(6) that, unless the Issuer defaults in making such redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date;

(7) the paragraph of the Notes and/or section of this Indenture pursuant to which the Notes called for redemption are being redeemed; and

(8) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Notes.

At the Issuer’s request, the Trustee shall give the notice of redemption in the Issuer’s name and at its expense; provided, however, that the Issuer has delivered to the Trustee, at least 30 days prior to the redemption date (or such shorter period as the Trustee shall agree), an Officers’ Certificate requesting that the Trustee give such notice and setting forth the information to be stated in such notice as provided in the preceding paragraph.

SECTION 5.4. Effect of Notice of Redemption. Once notice of redemption is mailed in accordance with Section 5.3, Notes called for redemption, unless such redemption is conditioned on the happening of a future event, become irrevocably due and payable on the redemption date at the redemption price. Any redemption or notice of redemption may, at the Issuer’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of an Equity Offering, other offering or other corporate transaction or event. Notice of any redemption in respect of an Equity Offering may be given prior to, and conditional on, the completion thereof.

SECTION 5.5. Deposit of Redemption or Purchase Price. Prior to 11:00 a.m. (New York City time) on the redemption or purchase date, the Issuer shall deposit with the Trustee or with the Paying Agent money sufficient to pay the redemption or purchase price of and accrued interest, if any, on, all Notes to be redeemed or purchased on that date. The Trustee or the Paying Agent shall promptly return to the Issuer any money deposited with the Trustee or the Paying Agent by the Issuer in excess of the amounts necessary to pay the redemption or purchase price of, and accrued interest, if any, on, all Notes to be redeemed or purchased.

 

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If the Issuer complies with the provisions of the preceding paragraph, on and after the redemption or purchase date, interest shall cease to accrue on the Notes or the portions of Notes called for redemption or purchase. If a Note is redeemed or purchased on or after an interest record date but on or prior to the related Interest Payment Date, then any accrued and unpaid interest shall be paid to the Person in whose name such Note was registered at the close of business on such record date. If any Note called for redemption or purchase is not so paid upon surrender for redemption or purchase because of the failure of the Issuer to comply with the preceding paragraph, interest shall be paid on the unpaid principal, from the redemption or purchase date until such principal is paid, and to the extent lawful on any interest not paid on such unpaid principal, in each case at the rate provided in the Notes and in Section 3.1.

SECTION 5.6. Notes Redeemed or Purchased in Part. Upon surrender of a Note that is redeemed or purchased in part, the Issuer shall issue and, upon receipt of an Issuer Order, the Trustee shall adjust the Schedule of Increases or Decreases of any Global Note and authenticate for the Holder at the expense of the Issuer a new Note equal in principal amount to the unredeemed or unpurchased portion of the Note surrendered; provided, that each such new Note shall be in a principal amount of $1,000 or integral multiple of $1,000 in excess thereof.

SECTION 5.7. Optional Redemption.

(a) At any time prior to October 1, 2016, the Issuer may, on one or more occasions, redeem all or any portion of the Notes, upon notice as provided in Section 5.3, at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus the Applicable Premium as of the Redemption Date (the “Redemption Date”), plus accrued and unpaid interest, to, but excluding, the Redemption Date.

(b) Prior to October 1, 2016, the Issuer may, at its option, upon notice as provided in Section 5.3 with the net cash proceeds of one or more Equity Offerings, redeem up to 40% of the aggregate principal amount of the Notes originally issued under the Indenture (including any Additional Notes issued after the Issue Date) at a redemption price equal to 108.000% of the principal amount thereof, plus accrued and unpaid interest, to, but excluding, the Redemption Date; provided that (a) at least 50% of the aggregate principal amount of Notes originally issued under this Indenture (including any Additional Notes issued after this Issue Date) remains outstanding immediately after the occurrence of any such redemption (excluding Notes held by the Issuer or its Subsidiaries) and (b) any such redemption occurs within 90 days following the closing of any such Equity Offering. The Notes to be redeemed shall be selected in the manner described under Section 5.1 through Section 5.6.

(c) Except pursuant to Section 5.7(a) or (b), the Notes shall not be redeemable at the Company’s option prior to October 1, 2016.

(d) The Issuer may redeem the Notes, in whole or in part, at any time on or after October 1, 2016 upon notice as provided in Section 5.3 at the following redemption prices (expressed as percentages of the principal amount to be redeemed) set forth below, plus accrued and unpaid interest, to, but excluding, the Redemption Date (subject to the right of Holders on the relevant regular record date to receive interest due on an Interest Payment Date that is prior to the redemption date), if redeemed during the 12-month period beginning on October 1 of the years indicated below:

 

     Percentage  

2016

     106.000

2017

     104.000

2018

     102.000

2019 and thereafter

     100.000

 

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(e) Unless the Issuer defaults in payment of the redemption price, interest shall cease to accrue on Notes or portions thereof called for redemption, unless such redemption is conditioned on the happening of a future event.

(f) Any redemption pursuant to this Section 5.7 shall be made pursuant to the provisions of Section 5.1 through Section 5.6.

SECTION 5.8. Mandatory Redemption. The Issuer is not required to make any mandatory redemption or sinking fund payments with respect to the Notes.

ARTICLE VI

DEFAULTS AND REMEDIES

SECTION 6.1. Events of Default. Each of the following is an “Event of Default”:

(1) default in the payment in respect of the principal of (or premium, if any, on) any Note when due and payable (whether at Stated Maturity or upon repurchase, acceleration, optional redemption or otherwise);

(2) default in the payment of any interest upon any Note when it becomes due and payable, and continuance of such default for a period of 30 days;

(3) failure to perform or comply with Section 3.9 and continuance of such failure to perform or comply for a period of 90 days after written notice thereof has been given to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the outstanding Notes voting as a single class;

(4) except as permitted by this Indenture, any Note Guarantee of any Guarantor that is a Significant Subsidiary (or group of Guarantors that together (determined as of the most recent consolidated financial statements of the Issuer delivered pursuant to Section 3.9(a)(1)(i) or
Section
 3.9(a)(1)(ii)) would constitute a Significant Subsidiary) shall for any reason cease to be in full force and effect or be declared null and void or any responsible officer of any Guarantor that is a Significant Subsidiary (or the responsible officers of any group of Guarantors that, taken together (determined as of the most recent consolidated financial statements of the Issuer for a

 

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fiscal period end) would constitute a Significant Subsidiary), as the case may be, denies that it has any further liability under its or their Note Guarantee(s) or gives notice to such effect, other than by reason of the termination of this Indenture or the release of any such Note Guarantee in accordance with this Indenture;

(5) default in the performance, or breach, of any covenant or agreement of the Issuer or any Restricted Subsidiary of the Issuer in this Indenture (other than a covenant or agreement a default in whose performance or whose breach is specifically dealt with in clauses (1), (2), (3) or (4) above), and continuance of such default or breach for a period of 60 days after written notice thereof has been given to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of at least 25% in aggregate principal amount of the outstanding Notes voting as a single class;

(6) default under any mortgage, indenture or instrument under which there is issued or by which there is secured or evidenced any Indebtedness for borrowed money by the Issuer or any Restricted Subsidiary of the Issuer or the payment of which is guaranteed by the Issuer or any Restricted Subsidiary of the Issuer, other than Indebtedness owed to the Issuer or any Restricted Subsidiary of the Issuer, whether such Indebtedness or Guarantee now exists or is created after the issuance of the Notes, if both:

(A) such default either results from the failure to pay any principal of such Indebtedness at its stated final maturity (after giving effect to any applicable grace periods) or relates to an obligation other than the obligation to pay principal of any such Indebtedness at its stated final maturity and results in the holder or holders of such Indebtedness causing such Indebtedness to become due prior to its stated maturity, and

(B) the principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at stated final maturity (after giving effect to any applicable grace periods), or the maturity of which has been so accelerated, aggregates $30.0 million or more at any one time outstanding;

(7) the entry against the Issuer or any Restricted Subsidiary of the Issuer of a final non-appealable judgment(s) by court(s) of competent jurisdiction for the payment of money in an aggregate amount in excess of $30.0 million (net of amounts covered by (x) insurance for which the insurer thereof has been notified of such claim and has not been denied or (y) valid third party indemnifications for which the indemnifying party thereof has been notified of such claim and has not challenged such indemnification), by a court or courts of competent jurisdiction, which judgment(s) remain undischarged, unpaid or unstayed for a period of 60 consecutive days; or

(8) the Issuer or any Significant Subsidiary (or group of Restricted Subsidiaries that together (determined as of the most recent consolidated financial statements of the Issuer delivered pursuant to Section 3.9(a)(1)(i) or Section 3.9(a)(1)(ii) for a fiscal period end) would constitute a Significant Subsidiary) pursuant to or within the meaning of any Bankruptcy Law:

(i) commences a voluntary case or proceeding;

 

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(ii) consents to the entry of an order for relief against it in an involuntary case or proceeding;

(iii) consents to the appointment of a custodian of it or for substantially all of its property;

(iv) makes a general assignment for the benefit of its creditors;

(v) consents to or acquiesces in the institution of a bankruptcy or an insolvency proceeding against it;

(vi) takes any comparable action under any foreign laws relating to insolvency; or

(9) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Issuer or any Significant Subsidiary (or group of Restricted Subsidiaries that together (determined as of the most recent consolidated financial statements of the Issuer delivered pursuant to Section 3.9(a)(1)(i) or Section 3.9(a)(1)(ii) for a fiscal period end) would constitute a Significant Subsidiary), in an involuntary case; (B) appoints a custodian of the Issuer or any Significant Subsidiary (or group of Restricted Subsidiaries that together (determined as of the most recent consolidated financial statements of the Issuer delivered pursuant to Section 3.9(a)(1)(i) or Section 3.9(a)(1)(ii) for a fiscal period end) would constitute a Significant Subsidiary), for substantially all of its property; or (C) orders the winding up or liquidation of the Issuer or any Significant Subsidiary (or group of Restricted Subsidiaries that together (determined as of the most recent consolidated financial statements of the Issuer delivered pursuant to Section 3.9(a)(1)(i) or Section 3.9(a)(1)(ii) for a fiscal period end) would constitute a Significant Subsidiary).

SECTION 6.2. Acceleration. If an Event of Default (other than an Event of Default specified in Section 6.1(8) or (9)) occurs and is continuing, then and in every such case the Trustee or the Holders of not less than 25% in aggregate principal amount of the outstanding Notes voting as a single class may declare the principal of the Notes and any accrued interest on the Notes to be due and payable immediately by a notice in writing to the Issuer (and to the Trustee if given by Holders); provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of the outstanding Notes may rescind and annul such acceleration if all Events of Default, other than the nonpayment of accelerated principal of or interest on the Notes, have been cured or waived as provided in this Indenture; provided such rescission would not conflict with any judgment of a court of competent jurisdiction.

 

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In the event of a declaration of acceleration of the Notes solely because an Event of Default specified in Section 6.1(6) has occurred and is continuing, the declaration of acceleration of the Notes shall be automatically rescinded and annulled if the Event of Default or payment default triggering such Event of Default pursuant to Section 6.1(6) shall be remedied or cured by the Issuer or a Restricted Subsidiary of the Issuer or waived by the holders of the relevant Indebtedness within 30 Business Days after the declaration of acceleration with respect thereto and if the rescission and annulment of the acceleration of the Notes would not conflict with any judgment or decree of a court of competent jurisdiction obtained by the Trustee for the payment of amounts due on the Notes.

If an Event of Default specified in Section 6.1(8) or (9) occurs, the principal of, premium, if any, and any accrued interest on the Notes then outstanding shall ipso facto become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder. The Trustee may withhold from Holders notice of any Default (except Default in payment of principal of, premium, if any, and interest) if the Trustee determines that withholding notice is in the interests of the Holders to do so.

SECTION 6.3. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of (or premium, if any) or interest on the Notes or to enforce the performance of any provision of the Notes, this Indenture or the Guarantees.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative.

SECTION 6.4. Waiver of Past Defaults. The Holders of a majority in principal amount of the then outstanding Notes by notice to the Trustee (with a copy to the Issuer, but the applicable waiver or rescission shall be effective when the notice is given to the Trustee) may, on behalf of the Holders of all the Notes, (a) waive, by their consent (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), an existing Default and its consequences under this Indenture except (i) a continuing Default in the payment of the principal of, or premium, if any, or interest on a Note held by a non-consenting Holder or (ii) a Default in respect of a provision that under Section 9.2 cannot be amended without the consent of each Holder affected and (b) rescind any acceleration and its consequences with respect to the Notes provided such rescission would not conflict with any judgment of a court of competent jurisdiction. When a Default or Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any consequent right.

SECTION 6.5. Control by Majority. The Holders of a majority in principal amount of the outstanding Notes voting as a single class shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, the Notes or the Guarantees or, subject to Section 7.1 and Section 7.2, that the Trustee determines is unduly prejudicial to the rights of other Holders (it being understood that the Trustee does not have an affirmative duty to

 

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ascertain whether or not any such directions are unduly prejudicial to such Holders) or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed proper by the Trustee that is not inconsistent with such direction. Prior to taking any such action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all costs, losses, liabilities and expenses caused by taking or not taking such action.

SECTION 6.6. Limitation on Suits. No Holder of any Note will have any right to institute any proceeding with respect to this Indenture or for any remedy thereunder, unless (x) such Holder shall have previously given to the Trustee written notice of a continuing Event of Default, (y) the Holders of at least 25% in aggregate principal amount of the outstanding Notes voting as a single class shall have made written request to the Trustee, and provided indemnity reasonably satisfactory to the Trustee, to institute such proceeding as Trustee and (z) the Trustee shall not have received from the Holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request and shall have failed to institute such proceeding within 60 days. Such limitations do not apply, however, to a suit instituted by a Holder directly (as opposed to through the Trustee) for enforcement of payment of the principal of (and premium, if any) or interest on such Note on or after the respective due dates expressed in such Note.

A Holder may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

SECTION 6.7. Rights of Holders to Receive Payment. Notwithstanding any other provision of this Indenture (including, without limitation, Section 6.6), the right of any Holder to receive payment of principal of, premium (if any), or interest on the Notes held by such Holder, on or after the respective due dates expressed or provided for in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder.

SECTION 6.8. Collection Suit by Trustee. If an Event of Default specified in clauses (1) or (2) of Section 6.1 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuer for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.6.

SECTION 6.9. Trustee May File Proofs of Claim. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Issuer, its Subsidiaries or its or their respective creditors or properties and, unless prohibited by law or applicable regulations, may be entitled and empowered to participate as a member of any official committee of creditors appointed in such matter and may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.6.

 

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No provision of this Indenture shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.

SECTION 6.10. Priorities. (a) If the Trustee collects any money or property pursuant to this Article VI, it shall pay out the money or property in the following order:

FIRST: to the Trustee for amounts due to it under Section 7.6;

SECOND: to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal, premium, if any, and interest, respectively; and

THIRD: to the Issuer, or to the extent the Trustee collects any amount for any Guarantor, to such Guarantor.

(b) The Trustee may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10. At least 15 days before such record date, the Issuer shall mail to each Holder and the Trustee a notice that states the record date, the payment date and amount to be paid.

SECTION 6.11. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by the Issuer, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in outstanding principal amount of the Notes.

ARTICLE VII

TRUSTEE

SECTION 7.1. Duties of Trustee. If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent Person would exercise or use under the circumstances in the conduct of such person’s own affairs; provided that the Trustee shall be under no obligation to exercise any of the rights or powers under this Indenture, the Notes or the Guarantees at the request or direction of any of the Holders unless the Holders have offered the Trustee indemnity or security satisfactory to the Trustee against any cost, loss, liability or expense.

 

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(a) Except during the continuance of an Event of Default:

(1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

(2) in the absence of gross negligence, willful misconduct or bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, opinions or orders furnished to the Trustee and conforming to the requirements of this Indenture, the Notes or the Guarantees, as applicable. However, in the case of any such certificates or opinions which by any provisions hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture, the Notes or the Guarantees, as the case may be (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

(b) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(1) this paragraph does not limit the effect of paragraph (a) of this Section 7.1;

(2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts;

(3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.5; and

(4) No provision of this Indenture, the Notes or the Guarantees shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or thereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(c) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.1.

(d) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Issuer.

(e) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

(f) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section 7.1.

 

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(g) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuer shall be sufficient if signed by one Officer of the Issuer.

SECTION 7.2. Rights of Trustee. Subject to Section 7.1:

(a) The Trustee may conclusively rely on and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order or other paper or document (whether in its original or facsimile form) reasonably believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. The Trustee shall receive and retain financial reports and statements of the Issuer as provided herein, but shall have no duty to review or analyze such reports or statements to determine compliance with covenants or other obligations of the Issuer.

(b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate and/or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on an Officers’ Certificate or an Opinion of Counsel, subject to customary assumptions and exclusions.

(c) The Trustee may execute any of the trusts and powers hereunder or perform any duties hereunder either directly by or through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care by it hereunder.

(d) In the absence of willful misconduct or negligence, the Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers, conferred upon it by this Indenture.

(e) The Trustee may consult with counsel of its selection, and the advice or opinion of counsel with respect to legal matters relating to this Indenture, the Notes or the Guarantees shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder or under the Notes or the Guarantees in good faith and in accordance with the advice or opinion of such counsel.

(f) The Trustee shall not be deemed to have notice of any Default or Event of Default or whether any entity or group of entities constitutes a Significant Subsidiary unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a Default or Event of Default or of any such Significant Subsidiary is received by the Trustee at the corporate trust office of the Trustee specified in Section 12.1, and such notice references the Notes and this Indenture.

(g) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and to each agent, custodian and other Person employed to act hereunder.

 

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(h) The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture, the Notes or the Guarantees at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture, unless the Holders shall have offered to the Trustee security or indemnity satisfactory to it against the costs, losses, expenses and liabilities which may be incurred therein or thereby.

(i) The Trustee shall not be deemed to have knowledge of any fact or matter unless such fact or matter is actually known to a Trust Officer of the Trustee.

(j) Whenever in the administration of this Indenture, the Notes or the Guarantees the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder or thereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith or willful misconduct on its part, rely upon an Officers’ Certificate.

(k) In no event shall the Trustee be responsible or liable for any special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit), irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

(l) The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, report, notice, request, direction, consent, order, bond, debenture, coupon or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine, during business hours and upon reasonable notice, the books, records and premises of the Issuer and the Restricted Subsidiaries, personally or by agent or attorney at the sole cost of the Issuer and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(m) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

(n) The Trustee may request that the Issuer deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture or the Notes.

SECTION 7.3. Individual Rights of Trustee. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer, Guarantors or their Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.9 and 7.10. In addition, the Trustee shall be permitted to engage in transactions with the Issuer.

SECTION 7.4. Trustees Disclaimer. The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture, the Offering Memorandum, the Purchase Agreement, the Guarantees or the Notes, shall not be accountable for the Issuer’s use of the proceeds from the sale of the Notes, shall not be responsible for the use

 

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or application of any money received by any Paying Agent other than the Trustee or any money paid to the Issuer pursuant to the terms of this Indenture and shall not be responsible for any statement of the Issuer in this Indenture or in any document issued in connection with the sale of the Notes or in the Notes other than the Trustee’s certificate of authentication.

SECTION 7.5. Notice of Defaults. If a Default or Event of Default occurs and is continuing and if a Trust Officer has actual knowledge thereof, the Trustee shall mail by first class mail to each Holder at the address set forth in the Notes Register notice of the Default or Event of Default within 90 days after it is actually known to a Trust Officer. Except in the case of a Default relating to the payment of principal of, premium (if any), or interest on any Note (including payments pursuant to the optional redemption or required repurchase provisions of such Note), the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of Holders.

SECTION 7.6. Compensation and Indemnity. The Issuer shall pay to the Trustee from time to time reasonable compensation for its services hereunder and under the Notes and the Guarantees as the Issuer and the Trustee shall from time to time agree in writing. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer and Guarantors jointly and severally shall reimburse the Trustee upon request for all out-of-pocket expenses incurred or made by it, including, but not limited to, costs of collection, costs of preparing reports, certificates and other documents, costs of preparation and mailing of notices to Holders. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the respective agents, counsel, accountants and experts of the Trustee. The Issuer and Guarantors jointly and severally shall indemnify each of the Trustee and its officers, directors, shareholders, employees and agents against any and all loss, liability, damages, claims or expense (including reasonable attorneys’ fees and expenses) incurred by it without willful misconduct or negligence on its part in connection with the acceptance or administration of this trust, the exercise of its rights and powers, and the performance of its duties hereunder and under the Notes and the Guarantees, including the costs and expenses of enforcing this Indenture (including this Section 7.6), the Notes and the Guarantees and of defending itself against any claims (whether asserted by any Holder, the Issuer or otherwise). Each of the Trustee shall notify the Issuer promptly of any claim for which it may seek indemnity of which it has received written notice. Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend the claim and the Trustee shall provide reasonable cooperation at the Issuer’s expense in the defense. The Trustee may have separate counsel and the Issuer shall pay the fees and expenses of such counsel.

To secure the Issuer’s and Guarantors’ payment obligations in this Section 7.6, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Notes. Such lien shall survive the satisfaction and discharge of this Indenture. The Trustee’s right to receive payment of any amounts due under this Section 7.6 shall not be subordinate to any other liability or Indebtedness of the Issuer.

The Issuer’s and Guarantors’ payment obligations pursuant to this Section 7.6 shall survive the discharge of this Indenture and the resignation or removal of the Trustee.

 

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“Trustee” for the purposes of this Section 7.6 shall include any predecessor Trustee and the Trustee in each of its capacities hereunder and each agent, custodian and other person employed to act hereunder; provided, however, that the negligence, willful misconduct or bad faith of any Trustee hereunder shall not affect the rights of any other Trustee hereunder. Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services after the occurrence of a Default specified in clause (8) or (9) of Section 6.1, the expenses (including the reasonable fees and expenses of its counsel) are intended to constitute expenses of administration under any Bankruptcy Law.

SECTION 7.7. Replacement of Trustee. The Trustee may resign at any time by so notifying the Issuer in writing not less than 30 days prior to the effective date of such resignation. The Holders of a majority in principal amount of the Notes may remove the Trustee by so notifying the removed Trustee in writing not less than 30 days prior to the effective date of such removal and may appoint a successor Trustee with the Issuer’s written consent, which consent shall not be unreasonably withheld. The Issuer shall remove the Trustee if:

(1) the Trustee fails to comply with Section 7.9;

(2) the Trustee is adjudged bankrupt or insolvent;

(3) a receiver or other public officer takes charge of the Trustee or its property; or

(4) the Trustee otherwise becomes incapable of acting.

If the Trustee resigns or is removed by the Issuer or by the Holders of a majority in principal amount of the Notes and such Holders do not reasonably promptly appoint a successor Trustee as described in the preceding paragraph, or if a vacancy exists in the office of the Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuer shall promptly appoint a successor Trustee.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Holders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.6.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of at least 10% in principal amount of the Notes may petition, at the Issuer’s expense, any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 7.9, any Holder, who has been a bona fide holder of a Note for at least six months, may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

 

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Notwithstanding the replacement of the Trustee pursuant to this Section 7.7, the Issuer’s obligations under Section 7.6 shall continue for the benefit of the retiring Trustee.

SECTION 7.8. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture, any of the Notes shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Notes so authenticated; and in case at that time any of the Notes shall not have been authenticated, any successor to the Trustee may authenticate such Notes either in the name of any predecessor hereunder or in the name of the successor to the Trustee; provided that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Notes in the name of any predecessor Trustee shall only apply to its successor or successors by merger, consolidation or conversion.

SECTION 7.9. Eligibility; Disqualification. This Indenture shall always have a Trustee that satisfies the requirements of TIA § 310(a)(1), (2) and (5) (whether or not applicable by law) in every respect. The Trustee shall have a combined capital and surplus of at least $100 million as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA § 310(b) (whether or not applicable by law); provided, however, that there shall be excluded from the operation of TIA § 310(b)(1) (whether or not applicable by law) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA § 310(b)(1) (whether or not applicable by law) are met.

SECTION 7.10. Preferential Collection of Claims Against the Issuer. The Trustee shall comply with TIA § 311(a) (whether or not applicable by law), excluding any creditor relationship listed in TIA § 311(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) (whether or not applicable by law) to the extent indicated.

SECTION 7.11. Trustees Application for Instruction from the Issuer. Any application by the Trustee for written instructions from the Issuer may, at the option of the Trustee, set forth in writing any action proposed to be taken or omitted by the Trustee under this Indenture and the date on and/or after which such action shall be taken or such omission shall be effective. The Trustee shall not be liable for any action taken by, or omission of, the Trustee in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any Officer of the Issuer actually receives such application, unless any such Officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Trustee shall have received written instructions in response to such application specifying the action to be taken or omitted.

 

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ARTICLE VIII

LEGAL DEFEASANCE AND COVENANT DEFEASANCE

SECTION 8.1. Option to Effect Legal Defeasance or Covenant Defeasance; Defeasance. The Issuer may elect, at its option, to have either Section 8.2 or 8.3 hereof be applied to all outstanding Notes upon compliance with the conditions set forth below in this Article VIII.

SECTION 8.2. Legal Defeasance and Discharge. Upon the Issuer’s exercise under Section 8.1 hereof of the option applicable to this Section 8.2, the Issuer and each of the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, be deemed to have been discharged from their obligation with respect to all outstanding Notes (including the Guarantees) on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Issuer and the Guarantors shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes (including the Guarantees), which shall thereafter be deemed to be “outstanding” only for the purposes of Section 8.6 hereof and the other Sections of this Indenture referred to in clauses (1) through (4) below, and to have satisfied all of their other obligations under such Notes, the Guarantees and this Indenture (and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging the same) and to have cured all then existing Events of Default, except for the following provisions which shall survive until otherwise terminated or discharged hereunder:

(1) the rights of Holders to receive payments in respect of the principal of and any premium and interest on the Notes when payments are due solely out of the trust referred to in Section 8.4 hereof;

(2) the Issuer’s obligations with respect to Notes under Article II concerning issuing temporary Notes, registration of such Notes, mutilated, destroyed, lost or stolen Notes and Section 3.10 hereof concerning the maintenance of an office or agency for payment and money for security payments held in trust;

(3) the rights, powers, trusts, duties and immunities of the Trustee and the Issuer’s and Guarantors’ obligations in connection therewith; and

(4) this Article VIII with respect to provisions relating to Legal Defeasance.

SECTION 8.3. Covenant Defeasance. Upon the Issuer’s exercise under Section 8.1 hereof of the option applicable to this Section 8.3, the Issuer and each of the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, be released from each of their obligations under the covenants contained in Section 3.2, 3.3, 3.4, 3.5, 3.6, 3.7, 3.8, 3.9, Section 3.16 and clause (iii) of Section 4.1(a) hereof with respect to the outstanding Notes on and after the date the conditions set forth in Section 8.4 hereof are satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “outstanding” for all other purposes hereunder. For this purpose, Covenant Defeasance means that, with

 

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respect to the outstanding Notes and Guarantees, the Issuer and the Guarantors may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event of Default under Section 6.1, but, except as specified above, the remainder of this Indenture and such Notes and Guarantees shall be unaffected thereby. In addition, upon the Issuer’s exercise under Section 8.1 of the option applicable to this Section 8.3, subject to the satisfaction of the conditions set forth in Section 8.4 hereof, clauses (3), (4), (5) and (7) of Section 6.1 shall not constitute Events of Default.

SECTION 8.4. Conditions to Legal or Covenant Defeasance. In order to exercise either Legal Defeasance or Covenant Defeasance under either Section 8.2 or Section 8.3:

(1) the Issuer must irrevocably have deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose of making the following payments, specifically pledged as security for, and dedicated solely to the benefits of the Holders of (A) money in an amount, or (B) U.S. government obligations, which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than the due date of any payment, money in an amount or (C) a combination thereof, in each case sufficient without reinvestment, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge, the entire indebtedness in respect of the principal of and premium, if any, and interest on such Notes on the Stated Maturity thereof or (if the Issuer has made irrevocable arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name and at the expense of the Issuer) the redemption date thereof, as the case may be, in accordance with the terms of this Indenture and such Notes;

(2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel, subject to customary assumptions and exclusions, stating that (A) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable U.S. federal income tax law (whether by statute or judicial precedent), in either case (A) or (B) to the effect that, and based thereon such opinion shall confirm that, the Holders will not recognize gain or loss for U.S. federal income tax purposes as a result of the deposit, defeasance and discharge to be effected with respect to such Notes and will be subject to U.S. federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit, defeasance and discharge were not to occur;

(3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee an Opinion of Counsel, subject to customary assumptions and exclusions, to the effect that the Holders of such outstanding Notes will not recognize gain or loss for U.S. federal income tax purposes as a result of the deposit and covenant defeasance to be effected with respect to such Notes and will be subject to federal income tax on the same amount, in the same manner and at the same times as would be the case if such deposit and Covenant Defeasance were not to occur;

 

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(4) no Default or Event of Default with respect to the outstanding Notes shall have occurred and be continuing at the time of such deposit after giving effect thereto (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit and the grant of any Lien to secure such borrowing);

(5) such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of, or constitute a default under, any material agreement or material instrument (other than this Indenture) to which the Issuer is a party or by which the Issuer is bound (other than that resulting from borrowing of funds to be applied to such deposit and the grant of any Lien to secure such borrowing); and

(6) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, subject to customary assumptions and exclusions, each stating that all conditions precedent with respect to such Legal Defeasance or Covenant Defeasance have been complied with.

Notwithstanding the foregoing, the Opinion of Counsel required by clause (2) above with respect to a Legal Defeasance need not to be delivered if all Notes not theretofore delivered to the Trustee for cancellation (x) have become due and payable, or (y) will become due and payable at Stated Maturity within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer.

SECTION 8.5. Deposited Money and Government Securities to be Held in Trust; Other Miscellaneous Provisions. Subject to Section 8.6 , all money and non-callable Government Securities (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee, collectively for purposes of this Section 8.5, the “Trustee”) pursuant to Section 8.4 in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as Paying Agent) as the Trustee may determine, to the Holders of such Notes of all sums due and to become due thereon in respect of principal, premium and Additional Interest, if any, and interest, but such money need not be segregated from other funds except to the extent required by law.

The Issuer shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the cash or non-callable Government Securities deposited pursuant to Section 8.4 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

 

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Notwithstanding anything in this Article VIII to the contrary, the Trustee shall deliver or pay to the Issuer from time to time upon the request of the Issuer any money or non-callable Government Securities held by it as provided in Section 8.4 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee (which may be the opinion delivered under Section 8.4(1)), are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

SECTION 8.6. Repayment to the Issuer. Any money deposited with the Trustee or any Paying Agent, or then held by the Issuer, in trust for the payment of the principal of, premium, if any, or interest on, any Note and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Issuer on its request unless an abandoned property law designates another Person or (if then held by the Issuer) shall be discharged from such trust; and the Holder of such Note shall thereafter be permitted to look only to the Issuer for payment thereof unless an abandoned property law designates another Person, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Issuer as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in the New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining shall be repaid to the Issuer.

SECTION 8.7. Reinstatement. If the Trustee or Paying Agent is unable to apply any money or U.S. dollars in accordance with Section 8.2 or 8.3 hereof, as the case may be, by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the Issuer’s and the Guarantors’ obligations under this Indenture and the Notes and the Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is permitted to apply all such money in accordance with Section 8.2 or 8.3 hereof, as the case may be; provided, however, that, if the Issuer makes any payment of principal of, premium, if any, or interest on, any Note following the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. government obligations held by the Trustee or Paying Agent.

ARTICLE IX

AMENDMENTS

SECTION 9.1. Without Consent of Holders. Notwithstanding Section 9.2 of this Indenture, without the consent of any Holders, the Issuer, the Guarantors and the Trustee, at any time and from time to time, may amend or supplement this Indenture, the Notes and the Note Guarantees for any of the following purposes:

(1) to evidence the succession of a Person to the Issuer and the assumption by any such successor of the covenants of the Issuer in this Indenture and the Notes and, if applicable, the Note Guarantee;

 

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(2) to add to or modify the covenants, in each case, for the benefit of the Holders, or to surrender any right or power herein conferred upon the Issuer or a Restricted Subsidiary of the Issuer;

(3) to add additional Defaults or Events of Default;

(4) to provide for uncertificated Notes in addition to or in place of the certificated Notes;

(5) to evidence and provide for the acceptance of appointment under this Indenture by a successor or replacement Trustee;

(6) to provide for or confirm the issuance of Additional Notes in accordance with the terms of this Indenture;

(7) to add a Guarantor (including a parent guarantor) or release a parent guarantor;

(8) to cure any ambiguity, defect, omission, mistake or inconsistency;

(9) to make any change that would provide any additional rights or benefits to the Holders or that does not adversely affect the legal rights under this Indenture of any such Holder;

(10) to conform the text of this Indenture, the Notes or the Note Guarantee to any provision under the heading “Description of the notes” in the Offering Memorandum to the extent that the Trustee has received an Officers’ Certificate stating that such text constitutes an unintended conflict with, or is inconsistent with, the description of the corresponding provision in the “Description of the notes”;

(11) to effect or maintain the qualification of this Indenture under the Trust Indenture Act; or

(12) to amend the provisions of this Indenture relating to the transfer and legending of Notes as permitted by this Indenture, including, without limitation, to facilitate the issuance and administration of the Notes; provided that (i) compliance with this Indenture as so amended would not result in notes being transferred in violation of the Securities Act or any applicable securities law and (ii) such amendment does not materially and adversely affect the rights of Holders to transfer Notes.

Subject to Section 9.2, upon the request of the Issuer, and upon receipt by the Trustee of the documents described in Section 12.2, the Trustee shall join with the Issuer and the Guarantors in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee’s own rights, duties, liabilities or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental indenture.

 

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After an amendment or supplement under this Section 9.1 becomes effective, the Issuer shall mail to Holders a notice briefly describing such amendment or supplement. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment or supplement under this Section 9.1.

SECTION 9.2. With Consent of Holders.

Except as provided below in this Section 9.2, this Indenture, the Notes and any Note Guarantees may be amended or supplemented with the consent of the Holders of at least a majority in principal amount of the Notes voting as a single class then outstanding, including consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes, and, subject to Section 6.4 and 6.7 hereof, any existing Default or Event of Default (other than a Default or Event of Default in the payment of the principal of, premium, if any, or interest on the Notes, except a payment default resulting from an acceleration that has been rescinded) or compliance with any provision of this Indenture, the Notes and the Guarantees may be waived with the consent of the Holders of a majority in principal amount of the then outstanding Notes voting as a single class, other than Notes beneficially owned by the Issuer or its Affiliates (including consents obtained in connection with a purchase of, or tender offer or exchange offer for the Notes). Section 2.11 hereof and Section 12.4 hereof shall determine which Notes are considered to be “outstanding” for the purposes of this Section 9.2.

Upon the request of the Issuer, and upon the filing with the Trustee of evidence satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of the documents described in Section 2.12, the Trustee shall join with the Issuer and the Guarantors in the execution of such amended or supplemental indenture unless such amended or supplemental indenture directly affects the Trustee’s own rights, duties, liabilities or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such amended or supplemental Indenture.

Without the consent of each Holder of Notes directly affected thereby, an amendment or waiver may not, with respect to any Notes held by a non-consenting Holder:

(1) reduce the principal amount of the Notes whose Holders must consent to an amendment, supplement or waiver;

(2) reduce the principal amount of or change the fixed maturity date of any such Note or alter or waive the provisions with respect to the optional redemption of the Notes (other than provisions relating to Section 3.5 and Section 3.8 and other than the related notice provisions);

(3) reduce the rate of or change the time for payment of interest on any such Note;

(4) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes, except a rescission of acceleration of the Notes by the Holders of at least a majority in aggregate principal amount of the Notes voting as a single class and a waiver of the payment default that resulted from such acceleration, or in respect of a covenant or provision contained in this Indenture or any Note Guarantee which cannot be amended or modified without the consent of all Holders of the Notes;

 

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(5) make any such Note payable in money other than that stated in the Notes;

(6) make any change in the provisions of this Indenture relating to waivers of past Defaults or the rights of Holders to receive payments of principal of or premium, if any, or interest on the Notes;

(7) make any change in to the amendment and waiver provisions in this Section 9.2;

(8) impair the right of any Holder to receive payment of principal of, or interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes; or

(9) make any change to the ranking or modify the ranking of any such Note or Note Guarantee that would adversely affect the Holders.

It shall not be necessary for the consent of the Holders under this Indenture to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. A consent to any amendment, supplement or waiver under this Indenture by any Holder of the Notes given in connection with a tender or exchange of such Holder’s Notes shall not be rendered invalid by such tender or exchange.

After an amendment or supplement under this Section 9.2 becomes effective, the Issuer shall mail to Holders a notice briefly describing such amendment or supplement. The failure to give such notice to all Holders, or any defect therein, shall not impair or affect the validity of an amendment or supplement.

For the avoidance of doubt, the provisions of Section 3.8 relating to the Issuer’s obligation to make an offer to repurchase the Notes as a result of a Change of Control, including the definition of “Change of Control,” may be waived, amended or modified with the written consent of the Holders of a majority in principal amount of the Notes outstanding under the Indenture.

SECTION 9.3. Revocation and Effect of Consents and Waivers.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder of a Note is a continuing consent by the Holder of a Note and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent or waiver is not made on any Note. However, any such Holder of a Note or subsequent Holder of a Note may revoke the consent or waiver as to such Holder’s Note or portion of its Note if the Trustee receives written notice of revocation before the date the amendment, supplement or waiver becomes effective. An amendment, supplement or waiver becomes effective in accordance with its terms and thereafter binds every Holder.

 

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The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date.

SECTION 9.4. Notation on or Exchange of Notes.

The Trustee may place an appropriate notation about an amendment, supplement or waiver on any Note thereafter authenticated. The Issuer in exchange for all Notes may issue and the Trustee shall, upon receipt of an Issuer Order, authenticate new Notes that reflect the amendment, supplement or waiver.

Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

SECTION 9.5. Trustee to Sign Amendments.

The Trustee shall sign any amended or supplemental indenture authorized pursuant to this Article IX if the amendment or supplement does not adversely affect the rights, duties, liabilities or immunities of the Trustee. In executing any amended or supplemental indenture, the Trustee shall receive and (subject to Section 7.1 and Section 7.2) shall be fully protected in relying upon, in addition to the documents required by Section 12.2, an Officers’ Certificate and an Opinion of Counsel, subject to customary assumptions and exclusions, stating that the execution of such amended or supplemental indenture is authorized or permitted by this Indenture.

ARTICLE X

GUARANTEE

SECTION 10.1. Guarantee. Subject to the provisions of this Article X, each Guarantor hereby fully, unconditionally and irrevocably guarantees, as primary obligor and not merely as surety, jointly and severally with each other Guarantor, to each Holder, and the Trustee the full and punctual payment when due, whether at maturity, by acceleration, by redemption or otherwise, of the principal of, premium, if any, and interest (including interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Issuer or any Guarantor whether or not a claim for post-filing or post-petition interest is allowed in such proceeding and the obligations under Section 7.6) on the Notes and all other obligations and liabilities of the Issuer under this Indenture (including without limitation interest) (all the foregoing being hereinafter collectively called the

 

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Guaranteed Obligations”). Each Note Guarantee shall be on an unsecured senior basis. Each Guarantor agrees that the Guaranteed Obligations shall (i) rank equally in right of payment with other existing and future senior Indebtedness of each such Guarantor, (ii) be effectively subordinated to all Secured Indebtedness of each such Guarantor to the extent of the value of the assets securing such Indebtedness and (iii) shall be senior in right of payment to all existing and future Subordinated Indebtedness of each such Guarantor.

To evidence its Note Guarantee set forth in this Section 10.1, each Guarantor hereby agrees that this Indenture (or a supplemental indenture to this Indenture) and a notation of the Note Guarantee shall both be executed on behalf of such Guarantor by an Officer of such Guarantor.

Each Guarantor hereby agrees that its Note Guarantee set forth in Section 10.1 hereof shall remain in full force and effect notwithstanding the absence of the notation of the Note Guarantee on the Notes.

If an Officer whose signature is on this Indenture or a supplemental indenture hereto no longer holds that office at the time the Trustee authenticates the Note, the Note Guarantee shall be valid nevertheless.

Upon execution of a supplemental indenture to this Indenture by the Guarantors, the Note Guarantees set forth in this Indenture shall be deemed duly delivered, without any further action by any Person, on behalf of the Guarantors. Following the Issue Date, the delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in this Indenture or any supplemental indenture on behalf of the Guarantors.

Each Guarantor further agrees (to the extent permitted by law) that the Guaranteed Obligations may be extended or renewed, in whole or in part, without notice or further assent from it, and that it shall remain bound under this Article X notwithstanding any extension or renewal of any Guaranteed Obligation.

Each Guarantor waives presentation to, demand of payment from and protest to the Issuer of any of the Guaranteed Obligations and also waives notice of protest for nonpayment. Each Guarantor waives notice of any default under the Notes or the Guaranteed Obligations.

Each Guarantor further agrees that its Note Guarantee herein constitutes a Guarantee of payment when due (and not a Guarantee of collection) and waives any right to require that any resort be had by any Holder to any security held for payment of the Guaranteed Obligations.

Except as set forth in Section 10.2, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason (other than payment of the Guaranteed Obligations in full), including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Guaranteed Obligations or otherwise. Without limiting the generality of

 

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the foregoing, the Guaranteed Obligations of each Guarantor herein shall not be discharged or impaired or otherwise affected by (a) the failure of any Holder to assert any claim or demand or to enforce any right or remedy against the Issuer or any other person under this Indenture, the Notes or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Notes or any other agreement; (d) the failure of any Holder to exercise any right or remedy against any other Guarantor; (e) any change in the ownership of the Issuer; (f) any default, failure or delay, willful or otherwise, in the performance of the Guaranteed Obligations, or (g) any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of any Guarantor or would otherwise operate as a discharge of such Guarantor as a matter of law or equity.

Each Guarantor agrees that its Note Guarantee herein shall remain in full force and effect until payment in full of all the Guaranteed Obligations or such Guarantor is released from its Note Guarantee in compliance with Section 10.2, Article VIII or Article XI. Each Guarantor further agrees that its Note Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of, premium, if any, or interest on any of the Guaranteed Obligations is rescinded or must otherwise be restored by any Holder upon the bankruptcy or reorganization of the Issuer or otherwise.

In furtherance of the foregoing and not in limitation of any other right which any Holder has at law or in equity against any Guarantor by virtue hereof, upon the failure of the Issuer to pay any of the Guaranteed Obligations when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, each Guarantor hereby promises to and shall, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee on behalf of the Holders an amount equal to the sum of (i) the unpaid amount of such Guaranteed Obligations then due and owing and (ii) accrued and unpaid interest on such Guaranteed Obligations then due and owing (but only to the extent not prohibited by law) (including interest accruing after the filing of any petition in bankruptcy or the commencement of any insolvency, reorganization or like proceeding relating to the Issuer or any Guarantor whether or not a claim for post-filing or post-petition interest is allowed in such proceeding).

Each Guarantor further agrees that, as between such Guarantor, on the one hand, and the Holders, on the other hand, (x) the maturity of the Guaranteed Obligations guaranteed hereby may be accelerated as provided in this Indenture for the purposes of its Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Guaranteed Obligations guaranteed hereby and (y) in the event of any such declaration of acceleration of such Guaranteed Obligations, such Guaranteed Obligations (whether or not due and payable) shall forthwith become due and payable by the Guarantor for the purposes of this Guarantee.

Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys’ fees and expenses) incurred by the Trustee or the Holders in enforcing any rights under this Section.

 

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SECTION 10.2. Limitation on Liability, Termination, Release and Discharge.

(a) Any term or provision of this Indenture to the contrary notwithstanding, the obligations of each Guarantor hereunder shall be limited to the maximum amount as shall, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, without limitation, any guarantees under the Senior Secured Credit Facilities) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Note Guarantee or pursuant to its contribution obligations under this Indenture, result in the obligations of such Guarantor under its Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federal or state law and not otherwise being void or voidable under any similar laws affecting the rights of creditors generally.

(b) Any Note Guarantee by a Guarantor shall be automatically and unconditionally released and discharged upon:

(1) (a) any sale, exchange, disposition or transfer (by merger or otherwise) of (i) the Capital Stock of a Guarantor (including any sale, exchange, disposition or transfer), after which the applicable Guarantor is no longer a Restricted Subsidiary or (ii) all or substantially all of the assets of such Guarantor, which sale, exchange or transfer is made in compliance with the applicable provisions of this Indenture;

(b) the release or discharge of the guarantee by, or direct obligation of, such Guarantor with respect to the Senior Secured Credit Facilities or the Guarantee which resulted in the creation of such Note Guarantee, except a discharge or release by or as a result of payment under such guarantee or direct obligation;

(c) the designation of any Guarantor as an Unrestricted Subsidiary in compliance with the applicable provisions of this Indenture;

(d) exercise of Legal Defeasance or Covenant Defeasance by the Issuer as described under Section 8.1 or Section 8.2 or the Issuer’s obligations under this Indenture being discharged in accordance with ARTICLE XI;

(e) the merger, consolidation or amalgamation of any Guarantor with and into the Issuer, another Guarantor or a Person that will become a Guarantor upon the consummation of such merger, consolidation or amalgamation, or upon the liquidation of such Guarantor following the transfer of all of its assets to the Issuer or another Guarantor; or

(f) as described in ARTICLE IX; and

(2) such Guarantor delivering to the Trustee an Officers’ Certificate and an Opinion of Counsel, subject to customary assumptions and exclusions, stating that all conditions precedent provided for in this Indenture relating to such transaction have been complied with. Upon request, the Trustee shall execute an instrument evidencing the release of such Guarantor.

 

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SECTION 10.3. Right of Contribution. Each Guarantor hereby agrees that any Guarantor that makes a payment on the obligations under the Note Guarantees shall be entitled, upon payment in full of all obligations under the Guarantees, to a contribution from each other Guarantor in an amount equal to such other Guarantors’ pro rata portion of such payment based on the respective net assets of all the Guarantors at the time of such payment determined in accordance with GAAP. The provisions of this Section 10.3 shall in no respect limit the obligations and liabilities of each Guarantor to the Trustee and the Holders and each Guarantor shall remain liable to the Trustee and the Holders for the full amount guaranteed by such Guarantor hereunder.

SECTION 10.4. No Subrogation. Notwithstanding any payment or payments made by each Guarantor hereunder, no Guarantor shall be entitled to be subrogated to any of the rights of the Trustee or any Holder against the Issuer or any other Guarantor or any guarantee or right of offset held by the Trustee or any Holder for the payment of the Guaranteed Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Issuer or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Trustee and the Holders by the Issuer on account of the Guaranteed Obligations are paid in full. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Guaranteed Obligations shall not have been paid in full, such amount shall be held by such Guarantor in trust for the Trustee and the Holders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Trustee in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Trustee, if required), to be applied against the Guaranteed Obligations.

SECTION 10.5. Release of Parent Company Guarantee. Any guarantee of the Notes provided by a direct or indirect parent company of the Issuer may be released at any time in the Issuer’s sole discretion.

ARTICLE XI

SATISFACTION AND DISCHARGE

SECTION 11.1. Satisfaction and Discharge.

This Indenture shall be discharged and shall cease to be of further effect as to all Notes, when:

(1) either: (A) all Notes theretofore authenticated and delivered (except lost stolen or destroyed notes which have been replaced or paid and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust) have been delivered to the Trustee for cancellation, or (B) all such Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable by making a notice of redemption or otherwise or (ii) will become

 

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due and payable within one year or are to be called for redemption within one year (a “Discharge”) under irrevocable arrangements for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Issuer, and the Issuer or any Guarantor has irrevocably deposited or caused to be deposited with the Trustee funds in an amount sufficient to pay and discharge the entire indebtedness on the Notes, not theretofore delivered to the Trustee for cancellation, for principal of, premium, if any, and interest to the Stated Maturity or Redemption Date;

(2) the Issuer has paid or caused to be paid all other sums then due and payable under this Indenture by the Issuer;

(3) the Issuer has delivered irrevocable instructions to the Trustee under this Indenture to apply the deposited money toward the payment of the Notes at maturity or on the redemption date, as the case may be; and

(4) the Issuer has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, subject to customary assumptions and exclusions, to the effect that all conditions precedent set forth in clauses (1)-(3) have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, if money has been deposited with the Trustee pursuant to Section 11.1(1), the provisions of Section 12.1 and Section 8.6 hereof shall survive.

SECTION 11.2. Application of Trust Money.

Subject to the provisions of Section 8.6 hereof, all money deposited with the Trustee pursuant to Section 11.1 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent (including the Issuer acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee; but such money need not be segregated from other funds except to the extent required by law.

If the Trustee or Paying Agent is unable to apply any money or Government Securities in accordance with Section 11.1 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer’s and any Guarantors’ obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to Section 11.1 hereof; provided that if the Issuer has made any payment of principal of, premium, if any, or interest on, any Notes because of the reinstatement of its obligations, the Issuer shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or Government Securities held by the Trustee or Paying Agent.

 

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ARTICLE XII

MISCELLANEOUS

SECTION 12.1. Notices. Any notice or communication shall be in writing and delivered in person, sent by facsimile, sent by electronic mail, delivered by commercial courier service or mailed by first-class mail, postage prepaid, addressed as follows:

if to the Issuer or the Guarantors:

CPG Merger Sub LLC

c/o CPG International LLC

888 North Keyser Ave.

Scranton, PA 18504

Attention: Chief Financial Officer

Facsimile: 570-558-8201

with a copy to:

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004

Attention: Neal McKnight

Facsimile: (212) 291-9097

E-mail: mcknightn@sullcrom.com

if to the Trustee, at its corporate trust office, which

corporate trust office for purposes of this Indenture is at

the date hereof located at:

Wilmington Trust, National Association

1100 North Market Street

Wilmington, DE 19890

Attention: Corporate Capital Markets – CPG International

Facsimile: 302-636-4145

Email: tmorris@wilmingtontrust.com

The Issuer or the Trustee by written notice to the other may designate additional or different addresses for subsequent notices or communications.

Any notice or communication to the Issuer or the Guarantors shall be deemed to have been given or made as of the date so delivered if personally delivered; when answered back, if telexed; when receipt is acknowledged, if telecopied; on the first date on which publication is made, when given by publication; and five calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Any notice or communication to the Trustee shall be deemed delivered upon receipt.

 

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The Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture sent by unsecured e-mail, pdf, facsimile transmission or other similar unsecured electronic methods, provided, however, that the Trustee shall have received an incumbency certificate listing persons designated to give such instructions or directions and containing specimen signatures of such designated persons, which such incumbency certificate shall be amended and replaced whenever a person is to be added or deleted from the listing. If the Issuer elects to give the Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Trustee in its discretion elects to act upon such instructions, the Trustee’s understanding of such instructions shall be deemed controlling. The Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Trustee’s reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Issuer agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Trustee, including without limitation the risk of the Trustee acting on unauthorized instructions, and the risk or interception and misuse by third parties.

Any notice or communication mailed to a Holder shall be mailed to the Holder at the Holder’s address as it appears in the Notes Register and shall be sufficiently given if so mailed within the time prescribed.

Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it, except that notices to the Trustee shall be effective only upon receipt.

In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.

Notwithstanding any other provision of this Indenture or any Note, where this Indenture or any Note provides for notice of any event (including any notice of redemption) to a Holder of a Global Note (whether by mail or otherwise), such notice shall be sufficiently given if given to DTC for such Note (or its designee), pursuant to the customary procedures of DTC.

SECTION 12.2. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuer to the Trustee to take or refrain from taking any action under this Indenture, the Issuer shall furnish to the Trustee:

(1) an Officers’ Certificate in form reasonably satisfactory to the Trustee stating that, in the opinion of the signer, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2) an Opinion of Counsel, subject to customary assumptions and exclusions, in form reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

 

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SECTION 12.3. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include:

(1) a statement that the individual making such certificate or opinion has read such covenant or condition;

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3) a statement that, in the opinion of such individual (not in its individual capacity), he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement as to whether or not, in the opinion of such individual (not in its individual capacity), such covenant or condition has been complied with.

In giving such Opinion of Counsel, counsel may rely as to factual matters on an Officers’ Certificate or on certificates of public officials.

SECTION 12.4. When Notes Disregarded. In determining whether the Holders of the required aggregate principal amount of Notes have concurred in any direction, waiver or consent, Notes owned by the Issuer, any Guarantor or any Affiliate of them shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Trust Officer of the Trustee actually knows are so owned shall be so disregarded. Also, subject to the foregoing, only Notes outstanding at the time shall be considered in any such determination.

SECTION 12.5. Rules by Trustee, Paying Agent and Registrar. The Trustee may make reasonable rules for action by, or at meetings of, Holders. The Registrar and the Paying Agent may make reasonable rules for their functions.

SECTION 12.6. Business Days. If a payment date (including an Interest Payment Date) is not a Business Day, payment shall be made on the next succeeding day that is a Business Day, and no interest shall accrue for the intervening period. If a regular record date is a Business Day, the record date shall not be affected.

SECTION 12.7. GOVERNING LAW. THIS INDENTURE, THE NOTES AND THE NOTE GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE OR INSTRUMENTS ENTERED INTO AND, IN EACH CASE, PERFORMED IN SAID STATE. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE COURTS OF, AND THE FEDERAL COURTS LOCATED IN, THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE (INCLUDING THE GUARANTEES SET FORTH HEREIN) OR THE NOTES.

 

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SECTION 12.8. USA Patriot Act. The parties hereto acknowledge that in accordance with Section 326 of the USA Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account. The parties to this Indenture agree that they shall provide the Trustee with such information as they may request in order to satisfy the requirements of the USA Patriot Act.

SECTION 12.9. No Recourse Against Others. An incorporator, director, officer, employee or stockholder of the Issuer or any Guarantor or any of their parent companies, solely by reason of this status, shall not have any liability for any obligations of the Issuer or any Guarantor under the Notes or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are a part of the consideration for the issuance of the Notes.

SECTION 12.10. Successors. All agreements of the Issuer and each Guarantor in this Indenture and the Notes shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successors.

SECTION 12.11. Multiple Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture.

SECTION 12.12. Table of Contents; Headings. The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof.

SECTION 12.13. WAIVERS OF JURY TRIAL. THE ISSUER, THE GUARANTORS AND THE TRUSTEE HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS INDENTURE, THE NOTES OR THE GUARANTEES AND FOR ANY COUNTERCLAIM THEREIN.

SECTION 12.14. Force Majeure. In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services, it being understood that the Trustee shall use reasonable best efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

 

 

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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed all as of the date and year first written above.

 

CPG MERGER SUB LLC
By:   /s/ Dan Lukas
  Name:   Dan Lukas
  Title:   Authorized Person

[Signature Page to the Indenture]


WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee
By:   /s/ W. Thomas Morris, II
  Name:   W. Thomas Morris, II
  Title:   Vice President

[Signature Page to the Indenture]


EXHIBIT A: Form of Note

[FORM OF FACE OF NOTE]

[Applicable Restricted Notes Legend]

[Depository Legend, if applicable]

[OID Legend, if applicable]

[Temporary Regulation S Legend, if applicable]

 

No. [        ]   

Principal Amount $[        ] [as

revised by the Schedule of Increases and
Decreases in Global Note attached hereto]1

CUSIP NO.                                                             2

CPG MERGER SUB LLC

8.000% Senior Notes due 2021

CPG Merger Sub LLC, a Delaware limited liability company (the “Issuer”), promises to pay to [Cede & Co.]1, or its registered assigns, the principal sum of                 Dollars, [as revised by the Schedule of Increases and Decreases in the Global Note attached hereto]1, on October 1, 2021.

Interest Payment Dates: April 1 and October 1, commencing on April 1, 2014

Record Dates: March 15 and September 15

Additional provisions of this Note are set forth on the other side of this Note.

 

 

1 

Insert in Global Notes only

2 

144A – 12626C AA0

Reg S – U22039 AA6

IAI – 12626C AB8


IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed.

 

CPG Merger Sub LLC
By:    
  Name:
  Title:

 

A-2


TRUSTEE’S CERTIFICATE OF AUTHENTICATION

Wilmington Trust, National Association, as Trustee,

certifies that this is one of the

Notes referred to in the Indenture.

 

By:   

 

   Date: _______________
   Authorized Officer   

 

A-3


[FORM OF REVERSE SIDE OF NOTE]

CPG MERGER SUB LLC

8.000% Senior Notes due 2021

Capitalized terms used herein and not defined herein have the meanings ascribed thereto in the Indenture.

1. Interest

CPG Merger Sub LLC, a Delaware limited liability company (such limited liability company, and its successors and assigns under the Indenture hereinafter referred to, being herein called the “Issuer”), promises to pay interest on the principal amount of this Note at the rate of 8.000% per annum, which shall accrue from the most recent date to which interest has been paid or, if no interest has been paid, from September 30, 2013. The Issuer shall pay interest on overdue principal at the rate specified herein, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. Interest on the Notes shall be computed on the basis of a 360-day year comprised of twelve 30-day months.

The Issuer shall make each interest payment in cash semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2014, or if any such day is not a Business Day, on the next succeeding Business Day (each, an “Interest Payment Date”) to Holders of record of Notes on the immediately preceding March 15 and September 15.

2. Method of Payment

By no later than 11:00 a.m. (New York City time) on the date on which any principal of, premium, if any, or interest on any Note is due and payable, the Issuer shall deposit with the Paying Agent a sum sufficient in immediately available funds to pay such principal, premium or interest when due. Interest on any Note which is payable, and is timely paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business on the preceding March 15 and September 15 at the office or agency of the Issuer maintained for such purpose pursuant to Section 2.3 of the Indenture. The principal of (and premium, if any) and interest on the Notes shall be payable at the office or agency of Paying Agent or Registrar designated by the Issuer maintained for such purpose in the United States or at such other office or agency of the Issuer as may be maintained for such purpose pursuant to Section 2.3 of the Indenture; provided, however, that, at the option of the Issuer, the principal of (and premium, if any) and interest may be paid by (i) check mailed to addresses of the Persons entitled thereto as such addresses shall appear on the Note Register or (ii) wire transfer to an account located in the United States maintained by the payee, subject to the last sentence of this paragraph. Payments in respect of Notes represented by a Global Note (including principal, premium, if any, and interest) shall be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company or any successor depository.

 

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3. Paying Agent and Registrar

The Issuer initially appoints Wilmington Trust, National Association (the “Trustee”), as Registrar and Paying Agent for the Notes. The Issuer may change any Registrar or Paying Agent without prior notice to the Holders. The Issuer or any Guarantor may act as Paying Agent, Registrar or transfer agent.

4. Indenture

The Issuer issued the Notes under an Indenture dated as of September 30, 2013 (as it may be amended or supplemented from time to time in accordance with the terms thereof, the “Indenture”), among CPG Merger Sub LLC, the guarantors named therein and the Trustee. The terms of the Notes include those stated in the Indenture. The Notes are subject to all terms and provisions of the Indenture, and Holders are referred to the Indenture for a statement of those terms. To the extent any provision of this Note conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling.

The Notes are senior unsecured obligations of the Issuer. The aggregate principal amount of Notes that may be authenticated and delivered under the Indenture is unlimited. This Note is one of the 8.000% Senior Notes due 2021 referred to in the Indenture. The Notes include (i) $315,000,000 principal amount of the Issuer’s 8.000% Senior Notes due 2021 issued under the Indenture (the “Initial Notes”) and (ii) if and when issued, additional 8.000% Senior Notes due 2021 of the Issuer that may be issued from time to time in accordance with the Indenture subsequent to September 30, 2013 (the “Additional Notes”) as provided in Section 2.1(a) of the Indenture. The Initial Notes and the Additional Notes shall be considered collectively as a single class for all purposes of the Indenture and any security documents. The Indenture imposes certain limitations on the incurrence of indebtedness and issuance of disqualified stock, the making of restricted payments, the incurrence of certain liens, dividend and other payment restrictions affecting restricted subsidiaries, the sale of assets and subsidiary stock, the entering into of agreements that restrict distribution from restricted subsidiaries and the consummation of mergers and consolidations. The Indenture also imposes requirements with respect to the provision of financial information and the provision of guarantees of the Notes by certain subsidiaries.

5. Redemption

At any time prior to October 1, 2016, the Issuer may, on one or more occasions, redeem all or any portion of the Notes, upon notice as provided in Section 5.3 of the Indenture, at a redemption price equal to 100% of the principal amount of Notes redeemed, plus the Applicable Premium as of the Redemption Date (the “Redemption Date”), plus accrued and unpaid interest, to, but excluding, the Redemption Date.

Prior to October 1, 2016, the Issuer may, at its option, upon notice as described under Section 5.3 of the Indenture, with the net cash proceeds of one or more Equity Offerings, redeem up to 40% of the aggregate principal amount of the Notes originally issued under the Indenture (including any Additional Notes issued after the Issue Date) at a redemption price equal to 108.000% of the principal amount thereof, plus accrued and unpaid interest, to, but

 

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excluding the redemption date; provided that (a) at least 50% of the aggregate principal amount of Notes originally issued under the Indenture (including any Additional Notes issued after the Issue Date) remains outstanding immediately after the occurrence of any such redemption (excluding Notes held by the Issuer or its Subsidiaries) and (b) any such redemption occurs within 90 days following the closing of any such Equity Offering. The Trustee shall select the Notes to be purchased in the manner described under Sections 5.1 through 5.6 of the Indenture.

Except as set forth above, the Notes shall not be redeemable at the Issuer’s option prior to October 1, 2016.

The Issuer may redeem the Notes, in whole or in part, at any time on or after October 1, 2016 upon notice as described under Section 5.3 of the Indenture, at the following redemption prices (expressed as percentages of principal amount of the Notes to be redeemed) set forth below, plus accrued and unpaid interest, to, but excluding the Redemption Date (subject to the right of Holders on the relevant regular record date to receive interest due on an Interest Payment Date that is prior to the Redemption Date), if redeemed during the 12-month period beginning on October 1 of the years indicated below:

 

Period

   Percentage  

2016

     106.000

2017

     104.000

2018

     102.000

2019 and thereafter

     100.000

Any redemption pursuant to this paragraph 6 shall be made pursuant to the provisions of Sections 5.1 through 5.6 of the Indenture.

The Issuer is not required to make mandatory redemption or sinking fund payments with respect to the Notes.

Any redemption or notice of redemption may, at the Issuer’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of an Equity Offering, other offering or other corporate transaction or event. Notice of any redemption in respect of an Equity Offering may be given prior to, and conditional on, the completion thereof.

6. Repurchase Provisions

If a Change of Control occurs, unless the Issuer has prior to or concurrently with the time the Issuer is required to make a Change of Control Offer, delivered electronically or mailed a redemption notice with respect to all the outstanding Notes as described in Section 5.7 of the Indenture, each Holder shall have the right to require the Issuer to repurchase from each Holder all or any part (equal to $1,000 or an integral multiple of $1,000 in excess thereof) of such Holder’s Notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, to, but excluding, the date of purchase, subject to the right of Holders on the relevant record date to receive interest due on the Interest Payment Date as provided in, and subject to the terms of, the Indenture. Such repurchase shall be made subject to the applicable procedures of DTC.

 

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7. Denominations; Transfer; Exchange

The Notes shall be issuable only in fully registered form, without coupons, and only in minimum denominations of principal amount of $1,000 and any integral multiple of $1,000 in excess thereof. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay a sum sufficient to cover any tax and fees required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Note (A) for a period beginning (1) 15 days before the mailing of a notice of an offer to repurchase or redeem Notes and ending at the close of business on the day of such mailing or (2) 15 days before an Interest Payment Date and ending on such Interest Payment Date or (B) called for redemption, except the unredeemed portion of any Note being redeemed in part.

8. Persons Deemed Owners

The registered Holder of this Note may be treated as the owner of it for all purposes.

9. Unclaimed Money

If money for the payment of principal, premium, if any, or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Issuer at its request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Issuer for payment as general creditors unless an abandoned property law designates another person and not to the Trustee for payment.

10. Defeasance

Subject to certain exceptions and conditions set forth in the Indenture, the Issuer at any time may terminate some or all of its obligations under the Notes and the Indenture if the Issuer deposits with the Trustee money or Government Securities for the payment of principal, premium, if any, and interest on the Notes to redemption or maturity, as the case may be.

11. Amendment, Supplement, Waiver

The provisions governing amendment, supplement and waiver of any provision of the Indenture, the Notes or the Note Guarantees are set forth in Article IX of the Indenture.

12. Defaults and Remedies

The Events of Default relating to the Notes are defined in Section 6.1 of the Indenture.

 

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13. Trustee Dealings with the Issuer

Subject to certain limitations set forth in the Indenture, The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Issuer, Guarantors or their Affiliates with the same rights it would have if it were not Trustee.

14. No Recourse Against Others

An incorporator, director, officer, employee or stockholder of the Issuer or any Guarantor or any of their parent companies, solely by reason of this status, shall not have any liability for any obligations of the Issuer or any Guarantor under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder waives and releases all such liability. The waiver and release are a part of the consideration for the issuance of the Notes.

15. Authentication

This Note shall not be valid until an authorized officer of the Trustee (or an authenticating agent acting on its behalf) manually signs the certificate of authentication on the other side of this Note.

16. Abbreviations

Customary abbreviations may be used in the name of a Holder or an assignee, such as TEN COM (= tenants in common), TEN ENT (= tenants by the entirety), JT TEN (= joint tenants with rights of survivorship and not as tenants in common), CUST (= custodian) and U/G/M/A (= Uniform Gift to Minors Act).

17. CUSIP, Common Code and ISIN Numbers

The Issuer has caused CUSIP, Common Code and ISIN numbers, if applicable, to be printed on the Notes and has directed the Trustee to use CUSIP, Common Code and ISIN numbers, if applicable, in notices of redemption or purchase as a convenience to Holders. No representation is made as to the accuracy of such numbers either as printed on the Notes or as contained in any notice of redemption or purchase and reliance may be placed only on the other identification numbers placed thereon.

18. Governing Law

This Note shall be governed by, and construed in accordance with, the laws of the State of New York.

 

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The Issuer shall furnish to any Holder upon written request and without charge to the Holder a copy of the Indenture. Requests may be made to:

CPG International LLC

888 North Keyser Ave.

Scranton, PA 18504

Attention: Chief Financial Officer

Facsimile 570-558-8201

with a copy to:

Sullivan & Cromwell LLP

125 Broad Street

New York, New York 10004

Attention: Neal McKnight

Facsimile: (212) 291-9097

E-mail: mcknightn@sullcrom.com

 

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ASSIGNMENT FORM

To assign this Note, fill in the form below:

I or we assign and transfer this Note to:

 

 

(Print or type assignee’s name, address and zip code)

 

 

(Insert assignee’s social security or tax I.D. No.)

and irrevocably appoint                 agent to transfer this Note on the books of the Issuer. The agent may substitute another to act for him.

 

 

 

Date:  

 

      Your Signature:  

 

 

Signature Guarantee:  

 

(Signature must be guaranteed)

 

 

Sign exactly as your name appears on the other side of this Note.

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to SEC Rule 17Ad-15.

The undersigned hereby certifies that it ☐ is / ☐ is not an Affiliate of the Issuer and that, to its knowledge, the proposed transferee ☐ is / ☐ is not an Affiliate of the Issuer.

In connection with any transfer or exchange of any of the Notes evidenced by this certificate occurring prior to the date that is one year after the later of the date of original issuance of such Notes and the last date, if any, on which such Notes were owned by the Issuer or any Affiliate of the Issuer, the undersigned confirms that such Notes are being:

CHECK ONE BOX BELOW:

 

(1)      acquired for the undersigned’s own account, without transfer; or
(2)      transferred to the Issuer; or
(3)      transferred pursuant to and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”); or
(4)      transferred pursuant to an effective registration statement under the Securities Act; or

 

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(5)      transferred pursuant to and in compliance with Regulation S under the Securities Act; or
(6)      transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act), that has furnished to the Trustee a signed letter containing certain representations and agreements (the form of which letter appears as Section 2.8 of the Indenture); or
(7)      transferred pursuant to another available exemption from the registration requirements of the Securities Act of 1933, as amended.

Unless one of the boxes is checked, the Trustee shall refuse to register any of the Notes evidenced by this certificate in the name of any person other than the registered Holder thereof; provided, however, that if box (5), (6) or (7) is checked, the Issuer may require, prior to registering any such transfer of the Notes, in its sole discretion, such legal opinions, certifications and other information as the Issuer may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, as amended, such as the exemption provided by Rule 144 under such Act.

 

                                                                                                    
      Signature
Signature Guarantee:      
                                                                                                                                                 
(Signature must be guaranteed)       Signature

 

 

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to SEC Rule 17Ad-15.

TO BE COMPLETED BY PURCHASER IF BOX (1) OR (3) ABOVE IS CHECKED.

The undersigned represents and warrants that it is purchasing this Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Issuer as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A.

 

   
Date:  

 

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[TO BE ATTACHED TO GLOBAL NOTES]

SCHEDULE OF INCREASES OR DECREASES IN GLOBAL NOTES

The following increases or decreases in this Global Note have been made:

 

Date of Exchange

  

Amount of decrease in
Principal Amount of this
Global Note

  

Amount of increase in
Principal Amount of this
Global Note

  

Principal Amount of this
Global Note following
such decrease or increase

  

Signature of authorized
signatory of Trustee or Notes
Custodian

           

 

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OPTION OF HOLDER TO ELECT PURCHASE

If you elect to have this Note purchased by the Issuer pursuant to Section 3.5 or 3.8 of the Indenture, check either box:

 

  
3.5    3.8

If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 3.5 or 3.8 of the Indenture, state the amount in principal amount (must be in denominations of $1,000 or an integral multiple of $1,000 in excess thereof): $                  and specify the denomination or denominations (which shall not be less than the minimum authorized denomination) of the Notes to be issued to the Holder for the portion of the within Note not being repurchased (in the absence of any such specification, one such Note shall be issued for the portion not being repurchased): ________________.

Date:                      Your Signature                                                                                                                                                    

                                                             (Sign exactly as your name appears on the other side of the Note)

Signature Guarantee:                                                                                                                                                                         

                                                                 (Signature must be guaranteed)

The signature(s) should be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to SEC Rule 17Ad-15.

 

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EXHIBIT B: Form of Indenture Supplement to Add Future Guarantors

This Supplemental Indenture is entered into as of [                ], 20[    ] (this “Supplemental Indenture”), by and among [NAME OF FUTURE GUARANTOR] (the “New Guarantor”), CPG International LLC (the “Issuer”), the guarantors party thereto from time to time and Wilmington Trust, National Association, as Trustee.

W I T N E S S E T H:

WHEREAS, CPG Merger Sub LLC, as the issuer and the Trustee have heretofore executed and delivered an Indenture dated as of September 30, 2013, as supplemented by a supplemental indenture dated as of September 30, 2013, among the guarantors party thereto and the Trustee (as supplemented, waived or otherwise modified, the “Indenture”), providing for the issuance of an aggregate principal amount of $315.0 million of 8.000% Senior Notes due 2021 of the Issuer (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the New Guarantor shall execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all of the Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “Guarantee”);

WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture; and

WHEREAS, all things have been done to make this Supplemental Indenture a legal, valid and binding agreement.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.

ARTICLE II

REPRESENTATIONS; AGREEMENT TO BE BOUND; GUARANTEE

SECTION 2.1 Representations. The New Guarantor represents and warrants to the Trustee as follows:

(i) It is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

 

B-1


(ii) The execution, delivery and performance by it of this Supplemental Indenture have been authorized and approved by all necessary [corporate], [limited liability company] [partnership] action on its part.

SECTION 2.2 Agreement to be Bound. The New Guarantor hereby becomes a party to the Indenture as a Guarantor and as such shall have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. The New Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

SECTION 2.3 Guarantee. The New Guarantor agrees, on a joint and several basis with all the existing Guarantors, to fully, unconditionally and irrevocably Guarantee to each Holder of the Notes and the Trustee the Guaranteed Obligations pursuant to Article X of the Indenture on a senior unsecured basis.

ARTICLE III

MISCELLANEOUS

SECTION 3.1 Notices. All notices and other communications to the New Guarantor shall be given as provided in the Indenture to the New Guarantor, at its address set forth below, with a copy to the Issuer as provided in the Indenture for notices to the Issuer.

SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained.

SECTION 3.3 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE OR INSTRUMENTS ENTERED INTO AND, IN EACH CASE, PERFORMED IN SAID STATE. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE COURTS OF, AND THE FEDERAL COURTS LOCATED IN, THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE (INCLUDING THE GUARANTEES SET FORTH HEREIN) OR THE NOTES.

SECTION 3.4 Severability Clause. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

 

B-2


SECTION 3.5 Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture or with respect to the recitals contained herein, all of which recitals are made solely by the other parties hereto.

SECTION 3.6 Counterparts. The parties hereto may sign one or more copies of this Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement.

SECTION 3.7 Headings. The headings of the Articles and the sections in this Supplemental Indenture are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

[NEW GUARANTOR],

as a Guarantor

By:    
  Name:
  Title:
CPG International LLC, as Issuer
By:    
  Name:
  Title:
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee
By:    
  Name:
  Title:

 

B-3

Exhibit 4.5

This Supplemental Indenture is entered into as of September 30, 2013 (this “Supplemental Indenture”), by and among the undersigned (each, a “New Guarantor”), CPG International LLC (the “Issuer”), the guarantors party thereto from time to time and Wilmington Trust, National Association, as Trustee.

W I T N E S S E T H:

WHEREAS, CPG Merger Sub LLC, as the issuer and the Trustee have heretofore executed and delivered an Indenture dated as of September 30, 2013, as supplemented by a supplemental indenture dated as of September 30, 2013, among the guarantors party thereto and the Trustee (as supplemented, waived or otherwise modified, the “Indenture”), providing for the issuance of an aggregate principal amount of $315.0 million of 8.000% Senior Notes due 2021 of the Issuer (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances each New Guarantor shall execute and deliver to the Trustee a supplemental indenture pursuant to which such New Guarantor shall unconditionally guarantee all of the Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “Guarantee”);

WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture; and

WHEREAS, all things have been done to make this Supplemental Indenture a legal, valid and binding agreement.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.

ARTICLE II

REPRESENTATIONS; AGREEMENT TO BE BOUND; GUARANTEE

SECTION 2.1 Representations. Each New Guarantor represents and warrants to the Trustee as follows:

(i) It is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

 


(ii) The execution, delivery and performance by it of this Supplemental Indenture have been authorized and approved by all necessary corporate or limited liability company (as applicable) action on its part.

SECTION 2.2 Agreement to be Bound. Each New Guarantor hereby becomes a party to the Indenture as a Guarantor and as such shall have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. Each New Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

SECTION 2.3 Guarantee. Each New Guarantor agrees, on a joint and several basis with all the existing Guarantors, to fully, unconditionally and irrevocably Guarantee to each Holder of the Notes and the Trustee the Guaranteed Obligations pursuant to Article X of the Indenture on a senior unsecured basis.

ARTICLE III

MISCELLANEOUS

SECTION 3.1 Notices. All notices and other communications to the New Guarantor shall be given as provided in the Indenture to the New Guarantor, at its address set forth below, with a copy to the Issuer as provided in the Indenture for notices to the Issuer.

SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained.

SECTION 3.3 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE OR INSTRUMENTS ENTERED INTO AND, IN EACH CASE, PERFORMED IN SAID STATE. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE COURTS OF, AND THE FEDERAL COURTS LOCATED IN, THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE (INCLUDING THE GUARANTEES SET FORTH HEREIN) OR THE NOTES.

SECTION 3.4 Severability Clause. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

SECTION 3.5 Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture or with respect to the recitals contained herein, all of which recitals are made solely by the other parties hereto.

 


SECTION 3.6 Counterparts. The parties hereto may sign one or more copies of this Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement.

SECTION 3.7 Headings. The headings of the Articles and the sections in this Supplemental Indenture are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

 


IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

GUARANTORS
CPG INTERNATIONAL INC.
  By:  

/s/ Eric K. Jungbluth

    Name:   Eric K. Jungbluth
    Title:   President and Chief Executive Officer
VYCOM CORP.
  By:  

/s/ Eric K. Jungbluth

    Name:   Eric K. Jungbluth
    Title:   President and Chief Executive Officer
SCRANTON PRODUCTS INC.
  By:  

/s/ Eric K. Jungbluth

    Name:   Eric K. Jungbluth
    Title:   Chief Executive Officer
SANATEC SUB I CORPORATON
  By:  

/s/ Eric K. Jungbluth

    Name:   Eric K. Jungbluth
    Title:   President and Chief Executive Officer
SANTANA PRODUCTS INC.
  By:  

/s/ Eric K. Jungbluth

    Name:   Eric K. Jungbluth
    Title:   President

 

[Signature page to Supplemental Indenture]


AZEK BUILDING PRODUCTS, INC.
  By:  

/s/ Eric K. Jungbluth

    Name:   Eric K. Jungbluth
    Title:   Chief Executive Officer
TIMBERTECH LIMITED
  By:  

/s/ Eric K. Jungbluth

    Name:   Eric K. Jungbluth
    Title:   Chief Executive Officer
PROCELL DECKING INC.
  By:  

/s/ Eric K. Jungbluth

    Name:   Eric K. Jungbluth
    Title:   President and Chief Executive Officer
CPG SUB I CORPORATION
  By:  

/s/ Eric K. Jungbluth

    Name:   Eric K. Jungbluth
    Title:   President and Chief Executive Officer

 

[Signature page to Supplemental Indenture]


VAST ENTERPRISES, LLC.
  By:  

/s/ Dan Lukas

    Name:   Dan Lukas
    Title:   Authorized Person

 

[Signature page to Supplemental Indenture]


WILMINGTON TRUST, NATIONAL
ASSOCIATION, as Trustee
  By:  

/s/ W. Thomas Morris, II

    Name:   W. Thomas Morris, II
    Title:   Vice President

 

[Signature page to Supplemental Indenture]

Exhibit 4.6

SECOND SUPPLEMENTAL INDENTURE

This Second Supplemental Indenture is entered into as of December 19, 2014 (this “Supplemental Indenture”), by and among CPG Building Products LLC (the “New Guarantor”), CPG International LLC (the “Issuer”) and Wilmington Trust, National Association, as Trustee (the “Trustee”).

W I T N E S S E T H:

WHEREAS, CPG Merger Sub LLC, as the issuer and the Trustee have heretofore executed and delivered an Indenture, dated as of September 30, 2013, as supplemented by a supplemental indenture, dated as of September 30, 2013, among the guarantors party thereto and the Trustee (as supplemented, waived or otherwise modified, the “Indenture”), providing for the issuance of an aggregate principal amount of $315.0 million of 8.000% Senior Notes due 2021 of the Issuer (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the New Guarantor shall execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all of the Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “Guarantee”);

WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture; and

WHEREAS, all things have been done to make this Supplemental Indenture a legal, valid and binding agreement.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.

ARTICLE II

REPRESENTATIONS; AGREEMENT TO BE BOUND; GUARANTEE

SECTION 2.1 Representations. The New Guarantor represents and warrants to the Trustee as follows:

(i)    It is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.


(ii)    The execution, delivery and performance by it of this Supplemental Indenture have been authorized and approved by all necessary limited liability company action on its part.

SECTION 2.2 Agreement to be Bound. The New Guarantor hereby becomes a party to the Indenture as a Guarantor and as such shall have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. The New Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

SECTION 2.3 Guarantee. The New Guarantor agrees, on a joint and several basis with all the existing Guarantors, to fully, unconditionally and irrevocably Guarantee to each Holder of the Notes and the Trustee the Guaranteed Obligations pursuant to Article X of the Indenture on a senior unsecured basis.

ARTICLE III

MISCELLANEOUS

SECTION 3.1 Notices. All notices and other communications to the New Guarantor shall be given as provided in the Indenture to the New Guarantor, at its address set forth below, with a copy to the Issuer as provided in the Indenture for notices to the Issuer.

SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained.

SECTION 3.3 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE OR INSTRUMENTS ENTERED INTO AND, IN EACH CASE, PERFORMED IN SAID STATE. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE COURTS OF, AND THE FEDERAL COURTS LOCATED IN, THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE (INCLUDING THE GUARANTEES SET FORTH HEREIN) OR THE NOTES.

SECTION 3.4 Severability Clause. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

SECTION 3.5 Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and


confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture or with respect to the recitals contained herein, all of which recitals are made solely by the other parties hereto.

SECTION 3.6 Counterparts. The parties hereto may sign one or more copies of this Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement.

SECTION 3.7 Headings. The headings of the Articles and the sections in this Supplemental Indenture are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

CPG INTERNATIONAL LLC,

as Issuer

By:  

/s/ Brian Cooper

Name:   Brian Cooper
Title:   General Counsel

 

CPG BUILDING PRODUCTS LLC,

as Guarantor

By:  

/s/ Brian Cooper

Name:   Brian Cooper
Title:   General Counsel

 

WILMINGTON TRUST, NATIONAL ASSOCIATION,

as Trustee

By:  

 

Name:  
Title:  

[Signature Page to Second Supplemental Indenture]


IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

CPG INTERNATIONAL LLC,
as Issuer
By:  

 

Name:  
Title:  

 

CPG BUILDING PRODUCTS LLC,
as Guarantor
By:  

 

Name:  
Title:  

 

WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee
By:  

/s/ W. Thomas Morris, II

Name:  

W. Thomas Morris, II

Title:  

Vice President

[Signature Page to Second Supplemental Indenture]

Exhibit 4.7

THIRD SUPPLEMENTAL INDENTURE

This Third Supplemental Indenture is entered into as of February 20, 2018 (this “Supplemental Indenture”), by and among WES, LLC and Ultralox Technology, LLC (each, a “New Guarantor”), CPG International LLC (the “Issuer”) and Wilmington Trust, National Association, as Trustee (the “Trustee”).

W I T N E S S E T H:

WHEREAS, CPG Merger Sub LLC, as the issuer and the Trustee have heretofore executed and delivered an Indenture, dated as of September 30, 2013, as supplemented by a first supplemental indenture, dated as of September 30, 2013, and a second supplemental indenture, dated as of December 19, 2014, among the guarantors party thereto and the Trustee (as supplemented, waived or otherwise modified, the “Indenture”), providing for the issuance of an aggregate principal amount of $315.0 million of 8.000% Senior Notes due 2021 of the Issuer (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances each New Guarantor shall execute and deliver to the Trustee a supplemental indenture pursuant to which each New Guarantor shall unconditionally guarantee all of the Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “Guarantee”);

WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture; and

WHEREAS, all things have been done to make this Supplemental Indenture a legal, valid and binding agreement.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.


ARTICLE II

REPRESENTATIONS; AGREEMENT TO BE BOUND; GUARANTEE

SECTION 2.1 Representations. Each New Guarantor represents and warrants to the Trustee as follows:

(i) It is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

(ii) The execution, delivery and performance by it of this Supplemental Indenture have been authorized and approved by all necessary limited liability company action on its part.

SECTION 2.2 Agreement to be Bound. Each New Guarantor hereby becomes a party to the Indenture as a Guarantor and as such shall have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. Each New Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

SECTION 2.3 Guarantee. Each New Guarantor agrees, on a joint and several basis with all the existing Guarantors, to fully, unconditionally and irrevocably Guarantee to each Holder of the Notes and the Trustee the Guaranteed Obligations pursuant to Article X of the Indenture on a senior unsecured basis.

ARTICLE III

MISCELLANEOUS

SECTION 3.1 Notices. All notices and other communications to each New Guarantor shall be given as provided in the Indenture to each New Guarantor, at its address set forth below, with a copy to the Issuer as provided in the Indenture for notices to the Issuer.

SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained.

SECTION 3.3 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE OR INSTRUMENTS ENTERED INTO AND, IN EACH CASE, PERFORMED IN SAID STATE. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE COURTS OF, AND THE FEDERAL COURTS LOCATED IN, THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE (INCLUDING THE GUARANTEES SET FORTH HEREIN) OR THE NOTES.


SECTION 3.4 Severability Clause. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

SECTION 3.5 Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture or with respect to the recitals contained herein, all of which recitals are made solely by the other parties hereto.

SECTION 3.6 Counterparts. The parties hereto may sign one or more copies of this Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement.

SECTION 3.7 Headings. The headings of the Articles and the sections in this Supplemental Indenture are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

CPG INTERNATIONAL LLC,
as Issuer
By:  

/s/ Brian Cooper

  Name:   Brian Cooper
  Title:   Secretary
WES, LLC,
as New Guarantor
By:  

/s/ Brian Cooper

  Name:   Brian Cooper
  Title:   Secretary
ULTRALOX TECHNOLOGY, LLC,
as New Guarantor
By:  

/s/ Brian Cooper

  Name:   Brian Cooper
  Title:   Secretary
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee  
By:  

 

  Name:  
  Title:  

 

[Signature Page to Third Supplemental Indenture]


IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

CPG INTERNATIONAL LLC,
as Issuer  
By:  

 

  Name:  
  Title:  
WES, LLC,
as New Guarantor
By:  

 

  Name:  
  Title:  
ULTRALOX TECHNOLOGY, LLC,
as New Guarantor
By:  

 

  Name:  
  Title:  
WILMINGTON TRUST, NATIONAL ASSOCIATION,
as Trustee
By:  

/s/ W. Thomas Morris, II

  Name:   W. Thomas Morris, II
  Title:   Vice President

 

[Signature Page to Supplemental Indenture]

Exhibit 4.8

FOURTH SUPPLEMENTAL INDENTURE

This Fourth Supplemental Indenture is entered into as of June 18, 2018 (this “Supplemental Indenture”), by and among Versatex Holdings, LLC, a Delaware limited liability company (“Versatex Holdings”) and Versatex Building Products, LLC, a Pennsylvania limited liability company (“Versatex Building Products” and together with Versatex Holdings, the “New Guarantors”), CPG International LLC (the “Issuer”), the guarantors party thereto from time to time and Wilmington Trust, National Association, as Trustee.

W I T N E S S E T H:

WHEREAS, CPG International LLC, as the issuer and the Trustee have heretofore executed and delivered an Indenture dated as of September 30, 2013, as supplemented by a supplemental indenture dated as of September 30, 2013, among the guarantors party thereto and the Trustee (as supplemented, waived or otherwise modified, the “Indenture”), providing for the issuance of an aggregate principal amount of $315.0 million of 8.000% Senior Notes due 2021 of the Issuer (the “Notes”);

WHEREAS, the Indenture provides that under certain circumstances the New Guarantors shall execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantors shall unconditionally guarantee all of the Issuer’s Obligations under the Notes and the Indenture on the terms and conditions set forth herein and under the Indenture (the “Guarantee”);

WHEREAS, pursuant to Section 9.1 of the Indenture, the Trustee is authorized to execute and deliver this Supplemental Indenture without the consent of the Holders; and

WHEREAS, all things have been done to make this Supplemental Indenture a legal, valid and binding agreement.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Defined Terms. As used in this Supplemental Indenture, terms defined in the Indenture or in the preamble or recital hereto are used herein as therein defined. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.

 

-1-


ARTICLE II

REPRESENTATIONS; AGREEMENT TO BE BOUND; GUARANTEE

SECTION 2.1 Representations. The New Guarantors represent and warrant to the Trustee as follows:

(i) Each New Guarantor is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization.

(ii) The execution, delivery and performance by each New Guarantor of this Supplemental Indenture have been authorized and approved by all necessary limited liability company action on its part.

SECTION 2.2 Agreement to be Bound. Each New Guarantor hereby becomes a party to the Indenture as a Guarantor and as such shall have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. Each New Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

SECTION 2.3 Guarantee. Each New Guarantor agrees, on a joint and several basis with all the existing Guarantors, to fully, unconditionally and irrevocably Guarantee to each Holder of the Notes and the Trustee the Guaranteed Obligations pursuant to Article X of the Indenture on a senior unsecured basis.

ARTICLE III

MISCELLANEOUS

SECTION 3.1 Notices. All notices and other communications to the New Guarantors shall be given as provided in the Indenture to the New Guarantors, at the address set forth below, with a copy to the Issuer as provided in the Indenture for notices to the Issuer.

SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained.

SECTION 3.3 GOVERNING LAW. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE OR INSTRUMENTS ENTERED INTO AND, IN EACH CASE, PERFORMED IN SAID STATE. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE COURTS OF, AND THE FEDERAL COURTS LOCATED IN, THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS SUPPLEMENTAL INDENTURE (INCLUDING THE GUARANTEES SET FORTH HEREIN) OR THE NOTES.

 

-2-


SECTION 3.4 Severability Clause. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

SECTION 3.5 Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of Notes heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of this Supplemental Indenture or with respect to the recitals contained herein, all of which recitals are made solely by the other parties hereto.

SECTION 3.6 Counterparts. The parties hereto may sign one or more copies of this Supplemental Indenture in counterparts, all of which together shall constitute one and the same agreement.

SECTION 3.7 Headings. The headings of the Articles and the sections in this Supplemental Indenture are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

[Signature Pages Follow]

 

-3-


IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

Versatex Holdings, LLC, as a Guarantor

c/o CPG International LLC

5215 Old Orchard Rd, Suite 725

Skokie, IL 60077

Attention: Chris Eppel

By:  

/s/ Jesse Singh

  Name:   Jesse Singh
  Title:   President
Versatex Building Products, LLC, as a Guarantor

c/o CPG International LLC

5215 Old Orchard Rd, Suite 725

Skokie, IL 60077

Attention: Chris Eppel

By:  

/s/ Jesse Singh

  Name:   Jesse Singh
  Title:   President
CPG International LLC, as Issuer
By:  

/s/ Jesse Singh

  Name:   Jesse Singh
  Title:   Chief Executive Officer
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee
By:  

 

  Name:   W. Thomas Morris, II
  Title:   Vice President

[Signature Page to Fourth Supplemental Indenture]


IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

 

Versatex Holdings, LLC, as a Guarantor

c/o CPG International LLC

5215 Old Orchard Rd, Suite 725

Skokie, IL 60077

Attention: Chris Eppel

By:  

 

  Name:   Jesse Singh
  Title:   President
Versatex Building Products, LLC, as a Guarantor

c/o CPG International LLC

5215 Old Orchard Rd, Suite 725

Skokie, IL 60077

Attention: Chris Eppel

By:  

 

  Name:   Jesse Singh
  Title:   President
CPG International LLC, as Issuer
By:  

 

  Name:   Jesse Singh
  Title:   Chief Executive Officer
WILMINGTON TRUST, NATIONAL ASSOCIATION, as Trustee
By:  

/s/ W. Thomas Morris, II

  Name:   W. Thomas Morris, II
  Title:   Vice President

[Signature Page to Fourth Supplemental Indenture]

Exhibit 10.1

$150,000,000

AMENDED AND RESTATED

REVOLVING CREDIT AGREEMENT,

Dated as of March 9, 2017,

among

CPG INTERNATIONAL LLC,

THE LENDERS PARTY HERETO,

BARCLAYS BANK PLC,

BANK OF AMERICA, N.A.

and

JPMORGAN CHASE BANK, N.A.,

as Co-Syndication Agents,

TD BANK, N.A.

and

THE HUNTINGTON NATIONAL BANK,

as Co-Documentation Agents

and

DEUTSCHE BANK AG NEW YORK BRANCH,

as Administrative Agent and Collateral Agent

 

 

DEUTSCHE BANK SECURITIES INC.,

BARCLAYS BANK PLC,

JPMORGAN CHASE BANK, N.A.

and

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

as Bookrunners and Lead Arrangers


TABLE OF CONTENTS

 

     Page  
ARTICLE I

 

Definitions

 

SECTION 1.01. Defined Terms

     1  

SECTION 1.02. Terms Generally

     51  

SECTION 1.03. Accounting Terms; GAAP

     51  

SECTION 1.04. Effectuation of Transactions

     52  

SECTION 1.05. Currencies

     52  

SECTION 1.06. Limited Condition Event

     52  
ARTICLE II

 

The Credits

 

SECTION 2.01. Commitments

     53  

SECTION 2.02. Loans and Borrowings

     55  

SECTION 2.03. Requests for Borrowing

     55  

SECTION 2.04. Swingline Loans

     56  

SECTION 2.05. Letters of Credit

     58  

SECTION 2.06. Funding of Borrowings

     63  

SECTION 2.07. Interest Elections

     64  

SECTION 2.08. Termination and Reduction of Commitments

     65  

SECTION 2.09. Promise to Pay; Evidence of Debt

     66  

SECTION 2.10. Optional Repayment of Loans

     66  

SECTION 2.11. Mandatory Repayment of Loans

     67  

SECTION 2.12. Fees

     67  

SECTION 2.13. Interest

     68  

SECTION 2.14. Alternate Rate of Interest

     69  

SECTION 2.15. Increased Costs

     69  

SECTION 2.16. Break Funding Payments

     70  

SECTION 2.17. Taxes

     71  

SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs

     74  

SECTION 2.19. Mitigation Obligations; Replacement of Lenders

     76  

SECTION 2.20. Illegality

     77  

SECTION 2.21. Incremental Revolving Commitments

     78  

SECTION 2.22. Refinancing Amendments

     79  

SECTION 2.23. Extensions of Revolving Facility Commitments

     80  

SECTION 2.24. Joint and Several Liability of Borrower Parties

     81  

SECTION 2.25. Appointment of Borrower as Agent for Borrower Parties

     82  

SECTION 2.26. Defaulting Lenders

     82  

 

i


ARTICLE III

 

Representations and Warranties

 

SECTION 3.01. Organization; Powers

     84  

SECTION 3.02. Authorization

     84  

SECTION 3.03. Enforceability

     85  

SECTION 3.04. Governmental Approvals

     85  

SECTION 3.05. Borrowing Base Certificate

     85  

SECTION 3.06. Financial Statements

     85  

SECTION 3.07. Title to Properties

     86  

SECTION 3.08. Subsidiaries

     86  

SECTION 3.09. Litigation; Compliance with Laws

     86  

SECTION 3.10. Federal Reserve Regulations

     86  

SECTION 3.11. Investment Company Act

     87  

SECTION 3.12. Labor Matters

     87  

SECTION 3.13. Tax Returns

     87  

SECTION 3.14. No Material Misstatements

     87  

SECTION 3.15. Employee Benefit Plans

     88  

SECTION 3.16. Environmental Matters

     89  

SECTION 3.17. Security Documents

     89  

SECTION 3.18. Location of Real Property and Leased Premises

     90  

SECTION 3.19. Solvency

     90  

SECTION 3.20. No Material Adverse Effect

     90  

SECTION 3.21. Use of Proceeds

     90  

SECTION 3.22. USA PATRIOT Act; FCPA; OFAC

     91  

SECTION 3.23. Intellectual Property; Licenses, Etc.

     91  

SECTION 3.24. EEA Financial Institutions

     91  
ARTICLE IV

 

Conditions of Lending

 

SECTION 4.01. All Credit Events

     92  

SECTION 4.02. Conditions to First Restatement Effective Date

     92  
ARTICLE V

 

Affirmative Covenants

 

SECTION 5.01. Existence; Businesses and Properties

     95  

SECTION 5.02. Insurance

     96  

SECTION 5.03. Taxes

     97  

SECTION 5.04. Financial Statements, Reports, etc.

     97  

SECTION 5.05. Litigation and Other Notices

     99  

SECTION 5.06. Compliance with Laws

     100  

SECTION 5.07. Maintaining Records; Access to Properties and Inspections; Appraisals

     100  

SECTION 5.08. Use of Proceeds

     101  

SECTION 5.09. Compliance with Environmental Laws

     101  

SECTION 5.10. Further Assurances; Additional Security

     101  

SECTION 5.11. Cash Management Systems; Application of Proceeds of Accounts

     103  

SECTION 5.12. Fiscal Year; Accounting

     104  

SECTION 5.13. Creation of Co-Borrowers

     105  

SECTION 5.14. Lender Calls

     105  

SECTION 5.15. Post-Closing Matters

     106  

SECTION 5.16. Patriot Act, OFAC, FCPA

     106  

 

ii


ARTICLE VI

 

Negative Covenants

 

SECTION 6.01. Indebtedness

     106  

SECTION 6.02. Liens

     110  

SECTION 6.03. Sale and Lease-Back Transactions

     114  

SECTION 6.04. Investments, Loans and Advances

     114  

SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions

     117  

SECTION 6.06. Restricted Payments

     120  

SECTION 6.07. Transactions with Affiliates

     123  

SECTION 6.08. Business of Borrower

     125  

SECTION 6.09. Limitation on Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By Laws and Certain Other Agreements; etc.

     125  

SECTION 6.10. Financial Performance Covenant

     128  
ARTICLE VIA

 

Holdings Covenant

 

ARTICLE VII

 

Events of Default

 

SECTION 7.01. Events of Default

     129  

SECTION 7.02. Right to Cure

     131  
ARTICLE VIII

 

The Agents

 

SECTION 8.01. Appointment

     132  

SECTION 8.02. Delegation of Duties

     134  

SECTION 8.03. Exculpatory Provisions

     134  

SECTION 8.04. Reliance by Administrative Agent

     135  

SECTION 8.05. Notice of Default

     135  

SECTION 8.06. Non-Reliance on Agents and Other Lenders

     135  

SECTION 8.07. Indemnification

     136  

SECTION 8.08. Agent in Its Individual Capacity

     136  

SECTION 8.09. Successor Agent

     137  

SECTION 8.10. Lead Arrangers; Co-Syndication Agents; Co-Documentation Agents

     137  
ARTICLE IX

 

Miscellaneous

 

SECTION 9.01. Notices; Communications

     137  

SECTION 9.02. Survival of Agreement

     138  

SECTION 9.03. Binding Effect

     139  

SECTION 9.04. Successors and Assigns

     139  

SECTION 9.05. Expenses; Indemnity    

     143  

 

iii


SECTION 9.06. Right of Set-off

     145  

SECTION 9.07. Applicable Law

     145  

SECTION 9.08. Waivers; Amendment

     145  

SECTION 9.09. Interest Rate Limitation

     147  

SECTION 9.10. Entire Agreement

     147  

SECTION 9.11. WAIVER OF JURY TRIAL

     148  

SECTION 9.12. Severability

     148  

SECTION 9.13. Counterparts

     148  

SECTION 9.14. Headings

     148  

SECTION 9.15. Jurisdiction; Consent to Service of Process

     148  

SECTION 9.16. Confidentiality

     149  

SECTION 9.17. Platform; Borrower Materials

     149  

SECTION 9.18. Release of Liens and Guarantees

     150  

SECTION 9.19. USA PATRIOT Act Notice

     150  

SECTION 9.20. Acknowledgement and Consent to Bail-In of EEA Financial Institutions

     150  

SECTION 9.21. Security Documents and ABL/Term Loan Intercreditor Agreement

     151  

SECTION 9.22. No Liability of the Issuing Banks

     151  

SECTION 9.23. Acknowledgements

     151  

SECTION 9.24. No Novation

     152  

SECTION 9.25. Delivery of Signature Pages; Amendment to Collateral Agreement

     152  

 

iv


Exhibits and Schedules   
Exhibit A    Form of Assignment and Acceptance
Exhibit B    Form of Borrowing Base Certificate
Exhibit C    Form of Borrowing Request
Exhibit D    Form of Co-Borrower Joinder Agreement
Exhibit E    Form of Letter of Credit Request
Exhibit F    Form of Swingline Borrowing Request
Exhibit G    Form of Interest Election Request
Exhibit H    Form of Note
Exhibit I    Form of Solvency Certificate
Exhibit J    Form of Amendment to the Collateral Agreement
Schedule 1.01B    Existing Letters of Credit
Schedule 1.01C    Guarantors
Schedule 1.01D    Sale/Lease-Back Documents
Schedule 1.01E    Concentration Limits
Schedule 2.01    Commitments
Schedule 3.04    Governmental Approvals
Schedule 3.08(a)    Subsidiaries
Schedule 3.08(b)    Outstanding Subscriptions, Options, Warrants, Calls, Rights, etc.
Schedule 3.09(a)    Litigation/Compliance with Laws
Schedule 3.13    Taxes
Schedule 3.16    Environmental Matters
Schedule 3.18    Material Real Property
Schedule 3.23    Intellectual Property
Schedule 5.02    Insurance
Schedule 5.15    Post-Closing Matters
Schedule 6.01(a)    Indebtedness
Schedule 6.02(a)    Liens
Schedule 6.04(h)    Investments
Schedule 6.06(k)    Restricted Payments
Schedule 6.07(e)    Transactions and Agreements
Schedule 9.01    Notice Information

 

 

v


AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as of March 9, 2017 (the “Agreement”), among CPG International LLC, a Delaware limited liability company as the borrower (the “Borrower”), CPG Newco LLC, a Delaware limited liability company and the parent of the Borrower (“Holdings”), the Co-Borrowers party hereto, the Lenders party hereto from time to time and Deutsche Bank AG New York Branch (“Deutsche Bank”), as administrative agent (in such capacity, and as further defined in Section 1.01, the “Administrative Agent”) and as collateral agent (in such capacity, and as further defined in Section 1.01, the “Collateral Agent”), and Deutsche Bank as swingline lender (in such capacity, and as further defined in Section 1.01, the “Swingline Lender”) and as an issuing bank (in such capacity, and as further defined in Section 1.01, an “Issuing Bank”).

A. The Borrower (as successor-in-interest to CPG International Inc., itself a successor-in-interest to CPG Merger Sub LLC) entered into that certain Revolving Credit Agreement, dated as of September 30, 2013 (as amended, supplemented or otherwise modified prior to the date hereof, the “Existing Revolving Credit Agreement”), among the Borrower, the co-borrowers party thereto, the lenders party thereto and Deutsche Bank, as administrative agent and collateral agent.

B. The parties hereto have agreed to amend and restate the Existing Revolving Credit Agreement as provided in this Agreement, which Agreement shall become effective upon the satisfaction of the conditions precedent set forth in Section 4.02 hereof.

C. It is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities existing under the Existing Revolving Credit Agreement or evidence repayment of any of such obligations and liabilities and that this Agreement amend and restate in its entirety the Existing Revolving Credit Agreement and re-evidence the obligations of the Borrower and the Co-Borrowers outstanding thereunder.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree that on the First Restatement Effective Date (as defined below), the Existing Revolving Credit Agreement shall be amended and restated in its entirety as follows:

ARTICLE I

Definitions

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

ABL Priority Collateral” shall have the meaning assigned to such term in the ABL/Term Loan Intercreditor Agreement.

ABL/Term Loan Intercreditor Agreement” shall mean the Intercreditor Agreement, dated as of the Closing Date, by and among the Administrative Agent, Barclays Bank PLC, as collateral agent under the Term Loan Credit Agreement, Holdings, Borrower and the other Subsidiary Loan Parties party thereto, as amended, restated, supplemented, replaced, refinanced or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement.

ABR” shall mean, for any day, a fluctuating rate per annum equal to the highest of (a) the New York Federal Reserve Bank Rate as of such day plus 12 of 1.00%, (b) the prime commercial lending rate announced as of such day by the Administrative Agent as the “prime rate” as in effect on such day and (c) the LIBO Rate as of such day (or, if such day is not a Business Day, the next preceding Business Day) for a deposit in Dollars with a maturity of one month plus 1.00%.

 


ABR Borrowing” shall mean a Borrowing comprised of ABR Loans.

ABR Loans” shall mean any ABR Revolving Loan or any Swingline Loan.

ABR Revolving Facility Borrowing” shall mean a Borrowing comprised of ABR Revolving Loans.

ABR Revolving Loan” shall mean any Revolving Loan bearing interest at a rate determined by reference to the ABR.

Acceptable Inspector” shall mean (a) with respect to an inventory appraisal, Accuval Associates LLC or any other experienced and reputable appraiser reasonably acceptable to the Administrative Agent and (b) with respect to a field examination, KPMG LLP or any other experienced and reputable field examiner reasonably acceptable to the Administrative Agent.

Account” shall mean, with respect to a person, any of such person’s now owned and hereafter acquired or arising accounts (as defined in the UCC), including, whether or not constituting “accounts” (as defined in the UCC), any rights to payment for the sale or lease of goods or rendition of services, whether or not they have been earned by performance or arising out of the use of a credit or charge card or information contained on or used with such card.

Account Debtor” shall mean each person obligated on an Account.

Accounting Change” shall have the meaning assigned to such term in Section 1.03.

Additional Lender” shall mean any person that provides Incremental Revolving Commitments or Replacement Revolving Commitments.

Adjusted LIBO Rate” shall mean, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum equal to the greater of (a) the LIBO Rate in effect for such Interest Period divided by one, minus the Statutory Reserves applicable to such Eurocurrency Borrowing, if any, and (b) 1.00%.

Adjustment Date” shall mean the first day of each January, April, July and October of each year, commencing April 1, 2017.

Administrative Agent” shall mean Deutsche Bank, in its capacity as administrative agent for itself and the Lenders hereunder, and any duly appointed successor in such capacity.

Administrative Agent Fees” shall have the meaning assigned to such term in Section 2.12(c).

Administrative Questionnaire” shall mean an Administrative Questionnaire in a form supplied by the Administrative Agent.

Affiliate” shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified.

Agents” shall mean the Administrative Agent and the Collateral Agent, in their respective capacities as such.

 

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Agreement” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Annual Financial Statements” shall have the meaning assigned to such term in Section 5.04(a).

Applicable Commitment Fee” shall mean a percentage per annum equal to (a) initially, 0.375%, and (b) from and after each Adjustment Date, a percentage per annum determined in accordance with the Applicable Commitment Fee Pricing Grid, based on the Average Daily Used Percentage for the most recent three month period ending on the day prior to such Adjustment Date. Changes in the Applicable Commitment Fee resulting from changes in the Average Daily Used Percentage shall become effective on the Adjustment Date. Each determination of the Average Daily Used Percentage pursuant to the Applicable Commitment Fee Pricing Grid shall be made in a manner consistent with the determination thereof pursuant to the definition of the term “Average Daily Used Percentage”.

Applicable Commitment Fee Pricing Grid” shall mean the table set forth below:

 

Average Daily Used Percentage

   Applicable Commitment Fee  

Greater than 50%

     0.25

Equal to or less than 50%

     0.375

Applicable Margin” shall mean a percentage per annum equal to (a) initially, (i) for Eurocurrency Revolving Loans, 1.50%, and (ii) for ABR Loans, 0.50%, and (b) from and after each Adjustment Date, the percentages per annum determined in accordance with the Applicable Margin Pricing Grid, based on Average Historical Availability for the most recent three month period ending on the date prior to such Adjustment Date. Changes in the Applicable Margin resulting from changes in the Average Historical Availability shall become effective on the Adjustment Date. Each determination of the Average Historical Availability pursuant to the Applicable Margin Pricing Grid shall be made in a manner consistent with the determination thereof pursuant to the definition of the term “Average Historical Availability”.

Applicable Margin Pricing Grid” shall mean the table set forth below:

 

Average Historical

Availability

   Applicable Margin for
Eurocurrency
Revolving Loans
    Applicable Margin
for ABR Loans
 

Greater than 66 2/3% of the Line Cap

     1.50     0.50

Less than or equal to 66 2/3% of the Line Cap but greater than or equal to 33% of the Line Cap

     1.75     0.75

Less than 33% of the Line Cap

     2.00     1.00

Appraised Liquidation Value” shall mean, with respect to Eligible Inventory, the appraised net orderly liquidation value thereof (expressed as a percentage of the Cost of such Inventory) as determined from time to time by an Acceptable Inspector in accordance with Section 5.07.

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

 

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Ares” shall mean Ares Corporate Opportunities Fund IV, L.P.

Asset Sale” shall mean any sale, transfer or other disposition (including any Sale and Lease-Back Transaction) to any person of any asset or assets of the Borrower, a Co-Borrower or any other Restricted Subsidiary; provided that the issuance of Equity Interests of (a) the Borrower or Holdings or (b) any Subsidiary of the Borrower to the Borrower, any Wholly Owned Subsidiary of the Borrower or on a pro rata basis to holders of Equity Interests of such Subsidiary, shall not, in each case, constitute an “Asset Sale”.

Assignee” shall have the meaning assigned to such term in Section 9.04(b).

Assignment and Acceptance” shall mean an assignment and acceptance entered into by a Lender and an Assignee, and accepted by the Administrative Agent and the Borrower (if required by Section 9.04), substantially in the form of Exhibit A (or such other form as may be agreed between the Borrower and the Administrative Agent).

Availability” shall mean, at any time, (a)(i) the Line Cap at such time plus (ii) cash and cash equivalents of the Borrower and the other Subsidiary Loan Parties at such time, to the extent maintained in a Blocked Account, minus (b) the Revolving Facility Credit Exposure at such time.

Availability Period” shall mean the period from and including the First Restatement Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Revolving Facility Commitments.

Available Unused Commitment” shall mean, with respect to a Lender at any time, an amount equal to the amount by which (a) the Revolving Facility Commitment of such Lender at such time exceeds (b) the aggregate Revolving Facility Credit Exposure (other than Revolving Facility Credit Exposure attributable to Swingline Loans) of such Lender at such time.

Average Daily Used Percentage” shall mean, for any period, the percentage derived by dividing (a) the sum of (i) the average daily principal balance of all Revolving Loans (other than the principal balance of any Swingline Loans) during such period plus (ii) the average daily undrawn amount of all outstanding Letters of Credit issued for the account or on behalf of the Borrower Parties during such period by (b) the average daily amount of the Revolving Facility Commitments during such period.

Average Historical Availability” shall mean, for any period, the average daily Availability for such period.

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

Bail-In Legislation” means, 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 for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

Blocked Account” shall have the meaning assigned to such term in Section 5.11(a).

Blocked Account Agreement” shall have the meaning assigned to such term in Section 5.11(a).

 

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Board” shall mean the Board of Governors of the Federal Reserve System of the United States of America.

Borrower” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Borrower Materials” shall have the meaning assigned to such term in Section 9.17.

Borrower Parties” shall mean, on any date of determination, a collective reference to the Borrower and each Co-Borrower as of such date.

Borrowing” shall mean a group of Loans of a single Type made on a single date and, in the case of Eurocurrency Revolving Loans, as to which a single Interest Period is in effect.

Borrowing Base” shall mean, subject to Section 5.04(h)(ii), with respect to the Loan Parties at any time, an amount equal to the sum of the following: (a) the sum of (i) 85% of the amount of the Eligible Accounts of the Loan Parties plus (ii) the lesser of (A) 85% of the lower of Cost, on a first in, first out basis, or market value of Eligible Inventory of the Loan Parties and (B) 85% of the Appraised Liquidation Value of Eligible Inventory of the Loan Parties minus (b) the sum of all applicable Reserves which the Administrative Agent deems necessary in the exercise of its Reasonable Credit Judgment to maintain with respect to the Loan Parties.

The specified percentages set forth in this definition will not be reduced without the consent of the Borrower. Any determination by the Administrative Agent in respect of the Borrowing Base shall be based on the Administrative Agent’s Reasonable Credit Judgment. The parties understand that the exclusionary criteria in the definitions of Eligible Accounts and Eligible Inventory, any Reserves that may be imposed as provided herein, any deductions or other adjustments to determine “lower of Cost, on a first in, first out basis, or market value” and factors considered in the calculation of Appraised Liquidation Value of Eligible Inventory have the effect of reducing the Borrowing Base and, accordingly, whether or not any provisions hereof so state, all of the foregoing shall be determined without duplication so as not to result in multiple reductions in the Borrowing Base for the same facts or circumstances.

Borrowing Base Certificate” shall mean a certificate by a Responsible Officer of the Borrower, substantially in the form of Exhibit B (or such other form as may be agreed between the Borrower and the Administrative Agent) setting forth the calculation of the Borrowing Base, including a calculation of each component thereof (including any adjustments pursuant to Section 5.04(h)(ii) and, to the extent the Borrower has received notice of any such Reserve from the Administrative Agent, any of the Reserves included in such calculation), all in such detail as shall be reasonably satisfactory to the Administrative Agent. All calculations of the Borrowing Base in connection with the preparation of any Borrowing Base Certificate shall be made by the Borrower and certified to the Administrative Agent.

Borrowing Minimum” shall mean $100,000 in the case of ABR Borrowings and $1.0 million in the case of Eurocurrency Borrowings.

Borrowing Multiple” shall mean $100,000 in the case of ABR Borrowings and $1.0 million in the case of Eurocurrency Borrowings.

Borrowing Request” shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C (or such other form as may be agreed by the Borrower and the Administrative Agent from time to time).

 

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Budget” shall have the meaning assigned to such term in Section 5.04(f).

Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided that when used in connection with a Eurocurrency Revolving Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in deposits in the London interbank market.

Capital Lease Obligations” shall mean, with respect to any person, the obligations of such person to pay rent or other amounts under any lease of (or other similar arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP (as in effect on the Closing Date) and, for purposes hereof, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP (as in effect on the Closing Date).

Cash Dominion Event” shall occur at any time that the Borrower shall have received written notice from the Administrative Agent that (a) Availability is less than the greater of (i) $12.5 million and (ii) 10% of the Line Cap then in effect, in each case, for five consecutive Business Days or (b) a Designated Event of Default has occurred and is continuing. Once commenced, a Cash Dominion Event shall be deemed to be continuing until such time as Availability equals or exceeds the greater of (i) $12.5 million and (ii) 10% of the Line Cap then in effect for 30 consecutive days or such Designated Event of Default has been cured or waived (or is otherwise no longer continuing), as applicable.

Cash Management Bank” shall mean any provider of Cash Management Services that, at the time such Cash Management Obligations were entered into or, if entered into prior to the Closing Date, on the Closing Date, was the Administrative Agent, a Lender or an Affiliate of the foregoing, whether or not such person subsequently ceases to be the Administrative Agent, a Lender or an Affiliate of the foregoing.

Cash Management Obligations” shall mean obligations owed by any Loan Party to any Cash Management Bank in respect of or in connection with Cash Management Services and designated by the Cash Management Bank and the Borrower in writing to the Administrative Agent as “Cash Management Obligations”.

Cash Management Services” shall mean any treasury, depository, pooling, netting, overdraft, stored value card, purchase card (including so called “procurement card” or “P-card”), debit card, credit card, cash management, e-payables and similar services and any automated clearing house transfer of funds.

CFC” shall mean a controlled foreign corporation under Section 957 of the Code.

A “Change in Control” shall be deemed to occur if:

(a) at any time, Holdings shall fail to own, directly or indirectly, beneficially and of record, 100% of the issued and outstanding Equity Interests of the Borrower;

(b) at any time prior to the consummation of a Qualified IPO, the Permitted Holders, taken together, shall cease to own beneficially, directly or indirectly, Equity Interests representing at least a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings (determined on a fully diluted basis but not giving effect to contingent voting rights that have not yet vested); or

 

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(c) at any time upon or after the consummation of a Qualified IPO, any person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Closing Date, but excluding any employee benefit plan of such person and its subsidiaries and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than the Permitted Holders or any underwriter participating in a Qualified IPO, shall have acquired beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 of the Exchange Act as in effect on the Closing Date) of Equity Interests of Holdings representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings (determined on a fully diluted basis but not giving effect to contingent voting rights that have not yet vested) and the percentage of the aggregate ordinary voting power so held by such person or “group” is greater than the percentage of the aggregate ordinary voting power represented by the Equity Interests of Holdings owned beneficially (within the meaning of Rules 13d-3 and 13d-5 of the Exchange Act as in effect on the Closing Date), directly or indirectly, in the aggregate by the Permitted Holders (determined on a fully diluted basis but not giving effect to contingent voting rights that have not yet vested),

unless, in the case of either clause (b) or (c) above, the Permitted Holders have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority of the persons constituting the Governing Persons of Holdings.

Notwithstanding the preceding or any provision of Rule 13d-3 of the Exchange Act (as in effect on the Closing Date, (i) a person or “group” shall not be deemed to beneficially own securities (1) subject to an equity or asset purchase agreement, merger agreement or similar agreement (or voting or option or similar agreement related thereto) until the consummation of the transactions contemplated by such agreement or (2) as a result of veto or approval rights in any joint venture agreement, shareholder agreement or other similar agreement and (ii) if any “group” includes one or more Permitted Holders, any issued and outstanding voting Equity Interests of Holdings beneficially owned, directly or indirectly, by any Permitted Holders that are a part of such “group” shall not be treated as being beneficially owned by any other member of such “group” for purposes of determining whether a Change in Control has occurred.

Change in Law” shall mean (a) the adoption of any law, rule, regulation or treaty after the Closing Date, (b) any change in law, rule, regulation or treaty or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Lender (or, for purposes of Section 2.15(b), by any lending office of such Lender or by such Lender’s holding company, if any) with any written request, guideline or directive (whether or not having the force of law) of any Governmental Authority, made or issued after the Closing Date; provided that, notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives promulgated thereunder or issued in connection therewith and (ii) 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 of America or foreign regulatory authorities, in each case pursuant to Basel III, in each case shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted, promulgated, implemented or issued.

Charges” shall have the meaning assigned to such term in Section 9.09.

Closing Date” shall mean September 30, 2013.

Closing Date First Lien Leverage Ratio” shall mean 4.50:1.00.

Closing Date Senior Secured Leverage Ratio” shall mean 4.50:1.00.

 

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Closing Date Transaction Documents” shall mean the “Transaction Documents” as defined in the Existing Revolving Credit Agreement.

Closing Date Transactions” shall mean the “Transactions” as defined in the Existing Revolving Credit Agreement.

Co-Borrower” shall have the meaning specified in Section 5.13(a).

Co-Borrower Joinder Agreement” shall mean a Co-Borrower Joinder Agreement substantially in the form of Exhibit D (or such other form as may be agreed between the Borrower and the Administrative Agent), executed and delivered by a new Co-Borrower in accordance with the provisions of Section 5.13(a).

Code” shall mean the Internal Revenue Code of 1986, as amended, modified, and supplemented.

Co-Documentation Agents” the Co-Documentation Agents identified on the cover page of this Agreement.

Co-Syndication Agents” the Co-Syndication Agents identified on the cover page of this Agreement.

Collateral” shall mean the “Collateral” as defined in the Collateral Agreement and shall also include all other property that is subject to any Lien in favor of the Administrative Agent for the benefit of the Secured Parties pursuant to any Security Document.

Collateral Agent” shall mean Deutsche Bank, in its capacity as Collateral Agent for itself and the other Secured Parties, and any duly appointed successor in that capacity.

Collateral Agreement” shall mean the Guarantee and Collateral Agreement dated as of the Closing Date, among the Loan Parties and the Administrative Agent, as amended, supplemented or otherwise modified from time to time.

Collateral and Guarantee Requirement” shall mean the requirement that:

(a) (i) on the Closing Date, the Administrative Agent shall have received (A) a counterpart of the Collateral Agreement duly executed and delivered on behalf of such CPG Merger Sub LLC and (B) a supplement to the Collateral Agreement, substantially in the form specified therein, duly executed and delivered on behalf of each person that was a Subsidiary as of such date (other than any Unrestricted Subsidiary, Immaterial Subsidiary, Qualified CFC Holding Company, CFC or Domestic Subsidiary of a CFC that, in each case, was not a Subsidiary Loan Party under and as defined in the Term Loan Credit Agreement as of such date), (ii) on or prior to the Closing Date, the Administrative Agent shall have received the Security Documents required to be delivered pursuant to Section 5.15 of the Existing Revolving Credit Agreement and (iii) on or prior to the First Restatement Effective Date, the Administrative Agent shall have received a supplement to the Collateral Agreement, substantially in the form specified therein, duly executed and delivered on behalf of each Subsidiary (other than any Unrestricted Subsidiary, Immaterial Subsidiary, Qualified CFC Holding Company, CFC or Domestic Subsidiary of a CFC that, in each case, is not a Subsidiary Loan Party under and as defined in the Term Loan Credit Agreement), if any, formed or acquired after the Closing Date and on or prior to the First Restatement Effective Date;

 

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(b) on the First Restatement Effective Date, (i) the Administrative Agent (or a designated bailee thereof) shall have received, subject to the exceptions set forth in the Collateral Agreement, (A) a pledge of all the issued and outstanding Equity Interests of each Subsidiary (other than any Unrestricted Subsidiary, Immaterial Subsidiary, Qualified CFC Holding Company or CFC) owned on the First Restatement Effective Date directly by any Loan Party and (B) a pledge of 100% of the outstanding non-voting Equity Interests and 65% of the outstanding voting Equity Interests of each (1) CFC directly owned by any Loan Party and (2) Qualified CFC Holding Company directly owned by any Loan Party and (ii) the Administrative Agent (or a designated bailee thereof) shall have received all certificates or other instruments (if any) representing such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank;

(c) (i) on the First Restatement Effective Date all Indebtedness of Holdings, the Borrower Parties and each other Subsidiary of Holdings having, in the case of each instance of Indebtedness, an aggregate principal amount in excess of $5.0 million (other than (A) intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings and its Subsidiaries or (B) to the extent that a pledge of such promissory note or instrument would violate applicable law) that is owing to any Loan Party shall be evidenced by a promissory note or an instrument and shall have been pledged pursuant to the Collateral Agreement (or other applicable Security Document as reasonably required by the Administrative Agent) and (ii) the Administrative Agent (or a designated bailee thereof) shall have received all such promissory notes or instruments, together with note powers or other instruments of transfer with respect thereto endorsed in blank;

(d) in the case of any person that becomes a Subsidiary (other than an Unrestricted Subsidiary, an Immaterial Subsidiary, a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC that, in each case, is not a Subsidiary Loan Party under and as defined in the Term Loan Credit Agreement) after the First Restatement Effective Date (with (i) any Subsidiary Redesignation resulting in an Unrestricted Subsidiary becoming a Restricted Subsidiary being deemed to constitute the acquisition of a Subsidiary, (ii) any Immaterial Subsidiary being designated a Material Subsidiary being deemed to constitute the acquisition of a Subsidiary and (iii) any transaction or event resulting in a Subsidiary ceasing to be a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC being deemed to constitute the acquisition of a Subsidiary), the Administrative Agent shall have received a supplement to the Collateral Agreement, substantially in the form specified therein, duly executed and delivered on behalf of such Subsidiary within the time period specified in Section 5.10(c);

(e) after the First Restatement Effective Date, subject to the exceptions set forth in the Collateral Agreement, (i)(A) all the issued and outstanding Equity Interests of any person that becomes a Subsidiary Loan Party after the First Restatement Effective Date and (B) all the Equity Interests that are acquired by a Loan Party after the First Restatement Effective Date (with (i) any Subsidiary Redesignation resulting in an Unrestricted Subsidiary becoming a Restricted Subsidiary being deemed to constitute the acquisition of the Equity Interests of such redesignated Subsidiary, (ii) any Immaterial Subsidiary being designated a Material Subsidiary being deemed to constitute the acquisition of the Equity Interests of such redesignated Subsidiary and (iii) any transaction or event resulting in a Subsidiary ceasing to be a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC being deemed to constitute the acquisition of any Equity Interests of such Subsidiary not required to be pledged pursuant to the Loan Documents during the time such Subsidiary was a Qualified CFC Holding Company, CFC or Domestic Subsidiary of a CFC) and owned directly by such Loan Party, shall have been pledged pursuant to the Collateral Agreement; provided that in no event shall any Loan Party be required to pledge (1) the Equity Interests of any Subsidiary that is an Unrestricted Subsidiary or an Immaterial Subsidiary or (2) more than 65% of the issued and outstanding voting Equity Interests of any CFC or any Qualified CFC Holding Company directly owned by such Loan Party and (ii) the

 

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Administrative Agent (or a designated bailee thereof) shall have received all certificates or other instruments (if any) representing such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank, to the extent required by the Collateral Agreement, in the case of each of clauses (i) and (ii), within the time period specified in Section 5.10(c);

(f) except as otherwise contemplated by the Security Documents, all documents and instruments, including Uniform Commercial Code financing statements and all other actions reasonably requested by the Administrative Agent to be filed, registered, recorded or delivered to create the Liens intended to be created by the Security Documents (in each case, including any supplements thereto) and perfect such Liens to the extent required by, and with the priority required by, the Security Documents, shall have been delivered to the Administrative Agent (or a designated bailee thereof) for filing, registration or the recording concurrently with, or promptly following, the execution and delivery of each such Security Document;

(g) except as otherwise contemplated by any Security Document, each Loan Party shall have obtained all consents and approvals required to be obtained by it in connection with (i) the execution and delivery of all Security Documents (or supplements thereto) to which it is a party and the granting by it of the Liens thereunder and (ii) the performance of its obligations thereunder; and

(h) after the First Restatement Effective Date, the Administrative Agent shall have received (i) such other Security Documents as may be required to be delivered pursuant to Section 5.10 or Section 5.15 and (ii) upon reasonable request by the Administrative Agent, evidence of compliance with any other requirements of Section 5.10.

Commitment Fee” shall have the meaning assigned to such term in Section 2.12(a).

Commitments” shall mean (a) with respect to any Lender, such Lender’s Revolving Facility Commitment, (b) with respect to the Swingline Lender, its Swingline Commitment and (c) with respect to any Issuing Bank, its Letter of Credit Commitment.

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

Consolidated Capital Expenditures” shall mean, for any period, the aggregate amount of all expenditures of the Borrower and the other Restricted Subsidiaries during such period determined on a consolidated basis that, in accordance with GAAP, are or should be included as “additions to property, plant or equipment” or similar items in the consolidated statement of cash flows of the Borrower. Notwithstanding the foregoing, Consolidated Capital Expenditures shall not include:

(a) expenditures made with tenant allowances received by the Borrower or any other Restricted Subsidiary from landlords in the ordinary course of business and subsequently capitalized,

(b) expenditures made in connection with the Closing Date Transactions and Permitted Business Acquisitions,

(c) expenditures to the extent they are (i) paid for in Equity Interests of any Parent Entity or (ii) made with proceeds of the issuance of Equity Interests of, or a cash capital contribution to, the Borrower after the Closing Date,

 

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(d) expenditures that are accounted for as capital expenditures by the Borrower or any Restricted Subsidiary and that actually are paid for by a person other than the Borrower or any other Restricted Subsidiary to the extent none of the Borrower or any other Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such person or any other person (whether before, during or after such period),

(e) any expenditures which are contractually required to be, and are, advanced or reimbursed to the Borrower or any other Restricted Subsidiary in cash by a third party (including landlords) during such period of calculation,

(f) the book value of any asset owned by the Borrower or any other Restricted Subsidiary prior to or during such period to the extent that such book value is included as a capital expenditure during such period as a result of such person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period; provided that (a) any expenditure necessary in order to permit such asset to be reused shall be included as a capital expenditure during the period in which such expenditure actually is made and (b) such book value shall have been included in Consolidated Capital Expenditures when such asset was originally acquired,

(g) that portion of interest on Indebtedness incurred for capital expenditures that is capitalized in accordance with GAAP,

(h) expenditures made in connection with the replacement, substitution, restoration, upgrade, development or repair of assets to the extent financed with (x) insurance or settlement proceeds paid on account of the loss of or damage to the assets being replaced, substituted, restored, upgraded, developed or repaired or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, in each case to the extent such expenditures are made within 24 months of receipt of such proceeds,

(i) in the event that any equipment is purchased simultaneously with the trade-in of existing equipment in the ordinary course of business, the gross amount of the credit granted by the seller of such equipment for the equipment being traded in at such time, or

(j) expenditures relating to the construction, acquisition, replacement, reconstruction, development, refurbishment, renovation or improvement of any property which has been transferred to a person other than the Borrower or any other Restricted Subsidiary during the same fiscal year in which such expenditures were made pursuant to a Sale and Lease-Back Transaction to the extent of the cash proceeds received by the Borrower or any other Restricted Subsidiary pursuant to such Sale and Lease-Back Transaction that are not required to repay loans under the Credit Facilities.

Consolidated Depreciation and Amortization Expense” shall mean, with respect to the Borrower and the other Restricted Subsidiaries for any period, the total amount of depreciation and amortization expense, including the amortization of key money and other intangible assets and deferred financing fees and amortization of unrecognized prior service costs, of the Borrower and the other Restricted Subsidiaries as set forth on the most recently delivered Required Financial Statements for such period and otherwise determined in accordance with GAAP.

 

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Consolidated EBITDA” shall mean, with respect to the Borrower and the other Restricted Subsidiaries for any period, the Consolidated Net Income of the Borrower and the other Restricted Subsidiaries for such period (without duplication):

(1) increased, in each case, to the extent deducted (and not added back) or, in the case of clause (l), not already included in Consolidated Net Income and, in each case, without duplication, by:

(a) provision for taxes based on income or, profits or capital, including state, franchise, excise and similar taxes and foreign withholding taxes of such person paid or accrued, including any penalties and interest relating to any tax examinations; plus

(b) Consolidated Interest Expense of the Borrower and the other Restricted Subsidiaries for such period (including (i) net losses on Hedge Agreements or other derivative instruments entered into for the purpose of hedging interest rate risk and (ii) expenses of surety bonds in connection with financing activities, in each case, to the extent included in Consolidated Interest Expense), together with items excluded from the definition of Consolidated Interest Expense pursuant to clauses (a)(i) and (a)(ii) thereof as well as items included under clause (4) of the definition of Fixed Charge Coverage Ratio; plus

(c) extraordinary, non-recurring or unusual losses, charges and expenses (provided that such losses, charges or expenses shall not be of the type that may be added back pursuant to clauses (e) or (j) below); plus

(d) charges and expenses relating to the Closing Date Transactions (including any printer expenses, filing fees, financial advisory fees, accounting fees, auditor fees, legal fees and other advisory and consulting fees and related out-of-pocket expenses and other fees, discounts and commissions, including with respect to underwriting, placement, arranging or syndication) recorded on or prior to December 31, 2014; plus

(e) (i) business optimization expenses (including consolidation initiatives), relocation or integration; (ii) expenses, costs and charges related to consolidation or closing of distribution centers or other facilities or exiting lines of business; acquisitions and mergers after the Closing Date; initiatives aimed at profitability improvement; strategic initiatives; personnel relocation, restructuring, redundancy, severance, termination, settlement or judgment; (iii) one-time compensation charges and (iv) the amount of any signing, retention and completion bonuses; provided that the aggregate amount added back pursuant to this clause (e) in any four-fiscal quarter period shall not exceed the greater of (i) $35.0 million and (ii) 25.0% of Consolidated EBITDA for such period (calculated prior to giving effect to any increase pursuant to this clause (e)); plus

(f) losses, charges and expenses attributable to asset dispositions or the sale or other disposition of any Equity Interests of the Borrower or any of the other Restricted Subsidiaries, in each case other than in the ordinary course of business, as determined in good faith by a Responsible Officer or Governing Person of the Borrower; plus

(g) losses, charges and expenses attributable to abandoned, closed, disposed or discontinued operations and losses, charges and expenses related to the disposal of disposed, abandoned, closed or discontinued operations; plus

(h) the amount of management, monitoring, consulting, transaction and advisory fees (including termination fees and distributions and dividends paid to Teachers to approximate management fees and transaction and advisory fees) and related indemnities, charges and expenses paid or accrued to or on behalf of any Parent Entity or any of the Permitted Holders, in each case, to the extent permitted under Section 6.06 and Section 6.07 of this Agreement; plus

(i) losses, charges and expenses related to internal software development that are expensed but could have been capitalized under alternative accounting policies in accordance with GAAP; plus

 

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(j) the amount of cost savings and synergies projected by the Borrower in good faith to be realized as a result of specified actions taken or expected to be taken prior to or during such period (which cost savings or synergies shall be subject only to certification by an officer of the Borrower and shall be calculated on a Pro Forma Basis as though such cost savings or 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; provided that (A) such cost savings or synergies are reasonably identifiable and factually supportable and (B) such actions have been taken or are expected to be taken within 18 months after the date of determination to take such action; and provided, further, that the aggregate amount added back pursuant to this clause (j) in any four-fiscal quarter period shall not exceed the greater of (i) $35.0 million and (ii) 25.0% of Consolidated EBITDA for such period (calculated prior to giving effect to any increase pursuant to this clause (j)); plus

(k) earn-out obligations incurred in connection with any Permitted Business Acquisition or other Investment, in each case consummated within the previous 24 months, and paid or accrued during the applicable period to the extent such earn-out is deducted from the calculation of Consolidated Net Income; plus

(l) business interruption insurance in an amount representing the earnings for the applicable period that such proceeds are intended to replace (whether or not received, so long as the Borrower in good faith expects to receive the same within the next four fiscal quarters (it being understood that to the extent not actually received within such four fiscal quarter period, such proceeds shall be deducted in calculating Consolidated EBITDA for the next four fiscal quarter period)); plus

(m) charges and expenses related to payments made to option holders of the Borrower or any Parent Entity in connection with, or as a result of, any distribution being made to equity holders of such person or any of its direct or indirect parents, which payments are being made to compensate such option holders as though they were equityholders at the time of, and entitled to share in, such distribution; plus

(n) any other non-cash losses, charges and expenses, including any write offs or write downs, reducing Consolidated Net Income for such period, decreased by all cash payments during such period on account of accruals on or reserves added back to Consolidated EBITDA pursuant to this clause (n) in prior periods, excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period; plus

(o) losses, charges and expenses attributable to the early extinguishment or conversion of Indebtedness or any Hedge Agreements or other derivative instruments, in each case entered into in the ordinary course of business (including deferred financing expenses written off and premiums paid); plus

(p) Consolidated Depreciation and Amortization Expense;

(2) decreased by (without duplication and to the extent increasing Consolidated Net Income for such period),

(a) non-cash gains, excluding any non-cash gains that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges that were deducted (and not added back) in the calculation of Consolidated EBITDA for any prior period; plus

(b) extraordinary, unusual or exceptional income or gains; plus

 

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(c) any gains attributable to asset dispositions or the sale or other disposition of any Equity Interests of the Borrower or any of the other Restricted Subsidiaries other than in the ordinary course of business, as determined in good faith by a Responsible Officer or the Governing Persons of the Borrower;

(d) gains attributable to abandoned, closed, disposed or discontinued operations and gains related to the disposal of disposed, abandoned, closed, or discontinued operations; plus

(e) gains attributable to the early extinguishment or conversion of Indebtedness or any Hedge Agreements or other derivative instruments, in each case entered into in the ordinary course of business.

Consolidated Interest Expense” shall mean, with respect to the Borrower and the other Restricted Subsidiaries for any period, the sum, without duplication, of:

(a) consolidated interest expense of the Borrower and the other Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including amortization of original issue discount, the interest component of Capital Lease Obligations, and net payments and receipts (if any) pursuant to interest rate Hedge Agreements but excluding (i) additional interest, if any, owing pursuant to a registration rights agreement, (ii) amortization of deferred financing fees, (iii) debt issuance costs, commissions, fees and expenses and (iv) non-cash expensing of any bridge, commitment or other financing fees that have been previously paid in cash (but solely to the extent not reducing Consolidated Interest Expense in any prior period) and (v) any original issue discount in respect of the Term Loans); plus

(b) consolidated capitalized interest of the Borrower and the other Restricted Subsidiaries for such period, whether paid or accrued; minus

(c) interest income of the Borrower and the other Restricted Subsidiaries for such period.

For purposes of this definition, interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Borrower (or any Parent Entity on behalf of the Borrower) to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP.

Consolidated Maintenance Capital Expenditures” shall mean, for any period, the portion of the aggregate amount of all Consolidated Capital Expenditures of the Borrower and the other Restricted Subsidiaries during such period attributable to maintenance of property, plant and equipment of the Borrower and the other Restricted Subsidiaries, as determined in good faith by a Responsible Officer or Governing Person of the Borrower.

Consolidated Net Income” shall mean with respect to the Borrower and the other Restricted Subsidiaries for any period, the aggregate of the Net Income of the Borrower and the other Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided that, without duplication:

(a) the cumulative effect of a change in accounting principles shall be excluded;

(b) the net after-tax effect of extraordinary, non-recurring and unusual gains, losses, charges and expenses shall be excluded (provided that such losses, charges or expenses shall not be of the type that may be excluded pursuant to clause (d));

 

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(c) the net after-tax effect of any charges and expenses recorded on or prior to December 31, 2014 related to the Closing Date Transactions (including any financial advisory fees, accounting fees, auditor fees, legal fees and other advisory and consulting fees and related out-of-pocket expenses and other fees, discounts and commissions, including with respect to underwriting, placement or syndication) shall be excluded;

(d) (i) business optimization expenses (including consolidation initiatives), relocation or integration; (ii) expenses, costs and charges related to consolidation or closing of distribution centers or other facilities or exiting lines of business; acquisitions and mergers after the Closing Date; initiatives aimed at profitability improvement; strategic initiatives; personnel relocation, restructuring, redundancy, severance, termination, settlement or judgment; (iii) one-time compensation charges and (iv) the amount of any signing, retention and completion bonuses shall in each case be excluded in an aggregate amount not to exceed the greater of (x) $35.0 million and (y) 25% of Consolidated Net Income (calculated prior to giving effect to this clause (d)) for such period;

(e) the net after-tax effect of gains, losses, charges and expenses attributable to asset dispositions or the sale or other disposition of any Equity Interests of any person, in each case other than in the ordinary course of business, as determined in good faith by a Responsible Officer or the Governing Persons of the Borrower or any Parent Entity on behalf of the Borrower, shall be excluded;

(f) the net after-tax effect of gains, losses, charges and expenses attributable to the early extinguishment or conversion of indebtedness, Hedge Agreements or other derivative instruments, in each case entered into in the ordinary course of business (including deferred financing expenses written off and premiums paid) shall be excluded;

(g) the Net Income for such period of any person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Borrower shall be increased by the amount of dividends or distributions or other payments that are actually paid to the Borrower or any other Restricted Subsidiary thereof in respect of such period in cash;

(h) the effects of adjustments (including the effects of such adjustments pushed down to the Borrower and the other Restricted Subsidiaries) in any line item in the Borrower’s consolidated financial statements pursuant to GAAP resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in connection with the Closing Date Transactions, any acquisition or any joint venture investments or the amortization or write off of any amounts thereof, net of taxes, shall be excluded;

(i) impairment charges, asset write offs and write downs, including impairment charges, asset write offs and write downs related to goodwill, intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case pursuant to GAAP shall be excluded;

(j) non-cash compensation charges and expenses, including any such charges and expenses arising from grants of stock appreciation or similar rights, phantom equity, stock options, restricted stock or other rights or equity incentive shall be excluded;

(k) (i) charges and expenses pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement, any stock subscription or shareholder agreement and (ii) charges, expenses, accruals and reserves in connection with the rollover, acceleration or payout of Equity Interests held by management of Holdings or any of its Restricted

 

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Subsidiaries, in the case of each of (i) and (ii), to the extent that (in the case of any cash charges and expenses) such charges, expenses, accruals and reserves are funded with cash proceeds contributed (other than from a Restricted Subsidiary) to the capital of Holdings or any direct or indirect parent of Holdings or Net Cash Proceeds of an issuance of Equity Interests (other than Disqualified Stock) of Holdings or (if such Net Cash Proceeds are contributed as common equity to the capital of Holdings) any direct or indirect parent of Holdings shall be excluded, in each case without duplication of proceeds applied in accordance with Section 6.01(aa), Section 6.06(d) or Section 6.09(b)(i)(3);

(l) charges, expenses and fees incurred, including financial advisory, accounting, auditor, legal and other consulting and advisory fees and any SEC or other filling fees and expenses, or any amortization thereof, in connection with any equity offering, acquisition (including a Permitted Business Acquisition), merger, investment, recapitalization, asset disposition, incurrence or repayment of Indebtedness (including deferred financing expenses), refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction consummated prior to the Closing Date and any transaction undertaken but not completed) and any non-recurring charges and expenses (including non-recurring merger expenses) incurred as a result of any such transaction shall be excluded;

(m) accruals and reserves that are established or adjusted, in each case within 18 months of the subject transaction, including as a result of the Closing Date Transactions or any other acquisition, investment, asset disposition, write down or write off (including the related tax benefit) in accordance with GAAP (including any adjustment of estimated payouts on earn-outs) or charges as a result of the adoption or modification of accounting policies shall be excluded;

(n) any charge or expense resulting from the application of FAS 141R relating to the incurrence of obligations in respect of an “earn out” or other similar contingent obligations shall be excluded;

(o) to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a good faith determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that (i) such coverage is not denied by the applicable carrier or indemnifying party in writing within 270 days and (ii) such amount is in fact reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within 365 days), losses, charges, expenses, accruals and reserves with respect to liability or casualty events or business interruption shall be excluded;

(p) losses, charges and expenses that are covered by indemnification or other reimbursement provisions in connection with any acquisition, investment or asset disposition, to the extent actually reimbursed, or, so long as the Borrower has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is in fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days), shall be excluded;

(q) (i) non-cash or unrealized gains or losses in respect of obligations under Specified Hedge Agreements or any ineffectiveness recognized in earnings related to qualifying hedge transactions or the fair value of changes therein recognized in earnings for derivatives that do not qualify as hedge transactions, in each case, in respect of obligations under Hedge Agreements entered into in the ordinary course of business, and (ii) unrealized gains or losses resulting from currency translation gains or losses related to currency remeasurements of indebtedness (including gains or losses resulting from (A) Hedge Agreements entered into in the ordinary course of business for currency exchange risk and (B) intercompany Indebtedness) and all other unrealized foreign currency translation gains or losses to the extent such gains or losses are non-cash items shall be excluded;

 

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(r) the net after-tax effect of gains, losses, charges and expenses attributable to disposed or discontinued operations and any net after-tax gains, losses, charges and expenses related to the disposal of disposed, abandoned or discontinued operations shall be excluded;

(s) non-cash interest charges on defined benefit plans, defined contribution plans or other pension plans shall be excluded;

(t) deferred tax expenses associated with tax deductions or net operating losses arising as a result of the Closing Date Transactions, or the release of any valuation allowance related to such item, shall be excluded (provided that they shall be deducted in any period in which such tax expense is incurred);

(u) any expenses or charges to the extent paid by a third party on behalf of the Borrower or any other Restricted Subsidiary shall be excluded; and

(v) the Consolidated Net Income of the Borrower will be increased by the amount of (i) the amount of cost savings and synergies, (ii) business optimization expenses (including consolidation initiatives), relocation or integration expenses; (iii) cost savings from the consolidation or closing of distribution centers or other facilities or exiting lines of business; and (iv) costs of initiatives aimed at profitability improvement; strategic initiatives; personnel relocation, restructuring, redundancy, severance, termination, settlement or judgment; and one-time compensation charges, in each case, in connection with the TimberTech Acquisition and actions by Holdings or any Restricted Subsidiary in connection therewith, not to exceed $28.0 million during the period commencing on the Closing Date and ending on the Maturity Date.

Consolidated Total Assets” shall mean, as of any date of determination, the total amount of all assets of the Borrower and the other Restricted Subsidiaries, determined in accordance with GAAP as of such date.

Consolidated Total Debt” shall mean, as of any date of determination, without duplication, (i) the aggregate principal amount of funded Indebtedness for borrowed money, Capital Lease Obligations and debt obligations evidenced by promissory notes or similar instruments of the Borrower and the other Restricted Subsidiaries outstanding on such date, determined on a consolidated basis in accordance with GAAP (but excluding the effects of any discounting of Indebtedness resulting from the application of purchase accounting in connection with the Closing Date Transactions or any Permitted Business Acquisitions) and (ii) guarantee obligations of the Borrower and the other Restricted Subsidiaries in respect of Indebtedness that, if incurred directly by the Borrower or any other Restricted Subsidiary, would constitute Indebtedness under clause (i) above; provided that Consolidated Total Debt shall not include (i) Indebtedness in respect of letters of credit, except to the extent of drawn and unreimbursed amounts thereunder, (ii) Indebtedness of Unrestricted Subsidiaries and (iii) obligations under Hedge Agreements.

Control” shall mean 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 ownership of voting securities, by contract or otherwise, and “Controlling” and “Controlled” shall have meanings correlative thereto.

 

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Cost” shall mean the calculated cost of purchases, based upon the Borrower’s accounting practices as reflected in the most recent Annual Financial Statements.

Covenant Trigger Event” shall occur at any time that Availability is less than the greater of (a) $12.5 million and (b) 10% of the Line Cap then in effect. Once commenced, a Covenant Trigger Event shall be deemed to be continuing until such time as Availability equals or exceeds the greater of (i) $12.5 million and (ii) 10% of the Line Cap then in effect for 30 consecutive days.

Credit Agreement Refinancing Indebtedness” shall mean any Indebtedness incurred pursuant to a Refinancing Amendment and issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, replace or refinance Revolving Facility Commitments (and extensions of credit thereunder) in whole (including any successive Credit Agreement Refinancing Indebtedness) (“Refinanced Debt” which, in the case of the Revolving Facility Commitments, shall be deemed to be in the full committed amount thereof whether or not drawn); provided that (i) such exchanging, extending, renewing, replacing or refinancing Indebtedness is in an original aggregate principal amount not greater than the principal amount of the Refinanced Debt (plus the amount of unpaid accrued or capitalized interest and premiums thereon (including tender premiums), underwriting discounts, original issue discount, defeasance costs, fees (including upfront fees), commissions and expenses), (ii) such Indebtedness is not secured by any assets or property of the Loan Parties that does not constitute Collateral, (iii) such Indebtedness is not guaranteed by any Subsidiary of the Borrower other than the Loan Parties, (iv) such Indebtedness does not mature prior to the Maturity Date of the Revolving Facility Commitments as of the First Restatement Effective Date and (v) such Refinanced Debt shall be repaid (in the case of Refinanced Debt consisting of Loans), defeased or satisfied and discharged, and all accrued interest, fees and premiums (if any) in connection therewith shall be paid and the Revolving Facility Commitments shall be permanently reduced on a dollar-for-dollar basis, in each case, on the date such Credit Agreement Refinancing Indebtedness is issued, incurred or obtained.

Credit Event” shall have the meaning assigned to such term in Article IV.

Credit Facilities” shall mean each of the Revolving Facility (including any replacement or refinancing of any Loans permitted hereunder) and the Term Facility.

Credit Party” shall mean any of the Administrative Agent, the Collateral Agent, each Lead Arranger, the Swingline Lender, each Issuing Bank or any Lender.

Cure Amount” shall have the meaning assigned to such term in Section 7.02.

Cure Right” shall have the meaning assigned to such term in Section 7.02.

DDA” shall mean any checking or other demand deposit account maintained by the Loan Parties.

DDA Notification” shall have the meaning assigned to such term in Section 5.11(a).

Default” shall mean any event or condition which, but for the giving of notice, lapse of time or both, would constitute an Event of Default.

Defaulting Lender” shall mean any Lender who meets any part of the definition of “Lender Default”.

 

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Designated Event of Default” shall mean any Event of Default under Section 7.01(a) (solely with respect to the accuracy of any Borrowing Base Certificate), 7.01(b), 7.01(c), 7.01(d) (solely with respect to a default under Section 5.04(h), 5.11 or 6.10), 7.01(h) or 7.01(i).

Designated Non-Cash Consideration” shall mean the fair market value of non-cash consideration received by the Borrower or any other Restricted Subsidiary in connection with an Asset Sale that is designated as Designated Non-Cash Consideration pursuant to a certificate of a Responsible Officer of the Borrower setting forth the basis of such valuation, less the amount of cash or cash equivalents received in connection with a subsequent sale of such Designated Non-Cash Consideration.

Deutsche Bank” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Disqualified Institution” shall mean (i) the persons identified in writing to the Administrative Agent on or prior to the First Restatement Effective Date as competitors of Holdings, the Borrower or any other Subsidiary (or, if after the First Restatement Effective Date, that are mutually agreed upon between the Borrower and the Administrative Agent, each party acting reasonably), (ii) Affiliates of any such competitors clearly identifiable by similarity of name other than any such Affiliate that is a bona fide debt fund or investment vehicle that is engaged in the making, purchasing, holding or otherwise investing in fixed-income instruments, commercial loans, bonds and similar extensions of credit in the ordinary course of business with separate fiduciary duties to the investors in such fund or vehicle, (iii) certain banks, financial institutions and other institutional lenders and investors that have been specifically identified in writing to the Administrative Agent on or prior to the First Restatement Effective Date, (iv) Affiliates of the Lead Arrangers engaged as principals primarily in private equity or venture capital (other than bona fide debt funds or investment vehicles that are engaged in the making, purchasing, holding or otherwise investing in fixed-income instruments, commercial loans, bonds and similar extensions of credit in the ordinary course of business with separate fiduciary duties to the investors in such funds or vehicles) or (v) such other persons identified in writing to the Administrative Agent on or prior to the First Restatement Effective Date (other than, in each case, such persons engaged by the Borrower as part of the Transactions or persons identified in writing by the Borrower to the Administrative Agent that are to be no longer considered Disqualified Institutions); provided that any Person that is a Lender and subsequently becomes a Disqualified Institution (but was not a Disqualified Institution at the time it became a Lender) shall not retroactively be deemed to be a Disqualified Institution hereunder; provided, further, any Person that is a Lender that is designated as a Disqualified Institution after the date it became a Lender, once so designated, shall not be entitled to acquire any additional assignments of, or participations in, Commitments or Loans from any other Lender.

Disqualified Stock” shall mean, with respect to any person, any Equity Interests of such person that, by their terms (or by the terms of any security or other Equity Interests into which they are convertible or for which they are redeemable or exchangeable), or upon the happening of any event or condition (a) mature or are mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale shall be subject to the prior repayment in full of the Loans and all other Obligations that are accrued and payable and the termination of the Commitments), (b) are redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provide for the scheduled payments of dividends in cash or (d) either mandatorily or at the option of the holders thereof, are or become convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Stock, in each case, prior to the date that is 91 days after the earlier of (i) the Latest Maturity Date and (ii) the date on which the Loans and all other Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent

 

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indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) are repaid in full, the Commitments are terminated and Letters of Credit expired, terminated or cash collateralized on terms satisfactory to the Issuing Banks; provided that only the portion of the Equity Interests that so mature or are mandatorily redeemable, are so convertible or exchangeable or are so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Stock; provided, further, that if such Equity Interests are issued to any employee or to any plan for the benefit of employees of Holdings or its Restricted Subsidiaries or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Stock solely because they may be required to be repurchased by Holdings or any of its Restricted Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability; provided, further, that any class of Equity Interests of such person that by its terms authorizes such person to satisfy its obligations thereunder by delivery of Equity Interests that are not Disqualified Stock shall not be deemed to be Disqualified Stock.

Distressed Person” shall have the meaning assigned to such term in the definition of “Lender-Related Distress Event”.

Dollars” or “$” shall mean lawful money of the United States of America.

Domestic Subsidiary” shall mean any Subsidiary that is not a Foreign Subsidiary.

Dominion Account” shall have the meaning assigned to such term in Section 5.11(b).

EEA Financial Institution” means (a) any institution 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 institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (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.

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.

Eligible Accounts” shall mean all Accounts of the Loan Parties reflected in the most recent Borrowing Base Certificate, net of sales, excise or similar taxes and net of returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding, available or claimed (in each case, without duplication, whether of the exclusionary criteria set forth below, of any Reserve or otherwise), except any Account with respect to which any of the exclusionary criteria set forth below applies (unless the Administrative Agent in its Reasonable Credit Judgment elects to include such Account). No Account shall be an Eligible Account if:

(a) it arises out of a sale made or services rendered by the applicable Loan Party to a Subsidiary or Affiliate of such Loan Party;

(b) it is not evidenced by an invoice;

(c) it remains unpaid more than 90 days after the original invoice date shown on the invoice (provided that as to Accounts with a due date greater than 30 days from the invoice date thereof, up to $6.0 million of which are unpaid more than 90 days after the original invoice date, but less than 120 days after the original invoice date, may be included as Eligible Accounts);

 

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(d) the total unpaid Accounts of the Account Debtor and its Affiliates to the Loan Parties exceed 50% of the respective net amount of all Eligible Accounts of the Loan Parties, but only to the extent of such excess;

(e) any covenant, representation or warranty contained in any Loan Document with respect to such Account has been breached in any material respect;

(f) the Account Debtor is also a creditor or supplier of the owner of such Account, or the Account Debtor has disputed liability with respect to such Account, or the Account Debtor has made any claim with respect to any other Account due from such Account Debtor to the owner of such Account, or the Account otherwise is or may become subject to right of setoff by the Account Debtor; provided that any such Account shall be ineligible under this clause (f) only to the extent of such contract, dispute, claim, setoff or similar right;

(g) (i) the Account Debtor has commenced a voluntary case under the U.S. federal bankruptcy laws (or any other applicable insolvency laws) as now constituted or hereafter amended, (ii) the Account Debtor has made an assignment composition or arrangement for the benefit of creditors, or a decree or order for relief has been entered by a court having jurisdiction in the premises in respect of the Account Debtor in an involuntary case under the federal bankruptcy laws (or any other applicable insolvency laws) as now constituted or hereafter amended, or any other petition or other application for relief under the U.S. federal bankruptcy laws (or any other applicable insolvency laws), as now constituted or hereafter amended, has been filed against the Account Debtor or (iii) the Account Debtor has failed, ceased business, ceased to be solvent, or consented to or suffered a receiver, trustee, liquidator, custodian, administrator receiver or manager, interim receiver, sheriff, monitor, sequestrator or similar officer of fiduciary to be appointed for it or for all or a significant portion of its assets or affairs; provided that the Administrative Agent may, in its Reasonable Credit Judgment, include Accounts from Account Debtors subject to such proceedings if and to the extent that such Accounts are fully covered by credit insurance, letters of credit or other sufficient third-party credit support, or are otherwise deemed by the Administrative Agent not to pose an unreasonable risk of non-collectibility;

(h) it arises from a sale made or services rendered to an Account Debtor that is headquartered outside the United States (which throughout this Agreement, for purposes of determining the Borrowing Base, shall include Puerto Rico) or Canada, unless backed by a letter of credit, credit insurance, guaranty, acceptance or similar terms acceptable to the Administrative Agent in its Reasonable Credit Judgment;

(i) it is owed by an Account Debtor that is not organized under the laws of the United States of America, any State of the United States, Canada or any Province of Canada, except to the extent that such Account is secured or payable by a letter of credit, credit insurance, guaranty, acceptance or similar terms satisfactory to the Administrative Agent in its Reasonable Credit Judgment;

(j) (i) it arises from a sale to the Account Debtor on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment, cash-on-delivery or any other repurchase or return basis or (ii) it is subject to a reserve established by the applicable Loan Party for potential returns or refunds, to the extent of such reserve;

 

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(k) the Account Debtor is the United States of America or Canada, or any agency thereof, unless the applicable Loan Party assigns its right to payment of such Account to the Collateral Agent, in a manner satisfactory to the Administrative Agent, in its Reasonable Credit Judgment, so as to comply with the Assignment of Claims Act of 1940 (31 U.S.C. §3727, 41 U.S.C. §15 et seq., as amended) or the Financial Administration Act (Canada), as amended;

(l) it is not subject to the Collateral Agent’s duly perfected, first-priority security interest or is subject to a Lien other than the Lien of the Collateral Agent (other than a Lien securing the Term Loan Obligations, Incremental Term Loans, Incremental Equivalent Term Debt, a Lien permitted under Section 6.02(t) or 6.02(bb), a Permitted Lien arising by operation of law and any other Permitted Lien that is subject to an intercreditor agreement in form and substance reasonably satisfactory to the Administrative Agent between the holder of such Lien and the Collateral Agent);

(m) the goods giving rise to such Account have not been delivered to and accepted by the Account Debtor or the services giving rise to such Account have not been performed by the applicable Loan Party and accepted by the Account Debtor or the Account otherwise does not represent a final sale;

(n) the Account is evidenced by chattel paper or an instrument of any kind, or has been reduced to judgment;

(o) the applicable Loan Party has made any agreement with the Account Debtor for any extension, compromise, settlement or modification of the Account or deduction therefrom (to the extent of such extension, compromise, settlement or modification), except for discounts or allowances (including credits, rebates, coupons or similar arrangements) which are made in the ordinary course of business and which discounts or allowances are reflected in the calculation of the face value of each invoice related to such Account;

(p) 50% or more of all Accounts owing from the Account Debtor or its Affiliates to the Loan Parties are not Eligible Accounts hereunder by reason of applicability of clause (c) above;

(q) the Account was acquired in a Permitted Business Acquisition, unless and until the Collateral Agent has completed or received such due diligence as the Agents may require, and the results of the foregoing are reasonably satisfactory to the Collateral Agent in its Reasonable Credit Judgment, and the Collateral Agent has agreed that such Account shall be deemed an Eligible Account; provided 100% of the net amount of such Account (to the extent such Account would otherwise be eligible pursuant to the other criteria of the definition of “Eligible Accounts”) shall be deemed an Eligible Account prior to the completion or receipt of such due diligence to the extent provided in Section 5.04(h)(ii).

(r) to the extent an Account represents any manufacturer’s or supplier’s credits, discounts, rebates, coupons, incentive plans or similar arrangements entitling a Borrower Party or any of its Affiliates to discounts on future purchase therefrom; or

(s) which is owing by an Account Debtor to the extent the aggregate amount of Eligible Accounts owing by such Account Debtor and its Affiliates to a Loan Party, taken as a whole, exceeds (i) with respect to each Account Debtor set forth on Schedule 1.01E, 20% of the aggregate amount of Eligible Accounts of the Loan Parties, (ii) with respect to an Account Debtor whose securities are rated BBB- (or the equivalent) or better by S&P or Baa3 (or the equivalent) or better by Moody’s, 30% of the aggregate amount of Eligible Accounts of the Loan Parties and (iii) with respect to each other Account Debtor, 15% of the aggregate amount of Eligible Accounts of the Loan Parties; provided that, with the consent of the Administrative Agent, in its Reasonable Credit Judgment, the Borrower may, from time to time, update Schedule 1.01E to include additional Account Debtors.

 

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If any Account at any time ceases to be an Eligible Account, then such Account shall promptly be excluded from the calculation of the Borrowing Base; provided, however, that if any Account ceases to be an Eligible Account because of the adjustment of or imposition of new exclusionary criteria pursuant to the succeeding paragraph, the Administrative Agent will not require exclusion of such Account from the Borrowing Base until three Business Days following the date on which the Administrative Agent gives notice to the Borrower of such ineligibility; provided that upon such notice, the Borrower Parties shall not be permitted to borrow any Loans or have any Letters of Credit issued so as to exceed the Borrowing Base after giving effect to such adjustment or imposition of new exclusionary criteria.

The Administrative Agent reserves the right, at any time and from time to time after the First Restatement Effective Date, to adjust any of the exclusionary criteria set forth above and to establish new criteria, in each case, in its Reasonable Credit Judgment (based on an analysis of material facts or events first occurring, or first discovered by the Administrative Agent after the First Restatement Effective Date), subject to the necessary approvals set forth in Section 9.08 in the case of adjustments or new criteria which have the effect of making more credit available than would have been available based upon the criteria in effect on the First Restatement Effective Date.

Eligible Domestic In-Transit Inventory” shall mean Inventory that would otherwise be Eligible Inventory (other than for its location) that has been shipped from a location of any Loan Party or from the manufacturer or wholesale distributor thereof within the United States for receipt at a location of any Loan Party within the United States and permitted hereunder, within 30 days of shipment, but in either case, which has not yet been delivered to such Loan Party, for which the purchase order is in the name of a Loan Party, title has passed to such Loan Party (and the Administrative Agent has received such evidence thereof as it has reasonably requested) and which is insured in accordance with the terms of this Agreement; provided that the aggregate amount of Inventory consisting of Eligible Domestic In-Transit Inventory for purposes of the calculation of the Borrowing Base at any time will not exceed $15.0 million.

Eligible Inventory” shall mean Inventory of each Loan Party consisting of raw materials, regrind, work-in-process and finished goods reflected in the most recent Borrowing Base Certificate, except any Inventory with respect to which any of the exclusionary criteria set forth below applies (unless the Administrative Agent in its Reasonable Credit Judgment elects to include such Inventory). No Inventory shall be Eligible Inventory if such Inventory:

(a) is obsolete, damaged, defective, unmerchantable, slow moving (with Inventory that has not been sold after a period of more than 12 months being deemed to be slow moving for this purpose), used, unfit for sale, not salable at prices approximating at least the cost of such Inventory in the ordinary course of business;

(b) does not meet in all material respects all standards imposed by any Governmental Authority having regulatory authority over such Inventory or its use or sale;

(c) is not solely owned by a Loan Party or a Loan Party does not have good and valid title thereto;

(d) it is not subject to the Collateral Agent’s duly perfected, first-priority security interest or is subject to a Lien other than the Lien of the Collateral Agent (other than a Lien securing the Term Loan Obligations, Incremental Term Loans, Incremental Equivalent Term Debt, a Lien permitted under Section 6.02(u) or 6.02(cc), a Permitted Lien arising by operation of law and any other Permitted Lien that is subject to an intercreditor agreement in form and substance reasonably satisfactory to the Administrative Agent between the holder of such Lien and the Collateral Agent);

 

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(e) is located (i) in a public warehouse, or (ii) in possession of a bailee; provided that (A) such Inventory will be Eligible Inventory if the Collateral Agent has received a reasonably satisfactory landlord’s agreement or bailee letter, as applicable, with respect to such location, (B) such Inventory will nevertheless be Eligible Inventory for 90 days following the date on which such Inventory becomes located in such warehouse, as applicable (or such longer period as the Administrative Agent may agree in its reasonable discretion), and the Administrative Agent may impose reserves equal to a two month rent reserve for such warehouse; provided that after 90 days (or such longer period as the Administrative Agent may agree in its reasonable discretion), such Inventory shall cease to be Eligible Inventory and (C) if such Inventory is in transit, it shall be Eligible Inventory if it satisfies the criteria set forth in clause (f) below;

(f) is in transit, except for Eligible Domestic In-Transit Inventory and Eligible LC Inventory and except as set forth in (g) below;

(g) is located outside of the United States of America or Canada, other than Eligible LC Inventory;

(h) which constitutes spare or replacement parts, subassemblies, packaging and shipping material, manufacturing supplies, samples, prototypes, displays or display items, bill-and-hold goods, goods that are returned or marked for return, repossessed goods, defective or damaged goods, goods held on consignment (unless a Loan Party retains title to such goods and such goods are fully insured) or goods which are not of a type held for sale in the ordinary course of business;

(i) is leased by or is on consignment to a Loan Party (unless a Loan Party retains title to such goods and such goods are fully insured);

(j) is not insured in compliance with the provisions of the Loan Documents;

(k) has been sold but not yet delivered or as to which a Borrower Party has accepted a deposit;

(l) is subject to the intellectual property rights of a third party; provided that such Inventory will be Eligible Inventory to the extent the Administrative Agent determines, in its Reasonable Credit Judgment, that upon an Event of Default such Inventory could be liquidated without (i) infringing or otherwise violating the rights of such third party, (ii) violating any contract with such licensor or (iii) incurring any liability with respect to payment of royalties other than royalties incurred pursuant to sale of such Inventory under the current licensing agreement;

(m) is acquired in a Permitted Business Acquisition, unless and until the Collateral Agent has completed or received (i) an appraisal of such Inventory from an Acceptable Inspector and otherwise meets the requirements of Eligible Inventory and (ii) such other due diligence as the Agents may require, all of the results of the foregoing to be reasonably satisfactory to the Agents in their Reasonable Credit Judgment; provided such Inventory (to the extent such Inventory (x) would otherwise be eligible pursuant to the other criteria of the definition of “Eligible Inventory” and (y) is of a type similar to inventory included in the Borrowing Base prior to such Permitted Business Acquisition (as determined by the Administrative Agent in its Reasonable Credit Judgment)) shall be deemed Eligible Inventory prior to the completion or receipt of such appraisal or due diligence to the extent provided in Section 5.04(h)(ii); or

 

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(n) is a discontinued product or component thereof and is not immediately usable in a continuing product; or

(o) is Inventory for which reclamation rights have been asserted by the seller.

If any Inventory at any time ceases to be Eligible Inventory, such Inventory shall promptly be excluded from the calculation of the Borrowing Base; provided, however, that if any Inventory ceases to be Eligible Inventory because of the adjustment of or imposition of new exclusionary criteria pursuant to the succeeding paragraph, the Administrative Agent will not require exclusion of such Inventory from the Borrowing Base until three Business Days following the date on which the Administrative Agent gives notice to the Borrower of such ineligibility; provided that upon such notice, the Borrower Parties shall not be permitted to borrow any Loans or have any Letters of Credit issued so as to exceed the Borrowing Base after giving effect to such adjustment or imposition of new exclusionary criteria.

The Administrative Agent reserves the right, at any time and from time to time after the First Restatement Effective Date, to adjust any of the exclusionary criteria set forth above and to establish new criteria, in each case, its Reasonable Credit Judgment (based on an analysis of material facts or events first occurring, or first discovered by the Administrative Agent after the First Restatement Effective Date), subject to the necessary approvals set forth in Section 9.08 in the case of adjustments or new criteria which have the effect of making more credit available than would be available based upon the criteria in effect on the First Restatement Effective Date.

Eligible LC Inventory” shall mean Inventory that would otherwise be Eligible Inventory (other than for its location) as to which: (i) the Inventory is purchased with and subject to a Letter of Credit issued hereunder, (ii) the Inventory is then in transit (whether by vessel, air or land) from a location outside of the continental United States of America to a location permitted hereunder and for which the Collateral Agent shall have received such evidence thereof as the Collateral Agent may reasonably require, (iii) the title of the Inventory has passed to, and such Inventory is owned by, a Loan Party and for which the Collateral Agent shall have received such evidence thereof as the Collateral Agent may reasonably require, (iv) the Collateral Agent has received each of the following (to the extent applicable): (A) a copy of the certificate of marine cargo insurance in connection therewith in which the Collateral Agent has been named as an additional insured and loss payee in a manner reasonably acceptable to the Collateral Agent and (B) a copy of the invoice, packing slip and manifest with respect thereto, (v) the Inventory is either (A) subject to a negotiable bill of lading: (1) that is consigned to the applicable Issuing Bank (unless and until such time as the Agents shall require that the same be consigned to the Collateral Agent, then thereafter, that is consigned to the Collateral Agent either directly or by means of endorsements), (2) that was issued by the carrier in respect of such Inventory and (3) is either in the possession of the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of the Collateral Agent or the subject of a telefacsimile or other electronic copy that the Agents have received from the applicable Issuing Bank with respect to the Letter of Credit and as to which the Agents have also received confirmation from such Issuing Bank that such document is in transit to the Agents or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory acting on behalf of the Collateral Agent or (B) subject to a negotiable cargo receipt and is not the subject of a bill of lading (other than a negotiable bill of lading consigned to, and in the possession of a consolidator or the Collateral Agent, or their respective agents) and such negotiable cargo receipt is (1) consigned to the applicable Issuing Bank (unless and until such time as Agents shall require that the same be consigned to the Collateral Agent, then thereafter, that is consigned to the Collateral Agent either directly or by means of endorsements), (2) issued by a consolidator in respect of such Inventory and (3) either in the possession of Collateral Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such

 

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Inventory acting on behalf of the Collateral Agent or the subject of a telefacsimile or other electronic copy that the Agents have received from the applicable Issuing Bank with respect to the Letter of Credit and as to which the Agents have also received a confirmation from such Issuing Bank that such document is in transit to the Collateral Agent or the customs broker, freight forwarder or other third party handling the shipping and delivery of such Inventory, (vi) such Inventory is insured in accordance with the terms of this Agreement, and (vii) such Inventory shall not have been in transit for more than 90 days.

environment” shall mean ambient and indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources such as flora and fauna or as otherwise defined in any Environmental Law.

Environmental Laws” shall mean all applicable laws (including common law), statutes, rules, regulations, codes, ordinances, orders, binding agreements and final, binding decrees or judgments, in each case, promulgated or entered into by or with any Governmental Authority, relating to the environment, preservation or reclamation of natural resources, the generation, management, Release or threatened Release of, or exposure to, any harmful or deleterious substances or to occupational health and safety matters (to the extent relating to the environment or exposure to harmful or deleterious substances) but for the avoidance of doubt excluding any laws relating to products liability.

Equity Interests” shall mean, with respect to any person, any and all shares, interests, rights to purchase or otherwise acquire, warrants, options, participations or other equivalents of or interests in (however designated) equity or ownership of such person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest, and any securities or other rights or interests convertible into or exchangeable for any of the foregoing.

ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time, and any final regulations promulgated and the rulings issued thereunder.

ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with the Borrower or any of its Subsidiaries, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

ERISA Event” shall mean (a) a Reportable Event, or the requirements of Section 4043(b) of ERISA apply, with respect to a Plan, (b) a withdrawal by Borrower or any of its Restricted Subsidiaries or, to the knowledge the Borrower, any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations by Borrower or any of its Restricted Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate that is treated as a termination under Section 4062(e) of ERISA, (c) a complete or partial withdrawal by the Borrower or any of its Restricted Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate from a Multiemployer Plan, receipt of written notification by the Borrower any of its Restricted Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate concerning the imposition of Withdrawal Liability or written notification that a Multiemployer Plan is, or is expected to be, insolvent, in reorganization within the meaning of Title IV of ERISA or endangered or in critical status within the meaning of Section 305 of ERISA, (d) the provision by a Plan administrator or the PBGC of notice of intent to terminate a Plan, the treatment of a Plan or Multiemployer Plan amendment as a termination under Sections 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a Plan or Multiemployer Plan, (e) the incurrence by the Borrower any of its Restricted Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan or

 

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Multiemployer Plan, other than for the payment of plan contributions or PBGC premiums due but not delinquent under Section 4007 of ERISA, (f) the application for a minimum funding waiver under Section 302(c) of ERISA with respect to a Plan, (g) the imposition of a lien under Section 303(k) of ERISA 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) a Foreign Benefit Event.

Eurocurrency Borrowing” shall mean a Borrowing comprised of Eurocurrency Revolving Loans.

Eurocurrency Revolving Loan” shall mean any Revolving Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

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.

Event of Default” shall have the meaning assigned to such term in Section 7.01.

Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

Excluded Amount” shall have the meaning assigned to such term in Section 5.11(a).

Excluded Assets” shall have the meaning assigned to it in the Collateral and Guarantee Agreement.

Excluded Swap Obligation” shall mean, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal or is not permitted 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 Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.

Excluded Taxes” shall mean, with respect to any Recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder, (a) income taxes imposed on or measured by its net income (however denominated), franchise taxes imposed in lieu of net income taxes or 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 making a Loan to the Borrower, any withholding tax (including any backup withholding tax) imposed by the United States that is in effect and would apply to amounts payable hereunder to such Lender at the time such Lender (i) acquires its interest in the Loans or Commitments (other than pursuant to Section 2.15) or (ii) designates a new lending office, except in each case to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from a Loan Party with respect to any withholding tax pursuant to Section 2.17(a) or Section 2.17(c)), (c) Taxes attributable to such Lender’s failure to comply with Section 2.17(d) and (d) any U.S. federal withholding Taxes imposed under FATCA.

 

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Executive Order” shall have the meaning assigned to such term in Section 3.22(b).

Existing Lenders” means “Lenders” under and defined in the Existing Revolving Credit Agreement.

Existing Letters of Credit” means the letters of credit currently outstanding under the Existing Revolving Credit Agreement and described on Schedule 1.01B hereto.

Existing Revolving Credit Agreement” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Existing Revolving Loans” means “Revolving Loans” under and as defined in the Existing Revolving Credit Agreement.

Existing Swingline Loans” means “Swingline Loans” under and as defined in the Existing Revolving Credit Agreement.

Extended Revolving Commitment” shall have the meaning assigned to such term in Section 2.23(a).

Extending Lender” shall have the meaning assigned to such term in Section 2.23(a).

Extension” shall have the meaning assigned to such term in Section 2.23(a).

Extension Amendment” shall have the meaning assigned to such term in Section 2.23(c).

Extension Offer” shall have the meaning assigned to such term in Section 2.23(a).

FATCA” shall mean 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 or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

FCPA” shall mean the Foreign Corrupt Practices Act of 1977, as amended, modified, and supplemented thereto.

Federal Funds Effective Rate” shall mean, for any day, an interest rate per annum equal to the rate calculated by the New York Federal Reserve Bank based on such day’s federal funds transactions by depository institutions (as determined in such manner as the New York Federal Reserve Bank shall set forth on its public website from time to time) and published on the next succeeding Business Day by the New York Federal Reserve Bank as the federal funds effective rate.

Fee Letter” shall mean the Fee Letter, dated August 16, 2013, by and among CPG Merger Sub, LLC, Barclays Bank PLC, Citigroup Global Markets Inc., Deutsche Bank, Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities Inc., JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, The Royal Bank of Scotland plc, RBS Securities Inc., UBS Loan Finance LLC and UBS Securities LLC, as amended and supplemented prior to the Closing Date.

Fees” shall mean the Commitment Fees, the L/C Participation Fees, the Issuing Bank Fees and the Administrative Agent Fees and all other fees set forth in the Fee Letter and relating hereto.

 

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Financial Officer” shall mean, with respect to any person, the chief financial officer, principal accounting officer, director of financial services, treasurer, assistant treasurer or controller of such person.

Financial Performance Covenant” shall mean the covenant set forth in Section 6.10.

First Lien Debt” shall mean, as of any date of determination, the aggregate principal amount of Consolidated Total Debt outstanding on such date that is secured by a Lien on the Term Loan Priority Collateral that is senior to the Lien on the Term Loan Priority Collateral securing the Obligations or that is secured by a Lien on the ABL Priority Collateral that is pari passu or senior to the Lien on the ABL Priority Collateral securing the Obligations.

First Lien Leverage Ratio” shall mean, as at any date of determination, the ratio of First Lien Debt (net of Unrestricted Cash and cash equivalents of the Borrower and the other Restricted Subsidiaries) as at such date to Consolidated EBITDA for the trailing four fiscal quarter period most recently ended prior to such date for which financial statements have been delivered pursuant to Section 5.04.

First Restatement Effective Date” means the date on which the conditions specified in Section 4.02 are satisfied (or waived in accordance with Section 9.08).

Fixed Charge Coverage Ratio” shall mean, the ratio of (i) trailing four-quarter Consolidated EBITDA of the Borrower and the other Restricted Subsidiaries minus unfinanced Consolidated Maintenance Capital Expenditures to (ii) the sum of (1) consolidated interest charges paid or payable currently in cash, but in any event to (A) exclude (w) fees and expenses associated with the Closing Date Transactions, the Transactions and any annual agency fees, (x) costs associated with obtaining, or breakage costs in respect of, obligations under Hedge Agreements, (y) fees and expenses associated with any Asset Sale, acquisitions, Investments, equity issuances or debt issuances (in each case, whether or not consummated) and (z) amortization of deferred financing costs and (B) be net of interest income, (2) taxes paid or payable currently in cash (including any Restricted Payments made to the Borrower to enable the Borrower to pay taxes), (3) scheduled principal payments of Indebtedness for borrowed money (including payments in respect of Capital Lease Obligations but excluding payments in respect of intercompany Indebtedness and any payments due on the final maturity of any such Indebtedness) paid or payable currently in cash and (4) all cash dividend payments (excluding items eliminated in consolidation) on any Disqualified Stock of the Borrower and the other Restricted Subsidiaries.

Foreign Benefit Event” shall mean, with respect to any Foreign Benefit Plan, (a) the existence of unfunded liabilities in excess of the amount permitted under any applicable law, or in excess of the amount that would be permitted absent a waiver from a Governmental Authority, (b) the failure to make the required contributions or payments under any applicable law on or before the due date for such contributions or payments, (c) the receipt of a notice by a Governmental Authority relating to the intention to terminate any such Foreign Benefit Plan, which termination would reasonably be expected to give rise to liability for the Borrower or any of the other Restricted Subsidiaries or to appoint a trustee or similar official to administer any such Foreign Benefit Plan, or alleging insolvency or any such Foreign Benefit Plan, (d) the incurrence of any liability under applicable law on account of the complete or partial termination of such Foreign Benefit Plan or the complete or partial withdrawal of any participating employer therein, (e) the occurrence of any transaction that is prohibited under any applicable law and could reasonably be expected to result in the incurrence of any liability by the Borrower or any of the other Restricted Subsidiaries, or (f) the imposition on the Borrower or any of the other Restricted Subsidiaries of any fine, excise tax or penalty resulting from any noncompliance with any applicable law, in each case, that would result in a Material Adverse Effect.

 

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Foreign Benefit Plan” shall mean any benefit plan (other than a Plan or a Multiemployer Plan) that is not governed by the laws of the United States and that, under applicable law, is required to be funded through a trust or other funding vehicle maintained exclusively by a Governmental Authority.

Foreign Lender” shall mean any Lender that is organized under the laws of a jurisdiction other than the United States of America. For purposes of this definition, the United States of America, each state thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

Foreign Subsidiary” shall mean any Subsidiary that is not organized under the laws of the United States or any state thereof or the District of Columbia.

Fronting Exposure” shall mean, at any time there is a Defaulting Lender, (a) with respect to the Issuing Banks, such Defaulting Lender’s Revolving Facility Percentage of the outstanding Revolving L/C Exposure, other than Revolving L/C Exposure 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 the Swingline Lender, such Defaulting Lender’s Revolving Facility 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” shall mean generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis, subject to the provisions of Section 1.03; provided that any reference to the application of GAAP in Section 3.13(b), Section 5.03, Section 5.07 and Section 6.02(e) to a Foreign Subsidiary (and not as a consolidated Subsidiary of the Borrower) shall mean generally accepted accounting principles in effect from time to time in the jurisdiction of organization of such Foreign Subsidiary.

Governing Person(s)” shall mean (a) in the case of any corporation, the board of directors of such corporation, (b) in the case of any limited liability company, (i) if such limited liability company is a member-managed limited liability company, the member(s) of such limited liability company or (ii) if such limited liability company is not a member-managed limited liability company, the board of directors, board of managers or manager of such limited liability company, (c) in the case of any partnership, the general partner of such partnership and (d) in case of any other entity, the functional equivalent of the foregoing as it relates to that entity.

Governmental Authority” shall mean any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body with competent jurisdiction over a person.

Guarantee” of or by any person (the “guarantor”) shall mean (a) any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take or pay or otherwise) or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligations, (ii) 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 Indebtedness or other obligation, (iii)

 

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entered into for the purpose of assuring in any other manner the holders of such Indebtedness or other obligation of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part) or (iv) as an account party in respect of any letter of credit, bank guarantee or other letter of credit guarantee issued to support such Indebtedness or other obligation, or (b) any Lien on any assets of the guarantor securing any Indebtedness (or any existing right, contingent or otherwise, of the holder of Indebtedness to be secured by such a Lien) of any other person, whether or not such Indebtedness or other obligation is assumed by the guarantor; provided, however, that the term “Guarantee” shall not include endorsements of instruments for deposit or collection in the ordinary course of business or customary and reasonable indemnity obligations in effect on the First Restatement Effective Date or entered into in connection with any acquisition or disposition of assets permitted by this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the Indebtedness in respect of which such Guarantee is made 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.

Guarantors” shall mean Holdings, each Restricted Subsidiary of the Borrower listed on Schedule 1.01C and each other Restricted Subsidiary of the Borrower that is or becomes, or is required to become, a party to the Collateral Agreement after the First Restatement Effective Date.

Hazardous Materials” shall mean all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including explosive or radioactive substances or petroleum or petroleum byproducts or distillates, friable asbestos or friable asbestos containing materials, polychlorinated biphenyls or radon gas, in each case, that are regulated or would give rise to liability under any Environmental Law.

Hedge Agreement” shall mean 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, in each case, not entered into for speculative purposes; 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 Holdings or any of its Subsidiaries shall be a Hedge Agreement.

Historical Annual Financial Statements” shall have the meaning assigned to such term in Section 4.02(b).

Historical Interim Financial Statements” shall have the meaning assigned to such term in Section 4.02(b).

Holdings” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Immaterial Subsidiary” shall mean any Subsidiary that (a) did not, as of the last day of the fiscal year of the Borrower most recently ended, have assets with a value in excess of 5.0% of the Consolidated Total Assets or revenues representing in excess of 5.0% of total revenues of the Borrower and the other Restricted Subsidiaries on a consolidated basis as of such date, and (b) when taken together with all Immaterial Subsidiaries as of the last day of the fiscal year of the Borrower most recently ended, have assets with a value in excess of 10.0% of Consolidated Total Assets or revenues representing in excess of 10.0% of total revenues of the Borrower and the other Restricted Subsidiaries as of such date; provided that the Borrower shall only be required to make such determination at the time it delivers

 

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Annual Financial Statements corresponding to such fiscal year pursuant to Section 5.04(a). The Borrower will designate in writing to the Administrative Agent the Subsidiaries that will cease to be treated as “Immaterial Subsidiaries” promptly after making any determination in order to comply with the foregoing limitation. All Accounts and Inventory of the Immaterial Subsidiaries shall be segregated or otherwise identifiable in a manner sufficient to distinguish ownership of such Accounts and Inventory from the Accounts and Inventory of the Loan Parties.

Incremental Equivalent Term Debt” shall mean the “Incremental Equivalent Term Debt” as defined in the Term Loan Credit Agreement.

Incremental Facility Amendment” shall have the meaning assigned to such term in Section 2.21(b).

Incremental Revolving Commitments” shall have the meaning assigned to such term in Section 2.21(a).

Incremental Revolving Lender” shall have the meaning assigned to such term in Section 2.21(b).

Incremental Term Loans” shall mean term loans made by one or more lenders to the Borrower pursuant to Section 2.19 of the Term Loan Credit Agreement.

Indebtedness” shall mean, with respect to any person, without duplication, (a) all obligations of such person for borrowed money, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person under conditional sale or title retention agreements relating to property or assets purchased by such person, (d) all obligations of such person issued or assumed as the deferred purchase price of property or services, to the extent the same would be required to be shown as a long-term liability on a balance sheet prepared in accordance with GAAP, (e) all Capital Lease Obligations of such person, (f) all net payments that such person would have to make in the event of an early termination, on the date Indebtedness of such person is being determined, in respect of outstanding Hedge Agreements, (g) the principal component of all obligations, contingent or otherwise, of such person as an account party in respect of letters of credit and bank guarantees, (h) the principal component of all obligations of such person in respect of bankers’ acceptances, (i) all Guarantees by such person of Indebtedness described in clauses (a) through (h) above) and (j) the amount of all obligations of such person with respect to the redemption, repayment or other repurchase of any Disqualified Stock (excluding accrued dividends that have not increased the liquidation preference of such Disqualified Stock); provided that Indebtedness shall not include (i) trade payables, accrued expenses and intercompany liabilities arising in the ordinary course of business, (ii) prepaid or deferred revenue arising in the ordinary course of business, (iii) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase prices of an asset to satisfy unperformed obligations of the seller of such asset, (iv) earn-out obligations until such obligations become a liability on the balance sheet of such person in accordance with GAAP or (v) obligations under or in respect of the Sale/Lease-Back Documents. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such person in respect thereof.

Indemnified Taxes” shall mean (a) all 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), Other Taxes.

Indemnitee” shall have the meaning assigned to such term in Section 9.05(b).

 

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Information” shall have the meaning assigned to such term in Section 3.14(a).

Insufficiency” with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA.

Intellectual Property Rights” shall have the meaning assigned to such term in Section 3.23.

Interest Election Request” shall mean a request by the Borrower to convert or continue a Revolving Facility Borrowing in accordance with Section 2.07.

Interest Payment Date” shall mean, (a) with respect to any Eurocurrency Revolving Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months’ duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months’ duration been applicable to such Borrowing and, in addition, the date of any refinancing or conversion of such Borrowing with or to a Borrowing of a different Type and (b) with respect to any ABR Loan, the last Business Day of each March, June, September and December.

Interest Period” shall mean, as to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as applicable, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is one, two, three or six months thereafter (or, if available to all Lenders, 12 months), as the Borrower may elect, or the date any Eurocurrency Borrowing is converted to an ABR Borrowing in accordance with Section 2.07 or repaid or prepaid in accordance with Section 2.10 or 2.11; provided, however, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period 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 (c) no Interest Period shall extend beyond the applicable Maturity Date. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period.

Inventory” shall mean, with respect to a person, all of such person’s now owned and hereafter acquired inventory (as defined in the UCC), goods and merchandise, wherever located, in each case, to be furnished under any contract of service or held for sale or lease, all returned goods, raw materials, work-in-process, finished goods (including embedded software), other materials, and supplies of any kind, nature or description which are used or consumed in such person’s business or used in connection with the packing, shipping, advertising, selling, or finishing of such goods, merchandise and other property, and all documents of title or other documents representing the foregoing.

Investment” shall have the meaning assigned to such term in Section 6.04.

Investment Conditions” shall mean (i) no Default or Event of Default shall have occurred and be continuing or would result from the taking of the relevant action as to which the satisfaction of the Investment Conditions is being determined and (ii) on a Pro Forma Basis, immediately prior to and immediately after giving effect to any transaction that is subject to the Investment Conditions, either (A) (1) Availability is at least 12.5% of the Line Cap at such time and for the immediately preceding 30 days and (2) the Fixed Charge Coverage Ratio, on a Pro Forma Basis, is at least 1.0 to 1.0 or (B) Availability is at least 15.0% of the Line Cap at such time and for the immediately preceding 30 days.

 

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IRS” means the United States Internal Revenue Service.

Issuing Bank” shall mean Deutsche Bank, Bank of America, N.A., Barclays Bank PLC, JPMorgan Chase Bank, N.A. and each other Issuing Bank designated pursuant to Section 2.05(k), in each case, in its capacity as an issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.05(i); provided that in no event shall Barclays Bank PLC be required to issue any Trade Letter of Credit. An Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

Issuing Bank Fees” shall have the meaning assigned to such term in Section 2.12(b).

Junior Financing” shall have the meaning assigned to such term in Section 6.09(b)(i).

Latest Maturity Date” shall mean, at any date of determination, the latest Maturity Date of the Revolving Facility Commitments, any Extended Revolving Commitments or any Replacement Revolving Commitments in effect on such date.

L/C Amount” shall have the meaning assigned to such term in the definition of “Revolving L/C Exposure”.

L/C Disbursement” shall mean a payment or disbursement made by an Issuing Bank pursuant to a Letter of Credit.

L/C Participation Fee” shall have the meaning assigned such term in Section 2.12(b).

LCE Election” shall have the meaning assigned to such term in Section 1.06.

LCE Test Date” shall have the meaning assigned to such term in Section 1.06.

Lead Arranger” shall mean each of the Bookrunners and Lead Arrangers identified on the cover page of this Agreement.

Lender” shall mean each financial institution listed on Schedule 2.01 (other than any such person that has ceased to be a party hereto pursuant to an Assignment and Acceptance in accordance with Section 9.04), as well as any person that becomes a Lender hereunder pursuant to Section 9.04 and any Additional Lender. Unless the context clearly indicates otherwise, the term “Lenders” shall include the Swingline Lender.

Lender Default” shall mean (a) the refusal (which may be given verbally or in writing and has not been retracted) or failure of a Lender to make available its portion of any Borrowing to acquire participations in a Swingline Loan pursuant to Section 2.04 or to fund its portion of any unreimbursed payment under Section 2.05(e), which refusal or failure is not cured within two Business Days after the date of such refusal or failure, unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s good faith determination that one or more conditions precedent to funding has not been satisfied, (b) the failure of a Lender to pay over to the Administrative Agent, any Issuing Bank or any other Lender any amount (other than any amount referred to in clause (a)) required to be paid by it under this Agreement within two Business Days of the

 

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date such amount is due, (c) any Lender having notified the Borrower or the Administrative Agent in writing that it does not intend to comply with its obligations under Section 2.04, Section 2.05 or Section 2.06, or any Lender having made a public statement that it does not intend to comply with Section 2.04, Section 2.05 or Section 2.06 or its funding obligations generally under other agreements pursuant to which it has committed to extend credit, unless such public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent to funding cannot be satisfied, (d) the failure of any Lender within three Business Days after request by the Administrative Agent in writing to confirm that it will comply with its obligations under Section 2.04, Section 2.05 or Section 2.06, as applicable, (e) the admission by any Lender that it has been deemed insolvent or is subject to a Lender-Related Distress Event or (f) any Lender, or the direct or indirect parent company of any Lender, becoming the subject of a Bail-In Action; provided that a Lender shall cease to be a Defaulting Lender pursuant to clause (d) hereof upon receipt of written confirmation by the Administrative Agent and the Borrower that it will comply with its obligations under Section 2.04, Section 2.05 or Section 2.06, as applicable.

Lender-Related Distress Event” shall mean, with respect to any Lender or any person that directly or indirectly Controls such Lender (each, a “Distressed Person”), as the case may be, a voluntary or involuntary case with respect to such Distressed Person under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, or a custodian, conservator, receiver or similar official being appointed for such Distressed Person or any substantial part of such Distressed Person’s assets, or such Distressed Person or any person that directly or indirectly controls such Distressed Person being subject to a forced liquidation, or such Distressed Person making a general assignment for the benefit of creditors or being otherwise adjudicated as, or determined by any Governmental Authority having regulatory authority over such Distressed Person or its assets to be, insolvent or bankrupt; provided that a Lender-Related Distress Event shall not be deemed to have occurred solely by virtue of the ownership or acquisition of any Equity Interests in any Lender or any person that directly or indirectly controls such Lender by a Governmental Authority or an instrumentality thereof.

lending office” shall mean, as to any Lender, the applicable branch, office or Affiliate of such Lender designated by such Lender to make Loans.

Letters of Credit” shall mean any letters of credit issued pursuant to Section 2.05.

Letter of Credit Commitment” shall mean, with respect to each Issuing Bank, the commitment of such Issuing Bank to issue Letters of Credit pursuant to Section 2.05, expressed as an amount representing the maximum aggregate permitted amount of the aggregate Revolving L/C Exposure attributable to Letters of Credit issued by such Issuing Bank. The Letter of Credit Commitment of (a) Deutsche Bank is $20.0 million, (b) Bank of America, N.A. is $10.0 million, (c) Barclays Bank PLC is $10.0 million and (d) JPMorgan Chase Bank, N.A. is $10.0 million.

Letter of Credit Request” shall mean a request by the Borrower substantially in the form of Exhibit E (or such other form as may be agreed between the Borrower and the Administrative Agent).

Letter of Credit Sublimit” shall mean $50.0 million.

Leverage Ratio Debt” shall have the meaning assigned to such term in Section 6.01(d).

 

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LIBO Rate” shall mean, with respect to any Eurocurrency Borrowing for any Interest Period, the rate per annum equal to the arithmetic mean of the offered rates for deposits in Dollars with a term equivalent to such Interest Period that appears on the Reuters Screen LIBOR01 Page (or such other page as may replace such page on such service for the purpose of displaying the rates at which Dollar deposits are offered by leading banks in the London interbank deposit market as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period; provided that if such rate is not available at such time for any reason, then the “LIBO Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurocurrency Revolving Loan being made, continued or converted by the Administrative Agent and with a term equivalent to such Interest Period would be offered by the Administrative Agent to major banks in the London interbank Eurocurrency market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period; provided, further, that if the “LIBO Rate” shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, hypothecation, pledge, charge, security interest or similar encumbrance in or on such asset or (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; provided that in no event shall an operating lease or an agreement to sell be deemed to constitute a Lien.

Limited Condition Event” shall have the meaning assigned to such term in Section 1.06.

Line Cap” shall mean, as of any date of determination, the lesser of the aggregate Revolving Facility Commitments and the Borrowing Base, each as then in effect.

Loan Accounts” shall mean the loan accounts established on the books of the Administrative Agent.

Loan Documents” shall mean this Agreement, the Security Documents, the ABL/Term Loan Intercreditor Agreement, any Note and, solely for the purposes of Section 3.01, Section 3.02, and Section 7.01 hereof, the Fee Letter, as each such document may be amended, restated, supplemented, replaced, refinanced or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement.

Loan Parties” shall mean Holdings, the Borrower, each Co-Borrower and the other Subsidiary Loan Parties.

Loans” shall mean the Revolving Loans and the Swingline Loans and any other loans and advances of any kind made by the Administrative Agent, any Lender or any Affiliate of the Administrative Agent or any Lender pursuant to this Agreement.

Management Group” shall mean the group consisting of the Governing Persons of Holdings and its Subsidiaries, as the case may be, on the Closing Date, or any replacements appointed or elected by the Sponsors or their Affiliates after the Closing Date.

Margin Stock” shall have the meaning assigned to such term in Regulation U.

Market Disruption Event” shall have the meaning assigned to such term in Section 2.14(b).

 

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Material Adverse Effect” shall mean a material adverse effect on (i) the business, financial condition or results of operations, in each case, of Holdings and its Restricted Subsidiaries, taken as a whole, (ii) the ability of the Borrower and the Guarantors (taken as a whole) to perform their payment obligations under the Loan Documents or (iii) the legality, validity or enforceability of the Loan Documents or the rights and remedies of the Administrative Agent and the Lenders, taken as a whole, under the Loan Documents.

Material Indebtedness” shall mean Indebtedness (other than Loans and Letters of Credit) of Holdings or any Subsidiary Loan Party in an aggregate principal amount exceeding $30.0 million.

Material Real Property” shall mean Real Property having a value on an individual basis in excess of $5.0 million.

Material Subsidiary” shall mean any Restricted Subsidiary other than Immaterial Subsidiaries.

Maturity Date” shall mean the earliest of (i) the date that is five years after the First Restatement Effective Date, (b) the date that is 91 days prior to the maturity of the Term Loan Obligations or any Permitted Refinancing Indebtedness in respect thereof and (c) the date that is 91 days prior to the maturity of the Senior Unsecured Notes or any Permitted Refinancing Indebtedness in respect thereof.

Maximum Rate” shall have the meaning assigned to such term in Section 9.09.

Minimum Extension Condition” shall have the meaning assigned to such term in Section 2.23(b).

Moody’s” shall mean Moody’s Investors Service, Inc.

Mortgage Policies” shall have the meaning assigned to such term in Section 5.10(b).

Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Borrower or any other Restricted Subsidiary or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding six plan years made or accrued an obligation to make contributions.

Net Cash Proceeds” shall mean 100% of the cash proceeds from the incurrence, issuance or sale by the Borrower or any other Restricted Subsidiary of any Indebtedness (other than all Indebtedness not incurred in violation of Section 6.01 (other than Credit Agreement Refinancing Indebtedness)), Equity Interests or capital contributions, net of all taxes and fees (including attorney, accountants, auditor, printer, SEC filing, brokerage, consultant, investment banking, advisory, placement, arranger or underwriting fees and expenses and any other customary fees and expenses actually incurred in connection therewith).

Net Income” shall mean, with respect to any person, the net income (loss) of such person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.

New York Courts” shall have the meaning assigned to such term in Section 9.15(a).

 

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New York Federal Reserve Bank” shall mean the Federal Reserve Bank of New York.

New York Federal Reserve Bank Rate” shall mean, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if neither of such rates are published for any day that is a Business Day, the term “New York Federal Reserve Bank Rate” shall mean the rate for a federal funds transaction quoted at 11:00 a.m. on such day received to the Administrative Agent from a federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

Non-Consenting Lender” shall have the meaning assigned to such term in Section 2.19(c).

Note” shall have the meaning assigned to such term in Section 2.09(b).

Obligations” shall mean (a) all amounts owing to any Agent, any Issuing Bank or any Lender pursuant to the terms of this Agreement or any other Loan Agreement, including all interest and expenses accrued or accruing (or that would, absent the commencement of an insolvency or liquidation proceeding, accrue) after the commencement by or against any Loan Party of any proceeding under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law naming such Loan Party as the debtor in such proceeding, in accordance with and at the rate specified in this Agreement, whether or not the claim for such interest or expense is allowed or allowable as a claim in such proceeding, (b) all amounts owing to any Qualified Counterparty under any Specified Hedge Agreement and (c) any Cash Management Obligations; provided that (i) the Obligations of the Loan Parties under any Specified Hedge Agreement and Cash Management Obligations shall be secured and guaranteed pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and guaranteed and (ii) any release of Collateral or Guarantors (as defined in the Collateral Agreement) effected in the manner permitted by this Agreement or any Security Document shall not require the consent of any Cash Management Bank or Qualified Counterparty pursuant to any Loan Document; and, provided, further, that for purposes of determining any Obligations of a Loan Party, “Obligations” shall not create any Guarantee by a Guarantor of any Excluded Swap Obligation of such Guarantor.

OFAC” shall have the meaning assigned to such term in Section 3.22(b).

Other Accounts” shall have the meaning assigned to such term in Section 5.11(a).

Other Connection Taxes” shall mean, 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 solely 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).

Other Taxes” shall mean any and all present or future stamp or documentary taxes or any other excise, transfer, sales, property, 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).

 

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Overadvance” shall have the meaning assigned to such term in Section 2.01(b).

Overnight Bank Funding Rate” shall mean, for any day, an interest rate per annum equal to the rate comprised of both overnight federal funds and overnight eurodollar borrowings by U.S. managed banking offices of depository institutions (as such composite rate shall be determined by the New York Federal Reserve Bank as set forth on its public website from time to time) and published on the next succeeding Business Day by the New York Federal Reserve Bank as an overnight bank funding rate (from and after such date as the New York Federal Reserve Bank shall commence to publish such composite rate).

Parent Entity” shall mean any direct or indirect parent of the Borrower.

Participant” shall have the meaning assigned to such term in Section 9.04(d).

Payment Conditions” shall mean (i) no Default or Event of Default shall have occurred and be continuing or would result from the taking of the relevant action as to which the satisfaction of the Payment Conditions is being determined and (ii) on a Pro Forma Basis, immediately prior to and immediately after giving effect to any transaction that is subject to the Payment Conditions, either (A) (1) Availability is at least 12.5% of the Line Cap at such time and for the immediately preceding 30 days and (2) the Fixed Charge Coverage Ratio, on a Pro Forma Basis, is at least 1.0 to 1.0 or (B) Availability is at least 17.5% of the Line Cap at such time and for the immediately preceding 30 days.

Payment Office” shall mean the office of the Administrative Agent located at 60 Wall St., 2nd floor, New York, NY 10005, or such other office as the Administrative Agent may designate to the Borrower and the Lenders from time to time.

PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, or any successor thereto.

Permitted Business Acquisition” shall mean any acquisition of a business, line or division of a person, all or substantially all the assets of, or a majority or all the Equity Interests (other than directors’ qualifying shares) in, or merger, consolidation or amalgamation with, a person or division or line of business of a person (or any subsequent acquisition of Equity Interests in a person, a majority of whose Equity Interests were previously acquired in a Permitted Business Acquisition) if, immediately after giving effect thereto, the Investment Conditions are satisfied.

Permitted Cure Securities” shall mean any equity securities of any Parent Entity other than Disqualified Stock.

Permitted Holder” shall mean any of (a) the Sponsors and any of their Affiliates, (b) funds or partnerships managed or advised by any of the persons described in clause (a) of this definition (but not including any portfolio company of any of the foregoing), (c) the Management Group, (d) family members or trusts of any person listed in clauses (a) and (c) and (e) any person that forms a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) with any of the persons listed in clauses (a), (c) and (d); provided that persons described in clauses (a), (c) and (d) shall form the majority in interest of any group formed pursuant to this clause (e).

Permitted Indebtedness” shall mean all Indebtedness not incurred in violation of Section 6.01.

 

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Permitted Investments” shall mean:

(a) Dollars, Canadian dollars, pounds sterling, euros or, in the case of any Foreign Subsidiary, such local currencies held by it from time to time in the ordinary course of business and not for speculation;

(b) direct obligations of the United States of America or any member of the European Union or any agency thereof or obligations guaranteed by the United States of America or any member of the European Union or any agency thereof, in each case, with maturities not exceeding two years;

(c) time deposits, eurodollar time deposits, certificates of deposit and money market deposits, in each case, with maturities not exceeding one year from the date of acquisition thereof, and overnight bank deposits, in each case, with any commercial bank having capital, surplus and undivided profits of not less than $250.0 million and whose long term debt, or whose parent holding company’s long term debt, is rated at least “A-2” by Moody’s or at least “A” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

(d) repurchase obligations for underlying securities of the types described in clauses (b) and (c) above entered into with a bank meeting the qualifications described in clause (c) above;

(e) commercial paper maturing not more than one year after the date of acquisition issued by a corporation (other than an Affiliate of the Borrower) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating, at the time any investment therein is made, of at least “P-1” by Moody’s or at least “A-1” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

(f) securities with maturities of two years or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, having one of the two highest rating categories obtainable from either Moody’s or S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

(g) Indebtedness issued by persons (other than a Sponsor or any Sponsor Affiliate) with a rating of at least “A-2” by Moody’s or “A” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency), in each case, with maturities not exceeding one year from the date of acquisition;

(h) shares of or interests in mutual funds substantially all of the assets of which comprise investments satisfying any of the provisions of clauses (a) through (g) above;

(i) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated “Aaa” by Moody’s and “AAA” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency) and (iii) have portfolio assets of at least $250.0 million; and

(j) instruments equivalent to those referred to in clauses (a) through (i) above denominated in any foreign currency comparable in credit quality and tenor to those referred to above and commonly used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Subsidiary organized in such jurisdiction.

Permitted Liens” shall have the meaning assigned to such term in Section 6.02.

 

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Permitted Refinancing Indebtedness” shall mean any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”) the Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); provided that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus the amount of unpaid accrued or capitalized interest and premiums thereon (including tender premiums), underwriting discounts, original issue discount, defeasance costs, fees (including upfront fees), commissions and expenses), (b) except with respect to Section 6.01(j), the Weighted Average Life to Maturity of such Permitted Refinancing Indebtedness is greater than or equal to the shorter of (i) the Weighted Average Life to Maturity of the Indebtedness being Refinanced and (ii) the Weighted Average Life to Maturity that would result if all payments of principal on the Indebtedness being Refinanced that were due on or after the date that is one year following the Latest Maturity Date were instead due on the date that is one year following the Latest Maturity Date; provided that no Permitted Refinancing Indebtedness incurred in reliance on this subclause (ii) shall have any scheduled principal payments due prior to the Latest Maturity Date in excess of, or prior to, the scheduled principal payments due prior to such Latest Maturity Date for the Indebtedness being Refinanced; provided, further, that this requirement shall not apply to Permitted Refinancing Indebtedness in the form of one-year bridge loans that are automatically convertible or exchangeable without conditions into other instruments meeting the requirements set forth in this definition (but for the avoidance of doubt, this requirement shall apply to any loans, securities or other debt into which such bridge loans are exchanged or that otherwise replace such bridge loans), (c) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing Indebtedness shall be subordinated in right of payment to such Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being Refinanced and (d) no Permitted Refinancing Indebtedness shall have different obligors, or greater guarantees or security, than the Indebtedness being Refinanced; provided, further, that (i) with respect to a Refinancing of any Indebtedness permitted hereunder that is subordinated, such Permitted Refinancing Indebtedness shall (A) be subordinated to the guarantee by Holdings and the Subsidiary Loan Parties of the Revolving Facility and (B) be otherwise on terms not materially less favorable to the Lenders than those contained in the documentation governing the Indebtedness being Refinanced and (ii) with respect to a Refinancing of the Term Loan Obligations, the Liens, if any, securing such Permitted Refinancing Indebtedness shall be (A) subject to the ABL/Term Loan Intercreditor Agreement or another intercreditor agreement that is substantially consistent with and no less favorable to the Lenders in any material respect than the ABL/Term Loan Intercreditor Agreement and (B) on terms not materially less favorable to the Lenders than those contained in the documentation governing the Indebtedness being Refinanced; provided, further, that Indebtedness constituting Permitted Refinancing Indebtedness shall not cease to constitute Permitted Refinancing Indebtedness as a result of the subsequent extension of the Latest Maturity Date.

person” shall mean any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company, government, individual or family trust, Governmental Authority or other entity of whatever nature.

Plan” shall mean any “employee pension benefit plan” as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) that is (a) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA and (b) either (i) sponsored or maintained (at the time of determination or at any time within the five years prior thereto) by Holdings or any of its Restricted Subsidiaries or any ERISA Affiliate or (ii) in respect of which Holdings or any of its Restricted Subsidiaries or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

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Platform” shall have the meaning assigned to such term in Section 9.17(a).

Pledged Collateral” shall have the meaning assigned to such term in the Collateral Agreement.

Pro Forma Basis” shall mean, for purposes of determining compliance with any provision of this Agreement, including the determination of any financial ratio or test, that the applicable Specified Transaction shall be deemed to have occurred as of the first day of the relevant period, including pro forma adjustments arising out of events attributable to the Specified Transactions (including giving effect to those specified in accordance with the definition of Consolidated EBITDA and Consolidated Net Income). Upon giving effect to a transaction on a “Pro Forma Basis,” (i) any indebtedness incurred by the Borrower or any of the other Restricted Subsidiaries in connection with such Specified Transaction (or any other transaction which occurred during the relevant period) shall be deemed to have been incurred as of the first day of the relevant period, (ii) if such Indebtedness has a floating or formula rate, then the rate of interest for such Indebtedness for the applicable period for purposes of the calculations contemplated by this definition shall be determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of such calculations, (iii) income statement items (whether positive or negative) attributable to all property acquired in such Specified Transaction or to the Investment constituting such Specified Transaction, as applicable, shall be included as if such Specified Transaction has occurred as of the first day of the relevant period, (iv) income statement items (whether positive or negative) attributable to all property disposed of in any Specified Transaction (including any income statement items attributable to disposed, abandoned or discontinued operations), shall be excluded as if such Specified Transaction has occurred as of the first day of the relevant period, (v) such other pro forma adjustments which would be permitted or required by Regulations S-K and S-X under the Securities Act of 1933, as amended, shall be taken into account and (vi) such other adjustments made by the Borrower with the consent of the Administrative Agent (not to be unreasonably withheld) shall be taken into account. Interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial officer of the Borrower to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be determined to have been based upon the rate actually chosen, or if none, then based upon such optional rate chosen as the Borrower or the applicable Restricted Subsidiary may designate. Any such adjustments included in calculations made on a Pro Forma Basis shall continue to apply to subsequent calculations of any applicable financial ratios or tests, including during any subsequent test periods in which the effects thereof are expected to be realized.

Projections” shall mean projections and any forward looking statements of such entities furnished to the Lenders or the Administrative Agent by or on behalf of Holdings or any of the Restricted Subsidiaries prior to the First Restatement Effective Date.

Protective Advances” shall have the meaning assigned to such term in Section 2.01(c).

Public Lender” shall have the meaning assigned to such term in Section 9.17(b).

Qualified CFC Holding Company” shall mean a Subsidiary of Holdings that has no material assets other than Equity Interests of one or more CFCs or Qualified CFC Holding Companies.

Qualified Counterparty” shall mean any counterparty to any Specified Hedge Agreement that, at the time such Specified Hedge Agreement was entered into or, if entered into prior to the Closing Date, on the Closing Date, was an Agent, a Lead Arranger, a Lender or an Affiliate of the foregoing, whether or not such person subsequently ceases to be an Agent, a Lead Arranger, a Lender or an Affiliate of the foregoing.

 

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Qualified Equity Interests” shall mean any Equity Interests other than Disqualified Stock.

Qualified IPO” shall mean (i) an underwritten primary or secondary (or combination of primary or secondary) public offering (other than a public offering pursuant to a Registration Statement on Form S-8) of the Equity Interests of the Borrower or any Parent Entity that generates gross cash proceeds of at least $100.0 million or (ii) any merger, consolidation or amalgamation following which the Borrower or Holdings merges with or into or becomes a Wholly Owned Subsidiary of another person, and such person has equity securities listed on a national securities exchange, regardless of whether the Borrower or Holdings, as the case may be, is the surviving entity.

Quarterly Financial Statements” shall have the meaning assigned to such term in Section 5.04(b).

Ratio Debt” shall have the meaning assigned to such term in Section 6.01(r).

Real Property” shall mean, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned in fee or leased by any Loan Party, together with, in each case, all easements, hereditaments and appurtenances relating thereto, and all improvements and appurtenant fixtures incidental to the ownership or lease thereof.

Reasonable Credit Judgment” shall mean reasonable (from the perspective of a secured asset-based lender) credit judgment exercised in good faith in accordance with customary business practices of the Administrative Agent for comparable asset-based lending transactions.

Recipient” shall mean the Administrative Agent and any Lender, as applicable.

Recovery Event” shall mean any settlement of, or payment in respect of, any property or casualty insurance claim or any condemnation proceeding relating to any asset of Holdings or any Restricted Subsidiary.

Refinance” shall have the meaning assigned to such term in the definition of the term “Permitted Refinancing Indebtedness”, and “Refinanced” shall have a meaning correlative thereto.

Refinanced Debt” shall have the meaning assigned to such term in the definition of the term “Credit Agreement Refinancing Indebtedness”.

Refinancing Amendment” shall mean an amendment to this Agreement executed by each of (a) the Borrower, the Co-Borrowers and Holdings, (b) the Administrative Agent and (c) each Lender that agrees to provide any Replacement Revolving Commitment pursuant thereto, in accordance with Section 2.22.

Register” shall have the meaning assigned to such term in Section 9.04(b)(iv).

Registered Equivalent Notes” shall mean, with respect to any notes originally issued in a Rule 144A or other private placement transaction under the Securities Act of 1933, as amended, substantially identical notes (having the same guarantees and collateral provisions) issued in a dollar-for-dollar exchange therefor pursuant to an exchange offer registered with the SEC.

 

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Regulation S-K” shall mean Regulation S-K in the Exchange Act, as amended, modified, and supplemented thereby.

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

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

Related Parties” shall mean, with respect to any specified person, such person’s Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such person and such person’s Affiliates.

Related Sections” shall have the meaning assigned to such term in Section 6.04.

Release” shall mean any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating in, into, upon, onto or through the environment.

Remaining Present Value” shall mean, as of any date with respect to any lease, the present value as of such date of the scheduled future lease payments with respect to such lease, determined with a discount rate equal to a market rate of interest for such lease reasonably determined at the time such lease was entered into.

Replacement Revolving Commitments” shall have the meaning assigned to such term in Section 2.22.

Reportable Event” shall mean any reportable event as defined in Section 4043(c) of ERISA or the regulations issued thereunder, other than those events as to which the 30 day notice period referred to in Section 4043(c) of ERISA has been waived, with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code).

Required Financial Statements” shall have the meaning assigned to such term in Section 5.04(b).

Required Lenders” shall mean, at any time, Lenders having (a) Revolving Facility Credit Exposure and (b) Available Unused Commitments that, taken together, represent more than 50% of the sum of (i) all Revolving Facility Credit Exposure and (ii) the total Available Unused Commitments at such time. The Revolving Facility Credit Exposure and Available Unused Commitment of any Defaulting Lender shall be disregarded in determining Required Lenders.

Required Mortgages” shall have the meaning assigned to such term in Section 5.10(f).

Reserves” shall mean as of any date of determination, such amounts as the Administrative Agent may from time to time establish and revise in its Reasonable Credit Judgment reducing the amount of Loans and Letters of Credit which would otherwise be available to the Borrower or any Co-Borrower under the lending formula(s) provided for herein: (a) to reflect events, conditions, contingencies or risks which, as determined by the Administrative Agent in its Reasonable Credit Judgment, adversely affect, or would have a reasonable likelihood of adversely affecting the ability of the Administrative Agent to realize the value or amount that might be received from the sale or other

 

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disposition or realization upon the Collateral, (b) to reflect costs, expenses and other amounts that the Administrative Agent may reasonably incur or be required to pay in order to sell, otherwise dispose of or realize upon the Collateral, (c) to reflect priority claims and liabilities that the Administrative Agent determines will need to be satisfied in connection with the sale, other disposition or realization on the Collateral, (d) to reflect criteria, events, conditions, contingencies or risks that differ materially from facts or events occurring or known to the Administrative Agent on the Closing Date and which directly and adversely affect any component of the Borrowing Base or (e) for customary rent reserves. To the extent that an event, condition or matter as to any Eligible Accounts or Eligible Inventory is addressed pursuant to the treatment thereof within the applicable definition of such terms, the Administrative Agent shall not also establish a Reserve to address the same event, condition or matter. The amount of any Reserve established by the Administrative Agent shall have a reasonable relationship to the event, condition or other matter which is the basis for such Reserve as determined by the Administrative Agent in good faith and to the extent that such Reserve is in respect of amounts that may be payable to third parties the Administrative Agent may, at its option, deduct such Reserve from the Line Cap at any time that such limit is less than the amount of the Line Cap. Notwithstanding the foregoing in this definition of “Reserves”, neither the Administrative Agent nor the Collateral Agent may establish any Reserve unless the Borrowers are given at least three Business Days’ prior written notice of the establishment of such reserve; provided that upon such notice, the Borrower Parties shall not be permitted to borrow any Loans or have any Letters of Credit issued so as to exceed the Borrowing Base after giving effect to such reserve. The Administrative Agent will be available during the three Business Day-period referred to in the foregoing sentence to discuss any such proposed Reserve with the Borrowers and, without limiting the right of the Administrative Agent to establish or change such Reserve in the Administrative Agent’s Reasonable Credit Judgment, the Borrowers may take such action as may be required so that the event, condition or matter that is the basis for such Reserve no longer exists, in a manner and to the extent reasonably satisfactory to the Administrative Agent.

Responsible Officer” shall mean, with respect to any Loan Party, the chief executive officer, president, vice president, secretary, assistant secretary or any Financial Officer of such Loan Party or any other individual designated in writing to the Administrative Agent by an existing Responsible Officer of such Loan Party as an authorized signatory of any certificate or other document to be delivered hereunder. 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 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 Payments” shall have the meaning assigned to such term in Section 6.06.

Restricted Subsidiary” shall mean any Subsidiary of Holdings that is not an Unrestricted Subsidiary.

Revolving Facility” shall mean the Revolving Facility Commitments (including any Incremental Revolving Commitments) and the extensions of credit made hereunder by the Revolving Lenders.

Revolving Facility Borrowing” shall mean a Borrowing comprised of Revolving Loans.

Revolving Facility Commitment” shall mean, with respect to a Lender, the commitment of such Lender to make Revolving Loans pursuant to Section 2.01, expressed as an amount representing the maximum aggregate permitted amount of such Lender’s Revolving Facility Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08, (b) reduced or increased from time to time pursuant to assignments by or to such Lender under Section 9.04

 

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or (c) increased from time to time under Section 2.21. The initial amount of each Lender’s Revolving Facility Commitment is set forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Revolving Facility Commitment, as applicable. The aggregate amount of the Lenders’ Revolving Facility Commitments on the First Restatement Effective Date is $150.0 million.

Revolving Facility Credit Exposure” shall mean, at any time, the sum of (a) the aggregate principal amount of the Revolving Loans outstanding at such time, (b) the Swingline Exposure at such time and (c) the Revolving L/C Exposure at such time. The Revolving Facility Credit Exposure of any Revolving Lender at any time shall be the product of (i) such Revolving Lender’s Revolving Facility Percentage and (ii) the aggregate Revolving Facility Credit Exposure of all Revolving Lenders, collectively, at such time.

Revolving Loans” shall have the meaning assigned to such term in Section 2.01(a).

Revolving Lender” shall mean each Lender with a Revolving Facility Commitment or outstanding Revolving Facility Credit Exposure.

Revolving Facility Percentage” shall mean, with respect to any Revolving Lender, the percentage of the total Revolving Facility Commitments represented by such Lender’s Revolving Facility Commitment. If the Revolving Facility Commitments have terminated or expired, the Revolving Facility Percentages shall be determined based upon the Revolving Facility Commitments most recently in effect, giving effect to any assignments pursuant to Section 9.04.

Revolving L/C Exposure” shall mean at any time the sum of (a) the aggregate undrawn amount of all Letters of Credit outstanding at such time (the “L/C Amount”) and (b) the aggregate principal amount of all L/C Disbursements that have not yet been reimbursed at such time. The Revolving L/C Exposure of any Revolving Lender at any time shall mean its Revolving Facility Percentage of the aggregate Revolving L/C Exposure 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 Rule 3.14 of the International Standard Practices, International Chamber of Commerce No. 590, such Letter of Credit shall be deemed to be “outstanding” in the amount so remaining available to be drawn. Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the stated amount of such Letter of Credit in effect at such time; provided that, with respect to any Letter of Credit that by its terms or the terms of any 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.

S&P” shall mean Standard & Poor’s Financial Services LLC or any successor entity thereto.

Sale and Lease-Back Transaction” shall have the meaning assigned to such term in Section 6.03.

Sale/Lease-Back Documents” shall mean each of the documents set forth on Schedule 1.01D.

SEC” shall mean the Securities and Exchange Commission or any successor thereto.

 

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Secured Parties” shall mean the collective reference to the “Secured Parties” as defined in the Collateral Agreement.

Security Documents” shall mean the Collateral Agreement, any mortgages delivered pursuant to Section 5.15 of the Existing Revolving Credit Agreement or otherwise granted pursuant to the terms of the Existing Revolving Credit Agreement or the terms hereof (and any amendments thereto required to be delivered pursuant to Section 5.15 hereof), each Blocked Account Agreement and each of the security agreements and other instruments and documents executed and delivered by any Loan Party pursuant to the Collateral Agreement or pursuant to Section 5.10 of the Existing Revolving Credit Agreement or Section 5.10 hereof.

Senior Secured Debt” shall mean, as of any date of determination, the aggregate principal amount of Consolidated Total Debt outstanding on such date that is secured by a Lien on any assets of Holdings or any Restricted Subsidiary.

Senior Secured Leverage Ratio” shall mean the ratio of Senior Secured Debt to Consolidated EBITDA for the trailing four fiscal quarter period most recently ended prior to the date of determination for which financial statements have been delivered pursuant to Section 5.04.

Senior Unsecured Notes” shall mean the senior unsecured notes in an aggregate amount not to exceed $315.0 million issued on the Closing Date to finance, in part, the Closing Date Transactions.

Settlement Date” shall have the meaning provided in Section 2.18(b).

Specified Event of Default” shall mean any Event of Default under Section 7.01(b), Section 7.01(c), Section 7.01(h) or Section 7.01(i).

Specified Hedge Agreement” shall mean any Hedge Agreement entered into or assumed between or among the Borrower, any Co-Borrower or any other Restricted Subsidiary and any Qualified Counterparty and designated by the Qualified Counterparty and the Borrower in writing to the Administrative Agent as a “Specified Hedge Agreement”.

Specified Transaction” shall mean with respect to any period, any (i) Investment involving the acquisition of an operating unit of a business or that constitutes an acquisition of all or substantially all of the common stock of a person and involves the payment of consideration by the Borrower and its Restricted Subsidiaries in excess of $5.0 million, (ii) sale or transfer of assets or property or other asset disposition (including any disposal, abandonment or discontinuance of operations) that yields gross proceeds to the Borrower or any of its Restricted Subsidiaries in excess of $5.0 million or involves the abandonment or discontinuation of operations with a value in excess of $5.0 million, (iii) incurrence, repayment or refinancing of Indebtedness, (iv) Restricted Payment, (v) designation or redesignation of an Unrestricted Subsidiary or Restricted Subsidiary, (vi) provision of Incremental Revolving Commitment increases, (vii) any Limited Condition Event or (viii) other event, in each case that by the terms of the Loan Documents requires pro forma compliance with a test or covenant hereunder or requires such test or covenant to be calculated on a “Pro Forma Basis.”

Sponsors” shall mean a collective reference to Ares and Teachers.

Sponsor Affiliate” shall mean each Affiliate of a Sponsor and each individual who is a partner or employee of a Sponsor.

 

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Standby Letters of Credit” shall have the meaning provided in Section 2.05(a).

Statutory Reserves” shall mean, with respect to any currency, any reserve, liquid asset or similar requirements established by any Governmental Authority of the United States of America or of the jurisdiction of such currency or any jurisdiction in which Loans in such currency are made to which banks in such jurisdiction are subject for any category of deposits or liabilities customarily used to fund loans in such currency or by reference to which interest rates applicable to Loans in such currency are determined.

Subagent” shall have the meaning assigned to such term in Section 8.02.

Subsidiary” shall mean, with respect to any person (herein referred to as the “parent”), any corporation, partnership, limited liability company or other entity of which (a) Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the Governing Persons of such corporation, partnership, limited liability company or other entity are at the time owned by such parent or (b) more than 50.0% of the Equity Interests are at the time owned by such parent. Unless the context otherwise requires, “Subsidiary” shall mean a Subsidiary of Holdings.

Subsidiary Loan Parties” shall mean each Borrower, Co-Borrower and Guarantor.

Subsidiary Redesignation” shall have the meaning assigned to such term in the definition of “Unrestricted Subsidiary”.

Swap Obligation” means, with respect to any Guarantor, 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.

Swingline Borrowing” shall mean a Borrowing comprised of Swingline Loans.

Swingline Borrowing Request” shall mean a request by the Borrower substantially in the form of Exhibit F (or such other form as may be agreed between the Borrower and the Administrative Agent).

Swingline Commitment” shall mean, with respect to any Swingline Lender, the commitment of such Swingline Lender to make Swingline Loans pursuant to Section 2.04. The aggregate amount of the Swingline Commitments on the First Restatement Effective Date is $15.0 million.

Swingline Exposure” shall mean, at any time, the aggregate principal amount of all outstanding Swingline Borrowings at such time. The Swingline Exposure of any Revolving Lender at any time shall mean its Revolving Facility Percentage of the aggregate Swingline Exposure at such time.

Swingline Lender” shall mean Deutsche Bank, in its capacity as a lender of Swingline Loans to the Borrower Parties.

Swingline Loans” shall mean the swingline loans made to the Borrower or any Co-Borrower pursuant to Section 2.04.

Taxes” shall mean any and all present or future taxes, levies, imposts, duties, deductions, withholdings or similar charges imposed by any Governmental Authority and any and all interest and penalties related thereto.

 

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Teachers” shall mean Ontario Teachers’ Pension Plan Board.

Term Facility” shall mean the “Term Facility” as defined in the Term Loan Credit Agreement.

Term Loan Credit Agreement” shall mean the Term Loan Credit Agreement, dated as of the Closing Date, by and among CPG Merger Sub LLC, CPG International Inc., CPG Newco LLC, the guarantors thereto, the lenders party thereto and Barclays Bank PLC, as administrative agent, initially in respect of up to $625.0 million of term loans made available on the Closing Date, as such document may be amended, restated, supplemented, replaced, refinanced or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement.

Term Loan Documents” shall mean the Term Loan Credit Agreement and the other “Loan Documents” under and as defined in the Term Loan Credit Agreement, as each such document may be amended, restated, supplemented or otherwise modified from time to time in accordance with the requirements thereof.

Term Loan Obligations” shall mean the “Obligations” as defined in the Term Loan Credit Agreement.

Term Loan Priority Collateral” shall have the meaning assigned to such term in the ABL/Term Loan Intercreditor Agreement.

Term Loan Security Documents” shall mean the “Security Documents” as defined in the Term Loan Credit Agreement.

Term Loans” shall mean the “Term Loans” as defined in the Term Loan Credit Agreement.

TimberTech Acquisition” shall refer to the acquisition of TimberTech Limited, an Ohio limited liability company, by CPG International Inc., which was consummated on September 21, 2012.

Trade Letters of Credit” shall have the meaning provided in Section 2.05(a).

Transactions” shall mean, collectively, the transactions to occur pursuant to the Loan Documents, including (a) the execution and delivery of the Loan Documents, the creation of the Liens pursuant to the Security Documents and the initial borrowings hereunder and (b) the payment of all fees and expenses incurred or paid in connection with the foregoing.

Type” shall mean, when used in respect of any Loan or Borrowing, the Rate by reference to which interest on such Loan or on the Loans comprising such Borrowing is determined. For purposes hereof, the term “Rate” shall mean Adjusted LIBO Rate or ABR, as applicable.

Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.

Unrestricted Cash” shall mean cash or cash equivalents of the Borrower or any of the other Restricted Subsidiaries that would not appear as “restricted” on the Required Financial Statements.

 

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Unrestricted Subsidiary” shall mean any Subsidiary of Holdings (other than the Borrower) designated by the Borrower as an Unrestricted Subsidiary hereunder by written notice to the Administrative Agent; provided that the Borrower shall only be permitted to so designate a new Unrestricted Subsidiary after the Closing Date if (i) no Default or Event of Default has occurred and is continuing or would result therefrom, (ii) such Unrestricted Subsidiary is capitalized (to the extent capitalized by Holdings or any of the Subsidiaries) through Investments as permitted by, and in compliance with, Section 6.04(j), and any prior or concurrent Investments in such Subsidiary by Holdings or any of its Restricted Subsidiaries shall be deemed to have been made under Section 6.04(j), (iii) without duplication of clause (ii), any assets owned by such Unrestricted Subsidiary at the time of the initial designation thereof are treated as Investments pursuant to Section 6.04(j), (iv) at the time such Subsidiary is designated an Unrestricted Subsidiary, the Fixed Charge Coverage Ratio, determined on a Pro Forma Basis, is not less than 2.00:1.00 and (v) such Subsidiary has been designated an “unrestricted subsidiary” (or otherwise not be subject to the covenants and defaults) under the Term Loan Credit Agreement, all other Indebtedness permitted to be incurred hereunder and all Permitted Refinancing Indebtedness in respect of any of the foregoing and all Disqualified Stock; provided further that at the time of designation of any Unrestricted Subsidiary, such Unrestricted Subsidiary, when taken together with all Unrestricted Subsidiaries as of the last day of the fiscal quarter of the Borrower most recently ended, shall not have assets with a value in excess of 10.0% of Consolidated Total Assets (calculated with respect to the Borrower and the other Restricted Subsidiaries) or revenues representing in excess of 10.0% of Consolidated EBITDA of the Borrower and the other Restricted Subsidiaries as of such date. The Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary for purposes of this Agreement (each, a “Subsidiary Redesignation”); provided that (a) such Unrestricted Subsidiary, after giving effect to such designation, shall be a Wholly Owned Subsidiary of Holdings, (b) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (c) all representations and warranties contained herein and in the Loan Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Subsidiary Redesignation (both before and after giving effect thereto), unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date, (d) at the time of such Subsidiary Redesignation, the Fixed Charge Coverage Ratio, determined on a Pro Forma Basis, is not less than 2.00:1.00 and (e) the Borrower shall have delivered to the Administrative Agent an officer’s certificate executed by a Responsible Officer of the Borrower, certifying to the best of such officer’s knowledge, compliance with the requirements of preceding clauses (a) through (d), inclusive.

U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.17(e).

USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)).

Weighted Average Life to Maturity” shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal (excluding nominal amortization), including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest 1/12) that will elapse between such date and the making of such payment by (b) the then outstanding principal amount of such Indebtedness.

Wholly Owned Subsidiary” shall mean, with respect to any person, a Subsidiary of such person, all of the Equity Interests of which (other than directors’ qualifying shares or nominee or other similar shares required pursuant to applicable law) are owned by such person or another Wholly Owned Subsidiary of such person.

 

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Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

Write-Down and Conversion Powers” means, 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.

SECTION 1.02. Terms Generally. The definitions set forth or referred to in Section 1.01 shall apply equally to both 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. Unless the context requires otherwise, (a) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (b) in the computation of periods of time from a specified date to a later specified date, the word “from” shall mean “from and including”; the words “to” and “until” each mean “to but excluding” and the word “through” shall mean “to and including”, (c) the word “will” shall be construed to have the same meaning and effect as the word “shall”, (d) the word “incur” shall be construed to mean incur, create, issue, assume or become liable in respect of (and the words “incurred” and “incurrence” shall have correlative meanings), (e) the word “or” shall be construed to mean “and/or”, (f) any reference to any person shall be construed to include such person’s legal successors and permitted assigns and (g) the words “asset” and “property” shall be construed to have the same meaning and effect. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, any reference in this Agreement to any Loan Document or organizational document of the Loan Parties shall mean such document as amended, restated, supplemented or otherwise modified from time to time (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document). Any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time.

SECTION 1.03. Accounting Terms; GAAP. Except as otherwise expressly provided herein (including pursuant to the definition of Capital Lease Obligations and Consolidated Capital Expenditures), all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, notwithstanding anything to the contrary herein, (i) all accounting or financial terms used herein shall be construed, and all financial computations pursuant hereto shall be made, without giving effect to any election under Statement of Financial Accounting Standards Board Accounting Standards Codification 825-10 (or any other Statement of Financial Accounting Standards Board Accounting Standards Codification having a similar effect) to value any Indebtedness or other liabilities of Holdings or any Restricted Subsidiary at “fair value”, as defined therein, (ii) for purposes of determinations of the Fixed Charge Coverage Ratio, the First Lien Leverage Ratio and the Senior Secured Leverage Ratio, GAAP shall be construed as in effect on the Closing Date and (iii) for purposes of determining compliance with any provision of this Agreement and any related definitions, the determination of whether a lease is to be treated as an operating lease or capital lease shall be made without giving effect to any change in GAAP that becomes effective on or after the Closing Date that would require treating any lease (or similar arrangement) as a capital lease where such lease (or similar arrangement) would not have been required to be so treated under GAAP as in effect on the

 

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Closing Date. In the event that any Accounting Change (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then upon the written request of the Borrower or the Administrative Agent, the Borrower, the Administrative Agent and the Lenders shall enter into good faith negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change with the desired result that the criteria for evaluating the Borrower’s financial condition shall be the same after such Accounting Change as if such Accounting Change had not occurred; provided that if such notice is given then the provisions of this Agreement in effect on the date of such Accounting Change shall remain in effect until the effective date of such amendment. “Accounting Change” shall mean any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants.

SECTION 1.04. Effectuation of Transactions. Each of the representations and warranties of Holdings and the Borrower contained in this Agreement (and all corresponding definitions) is made after giving effect to the Transactions, unless the context otherwise requires.

SECTION 1.05. Currencies. Unless otherwise specifically set forth in this Agreement, monetary amounts shall be in Dollars. For purposes of determining compliance with any Dollar-denominated restriction on the incurrence of Indebtedness or determining the amount of any Indebtedness or judgment pursuant to clauses (f) or (j) of Section 7.01, the Dollar-equivalent principal amount of any Indebtedness or judgment denominated in a foreign currency will be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred or such judgment was entered.

SECTION 1.06. Limited Condition Event.

(a) For purposes of determining (i) compliance under this Agreement with any financial ratio or test, including the First Lien Leverage Ratio, the Senior Secured Leverage Ratio and the Fixed Charge Coverage Ratio, (ii) the absence of any Default or Event of Default or (iii) compliance under this Agreement with any basket expressed as a percentage of Consolidated EBITDA or Consolidated Total Assets, in each case, as a condition to (w) the consummation of any transaction in connection with an acquisition of, or Investment in, any assets, business or person by one or more of the Borrower and the other Restricted Subsidiaries, in each case, that is not conditioned on the availability of, or on obtaining, third party financing, (x) the incurrence by one or more of the Borrower and the other Restricted Subsidiaries of any Indebtedness (and any Liens with respect thereto) the proceeds of which are used to finance an acquisition or Investment described in clause (w) above, (y) the making by one or more of the Borrower and the other Restricted Subsidiaries of any Restricted Payment in connection with any acquisition or Investment or (z) designation by the Borrower of any Subsidiary as a Restricted Subsidiary, Unrestricted Subsidiary or Immaterial Subsidiary in connection with any acquisition or Investment, in each case, permitted by this Agreement (any such acquisition, Investment, incurrence of Indebtedness or Liens, making of a Restricted Payment or designation of a Subsidiary, a “Limited Condition Event”), at the option of the Borrower (the Borrower’s election to exercise such option in connection with any Limited Condition Event, an “LCE Election”), the date of determination of whether any such action is permitted hereunder, shall be deemed to be (1) in the case of any such acquisition or Investment described in clause (w) above and any related incurrences of Indebtedness and/or Liens, either (I) on the date of the execution of the definitive agreement with respect to such acquisition or Investment or (II) on the date of the consummation of such acquisition or Investment, in either case of clause (I) or (II) after giving effect to such acquisition or Investment and any related incurrences of Indebtedness and/or Liens on a Pro Forma Basis, (2) in the case of any Restricted Payment made in connection with an acquisition or Investment, either (I) on the date of the execution of the definitive agreement with respect to such acquisition or Investment or (II) on the date of making such Restricted Payment, in either case of

 

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clause (I) or (II) after giving effect to the relevant Restricted Payment on a Pro Forma Basis, (3) in the case of a designation of a Subsidiary in connection with any acquisition or Investment, either (I) on the date of the execution of the definitive agreement for such acquisition or Investment which would result in such Subsidiary becoming a Restricted Subsidiary, Unrestricted Subsidiary or Immaterial Subsidiary, as applicable, or (II) on the date of the consummation of such acquisition or Investment on a Pro Forma Basis (each such date of determination, an “LCE Test Date”), and if, after giving effect to the Limited Condition Event and the other transactions to be entered into in connection therewith on a Pro Forma Basis as if they had occurred at the beginning of the trailing four fiscal quarter period most recently ended prior to the LCE Test Date for which financial statements have been delivered pursuant to Section 5.04, the Borrower could have taken such action on the relevant LCE Test Date in compliance with such financial ratio or test, default or event of default or basket, such financial ratio or test, default or event of default or basket shall be deemed to have been complied with.

(b) For the avoidance of doubt, if the Borrower has made an LCE Election and any of the financial ratios, tests or baskets for which compliance was determined or tested as of the LCE Test Date are exceeded as a result of fluctuations in any such financial ratio, test or basket at or prior to the consummation of the relevant transaction or action, such financial ratio, test or basket will not be deemed to have been exceeded as a result of such fluctuations. If the Borrower has made an LCE Election for any Limited Condition Event, then in connection with any subsequent calculation of such financial ratios, tests or baskets on or following the relevant LCE Test Date and prior to the earlier of (i) the date on which such Limited Condition Event is consummated and (ii) the date that the definitive agreement for such Limited Condition Event is terminated or expires without consummation of such Limited Condition Event, any such financial ratio, test or basket shall be calculated on a pro forma basis assuming such Limited Condition Event and other transactions in connection therewith (including any incurrence of debt and the use of proceeds thereof) have been consummated, except that (other than solely with respect to any incurrence test under which such Limited Condition Event is being made) Consolidated EBITDA, Consolidated Total Assets and Consolidated Net Income of any target of such Limited Condition Event can only be used in the determination of the relevant financial ratios, tests and baskets if and when such acquisition has closed.

ARTICLE II

The Credits

SECTION 2.01. Commitments. Subject to the terms and conditions set forth herein:

(a) Revolving Loans. Each Lender agrees to make loans (“Revolving Loans”) to the Borrower Parties from time to time during the Availability Period in amounts not to exceed (except for the Swingline Lender with respect to Swingline Loans) such Lender’s Revolving Facility Percentage of the Borrowing Base, and in an aggregate principal amount that will not result in (i) such Lender’s Revolving Facility Credit Exposure exceeding such Lender’s Revolving Facility Commitment or (ii) the total Revolving Facility Credit Exposure exceeding the total Revolving Facility Commitments. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower Parties may borrow, repay and reborrow Revolving Loans. On the First Restatement Effective Date, all Existing Revolving Loans shall be deemed to be repaid (other than for purposes of Section 2.16 of the Existing Revolving Credit Agreement) and such portion thereof that were ABR Revolving Loans shall be deemed to be reborrowed as ABR Revolving Loans by the applicable Borrower Party and such portion thereof that were Eurocurrency Revolving Loans shall be deemed to be reborrowed as Eurocurrency Revolving Loans by the applicable Borrower Party (it being understood that for each Borrowing of Existing Revolving Loans that were Eurocurrency Revolving Loans, (x) the initial Interest Period for the relevant reborrowed Eurocurrency Revolving Loans shall equal the remaining length of the Interest Period for

 

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such Borrowing and (y) the Adjusted LIBO Rate for the relevant reborrowed Eurocurrency Revolving Loans during such initial Interest Period shall be the Adjusted LIBO Rate for such Borrowing immediately prior to the First Restatement Effective Date) and Lenders shall advance funds to the Administrative Agent no later than 12:00 Noon, New York City time on the First Restatement Effective Date as shall be required to repay the Existing Revolving Loans and funded participations in Existing LC Disbursements and Existing Swingline Loans of Existing Lenders such that each Lender’s share of outstanding Revolving Loans on the First Restatement Effective Date is equal to its Revolving Facility Percentage (after giving effect to the First Restatement Effective Date).

(b) Overadvances. Insofar as the Borrower may request and the Administrative Agent or Required Lenders under the Revolving Facility (as provided below) may be willing in their sole discretion to make Revolving Loans to the Borrower Parties at a time when the Revolving Facility Credit Exposure exceeds, or would exceed with the making of any such Revolving Loan, the Borrowing Base (any such Loan being herein referred to individually as an “Overadvance”), the Administrative Agent shall enter such Overadvances as debits in the applicable Loan Account. All Overadvances shall be repaid on demand, shall be secured by the Collateral and shall bear interest as provided in this Agreement for Revolving Loans generally. Any Overadvance made pursuant to the terms hereof shall be made to the Borrower Parties by all Lenders ratably in accordance with their respective Revolving Facility Percentages. Overadvances in the aggregate amount of $5.0 million or less may, unless a Default or Event of Default has occurred and is continuing, be made in the sole, reasonable discretion of the Administrative Agent; provided that the Required Lenders may at any time revoke the Administrative Agent’s authorization to make future Overadvances (provided that existing Overadvances shall not be subject to such revocation and any such revocation must be in writing and shall become effective prospectively upon the Administrative Agent’s receipt thereof). Overadvances in an aggregate amount of more than $5.0 million but less than $10.0 million may, unless a Default or Event of Default has occurred and is continuing, be made with the consent of the Required Lenders. Overadvances in an aggregate amount of $10.0 million or more and Overadvances to be made after the occurrence and during the continuation of a Default or Event of Default shall require the consent of all Revolving Lenders. The foregoing notwithstanding, in no event, unless otherwise consented to by all Revolving Lenders, (x) shall any Overadvances be outstanding for more than 90 consecutive days, (y) after all outstanding Overadvances have been repaid, shall the Administrative Agent or Lenders make any additional Overadvances unless 30 days or more have expired since the last date on which any Overadvances were outstanding or (z) shall the Administrative Agent make Revolving Loans on behalf of Lenders under this Section 2.01(b) to the extent such Revolving Loans would cause a Lender’s share of the Revolving Facility Credit Exposure to exceed such Lender’s Revolving Facility Commitment or cause the aggregate Revolving Facility Commitments to be exceeded.

(c) Protective Advances. Upon the occurrence and during the continuance of an Event of Default, the Administrative Agent, in its sole, reasonable discretion, may make Revolving Loans to the Borrower Parties on behalf of the Lenders, so long as the aggregate amount of such Revolving Loans shall not exceed 5% of the Borrowing Base, if the Administrative Agent, in its Reasonable Credit Judgment, deems that such Revolving Loans are necessary or desirable (i) to protect all or any portion of the Collateral, (ii) to enhance the likelihood or maximize the amount of repayment of the Loans and the other Obligations or (iii) to pay any other amount chargeable to the Borrower Parties pursuant to this Agreement (such Revolving Loans, “Protective Advances”); provided that (A) in no event shall the Revolving Facility Credit Exposure exceed the aggregate Revolving Facility Commitments and (B) the Required Lenders under the Revolving Facility may at any time revoke the Administrative Agent’s authorization to make future Protective Advances (provided that existing Protective Advances shall not be subject to such revocation and any such revocation must be in writing and shall become effective prospectively upon the Administrative Agent’s receipt thereof). Each applicable Lender shall be obligated to advance to the Borrower Parties its Revolving Facility Percentage of each Protective

 

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Advance made in accordance with this Section 2.01(c). If Protective Advances are made in accordance with the preceding sentence, then all Revolving Lenders shall be bound to make, or permit to remain outstanding, such Protective Advances based upon their Revolving Facility Percentages in accordance with the terms of this Agreement. All Protective Advances shall be repaid by the Borrower Parties on demand, shall be secured by the Collateral and shall bear interest as provided in this Agreement for Revolving Loans generally.

SECTION 2.02. Loans and Borrowings.

(a) Each Loan shall be made as part of a Borrowing consisting of Loans of the same Type made by the Lenders ratably in accordance with their respective Commitments (or, in the case of Swingline Loans, in accordance with their respective Swingline Commitments). 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.

(b) Subject to Section 2.14, each Borrowing (other than a Swingline Borrowing) shall be comprised entirely of ABR Loans or Eurocurrency Revolving Loans as the Borrower may request in accordance herewith. Each Swingline Borrowing shall be an ABR Borrowing. Each Lender at its option may make any ABR Loan or Eurocurrency Revolving Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower Parties to repay such Loan in accordance with the terms of this Agreement and such Lender shall not be entitled to any amounts payable under Section 2.15 or 2.17 solely in respect of increased costs resulting from such exercise and existing at the time of such exercise.

(c) At the commencement of each Interest Period for any Eurocurrency Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. At the time that each ABR Revolving Facility Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided that an ABR Revolving Facility Borrowing may be in an aggregate amount that is equal to the entire unused available balance of the Revolving Facility Commitments or that is required to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e). Each Swingline Borrowing shall be in an amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than six Eurocurrency Borrowings outstanding.

(d) Notwithstanding any other provision of this Agreement, neither the Borrower nor any Co-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 Maturity Date.

SECTION 2.03. Requests for Borrowings.

(a) To request a Revolving Facility Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (i) in the case of a Eurocurrency Borrowing, not later than 2:00 p.m., New York City time, three Business Days before the date of the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than 2:00 p.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Borrowing to finance the reimbursement of an L/C Disbursement as contemplated by Section 2.05(e) may be given not later than 12:00 noon, New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or facsimile to the Administrative Agent of a written Borrowing Request substantially in the form of Exhibit C (or such other form as may be agreed between the Borrower and the Administrative Agent) and signed by the Borrower.

 

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(b) Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02:

(i) the aggregate amount of the requested Borrowing, which amount shall not exceed Availability;

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

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurocurrency Borrowing;

(iv) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

(v) the location and number of the Borrower Parties’ account to which funds are to be disbursed.

(c) Disbursement. Each Borrower Party hereby irrevocably authorizes the Administrative Agent to disburse the proceeds of each Loan requested pursuant to this Section 2.03. The proceeds of each Revolving Loan requested under this Section 2.03 shall be disbursed by the Administrative Agent in immediately available funds and in the same form as received from the Lenders, by wire transfer to such bank account as may be agreed upon by the Borrower and the Administrative Agent, from time to time or elsewhere if pursuant to a written direction from the Borrower. If at any time any Loan is funded in excess of the amount requested by the Borrower, the Borrower Parties agree, jointly and severally, to repay the excess to the Administrative Agent immediately upon notice thereof to the Borrower from the Administrative Agent or any Lender.

(d) If no election as to the Type of Revolving Facility Borrowing is specified, then the requested Revolving Facility Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurocurrency Borrowing, then the 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 2.03, the Administrative Agent shall advise the Lenders of the details thereof and of the amount of each such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04. Swingline Loans.

(a) Subject to the terms and conditions set forth herein, the Swingline Lender agrees to make Swingline Loans to the Borrower Parties 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 Commitment, (ii) the Revolving Facility Credit Exposure exceeding the total Revolving Facility Commitments or (iii) the Revolving Facility Credit Exposure exceeding the Borrowing Base; provided that the Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Borrowing. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower Parties may borrow, repay and reborrow Swingline Loans. On the First Restatement Effective Date, all Existing Swingline Loans shall be deemed to be repaid (other than for purposes of Section 2.16 of the Existing Revolving Credit Agreement) and reborrowed as Swingline Loans by the applicable Borrower Party.

 

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(b) To request a Swingline Borrowing, the Borrower shall notify the Administrative Agent and the Swingline Lender of such request by telephone (confirmed by a Swingline Borrowing Request by email or facsimile), not later than 2:00 p.m., New York City time, on the day of a proposed Swingline Borrowing. Each such notice and Swingline Borrowing Request shall be irrevocable and shall specify the requested (i) date (which shall be a Business Day) and (ii) amount of the Swingline Borrowing. The Swingline Lender shall consult with the Administrative Agent as to whether the making of the Swingline Loan is in accordance with the terms of this Agreement prior to the Swingline Lender funding such Swingline Loan. The Swingline Lender shall make each Swingline Loan in accordance with Section 2.02(a) on the proposed date thereof by wire transfer of immediately available funds by 4:00 p.m., New York City time, to the account of the Borrower Parties (or, in the case of a Swingline Borrowing made to finance the reimbursement of an L/C Disbursement as provided in Section 2.05(e), by remittance to the applicable Issuing Bank); provided that the Swingline Lender shall not be obligated to make any Swingline Loan at any time when any Lender is at such time a Defaulting Lender, unless the Swingline Lender is satisfied in its reasonable discretion that the related exposure will be 100% covered by the Commitments of the non-Defaulting Lenders in accordance with Section 2.26.

(c) The Swingline Lender may by written notice given to the Administrative Agent not later than 10:00 a.m., New York City time, on any Business Day require the Revolving Lenders to acquire participations on such Business Day in all or a portion of the outstanding Swingline Loans made by it. Such notice shall specify the aggregate amount of such Swingline Loans in which the Revolving Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each such Lender, specifying in such notice such Revolving Lender’s Revolving Facility Percentage of such Swingline Loan or Loans. Each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent for the account of the Swingline Lender, such Revolving Lender’s Revolving Facility Percentage of such Swingline Loan or Loans. Each Revolving Lender acknowledges and agrees that its respective obligation to acquire participations in Swingline Loans pursuant to this paragraph (c) 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 (c) by wire transfer of immediately available funds, in the same manner as provided in Section 2.06 with respect to Loans made by such Revolving Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the Swingline Lender the amounts so received by it from the Revolving Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph (c), and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to the Swingline Lender. Any amounts received by the Swingline Lender from any Borrower Party (or other party on behalf of any Borrower Party) in respect of a Swingline Loan after receipt by the 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 (c) and to the Swingline Lender, as their interests may appear; provided that any such payment so remitted shall be repaid to the Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to any Borrower Party for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph (c) shall not relieve any Borrower Party of any default in the payment thereof.

 

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(d) If the maturity date shall have occurred in respect of any tranche of Revolving Facility Commitments at a time when another tranche or tranches of Revolving Facility Commitments is or are in effect with a longer maturity date, then on the earliest occurring maturity date all then outstanding Swingline Loans shall be repaid in full on such date (and there shall be no adjustment to the participations in such Swingline Loans as a result of the occurrence of such maturity date); provided, however, that if on the occurrence of such earliest maturity date (after giving effect to any repayments of Revolving Loans and any reallocation of Letter of Credit participations as contemplated in Section 2.05(m)), there shall exist sufficient unutilized Extended Revolving Commitments so that the respective outstanding Swingline Loans could be incurred pursuant to the Extended Revolving Commitments that will remain in effect after the occurrence of such maturity date, then there shall be an automatic adjustment on such date of the participations in such Swingline Loans and same shall be deemed to have been incurred solely pursuant to the relevant Extended Revolving Commitments, and such Swingline Loans shall not be so required to be repaid in full on such earliest maturity date; provided, in no event shall such adjustment cause a Lender’s share of the Extended Revolving Commitment to exceed such Lender’s Commitment.

SECTION 2.05. Letters of Credit.

(a) Subject to the terms and conditions set forth herein, the Borrower may request the issuance of (i) trade letters of credit in support of trade obligations of the Borrower Parties or any other Subsidiary Loan Party incurred in the ordinary course of business (such letters of credit issued for such purposes, “Trade Letters of Credit”) and (ii) standby letters of credit issued for any other lawful purposes of the Borrower Parties and the other Subsidiary Loan Parties (such letters of credit issued for such purposes, “Standby Letters of Credit”) for their own account or for the account of any Subsidiary in a form reasonably acceptable to the applicable Issuing Bank, at any time and from time to time during the Availability Period and prior to the date that is five Business Days prior to the Maturity Date. All Letters of Credit shall be issued in Dollars. 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 or other agreement submitted by the Borrower to, or entered into by the Borrower with, an Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. “Letters of Credit” shall include Trade Letters of Credit and Standby Letters of Credit and the Existing Letters of Credit. Each Existing Letter of Credit shall be deemed to have been issued under this Section 2.05 on the First Restatement Effective Date.

(b) Notice of Issuance, Amendment, Renewal, Extension. To request the issuance of a Letter of Credit (or the amendment, renewal (other than an automatic extension in accordance with paragraph (c) of this Section 2.05) or extension of an outstanding Letter of Credit), the Borrower shall deliver by hand or facsimile (or transmit by e-mail, if arrangements for doing so have been approved by the applicable Issuing Bank) to the applicable Issuing Bank and the Administrative Agent three Business Days in advance of the requested date of issuance, amendment or extension (or such shorter period as the Administrative Agent and the applicable Issuing Bank in their sole discretion may agree) a Letter of Credit Request requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended or extended, and specifying the date of issuance, amendment or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with paragraph (c) of this Section 2.05), the amount of such Letter of Credit, the name and address of the beneficiary thereof, whether such Letter of Credit constitutes a Standby Letter of Credit or a Trade Letter of Credit, and such other information as shall be necessary to issue, amend or extend such Letter of Credit. If requested by the applicable Issuing Bank, the Borrower shall also submit a letter of credit application on such Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended or extended only if (and upon issuance, amendment or extension of each Letter of Credit the Borrower Parties shall be deemed to represent and warrant that), after giving

 

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effect to such issuance, amendment or extension (i) the Revolving L/C Exposure shall not exceed the Letter of Credit Sublimit, (ii) the Revolving Facility Credit Exposure shall not exceed the total Revolving Facility Commitments and (iii) the Revolving Facility Credit Exposure shall not exceed the Borrowing Base. Notwithstanding anything to the contrary contained herein, (i) no Issuing Bank shall issue (or be obligated 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 Issuing Bank from issuing such Letter of Credit, (B) any applicable law or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuing Bank shall prohibit the issuance of letters of credit generally, (C) such Letter of Credit shall impose upon such Issuing Bank any restriction, reserve or capital requirement (for which such Issuing Bank is not otherwise compensated hereunder) not in effect on the Closing Date, (D) such Letter of Credit shall impose upon such Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which such Issuing Bank in good faith deems material to it or (E) any Lender is at such time a Defaulting Lender, unless such Issuing Bank (1) is satisfied in its reasonable discretion that the related exposure will be 100% covered by the Commitments of the non-Defaulting Lenders in accordance with Section 2.26 or (2) the Borrower Parties have provided cash collateral in accordance with Section 2.26 and (ii) in no event shall any Issuing Bank be obligated to issue any Letter of Credit if, after giving effect to such issuance, the sum of (A) the aggregate amount of all Letters of Credit issued by such Issuing Bank outstanding at such time and (B) the aggregate principal amount of all L/C Disbursements made by such Issuing Bank that have not yet been reimbursed at such time would exceed the Letter of Credit Commitment of such Issuing Bank.

(c) Expiration Date. Each Standby Letter of Credit shall expire at or prior to the close of business on the earlier of (i) the date one year (unless otherwise agreed upon by the Administrative Agent and the applicable Issuing Bank in their sole discretion) after the date of the issuance of such Standby Letter of Credit (or, in the case of any extension thereof, one year (unless otherwise agreed upon by the Administrative Agent and the applicable Issuing Bank in their sole discretion) after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date; provided that any Standby Letter of Credit with a one year tenor may provide for automatic extension thereof for additional one year periods (which in no event shall extend beyond the date referred to in clause (ii) of this paragraph (c)) so long as such Standby Letter of Credit permits the applicable Issuing Bank to prevent any such extension at least once in each 12-month period (commencing with the date of issuance of such Standby Letter of Credit) by giving prior notice to the beneficiary thereof within a time period during such 12-month period to be agreed upon at the time such Standby Letter of Credit is issued; provided, further, that if the applicable Issuing Bank and the Administrative Agent each consent in their sole discretion, the expiration date of any Standby Letter of Credit may extend beyond the date referred to in clause (ii) above; provided that (x) if any such Standby Letter of Credit is outstanding or is issued after the date that is 30 days prior to the Maturity Date, the Borrower Parties shall provide cash collateral pursuant to documentation reasonably satisfactory to the Administrative Agent and the relevant Issuing Bank in an amount equal to 103% of the face amount of each such Standby Letter of Credit on or prior to the date that is 30 days prior to the Maturity Date or, if later, such date of issuance, and (y) to the extent such cash collateral is provided, each Revolving Lender’s participation in any undrawn Standby Letter of Credit that is outstanding on the Maturity Date shall terminate on the Maturity Date. Each Trade Letter of Credit shall expire at the earlier of (A) 180 days after such Trade Letter of Credit’s date of issuance and (B) the date that is five Business Days prior to the Maturity Date.

(d) Participations. By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Revolving Lenders, such Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit

 

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equal to such Revolving Lender’s Revolving Facility Percentage of the aggregate amount available to be drawn under such Letter of Credit. Each Revolving Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of each Issuing Bank, its Revolving Facility Percentage of each L/C Disbursement made by such Issuing Bank and not reimbursed by the Borrower Parties on the date due as provided in paragraph (e) of this Section 2.05, or of any reimbursement payment required to be refunded to the Borrower Parties for any reason. Each Revolving Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph (d) in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or Event of Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement. If the applicable Issuing Bank shall make any L/C Disbursement in respect of a Letter of Credit, the Borrower Parties shall reimburse such L/C Disbursement by paying to the Administrative Agent an amount equal to such L/C Disbursement not later than 2:00 p.m., New York City time, on the first Business Day after the Borrower receives notice under paragraph (g) of this Section 2.05 of such L/C Disbursement (or the second Business Day, if such notice is received after 12:00 noon, New York City time), together with accrued interest thereon from the date of such L/C Disbursement at the rate applicable to ABR Loans; provided that the Borrower Parties may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or Section 2.04 that such payment be financed with an ABR Revolving Facility Borrowing or a Swingline Borrowing, as applicable, in an equivalent amount and, to the extent so financed, the Borrower Parties’ obligations to make such payment shall be discharged and replaced by the resulting ABR Revolving Facility Borrowing or Swingline Borrowing. If the Borrower Parties fail to reimburse any L/C Disbursement when due, then the Administrative Agent shall promptly notify the applicable Issuing Bank and each other Revolving Lender of the applicable L/C Disbursement, the payment then due from the Borrower Parties in respect thereof and, in the case of a Revolving Lender, such Lender’s Revolving Facility Percentage thereof. Promptly following receipt of such notice, each Revolving Lender shall pay to the Administrative Agent its Revolving Facility Percentage of the payment then due from the Borrower Parties in the same manner as provided in Section 2.06 with respect to Loans made by such Lender (and Section 2.06 shall apply, mutatis mutandis, to the payment obligations of the Revolving Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Bank the amounts so received by it from the Revolving Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower Parties pursuant to this paragraph (e), the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to this paragraph (e) to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any payment made by a Revolving Lender pursuant to this paragraph (e) to reimburse an Issuing Bank for any L/C Disbursement (other than the funding of an ABR Revolving Loan or a Swingline Borrowing as contemplated above) shall not constitute a Loan and shall not relieve the Borrower Parties of their obligations to reimburse such L/C Disbursement.

(f) Obligations Absolute. The obligations of the Borrower Parties to reimburse L/C Disbursements as provided in paragraph (e) of this Section 2.05 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 any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by the applicable Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.05, constitute a legal or equitable discharge

 

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of, or provide a right of setoff against, any Borrower Party’s obligations hereunder. Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor 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 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 or any consequence arising from causes beyond the control of such Issuing Bank, or any of the circumstances referred to in clauses (i), (ii) or (iii) of the first sentence of this paragraph (f); provided that the foregoing shall not be construed to excuse the applicable Issuing Bank from liability to the Borrower Parties to the extent of any direct damages (as opposed to consequential damages, claims in respect of which are hereby waived by the Borrower Parties to the extent permitted by applicable law) suffered by any Borrower Party that are determined by a final and binding decision of a court of competent jurisdiction to have been caused by such Issuing Bank’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 the applicable Issuing Bank, such Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, the applicable Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures. The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the Borrower by telephone (confirmed by facsimile or e-mail) of any such demand for payment under a Letter of Credit and whether such Issuing Bank 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 Borrower Parties of their obligations to reimburse such Issuing Bank or the Revolving Lenders with respect to any such L/C Disbursement.

(h) Interim Interest. If an Issuing Bank shall make any L/C Disbursement, then, unless the Borrower Parties 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 Borrower Parties reimburse such L/C Disbursement, at the rate per annum then applicable to ABR Revolving Loans; provided that, if such L/C Disbursement is not reimbursed by the Borrower Parties when due pursuant to paragraph (e) of this Section 2.05, then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph (h) shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Revolving Lender pursuant to paragraph (e) of this Section 2.05 to reimburse such Issuing Bank shall be for the account of such Revolving Lender to the extent of such payment.

(i) Replacement of an Issuing Bank. An Issuing Bank may be replaced at any time by written agreement between the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of an Issuing Bank. At the time any such replacement shall become effective, the Borrower Parties shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12. From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of the replaced Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such

 

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successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of such Issuing Bank 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.

(j) Cash Collateralization. If any Event of Default shall occur and be continuing, (i) in the case of an Event of Default described in Section 7.01(h) or (i), on the Business Day, or (ii) in the case of any other Event of Default, on the third Business Day, in each case, following the date on which the Borrower receives notice from the Administrative Agent demanding the deposit of cash collateral pursuant to this paragraph (j), the Borrower Parties shall deposit in an account with or at the direction of the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Revolving Lenders, an amount in cash equal to the Revolving L/C Exposure as of such date plus any accrued and unpaid interest thereon; provided that upon the occurrence of any Event of Default with respect to the Borrower described in Section 7.01(h) or (i), 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. Each such deposit pursuant to this paragraph (j) shall be held by the Collateral Agent as collateral for the payment and performance of the obligations of the Borrower Parties under this Agreement. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of (A) for so long as an Event of Default shall be continuing, the Administrative Agent and (B) at any other time, the Borrower, in each case, in Permitted Investments and at the risk and expense of the Borrower, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in such account. Moneys in such account shall be applied by the Administrative Agent to reimburse each Issuing Bank for L/C Disbursements for which such Issuing Bank has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower Parties for the Revolving L/C Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of the Required Lenders), be applied to satisfy other obligations of the Borrower Parties under this Agreement. If the 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 Borrower within three Business Days after all Events of Default have been cured or waived.

(k) Additional Issuing Banks. From time to time, the Borrower may, by notice to the Administrative Agent, designate any Lender (in addition to Deutsche Bank) to act as an Issuing Bank; provided that such Lender agrees in its sole discretion to act as such and such Lender is reasonably satisfactory to the Administrative Agent as an Issuing Bank. Each such additional Issuing Bank shall execute a counterpart of this Agreement upon the approval of the Administrative Agent (which approval shall not be unreasonably withheld) and shall thereafter be an Issuing Bank hereunder for all purposes. The Borrower may, in its sole discretion, request a Letter of Credit issuance from any Issuing Bank.

(l) Reporting. Unless otherwise requested by the Administrative Agent, each Issuing Bank shall (i) provide to the Administrative Agent copies of any notice received from the Borrower or any Co-Borrower pursuant to Section 2.05(b) no later than the next Business Day after receipt thereof and (ii) report in writing to the Administrative Agent (A) on or prior to each Business Day on which such Issuing Bank expects to issue, amend or extend any Letter of Credit, the date of such issuance, amendment or extension, and the aggregate face amount of the Letters of Credit to be issued, amended or extended by it and outstanding after giving effect to such issuance, amendment or extension occurred (and whether the amount thereof changed), and such Issuing Bank shall be permitted to issue, amend or extend such Letter of Credit if the Administrative Agent shall not have advised such Issuing

 

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Bank that such issuance, amendment or extension would not be in conformity with the requirements of this Agreement, (B) on each Business Day on which such Issuing Bank makes any L/C Disbursement, the date of such L/C Disbursement and the amount of such L/C Disbursement and (C) on any other Business Day, such other information with respect to the outstanding Letters of Credit issued by such Issuing Bank as the Administrative Agent shall reasonably request, including but not limited to prompt verification of such information as may be requested by the Administrative Agent. The failure of any Issuing Bank to comply with the provisions of this paragraph (l) shall, unless otherwise agreed by the Administrative Agent, result in the letter of credit issued by it not being deemed a “Letter of Credit” hereunder and under the other Loan Documents.

(m) If the maturity date in respect of any tranche of Revolving Facility Commitments occurs prior to the expiration of any Letter of Credit, then (i) if one or more other tranches of Revolving Facility Commitments in respect of which the maturity date shall not have occurred are then in effect, such Letters of Credit shall automatically be deemed to have been issued (including for purposes of the obligations of the Revolving Lenders to purchase participations therein and to make Revolving Loans and payments in respect thereof pursuant to Section 2.05(e)) under (and ratably participated in by Lenders pursuant to) the Revolving Facility Commitments in respect of such non-terminating tranches up to an aggregate amount not to exceed the aggregate principal amount of the unutilized Revolving Facility Commitments thereunder at such time (it being understood that no partial face amount of any Letter of Credit may be so reallocated); provided, in no event shall such reallocation cause a Lender’s share of the Revolving Facility Commitment to exceed such Lender’s Commitment, and (ii) to the extent not reallocated pursuant to the immediately preceding clause (i), the Borrower shall cash collateralize any such Letter of Credit in accordance with Section 2.05(j). If, for any reason, such cash collateral is not provided or the reallocation does not occur, the Revolving Lenders under the maturing tranche shall continue to be responsible for their participating interests in the Letters of Credit. Except to the extent of reallocations of participations pursuant to clause (i) of the second preceding sentence, the occurrence of a maturity date with respect to a given tranche of Revolving Facility Commitments shall have no effect upon (and shall not diminish) the percentage participations of the Revolving Lenders in any Letter of Credit issued before such maturity date. Commencing with the maturity date of any tranche of Revolving Facility Commitments, the sublimit for Letters of Credit shall be agreed with the Lenders under the extended tranches.

SECTION 2.06. Funding of Borrowings.

(a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 10:00 a.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; provided that Swingline Loans shall be made as provided in Section 2.04. The Administrative Agent will make such Loans available to the Borrower Parties by promptly crediting the amounts so received, in like funds, to an account of the Borrower Parties as specified in the applicable Borrowing Request; provided that ABR Revolving Loans and Swingline Borrowings made to finance the reimbursement of an L/C Disbursement and reimbursements as provided in Section 2.05(e) shall be remitted by the Administrative Agent to the applicable Issuing Bank.

(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any 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 2.06 and may, in reliance upon such assumption, make available to the Borrower Parties 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 Borrower Parties severally agree to pay to the

 

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Administrative Agent forthwith on demand (without duplication) such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower Parties to but excluding the date of payment to the Administrative Agent at (i) in the case of such Lender, the greater of (A) the New York Federal Reserve Bank Rate and (B) a rate reasonably determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower Parties, the interest rate applicable to ABR Loans at such time. If such Lender pays such amount to the Administrative Agent then such amount shall constitute such Lender’s Loan included in such Borrowing.

(c) The foregoing notwithstanding, the Administrative Agent, in its sole discretion, may from its own funds make a Revolving Loan on behalf of any such Lender that fails to fund (including by means of Swingline Loans to the Borrower Parties). In such event, the Lender, on behalf of whom Administrative Agent made the Revolving Loan, shall reimburse Administrative Agent for all or any portion of such Revolving Loan made on its behalf upon written notice given to each applicable Lender not later than 12:00 noon, New York City time, on the Business Day such reimbursement is requested. On each such settlement date, the Administrative Agent will pay to each Lender the net amount owing to such Lender in connection with such settlement, including amounts relating to Loans, fees, interest and other amounts payable hereunder. The entire amount of interest attributable to such Revolving Loan for the period from and including the date on which such Revolving Loan was made on such Lender’s behalf, to but excluding the date the Administrative Agent is reimbursed in respect of such Revolving Loan by such Lender, shall be paid to the Administrative Agent for its own account.

SECTION 2.07. Interest Elections. Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.07. The 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 2.07 shall not apply to Swingline Borrowings, which may not be converted or continued.

To make an election pursuant to this Section 2.07, the Borrower shall notify the Administrative Agent of such election by telephone (i) in the case of an election to convert to or continue a Eurocurrency Borrowing, not later than 2:00 p.m., New York City time, three Business Days before the effective date of such election or (ii) in the case of an election to convert to or continue an ABR Borrowing, not later than 2:00 p.m., New York City time, one Business Day before the effective date of such election. Each such telephonic Interest Election Request shall be confirmed promptly by hand delivery, facsimile transmission or PDF attachment to an e-mail to the Administrative Agent of a written Interest Election Request substantially in the form of Exhibit G (or such other form as may be agreed between the Borrower and the Administrative Agent) and signed by the Borrower.

(a) Each telephonic and written Interest Election Request shall be irrevocable and shall specify the following information in compliance with Section 2.02:

(i) 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);

 

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(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 or a Eurocurrency Borrowing; and

(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of “Interest Period”; provided that if any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(b) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each applicable Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(c) If the Borrower Parties fail to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing two Business Days prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be continued as a Eurocurrency Borrowing having an Interest Period of one month’s duration. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the written request (including a request through electronic means) of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Borrowing may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each Eurocurrency Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

SECTION 2.08. Termination and Reduction of Commitments.

(a) Unless previously terminated, the Commitments shall terminate on the Maturity Date.

(b) The Borrower may at any time terminate, or from time to time reduce, the Revolving Facility Commitments; provided that (i) each reduction of the Revolving Facility Commitments shall be in an amount that is an integral multiple of $1.0 million and not less than $5.0 million (or, if less, the remaining amount of the applicable Revolving Facility Commitments) and (ii) the Borrower shall not terminate or reduce the Revolving Facility Commitments if, after giving effect to any concurrent repayment of the Revolving Loans in accordance with Section 2.11, the Revolving Facility Credit Exposure would exceed the lesser of the total Revolving Facility Commitments and the Borrowing Base.

(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Revolving Facility Commitments under paragraph (b) of this Section 2.08 at least three Business Days prior to the closing date of such termination or reduction, specifying such election and the closing date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.08 shall be irrevocable; provided that a notice of termination of the Revolving Facility Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified closing 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.

 

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SECTION 2.09. Promise to Pay; Evidence of Debt.

(a) Each of the Borrower Parties, jointly and severally, 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, Protective Advance and Overadvance to such Borrower Party on the Maturity Date and (ii) to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of (x) the Maturity Date and (y) the date that is five Business Days after such Swingline Loan was made.

(b) Any Lender may request that Loans made by it be evidenced by a promissory note (a “Note”). In such event, the Borrower Parties shall prepare, execute and deliver to such Lender a Note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in substantially the form attached hereto as Exhibit H (or such other form as may be agreed between the Administrative Agent and the Borrower). Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more Notes in such form payable to the payee named therein (or, if requested by such payee, to such payee and its registered assigns).

(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan to any of the Borrower Parties made hereunder, the Type thereof and the Interest Period (if any) applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower Parties to each Lender hereunder and (iii) any amount received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof. The entries made in the accounts maintained pursuant to this paragraph (c) shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligations of the Borrower Parties to repay the Obligations in accordance with the terms of this Agreement.

SECTION 2.10. Optional Repayment of Loans.

(a) The Borrower Parties shall have the right at any time and from time to time to repay any Loan in whole or in part, without premium or penalty (but subject to Section 2.16), in an aggregate principal amount, (i) in the case of Eurocurrency Revolving Loans, that is an integral multiple of $500,000 and not less than $2.5 million, and (ii) in the case of ABR Loans, that is an integral multiple of $100,000 and not less than $1.0 million, or, in each case, if less, the amount outstanding.

(b) Prior to any repayment of any Revolving Loans, the Borrower shall select the Borrowing or Borrowings to be repaid and shall notify the Administrative Agent by telephone (confirmed by hand delivery or facsimile transmission or PDF attachment to an e-mail) of such selection not later than 2:00 p.m., New York City time, (i) in the case of an ABR Borrowing, one Business Day before the anticipated date of such repayment and (ii) in the case of a Eurocurrency Borrowing, three Business Days before the anticipated date of such repayment. Each repayment of a Borrowing shall be applied to the Revolving Loans included in the repaid Borrowing such that each Revolving Lender receives its ratable share of such repayment (based upon the respective Revolving Facility Credit Exposures of the Revolving Lenders at the time of such repayment). Notwithstanding anything to the contrary in the immediately preceding sentence, prior to any repayment of a Swingline Loan hereunder, the Borrower shall select the Borrowing or Borrowings to be repaid and shall notify the Administrative Agent by telephone (confirmed

 

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by hand delivery, facsimile transmission or PDF attachment to an e-mail) of such selection not later than 2:00 p.m., New York City time, on the scheduled date of such repayment. Repayments of Eurocurrency Borrowings shall be accompanied by accrued interest on the amount repaid, together with any amounts due under Section 2.16.

SECTION 2.11. Mandatory Repayment of Loans.

(a) In the event the aggregate amount of the Revolving Facility Credit Exposure exceeds the Line Cap at such time, then the Borrower shall promptly repay outstanding Revolving Loans and Swingline Loans, and, if there remains an excess after paying all Revolving Loans and Swingline Loans, cash collateralize Letters of Credit (in accordance with Section 2.05(j)) in an aggregate amount equal to such excess.

(b) In the event and on such occasion as either (i) the Revolving L/C Exposure exceeds the Letter of Credit Sublimit or (ii) the aggregate Revolving L/C Exposure attributable to Letters of Credit issued by any Issuing Bank exceeds the Letter of Credit Commitment of such Issuing Bank, the Borrower shall deposit cash collateral (in accordance with Section 2.05(j)) in an amount equal to such excess.

(c) Upon the occurrence and during the continuance of a Cash Dominion Event, all amounts in the Dominion Account shall be applied by the Administrative Agent to repay outstanding Revolving Loans and Swingline Loans and, thereafter, if an Event of Default shall have occurred and be continuing, to cash collateralize (in accordance with Section 2.05(j)) the Revolving L/C Exposure.

(d) Any repayments made pursuant to this Section 2.11 shall be without premium or penalty, other than amounts due under Section 2.16, if any.

SECTION 2.12. Fees.

(a) The Borrower Parties agree, jointly and severally, to pay to each Lender (other than any Defaulting Lender), through the Administrative Agent, on the fifth Business Day of January, April, July and October in each year, and on the earlier of the Maturity Date and the date on which the Commitments of all the Lenders shall be terminated as provided herein, a commitment fee (a “Commitment Fee”) on the daily amount of the Available Unused Commitment of such Lender during the preceding three calendar month period (or other period commencing with the First Restatement Effective Date or ending with the date on which the last of the Commitments of such Lender shall be terminated) at a rate equal to the Applicable Commitment Fee. All Commitment Fees shall be computed on the basis of the actual number of days elapsed in a year of 360 days. For the purpose of calculating any Lender’s Commitment Fee, the outstanding Swingline Loans during the period for which such Lender’s Commitment Fee is calculated shall be deemed to be zero. The Commitment Fee due to each Lender shall commence to accrue on the First Restatement Effective Date and shall cease to accrue on the date on which the last of the Commitments of such Lender shall be terminated as provided herein.

(b) The Borrower Parties from time to time agree, jointly and severally, to pay (i) to each Revolving Lender (other than any Defaulting Lender, it being understood that at any time the Issuing Bank has Fronting Exposure to such Defaulting Lender, the L/C Participation Fee with respect to such Fronting Exposure shall be payable to each applicable Issuing Bank for its own account) through the Administrative Agent, on the fifth Business Day of January, April, July and October of each year and on the earlier of the Maturity Date and the date on which the Commitments of all the Lenders shall be terminated as provided herein, a fee (an “L/C Participation Fee”) on such Lender’s Revolving Facility Percentage of the daily aggregate Revolving L/C Exposure (excluding the portion thereof attributable to

 

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unreimbursed L/C Disbursements), during the preceding quarter (or shorter period commencing with the First Restatement Effective Date or ending with the Maturity Date or the date on which the Revolving Facility Commitments shall be terminated) at the rate per annum equal to the Applicable Margin for Eurocurrency Borrowings effective for each day in such period and (ii) to each Issuing Bank, for its own account (A) on the fifth Business Day of January, April, July and October of each year and on the earlier of the Maturity Date and the date on which the Commitments of all the Lenders shall be terminated as provided herein, a fronting fee in respect of each Letter of Credit issued by such Issuing Bank for the period from and including the date of issuance of such Letter of Credit to and including the termination of such Letter of Credit, computed at a rate equal to 0.125% per annum of the daily stated amount of such Letter of Credit) plus (B) such Issuing Bank’s customary issuance fees and customary documentary and processing fees and charges (collectively, “Issuing Bank Fees”). All L/C Participation Fees and Issuing Bank Fees that are payable in Dollars on a per annum basis shall be computed on the basis of the actual number of days elapsed in a year of 360 days.

(c) The Borrower Parties, jointly and severally, agree to pay to the Administrative Agent, for its own account, the agency fees set forth in the Fee Letter at the times specified therein or in such other amounts and at such other times as may be separately agreed in writing by the Administrative Agent and the Borrower from time to time (the “Administrative Agent Fees”).

(d) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent at the Payment Office for distribution, if and as appropriate, among the Lenders, except that Issuing Bank Fees shall be paid directly to the applicable Issuing Banks. Once paid, none of the Fees shall be refundable under any circumstances.

SECTION 2.13. Interest.

(a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the ABR plus the Applicable Margin.

(b) The Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin.

(c) Following the occurrence and during the continuation of a Specified Event of Default from the date the Borrower Parties receives written notice of such Specified Event of Default from the Administrative Agent, the Borrower Parties shall pay interest on overdue amounts hereunder at a rate per annum equal to (i) in the case of overdue principal of, or interest on, any Loan, 2.0% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section 2.13 or (ii) in the case of any other overdue amount, 2.0% plus the rate applicable to ABR Loans as provided in clause (a) of this Section 2.13.

(d) Accrued interest on each Loan shall be payable by the Borrower Parties, jointly and severally, in arrears (i) on each Interest Payment Date for such Loan and (ii) upon termination of the Revolving Facility Commitments; provided that (A) default interest accrued pursuant to paragraph (c) of this Section 2.13 shall be payable on demand, (B) in the event of any repayment of any Loan (other than a repayment of an ABR Revolving Loan or Swingline 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 and (C) in the event of any conversion of any Eurocurrency Revolving 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 computed by reference to the ABR at times when the ABR 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), and, in each case, shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable ABR, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.14. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or

(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period (each of clause (a) and (b), a “Market Disruption Event”);

then the Administrative Agent shall give notice thereof to the Borrower and the applicable Lenders by telephone, facsimile transmission or PDF attachment to an e-mail as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any applicable Borrowing to, or continuation of any such Borrowing as, a Eurocurrency Borrowing shall be ineffective and such Borrowing shall be converted to or continued as on the last day of the Interest Period applicable thereto an ABR Borrowing and (ii) if any Borrowing Request requests a Eurocurrency Borrowing, such Borrowing shall be made as an ABR Borrowing. During any period in which a Market Disruption Event is in effect, Borrower may request that the Administrative Agent request the Required Lenders to confirm that the circumstances giving rise to the Market Disruption Event continue to be in effect; provided that (A) Borrower shall not be permitted to submit any such request more than once in any 30-day period and (B) nothing contained in this Section 2.14 or the failure to provide confirmation of the continued effectiveness of such Market Disruption Event shall in any way affect the Administrative Agent’s or Required Lenders’ right to provide any additional notices of a Market Disruption Event as provided in this Section 2.14.

SECTION 2.15. Increased Costs.

(a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or Issuing Bank;

(ii) subject any Recipient to any Taxes (other than Indemnified Taxes and Excluded Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii) impose on any Lender or Issuing Bank or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Revolving Loans made by such Lender or any Letter of Credit or participation therein;

 

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and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Revolving Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or Issuing Bank, as applicable, for such additional costs incurred or reduction suffered.

(b) If any Lender or Issuing Bank 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 Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’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 Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy or liquidity), then from time to time the Borrower shall pay to such Lender or such Issuing Bank, as applicable, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered. Notwithstanding any other provision herein, no Lender or Issuing Bank shall demand compensation pursuant to this Section 2.15(b) as a result of a change in law resulting from Basel III or the Dodd-Frank Wall Street Reform and Consumer Protection Act if it shall not at the time be the general policy or practice of such Lender or such Issuing Bank to demand such compensation from similarly situated borrowers (to the extent that with respect to such change in law, such Lender has the right to do so under its credit facilities with similarly situated borrowers).

(c) A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or Issuing Bank or its holding company, as applicable, as specified in paragraph (a) or (b) of this Section 2.15 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or Issuing Bank, as applicable, the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Promptly after any Lender or any Issuing Bank has determined that it will make a request for increased compensation pursuant to this Section 2.15, such Lender or Issuing Bank shall notify the Borrower thereof. Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section 2.15 shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to this Section 2.15 for any increased costs or reductions incurred more than 180 days prior to the date that such Lender or Issuing Bank, as applicable, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefor; provided, further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180 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 Eurocurrency Revolving Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Revolving Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or repay any Eurocurrency Revolving Loan on the date specified in any notice delivered pursuant hereto or (d) the assignment of any Eurocurrency Revolving Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19,

 

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then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Revolving Loan, such loss, cost or expense to any Lender shall be deemed to be the amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue a Eurocurrency Revolving Loan, for the period that would have been the Interest Period for such Loan) over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in Dollars of a comparable amount and period from other banks in the Eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

SECTION 2.17. Taxes.

(a) Any and all payments by or on account of any obligation of any Loan Party hereunder or under any Loan Document shall be made free and clear of and without deduction for any Taxes, except as required by applicable law; provided that if a Loan Party or the Administrative Agent shall be required to deduct any Indemnified Taxes from such payments, then (i) the sum payable by such Loan Party shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.17) the Administrative Agent, any Lender or any Issuing Bank, as applicable, receives an amount equal to the amount it would have received had no such deductions been made, (ii) such Loan Party shall make such deductions and (iii) such Loan Party shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) In addition, the Loan Parties shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Each Loan Party shall indemnify the Administrative Agent, each Lender and each Issuing Bank, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes imposed on the Administrative Agent, such Lender or such Issuing Bank, as applicable (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17) 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 such Loan Party by a Lender or an Issuing Bank, or by the Administrative Agent on its own behalf or on behalf of a Lender or an Issuing Bank, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Taxes by a Loan Party to a Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(e) (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the

 

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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 Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.17(e)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower,

(A) any Lender that is a U.S. Person shall deliver to the 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 Borrower or the Administrative Agent), executed copies 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 entitled to do so, deliver to the 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 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 (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2) executed copies 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 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 the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or W-8BEN-E, as applicable; or

(4) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BEN-E, as applicable, a U.S. Tax Compliance Certificate, 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 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 on behalf of each such direct and indirect partner;

 

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(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the 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 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 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 Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the 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 Borrower or the Administrative Agent as may be necessary for the 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 clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(f) For purposes of determining withholding Taxes imposed under FATCA, from and after the effective date of this Agreement, the Borrower and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) the Loans (together with any other extensions of credit pursuant thereto) as not qualifying as “grandfathered obligations” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).

(g) If the Administrative Agent, Issuing Bank or any Lender receives a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by a Loan Party or with respect to which such Loan Party has paid additional amounts, in each case pursuant to this Section 2.17, it shall pay an amount equal to such refund to such Loan Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 2.17 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent, such Issuing Bank or such Lender (including any Taxes imposed with respect to such refund) as is determined by the Administrative Agent, such Issuing Bank or such Lender in good faith, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that such Loan Party, upon the request of the Administrative Agent, such Issuing Bank or such Lender, agrees to repay as soon as reasonably practicable the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Issuing Bank or such Lender in the event the Administrative Agent, such Issuing Bank or such Lender is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (g), in no event will the Administrative Agent, Issuing Bank or any Lender be required to pay any amount to a Loan Party pursuant to this paragraph (g)

 

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the payment of which would place the Administrative Agent, such Issuing Bank or such Lender in a less favorable net after-Tax position than the Administrative Agent, such Issuing Bank or such Lender 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 shall not be construed to require the Administrative Agent, any Issuing Bank or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems, in good faith, to be confidential) to the Loan Parties or any other person.

(h) Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so) and (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.04(d) relating to the maintenance of a Participant Register, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such 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 any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender against any amount due to the Administrative Agent under this paragraph (h).

SECTION 2.18. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) Unless otherwise specified, the Borrower Parties shall make each payment required to be made by them hereunder (whether of principal, interest, fees, reimbursement of L/C Disbursements or otherwise) prior to 2:00 p.m., New York City time, at the Payment Office, except payments to be made directly to the applicable Issuing Bank or the Swingline Lender as expressly provided herein and except that payments pursuant to Section 2.15, Section 2.16, Section 2.17 and Section 9.05 shall be made directly to the persons entitled thereto, on the date when due, in immediately available funds, without condition or deduction for any defense, recoupment, set-off or counterclaim. 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. The Administrative Agent shall distribute any such payments received by it for the account of any other person to the appropriate recipient promptly following receipt thereof and shall make settlements with the Lenders with respect to other payments at the times and in the manner provided in this Agreement. 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. Any payment required to be made by the Administrative Agent hereunder shall be deemed to have been made by the time required if the Administrative Agent shall, at or before such time, have taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by the Administrative Agent to make such payment.

(b) The amount of each Lender’s Revolving Facility Percentage of outstanding Loans (including outstanding Swingline Loans), shall be computed weekly (or more frequently in the Administrative Agent’s discretion) and shall be adjusted upward or downward based on all Loans (including Swingline Loans) and repayments of Loans (including Swingline Loans) received by the Administrative Agent as of 4:00 p.m. on the first Business Day (such date, the “Settlement Date”) following the end of the period specified by the Administrative Agent. The Administrative Agent shall

 

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deliver to each of the Lenders promptly after a Settlement Date a summary statement of the amount of outstanding Loans for the period and the amount of repayments received for the period. As reflected on the summary statement, (i) the Administrative Agent shall transfer to each Lender its Revolving Facility Percentage of repayments and (ii) each Lender shall transfer to the Administrative Agent (as provided below) or the Administrative Agent shall transfer to each Lender such amounts as are necessary to insure that, after giving effect to all such transfers, the amount of Loans made by each Lender shall be equal to such Lender’s Revolving Facility Percentage of all Loans outstanding as of such Settlement Date. If the summary statement requires transfers to be made to the Administrative Agent by the Lenders and is received prior to 2:00 p.m. on a Business Day, such transfers shall be made in immediately available funds no later than 4:00 p.m. that day and, if received after 2:00 p.m., then no later than 4:00 p.m. on the next Business Day. The obligation of each Lender to transfer such funds is irrevocable, unconditional and without recourse to or warranty by the Administrative Agent. If and to the extent any Lender shall not have so made its transfer to the Administrative Agent, such Lender agrees to pay to the Administrative Agent, forthwith on demand such amount, together with interest thereon, for each day from such date until the date such amount is paid to the Administrative Agent, equal to the greater of the New York Federal Reserve Bank 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.

(c) Except as otherwise provided in this Agreement, if (i) at any time insufficient funds are received by and available to the Administrative Agent from the Borrower Parties to pay fully all amounts of principal, unreimbursed L/C Disbursements, interest and fees and other Obligations then due from the Borrower or any Co-Borrower hereunder or (ii) at any time that a Cash Dominion Event shall have occurred and be continuing (including in connection with any termination of the Revolving Facility Commitments pursuant to Section 7.01) and the Administrative Agent or the Collateral Agent shall receive proceeds of Collateral, such funds shall be applied, (A) first, if an Event of Default has occurred and is continuing and either the Revolving Facility Commitments have been terminated or the Administrative Agent and the Lenders are exercising their rights as a secured creditor as a result of such Event of Default, toward payment of any expenses and indemnities due to the Agents under Section 9.05 hereof, (B) second, toward payment of interest and fees then due from the Borrower Parties hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, (C) third, toward payment of principal of Swingline Loans, unreimbursed L/C Disbursements, Protective Advances and Overadvances then due from the Borrower Parties hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal, unreimbursed L/C Disbursements, Protective Advances and Overadvances then due to such parties, (D) fourth, toward payment of other principal then due from the Borrower Parties hereunder, ratably among the parties entitled thereto in accordance with the amounts of such principal then due to such parties, (E) fifth, if an Event of Default shall have occurred and is continuing or during any Cash Dominion Event, to cash collateralize Letters of Credit issued for the account of the Borrower, any Co-Borrower or any other Subsidiary in accordance with Section 2.05(j), (F) sixth, to payment of obligations pursuant to Specified Hedge Agreements then due from any Loan Party, ratably among the parties entitled thereto in accordance with the amounts of obligations under such Specified Hedge Agreements then due to such parties, (G) seventh, to payment of Cash Management Obligations of the Loan Parties then due from any Loan Party, ratably among the parties entitled thereto in accordance with the amounts of such Cash Management Obligations then due to such parties, and (H) eighth, to payment of all other Obligations of the Borrower Parties then due and payable, ratably among the parties entitled thereto in accordance with the amounts of such Obligations then due to such parties; provided that the application of such proceeds shall at all times be subject to the application of proceeds provisions contained in the ABL/Term Loan Intercreditor Agreement. Any application of funds pursuant to this Section 2.18(c) to Revolving Loans shall be applied first, to ABR Loans and second, to Eurocurrency Revolving Loans.

 

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(d) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Revolving Loans or participations in L/C Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Revolving Loans and participations in L/C Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Revolving Loans and participations in L/C Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Revolving Loans and participations in L/C Disbursements and 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 (d) shall not be construed to apply to any payment made by the Borrower Parties 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 L/C Disbursements to any assignee or participant, other than to the Borrower Parties or any other Subsidiary or Affiliate thereof in an assignment not permitted by this Agreement (as to which the provisions of this paragraph (d) shall apply). Each of the Borrower Parties 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 any Borrower Party rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower Party in the amount of such participation.

(e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or the applicable Issuing Bank hereunder that the Borrower Parties will not make such payment, the Administrative Agent may assume that the Borrower Parties have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the applicable Issuing Bank, as applicable, the amount due. In such event, if the Borrower Parties have not in fact made such payment, then each of the Lenders or the applicable Issuing Bank, as applicable, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank 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 New York Federal Reserve Bank Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(f) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(c), Section 2.05(d) or (e), Section 2.06(b) or Section 2.18(e), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

SECTION 2.19. Mitigation Obligations; Replacement of Lenders.

(a) If any Lender requests compensation under Section 2.15, or if the Borrower Parties are required to pay any additional amount 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 assign its rights and obligations hereunder to another of its offices, branches or Affiliates if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or

 

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2.17, as applicable, in the future and (ii) would not subject such Lender to any material unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any material respect. The Borrower Parties hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) If any Lender requests compensation under Section 2.15, is a Defaulting Lender, or if the Borrower Parties are required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17, then the Borrower Parties may, at their 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 and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (i) the Borrower Parties shall have received the prior written consent of the Administrative Agent, the Swingline Lender and the Issuing Banks, which consent shall not unreasonably be withheld, (ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and funded participations in L/C Disbursements and 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 Borrower Parties (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Section 2.17, such assignment will result in a reduction in such compensation or payments. Nothing in this Section 2.19 shall be deemed to prejudice any rights that the Borrower Parties may have against any Lender that is a Defaulting Lender. In connection with any such assignment, the Borrower, the Administrative Agent, such replaced Lender and the replacement Lender shall otherwise comply with Section 9.04; provided that if such replaced Lender does not comply with Section 9.04 within three Business Days after the Borrower’s request, compliance with Section 9.04 shall not be required to effect such assignment.

(c) If any Lender (such Lender, a “Non-Consenting Lender”) has failed to consent to a proposed amendment, waiver, discharge or termination which, pursuant to the terms of Section 9.08, requires the consent of all of the Lenders affected or all Lenders and with respect to which the Required Lenders shall have granted their consent, then the Borrower Parties shall have the right (unless such Non-Consenting Lender grants such consent) at their sole expense, to replace such Non-Consenting Lender by deeming such Non-Consenting Lender to have assigned its Loans and Commitments hereunder to one or more assignees reasonably acceptable to the Administrative Agent, the Swingline Lender and the Issuing Banks; provided that (i) all Obligations of the Borrower Parties owing to such Non-Consenting Lender (including accrued Fees and any amounts due under Section 2.15, 2.16 or 2.17) being replaced shall be paid in full to such Non-Consenting Lender concurrently with such assignment and (ii) the replacement Lender shall purchase the foregoing by paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and unpaid interest thereon. No action by or consent of the Non-Consenting Lender shall be necessary in connection with such removal or assignment, which shall be immediately and automatically effective upon payment of such purchase price. In connection with any such assignment, the Borrower Parties, the Administrative Agent, such Non-Consenting Lender and the replacement Lender shall otherwise comply with Section 9.04; provided that if such Non-Consenting Lender does not comply with Section 9.04 within three Business Days after the Borrower’s request, compliance with Section 9.04 shall not be required to effect such assignment.

SECTION 2.20. Illegality. If any Lender reasonably determines that any change in law has made it unlawful, or if any Governmental Authority has asserted after the Closing Date that it is unlawful, for any Lender or its applicable lending office to make or maintain any Eurocurrency Revolving Loans, then, upon notice thereof by such Lender to the Borrower through the Administrative Agent, any obligations of such Lender to make or continue Eurocurrency Revolving Loans or to convert ABR

 

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Borrowings to Eurocurrency Borrowings shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall upon demand from such Lender (with a copy to the Administrative Agent), either convert all Eurocurrency Borrowings of such Lender to ABR Borrowings, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Loans. Upon any such repayment or conversion, the Borrower shall also pay accrued interest on the amount so repaid or converted.

SECTION 2.21. Incremental Revolving Commitments.

(a) At any time and from time to time, subject to the terms and conditions set forth herein, the Borrower may, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), establish one or more increases in the Revolving Facility Commitments (the “Incremental Revolving Commitments”). Notwithstanding anything to the contrary herein, the aggregate amount of the Incremental Revolving Commitments shall not exceed an amount equal to $100.0 million. Each establishment of Incremental Revolving Commitments pursuant to this Section 2.21 shall be in a minimum aggregate principal amount of $10.0 million and integral multiples of $1.0 million in excess thereof (or such lesser minimum amount reasonably approved by the Administrative Agent).

(b) Each notice from the Borrower pursuant to this Section 2.21 shall set forth the requested amount and proposed terms of the relevant Incremental Revolving Commitments. Incremental Revolving Commitments may be provided by any existing Lender (it being understood that no existing Lender will have an obligation to provide, and the Borrower Parties shall have no obligation to offer any existing Lender the opportunity to provide any commitment for, Incremental Revolving Commitments), in each case, on terms permitted under this Section 2.21, or any Additional Lender; provided that the Administrative Agent shall have consented (in each case, such consent not to be unreasonably withheld, delayed or conditioned) to any Additional Lender’s providing such Incremental Revolving Commitments if such consent by the Administrative Agent would be required under Section 9.04 for an assignment of Loans to such Additional Lender. Any Incremental Revolving Commitments shall become effective pursuant to an amendment (each, an “Incremental Facility Amendment”) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower Parties, each Lender or Additional Lender providing such Incremental Revolving Commitments (but without the consent of any other Lender) and the Administrative Agent. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Incremental Facility Amendment. Each of the parties hereto hereby agrees that, upon the effectiveness of any Incremental Facility Amendment, this Agreement and the other Loan Documents, as applicable, shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Incremental Revolving Commitments evidenced thereby. Upon each increase in Revolving Facility Commitments in accordance with this Section 2.21, each Lender immediately prior to such increase will automatically and without further act be deemed to have assigned to each Lender or Additional Lender providing such Incremental Revolving Commitments (each, an “Incremental Revolving Lender”) in respect of such increase, (i) each such Incremental Revolving Lender will automatically and without further act be deemed to have assumed a portion of such Revolving Lender’s participations hereunder in outstanding Letters of Credit and Swingline Loans such that, after giving effect to each such deemed assignment and assumption of participations, the percentage of the aggregate outstanding (A) participations hereunder in Letters of Credit and (B) participations hereunder in Swingline Loans held by each Lender (including each such Incremental Revolving Lender) will equal the percentage of the aggregate Revolving Facility Commitments of all Lenders presented by such Lender’s Revolving Facility Commitment and (ii) the Administrative Agent may, in consultation with the Borrower, take any and all actions as may be reasonably necessary to ensure that, after giving effect to

 

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such Lender’s Incremental Revolving Commitments, the percentage of the aggregate Revolving Facility Commitments held by each Lender (including each such Incremental Revolving Lender) will equal the percentage of the aggregate Revolving Facility Commitments of all Lenders presented by such Lender’s Revolving Facility Commitment (which may be accomplished, at the discretion of the Administrative Agent following consultation with the Borrower, (i) by requiring the outstanding Loans to be prepaid with the proceeds of a new Borrowing, (ii) by causing non-increasing Lenders to assign portions of their outstanding Loans to Incremental Revolving Lenders or (iii) by a combination of the foregoing).

(c) Any Incremental Revolving Commitments shall be subject to the following terms and conditions (i) no Default or Event of Default shall have occurred and be continuing or would result from the incurrence of such Incremental Revolving Commitments, (ii) the arrangement or similar fees for any Incremental Revolving Commitments shall be as determined by the Borrower and the arranger or the lenders providing such Incremental Revolving Commitments and (iii) except as otherwise provided in clause (ii), all other terms of such Incremental Revolving Commitments shall be on terms and pursuant to documentation applicable to the existing Revolving Facility.

(d) The proceeds of any Incremental Revolving Commitments will be used for general corporate purposes (including financing capital expenditures, Permitted Business Acquisitions, Restricted Payments, refinancing of Indebtedness and any other transaction not prohibited hereunder).

(e) Notwithstanding the foregoing, no Incremental Facility Amendment shall become effective unless, on the date of such effectiveness, the representations and warranties set forth in the Loan Documents are true and correct in all material respects (or, in the case of any representations and warranties qualified by materiality or Material Adverse Effect, in all respects) as of such date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which such case such representations and warranties shall be true and correct in all material respects as of such earlier date).

SECTION 2.22. Refinancing Amendments.

At any time and from time to time, the Borrower Parties may obtain, from any Lender or any Additional Lender, Credit Agreement Refinancing Indebtedness in respect of all of the Loans and Commitments then outstanding under this Agreement, in each case, pursuant to a Refinancing Amendment establishing replacement revolving commitments hereunder (“Replacement Revolving Commitments”). The terms of any Replacement Revolving Commitments shall be as agreed between the Borrower Parties and the lenders thereof, and shall be subject to the consent of the Administrative Agent, the Swingline Lender and the Issuing Banks (to the extent (i) such consent would be required with regard to the identity of potential lenders pursuant to Section 9.04, such consent not to be unreasonably withheld, delayed or conditioned, and (ii) the Administrative Agent, the Swingline Lender and such Issuing Banks shall remain in such capacity in connection with the Replacement Revolving Commitments). The effectiveness of any Refinancing Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 4.01 (including, solely to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of customary legal opinions, board resolutions, officers’ certificates or reaffirmation agreements consistent with those delivered on the First Restatement Effective Date under Section 4.02 (other than changes to such legal opinions resulting from a change in law, change in fact or change to counsel’s form of opinion reasonably satisfactory to the Administrative Agent)). The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Refinancing Amendment. Each of the parties hereto hereby agrees that, upon the effectiveness of any Refinancing Amendment, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Replacement Revolving Commitments established pursuant thereto. Any Refinancing Amendment may, without the consent of

 

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any person other than the Administrative Agent, the Swingline Lender, the Issuing Banks, the Borrower and the Lenders providing the applicable Credit Agreement Refinancing Indebtedness, 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, the Swingline Lender, the Issuing Banks and the Borrower Parties, to effect the provisions of this Section 2.22. This Section 2.22 shall supersede any provisions in Section 9.08 to the contrary. It is understood that (a) any Lender approached to provide all or a portion of Replacement Revolving Commitments may elect or decline, in its sole discretion, to provide such Replacement Revolving Commitments (it being understood that there is no obligation by the Borrower to approach any existing Lenders to provide any Replacement Revolving Commitments) and (b) the Administrative Agent, the Swingline Lender and each Issuing Bank shall have consented (such consent not to be unreasonably withheld, delayed or conditioned) to such person’s providing such Replacement Revolving Commitments if such consent would be required under Section 9.04 for an assignment of Loans or Commitments to such person.

SECTION 2.23. Extensions of Revolving Facility Commitments.

(a) Notwithstanding anything to the contrary in this Agreement, pursuant to one or more offers (each, an “Extension Offer”) made from time to time by the Borrower to all Lenders on a pro rata basis (based on the aggregate outstanding principal amount of the respective Revolving Facility Commitments) and on the same terms to each such Lender, the Borrower Parties may consummate from time to time transactions with individual Lenders that accept the terms contained in such Extension Offers to extend the Maturity Date of each such Lender’s Revolving Facility Commitments and otherwise modify the terms of such Revolving Facility Commitments pursuant to the terms of the relevant Extension Offer (including by increasing the interest rate or fees payable in respect of such Revolving Facility Commitments) (each, an “Extension”, and each group of Revolving Facility Commitments so extended, as well as the original Revolving Facility Commitments not so extended, being a “tranche”). Any Extended Revolving Commitments shall constitute a separate tranche of Revolving Facility Commitments from the tranche of Revolving Facility Commitments, so long as the following terms are satisfied: (i) no Event of Default shall have occurred and be continuing at the time the offering document in respect of an Extension Offer is delivered to the Lenders; (ii) except as to pricing (interest rate and fees) and maturity (which shall be set forth in the relevant Extension Offer but shall be no earlier than the Maturity Date of the then existing Revolving Facility Commitments), the Revolving Facility Commitment of any Lender that agrees to an Extension with respect to such Revolving Facility Commitment (an “Extending Lender”) extended pursuant to any Extension (an “Extended Revolving Commitment”), and the related outstandings, shall be a Revolving Facility Commitment (or related outstandings, as the case may be) with the same terms as the original Revolving Facility Commitments (and related outstandings); provided that (A) the borrowing and repayment (except for (1) payments of interest and fees at different rates on Extended Revolving Commitments (and related outstandings), (2) repayments required upon the Maturity Date of the non-extending Revolving Facility Commitments and (3) repayment made in connection with a permanent repayment and termination of Revolving Facility Commitments) of Loans with respect to Extended Revolving Commitments after the applicable extension date shall be made on a pro rata basis with all other Revolving Facility Commitments, (B) the permanent repayment of Revolving Loans with respect to, and termination of, Extended Revolving Commitments after the applicable extension date shall be made on a pro rata basis with all other Revolving Facility Commitments, except that the Borrower Parties shall be permitted to permanently repay and terminate Revolving Facility Commitments prior to any Extended Revolving Commitments, (C) assignments and participations of Extended Revolving Commitments and extended Revolving Loans shall be governed by the same assignment and participation provisions applicable to Revolving Facility Commitments and Revolving Loans, (D) subject to the provisions of Section 2.04(d) and Section 2.05(m) to the extent dealing with Swingline Loans and Letters of Credit that mature or expire after a maturity date when there exist Extended Revolving Commitments with a longer maturity date, all Swingline Loans and Letters of Credit

 

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shall be participated in on a pro rata basis by all Lenders with Revolving Facility Commitments in accordance with their Revolving Facility Percentage of the Revolving Facility Commitments (and except as provided in Section 2.04(d) and Section 2.05(m), without giving effect to changes thereto on an earlier maturity date with respect to Swingline Loans and Letters of Credit theretofore incurred or issued) and (E) at no time shall there be Revolving Facility Commitments hereunder (including Extended Revolving Commitments, Replacement Revolving Commitments and any Revolving Facility Commitments) which have more than two different Maturity Dates; (iii) if the aggregate principal amount of Revolving Facility Commitments (calculated on the face amount thereof) in respect of which Lenders shall have accepted the relevant Extension Offer shall exceed the maximum aggregate principal amount of Revolving Facility Commitments offered to be extended by the Borrower Parties pursuant to such Extension Offer, then the Revolving Facility Commitments of such Lenders shall be extended ratably up to such maximum amount based on the respective principal amounts (but not to exceed actual holdings of record) with respect to which such Lenders have accepted such Extension Offer; and (iv) any applicable Minimum Extension Condition shall be satisfied unless waived by the Borrower and, to extent provided below, the Administrative Agent.

(b) With respect to all Extensions consummated by the Borrower Parties pursuant to this Section 2.23, (i) such Extensions shall not constitute voluntary or mandatory payments for purposes of this Agreement and (ii) each Extension Offer shall specify the minimum amount of Revolving Facility Commitments to be tendered, which shall be an integral multiple of $1.0 million and an aggregate principal amount that is not less than $25.0 million (or if less, the remaining outstanding principal amount thereof) (or such lesser minimum amount reasonably approved by the Administrative Agent) (a “Minimum Extension Condition”). The transactions contemplated by this Section 2.23 (including, for the avoidance of doubt, payment of any interest, fees or premium in respect of any Extended Revolving Commitments on such terms as may be set forth in the relevant Extension Offer) shall not require the consent of any Lender or any other person (other than as set forth in clause (c) of this Section 2.23), and the requirements of any provision of this Agreement (including Section 2.11 and Section 2.18) or any other Loan Document that may otherwise prohibit any such Extension or any other transaction contemplated by this Section 2.23 shall not apply to any of the transactions effected pursuant to this Section 2.23.

(c) The consent (such consent not to be unreasonably withheld, delayed or conditioned) of the Administrative Agent shall be required to effectuate any Extension. No consent of any Lender or any other person shall be required to effectuate any Extension, other than the consent of the Borrower and each Lender agreeing to such Extension with respect to one or more of its Revolving Facility Commitments. The Lenders hereby irrevocably authorize the Administrative Agent to enter into amendments to this Agreement and the other Loan Documents (an “Extension Amendment”) with the Borrower as may be necessary in order to establish new tranches in respect of Revolving Facility Commitments so extended and such technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower in connection with the establishment of such new tranches, in each case, on terms consistent with this Section 2.23. This Section 2.23 shall supersede any provisions in Section 9.08 to the contrary. For the avoidance of doubt, it is understood that no existing Lenders will have any obligation to commit to any such extension.

SECTION 2.24. Joint and Several Liability of Borrower Parties.

(a) Each of the Borrower Parties is accepting joint and several liability hereunder in consideration of the financial accommodation to be provided by the Lenders under this Agreement, for the mutual benefit, directly and indirectly, of each of the Borrower Parties and in consideration of the undertakings of each of the Borrower Parties to accept joint and several liability for the obligations of each of them under the Loan Documents.

 

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(b) Each of the Borrower Parties jointly and severally hereby irrevocably and unconditionally accepts, not merely as a surety but also as a co-debtor, joint and several liability with the other Borrower Parties with respect to the payment and performance of all of the Obligations, it being the intention of the parties hereto that all of the Obligations shall be the joint and several obligations of each of the Borrower Parties without preferences or distinction among them.

(c) If and to the extent that any of the Borrower Parties shall fail to make any payment with respect to any of the Obligations hereunder as and when due or to perform any of such Obligations in accordance with the terms thereof, then in each such event, the other Borrower Parties will make such payment with respect to, or perform, such Obligation.

(d) The obligations of each Borrower Party under the provisions of this Section 2.24(d) constitute full recourse obligations of such Borrower Party, enforceable against it to the full extent of its properties and assets.

(e) Notwithstanding any provision to the contrary contained herein or in any other of the Loan Documents, the obligations of each Co-Borrower hereunder shall be limited to an aggregate amount equal to the largest amount that would not render its obligations hereunder subject to avoidance under Section 548 of the U.S. Bankruptcy Code or any comparable provisions of any applicable state law.

SECTION 2.25. Appointment of Borrower as Agent for Borrower Parties. Each Co-Borrower hereby appoints the Borrower to act as its exclusive agent for all purposes under this Agreement and the other Loan Documents (including with respect to all matters related to the borrowing and repayment of Loans as described in Article II hereof). Each Co-Borrower (in such capacity) acknowledges and agrees that (a) the Borrower may execute such documents on behalf of all the Borrower Parties as the Borrower deems appropriate in its sole discretion and each Borrower Party (in such capacity) shall be bound by and obligated by all of the terms of any such document executed by the Borrower on its behalf, (b) any notice or other communication delivered by the Administrative Agent or any Lender hereunder to the Borrower shall be deemed to have been delivered to each Borrower Party and (c) the Administrative Agent and each of the Lenders shall accept (and shall be permitted to rely on) any document or agreement executed by the Borrower on behalf of the Borrower Parties (or any of them).

SECTION 2.26. Defaulting Lenders.

(a) Adjustments. Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

(i) Waivers and Amendments. Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in Section 9.08.

(ii) Reallocation of Payments. 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 Article VII or otherwise), shall be applied at such time or times as may be 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 the Issuing Banks or Swingline Lender hereunder; third, if so determined by the Administrative Agent or requested by the applicable Issuing Bank or the Swingline Lender, to be held as cash

 

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collateral for future funding obligations of such Defaulting Lender of any participation in any Swingline Loan or Letter of Credit; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Revolving Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth, if so determined by the Administrative Agent and the Borrower, to be held in a non-interest bearing deposit account and released in order to satisfy obligations of such Defaulting Lender to fund Revolving Loans under this Agreement; sixth, to the payment of any amounts owing to the Lenders, the Issuing Banks or the Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, any Issuing Bank or Swingline Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower Parties as a result of any judgment of a court of competent jurisdiction obtained by the Borrower Parties against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and eighth, to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if such payment is a payment of the principal amount of any Loans or L/C Disbursements in respect of which such Defaulting Lender has not fully funded its appropriate share, such payment shall be applied solely to pay the Loans of, and L/C Disbursements owed to, all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Disbursements owed to, such Defaulting Lender. Any payments 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 2.26(a)(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(iii) Certain Fees. Such Defaulting Lender (A) shall not be entitled to receive any Commitment Fee pursuant to Section 2.12(a) for any period during which that Lender is a Defaulting Lender (and the Borrower Parties shall not be required to pay any such fee that otherwise would have been required to have been paid to such Defaulting Lender) and (B) shall not be entitled to receive any L/C Participation Fee pursuant to Section 2.12(a) for any period during which that Lender is a Defaulting Lender (and the Borrower Parties shall not be required to pay any such L/C Participation Fee that otherwise would have been required to have been paid to such Defaulting Lender except as provided in Section 2.12(a)).

(iv) Reallocation of Applicable Percentages to Reduce Fronting Exposure. During any period in which there is a Defaulting Lender, for purposes of computing the amount of the obligation of each non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit or Swingline Loans pursuant to Section 2.04 and Section 2.05, the “Revolving Facility Percentage” of each non-Defaulting Lender shall be computed without giving effect to the Commitment of such Defaulting Lender; provided, that, each such reallocation shall be given effect only to the extent such that the aggregate obligation of each non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit and Swingline Loans shall not exceed the positive difference, if any, of (1) the Revolving Facility Commitment of such non-Defaulting Lender minus (2) the aggregate outstanding amount of the Revolving Loans of such non-Defaulting Lender.

 

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(v) Elimination of Remaining Fronting Exposure. Within one Business Day of being notified that any Lender has become a Defaulting Lender, (A) the Borrower Parties shall deliver to the Administrative Agent cash collateral in an amount sufficient to cover all Fronting Exposure of the Revolving L/C Exposure (after giving effect to Section 2.26(a)(iv)) which shall be held as security for the reimbursement obligations of the Borrower with respect to the Revolving L/C Exposure and (B) the Borrower Parties shall repay an amount of Swingline Loans sufficient to eliminate the Fronting Exposure of the Swingline Lender (after giving effect to Section 2.26(a)(iv)).

(b) Defaulting Lender Cure. If the Borrower, the Administrative Agent, the Swingline Lender and the Issuing Banks agree in writing that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cash collateral), such Lender will, to the extent applicable, purchase that portion of outstanding Revolving Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Loans and funded and unfunded participations in Letters of Credit and Swingline Loans to be held on a pro rata basis by the Lenders in accordance with their Revolving Facility Percentages (without giving effect to Section 2.26(a)(iv)), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; and provided, further, that, except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.

ARTICLE III

Representations and Warranties

Each of Holdings (solely in respect of Section 3.01, Section 3.02, Section 3.03, Section 3.04 and Section 3.06 and solely regarding Holdings as such provision relates to its respective Guarantee of the Obligations, its respective pledge of the Equity Interests of the Borrower Parties, financial statements, Article VI and Article VIA) and the Borrower Parties, with respect to itself and each of its Restricted Subsidiaries, represents and warrants to each Agent and to each of the Lenders that:

SECTION 3.01. Organization; Powers. Each of Holdings, the Borrower Parties and the other Restricted Subsidiaries (i) is a partnership, limited liability company or corporation duly organized, validly existing and in good standing (or in any foreign jurisdiction where an equivalent status exists, enjoys the equivalent status under the laws of such foreign jurisdiction of organization) under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to own its property and assets and to carry on its business as now conducted, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect, (iii) is qualified to do business in each jurisdiction where such qualification is required, except where the failure so to qualify would not reasonably be expected to have a Material Adverse Effect, and (iv) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Borrower Parties, to borrow and otherwise obtain credit hereunder.

SECTION 3.02. Authorization. The execution, delivery and performance by each Loan Party of each of the Loan Documents to which it is a party, the borrowings hereunder and the Transactions (a) have been duly authorized by all corporate, stockholder, partnership or limited liability company action required to be taken by the Loan Parties and (b) will not violate (i) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents (including any partnership, limited liability company or operating agreement or by-laws) of any Loan

 

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Party or (ii) any applicable order of any court or any rule, regulation or order of any Governmental Authority, where any such violation referred to in this Section 3.02(b) would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (c) result in the creation or imposition of any Lien upon any property or assets of any Loan Party, other than the Liens created by the Loan Documents and Permitted Liens.

SECTION 3.03. Enforceability. This Agreement has been duly executed and delivered by each Loan Party that is party hereto and constitutes, and each other Loan Document when executed and delivered by each Loan Party that is party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against each such Loan Party in accordance with its terms, subject to (a) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally, (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), (c) implied covenants of good faith and fair dealing and (d) any foreign laws, rules and regulations as they relate to pledges of Equity Interests in Foreign Subsidiaries that are not Loan Parties.

SECTION 3.04. Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority or third party is or will be required in connection with the Transactions, the perfection or maintenance of the Liens created under the Security Documents or the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral, except for (a) the filing of Uniform Commercial Code financing statements and equivalent filings in foreign jurisdictions, (b) filings with the United States Patent and Trademark Office and the United States Copyright Office and comparable offices in foreign jurisdictions and equivalent filings in foreign jurisdictions, (c) filings required under Environmental Laws as set forth on Schedule 3.04, (d) such as have been made or obtained and are in full force and effect, (e) such actions, consents and approvals the failure of which to be obtained or made would not reasonably be expected to have a Material Adverse Effect and (f) filings or other actions listed on Schedule 3.04.

SECTION 3.05. Borrowing Base Certificate. At the time of delivery of each Borrowing Base Certificate, assuming that any eligibility criteria that requires the approval or satisfaction of the Administrative Agent has been approved by or is satisfactory to the Administrative Agent, each material Account reflected therein as eligible for inclusion in the Borrowing Base is an Eligible Account and the material Inventory reflected therein as eligible for inclusion in the Borrowing Base constitutes Eligible Inventory.

SECTION 3.06. Financial Statements. Each of the Historical Annual Financial Statements and the Historical Interim Financial Statements fairly present in all material respects the consolidated financial condition of the Borrower and its Restricted Subsidiaries as of the dates thereof and the results of operations of the Borrower and its Restricted Subsidiaries for the period covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein and subject to normal year-end audit adjustments. As of the First Restatement Effective Date, none of Holdings nor any Restricted Subsidiary has any material Guarantee obligations, known contingent liabilities and liabilities for taxes, or any long term leases or unusual forward or long term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph. During the period from September 30, 2016 to and including the First Restatement Effective Date there has been no disposition by Holdings or any Restricted Subsidiary of any material part of its business or property.

 

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SECTION 3.07. Title to Properties. Each of the Borrower Parties and each of the other Restricted Subsidiaries has valid fee simple title to, or valid leasehold interests in, or easements or other limited property interests in, all of its Real Properties and has valid title to its personal property and assets, in each case, except for Permitted Liens and defects in title that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes and except where the failure to have such title would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. All such properties and assets are free and clear of Liens, other than Permitted Liens.

SECTION 3.08. Subsidiaries.

(a) Schedule 3.08(a) sets forth as of the First Restatement Effective Date the name and jurisdiction of incorporation, formation or organization of each direct or indirect Subsidiary of Holdings and, as to each such Subsidiary, the percentage of each class of Equity Interests owned by Holdings or by any such Subsidiary.

(b) As of the First Restatement Effective Date and except as set forth on Schedule 3.08(b), there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors’ qualifying shares) of any nature relating to any Equity Interests owned or held by Holdings, the Borrower or any of the other Restricted Subsidiaries.

SECTION 3.09. Litigation; Compliance with Laws.

(a) Except as set forth on Schedule 3.09(a), there are no actions, suits or proceedings at law or in equity or by or on behalf of any Governmental Authority or in arbitration now pending, or, to the knowledge of the Borrower, threatened in writing against or affecting the Borrower Parties or any of the other Restricted Subsidiaries or any business, property or rights of any such person (but excluding any actions, suits or proceedings arising under or relating to any Environmental Laws, which are subject to Section 3.16) which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(b) To the knowledge of the Borrower, none of the Borrower Parties, any of the other Restricted Subsidiaries or their respective properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any law, rule or regulation (including any zoning, building, ordinance, code or approval, or any building permit, but excluding any Environmental Laws, which are subject to Section 3.16) or any restriction of record or agreement affecting any property, or is in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

SECTION 3.10. Federal Reserve Regulations.

(a) None of Holdings or any of the Restricted Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock.

(b) No part of the proceeds of any Loan or Letter of Credit will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose or (ii) for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation U or Regulation X.

 

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SECTION 3.11. Investment Company Act. None of Holdings or any of the Restricted Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

SECTION 3.12. Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Restricted Subsidiary pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees of each Restricted Subsidiary have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters; and (c) all payments due from any Restricted Subsidiary on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant Restricted Subsidiary.

SECTION 3.13. Tax Returns. Except as set forth on Schedule 3.13:

(a) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each of Holdings and the Restricted Subsidiaries has filed or caused to be filed all federal, state, local and non-U.S. Tax returns required to have been filed by it and each such Tax return is true and correct;

(b) Each of Holdings and the Restricted Subsidiaries has timely paid or caused to be timely paid all Taxes shown to be due and payable by it on the returns referred to in clause (a) of this Section 3.13 and all other Taxes or assessments (or made adequate provision (in accordance with GAAP) for the payment of all Taxes due) with respect to all periods or portions thereof ending on or before the First Restatement Effective Date (except Taxes or assessments that are being contested in good faith by appropriate proceedings in accordance with Section 5.03 and for which Holdings or any of the Restricted Subsidiaries (as the case may be) has set aside on its books adequate reserves in accordance with GAAP), which Taxes, if not paid or adequately provided for, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and

(c) Other than as would not be in, individually or in the aggregate, reasonably expected to have a Material Adverse Effect, as of the First Restatement Effective Date, with respect to each of Holdings and any of the Restricted Subsidiaries, there are no claims being asserted in writing with respect to any Taxes.

SECTION 3.14. No Material Misstatements.

(a) All written information (other than the Projections, estimates and information of a general economic nature or general industry nature) (the “Information”) concerning Holdings or any of its Subsidiaries, the Transactions and any other transactions contemplated hereby prepared by or on behalf of the foregoing or their representatives and made available to any Lender, any Lead Arranger or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby, when taken as a whole, was true and correct in all material respects as of the date such Information was furnished to such person and as of the First Restatement Effective Date and did not, taken as a whole, contain any untrue statement of a material fact as of any such date or omit to state a material fact necessary in order to make the statements contained therein, taken as a whole, not materially misleading in light of the circumstances under which such statements were made.

 

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(b) The Projections and estimates and information of a general economic nature prepared by or on behalf of the Borrower Parties or any of their representatives and that have been made available to any Lenders, any Lead Arranger or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby (i) have been prepared in good faith based upon assumptions believed by the Borrower Parties to be reasonable as of the date thereof (it being understood that actual results may vary materially from the Projections), as of the date such Projections and estimates were furnished to the Lenders and as of the First Restatement Effective Date and (ii) as of the First Restatement Effective Date, have not been modified in any material respect by the Borrower without the consent of the Administrative Agent and the Lead Arrangers.

SECTION 3.15. Employee Benefit Plans.

(a) Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) each Plan is in compliance with the applicable provisions of ERISA and the Code; (ii) no Reportable Event has occurred during the past five years as to which Holdings or any of the Restricted Subsidiaries or any ERISA Affiliate was required to file a report with the PBGC; (iii) no ERISA Event has occurred or is reasonably expected to occur; (iv) none of Holdings or any of the Restricted Subsidiaries has engaged in a “prohibited transaction” (as defined in Section 406 of ERISA and Code Section 4975) in connection with any employee pension benefit plan (as defined in Section 3(2) of ERISA) that would subject Holdings or any of the Restricted Subsidiaries to tax or other penalty; (v) none of Holdings, any of the Restricted Subsidiaries or, to the knowledge of the Borrower or any of the other Restricted Subsidiaries, any ERISA Affiliate has received any written notification that any Multiemployer Plan is in reorganization or has been terminated within the meaning of Title IV of ERISA, or has knowledge that any Multiemployer Plan is reasonably expected to be in reorganization (within the meaning of Section 4242 of ERISA), terminated, insolvent (within the meaning of Section 4245 of ERISA), or in endangered or in, or reasonably expected to be in, critical status (within the meaning of Section 305 of ERISA); and (vi) none of Holdings, any of the Restricted Subsidiaries or, to the knowledge of the Borrower and the other Restricted Subsidiaries, any ERISA Affiliate has incurred, and neither Holdings nor any of the Restricted Subsidiaries is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan.

(b) Each of Holdings and the Restricted Subsidiaries is in compliance with (i) all applicable provisions of law and all applicable regulations and published interpretations thereunder with respect to any employee pension benefit plan or other employee benefit plan governed by the laws of a jurisdiction other than the United States and (ii) the terms of any such plan, except, in each case, for such noncompliance that would not reasonably be expected to have a Material Adverse Effect.

(c) Within the last five years, no Plans of Holdings or any of the Restricted Subsidiaries or, to the knowledge of Borrower or any of the other Restricted Subsidiaries, ERISA Affiliates have been terminated, whether or not in a “standard termination” (as such term is used in Section 404(b)(1) of ERISA) that would reasonably be expected to result in liability to Holdings, the Restricted Subsidiaries or the ERISA Affiliates in excess of $15.0 million, nor has any Plan of the Borrower or any of the other Restricted Subsidiaries or, to the knowledge of the Borrower or the other Restricted Subsidiaries, the ERISA Affiliates (determined at any time within the past five years) with an Insufficiency been transferred outside of the “controlled group” (within the meaning of Section 4001(a)(14) of ERISA) of Holdings, the Restricted Subsidiaries or the ERISA Affiliates that has or would reasonably be expected to result in a Material Adverse Effect.

(d) Except as would not reasonably be expected to result in a Material Adverse Effect, there are no pending, or to the knowledge of the Borrower, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any person as fiduciary or sponsor of any Plan that could result in liability to Holdings or any of the Restricted Subsidiaries.

 

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(e) Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Foreign Benefit Plan is in compliance in all material respects with all requirements of law applicable thereto and the respective requirements of the governing documents of such plan. With respect to each Foreign Benefit Plan, none of Holdings or any of the Restricted Subsidiaries or Affiliates or any of their respective directors, officers, employees or agents has engaged in a transaction which would subject Holdings or any of the Restricted Subsidiaries or Affiliates, directly or indirectly, to a tax or civil penalty which can reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

SECTION 3.16. Environmental Matters. Except as set forth on Schedule 3.16 or as to matters that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (a) the Borrower Parties and each of the Restricted Subsidiaries is in compliance with all Environmental Laws (including having obtained all permits, licenses and other approvals required under any Environmental Law for the operation of its business as currently conducted and being in compliance with the terms of such permits, licenses and other approvals), (b) neither the Borrower Parties nor any of the Restricted Subsidiaries has received notice of or is subject to any pending, or to the Borrower’s knowledge, threatened action, suit or proceeding alleging a violation of, or liability under, any Environmental Law that remains outstanding or unresolved, (c) to the Borrower’s knowledge, there is and has been no Release or threatened Release of Hazardous Material at, on or under any property currently or formerly owned, operated or leased by the Borrower Parties or any of the Restricted Subsidiaries and no Hazardous Material has been generated, owned, treated, stored, handled or controlled by the Borrower Parties or any of the Restricted Subsidiaries and transported to or Released at any location which, in each case, described in this clause (c), would reasonably be expected to result in liability to the Borrower Parties or the Restricted Subsidiaries and (d) there are no agreements in which the Borrower Parties or any of the Restricted Subsidiaries has expressly assumed or undertaken responsibility for any known or reasonably likely liability or obligation of any other person arising under or relating to Environmental Laws or any Hazardous Materials.

SECTION 3.17. Security Documents.

(a) The Collateral Agreement is effective to create in favor of the Administrative Agent (for the benefit of the Secured Parties) a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Collateral described in the Collateral Agreement, when certificates or promissory notes, as applicable, representing such Pledged Collateral are delivered to the Administrative Agent (or a designated bailee thereof), and in the case of the other Collateral described in the Collateral Agreement (other than the Intellectual Property (as defined in the Collateral Agreement)), when financing statements and other filings specified in the Collateral Agreement are filed in the offices specified in the schedules to the Collateral Agreement, the Administrative Agent (for the benefit of the Secured Parties) shall have a perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and, subject to Section 9-315 of the New York Uniform Commercial Code, the proceeds thereof, as security for the Obligations to the extent perfection can be obtained by filing Uniform Commercial Code financing statements, in each case prior and superior in right to the Lien of any other person (except for Permitted Liens).

(b) When the Collateral Agreement or a summary thereof is properly filed in the United States Patent and Trademark Office and the United States Copyright Office, and, with respect to Collateral in which a security interest cannot be perfected by such filings, upon the proper filing of the financing statements referred to in paragraph (a) of this Section 3.17, the Administrative Agent (for the

 

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benefit of the Secured Parties) shall have, solely if and to the extent that a security interest may be perfected by making such filings, a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties thereunder in the domestic Intellectual Property, in each case prior and superior in right to the Lien of any other person (except for Permitted Liens) (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks and patents, trademark and patent applications and registered copyrights acquired by the grantors after the First Restatement Effective Date).

(c) Notwithstanding anything herein (including this Section 3.17) or in any other Loan Document to the contrary, neither the Borrower Parties nor any other Restricted Subsidiary make any representation or warranty as to the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest in any Equity Interests of any Foreign Subsidiary that is not a Loan Party, or as to the rights and remedies of the Agents or any Lender with respect thereto, under foreign law.

SECTION 3.18. Location of Real Property and Leased Premises.

(a) Schedule 3.18 correctly identifies, in all material respects, as of the First Restatement Effective Date, all Material Real Property owned by the Loan Parties. As of the First Restatement Effective Date, the Loan Parties own in fee all the Real Property set forth as being owned by them on Schedule 3.18.

(b) Schedule 3.18 lists correctly in all material respects, as of the First Restatement Effective Date, all Material Real Property leased by any Loan Party and the addresses thereof.

SECTION 3.19. Solvency. On the First Restatement Effective Date, after giving effect to the consummation of the Transactions, including the making of any Revolving Loans hereunder, and after giving effect to the application of the proceeds of such Indebtedness (a) the fair value of the assets of Holdings and its Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, direct, subordinated, contingent or otherwise, (b) the present fair saleable value of the property of Holdings and its Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (c) Holdings and its Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured and (d) Holdings and its Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital. For purposes of determining solvency, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.

SECTION 3.20. No Material Adverse Effect. Since September 30, 2016, there has been no change in the financial condition, business, operations, assets or liabilities of Holdings and the Restricted Subsidiaries that, taken as a whole, has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

SECTION 3.21. Use of Proceeds. The Borrower Parties will use the proceeds of the Revolving Loans and Swingline Loans, and may request the issuance of Letters of Credit, for general corporate purposes (including for capital expenditures, Permitted Business Acquisitions, the repayment or refinancing of Indebtedness and the making of Investments and Restricted Payments, in each case to the extent not prohibited hereunder).

 

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SECTION 3.22. USA PATRIOT Act; FCPA; OFAC.

(a) To the extent applicable, each of Holdings and the Restricted Subsidiaries is in compliance, in all material respects, with the USA PATRIOT Act.

(b) Neither Holdings nor any of the Restricted Subsidiaries is any of the following:

(i) a person that is listed in the annex to, or it otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing effective September 24, 2001 (the “Executive Order”);

(ii) a person owned or Controlled by, or acting for or on behalf of, any person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

(iii) a person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any laws with respect to terrorism or money laundering;

(iv) a person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

(v) a person that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website or other replacement official publication of such list and none of the proceeds of the Term Loans will be, directly or indirectly, offered, lent, contributed or otherwise made available to any Subsidiary, joint venture partner or other person (A) for the purpose of financing the activities of any person, or in any country or territory, that, at the time of such financing, is the subject of sanctions administered by OFAC or by any other authority applicable to Holdings or any of the Restricted Subsidiaries or (B) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of FCPA or any other anti-corruption law, rule or regulation applicable to Holdings or any of the Restricted Subsidiaries.

SECTION 3.23. Intellectual Property; Licenses, Etc. Except as would not reasonably be expected to have a Material Adverse Effect or as set forth on Schedule 3.23, (a) the Borrower Parties and each of the Subsidiary Loan Parties owns, or possesses the right to use, all intellectual property, including all of the patents, patent rights, trademarks, service marks, trade names, trade dress, copyrights or mask works, domain names, applications and registrations for any of the foregoing (collectively, “Intellectual Property Rights”) that are reasonably necessary for the operation of their respective businesses, (b) neither the Borrower Parties nor any of the Subsidiary Loan Parties nor any product, process, method, substance, part or other material now employed, sold or offered by the Borrower Parties or the Subsidiary Loan Parties is infringing, misappropriating or otherwise violating Intellectual Property Rights of any person, (c) no claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Borrower, threatened, and (d) no person is infringing, misappropriating or otherwise violating the Intellectual Property Rights owned by the Borrower or by any of the Subsidiary Loan Parties.

SECTION 3.24. EEA Financial Institutions. No Loan Party is an EEA Financial Institution.

 

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ARTICLE IV

Conditions of Lending

The obligations of (a) the Lenders (including the Swingline Lender) to make Loans and (b) any Issuing Bank to issue Letters of Credit or amend, extend or renew Letters of Credit hereunder (each, a “Credit Event”) are subject to the satisfaction or waiver of the following conditions:

SECTION 4.01. All Credit Events.

On the date of each Credit Event:

(a) The Administrative Agent shall have received, in the case of a Borrowing, a Borrowing Request as required by Section 2.03 (or a Borrowing Request shall have been deemed given in accordance with the last paragraph of Section 2.03) or, in the case of the issuance of a Letter of Credit, the applicable Issuing Bank and the Administrative Agent shall have received a notice requesting the issuance of such Letter of Credit (and if requested by such Issuing Bank, a letter of credit application) as required by Section 2.05(b).

(b) The representations and warranties set forth in the Loan Documents shall be true and correct in all material respects (or, in the case of any representations and warranties qualified by materiality or Material Adverse Effect, in all respects) as of such date, as applicable, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (or, in the case of any representations and warranties qualified by materiality or Material Adverse Effect, in all respects) as of such earlier date).

(c) At the time of and immediately after such Credit Event (other than an amendment, extension or renewal of a Letter of Credit without any increase in the stated amount of such Letter of Credit), no Default or Event of Default shall have occurred and be continuing or would result therefrom.

Each such Credit Event shall be deemed to constitute a representation and warranty by the Borrower on the date of such Credit Event as to the matters specified in paragraphs (b) and (c) of this Section 4.01.

SECTION 4.02. Conditions to First Restatement Effective Date. On the First Restatement Effective Date:

(a) Loan Documents. The Administrative Agent shall have received (i) this Agreement, duly executed and delivered by (A) a Responsible Officer of each Borrower Party, (B) the Administrative Agent, (C) each Issuing Bank, (D) the Swingline Lender, (E) Existing Lenders constituting the “Required Lenders” (under and as defined in the Existing Revolving Credit Agreement) and (F) each person listed on Schedule 2.01 hereto, (ii) an amendment to the Collateral Agreement in the form of Exhibit J, duly executed and delivered by (A) a Responsible Officer of each Loan Party and (B) the Administrative Agent and (iii) for the account of each Lender that has requested the same at least three Business Days prior to the First Restatement Effective Date, a Note executed and delivered by a Responsible Officer of the Borrower.

 

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(b) Income Statement and Balance Sheet; Financial Statements. The Administrative Agent shall have received the (i) audited consolidated balance sheets and related statements of income and cash flows of the Borrower and its Subsidiaries for the fiscal years ended September 30, 2015 and September 30, 2016 and, to the extent such consolidated balance sheets and related statements of income and cash flows include the financial results of any person who is not a Restricted Subsidiary, supplements showing consolidating information for the Borrower and its Restricted Subsidiaries (the items described in this clause (i), the “Historical Annual Financial Statements”) and (ii) unaudited interim consolidated balance sheets and related statements of income and cash flows of the Borrower and its Subsidiaries for the fiscal quarter ended December 31, 2016 and the comparative period in the preceding fiscal year (in the case of this clause (ii), without footnote disclosure) and, to the extent such unaudited interim consolidated balance sheets and related statements of income and cash flows include the financial results of any person who is not a Restricted Subsidiary, supplements showing consolidating information for the Borrower and its Restricted Subsidiaries (the items described in this clause (ii), the “Historical Interim Financial Statements”).

(c) Fees. All accrued fees of the Administrative Agent, all fees owed to the Lenders, and all reasonable, documented and invoiced out-of-pocket expenses required to be paid by the Borrower to the Lenders, the Lead Arrangers and the Agents on or before the First Restatement Effective Date (to the extent invoiced at least one Business Day prior to the First Restatement Effective Date except as otherwise agreed by the Borrower) shall have been paid to the extent due and payable.

(d) Solvency Certificate. The Administrative Agent shall have received a solvency certificate substantially in the form attached hereto as Exhibit I executed by a Financial Officer of the Borrower.

(e) First Restatement Effective Date Certificates.

(i) The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower with respect to each Loan Party dated the First Restatement Effective Date and certifying:

(A) that attached thereto is a true and complete copy of the charter or other similar organizational document of each Loan Party and each amendment thereto, certified (as of a date reasonably near the First Restatement Effective Date) as being a true and correct copy thereof by the Secretary of State or other applicable Governmental Authority of the jurisdiction in which each such Loan Party is organized;

(B) that attached thereto is a true and complete copy of a certificate of the Secretary of State or other applicable Governmental Authority of the jurisdiction in which each such Loan Party is organized, dated reasonably near the First Restatement Effective Date, listing the charter or other similar organizational document of such Loan Party and each amendment thereto on file in such office and, if available, certifying that (1) such amendments are the only amendments to such person’s charter on file in such office, (2) such person has paid all franchise taxes to the date of such certificate and (3) such person is duly organized and in good standing or full force and effect under the laws of such jurisdiction;

(C) that attached thereto is a true and complete copy of resolutions duly adopted by the Governing Persons of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which it is a party or any other document delivered in connection herewith and that such resolutions have not been modified, rescinded or amended and are in full force and effect; and

 

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(D) as to the incumbency and specimen signature of each Responsible Officer executing the Loan Documents or any other document delivered in connection herewith on behalf of such Loan Party (together with a certificate of another officer as to the incumbency and specimen signature of the Responsible Officer executing the certificate pursuant to this Section 4.02(e)(i)).

(ii) The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower certifying that (i) the representations and warranties set forth in the Loan Documents are true and correct in all material respects (or, in the case of any representations and warranties qualified by materiality or Material Adverse Effect, in all respects) as of First Restatement Effective Date, as applicable, with the same effect as though made on and as of the First Restatement Effective Date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects (or, in the case of any representations and warranties qualified by materiality or Material Adverse Effect, in all respects) as of such earlier date) and (ii) on the First Restatement Effective Date and immediately after the Transactions and any extensions of credit to be made under this Agreement on the First Restatement Effective Date, no Default or Event of Default shall have occurred and be continuing or would result therefrom.

(f) Legal Opinions. The Administrative Agent shall have received a customary legal opinion, in form and substance reasonably acceptable to the Administrative Agent, of Sullivan & Cromwell LLP, New York counsel to the Loan Parties.

(g) Pledged Equity Interests; Pledged Notes. The Administrative Agent shall have received (i) the certificates representing the Equity Interests pledged pursuant to the Collateral Agreement (if such Equity Interests are certificated), together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note required to be delivered by the Loan Parties pursuant to the Collateral Agreement endorsed in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof.

(h) Security Interests. The Administrative Agent shall have received the results of a search of the Uniform Commercial Code (or equivalent) filings made with respect to the Loan Parties in the applicable jurisdiction of organization of each Loan Party and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.02 or have been or will contemporaneously with the initial funding of the Loans on the First Restatement Effective Date be released or terminated. Each document (including any UCC financing statement) required by the Security Documents or reasonably requested by the Administrative Agent (subject to the terms of the Collateral Agreement) to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien on the Collateral described therein, prior and superior in right to any other person (other than with respect to Permitted Liens), shall have been filed, registered or recorded or shall have been delivered to the Administrative Agent in proper form for filing, registration or recordation.

(i) Know Your Customer and Other Required Information. To the extent reasonably requested in writing (which shall include any requests by e-mail) at least five Business Days prior to the First Restatement Effective Date, the Lenders shall have received, no later than one Business Day prior to the First Restatement Effective Date, all documentation and other information about the Loan Parties that is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act.

 

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(j) Existing Indebtedness. The Administrative Agent shall have received reasonably satisfactory evidence that, on or substantially concurrently with the First Restatement Effective Date, the outstanding principal amount of the Existing Revolving Loans and funded participations in Existing LC Disbursements and Existing Swingline Loans of the Existing Lenders shall have been repaid (or deemed repaid pursuant to the terms hereof), together with all accrued interest thereon, accrued fees and all other amounts payable to the Existing Lenders pursuant to the Existing Revolving Credit Agreement.

(k) Flood Hazards. The Administrative Agent shall have received for each Material Real Property subject to a mortgage securing the Obligations (i) a completed “Life-of-Loan” Federal Emergency Management Agency standard flood hazard determination, (ii) if such Material Real Property subject to a mortgage is located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a special flood hazard area, a notice about special flood hazard area status and flood disaster assistance duly executed by the Borrower and any applicable Subsidiary Loan Party relating thereto and (iii) if such Material Real Property subject to a mortgage securing the Obligations is located in an area identified by the Federal Emergency Management Agency (or any successor agency) as a special flood hazard area, evidence of flood insurance as and to the extent required under this Agreement.

(l) Borrowing Base Certificate. The Administrative Agent shall have received a Borrowing Base Certificate setting forth the calculation of the Borrowing Base as of January 31, 2017.

ARTICLE V

Affirmative Covenants

Each of Holdings and the Borrower Parties covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) shall have been paid in full, the Commitments have been terminated and Letters of Credit expired, terminated or cash collateralized on terms satisfactory to the Issuing Banks, unless the Required Lenders shall otherwise consent in writing, the Borrower will, and will cause the Restricted Subsidiaries to (and solely in respect of Section 5.01(a), Section 5.12 and Section 5.15, Holdings will):

SECTION 5.01. Existence; Businesses and Properties.

(a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except, in the case of a Restricted Subsidiary other than the Borrower, where the failure to do so would not reasonably be expected to have a Material Adverse Effect, and except as otherwise expressly permitted under Section 6.05.

(b) Except where the failure to do so would not reasonably be expected to have a Material Adverse Effect, do or cause to be done all things necessary to (i) lawfully obtain, preserve, renew, extend and keep in full force and effect the permits, franchises, authorizations, Intellectual Property Rights, licenses and rights with respect thereto necessary to the normal conduct of its business and (ii) at all times maintain and preserve all property necessary to the normal conduct of its business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times (in each case except as expressly permitted by this Agreement).

 

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SECTION 5.02. Insurance.

(a) Maintain insurance in such amounts and against such risks as are customarily maintained by similarly situated companies engaged in the same or similar businesses operating in the same or similar locations either with (or combination of), at the Borrower’s option, (i) financially sound and reputable insurance companies, in which case the Borrower shall cause the Administrative Agent to be listed as a co-loss payee on property and casualty policies and as an additional insured on liability policies, or (ii) maintain a sufficient amount of funds to effect self-insurance in an amount customarily maintained by similarly situated companies engaged in the same or similar business. Schedule 5.02 sets forth a true, complete and correct description of all material insurance maintained by or on behalf of Holdings, the Borrower Parties or the other Loan Parties as of the First Restatement Effective Date.

(b) In connection with the covenants set forth in this Section 5.02, it is understood and agreed that:

(i) neither the Agents, the Lenders, nor their respective agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 5.02, it being understood that (A) the Borrower Parties and the Restricted Subsidiaries shall look solely to their insurance companies or any other parties other than the aforesaid parties for the recovery of such loss or damage and (B) such insurance companies shall have no rights of subrogation against the Agents, the Lenders or their agents or employees. If, however, the insurance policies, as a matter of the internal policy of such insurer, do not provide waiver of subrogation rights against such parties, as required above, then the Borrower Parties hereby agree, to the extent permitted by law, to waive, and further agrees to cause each of the Restricted Subsidiaries, to the extent permitted by law, to waive, its right of recovery, if any, against the Administrative Agent, the Lenders and their agents and employees;

(ii) the designation of any form, type or amount of insurance coverage by the Administrative Agent or the Collateral Agent under this Section 5.02 shall in no event be deemed a representation, warranty or advice by the Agents or the Lenders that such insurance is adequate for the purposes of the business of the Borrower and the other Restricted Subsidiaries or the protection of their properties; and

(iii) if insurance is procured from insurance companies, the Borrower shall use commercially reasonable efforts to obtain endorsements reasonably acceptable to the Administrative Agent with respect to property and casualty insurance. Each insurance policy referred to in this Section 5.02 and procured from an insurance company shall provide that it shall not be canceled, modified or not renewed (x) by reason of nonpayment of premium except upon not less than 10 days’ prior written notice thereof by the insurer to the Administrative Agent (giving the Administrative Agent the right to cure defaults in the payment of premiums) or (y) for any other reason except upon not less than 30 days’ prior written notice thereof by the insurer to the Administrative Agent. The Borrower shall deliver to the Administrative Agent, prior to the cancellation, modification or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent, including an insurance binder) together with evidence reasonably satisfactory to the Administrative Agent of payment of the premium therefor.

 

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SECTION 5.03. Taxes. Pay and discharge promptly when due all material Taxes imposed upon it or its income or profits or in respect of its property, before the same shall become delinquent or in default; provided that such payment and discharge shall not be required with respect to any Tax, assessment, charge or levy so long as (a) the validity or amount thereof shall be contested in good faith by appropriate proceedings and (b) Holdings, the Borrower or any affected Restricted Subsidiary, as applicable, shall have set aside on its books reserves in accordance with GAAP with respect thereto.

SECTION 5.04. Financial Statements, Reports, etc. Furnish to the Administrative Agent (which will promptly furnish such information to the Lenders):

(a) within 90 days following the end of each fiscal year, (i) a consolidated balance sheet and related statements of operations, cash flows and owners’ equity showing the financial position of the Borrower and its Subsidiaries as of the close of such fiscal year and the consolidated results of its operations during such year (the “Annual Financial Statements” ); provided that if the Borrower includes the financial results of any person that is not a Restricted Subsidiary in such Annual Financial Statements, the Borrower shall also provide a supplement showing consolidating information for the Borrower and its Restricted Subsidiaries, (ii) a narrative discussion of management’s discussion and analysis of results (which need not be compliant with Regulation S-K) and (iii) setting forth in comparative form the corresponding figures for the prior fiscal year, which consolidated balance sheet and related statements of operations, cash flows and owners’ equity shall be audited by the Borrower’s (or any Parent Entity’s) independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which shall not be qualified as to scope of audit or as to the status of the Borrower or its Subsidiaries as a going concern other than any such qualification or exception that is solely with respect to, or resulting solely from, an upcoming maturity date under the Credit Facilities or the Senior Unsecured Notes occurring within one year from the time such report is delivered or any prospective default of any financial covenant) to the effect that such consolidated financial statements fairly present, in all material respects, the financial position and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP (it being understood that the delivery of annual reports on Form 10-K of Holdings, any Parent Entity or the Borrower and their respective consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(a) to the extent such annual reports include the information specified herein);

(b) within 45 days following the end of each of the first three fiscal quarters of each fiscal year, (i) a consolidated balance sheet and related statements of operations and cash flows showing (x) the financial position of the Borrower and its Subsidiaries as of the close of such fiscal quarter and the consolidated and consolidating results of its operations during such fiscal quarter and (y) the then-elapsed portion of the fiscal year and setting forth in comparative form the corresponding figures for the corresponding periods of the prior fiscal year (the “Quarterly Financial Statements” and, together with the Annual Financial Statements, the “Required Financial Statements”); provided that if the Borrower includes the financial results of any person that is not a Restricted Subsidiary in such Quarterly Financial Statements, the Borrower shall also provide (i) a supplement showing consolidating information for the Borrower and its Restricted Subsidiaries and (ii) a narrative discussion of management’s discussion and analysis of results (which need not be compliant with Regulation S-K). Notwithstanding the above, the Required Financial Statements shall be certified by a Responsible Officer of the Borrower on behalf of the Borrower as fairly presenting, in all material respects, the financial position and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes) (it being understood that the delivery of quarterly reports on Form 10-Q of Holdings or any Parent Entity and their respective consolidated subsidiaries shall satisfy the requirements of this Section 5.04(b) to the extent such quarterly reports include the information specified herein);

 

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(c) concurrently with any delivery of Required Financial Statements under paragraphs (a) and (b) of this Section 5.04, a certificate of a Financial Officer of the Borrower (i) certifying that no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto, (ii) certifying a list of all Immaterial Subsidiaries, that each Subsidiary set forth on such list individually qualifies as an Immaterial Subsidiary and that all such Subsidiaries in the aggregate do not exceed the limitation set forth in clause (b) of the definition of the term “Immaterial Subsidiary”, (iii) certifying a list of all Unrestricted Subsidiaries at such time and that each Subsidiary set forth on such list qualifies as an Unrestricted Subsidiary and (iv) setting forth computations in reasonable detail calculating the Fixed Charge Coverage Ratio for the fiscal quarter then ended (irrespective of whether a Covenant Trigger Event is then in effect);

(d) promptly after the same become publicly available, copies of all periodic and other publicly available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials filed by the Borrower or its Subsidiaries with the SEC or, after an initial public offering, distributed to its stockholders generally, as applicable;

(e) upon the reasonable request of the Administrative Agent, concurrently with the delivery of the Annual Financial Statements, provide an update to the information set forth on the schedules to the Collateral Agreement, together with (i) information about deposit accounts, securities accounts and commodities accounts entered into by the Borrower or any of the Loan Parties and (ii) information regarding Material Real Property acquired by the Borrower or any of the Loan Parties, in the case of each of (i) and (ii), since the First Restatement Effective Date or the delivery of the previous year’s Annual Financial Statements, as applicable, to the extent not previously notified to the Administrative Agent;

(f) within 90 days following the end of each fiscal year, a reasonably detailed consolidated annual budget for the succeeding fiscal year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of each fiscal quarter for such fiscal year and annual consolidated statements of projected cash flow and projected income), including a description of underlying assumptions with respect thereto (collectively, the “Budget”), which Budget shall in each case be accompanied by the statement of a Financial Officer of the Borrower to the effect that the Budget is based on assumptions believed by such Financial Officer to be reasonable as of the date of delivery thereof;

(g) promptly, from time to time, such other information regarding the operations, business affairs (including self-insurance) and financial condition of the Borrower and its Subsidiaries, or compliance with the terms of any Loan Document, in each case, as the Administrative Agent may reasonably request (for itself or on behalf of any Lender);

(h) In connection with the covenants set forth in this Section 5.04(h), it is understood and agreed that:

(i) Subject to Section 5.04(h)(ii), on or before the 15th Business Day of each month, a Borrowing Base Certificate as of the last day of the immediately preceding month, with such supporting materials as the Administrative Agent shall reasonably request. Notwithstanding the foregoing, after the occurrence and during the continuance of a Cash Dominion Event, on Wednesday of each week (or, if Wednesday is not a Business Day, on the next succeeding Business Day), the Borrower shall furnish a Borrowing Base Certificate calculated as of the close of business on Saturday of the immediately preceding calendar week.

 

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(ii) At any time and from time to time the Borrower is entitled to calculate the Borrowing Base on a Pro Forma Basis to give effect to a Permitted Business Acquisition (including an acquisition of inventory or accounts receivable), and to adjust the Borrowing Base accordingly, prior to completion of the applicable field examination or appraisal; provided that, if, on or prior to the date that is 90 days following the consummation of such Permitted Business Acquisition, the Borrower shall not have delivered the appropriate field examination or appraisal with respect to any asset included in the Borrowing Base pursuant to this Section 5.04(h)(ii), then on the date that is 90 days following the consummation of such Permitted Business Acquisition such asset shall be removed from the Borrowing Base until the completion of the applicable field examination or appraisal with respect to such asset.

(i) promptly upon request by the Administrative Agent (so long as the following are obtainable using commercially reasonable measures), copies of (i) each Schedule SB (Single-Employer Defined Benefit Plan Actuarial Information) to the most recent annual report (Form 5500 Series) filed with the IRS with respect to a Plan, (ii) the most recent actuarial valuation report for any Plan, (iii) all notices received from a Multiemployer Plan sponsor, a plan administrator or any governmental agency, or provided to any Multiemployer Plan by the Borrower, its Subsidiaries or any ERISA Affiliate, concerning an ERISA Event and (iv) with respect to each Foreign Benefit Plan, any available annual reports, actuarial valuation reports or notices from plan sponsors, plan administrators or any Governmental Authority with respect to such plan; and

(j) promptly following any request therefor by the Administrative Agent (so long as the following are obtainable using commercially reasonable measures), copies of (i) any documents described in Section 101(k)(1) of ERISA that the Borrower, its Subsidiaries or any ERISA Affiliate may request with respect to any Multiemployer Plan and (ii) any notices described in Section 101(l)(1) of ERISA that the Borrower, its Subsidiaries or any ERISA Affiliate may request with respect to any Multiemployer Plan; provided that if the Borrower, its Subsidiaries or any ERISA Affiliate has not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, the Borrower, its Subsidiaries or such ERISA Affiliate shall promptly make a request for such documents or notices from the such administrator or sponsor and shall provide copies of such documents and notices promptly after receipt thereof;

provided that (x) in the event that any Parent Entity, as applicable, is not engaged in any business or activity, and does not own any assets or have other liabilities, other than those incidental to its ownership directly or indirectly of the Equity Interests of the Borrower and its Subsidiaries, such consolidated reporting at a Parent Entity’s level in a manner consistent with that described in paragraphs (a) and (b) of this Section 5.04 for the Borrower will satisfy the requirements of such paragraphs and (y) the financial statements, information and other documents required to be provided as described above, may be those of (i) the Borrower or (ii) any Parent Entity rather than those of the Borrower; so long as the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such Parent Entity, on the one hand, and the information relating to the Borrower and the Restricted Subsidiaries on a standalone basis, on the other hand.

SECTION 5.05. Litigation and Other Notices. Furnish to the Administrative Agent (which will promptly thereafter furnish to the Lenders) written notice of the following promptly after any Responsible Officer of the Borrower obtains actual knowledge thereof:

(a) any Default or Event of Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto;

 

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(b) the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against Holdings or any of its Restricted Subsidiaries as to which an adverse determination is reasonably probable and which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;

(c) any other development, the subject matter of which is not covered by Section 5.05(a), Section 5.05(b), or Section 5.05(d), specific to the Borrower or any of its Restricted Subsidiaries that is not a matter of general public knowledge and that has had, or would reasonably be expected to have, a Material Adverse Effect;

(d) the development of any ERISA Event that, together with all other ERISA Events that have developed or occurred, would reasonably be expected to have a Material Adverse Effect; and

(e) any material change in accounting policies or financial reporting practices by any Loan Party with respect to the Borrower’s Accounts and Inventory or which otherwise would reasonably be expected to affect the calculation of the Borrowing Base and Reserves.

SECTION 5.06. Compliance with Laws. Comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (including ERISA), except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect; provided that this Section 5.06 shall not apply to Environmental Laws, which are the subject of Section 5.09, or laws related to Taxes, which are the subject of Section 5.03.

SECTION 5.07. Maintaining Records; Access to Properties and Inspections; Appraisals.

(a) Maintain all financial records in accordance with GAAP in all material respects and permit any persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender, to visit and inspect the financial records and the properties of the Borrower or any of the Restricted Subsidiaries at reasonable times, upon reasonable prior notice to the Borrower, and as often as reasonably requested, to make extracts from and copies of such financial records, and permit any persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender, upon reasonable prior notice to the Borrower to discuss the affairs, finances and condition of Holdings or any of the Restricted Subsidiaries with the officers thereof and independent accountants therefor (subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract); provided that any visit or inspection permitted pursuant to this Section 5.07 shall be limited to once per year in the absence of an Event of Default.

(b) Upon the Administrative Agent’s request, and at the expense of the Loan Parties, permit any Acceptable Inspector to conduct field examinations and inventory appraisals, with respect to any assets of the Borrower Parties or Guarantors comprising the Borrowing Base, at reasonable business times and upon reasonable prior notice to the Borrower; provided that (i) such field examinations and inventory appraisals shall not occur more frequently than (A) once per 12 month period if clauses (i)(B) and (ii) of this Section 5.07(b) do not apply and (B) subject to clause (ii) of this Section 5.07(b), twice per 12 month period if Availability is less than the greater of (x) $16.0 million and (y) 15.0% of the Line Cap for a period of five or more consecutive Business Days during such year, and (ii) additional field examinations and inventory appraisals shall be permitted upon the occurrence and during the continuance of a Designated Event of Default. The Loan Parties shall reasonably cooperate with the Administrative Agent and such Acceptable Inspector in the conduct of such field examinations and inventory appraisals. Such appraisals shall be prepared in a form and on a basis reasonably satisfactory to the Administrative

 

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Agent, such appraisals to include information required by applicable law and by the internal policies of the Lenders. With respect to each appraisal made pursuant to this Section 5.07(b) after the First Restatement Effective Date, (i) the Administrative Agent and the Loan Parties shall each be given a reasonable amount of time to review and comment on a draft form of the appraisal prior to its finalization and (ii) any adjustments to the Appraised Liquidation Value or the Borrowing Base hereunder as a result of such appraisal shall be reflected in the Borrowing Base Certificate delivered immediately succeeding such appraisal.

(c) Conduct a physical count of the Inventory either through periodic cycle counts or wall to wall counts consistent with past practices, so that all Inventory is subject to such counts at least once each year.

SECTION 5.08. Use of Proceeds. Use the proceeds of the Revolving Loans and Swingline Loans and use Letters of Credit for general corporate purposes and working capital (including for capital expenditures and Permitted Business Acquisitions, in each case to the extent not prohibited hereunder).

SECTION 5.09. Compliance with Environmental Laws. Comply, and make reasonable efforts to cause all lessees and other persons occupying its Real Properties to comply, with all Environmental Laws applicable to its operations and properties, and obtain and renew all material authorizations and permits required pursuant to Environmental Law for its operations and properties, in each case in accordance with Environmental Laws, except, in each case, to the extent the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

SECTION 5.10. Further Assurances; Additional Security.

(a) Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements and other documents and recordings of Liens in stock registries), that may be required under any applicable law, or that the Administrative Agent may reasonably request, to satisfy the Collateral and Guarantee Requirement and to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Borrower, and provide to the Administrative Agent, from time to time upon reasonable request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

(b) If the Borrower or any Subsidiary Loan Party directly or indirectly acquires fee-owned Real Property after the First Restatement Effective Date (with any fee-owned Real Property of (x) any Restricted Subsidiary that is acquired after the First Restatement Effective Date and becomes a Loan Party, (y) any Subsidiary that is designated a Restricted Subsidiary pursuant to a Subsidiary Redesignation and becomes a Loan Party and (z) any Immaterial Subsidiary that is designated a Material Subsidiary and becomes a Loan Party being deemed to have been acquired after the First Restatement Effective Date) that has a fair market value of $20.0 million or more on an individual basis (i) notify the Administrative Agent within 10 Business Days of the acquisition thereof, (ii) cause each such fee-owned Real Property to be subject to a mortgage or deed of trust securing the Obligations, in form and substance reasonably acceptable to the Administrative Agent within 90 days of the date of such acquisition (or such later date as may be agreed to by the Administrative Agent in its reasonable discretion), (iii) obtain fully paid American Land Title Association Lender’s Extended Coverage title insurance policies in form and substance, with endorsements (including zoning endorsements where available) and in amounts reasonably acceptable to the Administrative Agent (the “Mortgage Policies”), (iv) to the extent reasonably requested by the Administrative Agent, obtain American Land Title Association/American Congress on Surveying and Mapping form surveys, dated no more than 30 days before the date of their delivery to the

 

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Administrative Agent, certified to the Administrative Agent and the issuer of the Mortgage Policies in a manner reasonably satisfactory to the Administrative Agent, (v) provide evidence of insurance as required by Section 5.02 (including all insurance required to comply with applicable flood insurance laws) and, to the extent required by Section 5.02, naming the Administrative Agent as loss payee and additional insured, and in such amounts and covering such risks, as are reasonably satisfactory to the Administrative Agent, including the insurance required by the terms of any mortgages or deeds of trust, (vi) obtain customary mortgage or deed of trust enforceability opinions of local counsel for the Borrower and the Subsidiary Loan Parties in the states in which such fee-owned Real Properties are located and (vii) take, and cause the applicable Subsidiary Loan Party to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to perfect such Liens, including actions described in paragraph (a) of this Section 5.10, in each case, at the expense of the Loan Parties, subject to paragraph (e) of this Section 5.10.

(c) If any additional Subsidiary of the Borrower (other than an Immaterial Subsidiary, an Unrestricted Subsidiary, a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC) is formed or acquired after the First Restatement Effective Date (with (i) any Subsidiary Redesignation resulting in an Unrestricted Subsidiary becoming a Restricted Subsidiary being deemed to constitute the acquisition of a Subsidiary, (ii) any Immaterial Subsidiary being designated a Material Subsidiary being deemed to constitute the acquisition of a Subsidiary and (iii) any transaction or event resulting in a Subsidiary ceasing to be a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC being deemed to constitute the acquisition of a Subsidiary), within 10 Business Days after the date such Subsidiary is formed or acquired, notify the Administrative Agent and the Lenders thereof and, within 30 Business Days after the date such Subsidiary is formed or acquired (or such longer period as the Administrative Agent shall agree), cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary and with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of the Borrower or any other Subsidiary Loan Party, subject to paragraph (e) of this Section 5.10.

(d) (i) In each case, furnish to the Administrative Agent within 30 Business Days thereafter written notice of any change in (A) corporate or organization name, (B) organizational structure or (C) organizational identification number (or equivalent) with respect to Holdings, the Borrower and the other Subsidiary Loan Parties; provided that the Borrower shall not effect or permit any such change unless all filings have been made, or will have been made within any statutory period, under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected security interest in all Collateral for the benefit of the applicable Secured Parties and (ii) promptly notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed.

(e) The Collateral and Guarantee Requirement and the other provisions of this Section 5.10 need not be satisfied with respect to any Excluded Assets or Excluded Equity Interests (each as defined in the Collateral Agreement) or any exclusions and carve-outs from the perfection requirements set forth in the Collateral Agreement.

(f) Nothing in this Section 5.10 shall require Holdings, the Borrower or any other Loan Party to take any action outside the United States to create or perfect any security interests in any Collateral located outside of the United States or of a Foreign Subsidiary (it being understood that there shall be no security agreements or pledge agreements governed under the laws of any foreign jurisdiction). Furthermore, with respect to real property, no perfection steps shall be required by any means other than (1) solely with respect to any properties subject to any mortgages on fee-owned Real Property not excluded from the Collateral pursuant to this Agreement (“Required Mortgages”), fixture filings pursuant to the UCC in the applicable UCC filing office of the relevant jurisdiction in which such fee-owned Real Property is located and (2) the recording of Required Mortgages in the applicable county offices referred to in the foregoing clause (1).

 

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SECTION 5.11. Cash Management Systems; Application of Proceeds of Accounts.

(a) Within 90 days after the Closing Date (or such longer period as may be consented to by the Administrative Agent, such consent not to be unreasonably withheld, conditioned or delayed):

(i) enter into blocked account agreements (each, a “Blocked Account Agreement”), in form reasonably satisfactory to the Administrative Agent, with the Collateral Agent and any bank with which the Borrower or any other Subsidiary Loan Party maintains (A) any DDA having an average daily balance for any 30 day period in excess of $250,000 and (B) any concentration account into which DDAs are swept (each such account described in clauses (A) and (B), a “Blocked Account”) covering each such Blocked Account maintained with such bank;

(ii) ensure that all cash, checks, proceeds of collections of Accounts and other amounts received by or on behalf of the Borrower or any other Subsidiary Loan Party in respect of ABL Priority Collateral are deposited promptly upon receipt in accordance with historical practices into a DDA maintained in the name of the Borrower or such other Subsidiary Loan Party; and

(iii) deliver notifications to each depository institution with which any DDA is maintained, in form reasonably satisfactory to the Administrative Agent (each, a “DDA Notification”), instructing such depository institution to sweep, no less frequently than once per Business Day, all available cash balances and cash receipts, including the then contents or then entire ledger balance of such DDA net of such minimum balance (not to exceed $50,000 per account), if any, required by the bank at which such DDA is maintained to a concentration account of the Borrower Parties that are subject to Blocked Account Agreements; provided that the Borrower and its Subsidiary Loan Parties may maintain credit balances (including cash and cash equivalents) in DDAs or other deposit or securities accounts that are not Blocked Accounts (“Other Accounts”), so long as the aggregate credit balances in all such Other Accounts does not exceed $7.5 million (such amount, the “Excluded Amount”).

Notwithstanding anything herein to the contrary, the provisions of this Section 5.11(a) shall not apply to any deposit account that is acquired by a Loan Party in connection with a Permitted Business Acquisition or other Investment permitted under this Agreement prior to the date that is 90 days (or such later date as may be consented to by the Administrative Agent, such consent not to be unreasonably withheld, conditioned or delayed) following the date of such Permitted Business Acquisition or other Investment, and the balances held in such deposit accounts at the date of such Permitted Business Acquisition or other Investment shall not be counted toward the Excluded Amount until the end of such 90 day period (or later period, if applicable).

(b) With respect to the Blocked Accounts:

(i) Each Blocked Account Agreement shall require, after the occurrence and during the continuance of a Cash Dominion Event and receipt by the Borrower of written notice thereof by the Administrative Agent, the ACH or wire transfer no less frequently than once per Business Day (unless this Agreement has been terminated, the

 

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Commitments have been terminated and the Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent indemnification and reimbursement obligations for which no claim has been asserted) have been paid in full and all Letters of Credit have expired or been terminated or cash collateralized on terms satisfactory to the Issuing Banks) of all available cash balances and cash receipts, including the then contents or then entire ledger balance of each Blocked Account net of such minimum balance (not to exceed $250,000 per account), if any, required by the bank at which such Blocked Account is maintained to an account established with, and subject to the control of, the Administrative Agent (the “Dominion Account”).

(ii) All collected amounts received in the Dominion Account shall be distributed and applied in accordance with Section 2.18 on a daily basis to the repayment of all Loans (and cash collateralization of Letters of Credit) outstanding under this Agreement and to the payment of all other Obligations then due and owing with any excess, unless an Event of Default shall have occurred and be continuing, to be remitted to the Borrower Parties.

(iii) At any time after the occurrence and during the continuance of an Event of Default or a Cash Dominion Event as to which the Administrative Agent has notified the Borrower, any cash or cash equivalents owned by any Borrower Party shall be deposited in a Blocked Account subject to a Blocked Account Agreement (or a DDA which is swept daily to such a Blocked Account).

(iv) The Loan Parties may close DDAs or Blocked Accounts or open new DDAs or Blocked Accounts, subject to the contemporaneous execution and delivery to the Administrative Agent of a DDA Notification or Blocked Account Agreement consistent with the provisions of this Section 5.11.

(v) The Dominion Account shall at all times be under the sole dominion and control of the Collateral Agent.

(vi) So long as (A) no Event of Default has occurred and is continuing and (B) no Cash Dominion Event has occurred and is continuing, the Loan Parties shall have full and complete access to, and may direct the manner of disposition of, funds in the Blocked Accounts.

(vii) Any amounts held or received in the Dominion Account (including all interest and other earnings with respect thereto, if any) at any time (A) after this Agreement has been terminated, the Commitments have been terminated and the Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent indemnification and reimbursement obligations for which no claim has been asserted) have been paid in full and all Letters of Credit have expired or been terminated or cash collateralized on terms satisfactory to the Issuing Banks or (B) when all Events of Default and Cash Dominion Events have been cured shall be remitted to the Loan Parties as the Borrower may direct.

SECTION 5.12. Fiscal Year; Accounting. In the case of Holdings or any Restricted Subsidiary, cause the fiscal year to end on September 30, unless prior written notice of a change is given to the Administrative Agent.

 

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SECTION 5.13. Creation of Co-Borrowers.

(a) Provide to the Administrative Agent, to the extent the Borrower intends to qualify any then-existing Subsidiary Loan Party that is a Subsidiary of the Borrower (upon becoming a Co-Borrower pursuant to this Section 5.13, a “Co-Borrower”) as a Co-Borrower (i) a written request to designate such Subsidiary Loan Party as a Co-Borrower, (ii) a Co-Borrower Joinder Agreement executed by each of the Borrower and such Loan Party, (iii) no later than five Business Days prior to the date on which such Subsidiary will become a Co-Borrower, all documentation and other information about such Subsidiary that is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act and (iv) all other information with respect to such Subsidiary reasonably requested by the Administrative Agent; provided that the materials required to be delivered pursuant to this paragraph (a) may be delivered to the Administrative Agent concurrently with the materials causing the applicable Loan Party to guarantee the Obligations pursuant to the Collateral Agreement (it being understood that no person may become a Co-Borrower unless it is first (or simultaneously) becomes a Guarantor of the Obligations and no Loan Party can become a Co-Borrower until such materials have been delivered).

(b) Provide to the Administrative Agent, to the extent the Borrower intends to cause the release of any Co-Borrower from its qualification as a Co-Borrower hereunder (i) a written request for the release of the applicable Co-Borrower stating that such Co-Borrower is concurrently being released from its Obligations as a Subsidiary Loan Party in accordance with the terms of the Loan Documents and (ii) an updated Borrowing Base Certificate which shall demonstrate that, after giving effect to the exclusion of such Co-Borrower’s assets from the Borrowing Base, the Revolving Facility Credit Exposure will not exceed the Line Cap (or that Loans are being repaid or Letters of Credit cash collateralized in connection with such requested release to the extent necessary to eliminate such excess); provided that (A) any such request for release shall be effective upon the release of such Subsidiary Loan Party from the Collateral Agreement and the receipt of the materials referred to in paragraphs (a) and (b) of this Section 5.13, (B) the Administrative Agent or Lenders shall, upon the release of any Co-Borrower hereunder, return to the Borrower any Notes executed by such Co-Borrower and (C) the Administrative Agent shall, at the request of the Borrower, provide evidence of the release of any Co-Borrower in a form reasonably acceptable to the Borrower to the extent such release is permitted pursuant to this paragraph (b).

SECTION 5.14. Lender Calls. Following receipt by the Borrower of a request by the Administrative Agent (which request may only be given by the Administrative Agent to the Borrower no later than 30 days following delivery of the Annual Financial Statements pursuant to Section 5.04(a)), use commercially reasonable efforts to hold an update call (which call shall take place on or prior to the date that is 10 Business Days following the receipt of such notice) with a Financial Officer of the Borrower and such other members of senior management of the Borrower as the Borrower deems appropriate (with such other details to be reasonably agreed between the Borrower and the Administrative Agent) and the Lenders and their respective representatives and advisors to discuss the state of the Borrower’s business, including, but not limited, to recent performance, cash and liquidity management, operational activities, current business and market conditions and material performance changes; provided that in no event shall more than one such call be requested in any fiscal year (in total with respect to this Agreement and the Term Loan Credit Agreement). Notwithstanding the foregoing, if more than one such call per fiscal year is required pursuant to the Senior Unsecured Notes, the Administrative Agent shall be entitled to request additional update calls, it being understood that the frequency of calls hereunder shall at no time exceed the frequency of calls required with respect to the Senior Unsecured Notes; provided that the obligations of the Borrower to hold such additional update calls shall be satisfied by inviting the Administrative Agent and the Lenders to join any call held pursuant to the terms of the Senior Unsecured Notes.

 

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SECTION 5.15. Post-Closing Matters. Deliver to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, the items described on Schedule 5.15 hereof within the time periods specified thereon. All representations and warranties contained in this Agreement and the other Loan Documents shall be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions described on Schedule 5.15 within the time periods specified thereon, rather than as elsewhere provided in the Loan Documents).

SECTION 5.16. Patriot Act, OFAC, FCPA. Now or hereafter to the extent applicable to this Agreement, the transactions contemplated hereby or the Loan Parties’ execution, delivery and performance of the Loan Documents, comply in all material respects with the USA PATRIOT Act, OFAC and FCPA, and with respect to each statute, any successor statute thereto.

ARTICLE VI

Negative Covenants

The Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the Obligations (other than contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) shall have been paid in full and Letters of Credit have expired or been terminated or cash collateralized on terms satisfactory to the Issuing Banks, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, and will not permit any of the other Restricted Subsidiaries to:

SECTION 6.01. Indebtedness. Incur, create or assume any Indebtedness, except:

(a) any Indebtedness listed on Schedule 6.01(a) and any Permitted Refinancing Indebtedness in respect thereof;

(b) Indebtedness created hereunder or under the other Loan Documents, Credit Agreement Refinancing Indebtedness, Indebtedness created under Incremental Revolving Commitments and any unsecured Indebtedness constituting Permitted Refinancing Indebtedness incurred to Refinance any of the foregoing Indebtedness;

(c) Indebtedness pursuant to Hedge Agreements other than for speculative purposes;

(d) (i) so long as no Default or Event of Default has occurred and is continuing or would result from the incurrence of such Indebtedness, other Indebtedness secured by Liens permitted by Section 6.02(u) so long as, on a Pro Forma Basis, the Senior Secured Leverage Ratio is not greater than 5.25:1.00 (the “Leverage Ratio Debt”) and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Leverage Ratio Debt;

(e) Indebtedness 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 (including self-insurance) to the Borrower or any of the other Restricted Subsidiaries pursuant to reimbursement or indemnification obligations to such person, in each case, in the ordinary course of business; provided that upon the incurrence of Indebtedness with respect to reimbursement obligations regarding workers’ compensation claims, such obligations shall be reimbursed not later than 30 days following such incurrence;

 

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(f) intercompany Indebtedness between or among the Borrower and the Restricted Subsidiaries or between and among Restricted Subsidiaries; provided that (i) Indebtedness owing by any Restricted Subsidiary of the Borrower that is not a Loan Party to the Borrower or another Subsidiary Loan Party is permitted under Section 6.04(b) and (ii) Indebtedness owing by the Borrower or any other Subsidiary Loan Party to any Restricted Subsidiary that is not a Loan Party is subordinated to the Obligations pursuant to customary subordination provisions;

(g) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion guarantees and similar obligations, in each case, provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;

(h) (i) Indebtedness in respect of Cash Management Services in the ordinary course of business, (ii) other Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds, so long as such Indebtedness (other than credit or purchase cards) is extinguished within 10 Business Days after notification is received by the Borrower of its incurrence and (iii) any other cash management or treasury services entered in the ordinary course of business;

(i) (i) Indebtedness incurred or assumed in connection with a Permitted Business Acquisition; provided, in each case, (1) no Event of Default shall have occurred and be continuing immediately before such Permitted Business Acquisition or would result immediately after giving pro forma effect to such Permitted Business Acquisition and any related transactions, (2) the Borrower shall be able to incur $1 of Ratio Debt, (3)(x) if such Indebtedness incurred or assumed is First Lien Debt, the First Lien Leverage Ratio shall not exceed the Closing Date First Lien Leverage Ratio and (y) if such Indebtedness incurred or assumed is secured Indebtedness other than First Lien Debt, the Senior Secured Leverage Ratio shall not exceed the Closing Date Senior Secured Leverage Ratio, in each case, immediately after giving pro forma effect to such incurrence or assumption of Indebtedness and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness; provided that at the time of the incurrence or assumption of any Indebtedness pursuant to clause (i) above (and after giving effect thereto), the aggregate outstanding amount of Indebtedness incurred under this Section 6.01(i) together with any amounts incurred under Section 6.01(r), in each case, by Restricted Subsidiaries that are not Guarantors does not exceed $50.0 million;

(j) Capital Lease Obligations, Indebtedness incurred with respect to installations, repairs, improvement and removal of Real Property, purchase money Indebtedness, Indebtedness with respect to mortgage financings, and Indebtedness with respect to additions or improvements to Real Property in an aggregate outstanding principal amount not to exceed, at the time of incurrence of such Indebtedness (and after giving effect thereto), and together with the Remaining Present Value of outstanding leases entered into pursuant to Section 6.03, the greater of (i) $75.0 million and (ii) 4.5% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date such Indebtedness is incurred for which Required Financial Statements have been delivered pursuant to Section 5.04, and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness; provided that (i) such Indebtedness shall be incurred within 270 days after the acquisition, lease or improvement of the property that is the subject of such Indebtedness and (ii) the Remaining Present Value of outstanding leases entered into pursuant to Section 6.03 shall not apply for purposes of calculating Permitted Indebtedness under this clause (j) or permitted Sale and Lease-Back Transactions under Section 6.03 if the proceeds of the related Sale and Lease-Back Transactions are used to prepay Term Loans or Revolving Loans or any Incremental Revolving Commitments (in each case, to the extent commitments in respect thereof are permanently reduced by the amount of such prepayments);

 

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(k) [Reserved];

(l) other unsecured Indebtedness; provided that the aggregate outstanding principal amount of Indebtedness incurred pursuant to this clause (l) shall not exceed, at the time of incurrence of such Indebtedness (and after giving effect thereto) the greater of (i) $75.0 million and (ii) 4.5% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such incurrence for which Required Financial Statements have been delivered pursuant to Section 5.04;

(m) Indebtedness consisting of (i) Term Loan Obligations in an aggregate principal amount not in excess of (A) $625.0 million plus (B) the aggregate principal amount of any Incremental Term Loans or Incremental Equivalent Term Debt, in each case permitted by the Term Loan Credit Agreement as in effect on the Closing Date and (ii) Permitted Refinancing Indebtedness incurred to Refinance any of the foregoing Indebtedness;

(n) Guarantees (i) of the Indebtedness of the Borrower described in clause (m) of this Section 6.01 so long as any Liens securing the Term Loan Obligations or any Permitted Refinancing Indebtedness in respect thereof are subject to the ABL/Term Loan Intercreditor Agreement (in the case of Term Loan Obligations) or other intercreditor agreement(s) substantially consistent with and no less favorable to the Lenders in any material respect than the ABL/Term Loan Intercreditor Agreement, as applicable, (ii) of any Indebtedness of the Borrower or any other Subsidiary Loan Party permitted to be incurred under this Agreement, (iii) of Indebtedness otherwise permitted hereunder of any Restricted Subsidiary that is not a Subsidiary Loan Party to the extent such Guarantees are permitted by Section 6.04 (other than Section 6.04(t)); (iv) by any Restricted Subsidiary that is not a Loan Party of Indebtedness of another Restricted Subsidiary that is not a Loan Party and (v) of Indebtedness of Foreign Subsidiaries incurred for working capital purposes in the ordinary course of business on ordinary business terms so long as such Indebtedness is permitted to be incurred under Section 6.01(s) to the extent such Guarantees are permitted by Section 6.04 (other than Section 6.04(t)); provided that Guarantees by Borrower or any other Loan Party under this clause (n) of any Indebtedness of a person that is subordinated to other Indebtedness of such person shall be expressly subordinated to the Obligations to at least the same extent as such underlying Indebtedness is subordinated;

(o) Indebtedness arising from agreements of Borrower or any of the other Restricted Subsidiaries providing for indemnification, contribution, earn-out, adjustment of purchase or acquisition price or similar obligations, in each case, incurred or assumed in connection with the Closing Date Transactions, any Permitted Business Acquisition, Permitted Investment or the disposition of any business, assets or Subsidiaries not prohibited by this Agreement, other than Guarantees of Indebtedness incurred by any person acquiring all or any portion of such business, assets or Subsidiaries for the purpose of financing any such Permitted Business Acquisition;

(p) Indebtedness supported by a Letter of Credit, in a principal amount not in excess of the stated amount of such Letter of Credit;

(q) Indebtedness consisting of (i) the financing of insurance premiums or (ii) take or pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

(r) (i) so long as no Default or Event of Default has occurred and is continuing or would result from the incurrence of such Indebtedness, other Indebtedness so long as the Fixed Charge Coverage Ratio, on a Pro Forma Basis, is 2.00 to 1.00 or greater (“Ratio Debt”) and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Ratio Debt; provided that at the time of the incurrence of any Indebtedness pursuant to clause (i) above (and after giving effect thereto), the aggregate outstanding amount of Indebtedness incurred under this Section 6.01(r) together with any amounts incurred under Section 6.01(i), in each case, by Restricted Subsidiaries that are not Guarantors does not exceed $50.0 million;

 

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(s) (i) Indebtedness of Foreign Subsidiaries and (ii) Indebtedness incurred on behalf of, or representing Guarantees of Indebtedness of, joint ventures; provided that the aggregate outstanding principal amount of Indebtedness incurred pursuant to this clause (s) shall not exceed, at the time of incurrence of such Indebtedness (and after giving effect thereto) the greater of (i) $45.0 million and (ii) 2.50% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such incurrence for which Required Financial Statements have been delivered pursuant to Section 5.04;

(t) unsecured Indebtedness in respect of obligations to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services so long as such obligations are incurred in connection with open accounts extended by suppliers on customary trade terms (which require that all such payments be made within 60 days after the incurrence of the related obligations) in the ordinary course of business and not in connection with the borrowing of money or any Hedge Agreements;

(u) Indebtedness representing deferred compensation to employees, directors and officers incurred in the ordinary course of business;

(v) Indebtedness arising from customer deposits and advance payments received in the ordinary course of business from customers for goods and services purchased in the ordinary course of business;

(w) Indebtedness consisting of reimbursement obligations related to bank guarantees to the extent that such obligations are collateralized by cash or cash equivalents;

(x) Indebtedness consisting of promissory notes issued by the Borrower or any other Restricted Subsidiary to current or former officers, managers, directors and consultants thereof or employees, their respective estates or family members to finance the purchase or redemption of Equity Interests of the Borrower or any Parent Entity permitted by Section 6.06;

(y) Guarantees by the Borrower or any other Restricted Subsidiary of any lease or sublease permitted hereunder of real property entered into by the Borrower or any other Restricted Subsidiary in the ordinary course of business;

(z) Indebtedness consisting of obligations under deferred compensation or other similar arrangements incurred by Borrower or any of the other Restricted Subsidiaries in connection with the Closing Date Transactions or Permitted Business Acquisitions or any other Investment permitted hereunder;

(aa) unsecured Indebtedness in a principal amount not to exceed an amount equal to the Net Cash Proceeds received from the issuance or sale of Equity Interests (other than Disqualified Stock or Permitted Cure Securities) of the Borrower or any of the other Restricted Subsidiaries (other than any such sale to Holdings or any of the Restricted Subsidiaries) and any cash or cash equivalents consisting of a capital contribution received from equityholders (other than Holdings or any Restricted Subsidiary) of the Borrower or any of the other Restricted Subsidiaries (other than in respect of Disqualified Stock or any equity contributed as Permitted Cure Securities or any such proceeds used in connection with Section 6.06(d) or Section 6.09(b)(i)(3) or used to fund charges, expenses, accruals or reserves in accordance with clause (k) of the definition of “Consolidated Net Income”) so long as such Indebtedness matures at least 91 days after the Maturity Date;

 

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(bb) Indebtedness in respect of Senior Unsecured Notes and any Permitted Refinancing Indebtedness in respect thereof; and

(cc) all premium (if any, including tender premiums), defeasance costs, interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (bb) of this Section 6.01.

For purposes of determining compliance with this Section 6.01, (A) Indebtedness need not be permitted solely by reference to one category of Permitted Indebtedness described in Section 6.01(a) through Section 6.01(cc) but may be permitted in part under any combination thereof and (B) in the event that an item of Indebtedness (other than any item of Indebtedness set forth in Sections 6.01(a), (b), (d), (m) or (bb) meets the criteria of another category of Permitted Indebtedness described in Section 6.01 (other than Sections 6.01(a), (b), (d), (m) or (bb)), the Borrower may, in its sole discretion, reclassify such item of Indebtedness and such item of Indebtedness shall be treated as having been incurred or existing pursuant to such other clause; provided that such reclassification shall take place no more than once with respect to each item of Indebtedness.

SECTION 6.02. Liens. Create, incur or assume any Lien on any of its property or assets (including Equity Interests or other securities of any person) at the time owned by it or on any income or revenues or rights in respect of any thereof, except the following (collectively, “Permitted Liens”):

(a) (i) Liens existing on the First Restatement Effective Date (or created following the First Restatement Effective Date pursuant to agreements in existence on the First Restatement Effective Date requiring the creation of such Liens) and, in each case, set forth on Schedule 6.02(a); provided that such Liens shall secure only those obligations that they secure on the First Restatement Effective Date (and any Permitted Refinancing Indebtedness in respect of such obligations permitted by Section 6.01(a)) and shall not subsequently apply to any other property or assets of the Borrower or any of the other Restricted Subsidiaries other than (A) after-acquired property that is affixed to or incorporated into the property covered by such Lien and (B) proceeds and products thereof and (ii) Liens existing on the First Restatement Effective Date securing property or assets having a fair market value not to exceed $5.0 million in the aggregate and, in each case, any modifications, replacements, renewals or extensions thereof;

(b) any Lien created under the Loan Documents, and any Lien created under the definitive documentation evidencing any other Indebtedness permitted under Section 6.01(b);

(c) any Lien securing Indebtedness or Permitted Refinancing Indebtedness permitted by Section 6.01(i); provided that in the case of a Lien securing Permitted Refinancing Indebtedness, such Lien shall be permitted subject to compliance with clause (d) of the definition of “Permitted Refinancing Indebtedness”;

(d) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in compliance with Section 5.03;

(e) Liens imposed by law, including landlord’s, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, construction or other like Liens arising in the ordinary course of business securing obligations that are not overdue by more than 30 days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, the Borrower or any of the other Restricted Subsidiaries shall have set aside on its books reserves in accordance with GAAP;

 

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(f) (i) pledges and deposits and other Liens made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workers’ compensation, unemployment insurance and other social security laws or regulations and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations and (ii) 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 Borrower or any of its Restricted Subsidiaries;

(g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance and return of money bonds, bids, leases, government contracts, trade contracts, agreements with utilities, and other obligations of a like nature (including letters of credit in lieu of any such bonds or to support the issuance thereof) incurred by the Borrower or any of the other Restricted Subsidiaries in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;

(h) zoning restrictions, survey exceptions and such matters as an accurate survey would disclose, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, special assessments, rights of way covenants, conditions, restrictions and declarations on or with respect to the use of Real Property, servicing agreements, development agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of business and title defects or irregularities that are of a minor nature and that, in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of the Borrower or the other Restricted Subsidiaries;

(i) Liens securing Indebtedness permitted by Section 6.01(j) (limited to the assets subject to such Indebtedness or accessions to such property or the proceeds therefrom);

(j) Liens arising out of Sale and Lease-Back Transactions permitted under Section 6.03, so long as such Liens attach only to the property sold and being leased in such Sale and Lease-Back Transaction and any accessions thereto or proceeds thereof and related property;

(k) Liens securing judgments that do not constitute an Event of Default under Section 7.01(j);

(l) Liens disclosed by the title insurance policies delivered on or subsequent to the Closing Date pursuant to Section 5.10 and any replacement, extension or renewal of any such Lien (so long as the Indebtedness and other obligations secured by such replacement, extension or renewal Lien are permitted by this Agreement); provided that such replacement, extension or renewal Lien shall not cover any property other than the property that was subject to such Lien prior to such replacement, extension or renewal and any after-acquired property that is affixed to or incorporated into the property covered by such Lien;

(m) any interest or title of a lessor or sublessor under any leases or subleases entered into by the Borrower or any of the other Restricted Subsidiaries in the ordinary course of business;

(n) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Borrower or any of the other Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower or any of the other Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Borrower or any of the other Restricted Subsidiaries in the ordinary course of business;

 

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(o) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights;

(p) leases or subleases, licenses or sublicenses (including with respect to intellectual property and software) granted to others in the ordinary course of business that do not interfere in any material respect with the business of the Borrower and any of the other Restricted Subsidiaries taken as a whole;

(q) 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;

(r) Liens solely on any cash earnest money deposits made by the Borrower or any of the other Restricted Subsidiaries in connection with any letter of intent or purchase agreement in respect of any Investment permitted hereunder;

(s) Liens with respect to property or assets of any Restricted Subsidiary that is not a Loan Party securing Indebtedness of any Restricted Subsidiary that is not a Loan Party permitted under Section 6.01;

(t) Liens with respect to property or assets of a Foreign Subsidiary securing Indebtedness of such Foreign Subsidiary permitted under Section 6.01(s);

(u) Liens securing Leverage Ratio Debt; provided such Liens (i) apply only to property or assets of a Foreign Subsidiary, (ii) apply only to the Collateral and are (A) with respect to the Term Loan Priority Collateral, junior in priority to the Liens on the Term Loan Priority Collateral securing the Term Loan Obligations, but senior in priority to the Liens on the Term Loan Priority Collateral securing the Obligations and (B) with respect to the ABL Priority Collateral, junior in priority to the Liens on the ABL Priority Collateral securing the Obligations and the Term Loan Obligations or (iii) apply only to the Collateral and are junior in priority to the Liens on the Collateral securing the Obligations and the Term Loan Obligations; provided further any such Liens on Collateral are governed by an intercreditor agreement in form and substance reasonably satisfactory to the Administrative Agent;

(v) the prior rights of consignees and their lenders under consignment arrangements entered into in the ordinary course of business;

(w) Liens arising from precautionary Uniform Commercial Code financing statements;

(x) Liens on Equity Interests of any joint venture or Unrestricted Subsidiary (i) securing obligations of such joint venture or Unrestricted Subsidiary, as the case may be, or (ii) pursuant to the relevant joint venture agreement or arrangement;

(y) Liens on securities that are the subject of repurchase agreements constituting Permitted Investments under clause (d) of the definition thereof;

(z) Liens securing obligations in respect of trade-related letters of credit, trade-related bank guarantees or similar trade-related obligations permitted under Section 6.01(w) and covering the goods (or the documents of title in respect of such goods) financed by such letters of credit, bank guarantees or similar obligations and the proceeds and products thereof;

 

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(aa) Liens securing insurance premium financing arrangements so long as such Liens are limited to the applicable unearned insurance premiums;

(bb) Liens in favor of the Borrower or any of the Restricted Subsidiaries; provided that if any such Lien shall cover any Collateral, the holder of such Lien shall execute and deliver to the Administrative Agent a subordination agreement in form and substance reasonably satisfactory to the Administrative Agent;

(cc) Liens securing obligations permitted under Section 6.01(m) to the extent such Liens are subject to the ABL/Term Loan Intercreditor Agreement or other intercreditor agreement(s) reasonably satisfactory to the Administrative Agent and substantially consistent with and no less favorable to the Lenders in any material respect than the ABL/Term Loan Intercreditor Agreement;

(dd) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancings, refundings, extensions, renewals, or replacements) as a whole, or in part, of any Indebtedness secured by any Lien permitted by the foregoing clauses; provided, however, that (x) such new Lien pursuant to this clause (dd) shall be limited to all or part of the same property (which, for the avoidance of doubt, may include after-acquired property to the extent such after-acquired property would be subject to the existing Lien) that secured the original Lien (plus improvements on and accessions to such property), and (y) the Indebtedness secured by such Lien at such time pursuant to this clause (dd) is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the applicable Indebtedness at the time the original Lien became a Lien permitted hereunder, plus accrued interest, and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement; provided, further, that if any original Lien was subject to an intercreditor agreement with the Administrative Agent, such new Lien shall be subject to an intercreditor agreement substantially consistent with and no less favorable to the Lenders in any material respect than such original intercreditor agreement; and

(ee) other Liens securing obligations in an aggregate principal amount outstanding at any time not to exceed, at the time of incurrence of such Lien (and after giving effect thereto) the greater of (i) $30.0 million and (ii) 3.0% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such incurrence for which the Required Financial Statements have been delivered pursuant to Section 5.04, so long as any such Liens on the Accounts or Inventory of any Borrower Party or Guarantor are subordinated to the Liens on such assets securing the Obligations pursuant to the ABL/Term Loan Intercreditor Agreement or another intercreditor agreement substantially consistent with and no less favorable to the Lenders in any material respect than the ABL/Term Loan Intercreditor Agreement.

For purposes of determining compliance with this Section 6.02, (A) a Lien securing an item of Indebtedness need not be permitted solely by reference to one category of Permitted Liens described in Section 6.02(a) through Section 6.02(ee) but may be permitted in part under any combination thereof and (B) in the event that a Lien securing an item of Indebtedness (or any portion thereof) (other than any Lien permitted by Section 6.02(b), (u) or (cc)) meets the criteria of another category of Permitted Liens described in Section 6.02 (other than Section 6.02(b), (u) or (cc)), the Borrower may, in its sole discretion, reclassify such Lien securing such item of Indebtedness (or any portion thereof) and such Lien securing such item of Indebtedness will be treated as being incurred or existing pursuant to such other clause; provided that such reclassification shall take place no more than once with respect to any Lien securing an item of Indebtedness.

 

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SECTION 6.03. Sale and Lease-Back Transactions.

(a) Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a “Sale and Lease-Back Transaction”); provided that Sale and Lease-Back Transactions shall be permitted (a) pursuant to the Sale/Lease-Back Documents, (b) with respect to property owned (i) by the Borrower or any of its Domestic Subsidiaries that is acquired after the First Restatement Effective Date so long as such Sale and Lease-Back Transaction is consummated within 270 days of the acquisition of such property or (ii) by any Foreign Subsidiary of the Borrower regardless of when such property was acquired and (c) so long as at the time of any such Sale and Lease-Back Transaction (and after giving effect thereto), the Remaining Present Value of outstanding leases entered into pursuant to this Section 6.03, together with the outstanding amount of Indebtedness pursuant to Section 6.01(j) shall not exceed the greater of (i) $50.0 million and (ii) 3.0% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such Sale and Lease-Back Transaction for which Required Financial Statements have been delivered pursuant to Section 5.04; provided that the Remaining Present Value of outstanding leases entered into pursuant to this Section 6.03 shall not apply for purposes of calculating Permitted Indebtedness under Section 6.01(j) or permitted Sale and Lease-Back Transactions under this Section 6.03 if the proceeds of the related Sale and Lease-Back Transactions are used to prepay Term Loans or Revolving Loans or any Incremental Revolving Commitments (in each case, to the extent commitments in respect thereof are permanently reduced by the amount of such prepayments).

SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire (including pursuant to any merger, consolidation or amalgamation with a person that is not a Wholly Owned Subsidiary immediately prior to such merger, consolidation or amalgamation) any Equity Interests, evidences of Indebtedness or other securities of, make or permit to exist any loans or advances to or Guarantees of the obligations of, or make or permit to exist any investment or any other interest in (each, an “Investment”), any other person, except:

(a) the Closing Date Transactions;

(b) (i) Investments in the Equity Interests of Holdings, the Borrower or any other Restricted Subsidiary, (ii) intercompany loans to the Borrower or any other Restricted Subsidiary and (iii) Guarantees of Indebtedness expressly permitted hereunder; provided that in the case of an Investment by the Borrower or any of the other Restricted Subsidiaries in a Restricted Subsidiary that is not a Loan Party, at the time such Investment is made, no Event of Default shall have occurred and be continuing; provided, further, that, at the time of the making of any such Investment (and after giving effect thereto), the sum of (A) outstanding Investments (valued at the time of the making thereof and without giving effect to any write downs or write offs thereof) made after the Closing Date in Restricted Subsidiaries that are not Loan Parties pursuant to clause (i) plus (B) outstanding intercompany loans made after the Closing Date to Subsidiaries that are not Loan Parties pursuant to clause (ii) plus (C) outstanding Guarantees of Indebtedness after the Closing Date of Subsidiaries that are not Loan Parties pursuant to clause (iii) shall not exceed an aggregate net amount equal to the greater of (1) $30.0 million and (2) 2.00% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such Investment for which Required Financial Statements have been delivered pursuant to Section 5.04; provided, further, that (x) intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings or any of its Subsidiaries and (y) intercompany loans, advances or Indebtedness having a term not exceeding 364 days (inclusive of any roll-overs or extensions of terms) and made in the ordinary course of business consistent with past practice shall not be included in calculating the limitation in this paragraph (b) at any time;

 

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(c) Permitted Investments and Investments that were Permitted Investments when made;

(d) Investments arising out of the receipt by the Borrower or any of the other Restricted Subsidiaries of non-cash consideration for the sale or other disposition of assets permitted under Section 6.05;

(e) loans and advances to officers, directors, managers and employees or consultants of any Parent Entity or any of its Restricted Subsidiaries (i) not to exceed $15.0 million in the aggregate at any time outstanding (calculated without regard to write downs or write offs thereof), (ii) in respect of payroll payments and expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or (iii) in connection with the purchase of Equity Interests of any Parent Entity solely to the extent that the amount of such loans and advances shall be contributed to Holdings or any of its Restricted Subsidiaries in cash as common equity;

(f) accounts receivable, security deposits and repayments arising and trade credit granted in the ordinary course of business and any assets or securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and any repayments and other credits to suppliers made in the ordinary course of business;

(g) Hedge Agreements permitted by Section 6.01(c);

(h) Investments existing on, or contractually committed as of, the First Restatement Effective Date and set forth on Schedule 6.04(h) and any extensions, renewals or reinvestments thereof, so long as the aggregate amount of all Investments pursuant to this clause (h) is not increased at any time above the amount of such Investments existing or committed on the First Restatement Effective Date (other than pursuant to an increase as required by the terms of any such Investment as in existence on the First Restatement Effective Date);

(i) Investments resulting from pledges and deposits under the following clauses of Section 6.02: (a), (f), (g), (k), (q), (r) and (ee);

(j) other Investments in an aggregate amount (valued at the time of the making thereof, and without giving effect to any write downs or write offs thereof) not to exceed at the time of the making of such Investment (and after giving effect thereto) and together with all outstanding Investments pursuant to this Section 6.04(j)(i), the greater of (A) $75.0 million and (B) 4.5% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such Investment for which Required Financial Statements have been delivered pursuant to Section 5.04 (plus any returns of capital actually received by the respective investor in respect of Investments theretofore made by it pursuant to this clause (j)(i));

(k) Investments constituting Permitted Business Acquisitions;

(l) intercompany loans among Foreign Subsidiaries and Guarantees by Foreign Subsidiaries permitted by Section 6.01(n);

(m) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, customers and suppliers, in each case, in the ordinary course of business and Investments acquired as a result of a foreclosure by the Borrower or any of the other Restricted Subsidiaries with respect to any secured Investments or other transfer of title with respect to any secured Investment in default;

 

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(n) Investments of a Subsidiary of the Borrower acquired after the First Restatement Effective Date or of an entity merged into, or consolidated or amalgamated with, the Borrower or any other Restricted Subsidiary after the First Restatement Effective Date, in each case, (i) to the extent permitted under this Section 6.04, (ii) in the case of any acquisition, merger, consolidation or amalgamation, in accordance with Section 6.05, and (iii) to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger, consolidation or amalgamation and were in existence on the date of such acquisition, merger, consolidation or amalgamation;

(o) acquisitions of obligations of one or more directors, officers, managers or other employees of any Parent Entity, the Borrower or any other Restricted Subsidiary in connection with such director’s, officer’s, manager’s or employee’s acquisition of Equity Interests of any Parent Entity, so long as no cash is actually advanced by the Borrower or any of the other Restricted Subsidiaries to such directors, officers or employees in connection with the acquisition of any such obligations;

(p) Guarantees of operating leases (for the avoidance of doubt, excluding Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case, entered into by the Borrower or any of the other Restricted Subsidiaries in the ordinary course of business;

(q) Investments to the extent that payment for such Investments is made with Equity Interests of any Parent Entity;

(r) Investments consisting of the redemption, purchase, repurchase or retirement of any Equity Interests permitted under Section 6.06;

(s) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4 customary trade arrangements with customers consistent with past practices;

(t) Guarantees permitted under Section 6.01 (except to the extent such Guarantee is expressly subject to Section 6.04);

(u) advances in the form of a repayment of expenses, so long as such expenses are being paid in accordance with customary trade terms of the Borrower or any of the other Restricted Subsidiaries;

(v) Investments, including loans and advances to any Parent Entity, so long as Borrower or any of the other Restricted Subsidiaries would otherwise be permitted to make a Restricted Payment in such amount; provided that the amount of any such Investment shall also be deemed to be a Restricted Payment under the appropriate clause of Section 6.06 for all purposes of this Agreement;

(w) Investments consisting of the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other persons;

(x) purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or licenses or leases of intellectual property in each case in the ordinary course of business, to the extent such purchases and acquisitions constitute Investments;

 

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(y) Investments received substantially contemporaneously in exchange for Equity Interests of any Parent Entity;

(z) Investments in (i) joint ventures and Unrestricted Subsidiaries, (ii) the Equity Interests of one or more newly formed persons that are received in consideration of the contribution by the Borrower or any of the other Restricted Subsidiaries of assets (including Equity Interests and cash) to such person or persons and (iii) Foreign Subsidiaries, in each case, valued at the fair market value of such Investment at the time such Investment is made, in the aggregate at any time outstanding not to exceed the greater of (x) $45.0 million and (y) 2.50% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such Investment for which Required Financial Statements have been delivered pursuant to Section 5.04 (calculated without regard to write downs or write offs thereof); provided that if any Investment pursuant to this clause (z) is made in any person that is not a Restricted Subsidiary at the date of the making of such Investment and such person becomes a Restricted Subsidiary after such date pursuant to another Investment (including a Subsidiary Redesignation) the amount of which, when taken together with the amount of the prior Investment, would be permitted under another provision of this Section 6.04, any Investment in such person outstanding under this Section 6.04(z) shall thereafter be deemed to have been made pursuant to such other provision and shall cease to have been made pursuant to this clause (z) for so long as such person continues to be a Restricted Subsidiary;

(aa) Investments in assets useful in the business of the Borrower and any of its Subsidiaries made with the proceeds of any Reinvestment Deferred Amount or Below Threshold Asset Sale Proceeds (each as defined in the Term Loan Credit Agreement); provided, that if the underlying Asset Sale or Recovery Event was with respect to Holdings or a Subsidiary Loan Party, then such Investment shall be consummated by a Subsidiary Loan Party;

(bb) additional Investments; provided that both immediately before such Investment is made and immediately after giving effect thereto, the Investment Conditions shall be satisfied on a Pro Forma Basis; and

(cc) Investments in the Term Loans, the Senior Unsecured Notes and other Permitted Indebtedness of the Borrower, in each case to the extent such purchases or repurchases are not otherwise prohibited hereunder.

The amount of Investments that may be made at any time in Subsidiaries of the Borrower that are not Subsidiary Loan Parties pursuant to Section 6.04(b) or Section 6.04(j) (the “Related Sections”) may, at the election of the Borrower, be increased by the amount of Investments that could be made at such time under the other Related Section; provided that the amount of each such increase in respect of one Related Section shall be treated as having been used under the other Related Section.

SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions. Merge into, or consolidate or amalgamate with, any other person, or permit any other person to merge into or consolidate with it, or sell, transfer or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets (whether now owned or hereafter acquired), or issue, sell, transfer or otherwise dispose of any Equity Interests of any Restricted Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person or any division, unit or business of any other person, except that this Section 6.05 shall not prohibit:

(a) (i) the purchase and sale of inventory or equipment in the ordinary course of business, (ii) the acquisition or lease (pursuant to an operating lease) of any other asset in the ordinary course of business, (iii) the disposition of surplus, obsolete, damaged or worn out equipment or other property in the ordinary course of business or (iv) the disposition of Investments;

 

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(b) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing or would result therefrom, (i) the merger, consolidation or amalgamation of any Restricted Subsidiary into (or with) the Borrower in a transaction in which the Borrower is the survivor, (ii) the merger, consolidation or amalgamation of any Restricted Subsidiary into or with any Restricted Subsidiary of the Borrower (or person that will become a Restricted Subsidiary of the Borrower) that is or will become, substantially contemporaneously with the closing of the relevant transaction, a Subsidiary Loan Party in a transaction in which the surviving or resulting entity is a Restricted Subsidiary of the Borrower that is or becomes a Subsidiary Loan Party, (iii) the merger, consolidation or amalgamation of any Restricted Subsidiary that is not a Loan Party into or with any other Restricted Subsidiary that is not a Loan Party, (iv) the liquidation or dissolution or change in form of entity of any Restricted Subsidiary (other than the Borrower) if the Borrower or any Parent Entity on behalf of the Borrower determines in good faith that such liquidation, dissolution or change in form is in the best interests of the Borrower and (with respect to any liquidation or dissolution of a Loan Party, to the extent the residual assets of such Loan Party or proceeds thereof are not transferred to another Loan Party) is not materially disadvantageous to the Lenders or (v) the merger, consolidation or amalgamation of any Restricted Subsidiary of Holdings (other than the Borrower) with or into any other person in order to effect an Investment permitted under Section 6.04 so long as the continuing or surviving person shall be or become a Restricted Subsidiary of the Borrower that is a Subsidiary Loan Party if the merging, consolidating or amalgamating Restricted Subsidiary was a Loan Party and which, together with each of its Restricted Subsidiaries, shall have complied with the requirements of Section 5.10;

(c) sales, transfers, leases or other dispositions to the Borrower or any of the other Restricted Subsidiaries (upon voluntary liquidation or otherwise); provided that any sales, transfers, leases or other dispositions by a Loan Party to a Restricted Subsidiary that is not a Loan Party in reliance on this clause (c) shall be made in compliance with Section 6.07 and the aggregate gross proceeds (including non-cash proceeds) of any and all assets sold, leased, transferred or leased shall not in the aggregate exceed, as of the date of any such disposition (and after giving effect thereto), in any fiscal year of Holdings, the greater of (i) $20.0 million and (ii) 1.0% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such sale, transfer or other disposition for which Required Financial Statements have been delivered pursuant to Section 5.04;

(d) Sale and Lease-Back Transactions permitted by Section 6.03;

(e) Investments permitted by Section 6.04, Permitted Liens and Restricted Payments permitted by Section 6.06;

(f) Dispositions of Investments in joint ventures to the extent required by, or made pursuant to, contractual buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements;

(g) Transfers of property subject to casualty, eminent domain or condemnation proceedings (including in lieu thereof);

(h) the sale, lease, sublease, license, sublicense, consignment, conveyance or other disposition of equipment, inventory or other assets (including leasehold interests in real property) with respect to facilities that are temporarily not in use, held for sale or closed;

 

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(i) sales of non-core assets acquired in connection with an acquisition permitted hereunder and sales of real estate assets acquired in an acquisition permitted hereunder which, in each case, within 90 days of the date of the acquisition, are designated in writing to the Administrative Agent as being held for sale and not for the continued operation of the Borrower or any of the other Restricted Subsidiaries or any of their respective businesses;

(j) terminations of Hedge Agreements;

(k) sales or dispositions of Equity Interests of Unrestricted Subsidiaries;

(l) (i) licensing and cross-licensing arrangements involving any technology, intellectual property or intellectual property rights of the Borrower or any other Restricted Subsidiary in the ordinary course of business, other than any such exclusive licensing arrangement that prevents the Borrower or any other Restricted Subsidiary from conducting its business in any material respect, and (ii) the sale, disposal, abandonment, cancellation or lapse of intellectual property rights, or any issuances or registrations, or applications for issuances or registrations, of any intellectual property rights, which, in the reasonable good faith determination of the Borrower or any Parent Entity on behalf of the Borrower, are uneconomical, negligible, or not material to the conduct of the business of the Borrower or the other Restricted Subsidiaries;

(m) the sale of defaulted receivables in the ordinary course of business and not as part of an accounts receivables financing transaction;

(n) sales, transfers or other dispositions of assets not otherwise permitted by this Section 6.05; provided that (A) no Event of Default shall have occurred and be continuing or would result therefrom, (B) at least 75.0% of the consideration therefor shall be in the form of cash and cash equivalents and (C) such sale, transfer or disposition shall be made for fair value (as determined by the Borrower in good faith); provided, further, that (A) any liabilities (as shown on the most recent Required Financial Statements or in the notes thereto) of the Borrower or any of its Subsidiaries, other than liabilities that are by their terms subordinated to the Obligations, that are assumed by the transferee with respect to the applicable disposition and for which the Borrower and its Subsidiaries shall have been validly released by all applicable creditors in writing, (B) any securities received by the Borrower or its Subsidiaries from such transferee that are converted by the Borrower or such Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of the applicable disposition and (C) any Designated Non-Cash Consideration received in respect of such disposition having an aggregate fair market value as determined by the Borrower in good faith, taken together with all other Designated Non-Cash Consideration received pursuant to this clause (C) that is then outstanding, shall not exceed the greater of (x) $35.0 million and (y) 2.0% of Consolidated Total Assets (measured at the time such Designated Non-Cash Consideration is received), with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value, shall be deemed for purposes of this clause (n) to be cash;

(o) Permitted Business Acquisitions (including any merger, consolidation or amalgamation in order to effect a Permitted Business Acquisition); provided that following any such merger, consolidation or amalgamation involving the Borrower, the Borrower shall be the surviving entity;

(p) leases, licenses, or subleases or sublicenses of any real or personal property in the ordinary course of business;

 

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(q) sales, leases or other dispositions of inventory of the Borrower or any of its Subsidiaries determined by the management of the Borrower or any Parent Entity on behalf of the Borrower to be no longer useful or necessary in the operation of the business of the Borrower or such Subsidiary;

(r) any exchange or swap, including transactions covered by Section 1031 of the Code, of assets for services or other assets of comparable or greater value; provided that (i) no Event of Default shall exist or would result therefrom and (ii) in the event of an exchange or swap with a fair market value in excess of $15.0 million, such exchange or swap shall have been approved by at least a majority of the Governing Persons of the Borrower or any Parent Entity on behalf of the Borrower; and

(s) (i) termination of leases in the ordinary course of business, (ii) the expiration of any option agreement in respect of real or personal property and (iii) any surrender or waiver of contractual rights or the settlement, release or surrender of contractual rights or other litigation claims in the ordinary course of business.

To the extent any Collateral is disposed of in a transaction expressly permitted by this Section 6.05 to any person other than Holdings, the Borrower or any other Restricted Subsidiary, such Collateral shall be sold free and clear of the Liens created by the Loan Documents, and the Administrative Agent shall take, and shall be authorized by each Lender to take, any actions reasonably requested by the Borrower in order to evidence the foregoing, in each case, in accordance with Section 9.18.

SECTION 6.06. Restricted Payments. Declare or pay any dividend or make any other distribution (by reduction of capital or otherwise), directly or indirectly, whether in cash, property, securities or a combination thereof, with respect to any of its Equity Interests (other than dividends and distributions on Equity Interests payable solely by the issuance of additional Equity Interests (other than Disqualified Stock) of the person paying such dividends or distributions) or directly or indirectly redeem, purchase, retire or otherwise acquire for value any of its Equity Interests or set aside any amount for any such purpose (other than through the issuance of additional Equity Interests (other than Disqualified Stock) of the person redeeming, purchasing, retiring or acquiring such shares) (the foregoing, “Restricted Payments”) other than:

(a) Restricted Payments to Holdings, the Borrower or any other Subsidiary of Holdings (or, in the case of non-Wholly Owned Subsidiaries, to Holdings and to each other owner of Equity Interests of such Subsidiary on a pro rata basis (or more favorable basis from the perspective of Holdings, the Borrower or such Subsidiary) based on their relative ownership interests so long as any repurchase of its Equity Interests from a person that is not Holdings or a Restricted Subsidiary of Holdings is permitted under Section 6.04);

(b) Restricted Payments to permit any Parent Entity to (i) pay operating, overhead, legal, accounting and other professional fees and expenses (including directors’ fees and expenses and administrative, legal, accounting, filings and similar expenses), (ii) pay fees and expenses related to any public offering or private placement of debt or equity securities of any Parent Entity whether or not consummated or any Investment permitted hereunder, (iii) pay fees, non-income taxes and expenses in connection with any Parent Entity’s ownership of any Subsidiary or the maintenance of its legal existence, (iv) make payments permitted by Section 6.07 (other than Section 6.07(g)) or (v) pay customary salary, bonus and other benefits payable to, and indemnities provided on behalf of, officers and employees of any Parent Entity, in each case, in order to permit such Parent Entity to make such payments;

 

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(c) (i) Restricted Payments to any Parent Entity that files, or to any Parent Entity for the purpose of paying to any other Parent Entity that files, a consolidated U.S. federal or combined or unitary state tax return that includes Holdings and its Subsidiaries (or the taxable income thereof), in each case, to the extent income taxes reportable on such return are attributable to Holdings and its Restricted Subsidiaries, in an amount not to exceed the amount that Holdings and its Restricted Subsidiaries would have been required to pay in respect of U.S. federal, state or local taxes (as the case may be) in respect of such fiscal year if Holdings and its Restricted Subsidiaries paid such taxes directly as a stand-alone taxpayer (or stand-alone group) and (ii) to the extent of amounts paid by Unrestricted Subsidiaries to Holdings or any of its Subsidiaries (unless (A) such cash distribution by an Unrestricted Subsidiary is prohibited or restricted by any law, (B) the Borrower is unable to obtain, through commercially reasonable efforts, any required consent, approval or authorization of any Governmental Authority for such cash distribution, or (C) such cash distribution is prohibited by any contractual obligation or the terms of any security that the Borrower, through commercially reasonable efforts, is unable to avoid), Restricted Payments to any Parent Entity necessary to pay the tax liabilities of Unrestricted Subsidiaries or of any Parent Entity attributable to Unrestricted Subsidiaries;

(d) Restricted Payments to any Parent Entity the proceeds of which are used to purchase or redeem, or to any Parent Entity for the purpose of paying to any other Parent Entity to purchase or redeem, the Equity Interests of such Parent Entity (including related stock appreciation rights or similar securities) held by then present or former directors, consultants, officers or employees of the Borrower or any of its Restricted Subsidiaries, their respective estates or family members, or by any Plan or any shareholders’ agreement then in effect upon such person’s death, disability, retirement or termination of employment or under the terms of any such Plan or any other agreement under which such shares of stock or related rights were issued; provided that the aggregate amount of such purchases or redemptions under this clause (d) shall not exceed (i) $10.0 million in the aggregate in any fiscal year of Holdings (with any unused amounts in any fiscal year being carried over to the immediately succeeding fiscal year) plus (ii) the amount of Net Cash Proceeds (other than any such Net Cash Proceeds used for purposes of Section 6.01(aa) or Section 6.09(b)(i)(3) or used to fund charges, expenses, accruals or reserves in accordance with clause (k) of the definition of “Consolidated Net Income”) contributed to the Borrower or Holdings that were received by any Parent Entity during such fiscal year from sales of Equity Interests of any Parent Entity to directors, managers, consultants, officers or employees of the Borrower or any of its Subsidiaries in connection with permitted employee compensation and incentive arrangements, plus (iii) the amount of net proceeds of any key man life insurance policies received during such calendar year plus (iv) the amount of any bona fide cash bonuses otherwise payable to members of management, directors or consultants of the Borrower or any of its Subsidiaries in connection with the Closing Date Transactions that are foregone in return for the receipt of Equity Interests, the fair market value of which is equal to or less than the amount of such cash bonuses, which, if not used in any year, may be carried forward to any subsequent fiscal year; provided, further, that cancellation of Indebtedness owing to Holdings, the Borrower or any of its Subsidiaries from any future, present or former employees, directors, managers or consultants (or any of their respective estates or family members) of the Borrower or any of its Subsidiaries in connection with a repurchase of Equity Interests of any Parent Entity will not be deemed to constitute a Restricted Payment for purposes of this Section 6.06;

(e) non-cash repurchases of Equity Interests of Holdings, the Borrower or any of the Restricted Subsidiaries deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;

(f) Restricted Payments to allow any Parent Entity to make, or to any Parent Entity for the purpose of paying to any other Parent Entity 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; provided that any such payment is not for the purpose of evading the limitations of this Section 6.06;

 

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(g) after a Qualified IPO, Restricted Payments to any Parent Entity in an amount equal to 6.0% per annum of the cash proceeds from any public offering of the Equity Interests of Holdings or any Parent Entity that are contributed to or received by Holdings or the Borrower, so long as no Default or Event of Default has occurred or is continuing;

(h) Restricted Payments to any Parent Entity to finance, or to any Parent Entity for the purpose of paying to any other Parent Entity to finance, any Investment permitted to be made pursuant to Section 6.04; provided that (i) such Restricted Payment shall be made substantially concurrently with the closing of such Investment and (ii) such Parent Entity shall, immediately following the closing thereof, cause (A) all property acquired (whether assets or Equity Interests) to be contributed to the Borrower or any other Subsidiary or (B) the merger, consolidation or amalgamation (to the extent permitted by Section 6.05) of the person formed or acquired into the Borrower or any other Subsidiary in order to consummate such Permitted Business Acquisition or Investment, in each case, in accordance with the requirements of Section 5.10;

(i) so long as no Event of Default has occurred and is continuing, Restricted Payments to any Parent Entity not to exceed (i) $2.0 million in any fiscal year to pay, or to any Parent Entity for the purpose of paying to any other Parent Entity to pay, monitoring, consulting, management, transaction, advisory, termination or similar fees payable to a Sponsor or any Sponsor Affiliate in accordance with the terms of any management or similar agreement with terms reasonably consistent with the terms of similar agreements entered into by similar financial sponsors and portfolio companies as determined in good faith by the Borrower or any Parent Entity on behalf of the Borrower at the time such management or similar agreement is entered into by the Sponsors and the Borrower (or, in the case of Teachers, distributions and dividends paid to Teachers to approximate management fees and transaction and advisory fees) (it being understood that any amounts that are not paid due to the existence of an Event of Default shall accrue and may be paid when the applicable Event of Default ceases to exist or is otherwise waived and (ii) indemnities, reimbursements and reasonable and documented out-of-pocket fees and expenses of a Sponsor or any Sponsor Affiliate in connection therewith; provided that with respect to this clause (ii), such payments shall be on terms reasonably consistent with arrangements entered into between similar financial sponsors and portfolio companies as determined in good faith by the Borrower or any Parent Entity on behalf of the Borrower;

(j) Restricted Payments in an amount sufficient to make, to the extent permitted pursuant to Section 6.09(b), scheduled payments of interest on, prepayments of, or other payments in respect of, any Junior Financing;

(k) Restricted Payments required by the terms of agreements as in effect on the First Restatement Effective Date (or as amended, to the extent such amendment is not adverse to the Lenders in any material respect) and listed on Schedule 6.06(k);

(l) so long as no Event of Default has occurred and is continuing, payments to a Sponsor or any Sponsor Affiliate for any financial advisory, financing, underwriting or placement services or in respect of other investment banking or transaction advisory activities, including in connection with (i) the Closing Date Transactions, acquisitions or divestitures, which payments are approved by the majority of the Governing Persons of the Borrower or any Parent Entity on behalf of the Borrower, in good faith and (ii) distributions and dividends paid to Teachers to approximate management fees and transaction and advisory fees; provided that such payments shall be on terms reasonably consistent with arrangements entered into between similar financial sponsors and portfolio companies as determined in good faith by the Borrower or any Parent Entity on behalf of the Borrower; and

 

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(m) additional Restricted Payments; provided that both immediately before such Restricted Payment is made and immediately after giving effect thereto, the Payment Conditions shall be satisfied on a Pro Forma Basis.

SECTION 6.07. Transactions with Affiliates. Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates in a transaction involving aggregate consideration in excess of $2.5 million (for a single transaction or a series of related transactions) or $5.0 million consideration in the aggregate for all such transactions, unless such transaction is (i) otherwise permitted (or required) under this Agreement or (ii) upon terms no less favorable to Holdings or its Restricted Subsidiaries, as applicable, than would be obtained in a comparable arm’s length transaction with a person that is not an Affiliate, except that this Section 6.07 shall not prohibit:

(a) 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 Governing Persons of the Borrower or any Parent Entity;

(b) loans or advances to directors, officers, managers, employees or consultants of any Parent Entity, the Borrower or any of its Subsidiaries in accordance with Section 6.04(e);

(c) transactions between or among the Borrower and any other Restricted Subsidiary or any entity that becomes a Restricted Subsidiary as a result of such transaction (including via merger, consolidation or amalgamation in which a Loan Party is the surviving entity);

(d) the payment of fees, customary benefits, reasonable out of pocket costs and indemnities to directors, officers, consultants and employees of a Parent Entity, the Borrower or any of the other Restricted Subsidiaries in the ordinary course of business (limited, in the case of any Parent Entity, to the portion of such fees and expenses that are allocable to Holdings and its Restricted Subsidiaries (which shall be 100% for so long as such Parent Entity owns no assets other than, directly or indirectly, the Equity Interests in Holdings and its Restricted Subsidiaries and assets incidental to the ownership of Holdings and its Restricted Subsidiaries);

(e) (i) the Closing Date Transactions pursuant to the Closing Date Transaction Documents and (ii) transactions, agreements and arrangements in existence on the First Restatement Effective Date and set forth on Schedule 6.07(e) or any amendment thereto to the extent such amendment is not adverse to the Lenders in any material respect;

(f) (i) any employment agreements entered into by Holdings or any of its Restricted Subsidiaries in the ordinary course of business, (ii) 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 (iii) 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;

(g) Restricted Payments permitted under Section 6.06, including payments to any Parent Entity;

 

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(h) any purchase by Parent Entity or its Subsidiaries of the Equity Interests of any Wholly Owned Subsidiary; provided that any Equity Interests of any Wholly Owned Subsidiary purchased by such Parent Entity shall be pledged to the Administrative Agent on behalf of the Lenders pursuant to the Collateral Agreement;

(i) so long as no Specified Event of Default has occurred and is continuing, any agreement to pay, and the payment of, monitoring, consulting, management, transaction, advisory, termination or similar fees payable to a Sponsor or any Sponsor Affiliate pursuant to a management agreement or another similar or related agreement entered into with a Sponsor or any Sponsor Affiliate, which agreement has terms reasonably consistent with the terms of similar agreements entered into by similar financial sponsors and portfolio companies as determined in good faith by the Borrower or any Parent Entity on behalf of the Borrower at the time such management or similar agreement is entered into (or, in the case of Teachers, distributions and dividends paid to Teachers to approximate management fees and transaction and advisory fees), provided that amounts paid pursuant to this Section 6.07 shall not exceed $2.0 million in any fiscal year, and provided, further, that to the extent any such fees are not paid due to the occurrence of a Specified Event of Default, such fees shall accrue during the continuance of such Specified Event of Default and paid immediately upon the cure, cessation or waiver of such Specified Event of Default;

(j) [Reserved];

(k) any transaction in respect of which the Borrower delivers to the Administrative Agent (for delivery to the Lenders) a letter addressed to the Governing Persons of Holdings or the Borrower from an accounting, appraisal or investment banking firm, in each case, of nationally recognized standing which letter states that such transaction is on terms that are no less favorable to Holdings or its Subsidiaries, as applicable, than would be obtained in a comparable arm’s length transaction with a person that is not an Affiliate or is fair from a financial point of view;

(l) subject to clause (i) of this Section 6.07, the payment of all fees, expenses, bonuses and awards related to the Closing Date Transactions contemplated by the Confidential Information Memorandum dated September 2013, as modified or supplemented prior to the Closing Date, including fees to a Sponsor or any Sponsor Affiliate;

(m) transactions with a joint venture, partnership, limited liability company or other entity for the purchase or sale of goods, equipment and services entered into in the ordinary course of business and in a manner consistent with past practice;

(n) the issuance, sale or transfer of Equity Interests of Holdings or the Borrower to any Parent Entity and capital contributions by any Parent Entity to Holdings or the Borrower;

(o) the issuance of Equity Interests to the management of Holdings or any of its Subsidiaries in connection with the Closing Date Transactions;

(p) payments by Holdings or any of the Restricted Subsidiaries pursuant to tax sharing agreements among Holdings and any of the Restricted Subsidiaries on customary terms that require each party to make payments when such taxes are due or refunds received of amounts equal to the income tax liabilities and refunds generated by each such party calculated on a separate return basis, and payments to the party generating tax benefits and credits of amounts equal to the value of such tax benefits and credits made available to the group by such party;

 

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(q) payments or loans (or cancellation of loans) to employees, directors, officers or consultants that are (i) approved by a majority of the Governing Persons (excluding any interested persons) of Holdings or the Borrower in good faith, (ii) made in compliance with applicable law and (iii) otherwise permitted under this Agreement;

(r) transactions with customers, clients, suppliers, or purchasers or sellers or licensors or licensees of goods or services, licenses or sublicenses of intellectual property or lease or sublease of assets, in each case, in the ordinary course of business and otherwise in compliance with the terms of this Agreement that are fair to Holdings and its Subsidiaries;

(s) transactions between or among Holdings or any of its Restricted Subsidiaries and any person, a director of which is also a director of the Borrower or any Parent Entity, so long as (i) such director abstains from voting as a director of the Borrower or such Parent Entity, as the case may be, on any matter involving such other person and (ii) such person is not an Affiliate of the Borrower for any reason other than such director’s acting in such capacity;

(t) transactions permitted by, and complying with, the provisions of Section 6.04(b) and Section 6.05(b); and

(u) intercompany transactions undertaken in good faith (as certified by a Responsible Officer of the Borrower) for the purpose of improving the consolidated tax efficiency of Holdings and its Subsidiaries and not for the purpose of circumventing any covenant set forth herein.

SECTION 6.08. Business of Borrower.

Notwithstanding any other provisions hereof, engage at any time in any business or business activity other than any business or business activity conducted by the Borrower or any other Restricted Subsidiary on the First Restatement Effective Date and any similar, corollary, related, incidental or complementary businesses or business activities or a reasonable extension, development or expansion thereof or ancillary thereto.

SECTION 6.09. Limitation on Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By Laws and Certain Other Agreements; etc.

(a) Amend or modify in any manner materially adverse to the Lenders or the Administrative Agent, or grant any waiver or release under or terminate in any manner (if such granting or termination shall be materially adverse to the Lenders), the articles or certificate of incorporation (or similar document), by-laws, limited liability company operating agreement, partnership agreement or other organizational documents of the Borrower or any other Restricted Subsidiary.

(b) (2) Make, or agree or offer in writing to pay or make, directly or indirectly, any payment or other distribution (other than any consent or amendment fee) in cash in respect of (A) any Indebtedness permitted to be incurred hereunder that is subordinated in right of payment of the Obligations or secured by Liens that are in all respects subordinated to the Liens securing the Obligations, (B) Senior Unsecured Notes or unsecured Indebtedness incurred pursuant to Section 6.01(bb), (C) any Permitted Refinancing Indebtedness in respect of any of the foregoing (“Junior Financing”), (D) any Term Loan Obligations or any Permitted Refinancing Indebtedness in respect thereof or (E) any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination in respect of any Junior Financing or such Term Loan Obligations (or any Permitted Refinancing Indebtedness in respect thereof) except for (1) the incurrence of Permitted Refinancing Indebtedness in

 

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respect thereof, (2) payments of regularly scheduled principal and interest, mandatory offers to repay, mandatory repayments of principal, premium and interest and payments of fees, expenses and indemnification obligations with respect to such Junior Financing or Term Loan Obligations (or any Permitted Refinancing Indebtedness in respect thereof), (3) payments or distributions in respect of all or any portion of such Junior Financing or Term Loan Obligations (or any Permitted Refinancing Indebtedness in respect thereof) with the proceeds (other than any such proceeds used in connection with Section 6.01(aa) or Section 6.06(d) or used to fund charges, expenses, accruals or reserves in accordance with clause (k) of the definition of “Consolidated Net Income”) contributed directly or indirectly to the Borrower or Holdings by any Parent Entity from the issuance, sale or exchange by any Parent Entity of Equity Interests made within 18 months prior thereto, (4) the conversion of any such Junior Financing or Term Loan Obligations (or any Permitted Refinancing Indebtedness in respect thereof) to Equity Interests of any Parent Entity, (5) so long as no Event of Default has occurred and is continuing, any payment that is intended to prevent any Junior Financing or Term Loan Obligations (or any Permitted Refinancing Indebtedness in respect thereof) from being treated as an “applicable high yield discount obligation” within the meaning of Section 163(i)(1) of the Code, (6) additional payments and distributions so long as both immediately before such payment or distribution is made and immediately after giving effect thereto, the Payment Conditions are satisfied on a Pro Forma Basis or (7) otherwise in an amount up to $25.0 million; or

(i) amend or modify, or permit the amendment or modification of, any provision of any Junior Financing or any agreement, document or instrument evidencing or relating thereto, other than amendments or modifications that (A) are not materially adverse to the Lenders (as reasonably determined by the Borrower) or (B) otherwise comply with the definition of “Permitted Refinancing Indebtedness”.

(c) Permit any Restricted Subsidiary to enter into any agreement or instrument that by its terms restricts (1) the payment of dividends or distributions or the making of cash advances to the Borrower or any of its Subsidiaries that is a direct or indirect parent of such other Restricted Subsidiary or (2) the granting of Liens by the Borrower or such Restricted Subsidiary pursuant to the Security Documents, in each case other than those arising under any Loan Document, except, in each case, restrictions existing by reason of:

(i) restrictions imposed by applicable law;

(ii) contractual encumbrances or restrictions (A) under the Term Loan Documents, (B) under the Senior Unsecured Notes, (C) under the definitive documentation evidencing any Credit Agreement Refinancing Indebtedness or Credit Agreement Refinancing Indebtedness (as defined in the Term Loan Credit Agreement), (D) under Indebtedness created under Incremental Revolving Commitments, Incremental Term Loans, Incremental Equivalent Term Debt, (E) under Indebtedness permitted under Section 6.01(b) or Indebtedness secured by a Lien permitted under Section 6.02(u) or 6.02(ee) and (F) under any Permitted Refinancing Indebtedness in respect of any of the foregoing or any agreements related to any Permitted Refinancing Indebtedness in respect of any such Indebtedness that does not materially expand the scope of such encumbrances or restrictions (taken as a whole);

(iii) any restriction on a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of the Equity Interests or assets of a Restricted Subsidiary pending the closing of such sale or disposition;

 

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(iv) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business;

(v) any restrictions imposed by any agreement relating to secured Indebtedness permitted by this Agreement to the extent that such restrictions apply only to the property or assets securing such Indebtedness;

(vi) any restrictions imposed by any agreement relating to Indebtedness incurred pursuant to Sections 6.01(i), (j), (k), (l), (n) or (s) or Permitted Refinancing Indebtedness in respect thereof;

(vii) customary provisions contained in leases or licenses of intellectual property and other similar agreements entered into in the ordinary course of business;

(viii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest;

(ix) customary provisions restricting assignment of any agreement or any rights thereunder, in each case, entered into in the ordinary course of business;

(x) customary restrictions and conditions contained in any agreement relating to the sale, transfer or other disposition of any asset permitted under Section 6.05 pending the consummation of such sale, transfer or other disposition;

(xi) customary restrictions and conditions contained in the document relating to any Lien, so long as (1) such Lien is a Permitted Lien and such restrictions or conditions relate only to the specific asset subject to such Lien and (2) such restrictions and conditions are not created for the purpose of avoiding the restrictions imposed by this Section 6.09;

(xii) customary net worth provisions contained in Real Property leases entered into by Restricted Subsidiaries, so long as the Borrower or any Parent Entity on behalf of the Borrower has determined in good faith that such net worth provisions would not reasonably be expected to impair the ability of the Borrower and the other Restricted Subsidiaries to meet their ongoing obligations;

(xiii) any agreement in effect at the time any person becomes a Restricted Subsidiary, so long as such agreement was not entered into in contemplation of such person becoming a Restricted Subsidiary;

(xiv) restrictions in agreements representing Indebtedness permitted under Section 6.01 of a Restricted Subsidiary of the Borrower that is not a Subsidiary Loan Party;

(xv) customary restrictions on leases, subleases, licenses or Equity Interests or asset sale agreements otherwise permitted hereby as long as such restrictions relate to the Equity Interests and assets subject thereto;

(xvi) restrictions on cash or other deposits or net worth imposed by customers or suppliers under contracts entered into in the ordinary course of business; or

 

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(xvii) any encumbrances or restrictions of the type referred to in Section 6.09(c)(1) and Section 6.09(c)(2) imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (i) through (xvi) above, so long as such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Borrower or any Parent Entity on behalf of the Borrower, no more restrictive in any material respect with respect to or such Lien, dividend and other payment restrictions than those contained in the Lien, dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

SECTION 6.10. Financial Performance Covenant. Upon the occurrence and during the continuance of a Covenant Trigger Event, the Borrower shall maintain a Fixed Charge Coverage Ratio, on a Pro Forma Basis, of not less than 1.00:1.00 for the most recent period of four consecutive fiscal quarters for which Required Financial Statements have been, or are required to be, delivered at the time of occurrence of such Covenant Trigger Event, and each subsequent four fiscal quarter period ending during the continuance of such Covenant Trigger Event.

ARTICLE VIA

Holdings Covenant

Holdings covenants and agrees with each Lender that, so long as this Agreement shall remain in effect:

(a) Holdings shall not conduct, transact or otherwise engage in any material operating or business activities; provided that the following and any activities incidental thereto shall be permitted in any event: (i) its ownership of the Equity Interests of Borrower, including payment of dividends and other amounts in respect of its Equity Interests, (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance), (iii) the performance of its obligations with respect to the Loan Documents, the Term Loan Documents, the documents relating to the Senior Unsecured Notes and any documentation relating to any incremental facilities or refinancing of the foregoing and any management agreement entered into with a Sponsor or a Sponsor Affiliate, which management agreement has terms reasonably consistent with the terms of similar agreements entered into by financial sponsors and portfolio companies at the time such management agreement is entered into, (iv) any public offering of its common stock or any other issuance or sale of its Equity Interests and related activities to becoming and maintaining any requirements as a public reporting company or registrant with the SEC or any other securities regulatory authorities, (v) the issuance of securities, payment of dividends, making contributions to the capital of the Borrower and guaranteeing the obligations of the Borrower and the other Restricted Subsidiaries to the extent not prohibited under this Agreement, (vi) participating in tax, accounting and other administrative matters (x) as a member of the Borrower, (y) as a member of any unitary, combined or similar group including Holdings and the Borrower, or (z) with respect to its own business and activities, (vii) holding any cash or property (but not operate any property) received in connection with permitted Restricted Payments pending application of the proceeds thereof and (viii) providing indemnification to officers and directors.

(b) Holdings may merge, amalgamate or consolidate with or into any other person; provided that (i) such person is organized under the laws of the United States or any state or other political subdivision thereof (including any territory or the District of Columbia) and (ii) such person upon the consummation of such merger, consolidation or amalgamation becomes a party to this agreement and assumes the obligations of Holdings hereunder and from and after such time such person shall be deemed to be Holdings for all purposes hereunder.

 

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ARTICLE VII

Events of Default

SECTION 7.01. Events of Default. In case of the happening of any of the following events (each, an “Event of Default”):

(a) any representation or warranty made or deemed made by Holdings, the Borrower or any other Subsidiary Loan Party herein or in any other Loan Document or any certificate or document delivered pursuant hereto or thereto shall prove to have been false or misleading in any material respect when so made or deemed made;

(b) default shall be made in (i) the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof, at a date fixed for repayment thereof, by acceleration thereof or otherwise or (ii) the provision of any cash collateral when and as the same shall be required pursuant to Section 2.05(m);

(c) default shall be made in the payment of any interest on any Loan or the reimbursement of any L/C Disbursement or in the payment of any Fee or any other amount (other than an amount referred to in paragraph (b) of this Section 7.01) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days;

(d) default shall be made in the due observance or performance by Holdings, the Borrower or any other Subsidiary Loan Party of any covenant, condition or agreement contained in (i) Section 5.01(a), Section 5.05(a), Section 5.07, Section 5.08 or Section 5.11 (but only if such default occurs during a Cash Dominion Event) or in Article VI or Article VIA (in each case solely to the extent applicable to such person) or (ii) Section 5.04(h) and such default shall continue unremedied for a period of five Business Days following notice thereof from the Administrative Agent to the Borrower;

(e) default shall be made in the due observance or performance by the Borrower or any other Subsidiary Loan Party of any covenant, condition or agreement contained in any Loan Document (other than those specified in paragraphs (b), (c) and (d) of this Section 7.01) (in each case solely to the extent applicable to such person) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower;

(f) (i) any event or condition shall occur that (A) results in any Material Indebtedness becoming due prior to its scheduled maturity or (B) enables or permits (after all applicable grace periods have actually expired) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the repayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity or (ii) the Borrower or any Restricted Subsidiary shall fail to pay the principal of any Material Indebtedness at the stated final maturity thereof; provided that this clause (f) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness;

(g) a Change in Control shall have occurred;

 

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(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Holdings, the Borrower or any of the Material Subsidiaries, or of a substantial part of the property or assets of Holdings, the Borrower or any Material Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Material Subsidiary or for a substantial part of the property or assets of Holdings, the Borrower or any Material Subsidiary or (iii) the winding up or liquidation of Holdings, the Borrower or any Material Subsidiary (except, in the case of any Material Subsidiary, in a transaction permitted by Section 6.05) and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i) Holdings, the Borrower or any Material Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (h) of this Section 7.01, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Material Subsidiary or for a substantial part of the property or assets of Holdings, the Borrower or any Material Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) become unable or admit in writing its inability or fail generally to pay its debts as they become due;

(j) the failure by the Borrower or any other Material Subsidiary to pay one or more final judgments aggregating in excess of $30.0 million (to the extent not covered by insurance and which are not vacated, discharged, effectively waived or stayed or bonded pending appeal within 30 days from entry thereof), or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any other Subsidiary Loan Party to enforce any such judgment;

(k) (i) a trustee shall be appointed by a United States district court to administer any Plan, (ii) an ERISA Event or ERISA Events shall have occurred with respect to any Plan or Multiemployer Plan, (iii) the PBGC shall institute proceedings (including giving notice of intent thereof) to terminate any Plan or Plans, (iv) Holdings, the Borrower or any other Restricted Subsidiary or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization (within the meaning of Section 4242 of ERISA), is being terminated, is insolvent (within the meaning of Section 4245 of ERISA) or is in endangered or critical status (within the meaning of Section 305 of ERISA) or (v) Holdings, the Borrower or any other Restricted Subsidiary shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan (other than any “prohibited transaction” for which a statutory or administrative exemption is available) and, in each case, with respect to clauses (i) through (v) above, such event or condition, together with all other such events or conditions, if any, would reasonably be expected to have a Material Adverse Effect; and

(l) (i) any material provision of any Loan Document shall cease to be, or be asserted in writing by Holdings, the Borrower or any other Restricted Subsidiary not to be, for any reason, a legal, valid and binding obligation of any party thereto, (ii) any security interest purported to be created by any Security Document and to extend to assets that are of the type which may be included in the Borrowing Base (regardless of eligibility) or otherwise are not immaterial to Holdings, the Borrower and the other Restricted Subsidiaries on a consolidated basis shall cease to be, or shall be asserted in writing by the Borrower or any other Loan Party not to be, a valid and perfected security interest (perfected as or having

 

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the priority required by this Agreement or the relevant Security Document and subject to such limitations and restrictions as are set forth herein and therein) in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the limitations of foreign laws, rules and regulations as they apply to pledges of Equity Interests in Foreign Subsidiaries or the application thereof, or from the failure of the Administrative Agent to maintain possession of certificates actually delivered to it representing securities pledged under a Security Document or to file Uniform Commercial Code continuation statements or take the actions described on Schedule 3.04 and except to the extent that such loss is covered by a lender’s title insurance policy and the Administrative Agent shall be reasonably satisfied with the credit of such insurer or (iii) the Guarantees pursuant to the Security Documents by any Loan Party of any of the Obligations shall cease to be in full force and effect (other than in accordance with the terms thereof) or shall be asserted in writing by Holdings, the Borrower or any other Subsidiary Loan Party not to be in effect or not to be legal, valid and binding obligations;

then, (i) in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Section 7.01), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (A) terminate forthwith the Commitments, (B) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower Parties accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower Parties, anything contained herein or in any other Loan Document to the contrary notwithstanding, (C) if the Loans have been declared due and payable pursuant to clause (B) above, demand cash collateral pursuant to Section 2.05(j) and (D) exercise all rights and remedies granted to it under any Loan Document and all of its rights under any other applicable law or in equity, and (ii) in any event with respect to the Borrower described in paragraph (h) or (i) of this Section 7.01, the principal of the Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower Parties accrued hereunder and under any other Loan Document, shall automatically become due and payable and the Administrative Agent shall be deemed to have made a demand for cash collateral to the full extent permitted under Section 2.05(j), without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower Parties, anything contained herein or in any other Loan Document to the contrary notwithstanding.

SECTION 7.02. Right to Cure. Notwithstanding anything to the contrary contained in Section 7.01, in the event that the Borrower Parties fail (or, but for the operation of this Section 7.02, would fail) to comply with the requirements of the Financial Performance Covenant, until the expiration of the tenth day subsequent to the date (i) the Required Financial Statements are required to be delivered pursuant to Section 5.04(a) or (b) and (ii) the Financial Performance Covenant is required to be tested, any Parent Entity shall have the right to issue Permitted Cure Securities for cash or otherwise receive cash contributions to the common equity (or such other equity reasonably satisfactory to the Administrative Agent) capital of such Parent Entity, and, in each case, to contribute any such cash to the capital of the Borrower (collectively, the “Cure Right”) and, upon the receipt by the Borrower of such cash (the “Cure Amount”) pursuant to the exercise by such Parent Entity of such Cure Right, the Financial Performance Covenant shall be recalculated giving effect to a pro forma adjustment by which Consolidated EBITDA shall be increased with respect to such applicable fiscal quarter and any four-quarter period that contains such quarter, solely for the purpose of measuring the Financial Performance Covenant and not for any other purpose under this Agreement, by an amount equal to the Cure Amount. The resulting increase to Consolidated EBITDA from the application of a Cure Amount shall not result in any adjustment to Consolidated EBITDA or any other financial definition for any purpose under this Agreement other than for purposes of calculating the Financial Performance Covenant. In each four fiscal quarter period there

 

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shall be at least two fiscal quarters in which the Cure Right is not exercised and the Cure Right may not be exercised more than five times during the term of this Agreement. For purposes of this Section 7.02, the Cure Amount shall be no greater than the amount required for purposes of complying with the Financial Performance Covenant and no effect shall be given to the Cure Amount (including any prepayment of Indebtedness with the Cure Amount) other than the recalculation of Consolidated EBITDA pursuant to this Section 7.02. If, after giving effect to the adjustments in this Section 7.02, the Borrower shall then be in compliance with the requirements of the Financial Performance Covenant, the Borrower shall be deemed to have satisfied the requirements of the Financial Performance Covenant as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach of the Financial Performance Covenant and any related default that had occurred shall be deemed cured for the purposes of this Agreement.

ARTICLE VIII

The Agents

SECTION 8.01. Appointment.

(a) Each Lender (in its capacities as a Lender and the Swingline Lender (if applicable) and on behalf of itself and its Affiliates as potential counterparties to Hedge Agreements and as potential Cash Management Banks) and each Issuing Bank (in such capacities and on behalf of itself and its Affiliates as potential counterparties to Hedge Agreements and as potential Cash Management Banks) hereby irrevocably designates and appoints the Administrative Agent as agent of such Lender under this Agreement and the other Loan Documents, as applicable, including as the Collateral Agent for such Lender and the other applicable Secured Parties under the applicable Security Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacities, to enter into and take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. In addition, to the extent required under the laws of any jurisdiction other than the United States, each of the Lenders and the Issuing Banks hereby grants to the Administrative Agent any required powers of attorney to execute any Security Document governed by the laws of such jurisdiction on such Lender’s or Issuing Bank’s behalf. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the IRS or any other Governmental Authority asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding Tax ineffective or for any other reason, such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including any penalties or interest and together with all expenses (including legal expenses, allocated internal costs and out-of-pocket expenses) incurred. For the avoidance of doubt, the Borrower shall have no liability for the actions of the Administrative Agent pursuant to the immediately preceding sentence.

 

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(b) In furtherance of the foregoing, each Lender (in its capacities as a Lender and the Swingline Lender (if applicable) and on behalf of itself and its Affiliates as potential counterparties to Hedge Agreements and as potential Cash Management Banks) and each Issuing Bank (in such capacities and on behalf of itself and its Affiliates as potential counterparties to Hedge Agreements and as potential Cash Management Banks) hereby appoints and authorizes the Administrative Agent to act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on the 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 connection therewith, the Administrative Agent (and any Subagents appointed by the Administrative Agent pursuant to Section 8.02 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights or remedies thereunder at the direction of the Administrative Agent) shall be entitled to the benefits of this Article VIII (including Section 8.07) as though the Administrative Agent (and any such Subagents) were an “Agent” under the Loan Documents, as if set forth in full herein with respect thereto.

(c) Each Lender (in its capacities as a Lender and the Swingline Lender (if applicable) and on behalf of itself and its Affiliates as potential counterparties to Hedge Agreements and as potential Cash Management Banks) and each Issuing Bank (in such capacities and on behalf of itself and its Affiliates as potential counterparties to Hedge Agreements and as potential Cash Management Banks) irrevocably authorizes the Administrative Agent, at its option and in its discretion: (i) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (A) upon termination of the Commitments and payment in full of all Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) and the expiration, termination or cash collateralization (in a manner reasonably satisfactory to the Administrative Agent and the applicable Issuing Banks) of all Letters of Credit, (B) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document or (C) if approved, authorized or ratified in writing in accordance with Section 9.08 hereof; (ii) to release any Loan Party from its obligations under the Loan Documents if such person ceases to be a Subsidiary as a result of a transaction permitted hereunder or is designated as an Unrestricted Subsidiary; and (iii) 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 6.02(i) or (j). Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release its interest in particular types or items of property, or to release any Loan Party from its obligations under the Loan Documents.

(d) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, (i) the Administrative Agent (irrespective of whether the principal of any Obligation 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 the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise (A) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of any or all of the 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 Issuing Banks and the Agents and any Subagents allowed in such judicial proceeding and (B) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and (ii) any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and Issuing Bank to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Banks, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under the Loan Documents. 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 Issuing Bank any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or Issuing Bank or to authorize the Administrative Agent to vote in respect of the claim of any Lender or Issuing Bank in any such proceeding.

 

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SECTION 8.02. Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of the agents or attorneys-in-fact selected by it with reasonable care. The Administrative Agent may also from time to time, when the Administrative Agent deems it to be necessary or desirable, appoint one or more trustees, co-trustees, collateral co-agents, collateral subagents or attorneys-in-fact (each, a “Subagent”) with respect to all or any part of the Collateral; provided that no such Subagent shall be authorized to take any action with respect to any Collateral unless and except to the extent expressly authorized in writing by the Administrative Agent. Should any instrument in writing from the Borrower or any other Loan Party be required by any Subagent so appointed by the Administrative Agent to more fully or certainly vest in and confirm to such Subagent such rights, powers, privileges and duties, the Borrower shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent. If any Subagent, or successor thereto, shall die, become incapable of acting, resign or be removed, all rights, powers, privileges and duties of such Subagent, to the extent permitted by law, shall automatically vest in and be exercised by the Administrative Agent until the appointment of a new Subagent. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent, attorney-in-fact or Subagent that it selects in accordance with the foregoing provisions of this Section 8.02 in the absence of the Administrative Agent’s gross negligence or willful misconduct.

SECTION 8.03. Exculpatory Provisions. None of the Administrative Agent, its Affiliates or any of their respective officers, directors, employees, agents or attorneys-in-fact shall be (a) liable for any action lawfully taken or omitted to be taken by it or such person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such person’s own gross negligence or willful misconduct) or (b) 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 Agents 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 or for any failure of any Loan Party party thereto to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing, and (b) the Administrative Agent shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Administrative Agent or any of its Affiliates in any capacity. 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 this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or

 

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therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Security Documents, (v) the value or the sufficiency of any Collateral or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

SECTION 8.04. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) or conversation believed in good faith by it to be genuine and to have been signed, sent or otherwise authenticated by the proper person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed in good faith by it to have been made by the proper person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to any Credit Event that by its terms must be fulfilled to the satisfaction of a Lender or any Issuing Bank, the Administrative Agent may presume that such condition is satisfactory to such Lender or Issuing Bank unless the Administrative Agent shall have received notice to the contrary from such Lender or Issuing Bank prior to such Credit Event. The Administrative Agent may consult with legal counsel (including counsel to Holdings and the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all or other Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all or other Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.

SECTION 8.05. Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received written notice from a Lender, Holdings or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all or other Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

SECTION 8.06. Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of a Loan Party or any Affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent

 

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to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any Affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.

SECTION 8.07. Indemnification. The Lenders agree to indemnify each Agent and each Issuing Bank, in each case in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), in the amount of its pro rata share (based on its aggregate Revolving Facility Credit Exposure and, in the case of the indemnification of each Agent, unused Commitments hereunder; provided that the aggregate principal amount of Swingline Loans owing to the Swingline Lender and of L/C Disbursements owing to any Issuing Bank shall be considered to be owed to the Revolving Lenders ratably in accordance with their respective Revolving Facility Credit Exposure) (determined at the time such indemnity is sought), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against the Administrative Agent or such Issuing Bank in any way relating to or arising out of the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent or such Issuing Bank under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the Administrative Agent’s or such Issuing Bank’s gross negligence or willful misconduct. The failure of any Lender to reimburse the Administrative Agent or any Issuing Bank, as the case may be, promptly upon demand for its ratable share of any amount required to be paid by the Lenders to the Administrative Agent or such Issuing Bank, as the case may be, as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse the Administrative Agent or such Issuing Bank, as the case may be, for its ratable share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse the Administrative Agent or such Issuing Bank, as the case may be, for such other Lender’s ratable share of such amount. The agreements in this Section 8.07 shall survive the payment of the Loans and all other amounts payable hereunder.

SECTION 8.08. Agent in Its Individual Capacity. Each Agent and its affiliates may make loans to, accept deposits from, and generally engage in any kind of business with any Loan Party as though the Administrative Agent were not the Administrative Agent. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued, or Letter of Credit or Swingline Loan participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” shall include each Agent in its individual capacity.

 

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SECTION 8.09. Successor Agent. The Administrative Agent may resign as Administrative Agent upon 10 days’ notice to the Lenders and the Borrower. If the Administrative Agent resigns as the Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless a Specified Event of Default shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed if such successor is a commercial bank with a combined capital and surplus of at least $5.0 billion, and otherwise may be withheld in the Borrower’s sole discretion), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the reference to the resigning Administrative Agent shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective, and the retiring Administrative Agent hereunder shall, on behalf of the Lenders and the Issuing Banks, appoint a successor agent which shall (unless a Specified Event of Default shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed). After any retiring Administrative Agent’s resignation as Administrative Agent, the provisions of this Section 8.09 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. The Borrower shall have no obligation to pay any annual fee to any successor that is greater than or in addition to the annual fees payable to the Administrative Agent as in effect on the First Restatement Effective Date.

SECTION 8.10. Lead Arrangers; Co-Syndication Agents; Co-Documentation Agents. None of the Lead Arrangers, Co-Syndication Agents or Co-Documentation Agents shall have any duties or responsibilities hereunder in their respective capacities as such.

ARTICLE IX

Miscellaneous

SECTION 9.01. Notices; Communications.

(a) Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Section 9.01(b)), 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 e-mail, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, in each case, as follows:

(i) if to any Loan Party, the Administrative Agent any Issuing Bank as of the First Restatement Effective Date or the Swingline Lender, to the address, facsimile number, e-mail address or telephone number specified for such person on Schedule 9.01; and

(ii) if to any other Lender or Issuing Bank, to the address, facsimile number, e-mail address or telephone number specified in its Administrative Questionnaire.

 

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(b) Notices and other communications to the Lenders and any Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender or any Issuing Bank pursuant to Article II if such Lender or any Issuing Bank, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the 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) 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 electronic communications to the extent provided in Section 9.01(b) shall be effective as provided in such Section 9.01(b).

(d) Any party hereto may change its address, facsimile number or e-mail address for notices and other communications hereunder by notice to the other parties hereto.

(e) Documents required to be delivered pursuant to Section 5.04 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically (including as set forth in Section 9.17) and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 9.01 or (ii) on which such documents are posted on the 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); provided that the Borrower shall notify the Administrative Agent and each Lender (by facsimile or e-mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents; provided, further, that, upon reasonable request by the Administrative Agent, the Borrower shall also provide a hard copy to the Administrative Agent of any such document; provided, further, that any documents posted for which a link is provided after normal business hours for the recipient shall be deemed to have been given at the opening of business on the next Business Day for such recipient. 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 Loan Parties 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.

SECTION 9.02. Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and each Issuing Bank and shall survive the making by the Lenders of the Loans, the execution and delivery of the Loan Documents and the issuance of the Letters of Credit, regardless of any investigation made by such persons or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or L/C Disbursement 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 been terminated. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein (including pursuant to Section 2.15, Section 2.17 and Section 9.05) shall survive the payment in full of the principal and interest hereunder, the expiration of the Letters of Credit and the termination of the Commitments or this Agreement.

 

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SECTION 9.03. Binding Effect. This Agreement shall become effective when it has been executed by Holdings, the Borrower, and the Administrative Agent and when the Administrative Agent has received copies 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 Holdings, the Borrower, each Issuing Bank, each Agent, each Lender and their respective permitted successors and assigns.

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 Issuing Bank that issues any Letter of Credit), except that (i) no Borrower Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by a Borrower Party 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 9.04. 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 Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section 9.04) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, any Issuing Bank and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement or the other Loan Documents.

(b) (i) Subject to the conditions set forth in paragraph (b)(ii) of this Section 9.04, any Lender may assign to one or more assignees (other than a natural person or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person) (each, an “Assignee”) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitments and the Revolving Loans at the time owing to it with the prior written consent (such consent not to be unreasonably withheld) of:

(A) the Borrower; provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if a Specified Event of Default has occurred and is continuing, any other person; provided, further, that such consent shall be deemed to have been given if the Borrower has not responded within 10 Business Days after notice by the Administrative Agent or the respective assigning Lender; and

(B) the Administrative Agent, each Issuing Bank and the Swingline Lender; and

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitments or Loans, the amount of the Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5.0 million, unless each of the Borrower and the Administrative Agent otherwise consent; provided that (1) no such consent of the Borrower shall be required if a Specified Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds (with simultaneous assignments to or by two or more Approved Funds shall be treated as one assignment for purposes of meeting the minimum assignment amount requirement), if any;

 

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(B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent (or, if previously agreed with the Administrative Agent, manually), and shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent);

(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and any tax forms required to be delivered pursuant to Section 2.17;

(D) the Assignee shall not be the Borrower or any of the Borrower’s Affiliates or Subsidiaries; and

(E) the Assignor shall deliver to the Administrative Agent any Note issued to it with respect to the assigned Loan.

For the purposes of this Section 9.04, “Approved Fund” shall mean 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 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.

(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(v) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, 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 Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance 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 Section 2.13, Section 2.14, Section 2.15 and Section 9.05). 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 9.04.

(iv) The Administrative Agent, acting for this purpose as the Administrative Agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and Revolving L/C Exposure 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 Borrower, the Administrative Agent, the Issuing Banks and the Lenders may 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 Borrower, any Issuing Bank and any Lender (solely with respect to such Lender’s Loans) at any reasonable time and from time to time upon reasonable prior notice.

 

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(v) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an Assignee, the Assignee’s completed Administrative Questionnaire (unless the Assignee shall already be a Lender hereunder), all applicable tax forms, any Note outstanding with respect to the assigned Loan, the processing and recordation fee referred to in paragraph (b)(ii)(B) of this Section 9.04 and any written consent to such assignment required by paragraph (b) of this Section 9.04, the Administrative Agent promptly shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment, whether or not evidenced by a promissory note, shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph (b)(v).

(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that its Revolving Facility Commitment and the outstanding balances of its Revolving Loans, in each case, without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of Holdings, the Borrower or any other Subsidiary or the performance or observance by Holdings, the Borrower or any other Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) the Assignee represents and warrants that it is legally authorized to enter into such Assignment and Acceptance; (iv) the Assignee confirms that it has received a copy of this Agreement, together with copies of the most recent Required Financial Statements delivered pursuant to Section 5.04, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) the Assignee will independently and without reliance upon the Administrative Agent or the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) the Assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms of this Agreement, together with such powers as are reasonably incidental thereto; and (vii) the Assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

(d) (3) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (other than a natural person or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person) (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitments and 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 Borrower, the Administrative Agent, the Issuing Banks 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 pursuant to which a Lender sells such a participation shall provide that such Lender shall retain

 

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the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents; provided that (x) such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to Section 9.04(b)(i) or clauses (i), (ii), (iii), (iv), (v) or (vi) of the first proviso to Section 9.08(c) and (2) directly affects such Participant and (y) no other agreement with respect to amendment, modification or waiver may exist between such Lender and such Participant. Subject to clause (c)(ii) of this Section 9.04, the Borrower agrees that each Participant shall be entitled to the benefits of Section 2.13, Section 2.14 and Section 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section 9.04. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.06 as though it were a Lender; provided that such Participant shall be subject to Section 2.18(c) 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 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, letters of credit 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, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. 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.

(i) A Participant shall not be entitled to receive any greater payment under Section 2.15, Section 2.16 or Section 2.17 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent, 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. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.17 to the extent such Participant fails to comply with Section 2.17(e) as though it were a Lender.

(e) 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 or other central banking authority and in the case of any Lender that is an Approved Fund, any pledge or assignment to any holders of obligations owed, or securities issued, by such Lender, including to any trustee for, or any other representative of, such holders, and this Section 9.04 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.

(f) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) of this Section 9.04.

(g) [Reserved].

 

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(h) If the Borrower wishes to replace all of the Loans and Commitments with ones having different terms, it shall have the option, with the consent of the Administrative Agent and subject to at least three Business Days’ advance notice to the Lenders, instead of repaying the Loans or reducing or terminating the Commitments to be replaced, to (i) require the Lenders to assign such Loans or Commitments to the Administrative Agent or its designees and (ii) amend the terms thereof in accordance with Section 9.08 (with such replacement, if applicable, being deemed to have been made pursuant to Section 9.08(d)). Pursuant to any such assignment, all Loans and Commitments shall be purchased at par (allocated among the Lenders in the same manner as would be required if such Loans were being optionally prepaid or such Commitments were being optionally reduced or terminated by the Borrower), accompanied by payment of any accrued interest and fees thereon and any amounts owing pursuant to Section 9.05(b). By receiving such purchase price, the Lenders shall automatically be deemed to have assigned the Loans or Commitments pursuant to the terms of the form of Assignment and Acceptance attached hereto as Exhibit A, and accordingly no other action by such Lenders shall be required in connection therewith. The provisions of this paragraph (h) are intended to facilitate the maintenance of the perfection and priority of existing security interests in the Collateral during any such replacement.

(i) Notwithstanding the foregoing, no assignment may be made or participation sold to a Disqualified Institution without the prior written consent of the Borrower. For the avoidance of doubt, the list of Disqualified Institutions shall be made available to the Lenders.

SECTION 9.05. Expenses; Indemnity.

(a) The Borrower Parties, jointly and severally, agree to pay all reasonable, documented and invoiced out-of-pocket expenses incurred by the Administrative Agent and the Lead Arrangers in connection with the preparation of this Agreement and the other Loan Documents, or by the Administrative Agent (and in the case of enforcement of this Agreement, the Lenders) in connection with the preparation, execution and delivery, amendment, modification, waiver or enforcement of this Agreement (including expenses incurred in connection with due diligence and initial and ongoing Collateral examination to the extent incurred with the reasonable prior approval of the Borrower or provided for in this Agreement) or in connection with the administration of this Agreement and any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the Transactions hereby contemplated shall be consummated), including the reasonable, documented and invoiced fees, charges and disbursements of a single counsel for the Administrative Agent and the Lead Arrangers (and in the case of enforcement of this Agreement, the Lenders) (which shall be Simpson Thacher & Bartlett LLP), one firm of local counsel in each appropriate jurisdiction and, in the case of any actual or perceived conflict of interest, one additional firm of counsel for the Administrative Agent and the Lead Arrangers (and in the case of enforcement of this Agreement, the Lenders).

(b) The Borrower Parties, jointly and severally, agree to indemnify the Administrative Agent, each Lead Arranger, each Lender, each Issuing Bank, each of their respective Affiliates and each of their respective directors, officers, employees, agents, advisors, controlling persons, equityholders, partners, members and other representatives and each of their respective successors and permitted assigns (each such person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and reasonable, documented and invoiced fees, charges and disbursements of one firm of counsel for all Indemnitees, taken as a whole, and, if necessary, one firm of counsel in each appropriate jurisdiction (which may include a single special counsel in multiple jurisdictions) for all Indemnitees taken as a whole (and, in the case of an actual or perceived conflict of interest, an additional counsel for all Indemnitees subject to such conflict taken as a whole), incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document, the performance by the parties hereto and thereto of their respective obligations thereunder or the consummation of the

 

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Transactions and the other transactions contemplated hereby, (ii) any Loan or Letter of Credit or the use of the proceeds thereof (including any refusal by an Issuing Bank 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) or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto and regardless of whether such matter is initiated by a third party or by Holdings, the Borrower or any of their Subsidiaries or Affiliates; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (A) are determined by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from (1) the gross negligence, bad faith or willful misconduct of such Indemnitee or any of its Related Parties or (2) a material breach of the obligations of such Indemnitee hereunder or (B) result from any proceeding between or among Indemnitees that does not involve an act or omission by the Borrower or the other Subsidiaries (other than claims against the Administrative Agent or any Lead Arranger in its capacity or in fulfilling its role as the Administrative Agent or a Lead Arranger or any similar role hereunder (excluding its role as a Lender)).

(c) Subject to and without limiting the generality of the foregoing sentence, the Borrower Parties, jointly and severally, agree to indemnify each Indemnitee against, and hold each Indemnitee harmless from, any and all losses claims, damages, liabilities and related expenses, including reasonable, documented and invoiced fees, charges and disbursements of one firm of counsel for all Indemnitees, taken as a whole, and, if necessary, one firm of counsel in each appropriate jurisdiction (which may include a single special counsel in multiple jurisdictions) for all Indemnitees taken as a whole (and, in the case of an actual or perceived conflict of interest, an additional counsel for all Indemnitees subject to such conflict taken as a whole) and reasonable, documented and invoiced consultant fees, in each case, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of any claim related to Environmental Laws and the Borrower or any of the Restricted Subsidiaries, or any actual or alleged presence, Release or threatened Release of Hazardous Materials at, under, on or from any property for which the Borrower or any of its Restricted Subsidiaries is, or is alleged to be, liable under Environmental Laws; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee or any of its Related Parties.

(d) Any indemnification or payments required by the Loan Parties under this Section 9.05 shall not be duplicative of any indemnification or payments required by the Loan Parties under Section 2.17.

(e) To the fullest extent permitted by applicable law, Holdings and the Borrower shall not assert, and hereby waive, any claim against any Indemnitee, 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, the transactions contemplated hereby or thereby, any Commitment, any Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

(f) The agreements in this Section 9.05 shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations and the termination of this Agreement. All amounts due under this Section 9.05 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.

 

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SECTION 9.06. Right of Set-off. If an Event of Default shall have occurred and be continuing, each Lender and each Issuing Bank is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender or such Issuing Bank to or for the credit or the account of Holdings or any Subsidiary Loan Party against any of and all the obligations of Holdings or any Subsidiary Loan Party now or hereafter existing under this Agreement or any other Loan Document held by such Lender or such Issuing Bank, irrespective of whether or not such Lender or such Issuing Bank shall have made any demand under this Agreement or such other Loan Document and although the obligations may be unmatured. The rights of each Lender and each Issuing Bank under this Section 9.06 are in addition to other rights and remedies (including other rights of set-off) that such Lender or such Issuing Bank may have, but be exercised only at the direction of the Administrative Agent or the Required Lenders.

SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

SECTION 9.08. Waivers; Amendment.

(a) No failure or delay of the Administrative Agent or any Lender, any Issuing Bank in exercising any right or power hereunder or under any 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 each Agent, each Issuing Bank 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 any other Loan Document or consent to any departure by Holdings, the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 9.08, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on Holdings, the Borrower or any other Loan Party in any case shall entitle such person to any other or further notice or demand in similar or other circumstances.

(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (x) as provided in Section 2.19, Section 2.20 and Section 2.21, (y) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders, and (z) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by each party thereto and the Administrative Agent and consented to by the Required Lenders; provided, however, that except as provided in Section 2.20, Section 2.21 and Section 2.22, no such agreement shall:

(i) decrease, forgive, waive or excuse the principal amount of, or any interest on, or any fees in respect of, or extend the final maturity of, or decrease the rate of interest on, any Loan or any L/C Disbursement, or extend the stated expiration of any Letter of Credit (other than by waiver or modification of a condition precedent, Default, Event of Default or covenant), without the prior written consent of each Lender directly affected thereby, except as provided in Section 2.05(c) with respect to the expiration of Letters of Credit;

 

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(ii) increase or extend the Commitment of any Lender or decrease, waive or excuse the Commitment Fees or L/C Participation Fees or other fees of, any Lender, Agent or Issuing Bank without the prior written consent of such Lender, Agent or Issuing Bank (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default or of a mandatory reduction in the aggregate Commitments shall not constitute an increase or extension of the Commitments of any Lender);

(iii) extend any date on which payment of principal or interest on any Loan or any L/C Disbursement or any Fees, without the prior written consent of each Lender adversely affected thereby;

(iv) amend the provisions of Section 2.18(b), (c) or (d) of this Agreement, Section 5.02 of the Collateral Agreement or any analogous provision of any other Loan Document, in a manner that would by its terms alter the pro rata sharing of payments required thereby, without the prior written consent of each Lender adversely affected thereby;

(v) change the definition of the term “Borrowing Base” or any component definition thereof if as a result thereof the amounts available to be borrowed by the Borrower Parties would be increased, or increase any of the percentages set forth in the definition of “Borrowing Base” without the prior written consent of Lenders holding 66 2/3% of the Revolving Facility Commitments and Revolving Loans then outstanding; provided that the foregoing shall not limit the ability of the Administrative Agent to implement, change or eliminate any Reserves in its Reasonable Credit Judgment as permitted hereunder without the prior written consent of any Lenders;

(vi) amend or modify the provisions of this Section 9.08 or the definition of the term “Required 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 prior written consent of each Lender (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Loans and Commitments are included on the First Restatement Effective Date);

(vii) release all or substantially all of the Collateral (or subordinate the Liens in favor of the Administrative Agent on all or substantially all of the Collateral) or release any of Holdings or all or substantially all of the Subsidiary Loan Parties from their respective Guarantees under the Collateral Agreement, without the prior written consent of each Lender; or

(viii) increase the aggregate Revolving Facility Commitments, other than as provided in Section 2.21, without the prior written consent of each Lender;

provided that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or an Issuing Bank hereunder without the prior written consent of the Administrative Agent or such Issuing Bank acting as such at the effective date of such agreement, as applicable. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall bind any assignee of such Lender.

 

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(c) Without the consent of the Administrative Agent or any Lender or Issuing Bank, the Loan Parties and the Administrative Agent may (in their respective sole discretion, or shall, to the extent required by any Loan Document) enter into any amendment, modification or waiver of any Loan Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional property to become Collateral for the benefit of the Secured Parties, or as required by local law to give effect to, or protect any security interest for the benefit of the Secured Parties, in any property or so that the security interests therein comply with applicable law.

(d) Notwithstanding anything in this Agreement or any other Loan Document to the contrary, the Borrower may enter into Incremental Facility Amendments in accordance with Section 2.21, Refinancing Amendments in accordance with Section 2.22 and Extension Amendments in accordance with Section 2.23, and such Incremental Facility Amendments, Refinancing Amendments, Extension Amendments and Credit Agreement Refinancing Indebtedness shall be effective to amend the terms of this Agreement and the other applicable Loan Documents, in each case, without any further action or consent of any other party to any Loan Document.

(e) Notwithstanding the foregoing, the Administrative Agent, with the consent of the Borrower, may amend, modify or supplement any Loan Document without the consent of any Lender or the Required Lenders in order to correct, amend or cure any ambiguity, inconsistency or defect or correct any typographical error or other manifest error in any Loan Document; provided that the Administrative Agent shall promptly give the Lenders notice of any such amendment, modification or supplement.

(f) Notwithstanding the foregoing, technical and conforming modifications to the Loan Documents may be made, with the consent of the Borrower and the Administrative Agent to the extent necessary to integrate any Incremental Revolving Facility Commitments on substantially the same basis as the Revolving Loans, as applicable.

(g) Notwithstanding the foregoing, no consent of any Defaulting Lender shall be required other than with respect to any amendment or waiver set forth in clauses (i) through (iv) of Section 9.08(b) that directly and adversely affect such Lender.

SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges that are treated as interest under applicable law (collectively, the “Charges”), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender, shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law, the rate of interest payable hereunder, together with all Charges payable to such Lender, shall be limited to the Maximum Rate; provided that such excess amount shall be paid to such Lender on subsequent payment dates to the extent not exceeding the legal limitation.

SECTION 9.10. Entire Agreement. This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Notwithstanding the foregoing, the Fee Letter shall survive the execution and delivery of this Agreement and remain in full force and effect. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.

 

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SECTION 9.11. 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 RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. 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 AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

SECTION 9.12. Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 9.13. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract, and shall become effective as provided in Section 9.03. Delivery of an executed counterpart to this Agreement by facsimile or other electronic transmission (e.g., “PDF” or “TIFF”) shall be as effective as delivery of a manually signed original.

SECTION 9.14. 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 are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

SECTION 9.15. Jurisdiction; Consent to Service of Process.

(a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and any appellate court from any thereof (collectively, “New York Courts”), in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, 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 shall be heard and determined in such New York State court or, to the extent permitted by law, in such federal 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 shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction, except that each of the Loan Parties agrees that (a) it will not bring any such action or proceeding in any court other than New York Courts (it being acknowledged and agreed by the parties hereto that any other forum would be inconvenient and inappropriate in view of the fact that more of the Lenders who would be affected by any such action or proceeding have contacts with the State of New York than any other jurisdiction), and (b) in any such action or proceeding brought against any Loan Party in any other court, it will not assert any cross-claim, counterclaim or setoff, or seek any other affirmative relief, except to the extent that the failure to assert the same will preclude such Loan Party from asserting or seeking the same in the New York Courts.

 

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(b) 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 the other Loan Documents in any New York State or federal court. 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.

SECTION 9.16. Confidentiality. Each of the Lenders, each Issuing Bank and each of the Agents agrees that it shall maintain in confidence any information relating to Holdings, the Borrower and any Subsidiary furnished to it by or on behalf of Holdings, the Borrower or any other Subsidiary (other than information that (a) has become generally available to the public other than as a result of a disclosure by such party, (b) has been independently developed by such Lender, such Issuing Bank or the Administrative Agent without violating this Section 9.16 or (c) was available to such Lender, such Issuing Bank or the Administrative Agent from a third party having, to such person’s knowledge, no obligations of confidentiality to Holdings, the Borrower or any other Loan Party) and shall not reveal the same other than to its directors, trustees, officers, employees and advisors with a need to know or to any person that approves or administers the Loans on behalf of such Lender (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.16), except: (A) to the extent necessary to comply with law or any legal process or the requirements of any Governmental Authority, the National Association of Insurance Commissioners or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, (B) as part of normal reporting or review procedures to, or examinations by, Governmental Authorities or self-regulatory authorities, (C) to its parent companies, Affiliates or auditors (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.16), (D) in order to enforce its rights under any Loan Document in a legal proceeding, (E) to any pledge under Section 9.04(d) or any other prospective assignee of, or prospective Participant in, any of its rights under this Agreement (so long as such person shall have been instructed to keep the same confidential in accordance with this Section 9.16) and (F) to any direct or indirect contractual counterparty in Hedge Agreements or such contractual counterparty’s professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section 9.16). Notwithstanding the foregoing, no such information shall be disclosed to a Disqualified Institution that constitutes a Disqualified Institution at the time of such disclosure without the Borrower’s prior written consent.

SECTION 9.17. Platform; Borrower Materials. The Borrower hereby acknowledges that (a) the Administrative Agent or the Lead Arrangers will make available to the Lenders and the Issuing Banks materials or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”), and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”). The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (i) all the Borrower Materials 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, (ii) by marking Borrower Materials “PUBLIC”, the Borrower shall be deemed to have authorized the Administrative Agent, the Lead Arrangers, the Issuing Banks and the Lenders to treat the Borrower Materials as either publicly available information or not material information (although it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States Federal and state securities laws, (iii) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and (iv) the Administrative Agent and the Lead Arrangers shall be entitled to treat the Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor”.

 

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SECTION 9.18. Release of Liens and Guarantees. In the event that any Loan Party is designated as an Unrestricted Subsidiary or conveys, sells, leases, assigns, transfers or otherwise disposes of all or any portion of any of the Equity Interests or assets of any Loan Party to a person that is not (and is not required to become) a Loan Party in a transaction not prohibited by Section 6.05, any Liens created by any Loan Document in respect of such Unrestricted Subsidiary or Equity Interests or assets shall be automatically released and the Administrative Agent shall promptly (and the Lenders hereby authorize the Administrative Agent to) take such action and execute any such documents as may be reasonably requested by the Borrower and at the Borrower’s expense in connection with the release of any Liens created by any Loan Document in respect of such Unrestricted Subsidiary or Equity Interests or assets, and, in the case of either an Unrestricted Subsidiary or a disposition of the Equity Interests of any Subsidiary Loan Party (other than the Borrower) in a transaction permitted by Section 6.05 (including through merger, consolidation, amalgamation or otherwise) and as a result of which such Subsidiary Loan Party would cease to be a Subsidiary, such Subsidiary Loan Party’s obligations under the Collateral Agreement shall be automatically terminated and the Administrative Agent shall promptly (and the Lenders hereby authorize the Administrative Agent to) take such action and execute any such documents as may be reasonably requested by the Borrower to terminate such Subsidiary Loan Party’s obligations under the Collateral Agreement. In addition, the Administrative Agent agrees to take such actions as are reasonably requested by the Borrower and at the Borrower’s expense to terminate the Liens and security interests created by the Loan Documents when all the Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) are paid in full and all Commitments are terminated and Letters of Credit expired, terminated or cash collateralized on terms satisfactory to the Issuing Banks.

SECTION 9.19. USA PATRIOT Act Notice. Each Lender that is subject to the USA PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the USA PATRIOT Act.

SECTION 9.20. Acknowledgement and Consent to Bail-In of EEA 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 EEA Financial Institution arising under any Loan Document may be subject to the Write-Down and Conversion Powers of an EEA 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 an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

(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;

 

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(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA 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 any EEA Resolution Authority.

SECTION 9.21. Security Documents and ABL/Term Loan Intercreditor Agreement. The parties hereto acknowledge and agree that any provision of any Loan Document to the contrary notwithstanding, prior to the discharge in full of all Term Loan Claims (as defined in the ABL/Term Loan Intercreditor Agreement), the Loan Parties shall not be required to act or refrain from acting under any Security Document with respect to the Term Loan Priority Collateral in any manner that would result in a “Default” or “Event of Default” (as defined in any Term Loan Document) under the terms and provisions of the Term Loan Documents. Each Lender hereunder (a) consents to the subordination of Liens provided for in the ABL/Term Loan Intercreditor Agreement, (b) agrees that it will be bound by and will take no actions contrary to the provisions of the ABL/Term Loan Intercreditor Agreement and (c) authorizes and instructs the Administrative Agent to enter into the ABL/Term Loan Intercreditor Agreement as ABL Agent (as defined in the ABL/Term Loan Intercreditor Agreement) and on behalf of such Lender. The foregoing provisions are intended as an inducement to the lenders under the Term Loan Credit Agreement to extend credit and such lenders are intended third party beneficiaries of such provisions and the provisions of the ABL/Term Loan Intercreditor Agreement.

SECTION 9.22. No Liability of the Issuing Banks. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letter of Credit. Neither any Issuing Bank nor any of its officers or directors shall be liable or responsible for: (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to the Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the Borrower shall have a claim against such Issuing Bank, and such Issuing Bank shall be liable to the Borrower, to the extent of any direct, but not consequential, damages suffered by the Borrower that the Borrower prove were caused by (i) such Issuing Bank’s willful misconduct or gross negligence as determined in a final, non-appealable judgment by a court of competent jurisdiction in determining whether documents presented under any Letter of Credit comply with the terms of such Letter of Credit or (ii) such Issuing Bank’s willful failure to make lawful payment under a Letter of Credit after the presentation to it of a draft, certificates and other documents that strictly comply with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, such Issuing Bank may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary.

SECTION 9.23. Acknowledgements. Each of Holdings and the Borrower hereby acknowledges and agrees that (a) no fiduciary, advisory or agency relationship between the Loan Parties and the Credit Parties is intended to be or has been created in respect of any of the transactions contemplated by this Agreement or the other Loan Documents, irrespective of whether the Credit Parties have advised or are advising the Loan Parties on other matters, and the relationship between the Credit Parties, on the one hand, and the Loan Parties, on the other hand, in connection herewith and therewith is solely that of creditor and debtor, (b) the Credit Parties, on the one hand, and the Loan Parties, on the other hand, have an arm’s length business relationship that does not directly or indirectly give rise to, nor

 

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do the Loan Parties rely on, any fiduciary duty to the Loan Parties or their affiliates on the part of the Credit Parties, (c) the Loan Parties are capable of evaluating and understanding, and the Loan Parties understand and accept, the terms, risks and conditions of the transactions contemplated by this Agreement and the other Loan Documents, (d) the Loan Parties have been advised that the Credit Parties are engaged in a broad range of transactions that may involve interests that differ from the Loan Parties’ interests and that the Credit Parties have no obligation to disclose such interests and transactions to the Loan Parties, (e) the Loan Parties have consulted their own legal, accounting, regulatory and tax advisors to the extent the Loan Parties have deemed appropriate in the negotiation, execution and delivery of this Agreement and the other Loan Documents, (f) each Credit Party has been, is, and will be acting solely as a principal and, except as otherwise expressly agreed in writing by it and the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Loan Parties, any of their affiliates or any other person, (g) none of the Credit Parties has any obligation to the Loan Parties or their affiliates with respect to the transactions contemplated by this Agreement or the other Loan Documents except those obligations expressly set forth herein or therein or in any other express writing executed and delivered by such Credit Party and the Loan Parties or any such affiliate and (h) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Credit Parties or among the Loan Parties and the Credit Parties.

SECTION 9.24. No Novation The terms and conditions of the Existing Revolving Credit Agreement are amended as set forth herein, and restated in their entirety and superseded by, this Agreement. Nothing in this Agreement shall be deemed to work a novation of any of the obligations under the Existing Revolving Credit Agreement. Notwithstanding any provision of this Agreement or any other document or instrument executed in connection herewith, the execution and delivery of this Agreement and the incurrence of obligations hereunder shall be in substitution for, but not in payment of, the obligations owed by the Borrower Parties and the Guarantors under the Existing Revolving Credit Agreement (it being acknowledged that the Existing Revolving Loans and Existing Swingline Loans are being repaid on the First Restatement Effective Date for administrative convenience and to facilitate any reallocation of Revolving Facility Commitments affected on the First Restatement Effective Date). From and after the date hereof, each reference to the “Credit Agreement” or other reference originally applicable to the Existing Revolving Credit Agreement contained in any document executed and delivered in connection therewith shall be a reference to this Agreement, as amended, supplemented, restated or otherwise modified from time to time.

SECTION 9.25. Delivery of Signature Pages; Amendment to Collateral Agreement.

(a) Each Existing Lender shall consent to the amendment and restatement of the Existing Revolving Credit Agreement effected hereby by executing a signature page to this Agreement and each such Existing Lender hereby agrees that (to the extent it has a Revolving Facility Commitment) it will continue to be a party to this Agreement as a Lender, with obligations applicable to a Lender hereunder, including the obligation to make or continue to make extensions of credit to the Borrower and the Co-Borrowers in an aggregate amount not to exceed the amount of its Revolving Facility Commitment as set forth opposite such Lender’s name in Schedule 2.01, as such amount may be changed from time to time as provided in this Agreement.

(b) Each initial Lender shall become a party to this Agreement by delivering to the Administrative Agent a signature page to this Agreement duly executed by such Lender and each such initial Lender agrees to all of the provisions of this Agreement and acknowledges that it will become a party to this Agreement as of the First Restatement Effective Date as a Lender, with obligations applicable to a Lender hereunder, including the obligation to make extensions of credit to the Borrower and the Co-Borrowers in an aggregate principal amount not to exceed the amount of its Revolving Facility Commitment as set forth opposite such Lender’s name in Schedule 2.01, as such amount may be changed from time to time as provided in this Agreement.

 

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(c) Each Lender hereby directs and authorizes the Administrative Agent and Collateral Agent to enter into an amendment to the Collateral Agreement substantially in the form of Exhibit J hereto.

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first written above.

 

CPG NEWCO LLC,
as Holdings
By:  

/s/ Dan Lukas

  Name: Dan Lukas
  Title:   Authorized Person

 

Signature Page to CPG International LLC

Amended and Restated Revolving Credit Agreement


CPG INTERNATIONAL LLC,
as the Borrower
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Chief Financial Officer

 

Signature Page to CPG International LLC

Amended and Restated Revolving Credit Agreement


DEUTSCHE BANK AG NEW YORK BRANCH, as Administrative Agent, Collateral Agent, the Swingline Lender, an Issuing Bank and a Lender
By:  

/s/ Frank Fazio

  Name: Frank Fazio
  Title:   Managing Director
By:  

/s/ Stephen R. Lapidus

  Name: Stephen R. Lapidus
  Title:   Director

 

Signature Page to CPG International LLC

Amended and Restated Revolving Credit Agreement


TD Bank, NA, as a Lender
By:  

/s/ Jennifer Visconti

  Name: Jennifer Visconti
  Title:   Vice President

 

Signature Page to CPG International LLC

Amended and Restated Revolving Credit Agreement


BARCLAYS BANK PLC, as a Lender and an Issuing Bank
By:  

/s/ Marguerite Sutton

  Name: Marguerite Sutton
  Title:   Vice President

 

Signature Page to CPG International LLC

Amended and Restated Revolving Credit Agreement


JPMORGAN CHASE BANK, N.A., as a Lender and an Issuing Bank
By:  

/s/ Peter S. Predun

  Name: Peter S. Predun
  Title:   Executive Director

 

Signature Page to CPG International LLC

Amended and Restated Revolving Credit Agreement


THE HUNTINGTON NATIONAL BANK, as a Lender
By:  

/s/ Tracy L. Salyers

  Tracy L. Salyers
  Vice President

 

Signature Page to CPG International LLC

Amended and Restated Revolving Credit Agreement


BANK OF AMERICA, N.A., as a Lender and an Issuing Bank
By:  

/s/ Christy Bowen

  Name: Christy Bowen
  Title:   Vice President

 

Signature Page to CPG International LLC

Amended and Restated Revolving Credit Agreement


UBS AG, STAMFORD BRANCH, as a Lender
By:  

/s/ Darlene Arias

  Name: Darlene Arias
  Title:   Director
By:  

/s/ Craig Pearson

  Name: Craig Pearson
  Title:   Associate Director

 

Signature Page to CPG International LLC

Amended and Restated Revolving Credit Agreement


CITIBANK, N.A., as a Lender
By:  

/s/ Thomas M. Halsch

  Name: Thomas M. Halsch
  Title:   Vice President

 

Signature Page to CPG International LLC

Amended and Restated Revolving Credit Agreement


EXHIBIT A

[FORM OF]

ASSIGNMENT AND ACCEPTANCE

This Assignment and Acceptance (this “Assignment and Acceptance”) is dated as of the Effective Date set forth below and is entered into by and between [the][each]1 Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each]2 Assignee identified in item 2 below ([the][each, an] “Assignee”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]3 hereunder are several and not joint.]4 Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and the other Loan Documents to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the facility identified below (including any letters of credit and swingline loans included in such facility) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other Loan Documents or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Acceptance, without representation or warranty by [the][any] Assignor.

 

1.  Assignor[s]:

  

 

  
  

 

  

 

1 

For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.

2 

For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language.

3 

Select as appropriate.

4 

Include bracketed language if there are either multiple Assignors or multiple Assignees.

 

A-1


2.  Assignee[s]:

  

 

  
  

 

  

 

3.

Borrower: CPG International LLC, a Delaware limited liability company

 

4.

Administrative Agent: Deutsche Bank AG New York Branch, as the administrative agent under the Credit Agreement.

 

5.

Credit Agreement: Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017 (as amended, restated, supplemented or otherwise modified and in effect from time to time), among CPG International LLC, a Delaware limited liability company, as the Borrower, the Co-Borrowers party thereto, CPG Newco LLC, a Delaware limited liability company, as Holdings, the Lenders party thereto from time to time, Deutsche Bank AG New York Branch, as Administrative Agent, Collateral Agent, Swingline Lender and an Issuing Bank and the other Issuing Banks and agents party thereto.

 

6.

Assigned Interest[s]:

 

Assignor[s]5

   Assignee[s]6      Facility
Assigned7
     Amount of
Assignor’s
Commitment
/Loans8
     Amount of
Commitment/
Loans
Assigned9
     Percentage of
Assignor’s
Commitment/
Loans
Assigned10
    Resulting
Commitment/Loans
Amount for
Assignor
     Resulting
Commitment/Loans
Amount for
Assignee
 
         $                    $                                     $                    $                
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
                   
         $                    $                                     $                    $                
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
                   
         $                    $                                     $                    $                
        

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

 

[7.

Trade Date: __________________]11

 

5 

List each Assignor, as appropriate.

6 

List each Assignee, as appropriate.

7 

Fill in appropriate terminology for each applicable type of facility under the Credit Agreement that is being assigned under this Assignment, i.e., “Revolving Facility Commitment” or “Extended Revolving Commitment”.

8 

Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.

9 

Subject to minimum amount requirements pursuant to Section 9.04(b) of the Credit Agreement.

10 

Set forth, to at least 9 decimals, as a percentage of the Commitments/Loans of all Lenders thereunder.

11 

To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.

 

A-2


Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Acceptance are hereby agreed to:

 

ASSIGNOR

[NAME OF ASSIGNOR]

By:

 

 

Name:

Title:

ASSIGNEE

[NAME OF ASSIGNEE]

By:

 

 

Name:

Title:

 

A-3


Consented to and Accepted:
DEUTSCHE BANK AG NEW YORK BRANCH, as Administrative Agent, Swingline Lender and an Issuing Bank
By:  

             

Name:
Title:
By:  

         

Name:
Title:
BANK OF AMERICA, N.A., as an Issuing Bank
By:  

         

Name:
Title:
BARCLAYS BANK PLC, as an Issuing Bank
By:  

         

Name:
Title:
JPMORGAN CHASE BANK, N.A., as an Issuing Bank
By:  

         

Name:
Title:
[Consented to:]12
CPG INTERNATIONAL LLC, as Borrower
By:  

         

Name:
Title:

 

 

12 

To the extent required under Section 9.04 of the Credit Agreement.

 

A-4


ANNEX 1 TO ASSIGNMENT AND ACCEPTANCE

Reference is made to the Amended and Restated Revolving Credit Agreement dated as of March 9, 2017 (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company, as the Borrower, the Co-Borrowers party thereto, CPG Newco LLC, a Delaware limited liability company, as Holdings, the Lenders party thereto from time to time, Deutsche Bank AG New York Branch, as Administrative Agent, Collateral Agent, Swingline Lender and an Issuing Bank and the other Issuing Banks and agents party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ACCEPTANCE

1. Representations and Warranties.

1.1 Assignor. [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Loan Parties or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Loan Parties or any other Person of any of their respective obligations under any Loan Document.

1.2 Assignee. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an Assignee under the Credit Agreement (subject to such consents, if any, as may be required under Section 9.04 of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 5.04 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent, Collateral Agent, or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, the Collateral Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

 

A-5


2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued up to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Acceptance by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. This Assignment and Acceptance shall be construed in accordance with and governed by the laws of the State of New York.

4. Fees. This Assignment and Acceptance shall be delivered to the Administrative Agent with a processing and recordation fee of $3,500.00.

5. Administrative Questionnaire. If the Assignee is not a Lender, annexed hereto as Exhibit A is a completed administrative questionnaire, in form and substance satisfactory to the Administrative Agent, providing such information (including, without limitation, credit contact information and wiring instructions) of the Assignee as the Administrative Agent may reasonably require.

 

A-6


Exhibit A

Administrative Questionnaire

[provided by Administrative Agent]

 

A-7


EXHIBIT B

[FORM OF]

BORROWING BASE CERTIFICATE

[●], 20[●]

This Borrowing Base Certificate (this “Certificate”) is given by CPG International LLC, a Delaware limited liability company (the “Borrower”), pursuant to subsection 5.04(h) of that certain Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017 (as amended, restated, supplemented or otherwise modified and in effect from time to time, the “Credit Agreement”), among the Borrower, the Co-Borrowers party thereto, CPG Newco LLC, a Delaware limited liability company, as Holdings, the Lenders party thereto from time to time, Deutsche Bank AG New York Branch, as Administrative Agent, Collateral Agent, Swingline Lender and an Issuing Bank and the other Issuing Banks and agents party thereto. Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.

The officer executing this Certificate is a Responsible Officer of the Borrower and as such is duly authorized to execute and deliver this Certificate on behalf of the Borrower. By executing this Certificate, such officer hereby certifies that:

 

  (a)

Attached as Exhibit A is a schedule of the Borrowing Base for the period ended [●] (the “Reporting Date”) and the calculations made with respect to each component thereof;

 

  (b)

based on such schedule, the Borrowing Base as of the Reporting Date is:

$[●]

 

  (c)

The effective date of this Certificate shall be the date this Certificate is received by the Administrative Agent.

IN WITNESS WHEREOF, the Borrower has caused this Certificate to be executed by one of its Responsible Officers this _____ day of ________________, 20___.

 

CPG INTERNATIONAL LLC
By:  

         

  Name:
  Title:

 

B-1


EXHIBIT A TO THE BORROWING BASE CERTIFICATE

For the Period ended________________________

 

I.   Borrowing Base (details set forth in the attached schedules):

  

(a)   85% of the amount of the Eligible Accounts of the Loan Parties

   $_____________

(b)   plus, the lesser of:

  

1.  85% of the lower of Cost, on a first in, first out basis, or market value of Eligible Inventory of the Loan Parties, and

  

2.  85% of the Appraised Liquidation Value of Eligible Inventory of the Loan Parties

   $_____________

(c)   minus,

  

       the sum of all applicable Reserves

   $_____________

(d)   Sum (without double-counting) of (a) plus (b) minus (c)

   $_____________

 

B-2


Schedules to Borrowing Base Certificate

 

B-3


EXHIBIT C

[FORM OF]

BORROWING REQUEST

 

To:  Deutsche Bank AG New York Branch,

as Administrative Agent for

the Lenders referred to below                                    [●], 20[●]

Ladies and Gentlemen:

Reference is made to the Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017 (as amended, restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company, as the Borrower, the Co-Borrowers party thereto, CPG Newco LLC, a Delaware limited liability company, as Holdings, the Lenders party thereto from time to time, Deutsche Bank AG New York Branch, as Administrative Agent, Collateral Agent, Swingline Lender and an Issuing Bank and the other Issuing Banks and agents party thereto. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Credit Agreement.

The undersigned hereby gives you notice pursuant to Section 2.03 of the Credit Agreement that it requests a Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Borrowing is requested to be made:

 

(A)  Date of Borrowing

(which shall be a Business Day)

 

 

 

                     

(B)  Principal Amount of Borrowing

 

 

 

(C)  Type of Borrowing13

 

 

 

(D)  Interest Period and the last day thereof14

(in the case of a Eurocurrency Borrowing)

 

 

 

(E)  Account Number and Location

 

 

 

 

CPG INTERNATIONAL LLC
By:  

             

  Name:
  Title:

 

 

 

13 

Specify an ABR Borrowing or a Eurocurrency Borrowing.

14 

The initial Interest Period applicable to a Eurocurrency Borrowing shall be subject to the definition of “Interest Period”.

 

C-1


EXHIBIT D

[FORM OF]

CO-BORROWER JOINDER AGREEMENT

THIS CO-BORROWER JOINDER AGREEMENT (this “Agreement”), dated as of                     , ____, is by and among                     , a                      (the “New Co-Borrower”), CPG International LLC, a Delaware limited liability company, (the “Borrower”) and Deutsche Bank AG New York Branch (“Deutsche Bank”), as administrative agent (the “Administrative Agent”) under that certain Amended and Restated Revolving Credit Agreement, dated as March 9, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the Co-Borrowers party thereto, CPG Newco LLC, a Delaware limited liability company (“Holdings”), the Lenders party thereto from time to time, the Administrative Agent, Deutsche Bank AG New York Branch, as Collateral Agent, Swingline Lender and an Issuing Bank and the other Issuing Banks and agents party thereto. Capitalized terms used herein but not otherwise defined shall have the meanings provided in the Credit Agreement.

The New Co-Borrower hereby agrees as follows with the Administrative Agent, for the benefit of the Lenders:

1. The New Co-Borrower hereby acknowledges, agrees and confirms that, by its execution of this Agreement, the New Co-Borrower will be deemed to be a party to the Credit Agreement and a “Co-Borrower” and a “Borrower Party” for all purposes of the Credit Agreement and the other Loan Documents, and shall have all of the obligations of a Co-Borrower and a Borrower Party thereunder as if it had executed the Credit Agreement and the other Loan Documents. The New Co-Borrower hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions contained in the Loan Documents, including without limitation (a) all of the representations and warranties of the Borrower Parties set forth in Article III of the Credit Agreement, and (b) all of the affirmative and negative covenants set forth in Articles V and VI of the Credit Agreement.

2. The New Co-Borrower acknowledges and confirms that it has received a copy of the Credit Agreement and the schedules and exhibits thereto. The information on the schedules to the Credit Agreement are hereby amended to include the information shown on the attached Schedule A (Schedules to the Credit Agreement).

3. The Borrower confirms that all of the obligations of the Borrower and the Co-Borrowers under the Credit Agreement are, and upon the New Co-Borrower becoming a Co-Borrower, shall continue to be, in full force and effect. The parties hereto confirm and agree that immediately upon the New Co-Borrower becoming a Co-Borrower, the term “Obligations,” as used in the Credit Agreement, shall include all obligations of the Co-Borrower under the Credit Agreement and under each other Loan Document.

4. The New Co-Borrower hereby agrees that upon becoming a Co-Borrower it will assume all Obligations a Co-Borrower as set forth in the Credit Agreement.

5. The New Co-Borrower hereby agrees that, to the extent it is not a Subsidiary Loan Party (as defined in the Collateral Agreement) as of the date hereof, it will, concurrently with effectiveness of this Agreement, become (i) a party to the Collateral Agreement and any other applicable Security Documents and (ii) so long as the Term Loan Credit Agreement is outstanding, a party to (x) the Collateral Agreement (as defined in the Term Loan Credit Agreement) and any other applicable Term Loan Security Documents and (y) the ABL/Term Loan Intercreditor Agreement. Each of the Borrower and the New Co-Borrower agrees that at any time and from time to time, upon the written request of the Administrative Agent, it will execute and deliver such further documents and do such further acts and things as the Administrative Agent may reasonably request in order to effect the purposes of this Agreement.

 

D-1


6. This Agreement shall be construed in accordance with and governed by the laws of the State of New York.

7. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute one contract. Delivery of an executed counterpart to this Agreement by facsimile or other electronic transmission (e.g., “PDF” or “TIFF”) shall be as effective as delivery of a manually signed original.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

D-2


IN WITNESS WHEREOF, the Borrower and the New Co-Borrower have caused this Agreement to be duly executed by its respective authorized officer, and the Administrative Agent has caused the same to be accepted by its authorized officer, as of the day and year first above written.

 

CPG INTERNATIONAL LLC, as the Borrower
By:  

 

  Name:
  Title:
[NEW CO-BORROWER], as the New Co-Borrower

 

ACKNOWLEDGED AND ACCEPTED:
DEUTSCHE BANK AG NEW YORK BRANCH, as Administrative Agent
           By:  

 

    Name:
    Title:

 

D-3


Schedule A

Schedules to Credit Agreement

 

D-4


EXHIBIT E

[FORM OF]

LETTER OF CREDIT REQUEST

Dated             15            

Deutsche Bank AG New York Branch, as Administrative Agent, under the Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017 (as amended, restated, amended and restated, amended and extended, supplemented or modified from time to time, the “Credit Agreement”), among the Borrower, the Co-Borrowers party thereto, Holdings, the Lenders party thereto from time to time, Deutsche Bank AG New York Branch, as Administrative Agent, Collateral Agent, Swingline Lender and an Issuing Bank and the other Issuing Banks and agents party thereto.

Standby Letter of Credit Unit

Deutsche Bank AG New York Branch

60 Wall Street

New York, New York 10005

Tel.: (212) 250-1214

Fax: (212) 797-0403

Ladies and Gentlemen:

Pursuant to Section 2.05 of the Credit Agreement, the undersigned hereby requests that the Issuing Bank referred to above issue a [trade] [standby] Letter of Credit for the account of the undersigned on             16             (the “Date of Issuance”) which Letter of Credit shall be denominated in Dollars and shall be in the aggregate stated amount of             17            .

For purposes of this Letter of Credit Request, unless otherwise defined herein, all capitalized terms used herein which are defined in the Credit Agreement shall have the respective meaning provided therein.

The beneficiary of the requested Letter of Credit will be             18            , and such Letter of Credit will be in support of             19             and will have a stated expiration date of             20            .

 

 

15 

Date of Letter of Credit Request.

16 

Date of Issuance which shall be a Business Day that is at least three (3) Business Days after the date hereof (or such shorter period as is acceptable to the applicable Issuing Bank).

17 

Aggregate initial stated amount of the Letter of Credit, which should not be less than $50,000, or such lesser amount as is acceptable to the respective Issuing Bank.

18 

Insert name and address of beneficiary.

19 

Insert a description of L/C supportable obligations (in the case of standby Letters of Credit) and insert description of permitted trade obligations of the Company or any of its Subsidiaries (in the case of trade Letters of Credit).

20 

Insert the last date upon which drafts may be presented which (subject to the terms of Section 2.05 of the Credit Agreement) may not be later than (i) in the case of standby Letters of Credit, the earlier of (x) twelve (12) months after the Date of Issuance (subject to extension for successive 12 month periods to the extent such extension is not beyond five (5) days Business Days prior to the Maturity Date (unless cash collateralized in accordance with Section 2.05 of the Credit Agreement)) and (y) five (5) Business Days prior to the Maturity Date (unless cash collateralized in accordance with Section 2.05 of the Credit Agreement) and (ii) in the case of trade Letters of Credit, the earlier of (x) 180 days after the Date of Issuance and (y) five (5) Business Days prior to the Maturity Date.

 

E-1


We hereby certify that:

 

  (A)

the representations and warranties set forth in the Loan Documents are true and correct in all material respects (or, in the case of any representations and warranties qualified by materiality or Material Adverse Effect, in all respects) as of the date hereof, with the same effect as though made on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties were true and correct in all material respects (or, in the case of any representations and warranties qualified by materiality or Material Adverse Effect, in all respects) as of such earlier date); and

 

  (B)

no Default or Event of Default has occurred and is continuing and, immediately after giving effect to the issuance of the Letter of Credit requested hereby, no Default or Event of Default will result therefrom.21

Copies of all material documentation with respect to the supported transaction are attached hereto.

 

CPG INTERNATIONAL LLC[, as agent for [NAME OF APPLICABLE BORROWER PARTY]]
By:  

 

  Name:
  Title:

 

 

21 

Not required for an amendment, extension or renewal of a Letter of Credit without any increase in the stated amount of such Letter of Credit.

 

E-2


EXHIBIT F

[FORM OF]

SWINGLINE BORROWING REQUEST

 

To:  Deutsche Bank AG New York Branch,

as Administrative Agent for

the Lenders referred to below

 

[●], 20[●]

Ladies and Gentlemen:

Reference is made to the Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017 (as amended, restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company, as the Borrower, the Co-Borrowers party thereto, CPG Newco LLC, a Delaware limited liability company, as Holdings, the Lenders party thereto from time to time, Deutsche Bank AG New York Branch, as Administrative Agent, Collateral Agent, Swingline Lender and an Issuing Bank and the other Issuing Banks and agents party thereto. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Credit Agreement.

The undersigned hereby gives you notice pursuant to Section 2.04 of the Credit Agreement that it requests a Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Borrowing is requested to be made:

 

(A)  Date of Swingline Borrowing

(which shall be a Business Day)

  

 

                                       

(B)  Principal Amount of Swingline Borrowing

  

 

  

(C)  Account Number and Location

  

 

  

 

CPG INTERNATIONAL LLC
By:  

 

 

Name:

Title:

 

F-1


EXHIBIT G

[FORM OF]

INTEREST ELECTION REQUEST

 

To:  Deutsche Bank AG New York Branch,

as Administrative Agent for

the Lenders referred to below

 

[●], 20[●]

[●], 20[●]22

Ladies and Gentlemen:

Reference is made to the Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017 (as amended, restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company, as the Borrower, the Co-Borrowers party thereto, CPG Newco LLC, as Holdings, the Lenders party thereto from time to time, Deutsche Bank AG New York Branch, as Administrative Agent, Collateral Agent, Swingline Lender and an Issuing Bank and the other Issuing Banks and agents party thereto. Capitalized terms used herein and not otherwise defined herein have the meanings specified in the Credit Agreement.

This notice constitutes a notice of conversion or notice of continuation, as applicable, under Section 2.07 of the Credit Agreement, and the Borrower hereby irrevocably notifies the Administrative Agent of the following information with respect to the conversion or continuation requested hereby:

a. The Borrowing to which this Interest Election Request applies23 is [●];

b. The effective date of the election (which shall be a Business Day) made pursuant to this Interest Election Request is [●], 20[●];

c. The resulting Borrowing is to be [an ABR Borrowing][a Eurocurrency Borrowing][; and]

[d. The Interest Period applicable to the resulting Borrowing after giving effect to such election is [●]24].

 

CPG INTERNATIONAL LLC
By:  

                                                                   

Name:  

 

Title:  

 

 

22 

Administrative Agent must be notified as indicated in Section 2.07 of the Credit Agreement in the case of an election to convert to or continue a Eurocurrency Borrowing election, not later than 2:00 p.m. New York City time, three Business Days before the effective date of such election or, in the case of an election to convert or continue an ABR Borrowing, not later than 2:00 p.m., New York City time, one Business Day before the effective date of such election.

23 

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 specified pursuant to (d) below shall be specified for each resulting Borrowing).

24 

Include this clause (d) if the resulting Borrowing is a Eurocurrency Borrowing. Such Interest Period shall be a period contemplated by the definition of the term “Interest Period” as set forth in the Credit Agreement. In the case of a Eurocurrency Borrowing that does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration pursuant to Section 2.07(c).

 

G-1


EXHIBIT H

[FORM OF]

NOTE

 

$                                   

New York, New York

[Date]

FOR VALUE RECEIVED, the undersigned CPG International LLC, a Delaware limited liability company (the “Borrower”), hereby promises to pay to [                    ] (the “Lender”) on the Maturity Date (as defined in the Credit Agreement referred to below) in lawful money of the United States and in immediately available funds, the principal amount of                      DOLLARS ($                    ), or, if less, the aggregate unpaid principal amount of all Loans of the Lender outstanding under the Credit Agreement referred to below, which sum shall be due and payable in such amounts and on such dates as are set forth in the Credit Agreement. The Borrower further agrees to pay interest in like money at such office specified pursuant to Section 9.01(a)(ii) of the Credit Agreement on the unpaid principal amount hereof from time to time from the date hereof at the rates, and on the dates, specified in Section 2.13 of such Credit Agreement.

The holder of this Note may endorse and attach a schedule to reflect the date, Type and amount of each Loan of the Lender outstanding under the Credit Agreement, the date and amount of each payment or prepayment of principal hereof, and the date of each interest rate conversion or continuation pursuant to Section 2.07 of the Credit Agreement and the principal amount subject thereto; provided that the failure of the Lender to make any such recordation (or any error in such recordation) shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.

This Note is one of the Notes referred to in the Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017 (as amended, restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company, as the Borrower, the Co-Borrowers party thereto, CPG Newco LLC, a Delaware limited liability company, as Holdings, the Lenders party thereto from time to time, Deutsche Bank AG New York Branch, as Administrative Agent, Collateral Agent, Swingline Lender and an Issuing Bank and the other Issuing Banks and agents party thereto, is subject to the provisions thereof and is subject to optional and mandatory prepayment in whole or in part as provided therein. Terms used herein which are defined in the Credit Agreement shall have such defined meanings unless otherwise defined herein or unless the context otherwise requires.

This Note is secured and guaranteed as provided in the Credit Agreement and the Security Documents. Reference is hereby made to the Credit Agreement and the Security Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and guarantees, the terms and conditions upon which the security interest and each guarantee was granted and the rights of the holder of this Note in respect thereof.

Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided therein.

All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.

 

H-1


THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

[Signature Page Follows]

 

H-2


CPG INTERNATIONAL LLC, as Borrower
By:  

 

  Name:  

                                  

  Title:  

 

 

H-3


EXHIBIT I

[FORM OF]

SOLVENCY CERTIFICATE

OF CPG INTERNATIONAL LLC

AND ITS SUBSIDIARIES

[●], 2017

This Solvency Certificate is delivered pursuant to Section 4.02(d) of the Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017 (as amended, restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company, as the Borrower, the Co-Borrowers party thereto, CPG Newco LLC, a Delaware limited liability company, as Holdings, the Lenders party thereto from time to time, Deutsche Bank AG New York Branch, as Administrative Agent, Collateral Agent, Swingline Lender and an Issuing Bank and the other Issuing Banks and agents party thereto. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement.

The undersigned hereby certifies, solely in such undersigned’s capacity as [Chief Financial Officer] [chief accounting officer] [specify other officer with equivalent duties] of CPG International LLC, and not individually, as follows:

As of the date hereof, after giving effect to the consummation of the Transactions:

 

  a.

The fair value of the assets of the Borrower and its Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, subordinated, contingent or otherwise;

 

  b.

The present fair saleable value of the property of the Borrower and its Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured;

 

  c.

The Borrower and its Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured; and

 

  d.

The Borrower and its Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital.

For purposes of this Solvency Certificate, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.

 

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IN WITNESS WHEREOF, the undersigned has executed this Solvency Certificate on the date first written above.

 

CPG INTERNATIONAL LLC
By:  

                                                      

Name:  
Title:  

 

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EXHIBIT J

[FORM OF]

AMENDMENT TO COLLATERAL AGREEMENT

FIRST AMENDMENT TO ABL GUARANTEE AND COLLATERAL AGREEMENT

FIRST AMENDMENT TO ABL GUARANTEE AND COLLATERAL AGREEMENT, dated as of March 9, 2017 (this “Agreement”), to that certain ABL Guarantee and Collateral Agreement, dated as of September 30, 2013 (as amended, supplemented or otherwise modified prior to the date hereof, the “Existing Guarantee and Collateral Agreement”; the Existing Guarantee and Collateral Agreement, as amended by this Agreement, the “Guarantee and Collateral Agreement”), among CPG INTERNATIONAL LLC, a Delaware limited liability company (as successor-in-interest to CPG International Inc., itself a successor-in-interest in CPG Merger Sub LLC, the “Borrower”), CPG NEWCO LLC, a Delaware limited liability company (“Holdings”), and each other Subsidiary of Holdings party thereto from time to time (each a “Subsidiary Loan Party”) and DEUTSCHE BANK AG NEW YORK BRANCH (“Deutsche Bank”), as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined therein).

RECITALS:

WHEREAS, Holdings and the Borrower entered into that certain Revolving Credit Agreement, dated as of September 30, 2013 (as amended, supplemented or otherwise modified prior to the date hereof, the “Existing Credit Agreement”), among Holdings, the Borrower, the co-borrowers party thereto, the lenders party thereto and Deutsche Bank, as administrative agent and collateral agent;

WHEREAS, in connection with the Existing Credit Agreement, the Borrower, Holdings and the Subsidiary Loan Parties entered into the Guarantee and Collateral Agreement and to certain other Security Documents (as defined in the Existing Credit Agreement);

WHEREAS, concurrently with the execution of this Agreement, Holdings, the Borrower, the lenders party thereto, the Administrative Agent and the Collateral Agent are entering into an Amended and Restated Revolving Credit Agreement, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the “Amended and Restated Credit Agreement”) to amend and restate the Existing Credit Agreement in its entirety; and

WHEREAS, it is a condition precedent to the effectiveness of the Amended and Restated Credit Agreement that the Borrower, Holdings and the Subsidiary Loan Parties execute and deliver this Agreement.

NOW, THEREFORE, in consideration of the premises and the agreements hereinafter set forth, the parties hereto hereby agree as follows:

Section 1. Defined Terms. Capitalized terms used in this Agreement (including in the recitals above) and not otherwise defined herein have the meanings assigned thereto in the Amended and Restated Credit Agreement or the Guarantee and Collateral Agreement, as the context may require.

 

J-1


Section 2. Amendment to Existing Guarantee and Collateral Agreement.

 

  (a)

Section 4.03(a) of the Existing Guarantee and Collateral Agreement is hereby amended and restated in its entirety as follows:

“Each Pledgor agrees to furnish to the Administrative Agent within 30 Business Days thereafter written notice of any change in (i) its corporate or organization name, (ii) its type of organization or organizational structure, (iii) its organizational identification number, where applicable, or (iv) its “location” (determined as provided in UCC Section 9-307). Each Pledgor agrees promptly to provide the Administrative Agent with certified organizational documents reflecting any of the changes described in the immediately preceding sentence. Each Pledgor agrees not to effect or permit any change referred to in the first sentence of this paragraph (a) unless all filings have been made, or will have been made within any applicable statutory period, under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected security interest in all the Article 9 Collateral, for the ratable benefit of the Secured Parties, that is prior to any other Lien on any of the Article 9 Collateral other than (i) Permitted Liens having priority either by operation of applicable law or pursuant to the terms of the ABL/Term Loan Intercreditor Agreement and (ii) Permitted Liens which are permitted to have priority pursuant to the terms of the Credit Agreement. Each Pledgor agrees promptly to notify the Administrative Agent if any material portion of the Article 9 Collateral owned or held by such Pledgor is damaged or destroyed.”

 

  (b)

Schedules I, II, III, IV, V VI and VII of the Guarantee and Collateral Agreement are each hereby amended by deleting each such schedule and replacing it with the corresponding Schedule I, II, III, IV, V, VI or VII, as applicable, set forth as Exhibit A hereto.

Section 3. Acknowledgement and Reaffirmation. Each Guarantor hereby agrees that each reference to the “Credit Agreement” in the Guarantee and Collateral Agreement and the other Loan Documents shall be deemed to be a reference to the Amended and Restated Credit Agreement. Each of Holdings, the Borrower and the Subsidiary Loan Parties hereby agrees and confirms that (a) all of its obligations, liabilities and indebtedness under each Security Document to which it is a party as of the date hereof delivered under and as defined in the Existing Credit Agreement (collectively, the “Existing Security Documents”) shall remain in full force and effect on a continuous basis after giving effect to the effectiveness of the Amended and Restated Credit Agreement and the amendment to the Existing Guarantee and Collateral Agreement contained herein and (b) all of the Liens and security interests created and arising under each Existing Security Document remain in full force and effect on a continuous basis, and the perfected status and priority of each such Lien and security interest continues in full force and effect on a continuous basis, unimpaired, uninterrupted and undischarged, after giving effect to the effectiveness of the Amended and Restated Credit Agreement and the amendment to the Existing Guarantee and Collateral Agreement contained herein, as collateral security for its obligations, liabilities and indebtedness under the Amended and Restated Credit Agreement and under its guarantees in the Existing Security Documents.

Section 4. Conditions to Effectiveness. This Agreement shall become effective on the date (such date, the “First Amendment Effective Date”) on which the Administrative Agent shall have received this Agreement, duly executed and delivered by (A) a Responsible Officer of each of Holdings, the Borrower and the Subsidiary Loan Parties, (B) the Administrative Agent and (C) the Collateral Agent.

Section 5. Representations and Warranties. After giving effect to the amendments contained herein, on the First Amendment Effective Date, each of the Borrower, Holdings and the Subsidiary Loan Parties hereby confirms that the representations and warranties set forth in Section 4.02 of the Guarantee and Collateral Agreement are true and correct in all material respects.

 

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Section 6. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

Section 7. 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 RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. 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 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 7.

Section 8. Effect of This Agreement. Except as expressly set forth herein, this Agreement shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of any Secured Party under the Amended and Restated Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Amended and Restated Credit Agreement or any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle any party to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Amended and Restated Credit Agreement or any other Loan Document in similar or different circumstances.

Section 9. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. Delivery of an executed counterpart to this Agreement by facsimile or other electronic transmission shall be as effective as delivery of a manually signed original.

Section 10. Headings. Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

Section 11. Miscellaneous. This Agreement shall constitute a Security Document for all purposes of the Amended and Restated Credit Agreement.

[remainder of page intentionally left blank]

 

J-3


IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

CPG NEWCO LLC
By:  

 

  Name:
  Title:
CPG INTERNATIONAL LLC
By:  

 

  Name:
  Title:
CPG BUILDING PRODUCTS LLC
By:  

 

  Name:
  Title:
CPG SUB I CORPORATION
By:  

 

  Name:
  Title:
SANATEC SUB I CORPORATION
By:  

 

  Name:
  Title:

 

Signature Page to CPG International LLC

First Amendment to ABL Guarantee and Collateral Agreement


SANTANA PRODUCTS INC.
By:  

 

  Name:
  Title:
SCRANTON PRODUCTS INC.
By:  

 

  Name:
  Title:
VYCOM CORP.
By:  

 

  Name:
  Title:

 

Signature Page to CPG International LLC

First Amendment to ABL Guarantee and Collateral Agreement


DEUTSCHE BANK AG NEW YORK BRANCH, as Administrative Agent and Collateral Agent
By:  

 

  Name:
  Title:
By:  

 

  Name:
  Title:

 

Signature Page to CPG International LLC

First Amendment to ABL Guarantee and Collateral Agreement

Exhibit 10.2

ABL GUARANTEE AND COLLATERAL AGREEMENT,

dated as of September 30, 2013,

among

CPG MERGER SUB LLC,

as the initial Borrower,

each other Subsidiary of Holdings

identified herein

and

DEUTSCHE BANK AG NEW YORK BRANCH,

as Administrative Agent and Collateral Agent

Reference is made to the ABL/Term Loan Intercreditor Agreement, dated as of September 30, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “ABL/Term Loan Intercreditor Agreement”) among Deutsche Bank AG New York Branch, as administrative agent under the ABL Credit Agreement (the “ABL Administrative Agent”), Barclays Bank PLC, as administrative agent under the Term Loan Credit Agreement (the “Term Loan Administrative Agent”), the Borrower and the other parties thereto. Notwithstanding anything herein to the contrary, the lien and security interest granted to the ABL Administrative Agent, for the benefit of the secured parties hereunder, pursuant to this ABL Guarantee and Collateral Agreement (this “Agreement”) and the exercise of any right or remedy by the ABL Administrative Agent hereunder are subject to the provisions of the ABL/Term Loan Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of the ABL/Term Loan Intercreditor Agreement and this Agreement regarding the relative priorities of the liens granted to the ABL Administrative Agent and the Term Loan Administrative Agent in the collateral, the provisions of the ABL/Term Loan Intercreditor Agreement shall govern and control.


TABLE OF CONTENTS

 

 

         Page  
ARTICLE I DEFINITIONS   

Section 1.01.

  Credit Agreement      1  

Section 1.02.

  Other Defined Terms      1  
ARTICLE II GUARANTEE   

Section 2.01.

  Guarantee      4  

Section 2.02.

  Guarantee of Payment      4  

Section 2.03.

  No Limitations, Etc.      4  

Section 2.04.

  Reinstatement      6  

Section 2.05.

  Agreement To Pay; Contribution; Subrogation      6  

Section 2.06.

  Information      6  

Section 2.07.

  Maximum Liability      7  

Section 2.08.

  Taxes      7  

Section 2.09.

  Keepwell      7  
ARTICLE III PLEDGE OF SECURITIES   

Section 3.01.

  Pledge      7  

Section 3.02.

  Delivery of the Pledged Collateral      9  

Section 3.03.

  Representations, Warranties and Covenants      10  

Section 3.04.

  Registration in Nominee Name; Denominations      11  

Section 3.05.

  Voting Rights; Dividends and Interest, Etc.      12  
ARTICLE IV SECURITY INTERESTS IN OTHER PERSONAL PROPERTY   

Section 4.01.

  Security Interest      13  

Section 4.02.

  Representations and Warranties      16  

Section 4.03.

  Covenants      18  

Section 4.04.

  Other Actions      20  

Section 4.05.

  Covenants Regarding Patent, Trademark and Copyright Collateral      21  

Section 4.06.

  ABL/Term Intercreditor Relations      22  
ARTICLE V REMEDIES   

Section 5.01.

  Remedies Upon Default      22  

Section 5.02.

  Application of Proceeds      24  

Section 5.03.

  Securities Act, Etc.      24  
ARTICLE VI INDEMNITY, SUBROGATION AND SUBORDINATION   

Section 6.01.

  Indemnity      25  

Section 6.02.

  Contribution and Subrogation      25  

Section 6.03.

  Subordination      25  
ARTICLE VII MISCELLANEOUS   

Section 7.01.

  Notices      26  

Section 7.02.

  Security Interest Absolute      26  

Section 7.03.

  Limitation By Law      26  

Section 7.04.

  Binding Effect; Several Agreement      27  

Section 7.05.

  Successors and Assigns      27  

Section 7.06.

  Administrative Agent’s Fees and Expenses; Indemnification      27  

 

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Section 7.07.

  Administrative Agent Appointed Attorney-in-Fact      27  

Section 7.08.

  APPLICABLE LAW      28  

Section 7.09.

  Waivers; Amendment      28  

Section 7.10.

  WAIVER OF JURY TRIAL      28  

Section 7.11.

  Severability      28  

Section 7.12.

  Counterparts      28  

Section 7.13.

  Headings      28  

Section 7.14.

  Jurisdiction; Consent to Service of Process      29  

Section 7.15.

  Termination or Release      29  

Section 7.16.

  Additional Subsidiaries      30  

 

Schedules   
Schedule I    Subsidiary Loan Parties
Schedule II    Pledged Stock; Debt Securities
Schedule III    Intellectual Property
Schedule IV    Filing Jurisdictions
Schedule V    Commercial Tort Claims
Schedule VI    Matters Relating to Accounts and Inventory
Schedule VII    Jurisdictions of Organization, Locations of Chief Executive Offices

 

Exhibits   
Exhibit I    Form of Supplement to the Guarantee and Collateral Agreement

 

ii


ABL GUARANTEE AND COLLATERAL AGREEMENT, dated as of September 30, 2013 (this “Agreement”), among CPG MERGER SUB LLC, a Delaware limited liability company (prior to the consummation of the Acquisition, the “Borrower”) each other party that becomes a party to this Agreement after the Closing Date and DEUTSCHE BANK AG NEW YORK BRANCH, as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined below).

Reference is made to the ABL Credit Agreement dated as of September 30, 2013 (as amended, restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto from time to time, Deutsche Bank AG New York Branch, as Administrative Agent and Collateral Agent, and the other parties thereto.

Promptly following consummation of the Acquisition, each of CPG Newco LLC (“Holdings”) and the Subsidiary Loan Parties shall accede to this Agreement and each other Loan Document (as appropriate) by execution of a joinder, supplement or other form of applicable agreement.

The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Holdings, directly or indirectly, owns 100% of the equity interests of the Borrower and, following the consummation of the Acquisition, the Subsidiary Loan Parties (which at that time shall also be Subsidiaries of the Borrower). The Loan Parties will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement and are willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Credit Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined herein have the respective meanings assigned thereto in the Credit Agreement. All capitalized terms defined in the New York UCC (as defined herein) and not defined in this Agreement have the meanings specified therein.

(b) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to this Agreement.

Section 1.02. Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

ABL/Term Loan Intercreditor Agreement” shall mean the Intercreditor Agreement, dated as of the date hereof, among the Administrative Agent, the Term Loan Administrative Agent and the Pledgors.

Account Debtor” shall mean any person who is or who may become obligated to any Pledgor under, with respect to or on account of an Account.

Article 9 Collateral” shall have the meaning assigned to such term in Section 4.01.

Collateral” shall mean the collective reference to Article 9 Collateral and Pledged Collateral.


Control Agreement” shall mean a deposit account control agreement, a securities account control agreement or a commodity account control agreement, as applicable, which provides the Administrative Agent with “control” (within the meaning of the New York UCC) of any such accounts, in form and substance reasonably satisfactory to the Administrative Agent.

Copyright License” shall mean any written agreement, now or hereafter in effect, granting any right to any Pledgor under any Copyright now or hereafter owned by any third party (including, without limitation, any such rights that such Pledgor has the right to license).

Copyrights” shall mean all of the following which any Pledgor now or hereafter owns or in which any Pledgor now or hereafter has an interest (pursuant to a Copyright License or otherwise): (a) all copyright rights in any work subject to the copyright laws of the United States, whether as author, assignee, transferee or otherwise, (b) all registrations and applications for registration of any such Copyright in the United States, including registrations, supplemental registrations and pending applications for registration in the United States Copyright Office and the right to obtain all renewals thereof, including those listed on Schedule III, (c) all claims for, and rights to sue for, past or future infringements of any of the foregoing and (d) all income, royalties, damages and payments now or hereafter due and payable with respect to any of the foregoing, including damages and payments for past or future infringement thereof.

Credit Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

Discharge of Term Loan Claims” shall have the meaning assigned to such term in the ABL/Term Loan Intercreditor Agreement.

Excluded Assets” shall have the meaning assigned to such term in Section 4.01.

Excluded Equity Interests” shall have the meaning assigned to such term in Section 3.01.

Federal Securities Laws” shall have the meaning assigned to such term in Section 5.03.

Guarantors” shall mean Holdings and the Subsidiary Loan Parties.

Intellectual Property” shall mean all intellectual property of every kind and nature which any Pledgor now or hereafter owns or in which any Pledgor now or hereafter has an interest, including inventions, designs, Patents, Copyrights, Trademarks, trade secrets, domain names, confidential or proprietary technical and business information or know-how.

Intellectual Property Security Agreement” shall mean a security agreement in a form reasonably acceptable to the Administrative Agent and the Borrower.

IP Agreements” shall mean all material Copyright Licenses, Patent Licenses, Trademark Licenses, and all other agreements, relating to the license of any material Intellectual Property to which a Pledgor, now or hereafter, is a party, excluding, in each case, licenses of commercial business software and non-exclusive licenses of Intellectual Property incidental to the sale or purchase of products or services in the ordinary course of business, and including, without limitation, the agreements set forth on Schedule III hereto.

New York UCC” shall mean the Uniform Commercial Code as from time to time in effect in the State of New York.

 

2


Patent License” shall mean any written agreement, now or hereafter in effect, granting to any Pledgor any right to make, use or sell any invention covered by a Patent, now or hereafter owned by any third party (including, without limitation, any such rights that such Pledgor has the right to license).

Patents” shall mean all of the following which any Pledgor now or hereafter owns or in which any Pledgor now or hereafter has an interest (pursuant to a Patent License or otherwise): (a) all letters patent of the United States, including those listed on Schedule III, and all applications for letters patent of the United States, including those listed on Schedule III, (b) all provisionals, reissues, extensions, continuations, divisions, continuations-in-part, reexaminations or revisions thereof, and the inventions disclosed or claimed therein, including the right to make, use, import and/or sell the inventions disclosed or claimed therein, (c) all claims for, and rights to sue for, past or future infringements of any of the foregoing and (d) all income, royalties, damages and payments now or hereafter due and payable with respect to any of the foregoing, including damages and payments for past or future infringement thereof.

Pledged Collateral” shall have the meaning assigned to such term in Section 3.01.

Pledged Debt Securities” shall have the meaning assigned to such term in Section 3.01.

Pledged Securities” shall mean any promissory notes, stock certificates or other certificated securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

Pledged Stock” shall have the meaning assigned to such term in Section 3.01.

Pledgor” shall mean Holdings, the Borrower and each Subsidiary Loan Party.

Qualified Keepwell Provider” shall mean, in respect of any Swap Obligation, each Loan Party that, at the time the relevant guarantee (or grant of the relevant security interest, as applicable) becomes effective with respect to such Swap Obligation, has total assets exceeding $10,000,000 or otherwise 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” with respect to such Swap Obligation at such time by entering into a keepwell pursuant to section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

Secured Parties” shall mean (a) the Lenders, (b) the Agents, (c) each Issuing Bank, (d) the Cash Management Banks, (e) the Qualified Counterparties, (f) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (g) the successors and permitted assigns of each of the foregoing.

Security Interest” shall have the meaning assigned to such term in Section 4.01.

Subsidiary Loan Party” shall mean each Subsidiary identified on Schedule I, each Co-Borrower and each other Person that becomes a party hereto in accordance with Section 7.16.

Term Loan Administrative Agent” shall mean Barclays Bank PLC, as administrative agent under the Term Loan Credit Agreement, and any successor thereto.

Term Loan Priority Collateral” shall have the meaning assigned to such term in the ABL/Term Loan Intercreditor Agreement as in effect on the date hereof.

 

3


Trademark License” shall mean any written agreement, now or hereafter in effect, granting to any Pledgor any right to use any Trademark now or hereafter owned by any third party (including, without limitation, any such rights that such Pledgor has the right to license).

Trademarks” shall mean all of the following which any Pledgor now or hereafter owns or in which any Pledgor now or hereafter has an interest (pursuant to a Trademark License or otherwise): (a) all trademarks, service marks, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations thereof (if any), and all registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States (except for “intent-to-use” applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of the Lanham Act has been filed, to the extent that, and solely during the period for which, any assignment of an “intent-to-use” application prior to such filing would violate the Lanham Act), and all renewals thereof, including those listed on Schedule III, (b) all goodwill associated therewith or symbolized thereby, (c) all claims for, and rights to sue for, past or future infringements of any of the foregoing and (d) all income, royalties, damages and payments now or hereafter due and payable with respect to any of the foregoing, including damages and payments for past or future infringement thereof.

ARTICLE II

GUARANTEE

Section 2.01. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally to the Administrative Agent for the ratable benefit of the Secured Parties, as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Obligations (other than, with respect to any Guarantor, any Excluded Swap Obligations of such Guarantor). Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from such Guarantor, and that such Guarantor will remain bound upon its guarantee hereunder notwithstanding any extension or renewal of any Obligation. Each Guarantor waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment. For the avoidance of doubt, the guarantee by each Co-Borrower pursuant to this Article II shall be in addition to, and not in lieu of, such Co-Borrower’s joint and several liability in respect of the Obligations pursuant to the Credit Agreement.

Section 2.02. Guarantee of Payment. Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due (whether at the stated maturity, by acceleration or otherwise) and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any other Secured Party to any security held for the payment of the Obligations or to any balance of any Deposit Account or credit on the books of the Administrative Agent or any other Secured Party in favor of any Loan Party or any other person.

Section 2.03. No Limitations, Etc. (a) Except for termination of a Guarantor’s obligations hereunder as expressly provided for in Section 7.15 and except as provided in Section 2.07, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise (other than defense

 

4


of payment or performance). Without limiting the generality of the foregoing, except for termination or release of a Guarantor’s obligations hereunder in accordance with the terms of Section 7.15 hereof the obligations of each Guarantor hereunder, to the fullest extent permitted by applicable law, shall not be discharged or impaired or otherwise affected by, and each Guarantor hereby waives any defense to the enforcement hereof by reason of:

(i) the failure of the Administrative Agent or any other Secured Party to assert any claim or demand or to exercise or enforce any right or remedy under the provisions of any Loan Document or otherwise;

(ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement;

(iii) the failure to perfect any security interest in, or the release of, any of the Collateral held by or on behalf of the Administrative Agent or any other Secured Party for the Obligations;

(iv) any default, failure or delay, willful or otherwise, in the performance of the Obligations;

(v) any illegality, lack of validity or enforceability of any Obligation;

(vi) any change in the corporate existence, structure or ownership of any Loan Party, or any insolvency, bankruptcy or reorganization of any Loan Party;

(vii) the existence of any claim, set-off or other rights that the Guarantors may have at any time against the Borrower, the Administrative Agent, any other Secured Party or any other person, whether in connection herewith, the other Loan Documents or any unrelated transactions; provided that nothing herein will prevent the assertion of any such claim by separate suit or compulsory counterclaim;

(viii) any action permitted or authorized hereunder; or

(ix) any other circumstance (including any statute of limitations) or any act or omission that may in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a defense to, or a legal or equitable discharge of, the Borrower or any Guarantor or any other guarantor or surety (other than the payment in full in cash or immediately available funds of the Obligations).

Each Guarantor expressly authorizes the Secured Parties to take and hold security for the payment and performance of the Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release, substitute or add any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder.

(b) To the fullest extent permitted by applicable law and except for termination or release of a Guarantor’s obligations hereunder in accordance with the terms of Section 7.15 hereof, each Guarantor waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than, after all Commitments have been terminated, the return

 

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of all Letters of Credit (or cash collateralization thereof on terms satisfactory to the Issuing Bank), the payment in full in cash or immediately available funds of all the Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted). The Administrative Agent and the other Secured Parties may exercise any right or remedy available to them against any other Loan Party pursuant to this Agreement or the other Loan Documents, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent that after giving effect thereto all Obligations have been terminated and paid in full (other than contingent indemnity or expense reimbursement obligations that are not yet due and payable and for which no claim has been made). To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against any other Loan Party, as the case may be, or any security.

Section 2.04. Reinstatement. Each Guarantor agrees that its guarantee hereunder shall continue to be effective or be reinstated, if, at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise.

Section 2.05. Agreement To Pay; Contribution; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of any Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation. Subject to the foregoing, to the extent that any Guarantor shall, under this Agreement or the Credit Agreement as a joint and several obligor, repay any of the Obligations constituting Loans or other advances made to another Loan Party under the Credit Agreement (an “Accommodation Payment”), then the Guarantor making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Guarantors in an amount equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Guarantor’s Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Guarantors; provided that such rights of contribution and indemnification shall be subordinated to the discharge of Obligations. As of any date of determination, the “Allocable Amount” of each Guarantor shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Guarantor hereunder and under the Credit Agreement without (a) rendering such Guarantor “insolvent” within the meaning of Section 101 (31) of the Bankruptcy Code of the United States, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such Guarantor with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code of the United States, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Guarantor unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code of the United States or Section 4 of the UFTA, or Section 5 of the UFCA. Upon payment by any Guarantor of any sums to the Administrative Agent as provided above, all rights of such Guarantor against the Borrower, any other Loan Party or any other Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article VI.

Section 2.06. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the financial condition and assets of the Borrower and each other Loan Party, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that no Agent nor any other Secured Party will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

 

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Section 2.07. Maximum Liability. Each Guarantor, and by its acceptance of this guarantee, each Agent and each other Secured Party hereby confirms that it is the intention of all such persons that this guarantee and the Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of the U.S. Bankruptcy Code or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this guarantee and the Obligations of each Guarantor hereunder. To effectuate the foregoing intention, the Agents, the other Secured Parties and the Guarantors hereby irrevocably agree that the Obligations of Guarantor under this guarantee at any time shall be limited to the maximum amount as will result in the Obligations of such Guarantor under this guarantee not constituting a fraudulent transfer or conveyance.

Section 2.08. Taxes. Any and all payments by or on account of any obligation of any Guarantor hereunder shall be made free and clear of and without deduction for, any Indemnified Taxes or Other Taxes provided that if a Guarantor shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.08) the Administrative Agent or any Secured Party, as applicable, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Guarantor shall make such deductions and (iii) such Guarantor shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. The provisions of Section 2.15 of the Credit Agreement shall apply to each Guarantor mutatis mutandis.

Section 2.09. Keepwell. Each Qualified Keepwell Provider 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 this guarantee in respect of any Swap Obligation (provided, however, that each Qualified Keepwell Provider shall only be liable under this Section 2.09 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 2.09, or otherwise under this guarantee, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified Keepwell Provider under this Section 2.09 shall remain in full force and effect until all of the Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent indemnification and reimbursement obligations, in each case, that are not yet due and payable and for which no claim has been asserted) have been paid in full in cash or immediately available funds and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and each Issuing Bank has no further obligations to issue Letters of Credit under the Credit Agreement. Each Qualified Keepwell Provider intends that this Section 2.09 constitute, and this Section 2.09 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.

ARTICLE III

PLEDGE OF SECURITIES

Section 3.01. Pledge. As security for the payment or performance, as the case may be, in full of its Obligations, each Pledgor hereby pledges to the Administrative Agent, its successors and permitted assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Administrative Agent, its successors and permitted assigns, for the ratable benefit of the Secured Parties, a security interest in all of

 

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such Pledgor’s right, title and interest in, to and under (a)(i) the Equity Interests directly owned by it (including those Equity Interests listed on Schedule II) and (ii) any other Equity Interests obtained in the future by such Pledgor and, in each case, the certificates representing all such Equity Interests (the foregoing clauses (i) and (ii), collectively, the “Pledged Stock”); provided that the Pledged Stock shall not include:

(A) (1) more than 65% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary that is (x) a CFC directly owned by any Pledgor or (y) any Qualified CFC Holding Company directly owned by a Pledgor or (2) any of the issued and outstanding Equity Interests of (x) any Domestic Subsidiary that is a direct or indirect Subsidiary of a Foreign Subsidiary that is a CFC or (y) any Qualified CFC Holding Company that is not a “first tier” Subsidiary of a Loan Party,

(B) to the extent applicable law requires that a Subsidiary of such Pledgor issue directors’ qualifying shares, nominee shares or similar shares, which are required by Law to be held by persons other than the Pledgors, such qualifying shares, nominee shares or similar shares held by persons other than Pledgors,

(C) any Equity Interests of any person (other than a Wholly-Owned Subsidiary that is directly owned by a Pledgor), to the extent restricted or not permitted by the terms of such person’s organizational documents or other agreements with holders of such Equity Interests (so long as such prohibition did not arise as part of the acquisition or formation of such person or in anticipation of the Credit Agreement and other than to the extent that any such prohibition would be rendered ineffective pursuant to the UCC or any other applicable Law); provided that such Equity Interests shall cease to be Excluded Equity Interests at such time as such prohibition ceases to be in effect,

(D) any Equity Interests if, to the extent and for so long as the pledge of such Equity Interests hereunder is prohibited or restricted by any applicable Law, including any requirement to obtain consent of any Governmental Authority (other than to the extent such prohibition would be rendered ineffective under the UCC or any other applicable Law); provided that such Equity Interests shall cease to be Excluded Equity Interests at such time as such prohibition ceases to be in effect,

(E) any Equity Interests if, to the extent and for so long as the pledge of such Equity Interests hereunder would result in (1) material adverse tax consequences (including, without limitation, as a result of the operation of Section 956 of the Code or any similar Law or regulation in any applicable jurisdiction) or (2) material adverse regulatory consequences, in each case as reasonably determined by the Borrower and with the consent of the Administrative Agent (such consent not to be unreasonably withheld, delayed or conditioned),

(F) any margin stock,

(G) any Equity Interests that the Borrower and the Administrative Agent shall have agreed in writing to treat as Excluded Equity Interests for purposes hereof on account of the cost, difficulty, burden or consequences of pledging such Equity Interests hereunder being excessive in relation to the benefit to the Secured Parties of the security to be afforded thereby,

(H) any Equity Interests in captive insurance subsidiaries, special purpose entities identified in writing at any time by the Borrower to the Administrative Agent and not-for-profit subsidiaries and

(I) any Equity Interests in Unrestricted Subsidiaries (any Equity Interests excluded pursuant to clauses (A) through (H) above, along with this clause (I), the “Excluded Equity Interests”)

 

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(b)(i) the promissory notes and any instruments evidencing Indebtedness owned by it as of the Closing Date (including those listed opposite the name of such Pledgor on Schedule II) and (ii) any promissory notes and instruments and any Indebtedness in the future issued to such Pledgor having, an aggregate principal amount in excess of $5.0 million (the foregoing clauses (i) and (ii) collectively, the “Pledged Debt Securities”), in each case including all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all Pledged Debt Securities (except to the extent otherwise excluded from the Collateral pursuant to this Agreement), but excluding (1) intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings and its Subsidiaries or (2) to the extent the pledge of such promissory note or instrument would violate applicable law (after giving effect to the relevant anti-assignment provisions of the Uniform Commercial Code), (c) subject to Section 3.05 hereof, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other proceeds received in respect of, the securities referred to in clauses (a) and (b) above, (d) subject to Section 3.05 hereof, all rights and privileges of such Pledgor with respect to the securities and other property referred to in clauses (a), (b) and (c) above and (e) all proceeds of any of the foregoing (the items referred to in clauses (a) through (d) above being collectively referred to as the “Pledged Collateral”).

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Administrative Agent, its successors and permitted assigns, for the benefit of the Secured Parties, forever, subject, however, to the terms, covenants and conditions hereinafter set forth and in each case subject to the last paragraph of Article IV of the Credit Agreement and the Collateral and Guarantee Requirement.

Section 3.02. Delivery of the Pledged Collateral. (a) Each Pledgor agrees promptly to deliver or cause to be delivered to the Administrative Agent, for the benefit of the Secured Parties, any and all Pledged Securities to the extent such Pledged Securities, in the case of promissory notes or other instruments evidencing Indebtedness, are required to be delivered pursuant to paragraph (b) of this Section 3.02.

(b) Each Pledgor will cause any Indebtedness for borrowed money having an aggregate principal amount in excess of $5.0 million (other than (i) intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings, the Borrower and the other Subsidiaries or (ii) to the extent that a pledge of such promissory note or instrument would violate applicable law) owed to such Pledgor by any person to be evidenced by a duly executed promissory note that is pledged and delivered to the Administrative Agent, for the benefit of the Secured Parties, pursuant to the terms hereof. To the extent any such promissory note is a demand note, each Pledgor party thereto agrees, if requested by the Administrative Agent, to immediately demand payment thereunder upon a Specified Event of Default unless such demand would not be commercially reasonable or would otherwise expose such Pledgor to liability to the maker.

(c) Upon delivery to the Administrative Agent, (i) any Pledged Securities required to be delivered pursuant to the foregoing paragraphs (a) and (b) of this Section 3.02 shall be accompanied by stock powers or note powers, as applicable, duly executed in blank or other instruments of transfer reasonably satisfactory to the Administrative Agent and by such other instruments and documents as the Administrative Agent may reasonably request and (ii) all other property composing part of the Pledged Collateral delivered pursuant to the terms of this Agreement shall be accompanied to the extent necessary to perfect the security interest in or allow realization on the Pledged Collateral by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Administrative Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule II (or a supplement to Schedule II, as applicable) and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

 

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Section 3.03. Representations, Warranties and Covenants. Each Pledgor represents, warrants and covenants to and with the Administrative Agent, for the benefit of the Secured Parties, that:

(a) Schedule II correctly sets forth the percentage of the issued and outstanding shares of each class of the Equity Interests of the issuer thereof represented by such Pledged Stock, in each case as of the Closing Date and includes all Equity Interests, debt securities and promissory notes or instruments evidencing Indebtedness required to be pledged in order to satisfy the Collateral and Guarantee Requirement on the Closing Date. Any Pledgor may certificate any interest in a limited liability company or a limited partnership that was previously uncertificated; provided that the certificate is promptly delivered to the Administrative Agent in accordance with the Intercreditor Agreements. Any Pledgor may amend the organizational documents of any limited liability company or limited partnership so that such limited liability company’s or limited partnership’s interests are no longer represented by a certificate; provided that upon such action, the Administrative Agent will not cease to have a perfected security interest in such interests;

(b) the Pledged Stock and Pledged Debt Securities (solely with respect to Pledged Debt Securities issued by a person that is not a Subsidiary of Holdings or an Affiliate of any such Subsidiary, to the best of each Pledgor’s knowledge) have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable (other than with respect to Pledged Stock consisting of membership interests of limited liability companies to the extent provided in Sections 18-502 and 18-607 of the Delaware Limited Liability Company Act) and (ii) in the case of Pledged Debt Securities (solely with respect to Pledged Debt Securities issued by a person that is not a Subsidiary of Holdings or an Affiliate of any such Subsidiary, to the best of each Pledgor’s knowledge) are legal, valid and binding obligations of the issuers thereof, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding at law or in equity) and an implied covenant of good faith and fair dealing;

(c) except for the security interests granted hereunder, each Pledgor (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Pledgor, (ii) holds the same free and clear of all Liens, other than Permitted Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than pursuant to a transaction permitted by the Credit Agreement and other than Permitted Liens and (iv) subject to the rights of such Pledgor under the Loan Documents to dispose of Pledged Collateral, will use commercially reasonable efforts to defend its title or interest hereto or therein against any and all Liens (other than Permitted Liens), however arising, of all persons;

(d) other than as set forth in the Credit Agreement or the schedules thereto, and except for restrictions and limitations imposed by the Loan Documents or securities laws generally or otherwise permitted to exist pursuant to the terms of the Credit Agreement, the Pledged Stock (other than partnership interests) is and will continue to be freely transferable and assignable, and none of the Pledged Stock is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Stock hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Administrative Agent of rights and remedies hereunder;

 

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(e) each Pledgor has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;

(f) other than as set forth in the Credit Agreement or the schedules thereto, no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect);

(g) by virtue of the execution and delivery by the Pledgors of this Agreement, when any Pledged Securities (including Pledged Stock of any Domestic Subsidiary, any Qualified CFC Holding Company or any Foreign Subsidiary) are delivered to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), for the ratable benefit of the Secured Parties, in accordance with this Agreement and a financing statement covering such Pledged Securities is filed in the appropriate UCC filing office, the Administrative Agent will obtain, for the ratable benefit of the Secured Parties, a legal, valid and perfected lien upon and security interest in such Pledged Securities under the New York UCC or the corresponding code or statute of any other applicable jurisdiction, subject only to Permitted Liens, as security for the payment and performance of the Obligations;

(h) as of the Closing Date, none of the Equity Interests in limited liability companies or partnerships that are pledged by the Pledgors hereunder constitute a security under Section 8-103 of the New York UCC or the corresponding code or statute of any other applicable jurisdiction; and

(i) the Pledgors shall not amend, or permit to be amended, the limited liability company agreement (or operating agreement or similar agreement) or partnership agreement of any subsidiary of any Loan Party whose Equity Interests are, or are required to be, Collateral in a manner to cause such Equity Interests to constitute a security under Section 8-103 of the New York UCC or the corresponding code or statute of any other applicable jurisdiction unless such Loan Party shall have first delivered reasonable prior written notice to the Administrative Agent and shall have taken all actions contemplated hereby and as otherwise reasonably required by the Administrative Agent to maintain the security interest of the Administrative Agent therein as a valid, perfected, first priority security interest, subject to the relative priorities set forth in the ABL/Term Loan Intercreditor Agreement.

Section 3.04. Registration in Nominee Name; Denominations. The Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in the name of the applicable Pledgor, endorsed or assigned in blank or in favor of the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) or, if an Event of Default shall have occurred and be continuing, in its own name as pledgee or the name of its nominee (as pledgee or as sub-agent). Each Pledgor will promptly give to the Administrative Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. If an Event of Default shall have occurred and be continuing, the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) shall have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. Each Pledgor shall use its commercially reasonable efforts to cause any Loan Party that is not a party to this Agreement to comply with a request by the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), pursuant to this Section 3.04, to exchange certificates representing Pledged Securities of such Loan Party for certificates of smaller or larger denominations.

 

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Section 3.05. Voting Rights; Dividends and Interest, Etc. (a) Unless and until an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given written notice to the relevant Pledgors of the Administrative Agent’s intention to exercise its rights hereunder:

(i) Each Pledgor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Collateral or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents; provided that, except as permitted under the Credit Agreement, such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Collateral, the rights and remedies of any of the Administrative Agent or the other Secured Parties under this Agreement, the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

(ii) The Administrative Agent shall promptly execute and deliver to each Pledgor, or cause to be executed and delivered to such Pledgor, all such proxies, powers of attorney and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above.

(iii) Each Pledgor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Collateral to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws; provided that (A) any noncash dividends, interest, principal or other distributions, payments or other consideration in respect thereof, including any rights to receive the same to the extent not so distributed or paid, that would constitute Pledged Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities, received in exchange for Pledged Securities or any part thereof, or in redemption thereof, as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise and (B) any noncash dividends and other distributions paid or payable in respect of any Pledged Securities that would constitute Pledged Securities in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid in surplus, shall be and become part of the Pledged Collateral, and, if received by any Pledgor, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Administrative Agent, for the ratable benefit of the Secured Parties, and shall be forthwith delivered to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), for the ratable benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Administrative Agent).

(b) Upon the occurrence and during the continuance of an Event of Default and after written notice by the Administrative Agent to the relevant Pledgors of the Administrative Agent’s intention to exercise its rights hereunder, all rights of any Pledgor to dividends, interest, principal or other distributions that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.05 shall cease, and all such rights shall thereupon become vested, for the benefit of the Secured Parties, in the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions; provided, however, that even after the occurrence of an Event of Default, any Pledgor may continue to exercise dividend and distribution rights solely to the

 

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extent permitted under subclause (i), subclause (iii) and subclause (v) of Section 6.06(b) of the Credit Agreement. All dividends, interest, principal or other distributions received by any Pledgor contrary to the provisions of this Section 3.05 shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Administrative Agent, for the ratable benefit of the Secured Parties, and shall be forthwith delivered to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), for the ratable benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Administrative Agent). Any and all money and other property paid over to or received by the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) pursuant to the provisions of this paragraph (b), subject to the ABL/Term Intercreditor Agreement shall be retained by the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) in an account to be established by the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02 hereof. After all Events of Default have been cured or waived, the Administrative Agent shall, if not previously applied to the Obligations, promptly repay to each Pledgor (without interest) all dividends, interest, principal or other distributions that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.05 and that remain in such account.

(c) Upon the occurrence and during the continuance of an Event of Default and after the Administrative Agent shall have given written notice to the Borrower of the Administrative Agent’s intention to exercise its rights hereunder, all rights of any Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.05, and the obligations of the Administrative Agent under paragraph (a)(ii) of this Section 3.05, shall cease, and all such rights shall thereupon become vested in the Administrative Agent, for the ratable benefit of the Secured Parties, which shall have the sole and exclusive right and authority to exercise such voting and consensual rights and powers (subject to the ABL/Term Loan Intercreditor Agreement); provided that, unless otherwise directed by the Required Lenders, the Administrative Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have been cured or waived, each Pledgor shall have the right to exercise the voting and/or consensual rights and powers that such Pledgor would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above.

ARTICLE IV

SECURITY INTERESTS IN OTHER PERSONAL PROPERTY

Section 4.01. Security Interest. (a) As security for the payment or performance when due (whether at the stated maturity, by acceleration or otherwise), as the case may be, in full of the Obligations, each Pledgor hereby pledges to the Administrative Agent, its successors and permitted assigns, for the benefit of the Secured Parties, and hereby grants to the Administrative Agent, its successors and permitted assigns, for the ratable benefit of the Secured Parties, a security interest (the “Security Interest”) in all right, title and interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Pledgor or in which such Pledgor now has or at any time in the future may acquire any right, title or interest (collectively, the “Article 9 Collateral”):

(i) all Accounts;

(ii) all Chattel Paper;

 

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(iii) all cash and Money, whether held in a Deposit Account or in the possession of the Administrative Agent;

(iv) all Documents;

(v) all Equipment;

(vi) all General Intangibles;

(vii) all Instruments;

(viii) all Inventory;

(ix) all Investment Property;

(x) all Letter of Credit Rights;

(xi) all Intellectual Property;

(xii) all Commercial Tort Claims described on Schedule V hereto, as updated from time to time;

(xiii) all cash held in any Securities Account;

(xiv) all books and Records pertaining to the Article 9 Collateral; and

(xv) all Proceeds, Supporting Obligations and products of any and all of the foregoing and all collateral security and guarantees given by any person with respect to any of the foregoing.

Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute a grant of a security interest in (a) any vehicle or any other property covered by a certificate of title or ownership, whether now owned or hereafter acquired, (b) any Excluded Equity Interests, (c) any Letter of Credit Rights, except to the extent a security interest therein can be perfected by the filing of Uniform Commercial Code financing statements, and to the extent such Pledgor is not required by applicable law to apply the proceeds of a drawing of such Letter of Credit for a specified purpose, (d) any Pledgor’s right, title or interest in any lease, license, contract or agreement to which such Pledgor is a party or any of its right, title or interest thereunder to the extent, but only to the extent, that such a grant would, under the terms of such lease, license, contract or agreement, result in a breach of the terms of, or constitute a default under, or result in the abandonment, invalidation or unenforceability of or create a right of termination in favor of or require the consent of any other party thereto (other than such Pledgor), such lease, license, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the New York UCC or any other applicable law (including, without limitation, Title 11 of the United States Code) or principles of equity), (e) assets to the extent the granting of a security interest therein would be prohibited or restricted by applicable law, rule or regulation (including any requirement to obtain the consent of any Governmental Authority), (f)(i) payroll and other employee wage and benefit accounts, (ii) tax accounts, including, without limitation, sales tax accounts, (iii) escrow accounts and (iv) fiduciary or other trust accounts, and, in the case of clauses (i) through (iv), the funds or other property held in or maintained in such account, (g) any Commercial Tort Claim with a value not in excess of $5.0 million, as determined in good faith by the Borrower, (h) any governmental licenses or State or local franchises, charters or authorizations, to the

 

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extent security interests in such licenses, franchises, charters or authorizations are prohibited or restricted thereby, after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code of any applicable jurisdiction notwithstanding such prohibition or restriction, (i) assets if the granting of a security interest therein would result in (i) material adverse tax consequences (including, without limitation, as a result of the operation of Section 956 of the Code or any similar law or regulation in any applicable jurisdiction) or (ii) material adverse regulatory consequences, in each case as reasonably determined by the Borrower and with the consent of the Administrative Agent (which consent will not to be unreasonably withheld, delayed or conditioned), (j) those assets as to which the Administrative Agent and the Borrower reasonably agree in writing that any of the cost, difficulty, burden or consequences of obtaining such a security interest are excessive in relation to the benefit to the Lenders of the security to be afforded thereby, (k) any United States “intent to use” trademark application or intent-to-use service mark application filed pursuant to Section 1(b) of the Lanham Act to the extent that the grant of a security interest therein would impair the validity or enforceability of, or render void or voidable or result in the cancellation of the applicable Pledgor’s right, title or interest therein or any trademark or service mark issues as a result of such application under applicable federal law, after which period such application shall be automatically subject to the security interest granted herein and deemed to be included in the Collateral, (l) any assets and proceeds thereof subject to a Capital Lease Obligations or a purchase money Lien permitted by Section 6.02(i) of the Credit Agreement to the extent the documents providing for such Capital Lease Obligation or purchase money Lien do not permit such assets and proceeds thereof to the pledged to the Administrative Agent and (m) any assets acquired after the date hereof subject to a Lien permitted by Section 6.02(c) of the Credit Agreement that existed on such assets at the time of the acquisition thereof and was not incurred in contemplation of such acquisition so long as the documents providing for such Lien do not permit such assets to be pledged to the Administrative Agent (the assets described in clauses (a) through (l) above, collectively, the “Excluded Assets”); provided that such exclusions shall not apply to the proceeds of any of the foregoing property.

(b) Each Pledgor hereby irrevocably authorizes the Administrative Agent at any time and from time to time to file in any relevant jurisdiction any financing statements (including fixture filings) with respect to the Article 9 Collateral (including all Article 9 Collateral consisting of Pledged Collateral) or any part thereof and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (i) whether such Pledgor is an organization, the type of organization and any organizational identification number issued to such Pledgor, (ii) in the case of a financing statement filed as a fixture filing, a sufficient description of the property to which such Article 9 Collateral relates and (iii) a description of collateral that describes such property in any other manner as the Administrative Agent may reasonably determine is necessary to ensure the perfection of the security interest in the Article 9 Collateral granted under this Agreement, including describing such property as “all assets”, whether now owned or hereafter acquired, or words of similar effect. Each Pledgor agrees to provide such information to the Administrative Agent promptly upon request. As of the Closing Date, the filing jurisdictions for filing of each applicable Uniform Commercial Code financing statement is as set forth on Schedule IV.

The Administrative Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office) such documents as may be reasonably necessary for the purpose of perfecting, continuing, enforcing or protecting the Security Interest granted by each Pledgor, and naming any Pledgor or the Pledgors as debtors and the Administrative Agent as secured party. Notwithstanding anything to the contrary herein, no Pledgor shall be required to take any action under the laws of any jurisdiction other than the United States (or any political subdivision thereof) and its territories and possessions for the purpose of perfecting the Security Interest in any Article 9 Collateral of such Pledgor constituting Patents, Trademarks or Copyrights.

 

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(c) The Security Interest is granted as security only and shall not subject the Administrative Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Pledgor with respect to or arising out of the Article 9 Collateral.

(d) Notwithstanding anything to the contrary in this Agreement or the Credit Agreement, (i) no perfection steps shall be required by any means other than (A) filings pursuant to the Uniform Commercial Code in the office of the Secretary of State (or equivalent filing office) of the relevant State(s) of the respective jurisdictions of organization of each Pledgor, (B) filings in the United States Patent and Trademark Office and the United States Copyright Office of the short forms of Intellectual Property Security Agreement, (C) delivery of Collateral consisting of instruments, notes and debt securities in a principal amount in excess of $5.0 million; provided that such delivery shall not be required with respect to (1) instruments, notes and debt securities that are promptly deposited into an investment or securities account, (2) checks received in the ordinary course of business and (3) notes and debt securities issued in connection with the extension of trade credit by a grantor of a security interest, (D) delivery of Collateral consisting of certificated Equity Interests included in the Collateral and (E) (i) other actions expressly required by this Agreement or the Credit Agreement; (ii) Control Agreements or similar arrangements shall not be required with respect to any Deposit Accounts (other than Control Agreements required by Section 5.11 of the Credit Agreement or the Term Loan Credit Agreement), Securities Accounts, Commodities Accounts or other Collateral that requires perfection by “control”; and (iii) the Pledgors shall not be required to take any actions outside the United States to create or perfect any security interests in any Collateral (it being understood that there shall be no security agreements or pledge agreements governed under the laws of any foreign jurisdiction).

Section 4.02. Representations and Warranties. Each Pledgor represents and warrants to the Administrative Agent and the Secured Parties that:

(a) Each Pledgor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Administrative Agent the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than any consent or approval that has been obtained and is in full force and effect or has otherwise been disclosed herein or in the Credit Agreement.

(b) The information set forth in the schedules attached hereto is correct and complete, in all material respects, as of the Closing Date. The Uniform Commercial Code financing statements containing a description of the Article 9 Collateral that have been prepared by the Administrative Agent for filing in the office specified in Schedule IV constitute all the filings, recordings and registrations (except as set forth in the following clause (c)) that are, as of the Closing Date, necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Administrative Agent (for the benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing. Each Pledgor agrees to update the schedules attached hereto in accordance with Section 5.04(f) of the Credit Agreement.

(c) Each Pledgor represents and warrants that a fully executed Intellectual Property Security Agreement containing a description of all Article 9 Collateral consisting of Intellectual Property with respect to United States Patents (and Patents for which United States applications are pending), United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights (and Copyrights for which United States registration applications are pending) has been delivered to the Administrative Agent for recording with the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, and reasonably

 

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requested by the Administrative Agent, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Administrative Agent, for the benefit of the Secured Parties, in respect of all Article 9 Collateral consisting of such Intellectual Property in which a security interest may be perfected by recording with the United States Patent and Trademark Office and the United States Copyright Office.

(d) The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Obligations, (ii) subject to the filings described in Section 4.01(b), a perfected security interest in all Article 9 Collateral if and to the extent which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a security interest in all Intellectual Property Collateral upon the receipt and recording of the Intellectual Property Security Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, if and to the extent which a security interest may be perfected by such recording. The Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral other than (i) Permitted Liens having priority either by operation of applicable law or pursuant to the terms of the ABL/Term Loan Intercreditor Agreement or (ii) Permitted Liens which are permitted to have priority pursuant to the terms of the Credit Agreement.

(e) The Article 9 Collateral is owned by the Pledgors free and clear of any Lien other than Permitted Liens. None of the Pledgors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Pledgor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment in which any Pledgor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Permitted Liens.

(f) None of the Pledgors holds any Commercial Tort Claim individually in excess of $5.0 million as of the Closing Date except as indicated on Schedule V.

(g) Except as set forth in Schedule VI, as of the Closing Date, all Accounts have been originated by the Pledgors and all Inventory has been produced or acquired by the Pledgors in the ordinary course of business.

(h) As to itself and its Article 9 Collateral consisting of Intellectual Property, excluding the Excluded Assets (the “Intellectual Property Collateral”):

(i) The Intellectual Property Collateral set forth on Schedule III includes all of the Patents, Trademarks and Copyrights owned by such Pledgor as of the date hereof that are material to the operation of such Pledgor’s business. To the knowledge of such Pledgor, Pledgor owns all of the Patents, Trademarks, and Copyrights on Schedule III, free and clear of all Liens except Permitted Liens.

(ii) The issued Patents, registered Copyrights and registered Trademarks included in the Intellectual Property Collateral are subsisting and unexpired and have not been adjudged invalid or unenforceable in whole or part, and are valid and enforceable, except as would not reasonably be expected to have a Material Adverse Effect. Such Pledgor is not aware of any uses of any item of Intellectual Property Collateral that would be expected to lead to such item becoming invalid or unenforceable.

 

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(iii) The operation of such Pledgor’s business as currently conducted and the use of the Intellectual Property Collateral in connection therewith do not conflict with, infringe, misappropriate, dilute, misuse or otherwise violate any third party rights in any Intellectual Property.

(iv) To the knowledge of such Pledgor, no third party is infringing, misappropriating, diluting, misusing or otherwise violating such Pledgor’s rights in any Intellectual Property.

(v) Such Pledgor has (A) made or performed in the ordinary course of Pledgor’s business, acts, including without limitation filings, recordings and payment of all required fees and taxes, required to maintain and protect its interest in each and every item of Intellectual Property Collateral in full force and effect in the United States and (B) used proper statutory notice in connection with its use of each Patent, Trademark and Copyright in the Intellectual Property Collateral, except, in the case of each of (A) and (B), to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect.

(vi) With respect to each IP Agreement, the absence, termination or violation of which would reasonably be expected to have a Material Adverse Effect: (A) such Pledgor has not received any written notice of termination or cancellation under such IP Agreement; (B) such Pledgor has not received any written notice of a breach or default under such IP Agreement, which breach or default has not been cured or waived; and (C) neither such Pledgor nor, to the knowledge of such Pledgor, any other party to such IP Agreement is in breach or default thereof in any material respect, and to the knowledge of such Pledgor, no event has occurred that, with notice or lapse of time or both, would constitute such a breach or default or permit termination, modification or acceleration under such IP Agreement.

(i) On the date hereof, such Pledgor’s jurisdiction of organization, identification number from the jurisdiction of organization (if any), and the location of such Pledgor’s chief executive office or sole place of business or principal residence, as the case may be, are specified on
Schedule VII
. Such Pledgor has furnished to the Administrative Agent a certified charter, certificate of incorporation or other organization document and long-form good standing certificate as of a date which is recent to the date hereof.

(j) No amount payable to such Pledgor under or in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been delivered to the Administrative Agent. None of the obligors on any Receivables is a Governmental Authority. The amounts represented by such Pledgor to the Lenders from time to time as owing to such Pledgor in respect of the Receivables will at such times be accurate.

Section 4.03. Covenants.

(a) Each Pledgor agrees to provide at least 10 days’ prior written notice to the Administrative Agent of any change (i) in its corporate or organization name, (ii) in its identity or type of organization or corporate structure, (iii) in organizational identification number, where applicable, or (iv) in its “location” (determined as provided in UCC Section 9-307). Each Pledgor agrees promptly to provide the Administrative Agent with certified organizational documents reflecting any of the changes described in the immediately preceding sentence. Each Pledgor agrees not to effect or permit any change

 

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referred to in the first sentence of this paragraph (a) unless all filings have been made, or will have been made within any applicable statutory period, under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Article 9 Collateral, for the ratable benefit of the Secured Parties. Each Pledgor agrees promptly to notify the Administrative Agent if any material portion of the Article 9 Collateral owned or held by such Pledgor is damaged or destroyed.

(b) Each Pledgor agrees to update the schedules attached hereto in accordance with Section 5.04(f) of the Credit Agreement.

(c) Subject to the rights of such Pledgor under the Loan Documents to dispose of Collateral, each Pledgor shall, at its own expense, use commercially reasonable efforts to defend title to the Article 9 Collateral against all persons and to defend the Security Interest of the Administrative Agent, for the ratable benefit of the Secured Parties, in the Article 9 Collateral and the priority thereof against any Lien that is not a Permitted Lien.

(d) Each Pledgor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Administrative Agent may from time to time reasonably request to preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement and the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Article 9 Collateral that is in excess of $5.0 million shall be or become evidenced by any promissory note or other instrument, such note or instrument, subject to the ABL/Term Intercreditor Agreement, shall be promptly pledged and delivered to the Administrative Agent, for the ratable benefit of the Secured Parties, duly endorsed in a manner reasonably satisfactory to the Administrative Agent.

(e) After the occurrence of an Event of Default and during the continuance thereof, the Administrative Agent shall have the right to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, in the case of Accounts or Article 9 Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making such a verification. The Administrative Agent shall have the right to share any information it gains from such inspection or verification with any Secured Party.

(f) None of the Pledgors will, without the Administrative Agent’s prior written consent (which consent shall not be unreasonably withheld), grant any extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises or settlements granted or made in the ordinary course of business and consistent with prudent business practices or as otherwise permitted under the Credit Agreement.

(g) At its option after the occurrence of an Event of Default and during the continuance thereof, the Administrative Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not a Permitted Lien, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Pledgor fails to do so as required by the Credit Agreement or this Agreement, and each Pledgor jointly and severally agrees to reimburse the Administrative Agent on demand for any reasonable payment made or any reasonable expense incurred by the Administrative Agent pursuant to the foregoing

 

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authorization; provided, however, that nothing in this Section 4.03(e) shall be interpreted as excusing any Pledgor from the performance of, or imposing any obligation on the Administrative Agent or any Secured Party to cure or perform, any covenants or other promises of any Pledgor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

(h) Each Pledgor (rather than the Administrative Agent or any Secured Party) shall remain liable for the observance and performance of all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral.

(i) Each Pledgor irrevocably makes, constitutes and appoints the Administrative Agent (and all officers, employees or agents designated by the Administrative Agent) as such Pledgor’s true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Article 9 Collateral under policies of insurance, endorsing the name of such Pledgor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Pledgor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or under the Credit Agreement or to pay any premium in whole or part relating thereto, the Administrative Agent may, after the occurrence and during the continuation of an Event of Default, without waiving or releasing any obligation or liability of the Pledgors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Administrative Agent reasonably deems advisable. All sums disbursed by the Administrative Agent in connection with this Section 4.03(g), including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Pledgors to the Administrative Agent and shall be additional Obligations secured hereby.

Section 4.04. Other Actions. In order to further ensure the attachment, perfection and priority of, and the ability of the Administrative Agent to enforce, for the ratable benefit of the Secured Parties, the Administrative Agent’s security interest in the Article 9 Collateral, each Pledgor agrees, in each case at such Pledgor’s own expense, to take the following actions with respect to the following Article 9 Collateral:

(a) Instruments and Tangible Chattel Paper. If any Pledgor shall at any time hold or acquire any Instruments (other than checks received and processed in the ordinary course of business) or Tangible Chattel Paper evidencing an amount in excess of $5.0 million, such Pledgor shall forthwith endorse, assign and deliver the same to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), accompanied by such instruments of transfer or assignment duly executed in blank as the Administrative Agent may from time to time reasonably request.

(b) Investment Property. Except to the extent otherwise provided in Article III, if any Pledgor shall at any time hold or acquire any Certificated Security constituting Pledged Collateral or Article 9 Collateral, such Pledgor shall forthwith endorse, assign and deliver the same to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), accompanied by such instruments of transfer or assignment duly executed in blank as the Administrative Agent may from time to time reasonably specify. If any security of a domestic issuer now owned or hereafter acquired by any Pledgor is uncertificated and is issued to such Pledgor or its nominee directly by the issuer thereof, such Pledgor shall promptly notify the Administrative Agent of such uncertificated securities and upon the occurrence and during the continuance of an Event of Default, such Pledgor shall pursuant to an agreement in form and substance reasonably satisfactory to the Administrative Agent, either (i) cause the issuer to agree to comply with instructions from the

 

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Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) as to such security, without further consent of any Pledgor or such nominee or (ii) cause the issuer to register the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) as the registered owner of such security.

(c) Commercial Tort Claims. If any Pledgor shall at any time hold or acquire a Commercial Tort Claim in an amount reasonably estimated to exceed $5.0 million at any time after the date hereof, such Pledgor shall promptly notify the Administrative Agent thereof by updating Schedule V hereof, and grant to the Administrative Agent in writing a security interest therein and in the proceeds thereof, all under the terms and provisions of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Administrative Agent.

Section 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral. Except as permitted by the Credit Agreement: (a) Each Pledgor agrees that it will not knowingly do any act or omit to do any act (and will exercise commercially reasonable efforts to contractually prohibit its licensees from doing any act or omitting to do any act) whereby any Patent that is material to the normal conduct of such Pledgor’s business may become prematurely invalidated, abandoned, lapsed or dedicated to the public, and agrees that it shall take commercially reasonable steps with respect to any material products covered by any such Patent as necessary to establish and preserve its rights under applicable patent laws.

(b) Each Pledgor will, and will use its commercially reasonable efforts to contractually require its licensees and its sublicensees to, for each material Trademark necessary to the normal conduct of such Pledgor’s business, (i) maintain such Trademark in full force free from any adjudication of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of federal registration or claim of trademark or service mark as required under applicable law and (iv) not knowingly, or knowingly permit its licensees’ use of, use such Trademark in violation of any third-party rights.

(c) Each Pledgor will, and will use its commercially reasonable efforts to cause its licensees and its sublicensees to, for each work covered by a material Copyright necessary to the normal conduct of such Pledgor’s business that it publishes, displays and distributes, use a copyright notice as necessary and sufficient to establish and preserve its rights under applicable copyright laws.

(d) Each Pledgor shall notify the Administrative Agent promptly if it knows that any Patent, Trademark or Copyright material to the normal conduct of such Pledgor’s business may imminently become abandoned, lapsed or dedicated to the public, or of any materially adverse determination or development, excluding office actions and similar determinations or developments in the United States Patent and Trademark Office, United States Copyright Office, any court or any similar office of any country, regarding such Pledgor’s ownership of any such material Patent, Trademark or Copyright or its right to register or to maintain the same.

(e) Each Pledgor, either itself or through any agent, employee, licensee or designee, shall (i) inform the Administrative Agent on an annual basis of each application by itself, or through any agent, employee, licensee or designee, for any Patent with the United States Patent and Trademark Office and each registration of any Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any comparable office or agency in any other country filed during the preceding twelve month period and (ii) upon the reasonable request of the Administrative Agent, execute and deliver any and all agreements, instruments, documents and papers as the Administrative Agent may reasonably request to evidence the Administrative Agent’s security interest in such Patent, Trademark or Copyright.

 

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(f) Each Pledgor shall exercise its reasonable business judgment consistent with the practice in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office with respect to maintaining and pursuing each application relating to any Patent, Trademark and/or Copyright (and obtaining the relevant grant or registration) material to the normal conduct of such Pledgor’s business and to maintain (i) each issued Patent and (ii) the registrations of each Trademark and each Copyright that is in each case material to the normal conduct of such Pledgor’s business, including, when applicable and necessary in such Pledgor’s reasonable business judgment, timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if any Pledgor believes necessary in its reasonable business judgment, to initiate opposition, interference and cancellation proceedings against third parties.

(g) In the event that any Pledgor knows or has reason to know that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the normal conduct of its business has been materially infringed, misappropriated or diluted by a third party, such Pledgor shall promptly notify the Administrative Agent and shall, if such Pledgor deems it necessary in its reasonable business judgment, promptly take actions as are reasonably appropriate under the circumstances.

Section 4.06. ABL/Term Intercreditor Relations. Notwithstanding anything herein to the contrary, (a) the Pledgors and the Administrative Agent acknowledge that the exercise of certain of the Administrative Agent’s rights and remedies hereunder are subject to the provisions of the ABL/Term Loan Intercreditor Agreement, and (b) prior to the Discharge of Term Loan Claims, any obligation hereunder to physically deliver any Term Loan Priority Collateral to the Administrative Agent shall be deemed satisfied by the delivery to the Term Loan Administrative Agent, acting as gratuitous bailee for the Administrative Agent in accordance with the ABL/Term Loan Intercreditor Agreement. The failure of the Administrative Agent or any other Secured Party to immediately enforce any of its rights and remedies hereunder (as a result of the terms of the ABL/Term Loan Intercreditor Agreement or otherwise) shall not constitute a waiver of any such rights and remedies. In the event of any conflict or inconsistency between the ABL/Term Loan Intercreditor Agreement and this Agreement regarding the relative priorities of the liens granted to the Administrative Agent and the Term Loan Administrative Agent in the Collateral, the terms of the ABL/Term Loan Intercreditor Agreement shall govern and control.

ARTICLE V

REMEDIES

Section 5.01. Remedies Upon Default. Upon the occurrence and during the continuance of an Event of Default, each Pledgor agrees to deliver each item of Collateral to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) on demand, and it is agreed that the Administrative Agent shall have the right, subject to applicable law, to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Pledgors to the Administrative Agent or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or a non-exclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Administrative Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers thereunder cannot be obtained with the use of commercially reasonable efforts, which each Pledgor hereby agrees to use) and (b) to take possession of the Article 9 Collateral and without liability for trespass to the applicable Pledgor to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of, removing or selling the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the applicable Uniform Commercial Code or other applicable law. Without limiting the generality of the

 

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foregoing rights and remedies, each Pledgor agrees that the Administrative Agent shall have the right, subject to the mandatory requirements of applicable law (including the Uniform Commercial Code), to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Administrative Agent shall deem appropriate. The Administrative Agent shall be authorized in connection with any sale of a security (if it deems it advisable to do so) pursuant to the foregoing to restrict the prospective bidders or purchasers to persons who represent and agree that they are purchasing such security for their own account, for investment, and not with a view to the distribution or sale thereof. Upon consummation of any such sale of Collateral pursuant to this Section 5.01, the Administrative Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives and releases (to the extent permitted by law) all rights of redemption, stay, valuation and appraisal that such Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

The Administrative Agent shall give the applicable Pledgors ten Business Days’ written notice (which each Pledgor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Administrative Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Administrative Agent may fix and state in the notice (if any) of such sale. The Collateral, or the portion thereof, to be sold at any such sale may be sold in one lot as an entirety or in separate parcels, in the Administrative Agent’s own right or by one or more agents and contractors, upon any premises owned, leased, or occupied by any Pledgor and the Administrative Agent and any such agent or contractor, in conjunction with any such sale, may augment the Inventory to be sold with other goods (all of which other goods shall remain the sole property of the Administrative Agent or such agent or contractor), all as the Administrative Agent may (in its sole and absolute discretion) determine. The Administrative Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In the case of any sale of all or any part of the Collateral made on credit or for future delivery, the Collateral so sold may be retained by the Administrative Agent until the sale price is paid by the purchaser or purchasers thereof, but the Administrative Agent shall not incur any liability in the event that any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in the case of any such failure, such Collateral may be sold again upon notice given in accordance with provisions above. At any public (or, to the extent permitted by law, private) sale made pursuant to this Section 5.01, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Pledgor (all such rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Pledgor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property in accordance with Section 5.02 hereof without further accountability to any Pledgor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Administrative Agent shall be free to carry out such sale pursuant to such agreement and no Pledgor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Administrative Agent shall have entered into such an agreement all Events of Default shall have been

 

23


remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Administrative Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

For the purpose of enabling the Administrative Agent to exercise rights and remedies under this Agreement at such time as the Administrative Agent shall be lawfully entitled to exercise such rights and remedies, each Pledgor hereby grants to the Administrative Agent an irrevocable (subject to the last sentence of this paragraph), nonexclusive license (exercisable without payment of royalty or other compensation to the Pledgors), subject, in the case of Trademarks to sufficient rights to quality control and inspection in favor of such Pledgor to avoid the risk of invalidation of such Trademarks, to use, license or sublicense any of the Intellectual Property Collateral now owned or hereafter acquired by such Pledgor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Administrative Agent may be exercised, at the option of the Administrative Agent, only upon the occurrence and during the continuation of an Event of Default; provided, however, that any license or sublicense to any Intellectual Property granted by the Administrative Agent in accordance herewith shall be binding upon each Pledgor notwithstanding any subsequent cure of an Event of Default.

With respect to the foregoing, the Administrative Agent shall provide the Borrower with seven (7) days’ written notice prior to taking the actions contemplated by this Section 5.01.

Section 5.02. Application of Proceeds. Subject to the terms of the ABL / Term Loan Intercreditor Agreement, the Administrative Agent shall promptly apply the proceeds, moneys or balances of any collection or sale of Collateral, as well as any Collateral consisting of cash, in the manner specified in the Credit Agreement.

The Administrative Agent shall have absolute discretion as to the time of application of any such proceeds, moneys or balances in accordance with this Agreement. Upon any sale of Collateral by the Administrative Agent (including pursuant to a power of sale granted by statute or under a judicial proceeding), the receipt of the purchase money by the Administrative Agent or of the officer making the sale shall be a sufficient discharge to the purchaser or purchasers of the Collateral so sold and such purchaser or purchasers shall not be obligated to see to the application of any part of the purchase money paid over to the Administrative Agent or such officer or be answerable in any way for the misapplication thereof.

Section 5.03. Securities Act, Etc. In view of the position of the Pledgors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar federal statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Administrative Agent if the Administrative Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Administrative Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable Blue Sky or other state

 

24


securities laws or similar laws analogous in purpose or effect. Each Pledgor acknowledges and agrees that in light of such restrictions and limitations, the Administrative Agent, in its sole and absolute discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws or, to the extent applicable, Blue Sky or other state securities laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Administrative Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Administrative Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.03 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Administrative Agent sells.

ARTICLE VI

INDEMNITY, SUBROGATION AND SUBORDINATION

Section 6.01. Indemnity. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03 hereof), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor (other than Holdings) under this Agreement in respect of any Obligation of the Borrower, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor (other than Holdings) shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part an Obligation of the Borrower, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.

Section 6.02. Contribution and Subrogation. Subject to Section 2.07, each Guarantor (other than Holdings) (a “Contributing Guarantor”) agrees (subject to Section 6.03 hereof) that, in the event a payment shall be made by any other Guarantor (other than Holdings) hereunder in respect of any Obligation or assets of any other Guarantor (other than Holdings) shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party and such other Guarantor other than Holdings (the “Claiming Guarantor”) shall not have been fully indemnified by the Borrower as provided in Section 6.01 hereof, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as applicable, in each case multiplied by a fraction of which the numerator shall be the net worth of such Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 7.16 hereof, the date of the supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 6.02 shall be subrogated to the rights of such Claiming Guarantor under Section 6.01 hereof to the extent of such payment.

Section 6.03. Subordination. (a) Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 6.01 and 6.02 hereof and all other rights of indemnity, contribution or subrogation of the Guarantors under applicable law or otherwise shall be fully subordinated to the payment in full in cash or immediately available funds of the Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent

 

25


indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) until such time as this Agreement has been terminated in accordance with Section 7.15(a). No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 6.01 and 6.02 hereof (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of the Borrower with respect to the Obligations or any Guarantor with respect to its obligations hereunder, and the Borrower shall remain liable for the full amount of the Obligations and each Guarantor shall remain liable for the full amount of its obligations hereunder.

(b) The Borrower and each Guarantor hereby agree that all Indebtedness and other monetary obligations owed by it to the Borrower, any other Guarantor or any Subsidiary shall be fully subordinated to the payment in full in cash or immediately available funds of the Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) to the extent subordination is required pursuant to the provisions of Section 6.01(f) of the Credit Agreement, until such time as this Agreement has been terminated in accordance with Section 7.15(a).

ARTICLE VII

MISCELLANEOUS

Section 7.01. Notices. All communications and notices hereunder shall (except as otherwise permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Loan Party shall be given to it in care of the Borrower, with such notice to be given as provided in Section 9.01 of the Credit Agreement.

Section 7.02. Security Interest Absolute. All rights of the Administrative Agent hereunder, the Security Interest in the Article 9 Collateral, the security interest in the Pledged Collateral and all obligations of each Pledgor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations or (d) subject only to termination or release of a Guarantor’s obligations hereunder in accordance with the terms of Section 7.15 hereof any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the Obligations or this Agreement (other than a defense of payment or performance).

Section 7.03. Limitation By Law. All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they shall not render this Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law.

 

26


Section 7.04. Binding Effect; Several Agreement. This Agreement shall become effective as to any party to this Agreement when a counterpart hereof executed on behalf of such party shall have been delivered to the Administrative Agent and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such party and the Administrative Agent and their respective permitted successors and assigns, and shall inure to the benefit of such party, the Administrative Agent and the other Secured Parties and their respective permitted successors and assigns, except that no party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement ,the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

Section 7.05. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party, and all covenants, promises and agreements by or on behalf of any Pledgor or the Administrative Agent that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns; provided that, except with respect to the Contribution no Pledgor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent.

Section 7.06. Administrative Agents Fees and Expenses; Indemnification. The parties hereto agree that the Administrative Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.05 of the Credit Agreement and the provisions of Section 9.05 shall be incorporated by reference herein and apply to each Pledgor mutatis mutandis.

Section 7.07. Administrative Agent Appointed Attorney-in-Fact. Each Pledgor hereby appoints the Administrative Agent the attorney-in-fact of such Pledgor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Administrative Agent may deem necessary to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. The Administrative Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Administrative Agent’s name or in the name of such Pledgor, (a) to receive, endorse, assign or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof, (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral, (c) to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Collateral, (d) to sign the name of any Pledgor on any invoice or bill of lading relating to any of the Collateral, (e) to send verifications of Accounts to any Account Debtor, (f) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the Collateral or to enforce any rights in respect of any Collateral, (g) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral, (h) to notify, or to require any Pledgor to notify, Account Debtors to make payment directly to the Administrative Agent, and (i) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Administrative Agent were the absolute owner of the Collateral for all purposes; provided that nothing herein contained shall be construed as requiring or obligating the Administrative Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Administrative Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Administrative Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

 

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Section 7.08. APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

Section 7.09. Waivers; Amendment. (a) No failure or delay by the Administrative Agent or any Lender in exercising any right, power or remedy hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy, or any abandonment or discontinuance of steps to enforce such a right, power or remedy, preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The rights, powers and remedies of the Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights, powers or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 7.09, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.

(b) 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 Administrative Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement.

Section 7.10. 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 RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. 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 7.10.

Section 7.11. Severability. In the event any one or more of the provisions contained in this Agreement or the other Loan Documents should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby.

Section 7.12. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 7.04 hereof. Delivery of an executed counterpart to this Agreement by facsimile or other electronic transmission shall be as effective as delivery of a manually signed original.

Section 7.13. 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 are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

 

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Section 7.14. Jurisdiction; Consent to Service of Process. (a) Each party to this Agreement hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, 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 shall be heard and determined in such New York State or, to the extent permitted by law, in such federal 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 shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Pledgor, or its properties, in the courts of any jurisdiction.

(b) Each party to this Agreement 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 in any New York State or federal court. 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.

Section 7.15. Termination or Release. (a) This Agreement, the guarantees made herein, the pledges made herein, the Security Interest and all other security interests granted hereby shall terminate when all the Obligations (other than Obligations in respect of Specified Hedge Agreements, Cash Management Obligations and contingent indemnification and reimbursement obligations, in each case, that are not yet due and payable and for which no claim has been asserted) have been paid in full in cash or immediately available funds and the Lenders have no further commitment to lend under the Credit Agreement, the L/C Exposure has been reduced to zero and each Issuing Bank has no further obligations to issue Letters of Credit under the Credit Agreement.

(b) A Subsidiary Loan Party shall automatically be released from its obligations hereunder and the security interests in the Collateral of such Subsidiary Loan Party shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Subsidiary Loan Party ceases to be a Subsidiary Loan Party, is designated as an Unrestricted Subsidiary or otherwise ceases to be a Guarantor (subject to the limitations on releases of Co-Borrower set forth in Section 5.13(b) of the Credit Agreement); provided that such portion of the Lenders as shall be required by the terms of the Credit Agreement to have consented to such transaction (to the extent such consent is required by the Credit Agreement) shall have consented thereto and the terms of such consent did not provide otherwise; provided further to the extent the Term Loan Security Documents are in effect on such date, such Subsidiary Loan Party (and the security interests in the Collateral in respect thereof) shall be released under the Term Loan Security Documents concurrently with the release referred to in this clause (b).

(c) Upon any sale or other transfer by any Pledgor of any Collateral that is permitted under the Credit Agreement to any person that is not a Pledgor, or upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.08 of the Credit Agreement, the security interest in such Collateral shall be automatically released; provided to the extent the Term Loan Security Documents are in effect on such date, the security interests in such Collateral shall be released under the Term Loan Security Documents concurrently with the release referred to in this clause (c).

 

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(d) In connection with any termination or release pursuant to paragraph (a), (b) or (c) of this Section 7.15, the Administrative Agent shall execute and deliver to any Pledgor, at such Pledgor’s expense, all documents that such Pledgor shall reasonably request to evidence such termination or release (including, without limitation, UCC termination statements) and will duly assign and transfer to such Pledgor such of the Pledged Collateral that may be in the possession of the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) and has not theretofore been sold or otherwise applied or released pursuant to this Agreement; provided that the Administrative Agent shall not be required to take any action under this Section 7.15(d) unless such Pledgor shall have delivered to the Administrative Agent together with such request, which may be incorporated into such request, (i) a reasonably detailed description of the Collateral, which in any event shall be sufficient to effect the appropriate termination or release without affecting any other Collateral and (ii) a certificate of a Responsible Officer of the Borrower or such Pledgor certifying that the transaction giving rise to such termination or release is permitted by the Credit Agreement and was consummated in compliance with the Loan Documents. Any execution and delivery of documents pursuant to this Section 7.15 shall be without recourse to or warranty by the Administrative Agent.

Section 7.16. Additional Guarantors. Upon execution and delivery by the Administrative Agent and any Subsidiary that is required to become a party hereto by Section 5.10 of the Credit Agreement of an instrument in the form of Exhibit I hereto, such Subsidiary shall become a Subsidiary Loan Party hereunder with the same force and effect as if originally named as a Subsidiary Loan Party herein. The execution and delivery of any such instrument shall not require the consent of any other party to this Agreement. Upon execution and delivery by the Administrative Agent and Holdings of an instrument in the form of Exhibit I hereto, Holdings shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any such instrument shall not require the consent of any other party to this Agreement. The rights and obligations of each party to this Agreement shall remain in full force and effect notwithstanding the addition of any new party to this Agreement.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

CPG MERGER SUB LLC, as Borrower

By  

/s/ Dan Lukas

  Name: Dan Lukas
  Title:   Authorized Person

 

[Signature Page to ABL Guarantee and Collateral Agreement]


DEUTSCHE BANK AG NEW YORK BRANCH, as
Administrative Agent and Collateral Agent
By:  

/s/ Peter Cucchiara

  Name: Peter Cucchiara
  Title:   Vice President
By:  

/s/ Kirk L. Tashjian

  Name: Kirk L. Tashjian
  Title:   Vice President

 

[Signature Page to ABL Guarantee and Collateral Agreement]


Schedule I

Subsidiary Loan Parties

 

1.

CPG International I Inc.

 

2.

Vycom Corp.

 

3.

Scranton Products Inc.

 

4.

Sanatec Sub I Corporation

 

5.

Santana Products Inc.

 

6.

AZEK Building Products, Inc.

 

7.

TimberTech Limited

 

8.

Procell Decking Inc.

 

9.

VAST Enterprises, LLC

 

10.

CPG Sub I Corporation


Schedule II

A. Pledged Stock

 

Entity

   Form of Entity    Jurisdiction of
Organization
  

Holder(s) of

Equity

Interests/Pledgor

   Percent
Held/Pledged
  Certificated

CPG International Inc.

   Corporation    Delaware    CPG Newco LLC    100%   No

CPG International I Inc.

   Corporation    Delaware    CPG International Inc.    100%   Yes

Vycom Corp.

   Corporation    Delaware    CPG International I Inc.    100%   Yes

Scranton Products Inc.

   Corporation    Delaware    CPG International I Inc.    100%   Yes

Sanatec Sub I Corporation

   Corporation    Delaware    Scranton Products Inc.    100%   Yes

Santana Products Inc.

   Corporation    Delaware    Scranton Products Inc.    100%   Yes

AZEK Building Products, Inc.

   Corporation    Delaware    CPG International I Inc.    100%   Yes

TimberTech Limited

   Limited liability
company
   Ohio    CPG International I Inc.    100%   No

Procell Decking Inc.

   Corporation    Delaware    AZEK Building Products, Inc.    100%   Yes

VAST Enterprises, LLC

   Limited liability
company
   Minnesota    AZEK Building Products, Inc.    100%   No

CPG Sub I Corporation

   Corporation    Delaware    CPG International I Inc.    100%   Yes

AZEK Canada Inc.

   Corporation    Ontario    AZEK Building Products, Inc.    100%/65%   No


B. Debt Securities

 

Pledgor    Debt Security
Holdings, the Borrower and each Subsidiary Loan Party    Global Intercompany Note among Holdings, the Borrower and each Subsidiary Loan Party, in each case as payor and payee, replacing, superseding and canceling the loans and advances made pursuant to (i) the Subordinated Intercompany Notes among CPG International I Inc., as payee, and (A) Procell Decking Inc., as payor, in the original principal amount of $33.0 million, (B) Scranton Products Inc., as payor, in the original principal amount of $33.5 million, (C) AZEK Building Products, Inc., as payor, in the original principal amount of $132.0 million and (D) Scranton Products Inc., as payor, in the original principal amount of $88.0 million and (ii) the intercompany loans by CPG International Inc., CPG International I Inc., Scranton Products Inc., AZEK Building Products, Inc., Santana Products Inc., Sanatec Sub I Corporation, CPG Sub I Corporation, Vycom Corp. and Procell Decking Inc., as payors, to CPG International Inc., CPG International I Inc., Scranton Products Inc., AZEK Building Products, Inc., Santana Products Inc., Sanatec Sub I Corporation, CPG Sub I Corporation, Vycom Corp. and Procell Decking Inc., as payees.


Schedule III

Intellectual Property

1. Patents, Trademarks, Copyrights (Owned)

Please see attached schedules III(1), III(2), III(3) for list of material owned patents, trademarks and copyrights.

2. Third Party IP Agreements

None.


Schedule III(1)

Patents

U.S. PATENTS AND PATENT APPLICATIONS

 

Country    Owner    Title   Application No.     File Date     Patent No.     Issue Date     Status

US

   AZEK Building Products, Inc.    An Apparatus and Method for Edge Sealing of Foam Boards     12/390,037       2/20/2009       8,333,582       12/18/2012     Issued

US

   AZEK Building Products, Inc.    Apparatus and Method for Edge Sealing of Foam Boards     13/716,795       12/17/2012         Pending

US

   AZEK Canada, Inc.    Guard Rail System     09/994,736       11/28/2001       6,702,259       3/9/2004     Issued

US

   AZEK Canada, Inc.    Method of Assembling a Guard Rail     11/409,005       4/24/2006       7,472,482       1/6/2009     Issued

US

   AZEK Building Products, Inc.    Rail Assembly Having a Baluster Swing Bracket     12/836,685       7/15/2010       8,376,321       2/19/2013     Issued

US

   AZEK Building Products, Inc.    Screw Type Fastener     29/356,196       2/22/2010       D651,507       1/3/2012     Issued

US

   AZEK Building Products, Inc.    Universal Skirt Board     12/985,650       1/6/2011         Pending

US

   AZEK Building Products, Inc.    Water Barrier Trim     12/986,413       1/7/2011       8,347,567       1/8/2013     Issued

US

   AZEK Building Products, Inc.    Integrated Drip Edge     29/410,691       1/11/2012       D679,418       4/2/2013     Issued

US

   AZEK Building Products, Inc.    Water Barrier Trim     29/440,517       12/21/2012       D684,706       6/18/2013     Issued

US

   AZEK Building Products, Inc.    Interlocking Decorative Trim System     12/986,483       1/7/2011       8,375,660       2/19/2013     Issued

 

-5-


Country    Owner    Title   Application No.     File Date     Patent No.     Issue Date     Status

US

   AZEK Building Products, Inc.    Finish Grade Trim Base     29/410,009       1/3/2012       D679,420       4/2/2013     Issued

US

   AZEK Building Products, Inc.    Finish Grade Trim     29/410,010       1/3/2012       D679,421       4/2/2013     Issued

US

   AZEK Building Products, Inc.    Universal Bracket     12/819,430       6/21/2010       8,398,058       3/19/2013     Issued

US

   AZEK Building Products, Inc.    Screw Type Fastener Having an Unthreaded Shank     29/369,633       9/10/2010       D637,896       5/17/2011     Issued

US

   AZEK Building Products, Inc.    Bench and Planter Combination     13/347,024       1/10/2012         Pending

US

   AZEK Building Products, Inc.    Adjustable Gate     13/347,013       1/10/2012         Pending

US

   AZEK Building Products, Inc.    Deck Storage Bin System     13/347,002       1/10/2012         Pending

US

   AZEK Building Products, Inc.    Bracket     29/383,111       1/12/2011       D655,149       3/6/2012     Issued

US

   AZEK Building Products, Inc.    Spring Clip Method of use for Installing Railings     13/345,950       1/9/2012         Pending

US

   AZEK Building Products, Inc.    Bottom Rail Bracket Assembly     29/383,114       1/12/2011       D656,813       4/3/2012     Issued

US

   AZEK Building Products, Inc.    Retainer for Railings     29/386,040       2/24/2011       D669,340       10/23/2012     Issued

US

   AZEK Building Products, Inc.    Angle Shim     29/386,039       2/24/2011       D,679,574       4/9/2013     Issued

US

   AZEK Building Products, Inc.    Storage Tub     29/386,765       3/4/2011       D663,525       7/17/2012     Issued

US

   AZEK Building Products, Inc.    Siding Board     29/387,081       3/9/2011       D661,818       6/12/2012     Issued

 

-6-


Country    Owner    Title   Application No.     File Date     Patent No.     Issue Date     Status

US

   AZEK Building Products, Inc.    Lighted Railing and Similar Structures     13/345,970       1/9/2012       8,388,214       3/5/2013     Issued

US

   AZEK Building Products, Inc.    Light Strip for Railings     29/408,376       12/12/2011       D661,010       5/29/2012     Issued

US

   AZEK Building Products, Inc.    Crosshead Pediment     29/401,766       9/15/2011       D674,122       1/8/2013     Issued

US

   AZEK Building Products, Inc.    Crown Moulding     29/407,992       12/6/2011       D666,326       8/28/2012     Issued

US

   AZEK Building Products, Inc.    Universal Skirt Board     29/410,689       1/11/2012       D679,417       4/2/2013     Issued

US

   AZEK Building Products, Inc.    Interlocking Finish Trim     29/422,948       5/25/2012       D679,419       4/2/2013     Issued

US

   AZEK Building Products, Inc.    Interlocking Finish Trim Base     29/422,951       5/25/2012       D679,380       4/2/2013     Issued

US

   AZEK Building Products, Inc.    Column Panel     29/454,249       5/8/2013         Pending

US

   AZEK Building Products, Inc.    Column Panel     29/454,245       5/8/2013         Pending

US

   AZEK Building Products, Inc.    Column Panel     29/454,243       5/8/2013         Pending

US

   AZEK Building Products, Inc.    Corner Reinforcement for Building Trim     29/410,687       1/11/2012       D684,279       6/11/2013     Issued

US

   Scranton Products Inc.    Locker     12/505,017       7/17/2009       8,333,412       12/18/2012     Issued

US

   Scranton Products Inc.    Locker     08/196,660       2/10/1994       5,564,806       10/15/1996     Issued

US

   Scranton Products Inc.    Locker Door Retrofit Assembly     08/356,490       12/15/1994       5,595,426       1/21/1997     Issued

US

   Scranton Products Inc.    Locker Door Retrofit Assembly     08/754,496       11/20/1996       5,810,458       9/22/1998     Issued

 

-7-


Country    Owner    Title   Application No.     File Date     Patent No.     Issue Date     Status

US

   Scranton Products Inc.    Locker Door Retrofit Assembly     09/118,636       7/17/1998       5,951,126       9/14/1999     Issued

US

   Scranton Products Inc.    Fire Retarding Polypropylene Composition     09/004,374       1/8/1998       6,348,122       2/19/2002     Issued

US

   Scranton Products Inc.    Locker Retrofit Assembly     10/821,364       4/9/2004       7,409,805       8/12/2008     Issued

US

   Scranton Products Inc.    Locker Handle     29/358,631       3/30/2010       D653,932       2/14/2012     Issued

US

   Scranton Products    Hinge     29/410,443       1/9/2012         Pending

US

   Scranton Products Inc.    Thermoformed or Molded Partition     12/845,074 1      07/28/2010         Pending

US

   Scranton Products Inc.    Clam Hinge     29/425,900       6/28/2012       D,679,570       4/9/2013     Issued

US

   TimberTech Limited    Synthetic Wood Post Cap     09/824,463       04/02/2001       6,662,515       12/16/2003     Issued

US

   TimberTech Limited    Deck Plank     08/752,813       11/21/1996       5,836,128       11/17/1998     Issued

US

   TimberTech Limited    Deck Plank     09/009,283       01/20/1998       6,131,355       10/17/2000     Issued

US

   TimberTech Limited    Deck Plank     09/162,626       09/29/1998       6,035,588       03/14/2000     Issued

US

   TimberTech Limited    Deck Plank     09/643,806       08/22/2000       6,272,808       08/14/2001     Issued

US

   TimberTech Limited    Method Of Manufacturing A Sacrificial Limb For A Deck Plank     09/413,385       10/06/1999       6,423,257       07/23/2002     Issued

US

   TimberTech Limited    Rail System And Method For Assembly     12/831,064       07/06/2010       8,167,275       05/01/2012     Issued

US

   TimberTech Limited    Rail System And Method For Assembly     13/461,496       05/01/2012         Pending

US

   TimberTech Limited    Fiberglass/Cellulosic Composite And Method For Molding     11/625,196       01/19/2007       7,743,567       6/29/2010     Issued

US

   TimberTech Limited    Methods Of Manufacturing A Lattice Having A Distressed Appearance     11/968,086       12/31/2007       8,074,339       12/13/2011     Issued

 

1 

CPG International Holdings LP intends to abandon this patent application. If and when the patent application is abandoned, the patent application will effectively be removed from the schedules.

 

-8-


Country    Owner    Title   Application No.     File Date     Patent No.     Issue Date     Status

US

   TimberTech Limited    Outdoor Deck Lighting System     12/049,938       03/17/2008       7,686,485       3/30/2010     Issued

US

   TimberTech Limited    Baluster Light System     12/049,967       03/17/2008       7,862,196       01/04/2011     Issued

US

   TimberTech Limited    Deck Lighting System     12/049,929       03/17/2008       7,661,837       2/16/2010     Issued

US

   TimberTech Limited    Stair Riser Light And Method For Installing Same     12/049,979       03/17/2008       7,934,848       5/3/2011     Issued

US

   TimberTech Limited    Bracketing System     11/843,646       08/22/2007       7,913,960       3/29/2011     Issued

US

   TimberTech Limited    Capped Component And Method For Forming     12/635,532       12/10/2009       8,460,797       6/11/2013     Issued

US

   TimberTech Limited    Compression Molding Of Synthetic Wood Material     08/739,416       10/29/1996       6,180,257       1/30/2001     Issued

US

   TimberTech Limited    Compression Molding Of Synthetic Wood Material     09/712,118       11/14/2000       6,511,757       1/28/2003     Issued

US

   TimberTech Limited    Foam Composite Wood Replacement Material     10/038,851       12/31/2001       6,590,004       07/08/2003     Issued

US

   TimberTech Limited    Cellulosic/Polymer Composite Material     10/802,467       03/17/2004       6,971,211       12/06/2005     Issued

US

   TimberTech Limited    Cellulose/Polyolefin Composite Pellet     10/001,530       10/25/2001       6,632,863       10/14/2003     Issued

US

   TimberTech Limited    Water Drainage System For A Deck     09/564,511       05/04/2000       6,393,785       05/28/2002     Issued

US

   TimberTech Limited    Renewable Surface For Extruded Synthetic Wood Material     08/735,334       10/22/1996       5,866,264       02/02/1999     Issued

US

   TimberTech Limited    Multilayer Synthetic Wood Component     09/854,894       05/14/2001       6,579,605       06/17/2003     Issued

US

   TimberTech Limited    Multilayer Synthetic Wood Component     10/421,156       04/23/2003       6,958,185       10/25/2005     Issued

US

   TimberTech Limited    Flexible Wood Composition     09/822,953       03/30/2001       6,617,376       09/09/2003     Issued

US

   TimberTech Limited    Thermally Cooled And Heated Decking     13/471,101       5/14/2012         Pending

US

   TimberTech Limited    Composite Component Having A Multilayer Cap     13/590,143       8/20/2012         Pending

US

   TimberTech Limited    Vinyl Based Cellulose Reinforced Composite     08/791,178       01/31/1997       6,011,091       01/04/2000     Issued

US

   TimberTech Limited    Vinyl Based Cellulose Reinforced Composite     09/439,677       11/15/1999       6,103,791       08/15/2000     Issued

 

-9-


Country    Owner    Title   Application No.     File Date     Patent No.     Issue Date     Status

US

   TimberTech Limited    Vinyl Based Cellulose Reinforced Composite     09/595,690       06/16/2000       6,248,813       06/19/2001     Issued

US

   TimberTech Limited    Variegated Asa Capstock     12/324,768       11/26/2008         Pending

US

   TimberTech Limited    Variegated Asa Capstock     61/696,476       09/04/2012         Pending

US

   TimberTech Limited    Extrusion Of Synthetic Wood Material     08/735,329       10/22/1996       6,117,924       09/12/2000     Issued

US

   TimberTech Limited    Extrusion Of Synthetic Wood Material     10/247,918       09/20/2002       6,984,676       01/10/2006     Issued

US

   TimberTech Limited    Balanced Cooling Of Extruded Synthetic Wood Material     08/735,323       10/22/1996       5,827,462       10/27/1998     Issued

US

   TimberTech Limited    Extrusion Of Synthetic Wood Material     08/741,846       10/31/1996       6,344,504 2      02/05/2002     Issued

US

   TimberTech Limited    Extrusion Of Synthetic Wood Material Using     10/036,053       12/27/2001       6,498,205       12/24/2002     Issued
      Thermoplastic Material In Powder Form          

US

   TimberTech Limited    Cellulosic, Inorganic-Filled Plastic Composite     09/473,377       12/28/1999       6,337,138       01/08/2002     Issued

US

   TimberTech Limited    System For Drying And Processing Cellulosic Compounds     09/443,694       11/19/1999       6,409,952       06/25/2002     Issued

US

   Vast Enterprises, LLC    Method for installing a bounded paving system.     13/254,367       10/17/2011         Pending

US

   Vast Enterprises, LLC    Methods and devices for constructing a wall with brick facade     12/397,988       3/4/2009       8,316,616       11/27/2012     Issued

US

   Vast Enterprises, LLC    Structural paver decking assembly and method for same     12/717,856       03/4/2010       8,336,278       12/25/2012     Issued

US

   Vast Enterprises, LLC    Brick cutting apparatuses and methods     12/395,825       03/2/2009       8,251,052       08/28/2012     Issued

US

   Vast Enterprises, LLC    Method of installing a paving system     12/990,419       11/19/2010         Pending

US

   Vast Enterprises, LLC    Paver System     29281259       06/19/2007       D581549       11/25/2008     Issued

US

   Vast Enterprises, LLC    Paver system     11/435,319       05/16/2006       7,344,334       3/18/2008     Issued

 

2 

One of the named inventors for this patent, Terry Laver, worked for another company, Strandex Corporation. The United States Patent and Trademark Office record shows that no assignment has been recorded from Mr. Laver for this patent and CPG International Inc. does not have an assignment from Mr. Laver.

 

-10-


NON-U.S. PATENTS AND PATENT APPLICATIONS

 

Country    Owner    Title   Application No.     File Date     Patent No.     Issue Date   Status

CA

   AZEK Building Products, Inc.    An Apparatus and Method for Edge Sealing of Foam Boards     2,693,650       2/18/2010         Pending

CA

   AZEK Canada, Inc.    Guard Rail System     2,491,550       1/5/2005         Pending

CA

   AZEK Canada, Inc.    Guard Rail System     2,363,976       11/26/2001       2,363,976     4/26/2005   Issued

CA

   AZEK Building Products, Inc.    Rail Assembly Having a Baluster Swing Bracket     2,746,198       7/13/2011         Pending

CA

   AZEK Building Products, Inc.    Screw Type Fastener     136652       8/10/2010       136652     3/9/2011   Issued

CA

   AZEK Building Products, Inc.    Universal Bracket     2,743,379       6/16/2011         Pending

CN

   AZEK Building Products, Inc.    Universal Bracket     201110214555.2       6/21/2011         Pending

CA

   AZEK Building Products, Inc.    Screw Type Fastener Having Unthreaded Shank     137596       10/21/2010       137596     5/12/2011   Issued

CN

   AZEK Building Products, Inc.    Screw Type Fastener Having an Unthreaded Shank     201030589730.2       11/3/2010       ZL201030589730.2     4/13/2011   Issued

TW

   AZEK Building Products, Inc.    Screw Type Fastener Having Unthreaded Shank     099305915       11/18/2010       D146576     4/21/2012   Issued

CA

   AZEK Building Products, Inc.    Bracket     141284       7/12/2011       141284     2/24/2012   Issued

CA

   AZEK Building Products, Inc.    Bottom Rail Bracket     141283       7/12/2011       141283     2/24/2012   Issued

 

-11-


Country    Owner    Title   Application No.     File Date     Patent No.     Issue Date     Status

CA

   AZEK Building Products,    Retainer for Railings     141929       8/23/2011       141929       3/22/2012     Issued
   Inc.             

CA

   AZEK Building Products,    Angle Shim     141928       8/23/2011       141928       3/19/2012     Issued
   Inc.             

CA

   Scranton ProductsInc.    Locker     2,697,278       3/18/2010         Pending

DE

   Compression Polymers Corp.3    Fire Retarding Polypropylene Composition     199 82 451.7       1/8/1999       199 82 451.7       7/17/2008     Issued

CA

   Scranton Products Inc.    Locker Handle     136458       7/23/2010       136458       2/28/2011     Issued

CA

   Scranton Products Inc.    Thermoformed or Molded Partition     2,747,271       7/26/2011         Pending

MX

   Scranton Products Inc.    Thermoformed or Molded Partition     MX/a/2011/007953       7/27/2011         Pending

CA

   Scranton Products    Hinge     146232       6/28/2012         Pending

MX

   Scranton Products    Hinge     MX/f/2012/002091       10/8/2012         Pending

CA

   Scranton Products Inc.    Clam Hinge     148944       12/13/2012         Pending

MX

   Scranton Products Inc.    Clam Hinge     MX/f/2012/004085       12/19/2012         Pending

 

3 

To be transferred.

 

-12-


Schedule III(2)

Trademarks

 

U.S. TRADEMARK REGISTRATIONS AND APPLICATIONS

 

Country    Owner    Mark    Application
No.
   File Date    Registration
No.
   Registration
Date
   Status
US    AZEK Building Products, Inc.    AZEK    78/594,481    3/24/2005    3,068,158    3/14/2006    Registered
US    AZEK Building Products, Inc.    AZEK    78/071,690    6/29/2001    2,696,724    3/11/2003    Registered
US    AZEK Building Products, Inc.    PROCELL    77/225,010    7/9/2007    3,397,777    3/18/2008    Registered
US    AZEK Building Products, Inc.    AZEK TRIM and Design    77/319,019    11/1/2007    3,495,156    9/2/2008    Registered
US    AZEK Building Products, Inc.    AZEK Moulding and Design    77/319,029    11/1/2007    3,461,329    7/8/2008    Registered
US    AZEK Building Products, Inc.    AZEK Deck and Design    77/319,059    11/1/2007    3,466,497    7/15/2008    Registered
US    AZEK Building Products    Vintec    74/396,882    6/1/1993    1,821,342    2/15/1994    Registered
US    AZEK Building Products    Celtec    73/646,733    2/17/1987    1,458,348    9/22/1987    Registered
US    AZEK Building Products    Once You Look, It’s All You’ll See    78/487,138    9/21/2004    3,121,847    7/25/2006    Registered
US    AZEK Building Products, Inc.    AZEK PORCH and Design    77/493,961    6/9/2008    3,569,527    2/3/2009    Registered
US    AZEK Canada, Inc.    Fensations    76/644,936    8/15/2005    3,383,684    2/19/2008    Registered
US    AZEK Building Products, Inc.    HARVEST COLLECTION    77/861,605    10/30/2009    3,868,585    10/26/2010    Registered
US    AZEK Building Products, Inc.    KONA    77/861,614    10/30/2009    3,806,726    6/22/2010    Registered
US    AZEK Building Products, Inc.    FAWN    77/861,622    10/30/2009    3,855,187    9/28/2010    Registered
US    AZEK Building Products, Inc.    SEDONA    77/861,631    10/30/2009    3,892,034    12/21/2010    Registered

 

-13-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status
US    AZEK Building Products, Inc.    TAHOE      77/861,643        10/30/2009        3,806,730        6/22/2010      Registered
US    AZEK Building Products, Inc.    ARBOR COLLECTION      77/861,638        10/30/2009        3,806,729        6/22/2010      Registered
US    AZEK Building Products, Inc.    ACACIA      77/861,650        10/30/2009        3,855,188        9/28/2010      Registered
US    AZEK Building Products, Inc.    REDLAND ROSE      77/861,658        10/30/2009        3,892,035        12/21/2010      Registered
US    AZEK Building Products, Inc.    MARIPOSA      85/958,134        6/12/2013            Pending
US    AZEK Building Products, Inc.    MORADO      77/861,675        10/30/2009        3,855,189        9/28/2010      Registered
US    AZEK Building Products, Inc.    COBRE      77/861,680        10/30/2009        3,877,979        11/16/2010      Registered
US    AZEK Building Products, Inc.    SILVER OAK      77/861,684        10/30/2009        3,952,777        4/26/2011      Registered
US    AZEK Building Products, Inc.    AZEK RAIL AND DESIGN      77/927,147        2/3/2010        3,844,774        9/7/2010      Registered
US    AZEK Building Products, Inc.    MODENA      85/195,469        12/10/2010        3,997,331        7/19/2011      Registered
US    AZEK Building Products, Inc.    VILLA      85/348,055        6/16/2011        4,090,685        1/24/2012      Registered
US    AZEK Building Products, Inc.    OYSTER      85/551,141        2/23/2012        4,213,907        9/25/2012      Registered
US    AZEK Building Products, Inc.    PREMIER RAILING      85/551,098        2/23/2012            Pending
US    AZEK Building Products, Inc.    AZEK and Design      85/697,369        8/7/2012        4,323,511        4/23/2013      Registered
US    CCP Holdings Inc.4    Premier Composite Railing & Deck      76/488,955        2/5/2003        3,382,299        2/12/2008      Registered
      and Design               
US    Scranton Products Inc.    Poly-Mar HD      74/309,678        9/1/1992        1,785,556        8/3/1993      Registered
US    Scranton Products Inc.    Poly-Marble HD      74/310,043        9/2/1992        1,781,445        7/13/1993      Registered

 

4 

To be transferred.

 

-14-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status
US    Scranton Products Inc.    Hiny Hiders      74/309,661        9/1/1992        1,772,990        5/25/1993      Registered
US    Scranton Products Inc.    Hiny Hiders and Design      78/864,403        4/19/2006        3,293,859        9/18/2007      Registered
US    Scranton Products Inc.    Sanatec      74/640,108        2/24/1995        1,951,251        1/23/1996      Registered
US    Scranton Products Inc.    Protec      74/396,884        6/1/1993        1,821,344        2/15/1994      Registered
US    Scranton Products Inc.    Flametec      75/905,554        1/25/2000        2,452,876        5/22/2001      Registered
US    Scranton Products Inc.    Hitec      74/396,883        6/1/1993        1,833,834        5/3/1994      Registered
US    Scranton Products Inc.    Tufftec Lockers      78/405,595        4/21/2004        2,947,960        5/10/2005      Registered
US    Scranton Products Inc.    Playboard      78/283,720        8/6/2003        2,945,195        4/26/2005      Registered
US    Scranton Products Inc.    Grip X      78/283,715        8/6/2003        2,945,194        4/26/2005      Registered
US    Scranton Products Inc.    Seaboard      78/308,394        10/2/2003        2,930,670        3/8/2005      Registered
US    Scranton Products Inc.    Kytec      75/910,088        1/26/2000        2,511,775        11/27/2001      Registered
US    Scranton Products, Inc.    Ultra White      78/757,958        11/21/2005        3,186,396        12/19/2006      Registered
US    Scranton Products, Inc.    COMTEC INDUSTRIES      85/058,293        6/9/2010        3,907,932        1/18/2011      Registered
US    Scranton Products, Inc.    SCRANTON PRODUCTS AND DESIGN      85/062,238        6/14/2010        3,908,051        1/18/2011      Registered
US    Scranton Products, Inc.    SCRANTON PRODUCTS      85/058,348        6/9/2010        3,871,769        11/2/2010      Registered
US    Scranton Products, Inc.    VYCOM      85/058,299        6/9/2010        3,907,933        1/18/2011      Registered
US    Scranton Products, Inc.    WHERE QUALITY MEETS PERFORMANCE      85/070,837        6/24/2010        3,908,104        1/18/2011      Registered
US    Scranton Products, Inc.    VYCOM OLEFIN & PVC SOLUTIONS AND DESIGN      85/062,961        6/15/2010        3,908,054        1/18/2011      Registered

 

-15-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status
US    Scranton Products, Inc.    POLYCARVE      85/070,828        6/24/2010        3,911,214        1/25/2011      Registered
US    Scranton Products, Inc.    RESISTALL      85/116,708        8/26/2010        3,946,346        4/12/2011      Registered
US    Scranton Products, Inc.    DesignBoard      85/428,383        9/21/2011        4,319,071        4/9/2013      Registered
US    Scranton Products, Inc.    DURALIFE LOCKERS      85/650,695        6/13/2012        4397391        9/3/2013      Registered
US    Scranton Products, Inc.    TUFFTEC      85939682        5/22/2013            Pending
US    Scranton Products, Inc.    EX      85939710        5/22/2013            Pending
US    Scranton Products, Inc.    ENDURABOND      85944758        5/29/2013            Pending
US    Scranton Products, Inc.    ENDURALITE      85/796,381        12/6/2012            Pending
US    TimberTech Limited    BUILDERBOARD      78/693,198        08/16/2005        3,178,753        11/28/2006      Registered
US    TimberTech Limited    BUILDERRAIL      77/142,784        03/28/2007        3,412,440        04/15/2008      Registered
US    TimberTech Limited    LOGO      77/161,506        4/20/2007        3,415,387        04/22/2008      Registered
US    TimberTech Limited    CONCEALOC      78/951,964        08/15/2006        3,433,341        05/20/2008      Registered
US    TimberTech Limited    EARTHWOOD      78/646,899        06/09/2005        3,184,871        12/12/2006      Registered
US    TimberTech Limited    EARTHWOOD EVOLUTIONS      85/012,497        04/13/2010        3,986,813        06/28/2011      Registered
US    TimberTech Limited    FENCESCAPE      77/042,329        11/13/2006        3,382,509        02/12/2008      Registered
US    TimberTech Limited    FLOORIZON      78/465,462        08/11/2004        3,163,622        10/24/2006      Registered
US    TimberTech Limited    LESS WORK. MORE LIFE.      78/047,349        02/08/2001        2,652,749        11/19/2002      Registered
US    TimberTech Limited    LOOKS BETTER. LASTS LONGER.      77/075,658        01/04/2007        3,450,242        06/17/2008      Registered

 

-16-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status
US    TimberTech Limited    LOGO      75/100,026        05/07/1996        2,112,994        11/11/1997      Registered
US    TimberTech Limited    RADIANCERAIL      78/646,901        06/09/2005        3,216,481        03/06/2007      Registered
US    TimberTech Limited    RADIANCERAIL EXPRESS      85/351,440        06/21/2011        4,108,138        03/06/2012      Registered
US    TimberTech Limited    RELIABOARD      77/768,867        06/26/2009        3,874,378        11/09/2010      Registered
US    TimberTech Limited    SECURE-MOUNT POST      77/840,457        10/02/2009        3,851,829        09/21/2010      Registered
US    TimberTech Limited    TIMBERTECH      75/100,025        05/07/1996        2,112,993        11/11/1997      Registered
US    TimberTech Limited    LOGO      75/100,027        05/07/1996        2,112,995        11/11/1997      Registered
US    TimberTech Limited    TOPLOC      85/063,944        06/16/2010        4,003,707        07/26/2011      Registered
US    TimberTech Limited    TOPLOC      86/050308        08/28/2013            Pending
US    TimberTech Limited    TWINFASCIA      78/465,460        08/11/2004        3,133,999        08/22/2006      Registered
US    TimberTech Limited    TWINFINISH      78/205,132        01/20/2003        2,925,850        02/08/2005      Registered
US    TimberTech Limited    TWINRISER      78/887,449        05/19/2006        3,321,644        10/23/2007      Registered
US    TimberTech Limited    VALUPLANK      77/242,754        07/31/2007        3,728,937        12/22/2009      Registered
US    TimberTech Limited    XLM      77/161,687        04/20/2007        3,412,485        04/15/2008      Registered
US    TimberTech Limited    YOU’LL NEVER FIND WOOD      85/168,827        11/04/2010            Pending
      THIS GOOD               
US    Vast Enterprises, LLC    LOGO      77/205,254        6/13/2007        3,391,274        3/4/2008      Registered

 

-17-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status
US    Vast Enterprises, LLC    Vast      77/205,159        6/13/2007        3,391,272        3/4/2008      Registered
STATE - OH    TimberTech Limited    TIMBERTECH            1075726        5/4/1999      Registered
STATE - PA    Santana Products Inc.    POLY - MARBLE HD      03-010685           2094359        6/12/1992      Registered
STATE - PA    Santana Products Inc.    HINY HIDERS      03-010684           2094360        6/12/1992      Registered
STATE - PA    Santana Products Inc.    POLY - MAR HD      03-010686           2094357        6/12/1992      Registered
STATE - PA    Santana Products Inc.    SANTANA      01-103479           1614684        10/19/1990      Registered

 

-18-


NON-U.S. TRADEMARK REGISTRATIONS AND APPLICATIONS

 

Country    Owner    Mark   

Application

No.

     File Date      Registration
No.
     Registration
Date
     Status

ARGENTINA

   AZEK Building Products, Inc.    AZEK      2.835.124        6/30/2008        2.311.264        9/4/2009      Registered

AUSTRALIA

   AZEK Building Products, Inc.    AZEK      1247932        6/24/2008        1247932        6/24/2008      Registered

BERMUDA

   AZEK Building Products, Inc.    AZEK      48239        7/4/2008        48239        7/4/2008      Registered

BRAZIL

   AZEK Building Products, Inc.    AZEK      901047600        7/15/2008        901047600        11/9/2010      Registered

CANADA

   AZEK Building Products, Inc.    AZEK      1,331,590        1/17/2007        TMA711,762        4/14/2008      Registered

COSTA RICA

   AZEK Building Products, Inc.    AZEK      2008-6495        7/4/2008        183418        12/18/2008      Registered

DOMINICAN REPUBLIC

   AZEK Building Products, Inc.    AZEK      2008-28199        7/2/2008        169612        9/15/2008      Registered

EUROPEAN UNION (CTM)

   AZEK Building Products, Inc.    AZEK      005621149        1/17/2007        005621149        4/11/2008      Registered

INDIA

   AZEK Building Products, Inc.    AZEK      1702935        6/24/2008        1702935        11/22/2010      Registered

SOUTH KOREA

   AZEK Building Products, Inc.    AZEK      40-2008-0033534        7/8/2008        0791608        6/9/2009      Registered

MEXICO

   AZEK Building Products, Inc.    AZEK      830574        1/17/2007        1007487        10/22/2007      Registered

MEXICO

   AZEK Building Products, Inc.    AZEK      830575        1/17/2007        1007488        10/22/2007      Registered

NEW ZEALAND

   AZEK Building Products, Inc.    AZEK      791673        6/24/2008        791673        6/24/2008      Registered

RUSSIAN FEDERATION

   AZEK Building Products, Inc.    AZEK      2008720470        6/27/2008        383728        7/15/2009      Registered

SAUDI ARABIA

   AZEK Building Products, Inc.    AZEK      132336        6/28/2008        1108/24        11/15/2009      Registered

TURKEY

   AZEK Building Products, Inc.    AZEK      2008/37905        6/26/2008        2008/37905        7/28/2009      Registered

 

-19-


Country    Owner    Mark   

Application

No.

     File Date      Registration
No.
     Registration
Date
     Status

AUSTRALIA

   AZEK Building Products, Inc.    Procell      1216438        12/18/2007        1216438        12/18/2007      Registered

CANADA

   AZEK Building Products, Inc.    PROCELL      1,371,929        11/14/2007        TMA741,441        6/4/2009      Registered

CHILE

   AZEK Building Products, Inc.    PROCELL      802-327        1/9/2008        820.591        6/26/2008      Registered

CHINA

   AZEK Building Products, Inc.    PROCELL      6496593        1/7/2008        6496593        4/14/2010      Registered

EUROPEAN UNION (CTM)

   AZEK Building Products, Inc.    PROCELL      006552269        1/3/2008        006552269        10/8/2008      Registered

MEXICO

   AZEK Building Products, Inc.    PROCELL      905544        1/7/2008        1036971        4/28/2008      Registered

RUSSIAN

   AZEK Building Products, Inc.    PROCELL      2007740842        12/25/2007        374390        3/12/2009      Registered

FEDERATION TURKEY

   AZEK Building Products, Inc.    PROCELL      2007/68973        12/26/2007        200768973        12/26/2008      Registered

UKRAINE

   AZEK Building Products, Inc.    PROCELL      m200800121        1/8/2008        109320        7/10/2009      Registered

NEW ZEALAND

   Vycom Corp.    Vintec      230947        10/11/1993        230947        10/11/1993      Registered

NEW ZEALAND

   Vycom Corp.    Celtec      230946        10/11/1993        230946        10/11/1993      Registered

MEXICO

   Compression Polymers Corp.    Once You Look, It’s All You See      701,219        2/9/2005        905705        10/27/2005      Registered

MEXICO

   Compression Polymers Corp.    Once You Look, It’s All You’ll See      701,220        2/9/2005        905706        10/27/2005      Registered

WIPO

   Compression Polymers Corp.    Once You Look, It’s All You’ll See            854775        2/2/2005      Registered

CANADA

   AZEK Building Products, Inc.    HARVEST COLLECTION      1,478,846        4/28/2010        TMA793,919        3/25/2011      Registered

CANADA

   AZEK Building Products, Inc.    KONA      1,478,845        4/28/2010            Pending

CANADA

   AZEK Building Products, Inc.    TAHOE      1,478,847        4/28/2010        TMA793,914        3/25/2011      Registered

CANADA

   AZEK Building Products, Inc.    ARBOR COLLECTION      1,478,844        4/28/2010        TMA793,921        3/25/2011      Registered

 

-20-


Country    Owner    Mark   

Application

No.

     File Date      Registration
No.
     Registration
Date
     Status

CANADA

   AZEK Building Products, Inc.    COBRE      1,478,852        4/28/2010        TMA824,666        5/23/2012      Pending

CANADA

   AZEK Building Products, Inc.    AZEK RAIL & DESIGN      1,490,880        8/3/2010        TMA804,039        8/10/2011      Registered

CANADA

   AZEK Building Products, Inc.    TERRA COLLECTION      1,479,039        4/29/2010        TMA825,144        5/30/2012      Registered

CANADA

   AZEK Building Products, Inc.    MODENA      1,530,879        6/8/2011        TMA845,425        3/7/2013      Registered

MEXICO

   AZEK Building Products, Inc.    MODENA      1184783        6/8/2011        1251134        11/11/2011      Registered

CANADA

   AZEK Building Products, Inc.    OYSTER      1,587,038        7/20/2012            Pending

AUSTRALIA

   AZEK Building Products, Inc.    AZEK and Design      1537851        1/29/2013        1537851        5/29/2013      Registered

BRAZIL

   AZEK Building Products, Inc.    AZEK and Design      840410468        2/1/2013            Pending

CANADA

   AZEK Building Products, Inc.    AZEK and Design      1,613,153        2/7/2013            Pending

CHILE

   AZEK Building Products, Inc.    AZEK and Design      1.044.527        2/4/2013            Pending

COLOMBIA

   AZEK Building Products, Inc.    AZEK and Design      13-020244        2/4/2013            Pending

EUROPEAN UNION (CTM)

   AZEK Building Products, Inc.    AZEK and Design      011586691        2/6/2013        011586691        6/28/2013      Pending

CANADA

   AZEK Canada, Inc.    Fensations      1,267,897        8/10/2005        TMA678,451        12/12/2006      Registered

CANADA

   AZEK Canada, Inc.    TRADEMARK      1,281,331        11/30/2005        TMA731,442        12/23/2008      Registered

GERMANY

   Compression Polymers Corp.5    FLAME TEC      30055516        7/25/2000        30055516        4/2/2001      Registered

JAPAN

   Compression Polymers Group    FLAMETEC      2000-081494        7/24/2000        4445565        1/12/2001      Registered

AUSTRALIA

   Compression Polymers Corp.    Seaboard      996221        4/1/2004        996221        7/25/2005      Registered

 

5 

To be transferred.

 

-21-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status
CANADA    Compression Polymers Corp.    Seaboard      1,212,045        4/2/2004        657,224        1/24/2006      Registered
INDIA    Compression Polymers Corp.    ONCE YOU LOOK, IT’S ALL YOU SEE      1342920        3/7/2005            Pending
INDIA    Compression Polymers Corp.    ONCE YOU LOOK, IT’S ALL YOU SEE      1344691        3/15/2005        755388        09/24/2008      Registered
MEXICO    Santana Products, Inc.    SANTANA      489723        6/8/2001        831700        4/21/2004      Registered
MEXICO    Santana Products, Inc.    SANTANA      489724        6/8/2001        709333        7/30/2001      Registered
MEXICO    Santana Products, Inc.    SANTANA      489725        6/8/2001        709334        7/30/2001      Registered
CANADA    Scranton Products, Inc.    COMTEC INDUSTRIES      1,506,789        12/7/2010        TMA813,246        12/2/2011      Registered
MEXICO    Scranton Products, Inc.    COMTEC INDUSTRIES      1141007        12/9/2010        1245484        10/19/2011      Registered
CANADA    Scranton Products, Inc.    SCRANTON PRODUCTS & DESIGN      1,506,791        12/7/2010        TMA813,243        12/2/2011      Registered
MEXICO    Scranton Products, Inc.    SCRANTON PRODUCTS AND DESIGN      1140105        12/7/2010        1245483        10/19/2011      Registered
MEXICO    Scranton Products, Inc.    SCRANTON PRODUCTS AND      1140106        12/7/2010        1274898        3/23/2012      Registered
      DESIGN               
CANADA    Scranton Products, Inc.    SCRANTON PRODUCTS      1,506,799        12/7/2010        TMA826,472        6/18/2012      Registered
MEXICO    Scranton Products, Inc.    SCRANTON PRODUCTS      1140102        12/7/2010        1257584        12/12/2011      Registered
MEXICO    Scranton Products, Inc.    SCRANTON PRODUCTS      1140103        12/7/2010        1257585        12/12/2011      Registered
CANADA    Scranton Products, Inc.    VYCOM      1,506,786        12/7/2010        TMA813,244        12/2/2011      Registered
CANADA    Scranton Products, Inc.    WHERE QUALITY MEETS PERFORMANCE      1,506,792        12/7/2010        TMA813,245        12/2/2011      Registered

 

-22-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status
MEXICO    Scranton Products, Inc.    WHERE QUALITY MEETS PERFORMANCE      0065362        12/9/2010        67177        1/26/2012      Registered
CANADA    Scranton Products, Inc.    V COM OLEFIN AND PVC SOLUTIONS & DESIGN      1,506,790        12/7/2010        TMA813,256        12/2/2011      Registered
CANADA    Scranton Products, Inc.    CORRTEC      1,506,788        12/7/2010        TMA850172        5/3/2013      Registered
MEXICO    Scranton Products, Inc.    CORRTEC      1140101        12/7/2010        1246307        10/21/2011      Registered
CANADA    Scranton Products, Inc.    POLYCARVE      1,508,691        12/21/2010        TMA834,523        10/17/2012      Registered
MEXICO    Scranton Products, Inc.    POLYCARVE      1168339        4/4/2011        1263484        1/27/2012      Registered
MEXICO    Scranton Products, Inc.    CELTEC      1114618        8/25/2010        1198969        1/27/2011      Registered
CANADA    Scranton Products, Inc.    RESISTALL      1,512,133        1/21/2011            Pending
CANADA    Scranton Products, Inc.    DURALIFE LOCKER      1,606,485        12/13/2012            Pending
MEXICO    Scranton Products, Inc.    DURALIFE LOCKER      1332658        12/10/2012            Pending
CANADA    TimberTech Limited    BUILDERRAIL      1,342,127        04/04/2007        TMA745,614        08/18/2009      Registered
CANADA    TimberTech Limited    LOGO      1,357,918        07/31/2007        TMA803,183        07/29/2011      Registered
CTM    TimberTech Limited    LOGO      006154785        07/31/2007        006154785        08/18/2008      Registered
CANADA    TimberTech Limited    CONCEALOC      1,331,854        01/18/2007        TMA705,772        01/25/2008      Registered
CTM    TimberTech Limited    CONCEALOC      005937511        05/25/2007        005937511        04/25/2008      Registered
CANADA    TimberTech Limited    DOCKSIDER      1,309,033        07/13/2006        TMA721,545        08/21/2008      Registered
CTM    TimberTech Limited    DOCKSIDER      005204128        07/18/2006        005204128        07/05/2007      Registered
CANADA    TimberTech Limited    EARTHWOOD      1,282,525        12/09/2005        TMA680,750        01/31/2007      Registered

 

-23-


Country    Owner    Mark    Application No.      File Date      Registration No.      Registration
Date
     Status
FRANCE    TimberTech Limited    EARTHWOOD      10/3728292        03/30/2010        103728292        12/08/2005      Registered
GERMANY    TimberTech Limited    EARTHWOOD      302010000635.8/19        12/08/2005        302010000635        07/19/2010      Registered
SPAIN    TimberTech Limited    EARTHWOOD      2907927/6        12/30/2009        2907927        06/02/2010      Registered
UK    TimberTech Limited    EARTHWOOD      2535980        12/08/2005        2535980        05/21/2010      Registered
BENELUX    TimberTech Limited    EARTHWOOD      0200970        12/08/2005        0200970        05/20/2010      Registered
SPAIN    TimberTech Limited    TIMBERTECH CATALUNYA      2853148/5        11/19/2008        2853148/5        03/16/2009      Registered
SPAIN    TimberTech Limited    LOGO      2856393/X        12/12/2008        2856393/X        06/12/2009      Registered
SPAIN    TimberTech Limited   

TIMBERTECH ESPAÑA. LESS WORK MORE LIFE

     2859139/9        01/13/2009        2859139/9        05/20/2009      Registered
SPAIN    TimberTech Limited    TIMBERTECH ESPAÑA      2878862/1        06/04/2009        2878862/1        10/16/2009      Registered
CANADA    TimberTech Limited    FENCESCAPE      1,337,089        02/27/2007        TMA713,281        05/01/2008      Registered
CANADA    TimberTech Limited    FLOORIZON      1,350,127        06/04/2007        TMA721,739        08/22/2008      Registered
CANADA    TimberTech Limited    RADIANCERAIL      1,282,522        12/09/2005        TMA680,751        01/31/2007      Registered
CTM    TimberTech Limited    RADIANCERAIL      004772381        12/08/2005        004772381        12/14/2006      Registered
NEW
ZEALAND
   TimberTech Limited    TIMBERTECH      679568        05/23/2003        679568        05/23/2003      Registered
BRAZIL    TimberTech Limited    TIMBERTECH      820405132        11/24/1997        820405132        03/27/2001      Registered
BRAZIL    TimberTech Limited    LOGO      820405124        11/24/1997        820405124        03/27/2001      Registered
CANADA    TimberTech Limited    TIMBERTECH      1,017,584        06/02/1999        638,171        04/22/2005      Registered

 

-24-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status
CANADA    TimberTech Limited    LOGO      1,017,585        06/02/1999        TMA647,133        09/01/2005      Registered
CTM    TimberTech Limited    TIMBERTECH      000671347        11/05/1997        000671347        04/23/1999      Registered
CTM    TimberTech Limited    LOGO      000671453        11/05/1997        000671453        03/22/1999      Registered
JAPAN    TimberTech Limited    LOGO      53136/99        06/15/1999        04450396        02/02/2001      Registered
CANADA    TimberTech Limited    TWINFINISH      1,282,526        12/09/2005        TMA683,521        03/13/2007      Registered
CTM    TimberTech Limited    TWINFINISH      004772951        12/08/2005        004772951        12/14/2006      Registered
CANADA    TimberTech Limited    VALUPLANK      1,379,650        01/17/2008        TMA744,955        08/10/2009      Registered
CTM    TimberTech Limited    VALUPLANK      006545479        12/28/2007        006545479        11/27/2009      Registered
CANADA    TimberTech Limited    XLM      1,357,920        07/31/2007        TMA775,140        08/20/2010      Registered
CTM    TimberTech Limited    XLM      006154082        07/31/2007        006154082        08/18/2008      Registered
CANADA    TimberTech Limited    EVOLUTIONS RAIL      1,588,040        07/30/2012            Pending
CTM    TimberTech Limited    EVOLUTIONS RAIL      011092186        08/06/2012        011092186        12/28/2012      Registered
UAE    TimberTech Limited    TIMBERTECH & DEVICE (in black & white)      179982        09/30/2012            Pending
UNITED
KINGDOM
   Vycom Corp.    CELTEC      1,547,946        9/16/1993        1,547,946        12/04/1998      Registered
AUSTRALIA    Vycom Corp.    CELTEC      613822        10/14/1993        A613822        12/20/1994      Registered
AUSTRALIA    Vycom Corp.    VINTEC      613823        10/14/1993        A613823        12/20/1994      Registered

 

-25-


Schedule III(3)

U.S. COPYRIGHT REGISTRATIONS AND APPLICATIONS

 

Country    Record Owner    Copyright Title    Registration Number    Registration Date
United States    AZEK Building Products, Inc.    Azek Trimboards installation guidelines.    TX0006265403    01/18/2006
United States    AZEK Building Products, Inc.    Azek Trimboards limited warranty.    TX0006265404    01/18/2006

NON-U.S. COPYRIGHT REGISTRATIONS AND APPLICATIONS

None.

REGISTERED DOMAIN NAMES

 

azek.biz

azek.com

azek.info

azek.net

azek.us

azekbuildingproducts.com

azekdeck.com

azekdecking.com

azekindustries.com

azeksucks.biz

azeksucks.com

azeksucks.info

azeksucks.net

azeksucks.org

azeksucks.us

azektrimboardssuck.biz

azektrimboardssuck.com

azektrimboardssuck.info

azektrimboardssuck.net

azektrimboardssuck.org

azektrimboardssuck.us

azektrimboardssucks.biz

azektrimboardssucks.com

azektrimboardssucks.info

azektrimboardssucks.net

azektrimboardssucks.org

azektrimboardssucks.us

azektrimboardsucks.biz

azektrimboardsucks.com

azektrimboardsucks.info

azektrimboardsucks.org

azektrimboardsucks.us

azekworldwide.com

celtecmarine.com

celtecmarine.us

composatron.com

compressionpolymers.biz

compressionpolymers.com

compressionpolymers.net

compressionpolymers.org

compressionpolymers.us

compressionpolymerscorp.biz

compressionpolymerscorp.com

compressionpolymerscorp.info

compressionpolymerscorp.net

compressionpolymerscorp.org

compressionpolymerscorp.us

comtecindustries.biz

comtecindustries.com

comtecindustries.info

comtecindustries.net

comtecindustries.org

comtecindustries.us

cpcorp.biz cpcorp.info

cpcorp.us cpg-int.com

cpg-vycom.biz

cpg-vycom.com

cpg-vycom.net

cpg-vycom.org

cpg-vycom.us

cpggreeninitiative.com

cpggreeninitiative.net

cpgint.com

cpgintsustainability.com

cpgintsustainability.net

cpgsustainabilitymission.com

cpgsustainabilitymission.net

dieblock.com

dieblok.com

hinyhider.com

hinyhiders.com

hyzek.com hyzek.net

procelldeck.com

procelldecking.com

procelldecks.com

santanaproducts.com

scranton-products.com

scrantonprod.com

scrantonproducts.com

seaboard-marine.com

timbertech.com

vycom.biz

vycom.info

vycom.org

vycom.us

vycomcorp.com

vycomcorp.info

 

 

-26-


vycomcorp.net

vycomcorp.org

vycomcorp.us

cpgdirect.com

azekdirect.com

builderrail.com

concealoc.com

concealock.com

discoverrail.com

dogsondecks.com

earthwoodevolutions.com

extremelowmaintenance.com

fencescape.com

floorizon.com

lessworkmorelife.com

radiancerail.com

securemountpost.com

timbertech.com

timbertechcontractor.com

 

timbertechglobaldirect.com

timbertechpress.com

timbertechpro.com

timbertechstore.com

twinfinish.com

deckedoutforlife.com

evolutionsrail.com

fencescapedirect.com

fencescaping.com

fencingscape.com

radiancerailexpress.com

styleselectiondeck.com

styleselectiondecking.com

styleselectionrail.com

styleselectionrailing.com

styleselectionsdeck.com

styleselectionsdecking.com

styleselectionsdecking.net

styleselectionsrail.com

 

styleselectionsrailing.com

timbertechdirect.com

timbertechfencescape.com

timbertechfencing.com

timbertech.ie

timbertech.cl

timbertech.co.cr

timbertech.com.co

timbertech.com.pa

timbertech.co.za

timbertechdeutschland.de

timbertechoesterreich.at

timbertechschweiz.ch

timberech.com.br

timbertech.pt

timbertechespana.es

timbertechespana.es

timbertech.fr

 

 

-27-


Schedule IV

Filing Jurisdictions

 

Entity

  

Filing Jurisdiction

CPG International Inc.

   Delaware

CPG International I Inc.

   Delaware

Vycom Corp.

   Delaware

Scranton Products Inc.

   Delaware

Sanatec Sub I Corporation

   Delaware

Santana Products Inc.

   Delaware

AZEK Building Products, Inc.

   Delaware

TimberTech Limited

   Ohio

Procell Decking Inc.

   Delaware

VAST Enterprises, LLC

   Minnesota

CPG Sub I Corporation

   Delaware

CPG Newco LLC

   Delaware

 

 

-28-


Schedule V

Commercial Tort Claims

None.

 

-29-


Schedule VI

Matters Relating to Accounts and Inventory

None.

 

-30-


Schedule VII

Jurisdictions of Organization, Locations of Chief Executive Offices

 

Entity

  

Jurisdiction of
Organization

   Identification
Number
  

Location of Chief Executive Office

CPG International Inc.

   Delaware    3937658   

888 N. Keyser Avenue

Scranton, PA 18504

CPG International I Inc.

   Delaware    3953009   

888 N. Keyser Avenue

Scranton, PA 18504

Vycom Corp.

   Delaware    4068646   

888 N. Keyser Avenue

Scranton, PA 18504

Scranton Products Inc.

   Delaware    3359187   

888 N. Keyser Avenue

Scranton, PA 18504

Sanatec Sub I Corporation

   Delaware    4068653   

888 N. Keyser Avenue

Scranton, PA 18504

Santana Products Inc.

   Delaware    3564527   

888 N. Keyser Avenue

Scranton, PA 18504

AZEK Building Products, Inc.

   Delaware    3359183   

888 N. Keyser Avenue

Scranton, PA 18504

TimberTech Limited

   Ohio    1047360   

894 Prairie Avenue

Wilmington, OH 45177

Procell Decking Inc.

   Delaware    4068656   

888 N. Keyser Avenue

Scranton, PA 18504

VAST Enterprises, LLC

   Minnesota    20-4245524   

1828 Marshall Street N.E., Suite 15A,

Minneapolis, MN 55418

CPG Sub I Corporation

   Delaware    4068643   

888 N. Keyser Avenue

Scranton, PA 18504

CPG Newco LLC

   Delaware    5384228   

888 N. Keyser Avenue

Scranton, PA 18504

 

-31-


Exhibit I

to Guarantee and

Collateral Agreement1

SUPPLEMENT NO.                dated as of                        (this “Supplement”), to the ABL Guarantee and Collateral Agreement dated as of September 30, 2013 (the “Guarantee and Collateral Agreement”), among CPG MERGER SUB LLC, a Delaware limited liability company (prior to the consummation of the Acquisition, the “Borrower”), CPG NEWCO LLC (“Holdings”) and each other Subsidiary of Holdings that, in each case, becomes a party to the Guarantee and Collateral Agreement after the Closing Date (each, a “Subsidiary Loan Party”) and DEUTSCHE BANK AG NEW YORK BRANCH, as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined therein).

A. Reference is made to the ABL Credit Agreement dated as of September 30, 2013 (as amended, restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the Co-Borrowers party thereto from time to time, the lenders party thereto from time to time (the “Lenders”), the Administrative Agent and the Collateral Agent for the Lenders and the other parties from time to time thereto.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement and the Guarantee and Collateral Agreement referred to therein.

C. The Pledgors have entered into the Guarantee and Collateral Agreement in order to induce the Lenders to make Loans, each Issuing Bank to issue Letters of Credit and each Agent and Lender and their respective Affiliates to extend financial accommodations pursuant to any Specified Hedge Agreement or any agreement constituting a Cash Management Obligation under the Credit Agreement. Section 7.16 of the Guarantee and Collateral Agreement provides that [Holdings and] 2 additional Subsidiaries of Holdings may become Subsidiary Loan Parties under the Guarantee and Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. [Holdings and] The undersigned Subsidiary (the “New Guarantor”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Loan Party under the Guarantee and Collateral Agreement in order to induce the Lenders to make additional Loans, each Issuing Bank to issue additional Letters of Credit and each Agent and Lender and their respective Affiliates to extend financial accommodations pursuant to any Specified Hedge Agreement or any agreement constituting a Cash Management Obligation (if available under the Credit Agreement), and as consideration for any such financial accommodations previously made or issued under the Credit Agreement.

Accordingly, the Administrative Agent and the New Guarantor agree as follows:

SECTION 1. In accordance with Section 7.16 of the Guarantee and Collateral Agreement, the New Guarantor by its signature below becomes a Subsidiary Loan Party, a Guarantor and a Pledgor under the Guarantee and Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Loan Party, a Guarantor and a Pledgor, and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee and Collateral Agreement applicable to it as a Subsidiary Loan

 

1 

At any time that the ABL/Term Loan Intercreditor Agreement is outstanding, language to be inserted regarding joinder to such agreement.

2 

Modify accordingly if executed by Holdings.

 

Exhibit I-1


Party, a Guarantor and a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor and a Pledgor thereunder are true and correct, in all material respects, on and as of the date hereof. In furtherance of the foregoing, the New Guarantor, as security for the payment and performance in full of the Obligations (as defined in the Guarantee and Collateral Agreement), does hereby create and grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in and Lien on all the New Guarantor’s right, title and interest in and to the Collateral (as defined in the Guarantee and Collateral Agreement) of the New Guarantor. Each reference to a “Subsidiary Loan Party,” a “Guarantor,” or a “Pledgor” in the Guarantee and Collateral Agreement shall be deemed to include the New Guarantor. The Guarantee and Collateral Agreement is hereby incorporated herein by reference.

SECTION 2. The New Guarantor represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing.

SECTION 3. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. This Supplement shall become effective when (a) the Administrative Agent shall have received a counterpart of this Supplement that bears the signature of the New Guarantor and (b) the Agents have executed a counterpart hereof.

SECTION 4. The New Guarantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of all the Pledged Securities of the New Guarantor as of the date hereof, (b) set forth on Schedule II attached hereto is a true and correct schedule of all of the material Patents, Trademarks and Copyrights of the New Guarantor as of the date hereof, (c) set forth on Schedule III attached hereto is a true and correct schedule of all Commercial Tort Claims of the New Guarantor individually in excess of $5.0 million as of the date hereof and (d) set forth under its signature hereto, is the true and correct legal name of the New Guarantor, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Guarantee and Collateral Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Guarantee and Collateral Agreement.

 

Exhibit I-2


SECTION 9. The New Guarantor agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, disbursements and other charges of counsel for the Administrative Agent.

IN WITNESS WHEREOF, the New Guarantor and the Agents have duly executed this Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.

 

[Name of New Guarantor]

By:   Name:
 

Title:

Legal Name:

Jurisdiction of Formation:

Location of Chief Executive Office:

DEUTSCHE BANK AG NEW YORK BRANCH, as

Administrative Agent and Collateral Agent

By:   Name:
  Title:

 

Exhibit I-3


Schedule I

to Supplement No.         to the

Guarantee and

Collateral Agreement

Pledged Securities of the New Guarantor

EQUITY INTERESTS

 

Number of Issuer

Certificate

  

Registered Owner

  

Number and Class of

Equity Interest

  

Percentage of Equity Interests

DEBT SECURITIES

 

Issuer

  

Principal Amount

  

Date of Note

  

Maturity Date

 

Schedule I-1


Schedule II

to Supplement No.        to the

Guarantee and

Collateral Agreement

PATENTS, TRADEMARKS AND COPYRIGHTS

 

Schedule II-1


Schedule III

to Supplement No.         to the

Guarantee and

Collateral Agreement

COMMERCIAL TORT CLAIMS

 

Schedule III-1

Exhibit 10.3

ABL GUARANTEE AND COLLATERAL AGREEMENT SUPPLEMENT

This Supplement is entered into as of January 29, 2018 (this “Supplement”), by WES, LLC, a Minnesota limited liability company, and UltraLox Technology, LLC, a Minnesota limited liability company (each, a “New Guarantor”), and Deutsche Bank AG New York Branch, as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”). Reference is hereby made to that certain ABL Guarantee and Collateral Agreement, dated as of September 30, 2013, as amended by First Amendment to ABL Guarantee and Collateral Agreement, dated as of March 9, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Guarantee and Collateral Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), CPG Newco LLC, a Delaware limited liability company (“Holdings”), and certain Subsidiaries of Holdings (each, a “Subsidiary Loan Party”) and Deutsche Bank AG New York Branch, as the Administrative Agent and as the Collateral Agent for the Secured Parties (as defined therein).

A. Reference is made to that certain Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower), the Lenders party thereto, the Administrative Agent, the Collateral Agent, and other agents party thereto.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement and the Guarantee and Collateral Agreement referred to therein, as applicable.

C. The Pledgors have entered into the Guarantee and Collateral Agreement in order to induce the Lenders to make Loans, each Issuing Bank to issue Letters of Credit and each Agent and Lender and their respective Affiliates to extend financial accommodations pursuant to any Specified Hedge Agreement or any agreement constituting a Cash Management Obligation under the Credit Agreement. Section 7.16 of the Guarantee and Collateral Agreement provides that additional Subsidiaries may become Subsidiary Loan Parties under the Guarantee and Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. Each New Guarantor is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guarantee and Collateral Agreement in order to induce the Lenders to make additional Loans, each Issuing Bank to issue additional Letters of Credit and each Agent and Lender and their respective Affiliates to extend financial accommodations pursuant to any Specified Hedge Agreement or any agreement constituting a Cash Management Obligation (if available under the Credit Agreement), and as consideration for any such financial accommodations previously made or issued under the Credit Agreement.

Accordingly, the Administrative Agent and each New Guarantor agree as follows:

SECTION 1. In accordance with Section 7.16 of the Guarantee and Collateral Agreement, each New Guarantor by its signature below becomes a Subsidiary Loan Party, a Guarantor and a Pledgor under the Guarantee and Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Loan Party, a Guarantor and a Pledgor, and each New Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee and


Collateral Agreement applicable to it as a Subsidiary Loan party, a Guarantor and a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor and a Pledgor thereunder are true and correct, in all material respects, on and as of the date hereof. In furtherance of the foregoing, each New Guarantor, as security for the payment and performance in full of the Obligations (as defined in the Guarantee and Collateral Agreement), does hereby create and grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in and Lien on all of such New Guarantor’s right, title and interest in and to the Collateral (as defined in the Guarantee and Collateral Agreement) of such New Guarantor. Each reference to a “Subsidiary Loan Party,” a “Guarantor,” or a “Pledgor” in the Guarantee and Collateral Agreement shall be deemed to include each New Guarantor. The Guarantee and Collateral Agreement is hereby incorporated herein by reference.

SECTION 2. Each New Guarantor represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing.

SECTION 3. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. This Supplement shall become effective when (a) the Administrative Agent shall have received a counterpart of this Supplement that bears the signature of each New Guarantor and (b) the Agents have executed a counterpart hereof.

SECTION 4. Each New Guarantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of all the Pledged Securities of such New Guarantor as of the date hereof, (b) set forth on Schedule II attached hereto is a true and correct schedule of all of the material Patents, Trademarks and Copyrights of such New Guarantor as of the date hereof, (c) set forth on Schedule III attached hereto is a true and correct schedule of all Commercial Tort Claims of such New Guarantor individually in excess of $5.0 million as of the date hereof and (d) set forth on Schedule IV is the true and correct legal name of such New Guarantor, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Guarantee and Collateral Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.


SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Guarantee and Collateral Agreement.

SECTION 9. Each New Guarantor agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, in each case in accordance with and pursuant to the terms of Section 7.06 of the Guarantee and Collateral Agreement, including the reasonable fees, disbursements and other charges of counsel for the Administrative Agent.


IN WITNESS WHEREOF, each New Guarantor and the Agents have duly executed this Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.

 

WES, LLC
By:  

/s/ Christopher Eppel

  Name:   Christopher Eppel
  Title:   CFO

 

UltraLox Technology, LLC
By:  

/s/ Christopher Eppel

  Name:   Christopher Eppel
  Title:   CFO


ACKNOWLEDGED AND ACCEPTED:

DEUTSCHE BANK AG NEW YORK BRANCH,

as Administrative Agent

By:  

/s/ Dusan Lazarov

  Name: Dusan Lazarov
  Title: Director
By:  

/s/ Marcus Tarkington

  Name: Marcus Tarkington
  Title: Director


SCHEDULE I

Pledged Securities

A. Pledged Stock

 

Entity

  

Form of

Entity

   Jurisdiction
of
Organization
   Holder(s) of
Equity
Interests /
Pledgor
   Percent
Held /
Pledged
    Certificated  

WES, LLC

   Limited liability company    Minnesota    CPG International LLC      100     No  

UltraLox Technology, LLC

   Limited liability company    Minnesota    WES, LLC      100     No  

B. Pledged notes

None.


SCHEDULE II

Intellectual Property

A. Patents

 

Country

  

Owner

  

Title

   Application
Number
     File Date      Patent No.      Issue Date      Status  

US

   WES, LLC    PRESS FOR ASSEMBLING RAILING SYSTEMS      11/678,360        02/23/07        7,975,374        07/12/11        GRANTED  

US

   WES, LLC    RAILING SYSTEM      11/678,354        02/23/07        8,286,948        10/16/12        GRANTED  

Canada

   WES, LLC    PRESS FOR ASSEMBLING RAILING SYSTEMS      2,537,683        02/23/07       

CA2579495

C                 

 

 

     06/03/14        GRANTED  

Canada

   WES, LLC    RAILING SYSTEM      2,537,683        02/23/07        CA2579497        10/13/15        GRANTED  

B. Trademarks

 

Country

  

Owner

  

Title

  

Application Number

US

   WES, LLC    UltraLox    87416602

US

   WES, LLC    UltraLox Interlocking    87588010

US

   WES, LLC    Williams Architectural Products    87416595

US

   WES, LLC    Harmony Railing    87416599

US

   WES, LLC    Aria Railing    87434953

C. Copyrights

None.

D. Domain Names

ultralox.com

williamsrailing.com

harmonyrailing.com

ariarailing.com

deckrailingandfence.com

ultraloxcloud.com

ultraloxmarketing.com

advancedmarketingdevelopment.com

directrailing.com

harmonyordering.com


orderingharmony.com

bestaluminumrailing.com

bestdeckrailing.com

ultraloxinterlocking.com

ultraloxrailing.com

ultraloxrail.com

ultraloxtechnologies.com

ultraloxproducts.com

harmonyrail.com

ariarail.com

railingaccent.com

railingaccents.com

ultraloxfencing.com

ultraloxfence.com

harmonyrailings.com

deckbuildersdirect.com

harmonyorders.com

ultraloxsystems.com

deckandlandscaping.com

ultraloxmap.com

loxiteonline.com

williamsrail-fence.com


SCHEDULE III

Commercial Tort Claims

None.


SCHEDULE IV

Jurisdictions of Organization, Locations of Chief Executive Offices

 

Entity

   Jurisdiction of
Organization
   Identification
Number
  

Location of Chief Executive Office

WES, LLC

   Minnesota    47-2506778   

2955 Lone Oak Drive, #180

Eagan, Minnesota 55121

UltraLox Technology, LLC

   Minnesota    47-3248718   

2955 Lone Oak Drive, #180

Eagan, Minnesota 55121

Exhibit 10.4

ABL GUARANTEE AND COLLATERAL AGREEMENT SUPPLEMENT

This Supplement is entered into as of June 18, 2018 (this “Supplement”), by Versatex Holdings, LLC, a Delaware limited liability company, and Versatex Building Products, LLC, a Pennsylvania limited liability company (each, a “New Guarantor”), and Deutsche Bank AG New York Branch, as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”). Reference is hereby made to that certain ABL Guarantee and Collateral Agreement, dated as of September 30, 2013, as amended by First Amendment to ABL Guarantee and Collateral Agreement, dated as of March 9, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Guarantee and Collateral Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), CPG Newco LLC, a Delaware limited liability company (“Holdings”), and certain Subsidiaries of Holdings (each, a “Subsidiary Loan Party”) and Deutsche Bank AG New York Branch, as the Administrative Agent and as the Collateral Agent for the Secured Parties (as defined therein).

A. Reference is made to that certain Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower), the Lenders party thereto, the Administrative Agent, the Collateral Agent, and other agents party thereto.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement and the Guarantee and Collateral Agreement referred to therein, as applicable.

C. The Pledgors have entered into the Guarantee and Collateral Agreement in order to induce the Lenders to make Loans, each Issuing Bank to issue Letters of Credit and each Agent and Lender and their respective Affiliates to extend financial accommodations pursuant to any Specified Hedge Agreement or any agreement constituting a Cash Management Obligation under the Credit Agreement. Section 7.16 of the Guarantee and Collateral Agreement provides that additional Subsidiaries may become Subsidiary Loan Parties under the Guarantee and Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. Each New Guarantor is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guarantee and Collateral Agreement in order to induce the Lenders to make additional Loans, each Issuing Bank to issue additional Letters of Credit and each Agent and Lender and their respective Affiliates to extend financial accommodations pursuant to any Specified Hedge Agreement or any agreement constituting a Cash Management Obligation (if available under the Credit Agreement), and as consideration for any such financial accommodations previously made or issued under the Credit Agreement.

Accordingly, the Administrative Agent and each New Guarantor agree as follows:

SECTION 1. In accordance with Section 7.16 of the Guarantee and Collateral Agreement, each New Guarantor by its signature below becomes a Subsidiary Loan Party, a Guarantor and a Pledgor under the Guarantee and Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Loan Party, a Guarantor and a Pledgor, and each New Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee and


Collateral Agreement applicable to it as a Subsidiary Loan party, a Guarantor and a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor and a Pledgor thereunder are true and correct, in all material respects, on and as of the date hereof. In furtherance of the foregoing, each New Guarantor, as security for the payment and performance in full of the Obligations (as defined in the Guarantee and Collateral Agreement), does hereby create and grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in and Lien on all of such New Guarantor’s right, title and interest in and to the Collateral (as defined in the Guarantee and Collateral Agreement) of such New Guarantor. Each reference to a “Subsidiary Loan Party,” a “Guarantor,” or a “Pledgor” in the Guarantee and Collateral Agreement shall be deemed to include each New Guarantor. The Guarantee and Collateral Agreement is hereby incorporated herein by reference.

SECTION 2. Each New Guarantor represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing.

SECTION 3. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. This Supplement shall become effective when (a) the Administrative Agent shall have received a counterpart of this Supplement that bears the signature of each New Guarantor and (b) the Agents have executed a counterpart hereof.

SECTION 4. Each New Guarantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of all the Pledged Securities of such New Guarantor as of the date hereof, (b) set forth on Schedule II attached hereto is a true and correct schedule of all of the material Patents, Trademarks and Copyrights of such New Guarantor as of the date hereof, (c) set forth on Schedule III attached hereto is a true and correct schedule of all Commercial Tort Claims of such New Guarantor individually in excess of $5.0 million as of the date hereof and (d) set forth on Schedule IV is the true and correct legal name of such New Guarantor, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Guarantee and Collateral Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.


SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Guarantee and Collateral Agreement.

SECTION 9. Each New Guarantor agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, in each case in accordance with and pursuant to the terms of Section 7.06 of the Guarantee and Collateral Agreement, including the reasonable fees, disbursements and other charges of counsel for the Administrative Agent.


IN WITNESS WHEREOF, each New Guarantor and the Agents have duly executed this Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.

 

VERSATEX HOLDINGS, LLC
By:  

/s/ Jesse Singh

  Name:   Jesse Singh
  Title:   President

 

VERSATEX BUILDING PRODUCTS, LLC
By:  

/s/ Jesse Singh

  Name:   Jesse Singh
  Title:   President

[Signature Page to Guarantee and Collateral Supplement (ABL)]


ACKNOWLEDGED AND ACCEPTED:

DEUTSCHE BANK AG NEW YORK BRANCH,

as Administrative Agent

By:  

/s/ Frank Fazio

  Name:   Frank Fazio
  Title:   Managing Director
 

/s/ Stephen R. Lapidus

  Name:   Stephen R. Lapidus
  Title:   Director

[Signature Page to Guarantee and Collateral Supplement (ABL)]


SCHEDULE I

Pledged Securities

A. Pledged Stock

 

Entity

  

Form of

Entity

  

Jurisdiction

of

Organization

  

Holder(s) of

Equity

Interests /

Pledgor

   Percent
Held /
Pledged
    Certificated

Versatex Holdings, LLC

   Limited liability company    Delaware    CPG International LLC      100   Yes

Versatex Building Products, LLC

   Limited liability company    Pennsylvania    Versatex Holdings, LLC      100   Yes

B. Pledged notes

None.


SCHEDULE II

Intellectual Property

A. Patents

Owned Patents

None.

Licensed Patents

 

Patent

  

Name and Address of Licensor

7,997,044 B2

(Reeam 7,997,044 C1)

  

Marhaygue, LLC

 

8 Lachicotte Drive

Pawleys Island, South Carolina 29585

B. Trademarks

 

Country

  

Owner

   Title    Application Number  

US

   Versatex Buildings Products, LLC    VERSATEX      3,077,495  

US

   Versatex Buildings Products, LLC    STEALTH      4,124,302  

US

   Versatex Buildings Products, LLC    VERSAWRAP      4,119,315  

C. Copyrights

None.

D. Domain Names

None.


SCHEDULE III

Commercial Tort Claims

None.


SCHEDULE IV

Jurisdictions of Organization, Locations of Chief Executive Offices

 

Entity

  

Jurisdiction of

Organization

   Identification
Number
  

Location of Chief Executive Office

Versatex Holdings, LLC

   Delaware    6144649   

400 Steel Street

Aliquippa

Beaver County, Pennsylvania 15001

Versatex Building Products, LLC

   Pennsylvania    4290561   

400 Steel Street

Aliquippa

Beaver County, Pennsylvania 15001

Exhibit 10.5

Trademark Security Agreement

Trademark Security Agreement, dated as of September 30, 2013, by AZEK Building Products, Inc., Scranton Products Inc., TimberTech Limited, and Vast Enterprises, LLC (the “Pledgors”), in favor of DEUTSCHE BANK AG NEW YORK BRANCH, in its capacity as administrative agent and collateral agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent and Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgors are party to a ABL Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ABL Security Agreement”) in favor of the Administrative Agent and Collateral Agent pursuant to which the Pledgors are required to execute and deliver this Trademark Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgors hereby agree with the Administrative Agent and Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them in the Security Agreement.

SECTION 2. Grant of Security Interest in Trademark Collateral. Each Pledgor hereby pledges and grants to the Administrative Agent and Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of such Pledgor:

(a) Trademarks of such Pledgor listed on Schedule I attached hereto;

(b) all goodwill associated with such Trademarks; and

(c) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent and Collateral Agent pursuant to the ABL Security Agreement and Pledgors hereby acknowledge and affirm that the rights and remedies of the Administrative Agent and Collateral Agent with respect to the security interest in the Trademarks made and granted hereby are more fully set forth in the ABL Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Trademark Security Agreement is deemed to conflict with the Tern Loan Security Agreement, the provisions of the ABL Security Agreement shall control unless the Administrative Agent and Collateral Agent shall otherwise determine.

 

1


SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the ABL Security Agreement, the Administrative Agent and Collateral Agent shall execute, acknowledge, and deliver to the Pledgors an instrument in writing in recordable form releasing the collateral, grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Trademarks under this Trademark Security Agreement.

SECTION 5. Counterparts. This Trademark Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Trademark Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Trademark Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]

 

2


IN WITNESS WHEREOF, each Pledgor has caused this Trademark Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

PLEDGORS:
AZEK BUILDING PRODUCTS, INC.
       By:  

/s/ Eric K. Jungbluth

    Name: Eric K. Jungbluth
    Title: Chief Executive Officer
SCRANTON PRODUCTS INC.
  By:  

/s/ Eric K. Jungbluth

    Name: Eric K. Jungbluth
    Title: Chief Executive Officer
TIMBERTECH LIMITED
  By:  

/s/ Eric K. Jungbluth

    Name: Eric K. Jungbluth
    Title: Chief Executive Officer

[Signature Page to Trademark Security Agreement (ABL)]

 

3


VAST ENTERPRISES, LLC.
       By:  

/s/ Dan Lukas

    Name: Dan Lukas
    Title: Authorized Person

[Signature Page to Trademark Security Agreement (ABL)]

 

4


Accepted and Agreed.

DEUTSCHE BANK AG NEW YORK BRANCH,

as Administrative Agent and Collateral Agent

       By:  

/s/ Peter Cucchiara

    Name: Peter Cucchiara
    Title: Vice President
  By:  

/s/ Kirk L. Tashjian

    Name: Kirk L. Tashjian
    Title: Vice President

[Signature Page to Trademark Security Agreement (ABL)]

 

5

Exhibit 10.6

Trademark Security Agreement

Trademark Security Agreement, dated as of January 29, 2018, by WES, LLC (the “Pledgor”), in favor of DEUTSCHE BANK AG NEW YORK BRANCH, in its capacity as administrative agent pursuant to the Term Loan Credit Agreement (in such capacity, the “Administrative Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgor is party to an ABL Guarantee and Collateral Agreement dated as of September 30, 2013 and the First Amendment to the ABL Guarantee and Collateral Agreement dated as of March 9, 2017 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ABL Security Agreement”) in favor of the Administrative Agent pursuant to which the Pledgor is required to execute and deliver this Trademark Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgor hereby agrees with the Administrative Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the Term Loan Security Agreement and used herein have the meaning given to them in the ABL Security Agreement.

SECTION 2. Grant of Security Interest in Trademark Collateral. The Pledgor hereby pledges and grants to the Administrative Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of Pledgor:

(a) Trademarks of the Pledgor listed on Schedule I attached hereto;

(b) all goodwill associated with such Trademarks; and

(c) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent pursuant to the ABL Security Agreement and the Pledgor hereby acknowledges and affirms that the rights and remedies of the Administrative Agent with respect to the security interest in the Trademarks made and granted hereby are more fully set forth in the ABL Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Trademark Security Agreement is deemed to conflict with the ABL Security Agreement, the provisions of the ABL Security Agreement shall control unless the Administrative Agent shall otherwise determine.


SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the ABL Security Agreement, the Administrative Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in writing in recordable form releasing the collateral, grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Trademarks under this Trademark Security Agreement.

SECTION 5. Counterparts. This Trademark Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Trademark Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Trademark Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]


IN WITNESS WHEREOF, the Pledgor has caused this Trademark Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

PLEDGOR:
WES, LLC
        By:  

/s/ Christopher Eppel

        Name:  

Christopher Eppel

        Title:  

CFO

[Signature Page to Trademark Security Agreement (ABL)]


Accepted and Agreed:

DEUTSCHE BANK AG NEW YORK BRANCH

as Administrative Agent

      By:  

/s/ Dusan Lazarov

      Name:  

Dusan Lazarov

      Title:  

Director

      By:  

/s/ Marcus Tarkington

      Name:  

Marcus Tarkington

      Title:  

Director

[Signature Page to Trademark Security Agreement (ABL)]

Exhibit 10.7

Trademark Security Agreement

Trademark Security Agreement, dated as of June 18, 2018, by Versatex Building Products, LLC (the “Pledgor”), in favor of DEUTSCHE BANK AG NEW YORK BRANCH, in its capacity as administrative agent pursuant to the Term Loan Credit Agreement (in such capacity, the “Administrative Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgor is party to an ABL Guarantee and Collateral Agreement dated as of September 30, 2013, and the First Amendment to the ABL Guarantee and Collateral Agreement dated as of March 9, 2017 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ABL Security Agreement”), in favor of the Administrative Agent pursuant to which the Pledgor is required to execute and deliver this Trademark Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgor hereby agrees with the Administrative Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the ABL Security Agreement and used herein have the meaning given to them in the ABL Security Agreement.

SECTION 2. Grant of Security Interest in Trademark Collateral. The Pledgor hereby pledges and grants to the Administrative Agent, for the benefit of the Secured Parties, a lien on and security interest in and to all of the Pledgor’s right, title and interest in, to and under all the following Pledged Collateral of Pledgor:

(a) Trademarks of the Pledgor listed on Schedule I attached hereto;

(b) all goodwill associated with such Trademarks; and

(c) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent pursuant to the ABL Security Agreement, and the Pledgor hereby acknowledges and affirms that the rights and remedies of the Administrative Agent with respect to the security interest in the Trademarks made and granted hereby are more fully set forth in the ABL Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Trademark Security Agreement is deemed to conflict with the ABL Security Agreement, the provisions of the ABL Security Agreement shall control unless the Administrative Agent shall otherwise determine.

SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the ABL Security Agreement, the Administrative Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in writing in recordable form releasing the collateral, grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Trademarks under this Trademark Security Agreement.


SECTION 5. Counterparts. This Trademark Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Trademark Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Trademark Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]


IN WITNESS WHEREOF, the Pledgor has caused this Trademark Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

PLEDGOR:

Versatex Building Products, LLC

By:

 

/s/ Jesse Singh

 

Name: Jesse Singh

 

Title: President

 

[Signature Page to Trademark Security Agreement (ABL)]


Accepted and Agreed:

 

DEUTSCHE BANK AG NEW YORK BRANCH

as Administrative Agent

  By:   /s/ Frank Fazio
  Name:   Frank Fazio
  Title:   Managing Director
  By:   /s/ Stephen R. Lapidus
  Name:   Stephen R. Lapidus
  Title:   Director

 

[Signature Page to Trademark Security Agreement (ABL)]

Exhibit 10.8

Patent Security Agreement

Patent Security Agreement, dated as of September 30, 2013, by AZEK Building Products, Inc., TimberTech Limited, Scranton Products Inc. and Vast Enterprises, LLC (the “Pledgors”), in favor of DEUTSCHE BANK AG NEW YORK BRANCH, in its capacity as administrative agent and collateral agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent and Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgors are party to a ABL Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ABL Security Agreement”) in favor of the Administrative Agent and Collateral Agent pursuant to which the Pledgors are required to execute and deliver this Patent Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgors hereby agree with the Administrative Agent and Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the ABL Security Agreement and used herein have the meaning given to them in the ABL Security Agreement.

SECTION 2. Grant of Security Interest in Patent Collateral. Each Pledgor hereby pledges and grants to the Administrative Agent and Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of such Pledgor:

(a) Patents of such Pledgor listed on Schedule I attached hereto; and

(b) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Patent Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent and Collateral Agent pursuant to the ABL Security Agreement and Pledgors hereby acknowledge and affirm that the rights and remedies of the Administrative Agent and Collateral Agent with respect to the security interest in the Patents made and granted hereby are more fully set forth in the ABL Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Patent Security Agreement is deemed to conflict with the ABL Security Agreement, the provisions of the ABL Security Agreement shall control unless the Administrative Agent and Collateral Agent shall otherwise determine.


SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the ABL Security Agreement, the Administrative Agent and Collateral Agent shall execute, acknowledge, and deliver to the Pledgors an instrument in writing in recordable form releasing the collateral, grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Patents under this Patent Security Agreement

SECTION 5. Counterparts. This Patent Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Patent Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Patent Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]

 

2


IN WITNESS WHEREOF, each Pledgor has caused this Patent Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

PLEDGORS:
AZEK BUILDING PRODUCTS, INC.

By:

  /s/ Eric K. Jungbluth
 

Name:  Eric K. Jungbluth

 

Title:   Chief Executive Officer

SCRANTON PRODUCTS INC.

By:

 

/s/ Eric K. Jungbluth

 

Name:  Eric K. Jungbluth

 

Title:   Chief Executive Officer

TIMBERTECH LIMITED

By:

  /s/ Eric K. Jungbluth
 

Name:  Eric K. Jungbluth

 

Title:   Chief Executive Officer

[Signature Page to Patent Security Agreement (ABL)]

 

3


VAST ENTERPRISES, LLC

By:

  /s/ Dan Lukas
 

Name:  Dan Lukas

 

Title:    Authorized Person

[Signature Page to Patent Security Agreement (ABL)]

 

4


DEUTSCHE BANK AG NEW YORK BRANCH

as Administrative Agent and Collateral Agent

By:

  /s/ Peter Cucchiara
 

Name:    Peter Cucchiara

 

Title:      Vice President

By:

 

/s/ Kirk L. Tashjian

 

Name:  Kirk L. Tashjian

 

Title:    Vice President

[Signature Page to Patent Security Agreement (ABL)]

 

5

Exhibit 10.9

Patent Security Agreement

Patent Security Agreement, dated as of January 29, 2018, by WES, LLC (the “Pledgor”), in favor of DEUTSCHE BANK AG NEW YORK BRANCH, in its capacity as administrative agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgor is party to an ABL Guarantee and Collateral Agreement dated as of September 30, 2013 and the First Amendment to the ABL Guarantee and Collateral Agreement dated as of March 9, 2017 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ABL Security Agreement”) in favor of the Administrative Agent and Collateral Agent pursuant to which the Pledgor is required to execute and deliver this Patent Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgor hereby agrees with the Administrative Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the ABL Security Agreement and used herein have the meaning given to them in the ABL Security Agreement.

SECTION 2. Grant of Security Interest in Patent Collateral. The Pledgor hereby pledges and grants to the Administrative Agent and Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of each of its right, title and interest in, to and under all the following Pledged Collateral of Pledgor:

(a) Patents of the Pledgor listed on Schedule I attached hereto; and

(b) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Patent Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent pursuant to the ABL Security Agreement and the Pledgor hereby acknowledges and affirms that the rights and remedies of the Administrative Agent with respect to the security interest in the Patents made and granted hereby are more fully set forth in the ABL Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Patent Security Agreement is deemed to conflict with the ABL Security Agreement, the provisions of the ABL Security Agreement shall control unless the Administrative Agent shall otherwise determine.

SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the ABL Security Agreement, the Administrative Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in


writing in recordable form releasing the collateral, grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Patents under this Patent Security Agreement.

SECTION 5. Counterparts. This Patent Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Patent Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Patent Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]

 

2


IN WITNESS WHEREOF, the Pledgors have caused this Patent Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

PLEDGOR:
WES, LLC
        By:  

/s/ Christopher Eppel

        Name:  

Christopher Eppel

        Title:  

CFO

[Signature Page to Patent Security Agreement (ABL)]


Accepted and Agreed:

DEUTSCHE BANK AG NEW YORK BRANCH

 

as Administrative Agent

        By:  

/s/ Dusan Lazarov

        Name:  

Dusan Lazarov

        Title:  

Director

        By:  

/s/ Marcus Tarkington

        Name:  

Marcus Tarkington

        Title:  

Director

[Signature Page to Patent Security Agreement (ABL)]

Exhibit 10.10

Copyright Security Agreement

Copyright Security Agreement, dated as of September 30, 2013, by AZEK Building Products, Inc. (the “Pledgor”), in favor of DEUTSCHE BANK AG NEW YORK BRANCH, in its capacity as administrative agent and collateral agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent and Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgor is party to an ABL Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ABL Security Agreement”) in favor of the Administrative Agent and Collateral Agent pursuant to which the Pledgor is required to execute and deliver this Copyright Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgor hereby agrees with the Administrative Agent and Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the ABL Security Agreement and used herein have the meaning given to them in the ABL Security Agreement.

SECTION 2. Grant of Security Interest in Copyright Collateral. The Pledgor hereby pledges and grants to the Administrative Agent and Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of such Pledgor:

(a) Copyrights of such Pledgor listed on Schedule I attached hereto; and

(b) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Copyright Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent and Collateral Agent pursuant to the ABL Security Agreement and the Pledgor hereby acknowledges and affirms that the rights and remedies of the Administrative Agent and Collateral Agent with respect to the security interest in the Copyrights made and granted hereby are more fully set forth in the ABL Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Copyright Security Agreement is deemed to conflict with the ABL Security Agreement, the provisions of the ABL Security Agreement shall control unless the Administrative Agent and Collateral Agent shall otherwise determine.


SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the ABL Security Agreement, the Administrative Agent and Collateral Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in writing in recordable form releasing the collateral, grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Copyrights under this Copyright Security Agreement.

SECTION 5. Counterparts. This Copyright Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Copyright Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Copyright Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]

 

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IN WITNESS WHEREOF, the Pledgor has caused this Copyright Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

AZEK Building Products, Inc.,

as Pledgor

By:  

/s/ Eric K. Jungbluth

Name: Eric K. Jungbluth
Title: Chief Executive Officer

[Signature Page to Copyright Security Agreement (ABL)]


DEUTSCHE BANK AG NEW YORK BRANCH

as Administrative Agent and Collateral Agent

By:  

/s/ Peter Cucchiara

  Name: Peter Cucchiara
  Title:   Vice President
By:  

/s/ Kirk L. Tashjian

  Name: Kirk L. Tashjian
  Title:   Vice President

[Signature Page to Copyright Security Agreement (ABL)]

Exhibit 10.12

INCREMENTAL AMENDMENT NO. 1

INCREMENTAL AMENDMENT NO. 1, dated as of June 18, 2018 (this “Incremental Amendment”), to the Term Loan Credit Agreement, dated as of September 30, 2013 (as amended by the First Amendment, dated as of February 6, 2014, the Second Amendment, dated as of May 5, 2017, and as further amended, supplemented or otherwise modified prior to giving effect to this Incremental Amendment, the “Credit Agreement”; and the Credit Agreement as so amended, the “Amended Credit Agreement”), among CPG NEWCO LLC (“Holdings”), CPG INTERNATIONAL LLC (as successor-in-interest to CPG International Inc., itself a successor-in-interest to CPG Merger Sub LLC, the “Borrower”), the lenders party thereto from time to time (the “Lenders”), JEFFERIES FINANCE LLC (as successor-in-interest to Barclays Bank PLC), as administrative agent (in such capacity, and as further defined in Section 1.01 of the Credit Agreement, the “Administrative Agent”) and as collateral agent (in such capacity, and as further defined in Section 1.01 of the Credit Agreement, the “Collateral Agent”), and the other agents parties thereto.

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, certain loans to the Borrower;

WHEREAS, Section 2.19 of the Credit Agreement permits the Borrower to borrow Incremental Term Loans under the Credit Agreement;

WHEREAS, the Borrower has requested to borrow an additional $225,000,000 of term loans (the “2018 Incremental Term Loans” and the commitments in respect thereof, the “2018 Incremental Term Commitments”) for the purpose of financing the acquisition (the “Acquisition”) by the Borrower of Versatex Holdings, LLC (the “Target”) and its Subsidiaries pursuant to that certain Membership Interest Purchase Agreement, dated as of May 11, 2018, by and among the Borrower, the Target and the other parties party thereto (the “Acquisition Agreement”);

WHEREAS, Jefferies Finance LLC, Barclays Bank PLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Bank Securities Inc. and Citigroup Global Markets Inc. are acting as joint lead arrangers (the “Lead Arrangers”) in connection with this Incremental Amendment and the arrangement of the 2018 Incremental Term Loans;

WHEREAS, each Person signatory hereto as an “Incremental Term Lender” (each, a “2018 Incremental Term Lender”) has agreed to provide 2018 Incremental Term Commitments in the amount set forth opposite such Person’s name in the commitment schedule attached hereto as Annex I (the “Incremental Commitment Schedule”) under the heading “2018 Incremental Term Commitments”, upon the terms and subject to the conditions set forth herein;

WHEREAS, the 2018 Incremental Term Loans shall be fungible with the term loans outstanding under the Credit Agreement immediately prior to giving effect to the Incremental Amendment Effective Date (the “Existing Term Loans”) and the 2018 Incremental Term Loans and the Existing Term Loans shall constitute one tranche of term loans;

WHEREAS, the Borrower desires to amend the Credit Agreement as further set forth herein;

WHEREAS, as permitted by Section 9.08 of the Credit Agreement, the Credit Agreement may be amended pursuant to an agreement entered into by the Borrower and the Required Lenders;


NOW THEREFORE, in consideration of the premises and mutual covenants hereinafter set forth, the parties hereto agree as follows:

SECTION 1. Definitions. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. As used in this Incremental Amendment, the following terms shall have the meanings specified below:

Specified Acquisition Agreement Representations” shall mean such of the representations and warranties made by or on behalf of the Target in the Acquisition Agreement as are material to the interests of the 2018 Incremental Term Loan Lenders, but only to the extent that the Borrower (or its affiliates) has the right (taking into account any applicable cure provisions) to terminate its (or their) obligations under the Acquisition Agreement or decline to consummate the Acquisition without any liability in accordance with the terms thereof as a result of a breach of such representations and warranties in the Acquisition Agreement.

Specified Representations” shall mean the representations and warranties with respect to the Borrower and the Subsidiary Loan Parties set forth in the following sections of the Credit Agreement: Section 3.01 (but solely with respect to organizational status and organizational power and authority to execute, deliver and perform obligations with respect to this Incremental Amendment), Section 3.02(a) (but solely with respect to this Incremental Amendment), Section 3.02(b)(i) (but solely with respect to this Incremental Amendment, the incurrence of the 2018 Incremental Term Loans and the provision of guarantees and grant of security interests in respect thereof), Section 3.03 (but solely with respect to this Incremental Amendment), Section 3.10, Section 3.11, Section 3.17 (subject to the Limited Conditionality Provisions), Section 3.19 and Section 3.22(a) (solely as to the use of proceeds of the 2018 Incremental Term Loans).

SECTION 2. 2018 Incremental Term Loans.

(a) Subject to the terms and conditions set forth herein and in the Credit Agreement, each 2018 Incremental Term Loan Lender severally agrees (i) to make a 2018 Incremental Term Loan to the Borrower on and as of the Incremental Amendment Effective Date (as defined below) pursuant to Section 2.02 of the Amended Credit Agreement in an aggregate principal amount equal to its 2018 Incremental Term Loan Commitment and (ii) to the terms of the Amended Credit Agreement.

(b) The 2018 Incremental Term Loans shall be Term Loans for all purposes of the Amended Credit Agreement, with the terms and conditions set forth therein as applicable to the “2018 Incremental Term Loans”, the “Effective Date Term Loans” and the “Term Loans”, as applicable, and shall constitute one tranche of term loans with the Existing Term Loans. The 2018 Incremental Term Loans shall be funded on the Incremental Amendment Effective Date as Eurocurrency Loans bearing interest based on the Interest Period selected in the Borrowing Request delivered pursuant to Section 5 below, which Interest Period shall be the same as that of the Existing Term Loans. The 2018 Incremental Term Loan will be issued on the 2018 Incremental Amendment Effective Date in an amount equal to 99.75% of the stated principal amount of the 2018 Incremental Term Loan.

SECTION 3. 2018 Incremental Term Lenders.

(a) As of the Incremental Amendment Effective Date, each 2018 Incremental Term Lender shall be a party to the Amended Credit Agreement and, to the extent provided in this Incremental Amendment, have the rights and obligations of a Lender under the Amended Credit Agreement and under the other Loan Documents and shall be bound by the provisions thereof.

 

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(b) Each 2018 Incremental Term Lender (i) represents and warrants that (A) it has full power and authority, and has taken all action necessary, to execute and deliver this Incremental Amendment and to become a Lender under the Amended Credit Agreement, (B) it meets all the requirements to be a Lender under the Amended Credit Agreement, (C) from and after the Incremental Amendment Effective Date, it shall be bound by the provisions of the Amended Credit Agreement as a Lender thereunder and, to the extent provided in this Incremental Amendment, shall have the obligations of a Lender thereunder, (D) it has received copies of the most recent financial statements delivered pursuant to Section 5.04 of the Credit Agreement, and such other documents and information as it deems appropriate to make its own credit analysis and decision to become a Lender under the Amended Credit Agreement, (E) it has, independently and without reliance upon the Administrative Agent, Collateral Agent, or any other Lender under the Amended Credit Agreement and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to become a Lender under the Amended Credit Agreement, and (F) if it is a Foreign Lender, it has delivered to the Administrative Agent any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by such 2018 Incremental Term Loan; and (ii) agrees that (A) it will, independently and without reliance upon the Administrative Agent, the Collateral Agent or any other Lender under the Amended Credit Agreement, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (B) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender under the Amended Credit Agreement.

SECTION 4. Amendment. Effective as of the Incremental Amendment Effective Date, (a) the Credit Agreement shall be amended and restated in its entirety in the form of the Amended Credit Agreement attached as Exhibit A hereto, (b) the Schedules of the Credit Agreement shall be amended and restated in their entirety in the form attached as Exhibit B hereto and (c) the Exhibits of the Credit Agreement shall be amended and restated in their entirety the form attached as Exhibit C hereto.

SECTION 5. Incremental Amendment Effective Date. This Incremental Amendment shall become effective as of the date (the “Incremental Amendment Effective Date”) on which the following conditions precedent have been satisfied or waived:

(a) The Administrative Agent shall have received this Incremental Amendment, executed and delivered by the Administrative Agent, the Borrower, the 2018 Incremental Term Lenders and the Required Lenders.

(b) Prior to or substantially concurrently with the funding of the 2018 Incremental Term Loans, the Acquisition shall be consummated, in all material respects, in accordance with the terms of the Acquisition Agreement, as amended or otherwise modified, but without giving effect to any amendments, waivers, consents or other modifications thereto which would be materially adverse to the 2018 Incremental Term Loan Lenders without the prior written consent of the 2018 Incremental Term Loan Lenders, such consent not to be unreasonably withheld, delayed or conditioned; provided that (a) any decrease in the purchase price for the Acquisition shall not be deemed to be materially adverse to the 2018 Incremental Term Loan Lenders so long as such decrease is allocated to reduce the 2018 Incremental Term Loans and (b) any increase in the purchase price shall not be materially adverse to the 2018 Incremental Term Loan Lenders so long as such increase is funded by the amounts permitted to be drawn at closing under the 2018 Incremental Term Loans, the ABL Facility, equity contributions from the Sponsors and their respective Affiliates and other equity investors, or Borrower’s cash on hand.

 

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(c) All accrued fees required to be paid to the Administrative Agent, all fees owed to the 2018 Incremental Term Loan Lenders, and all expenses required to be paid or reimbursed on the Incremental Amendment Effective Date (to the extent such expenses are invoiced at least three business days prior to the Incremental Amendment Effective Date except as otherwise agreed by the Borrower), shall have been paid, including, at the Borrower’s option, from the proceeds of the 2018 Incremental Term Loans.

(d) The Administrative Agent shall have received, for the ratable benefit of the existing Lenders, all accrued and unpaid interest to, but not including, the Incremental Amendment Effective Date with respect to the outstanding Existing Term Loans.

(e) The Administrative Agent shall have received (a) from the Target and its Subsidiaries, audited financial statements for the fiscal years ended December 31, 2017, 2016 and 2015, unaudited financial statements for the fiscal quarter ended March 31, 2018 and unaudited financial statements for each subsequent fiscal quarter ended at least 45 days prior to the 2018 Incremental Amendment Effective Date and (b) from CPG Holdings LLC (“Holdings”) and its Subsidiaries audited financial statements for the fiscal years ending September 30, 2017, 2016 and 2015, unaudited financial statements for the fiscal quarter ended March 31, 2018 and unaudited financial statements for each subsequent fiscal quarter ended at least 45 days prior to the Incremental Amendment Effective Date. The Administrative Agent acknowledges receipt as of the date hereof of the audited financial statements for the fiscal years ended December 31, 2017, 2016 and 2015 and the unaudited financial statements for the fiscal quarter ended March 31, 2018, in the case of the Target and its Subsidiaries, and the audited financial statements for the fiscal years ended September 30, 2017, 2016 and 2015 and the unaudited financial statements for the fiscal quarter ended March 31, 2018, in the case of Holdings and its Subsidiaries.

(f) To the extent reasonable and customary and requested at least ten (10) Business Days prior to the Incremental Amendment Effective Date, the 2018 Incremental Term Loan Lenders shall have received all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the PATRIOT Act, at least three (3) business days prior to the Incremental Amendment Effective Date.

(g) The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower with respect to each Loan Party dated the Incremental Amendment Effective Date and certifying:

(i) that attached thereto is a true and complete copy of the charter or other similar organizational document of each Loan Party and each amendment thereto, certified (as of a date reasonably near the Incremental Amendment Effective Date) as being a true and correct copy thereof by the Secretary of State or other applicable Governmental Authority of the jurisdiction in which each such Loan Party is organized;

(ii) that attached thereto is a true and complete copy of a certificate of the Secretary of State or other applicable Governmental Authority of the jurisdiction in which each such Loan Party is organized, dated reasonably near the Incremental Amendment Effective Date, listing the charter or other similar organizational document of such Loan Party and each amendment thereto on file in such office and, if available, certifying that (1) such amendments are the only amendments to such person’s charter on file in such office, (2) such person has paid all franchise taxes to the date of such certificate and (3) such person is duly organized and in good standing or full force and effect under the laws of such jurisdiction;

 

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(iii) that attached thereto is a true and complete copy of resolutions duly adopted by the Governing Persons of such Loan Party authorizing the execution, delivery and performance of this Incremental Amendment and any other document delivered in connection with this Incremental Amendment and that such resolutions have not been modified, rescinded or amended and are in full force and effect; and

(iv) as to the incumbency and specimen signature of each Responsible Officer executing this Incremental Amendment and any other document delivered in connection with this Incremental Amendment on behalf of such Loan Party (together with a certificate of another officer as to the incumbency and specimen signature of the Responsible Officer executing the certificate pursuant to this Section 5(g)(iv).

(h) The Administrative Agent shall have received a customary legal opinion, in form and substance reasonably acceptable to the Administrative Agent, of (i) Sullivan & Cromwell LLP, New York counsel to the Borrower, and (ii) Clark Hill PLC, special Pennsylvania counsel to Versatex Building Products, LLC.

(i) The Administrative Agent shall have received a solvency certificate substantially in the form of Exhibit D to the Amended Credit Agreement executed by a Financial Officer of Holdings.

(j) The Administrative Agent shall have received a notice pursuant to Section 2.19 of the Credit Agreement.

(k) Subject to the Limited Conditionality Provisions, (i) the Borrower shall have caused (or shall substantially simultaneously with the Incremental Amendment Effective Date cause) the Collateral and Guarantee Requirement to be satisfied, including with respect to the Target and each of its Subsidiaries (other than an Immaterial Subsidiary, an Unrestricted Subsidiary, a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC) (the Target and such Subsidiaries, the “Target Loan Parties”) and with respect to any Equity Interest in or Indebtedness of any Subsidiary (including the Target Loan Parties) owned by or on behalf of the Borrower or any other Subsidiary Loan Party and (ii) each document (including any UCC financing statement) required by the Security Documents or reasonably requested by the Administrative Agent (subject to the terms of the Collateral Agreement) to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien on the Collateral (including in respect of the Collateral of the Target Loan Parties) described therein, prior and superior in right to any other person (other than with respect to Permitted Liens), shall have been filed, registered or recorded or shall have been delivered to the Administrative Agent in proper form for filing, registration or recordation.

(l) No Specified Events of Default shall have occurred or be continuing as of the date hereof.

(m) The Specified Acquisition Agreement Representations shall be true and correct to the extent required by the Limited Conditionality Provisions and the Specified Representations shall be true and correct in all material respects (except in the case of any Specified Representation which expressly relates to a given date or period, such representation and warranty shall be true and correct in all material respects as of the respective date or for the respective period, as the case may be); provided that to the extent that any Specified Representation is qualified by or subject to a “material adverse effect”, “material adverse change” or similar term or qualification, (a) the definition thereof shall be the definition of “Material Adverse Effect” (as defined in the Acquisition Agreement) for purposes of the making or deemed making of such Specified Representation on, or as of, the Incremental Amendment Effective Date (or any date prior thereto) and (b) the same shall be true and correct in all respects.

 

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(n) There shall not have occurred any Material Adverse Effect (as defined in the Acquisition Agreement).

(o) The repayment of the existing indebtedness of the Target, including, without limitation, that certain Credit and Security Agreement by and among Versatex Building Products, LLC, and Versatex Holdings, LLC, the Lenders and Regions Bank, dated September 28, 2016, as amended by that First Amendment to Credit and Security Agreement, dated September 26, 2017 (the repayment of such debt, the “Debt Repayment”) shall have been consummated, or shall be consummated substantially simultaneously with, the borrowings of the 2018 Incremental Term Loans.

(p) Prior to the Incremental Amendment Effective Date, the Administrative Agent shall have received a Borrowing Request in respect of the 2018 Incremental Term Loans.

Notwithstanding anything to the contrary herein or otherwise, to the extent any security interest in the intended Collateral of the Target Loan Parties (other than (x) the delivery of certificates evidencing equity interests for the Borrower and the Guarantors (other than, in the case of the Target and its subsidiaries, with respect to any such certificate that has not been made available to the Borrower at least five business days prior to the Incremental Amendment Effective Date, to the extent the Borrower has used commercially reasonable efforts to procure delivery thereof and (y) any Collateral the security interest in which may be perfected by the filing of a UCC financing statement for entities organized in the United States) is not or cannot be provided or perfected on the Incremental Amendment Effective Date after use by the Borrower of commercially reasonable efforts to do so or without undue burden or expense, then the provision and/or perfection of security interests in such Collateral shall not constitute a condition precedent to the availability of the 2018 Incremental Term Loans on the Incremental Amendment Effective Date, but (a) in the case of certificates evidencing equity interests, may be delivered five Business Days after the Incremental Amendment Effective Date (or such later date as reasoanbly agreed by the Administrative Agent) and (b) in all other cases, may instead be delivered or perfected (notwithstanding anything to the contrary contained in the definition of “Collateral and Guarantee Requirement” in the Amended Credit Agreement or Section 5.10(c) thereof, within 90 days after the Incremental Amendment Effective Date (or such later date as reasonably agreed by the Administrative Agent). The provisions in this paragraph are referred to as the “Limited Conditionality Provisions”.

SECTION 6. Reaffirmation. Each Loan Party hereby:

(a) acknowledges its receipt of a copy of this Incremental Amendment and the Amended Credit Agreement and its review of the terms and conditions thereof and consents to the terms and conditions of this Incremental Amendment and the Amended Credit Agreement and the transactions contemplated thereby, including the extension of credit to the Borrower in the form of the 2018 Incremental Term Loans;

(b) agrees that, notwithstanding the effectiveness of this Incremental Amendment and the Amended Credit Agreement and the consummation of the transactions contemplated thereby, (i) each Security Document to which it is a party shall continue to be in full force and effect and (ii) all guarantees, pledges, grants and other commitments thereunder shall continue to be in full force and effect and shall accrue to the benefit of the Secured Parties, including the holders of the 2018 Incremental Term Loans; and

(c) confirms that neither the amendment and restatement of the Credit Agreement effected pursuant to this Incremental Amendment nor the execution, delivery, performance or effectiveness of this Incremental Amendment and the Amended Credit Agreement (i) impairs the validity, effectiveness or priority of the Liens granted pursuant to any Security Document, and such Liens continue unimpaired with the same priority to secure repayment of all Obligations as defined under the Amended Credit Agreement, whether heretofore or hereafter incurred or (ii) requires that any new filings be made or other action taken to perfect or to maintain the perfection of such Liens.

 

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SECTION 7. Effect of Amendment.

(a) Except as expressly set forth herein, this Incremental Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or the Administrative Agent under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of the Credit Agreement or of any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and affect. Nothing herein shall be deemed to entitle the Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances. Nothing in this Incremental Amendment shall be deemed to be a novation of any obligations under the Credit Agreement or any other Loan Document.

(b) On and after the Incremental Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import, and each reference to the Credit Agreement in any other Loan Document shall be deemed a reference to the Credit Agreement as amended hereby. This Incremental Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.

(c) Except as expressly provided herein or in the Credit Agreement, the 2018 Incremental Term Loans shall be subject to the terms and provisions of the Credit Agreement and the other Loan Documents.

SECTION 8. General.

(a) APPLICABLE LAW. THIS INCREMENTAL AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

(b) Counterparts. This Incremental Amendment may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract. Delivery of an executed counterpart to this Incremental Amendment by facsimile or other electronic transmission (e.g., “PDF” or “TIFF”) shall be as effective as delivery of a manually signed original.

(c) Amendments. This Incremental Amendment may be amended, modified or supplemented only by a writing signed by the Administrative Agent, the requisite Lenders and the Borrower in accordance with Section 9.08 of the Credit Agreement.

(d) Headings. Section headings used herein are for convenience of reference only, are not part of this Incremental Amendment and are not to affect the construction of, or be taken into consideration in interpreting, this Incremental Amendment.

[remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Incremental Amendment to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written.

 

CPG NEWCO LLC, as Holdings
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Authorized Person
CPG INTERNATIONAL LLC, as Borrower
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Chief Financial Officer
VYCOM CORP., as Guarantor
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Chief Financial Officer
SCRANTON PRODUCTS INC., as Guarantor
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Chief Financial Officer
CPG SUB I CORPORATION, as Guarantor
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Chief Financial Officer

Incremental Amendment to Term Loan Credit Agreement

CPG International LLC


CPG BUILDING PRODUCTS LLC, as Guarantor
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Chief Financial Officer
SANATEC SUB I CORPORATION, as Guarantor
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Chief Financial Officer
SANTANA PRODUCTS INC., as Guarantor
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Chief Financial Officer
WES, LLC, as Guarantor
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Chief Financial Officer
ULTRALOX TECHNOLOGY, LLC, as Guarantor
By:  

/s/ Chris Eppel

  Name: Chris Eppel
  Title:   Chief Financial Officer

Incremental Amendment to Term Loan Credit Agreement

CPG International LLC


JEFFERIES FINANCE LLC, as Administrative Agent Collateral Agent, and 2018 Incremental Term Lender
By:  

/s/ Jason Kennedy

  Name: Jason Kennedy
  Title:   Managing Director


1199SEIU Health Care Employees Pension Fund, as a Required Lender
By: Crescent Capital Group LP, its adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


ABB Inc. Master Trust, as a Required Lender

By: Pacific Investment Management Company LLC,

 

as its Investment Advisor

By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


ABS Loans 2007 Limited, a subsidiary of Goldman Sachs Institutional Funds II PLC
as a Required Lender
By:  

/s/ Chris Lam

  Name: Chris Lam
  Title:   Authorized Signatory


Advanced Series Trust – AST Goldman Sachs Multi

-Asset Portfolio

By: Goldman Sachs Asset Management, L.P. solely as its investment advisor and not as principal
as a Required Lender
By:  

/s/ Chris Lam

  Name: Chris Lam
  Title:   Authorized Signatory


KRH US Loan Master Fund 2017-5 a series trust of Global Cayman Investment Trust
By: Goldman Sachs Asset Management, L.P. solely as its investment advisor and not as principal
as a Required Lender
By:  

/s/ Chris Lam

  Name: Chris Lam
  Title:   Authorized Signatory


Goldman Sachs Lux Investment Funds for the benefit of Goldman Sachs High Yield Floating Rate Portfolio (Lux)
By: Goldman Sachs Asset Management, L.P. solely as its investment advisor and not as principal
as a Required Lender
By:  

/s/ Chris Lam

  Name: Chris Lam
  Title:   Authorized Signatory


Goldman Sachs Trust on behalf of the Goldman Sachs High Yield Floating Rate Fund
By: Goldman Sachs Asset Management, L.P. as its investment advisor and not as principal
as a Required Lender
By:  

/s/ Chris Lam

  Name: Chris Lam
  Title:   Authorized Signatory


Dedicated Global Fixed Income Fund I
by Goldman Sachs Asset Management Australia Pty, Ltd. solely as its investment advisor and not as principal
as a Required Lender
By:  

/s/ Chris Lam

  Name: Chris Lam
  Title:   Authorized Signatory


MP CLO IV, Ltd., as a Required Lender
By: MP CLO Management LLC, its Manager
By:  

/s/ Thomas Shandell

  Name: Thomas Shandell
  Title:   CEO
By:  

 

  Name:
  Title:


AEGIS Electric and Gas International Services, Ltd.,

as a Required Lender

by SHENKMAN CAPITAL MANAGEMENT, INC.,
as Investment Manager
By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


AIC Loan Fund LLC (fka Emerald Gate Treasury Fund
LLC), as a Required Lender
By:  

/s/ Rob Stobo

  Name: Rob Stobo
  Title:   Authorized Signatory


American Beacon Crescent Short Duration High Income Fund, as a Required Lender
by Crescent Capital Group LP, its sub-adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


American Century Capital Portfolios, Inc. - AC Alternatives Income Fund, as a Required Lender
By: Bain Capital Credit, LP as Subadvisor
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Aon Hewitt Group Trust - High Yield Plus Bond

Fund, as a Required Lender

By: Bain Capital Credit, LP as Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


ARCHES FUNDING ULC, as a Required Lender
By:  

/s/ Madonna Sequeira

  Name: Madonna Sequeira
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


Ares XLV CLO Ltd., as a Required Lender
By:   Ares CLO Management II LLC, its Asset Manager
By:  

/s/ Neil Singhal

  Name:   Neil Singhal
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:  


Ares XLVI CLO Ltd., as a Required Lender
By:   Ares CLO Management LLC, its Asset Manager
By:  

/s/ Neil Singhal

  Name:   Neil Singhal
  Title:   Authorized Signatory
By:  

 

  Name:  
  Title:  


ARES XXIX CLO LTD., as a Required Lender
By:   Ares CLO Management XXIX L.P., its Asset Manager
By:   Ares CLO GP XXIX, LLC, its General Partner
By:  

/s/ Neil Singhal

  Name:   Neil Singhal
  Title:   Authorized Signatory
By:  

 

  Name:  
  Title:  


ARES XXVIII CLO LTD., as a Required Lender
By:   Ares CLO Management XXVIII L.P., its Asset Manager
By:   Ares CLO GP XXVIII, LLC, its General Partner
By:  

/s/ Neil Singhal

  Name:   Neil Singhal
  Title:   Authorized Signatory
By:  

 

  Name:  
  Title:  


Associated Electric & Gas International Services, Limited, as a Required Lender

by SHENKMAN CAPITAL MANAGEMENT, INC.,

 

as Investment Manager

By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


ATLAS SENIOR LOAN FUND IX, LTD., as a Required Lender
By:   Crescent Capital Group LP, its adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


ATLAS SENIOR LOAN FUND V, LTD., as a Required Lender
By:   Crescent Capital Group LP, its adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


ATLAS SENIOR LOAN FUND VII, LTD., as a Required Lender
By:   Crescent Capital Group LP, its adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


ATLAS SENIOR LOAN FUND X, LTD., as a Required Lender
By:   Crescent Capital Group LP, its adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


Atlas Senior Secured Loan Fund VIII, Ltd., as a Required Lender
By:   Crescent Capital Group LP, its adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


AVAW Loans Sankaty z.H. Internationale
Kapitalanlagegesellschaft mbH, as a Required Lender
By:   Bain Capital Credit, LP as Fund Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Avery Point V CLO, Limited, as a Required Lender
By:   Bain Capital Credit, LP as Portfolio Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Avery Point VI CLO, Limited, as a Required Lender
By:   Bain Capital Credit, LP as Portfolio Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Avery Point VII CLO, Limited, as a Required Lender
By:   Bain Capital Credit, LP as Portfolio Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


BAIN CAPITAL CREDIT CLO 2016-2, LIMITED,

as a Required Lender

By: Bain Capital Credit CLO Advisors, LP, as Portfolio Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Bain Capital Credit CLO 2017-1, Limited, as a Required Lender
By:   Bain Capital Credit, LP as Collateral Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Bain Capital Credit CLO 2018-1, Limited, as a Required Lender
By:   Bain Capital Credit, LP as Portfolio Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


BAIN CAPITAL CREDIT MANAGED ACCOUNT (BLANCO), L.P., as a Required Lender
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Baloise Senior Secured Loan Fund II, as a Required Lender
By:   Bain Capital Credit, LP as Sub Investment Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Bandera Strategic Credit Partners II LP, as a Required Lender

By: Octagon Credit Investors, LLC

 

as Investment Manager

By:  

/s/ Kimberly Wong Lem

  Name: Kimberly Wong Lem
  Title:   Vice President, Portfolio Administration
By:  

 

  Name:
  Title:


Barclays Bank PLC, as a Required Lender
By:  

/s/ Jacqueline Custodio

  Name: Jacqueline Custodio
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


Blue Cross and Blue Shield of Florida, Inc., as a Required Lender
By: Guggenheim Partners Investment Management, LLC as Manager
By:  

/s/ Kaitlin Trinh

  Name: Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:
  Title:


Blue Cross of California, as a Required Lender
By:   Bain Capital Credit, LP, as Investment Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Brookside Mill CLO Ltd., as a Required Lender

By: Shenkman Capital Management, Inc.

 

as Collateral Manager

By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


CARE Super, as a Required Lender

By: SHENKMAN CAPITAL MANAGEMENT, INC.,

as Investment Manager

By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


Catholic Health Initiatives Master Trust, as a Required Lender
By: Bain Capital Credit, LP, as Investment Adviser and Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Bain Capital Credit CLO 2017-2, Limited, as a Required Lender
By: Bain Capital Credit, LP, as Collateral Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Cavalry CLO IV, Ltd., as a Required Lender
By: Bain Capital Credit, LP, as Collateral Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


CFG Pension Plan, as a Required Lender

By: Pacific Investment Management Company LLC,

 

as its Investment Advisor

By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


CHI Operating Investment Program L.P., as a Required Lender
By: Bain Capital Credit, LP, as Investment Adviser and Manager
By:  

/s/ Andrew Viens

  Name:   Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


City of New York Group Trust, as a Required Lender
By: The Comptroller of the City of New York
By: Guggenheim Partners Investment Management, LLC as Manager
By:  

/s/ Kaitlin Trinh

  Name:   Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:  
  Title:  


Community Insurance Company, as a Required Lender
By: Bain Capital Credit, LP, as Investment Manager
By:   /s/ Andrew Viens
  Name:   Andrew Viens
  Title:   Executive Vice President
By:    
  Name:  
  Title:  


Continental Airlines, Inc. Pension Master Trust, as a Required Lender

By: Pacific Investment Management Company LLC,

as its Investment Advisor

By:   /s/ Arthur Y.D. Ong
  Name:   Arthur Y.D. Ong
  Title:   Executive Vice President
By:   Name:
  Title:


Crescent Capital High Income Fund B L.P., as a Required Lender
By: Crescent Capital Group LP, its adviser
By:   /s/ Brian McKeon
  Name:   Brian McKeon
  Title:   Vice President
By:   /s/ Wayne Hosang
  Name:   Wayne Hosang
  Title:   Managing Director


CRESCENT CAPITAL HIGH INCOME FUND L.P., as a Required Lender
By: Crescent Capital Group LP, its adviser
By:   /s/ Brian McKeon
  Name:   Brian McKeon
  Title:   Vice President
By:   /s/ Wayne Hosang
  Name:   Wayne Hosang
  Title:   Managing Director


Crescent Senior Secured Floating Rate Loan Fund, LLC, as a Required Lender
By: Crescent Capital Group LP, its adviser
By:   /s/ Brian McKeon
  Name:   Brian McKeon
  Title:   Vice President
By:   /s/ Wayne Hosang
  Name:   Wayne Hosang
  Title:   Managing Director


JNL/PIMCO Credit Income Fund, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:   /s/ Arthur Y.D. Ong
  Name:   Arthur Y.D. Ong
  Title:   Executive Vice President
By:    
  Name:  
  Title:  


DaVinci Reinsurance Ltd., as a Required Lender
By: Guggenheim Partners Investment Management LLC as Manager
By:   /s/ Kaitlin Trinh
  Name:   Kaitlin Trinh
  Title:   Authorized Person
By:    
  Name:  
  Title:  


DTE Energy Company Affiliates Employee Benefit Plans Master Trust, as a Required Lender

By: Pacific Investment Management Company LLC,

as its Investment Advisor

By:   /s/ Arthur Y.D. Ong
  Name:   Arthur Y.D. Ong
  Title:   Executive Vice President
By:    
  Name:  
  Title:  


Dunham Floating Rate Bond Fund, as a Required Lender
By:   /s/ Kyle Jennings
  Name:   Kyle Jennings
  Title:   Managing Director
By:    
  Name:  
  Title:  


EAF comPlan II – Private Debt, as a Required Lender
By: Guggenheim Partners Investment Management LLC as Asset Manager
By:   /s/ Kaitlin Trinh
  Name:   Kaitlin Trinh
  Title:   Authorized Person
By:    
  Name:  
  Title:  


Electronic Data Systems 1994 Pension Scheme, as a Required Lender

by SHENKMAN CAPITAL MANAGEMENT, INC.,

 

as Investment Manager

By:   /s/ Dov Braun
  Name:   Dov Braun
  Title:   CFO
By:    
  Name:  
  Title:  


Electronic Data Systems Retirement Plan, as a Required Lender

 

by SHENKMAN CAPITAL MANAGEMENT, INC.,

 

as Investment Manager

By:   /s/ Dov Braun
  Name:   Dov Braun
  Title:   CFO
By:    
  Name:  
  Title:  


Elysium Limited, as a Required Lender
By:   /s/ Adam Kaiser
  Name:   Adam Kaiser
  Title:   Attorney-In-Fact
By:    
  Name:  
  Title:  


State of Hawaii Employees’ Retirement System, as a Required Lender

By: Pacific Investment Management Company LLC,

as its Investment Advisor

By:   /s/ Arthur Y.D. Ong
  Name:   Arthur Y.D. Ong
  Title:   Executive Vice President
By:    
  Name:  
  Title:  


Employees’ Retirement System of the State of Rhode Island, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:   /s/ Arthur Y.D. Ong
  Name:   Arthur Y.D. Ong
  Title:   Executive Vice President
By:    
  Name:  
  Title:  


Endurance Investment Holdings Ltd., as a Required Lender
By: Guggenheim Partners Investment Management LLC as Asset Manager
By:   /s/ Kaitlin Trinh
  Name:   Kaitlin Trinh
  Title:   Authorized Person
By:    
  Name:  
  Title:  


First American Title Insurance Company, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:   /s/ Arthur Y.D. Ong
  Name:   Arthur Y.D. Ong
  Title:   Executive Vice President
By:    
  Name:  
  Title:  


FirstEnergy System Master Retirement Trust, as a Required Lender
By: Bain Capital Credit, LP, as Manager
By:   /s/ Andrew Viens
  Name:   Andrew Viens
  Title:   Executive Vice President
By:    
  Name:  
  Title:  


Four Points Multi-Strategy Master Fund Inc. (Loan Account), as a Required Lender

by SHENKMAN CAPITAL MANAGEMENT, INC.,

 

as Investment Manager for the Loan Account

By:   /s/ Dov Braun
  Name:   Dov Braun
  Title:   CFO
By:    
  Name:  
  Title:  


Future Fund Board of Guardians for and on behalf of Medical Research Future Fund, as a Required Lender
By: Bain Capital Credit, LP, as Investment Manager
By:  

/s/ Andrew Viens

  Name:   Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


GGH US BL Ametrine Sub-Trust A Sub-Trust Of Guggenheim Amethyst Trust, as a Required Lender
By: Guggenheim Partners Investment Management LLC as Investment Manager
By:  

/s/ Kaitlin Trinh

  Name:   Trinh, Kaitlin
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


Government Employees Superannuation Board, as a Required Lender
By: Bain Capital Credit, LP, as Manager
By:  

/s/ Andrew Viens

  Name:   Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


TICP CLO IX, Ltd., as a Required Lender
By: TICP CLO IX Management LLC
Its Collateral Manager
By:  

/s/ Daniel Wanek

  Name:   Daniel Wanek
  Title:   Vice President
By:  

 

  Name:  
  Title:  


Greyhound Lines, Inc. – Amalgamated Transit Union National Local 1700 Retirement & Disability Trust, as a Required Lender
By: Pacific Investment Management Company LLC,
as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name:   Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Griffin Institutional Access Credit Fund, as a Required Lender
By: BCSF Advisors, LP, as Sub-Adviser
By:  

/s/ Andrew Viens

  Name:   Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Guggenheim Defensive Loan Fund, as a Required Lender
By: Guggenheim Partners Investment Management LLC as Investment Manager
By:  

/s/ Kaitlin Trinh

  Name:   Kaitlin Trinh
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


Guggenheim Funds Trust – Guggenheim Floating Rate Strategies Fund, as a Required Lender
By: Guggenheim Partners Investment Management LLC
By:  

/s/ Kaitlin Trinh

  Name:   Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:  
  Title:  


Guggenheim Funds Trust – Guggenheim Macro Opportunities Fund, as a Required Lender
By: Guggenheim Partners Investment Management LLC
By:  

/s/ Kaitlin Trinh

  Name:   Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:  
  Title:  


Guggenheim Funds Trust – Guggenheim High Yield Fund, as a Required Lender
By: Security Investors, LLC as Investment Adviser
By:  

/s/ Kaitlin Trinh

  Name:   Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:  
  Title:  


Guggenheim U.S. Loan Fund II, as a Required Lender
By: Guggenheim Partners Investment Management LLC as Investment Manager
By:  

/s/ Kaitlin Trinh

  Name:   Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:  
  Title:  


Guggenheim U.S. Loan Fund III, as a Required Lender
By: Guggenheim Partners Investment Management, LLC as Investment Manager
By:  

/s/ Kaitlin Trinh

  Name:   Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:  
  Title:  


Guggenheim Variable Funds Trust – Series P (High Yield Series), as a Required Lender
By: Security Investors, LLC as Management Company
By:  

/s/ Kaitlin Trinh

  Name:   Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:  
  Title:  


HBOS Final Salary Trust Ltd (On Behalf of HBOS Final Salary PS), as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Health Employees Superannuation Trust Australia, as a Required Lender

By: SHENKMAN CAPITAL MANAGEMENT, INC.,

 

as Investment Manager

By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


Hewlett-Packard Company Master Trust, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


IAM National Pension Fund, as a Required Lender
By: Guggenheim Partners Investment Management, LLC as Adviser
By:  

/s/ Kaitlin Trinh

  Name: Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:
  Title:


Illinois State Board of Investment, as a Required Lender
By: Crescent Capital Group LP, its adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


ITG Brands, LLC Retirement Allowance Plan for Hourly Rated and/or Piecework Employees Trust, as a Required Lender

By: Pacific Investment Management Company LLC,

 

as its Investment Advisor

By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


IU Health Defined Benefit Group Investment Trust, as a Required Lender

By: Pacific Investment Management Company LLC,

 

as its Investment Advisor

By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Jackson Mill CLO Ltd., as a Required Lender

By: Shenkman Capital Management, Inc.,

 

as Portfolio Manager

By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


Jefferson Mill CLO Ltd., as a Required Lender

By: Shenkman Capital Management, Inc.,

 

as Collateral Manager

By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


JNL/Crescent High Income Fund, as a Required Lender
By: Crescent Capital Group LP, its sub-adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


Kaiser Foundation Hospitals, as a Required Lender
By: Bain Capital Credit, LP, as Investment Adviser and Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Kaiser Permanente Group Trust, as a Required Lender
By: Bain Capital Credit, LP, as Investment Adviser and Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Kentucky Retirement Systems (Shenkman – Insurance Fund Account), as a Required Lender by SHENKMAN CAPITAL MANAGEMENT, INC.,
as Investment Manager
By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


Kentucky Retirement Systems (Shenkman – Pension Account), as a Required Lender
By: SHENKMAN CAPITAL MANAGEMENT, INC.,
as Investment Manager
By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


Kentucky Teachers’ Retirement System Insurance Trust Fund, as a Required Lender by SHENKMAN CAPITAL MANAGEMENT, INC.,

 

as Investment Manager

By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


LCM 26 Ltd., as a Required Lender
By: LCM Asset Management LLC
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XIII Limited Partnership, as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XIV Limited Partnership, as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XIX Limited Partnership, as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XV Limited Partnership, as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XVI Limited Partnership, as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XVII Limited Partnership, as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XVIII Limited Partnership, as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XX Limited Partnership, as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XXI Limited Partnership, as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XXII Ltd., as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XXIII Ltd., as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


LCM XXIV Ltd., as a Required Lender
By: LCM Asset Management LLC
As Collateral Manager
By:  

/s/ Alexander B. Kenna

  Name: Alexander B. Kenna
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


JEFFERIES LEVERAGED CREDIT PRODUCTS, LLC as a Required Lender
By:  

/s/ Joseph Darconte

  Name: Joseph Darconte
  Title:   Senior Vice President


Lloyds Bank Pension Scheme No. 1, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Lloyds Bank Pension Scheme No. 2, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Lord Abbett Floating Rate Fund Ltd., as a Required Lender
By: Lord, Abbett & Co. LLC, as Investment Manager
By:  

/s/ Kearney Posner

  Name: Kearney Posner
  Title:   Associate Portfolio Manager
By:  

 

  Name:
  Title:


Lord Abbett Investment Trust – Lord Abbett Floating Rate Fund, as a Required Lender
By: Lord, Abbett & Co. LLC, as Investment Manager
By:  

/s/ Kearney Posner

  Name: Kearney Posner
  Title:   Associate Portfolio Manager
By:  

 

  Name:
  Title:


Los Angeles County Employees Retirement

Association, as a Required Lender

By: Bain Capital Credit, LP, as Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Marble Point CLO X Ltd., as a Required Lender
By: MP CLO Management LLC, its Manager
By:  

/s/ Thomas Shandell

  Name: Thomas Shandell
  Title:   CEO
By:  

 

  Name:
  Title:


Marble Point CLO XI Ltd., as a Required Lender
By: Marble Point CLO Management LLC, its Manager
By:  

/s/ Thomas Shandell

  Name: Thomas Shandell
  Title:   CEO
By:  

 

  Name:
  Title:


Mercer Field II CLO Ltd., as a Required Lender
By: Guggenheim Partners Investment Management, LLC as Collateral Manager
By:  

/s/ Kaitlin Trinh

  Name: Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:
  Title:


Michelin North America Inc. Master Retirement Trust, as a Required Lender
By: Pacific Investment Management Company LLC,
as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


MP CLO III, Ltd., as a Required Lender
By: MP CLO Management LLC, its Manager
By:  

/s/ Thomas Shandell

  Name: Thomas Shandell
  Title:   CEO
By:  

 

  Name:
  Title:


MP CLO VI, Ltd., as a Required Lender
By: MP CLO Management LLC, its Manager
By:  

/s/ Thomas Shandell

  Name: Thomas Shandell
  Title:   CEO
By:  

 

  Name:
  Title:


MP CLO VII, Ltd., as a Required Lender
By: MP CLO Management LLC, its Collateral Manager
By:  

/s/ Thomas Shandell

  Name: Thomas Shandell
  Title:   CEO
By:  

 

  Name:
  Title:


Muzinich & Co., (Ireland) Limited for the account of Muzinich Global Tactical Credit, as a Required Lender
By:  

/s/ Patricia Charles

  Name: Patricia Charles
  Title:   Associate
By:  

 

  Name:
  Title:


National Electrical Benefit Fund, as a Required Lender
By: Crescent Capital Group LP, its adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


Neuberger Berman CLO XVII, Ltd., as a Required Lender
By Neuberger Berman Investment Advisers LLC as collateral manager
By:  

/s/ Colin Donlan

  Name: Colin Donlan
  Title:   Authorized Signatory
By:  

 

  Name:
  Title:


Newfleet CLO 2016-1, Ltd., as a Required Lender
By:  

/s/ Kyle Jennings

  Name: Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:
  Title:


Oncor Retirement Plan Trust, as a Required Lender
By: Pacific Investment Management Company LLC,
as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


PIMCO Bermuda Trust II: PIMCO Bermuda Bank Loan Fund (M), as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


PIMCO Cayman Bank Loan Libor Plus Fund JPY Hedge A Series Trust of Multi Manager Global Investment Trust, as a Required Lender
By: Pacific Investment Management Company LLC,
as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


PIMCO Cayman Bank Loan LIBOR Plus Fund JPY Hedge Series 2 A Series Trust of Multi Manager Global Investment Trust, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


PIMCO Cayman Trust: PIMCO Cayman Bank Loan Fund, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


PIMCO Cayman Trust: PIMCO Cayman Bank Loan Fund II, as a Required Lender
By: Pacific Investment Management Company LLC,
as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


PIMCO Funds: PIMCO Investment Grade Corporate Bond Fund, as a Required Lender
By: Pacific Investment Management Company LLC,
as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


PIMCO Funds Ireland plc: PIMCO Senior Loan Fund, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


PIMCO Funds: PIMCO Senior Floating Rate Fund, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Putnam Floating Rate Income Fund, as a Required Lender
By:  

/s/ Kerry O’Donnell

  Name: Kerry O’Donnell
  Title:   Manager


Putnam Investment Management, LLC on behalf of Seasons Series Trust (Sun America) – Asset Allocation: Diversified Growth Portfolio, as a Required Lender
By:  

/s/ Suzanne Deshaies

  Name: Suzanne Deshaies
  Title:   Vice President


Putnam Diversified Income Trust (Cayman) Master Fund, as a Required Lender
by The Putnam Advisory Company, LLC
By:  

/s/ Kerry O’Donnell

  Name: Kerry O’Donnell
  Title:   Manager


Putnam Premier Income Trust, as a Required Lender
By:  

/s/ Kerry O’Donnell

  Name: Kerry O’Donnell
  Title:   Manager


Putnam Master Intermediate Income Trust, as a Required Lender
By:  

/s/ Kerry O’Donnell

  Name: Kerry O’Donnell
  Title:   Manager


Putnam Variable Trust, on behalf of its series, Putnam VT Diversified Income Fund, as a Required Lender
by Putnam Investment Management, LLC
By:  

/s/ Kerry O’Donnell

  Name: Kerry O’Donnell
  Title:   Manager Operations


Putnam Canadian Global Trust – Putnam Canadian Fixed Income Global Alpha Fund, as a Required Lender
by The Putnam Advisory Company, LLC
By:  

/s/ Kerry O’Donnell

  Name: Kerry O’Donnell
  Title:   Manager


Putnam Absolute Return Fixed Income Fund, as a Required Lender
by The Putnam Fiduciary Trust Company
By:  

/s/ Kerry O’Donnell

  Name: Kerry O’Donnell
  Title:   Manager


Putnam Absolute Return 300 Fund, as a Required Lender
by Putnam Investment Management, LLC
By:  

/s/ Kerry O’Donnell

  Name: Kerry O’Donnell
  Title:   Manager


Putnam Funds Trust, on behalf of its series, Putnam Multi-Asset Absolute Return Fund, as a Required Lender
By Putnam Investment Management, LLC
By:  

/s/ Kerry O’Donnell-Rancourt

  Name: Kerry O’Donnell-Rancourt
  Title:   Manager


Putnam Total Return Fund, as a Required Lender
By Putnam Investment Management, LLC
By:  

/s/ Suzanne Deshaies

  Name: Suzanne Deshaies
  Title:   VP


Putnam Total Return Trust, as a Required Lender
By Putnam Investment Management, LLC
By:  

/s/ Suzanne Deshaies

  Name: Suzanne Deshaies
  Title:   VP


Putnam Retirement Advantage GAA Growth Portfolio, as a Required Lender
By Putnam Investment Management, LLC
By:  

/s/ Suzanne Deshaies

  Name: Suzanne Deshaies
  Title:   VP


Putnam Retirement Advantage GAA Balance Portfolio, as a Required Lender
By Putnam Investment Management, LLC
By:  

/s/ Suzanne Deshaies

  Name: Suzanne Deshaies
  Title:   VP


Putnam Retirement Advantage GAA Conservative Portfolio, as a Required Lender
By Putnam Investment Management, LLC
By:  

/s/ Suzanne Deshaies

  Name: Suzanne Deshaies
  Title:   VP  


Putnam Dynamic Asset Allocation Growth Fund, as a Required Lender
By Putnam Investment Management, LLC
By:  

/s/ Suzanne Deshaies

  Name: Suzanne Deshaies
  Title:   VP  


Putnam Dynamic Asset Allocation Balanced Fund, as a Required Lender
By Putnam Investment Management, LLC
By:  

/s/ Suzanne Deshaies

  Name: Suzanne Deshaies
  Title:   VP


Putnam Variable Trust – Putnam VT Global Asset Allocation Fund, as a Required Lender
by Putnam Investment Management, LLC
By:  

/s/ Kerry O’Donnell

  Name: Kerry O’Donnell
  Title:   Manager


Putnam Dynamic Asset Allocation Conservative Fund, as a Required Lender
By Putnam Investment Management, LLC
By:  

/s/ Suzanne Deshaies

  Name: Suzanne Deshaies
  Title:   VP


Great-West Putnam High Yield Bond Fund, as a Required Lender

 

by Putnam Investment Management, LLC

By:  

/s/ Kerry O’Donnell

  Name:   Kerry O’Donnell
  Title:   Manager


Putnam Dynamic Risk Allocation Fund, as a Required Lender
By Putnam Investment Management, LLC
By:  

/s/ Kerry O’Donnell

  Name:   Kerry O’Donnell
  Title:   Manager


Counsel Fixed Income, as a Required Lender

 

by Putnam Investment Canada, ULC

By:  

/s/ Kerry O’Donnell

  Name:   Kerry O’Donnell
  Title:   Manager


International Investment Fund – Putnam Global Alpha Fund, as a Required Lender
by The Putnam Advisory Company, LLC
By:  

/s/ Kerry O’Donnell

  Name:   Kerry O’Donnell
  Title:   Manager


International Investment Fund – Putnam Global Alpha A Fund, as a Required Lender
by The Putnam Advisory Company, LLC
By:  

/s/ Kerry O’Donnell

  Name:   Kerry O’Donnell
  Title:   Manager


Counsel North American High Yield Bond, as a

Required Lender

By Putnam Investments Canada, ULC
By:  

/s/ Kerry O’Donnell

  Name:   Kerry O’Donnell
  Title:   Manager


Minister for Finance (Ireland Strategic Investment

Fund), as a Required Lender

By The Putnam Advisory Company, LLC
By:  

/s/ Kerry O’Donnell-Rancourt

  Name:   Kerry O’Donnell-Rancourt
  Title:   Middle Office Manager


Race Point IX CLO, Limited, as a Required Lender
By: Bain Capital Credit, LP, as Portfolio Manager
By:  

/s/ Andrew Viens

  Name:   Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Race Point VIII CLO, Limited, as a Required Lender
By: Bain Capital Credit, LP, as Portfolio Manager
By:  

/s/ Andrew Viens

  Name:   Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Regence Bluecross Blueshield of Oregon, as a

Required Lender

By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name:   Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Regence Bluecross Blueshield of Utah, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name:   Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Regence Blueshield, as a Required Lender

 

By: Pacific Investment Management Company LLC, as its Investment Advisor

By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Regence Blueshield of Idaho, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Renaissance Investment Holdings Ltd., as a Required Lender
By: Guggenheim Partners Investment Management, LLC as Manager

By:

 

/s/ Kaitlin Trinh

 

Name:

 

Kaitlin Trinh

  Title:   Authorized Person

By:

 

 

 

Name:

 
 

Title:

 


Retail Employees Superannuation Trust, as a Required Lender
By: Bain Capital Credit, LP, as Investment Adviser and Manager
By:  

/s/ Andrew Viens

  Name:   Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Romark CLO - I Ltd, as a Required Lender
By: Shenkman Capital Management, Inc, as Servicer
By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


Romark CLO - II Ltd, as a Required Lender
By: Romark CLO Advisors LLC, as Collateral Manager
By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


San Francisco City and County Employees’ Retirement System, as a Required Lender
By: Bain Capital Credit, LP, as Investment Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Bain Capital Credit Managed Account (FSS), L.P., as a Required Lender
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Bain Capital Credit Rio Grande FMC, L.P., as a Required Lender
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


BAIN CAPITAL SENIOR LOAN FUND (SRI), L.P., as a Required Lender
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Bain Capital Senior Loan Fund Public Limited Company, as a Required Lender
By: Bain Capital Credit, LP, as Investment Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


BAIN CAPITAL SENIOR LOAN FUND, L.P., as a Required Lender
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Shenkman Floating Rate High Income Fund, as a Required Lender

By: Shenkman Capital Management, Inc.,

 

as Collateral Manager

By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


St. Luke’s Health System Retirement Plan, as a Required Lender

By: Pacific Investment Management Company LLC, as

 

its Investment Advisor

By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


State—Boston Retirement System, as a Required Lender
By: Crescent Capital Group LP, its adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


Stichting Bedrijfspensioenfonds voor de Agrarische en Voedselvoorzieningshandel, as a Required Lender
By: Pacific Investment Management Company LLC, as its Investment Advisor
By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:
  Title:


Sudbury Mill CLO, Ltd., as a Required Lender

By: Shenkman Capital Management, Inc.,

 

as Collateral Manager

By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:
  Title:


AIG Flexible Credit Fund, as a Required Lender
By:  

/s/ Kyle Jennings

  Name: Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


Sunsuper Pooled Superannuation Trust, as a Required Lender
By: Bain Capital Credit, LP, as Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Yellowstone Trading, LLC, as a Required Lender
By: SunTrust Bank, as manager
By:  

/s/ Connie Bailey-Blake

  Name: Connie Bailey-Blake
  Title:   Vice President
By:  

 

  Name:  
  Title:  


Suzuka INKA, as a Required Lender
By: Bain Capital Credit, LP, as Fund Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Teachers’ Retirement System of the State of Kentucky, as a Required Lender

by SHENKMAN CAPITAL MANAGEMENT, INC.,

 

as Investment Manager

By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:  
  Title:  


The Pension Plan of the United Church of Canada, as a Required Lender

By: Pacific Investment Management Company LLC,

 

as its Investment Advisor

By:  

/s/ Arthur Y.D. Ong

  Name: Arthur Y.D. Ong
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Virginia College Savings Plan, as a Required Lender

 

by SHENKMAN CAPITAL MANAGEMENT, INC., as

Investment Manager
By:  

/s/ Dov Braun

  Name: Dov Braun  
  Title:   CFO  
By:  

 

  Name:  
  Title:  


TICP CLO I-2, Ltd., as a Required Lender
By: TICP CLO I Management, LLC
Its Collateral Manager
By:  

/s/ Daniel Wanek

  Name: Daniel Wanek
  Title:   Vice President
By:  

 

  Name:  
  Title:  


TICP CLO II-2, Ltd., as a Required Lender
By: TICP CLO II Management, LLC
Its Collateral Manager
By:  

/s/ Daniel Wanek

  Name: Daniel Wanek
  Title:   Vice President
By:  

 

  Name:  
  Title:  


TICP CLO III-2, Ltd., as a Required Lender
By: TICP CLO III Management, LLC
Its Collateral Manager
By:  

/s/ Daniel Wanek

  Name: Daniel Wanek
  Title:   Vice President
By:  

 

  Name:  
  Title:  


TICP CLO IV Ltd, as a Required Lender
By:  

/s/ Daniel Wanek

  Name: Daniel Wanek
  Title:   Vice President
By:  

 

  Name:  
  Title:  


TICP CLO V 2016-1, Ltd., as a Required Lender
By:  

/s/ Daniel Wanek

  Name: Daniel Wanek
  Title:   Vice President
By:  

 

  Name:  
  Title:  


TICP CLO VI 2016-2, Ltd., as a Required Lender
By:  

/s/ Daniel Wanek

  Name: Daniel Wanek
  Title:   Vice President
By:  

 

  Name:  
  Title:  


TICP CLO VII, Ltd, as a Required Lender
By: TICP CLO VII Management, LLC
Its Collateral Manager
By:  

/s/ Daniel Wanek

  Name: Daniel Wanek
  Title:   Vice President
By:  

 

  Name:  
  Title:  


TICP CLO VIII, Ltd, as a Required Lender
By: TICP CLO VIII Management, LLC
Its Collateral Manager
By:  

/s/ Daniel Wanek

  Name: Daniel Wanek
  Title:   Vice President
By:  

 

  Name:  
  Title:  


TICP CLO X, Ltd., as a Required Lender
By: TICP CLO X Management, LLC
Its Collateral Manager
By:  

/s/ Daniel Wanek

  Name: Daniel Wanek
  Title:   Vice President
By:  

 

  Name:  
  Title:  


Trustmark Insurance Company, as a Required Lender
By: Crescent Capital Group LP, its adviser
By:  

/s/ Brian McKeon

  Name:   Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name:   Wayne Hosang
  Title:   Managing Director


Virtus GF Multi-Sector Short Duration Bond Fund, as a Required Lender
By:  

/s/ Kyle Jennings

  Name:   Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


Virtus Newfleet High Yield Fund, as a Required Lender
By:  

/s/ Kyle Jennings

  Name:   Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


Virtus Newfleet Multi-Sector Intermediate Bond Fund, as a Required Lender
By:  

/s/ Kyle Jennings

  Name:   Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


Virtus Newfleet Multi-Sector Short Term Bond Fund, as a Required Lender
By:  

/s/ Kyle Jennings

  Name:   Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


Virtus Newfleet Multi-Sector Bond ETF, as a Required Lender
By:  

/s/ Kyle Jennings

  Name:   Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


Virtus Newfleet Senior Floating Rate Fund, as a Required Lender
By:  

/s/ Kyle Jennings

  Name:   Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


Virtus Tactical Allocation Fund, as a Required Lender
By:  

/s/ Kyle Jennings

  Name:   Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


Virtus Total Return Fund Inc., as a Required Lender
By:  

/s/ Kyle Jennings

  Name:   Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


VVIT: Virtus Newfleet Multi-Sector Intermediate Bond Series, as a Required Lender
By:  

/s/ Kyle Jennings

  Name:   Kyle Jennings
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


WEBSTER FALLS FUNDING ULC, as a Required Lender
By:  

/s/ Madonna Sequeira

  Name:   Madonna Sequeira
  Title:   Authorized Signatory
By:  

 

  Name:  
  Title:  


Wells Fargo and Company Master Pension Trust, as a Required Lender
By: Guggenheim Partners Investment Management, LLC as Investment Manager
By:  

/s/ Kaitlin Trinh

  Name: Trinh, Kaitlin
  Title:   Managing Director
By:  

 

  Name:  
  Title:  


West Bend Mutual Insurance Company, as a Required Lender
By: Crescent Capital Group LP, its sub-adviser
By:  

/s/ Brian McKeon

  Name: Brian McKeon
  Title:   Vice President
By:  

/s/ Wayne Hosang

  Name: Wayne Hosang
  Title:   Managing Director


WM Pool - Fixed Interest Trust No. 7, as a Required Lender by SHENKMAN CAPITAL MANAGEMENT, INC.,
as Investment Manager
By:  

/s/ Dov Braun

  Name: Dov Braun
  Title:   CFO
By:  

 

  Name:  
  Title:  


XL Investments Ltd, as a Required Lender
By: Bain Capital Credit, LP, as Investment Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


XL RE Europe SE, as a Required Lender
By: Bain Capital Credit, LP, as Investment Manager
By:  

/s/ Andrew Viens

  Name: Andrew Viens
  Title:   Executive Vice President
By:  

 

  Name:  
  Title:  


Zilux Senior Loan Fund, as a Required Lender
BY: Guggenheim Partners Investment Management, LLC as Investment Manager
By:  

/s/ Kaitlin Trinh

  Name: Kaitlin Trinh
  Title:   Authorized Person
By:  

 

  Name:  
  Title:  


EXHIBIT A

AMENDED CREDIT AGREEMENT


EXHIBIT A

 

 

 

AMENDED AND RESTATED

TERM LOAN CREDIT AGREEMENT,

Dated as of June 18, 2018,

among

CPG INTERNATIONAL LLC,

as the Borrower,

THE LENDERS PARTY HERETO,

and

JEFFERIES FINANCE LLC,

as Administrative Agent and Collateral Agent

 

 

 

JEFFERIES FINANCE LLC,

BARCLAYS BANK PLC,

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED,

DEUTSCHE BANK SECURITIES INC., and

CITIGROUP GLOBAL MARKETS INC.

as Joint Lead Arrangers and Bookrunners with respect to the Incremental Amendment

 

i


TABLE OF CONTENTS

 

          Page  
ARTICLE I

 

Definitions

 

Section 1.01

   Defined Terms      2  

Section 1.02

   Terms Generally      50  

Section 1.03

   Accounting Terms; GAAP      51  

Section 1.04

   Currencies      52  

Section 1.05

   Limited Condition Event      52  
ARTICLE II

 

The Credits

 

Section 2.01

   [Reserved]      53  

Section 2.02

   Term Loans and Borrowings      53  

Section 2.03

   Request for Borrowing      54  

Section 2.04

   Funding of Borrowings      54  

Section 2.05

   Interest Elections      54  

Section 2.06

   Promise to Pay; Evidence of Debt      55  

Section 2.07

   Repayment of Term Loans      56  

Section 2.08

   Optional Prepayment of Term Loans      57  

Section 2.09

   Mandatory Prepayment of Term Loans      57  

Section 2.10

   Fees      59  

Section 2.11

   Interest      59  

Section 2.12

   Alternate Rate of Interest      60  

Section 2.13

   Increased Costs      60  

Section 2.14

   Break Funding Payments      61  

Section 2.15

   Taxes      62  

Section 2.16

   Payments Generally; Pro Rata Treatment; Sharing of Set-offs      65  

Section 2.17

   Mitigation Obligations; Replacement of Lenders      66  

Section 2.18

   Illegality      67  

Section 2.19

   Incremental Term Facilities      68  

Section 2.20

   Refinancing Amendments      71  

Section 2.21

   Extensions of Term Loans      72  
ARTICLE III

 

Representations and Warranties

 

Section 3.01

   Organization; Powers      73  

Section 3.02

   Authorization      74  

Section 3.03

   Enforceability      74  

Section 3.04

   Governmental Approvals      74  

Section 3.05

   Financial Statements      74  

 

ii


Section 3.06

   Labor Matters      75  

Section 3.07

   Title to Properties      75  

Section 3.08

   Subsidiaries      75  

Section 3.09

   Litigation; Compliance with Laws      75  

Section 3.10

   Federal Reserve Regulations      76  

Section 3.11

   Investment Company Act      76  

Section 3.12

   [Reserved.]      76  

Section 3.13

   Tax Returns      76  

Section 3.14

   No Material Misstatements      77  

Section 3.15

   Employee Benefit Plans      78  

Section 3.16

   Environmental Matters      79  

Section 3.17

   Security Documents      79  

Section 3.18

   Location of Real Property and Leased Premises      79  

Section 3.19

   Solvency      79  

Section 3.20

   No Material Adverse Effect      80  

Section 3.21

   [Reserved]      80  

Section 3.22

   USA PATRIOT Act; FCPA; OFAC      80  

Section 3.23

   Intellectual Property; Licenses, Etc.      80  

Section 3.24

   EEA Financial Institutions. No Loan Party is an EEA Financial Institution      81  
ARTICLE IV

 

Conditions of Lending

 

Section 4.01

   Conditions Precedent      81  
ARTICLE V

 

Affirmative Covenants

 

Section 5.01

   Existence; Businesses and Properties      85  

Section 5.02

   Insurance      85  

Section 5.03

   Taxes      86  

Section 5.04

   Financial Statements, Reports, etc.      86  

Section 5.05

   Litigation and Other Notices      89  

Section 5.06

   Compliance with Laws      89  

Section 5.07

   Maintaining Records; Access to Properties and Inspections      89  

Section 5.08

   Use of Proceeds      90  

Section 5.09

   Compliance with Environmental Laws      90  

Section 5.10

   Further Assurances; Additional Security      90  

Section 5.11

   Fiscal Year; Accounting      91  

Section 5.12

   Credit Ratings      92  

Section 5.13

   Lender Calls      92  

Section 5.14

   Post-Closing Matters      92  

Section 5.15

   Patriot Act, OFAC, FCPA      92  
ARTICLE VI

 

Negative Covenants

 

Section 6.01

   Indebtedness      93  

 

iii


Section 6.02

   Liens      97  

Section 6.03

   Sale and Lease-Back Transactions      100  

Section 6.04

   Investments, Loans and Advances      101  

Section 6.05

   Mergers, Consolidations, Sales of Assets and Acquisitions      104  

Section 6.06

   Restricted Payments      107  

Section 6.07

   Transactions with Affiliates      110  

Section 6.08

   Business of Borrower      112  

Section 6.09

   Limitation on Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By Laws and Certain Other Agreements; etc.      112  
ARTICLE VIA

 

Holdings Covenant

 

ARTICLE VII

 

Events of Default

 

Section 7.01

   Events of Default      115  
ARTICLE VIII

 

The Agents

 

Section 8.01

   Appointment      118  

Section 8.02

   Delegation of Duties      119  

Section 8.03

   Exculpatory Provisions      120  

Section 8.04

   Reliance by Administrative Agent      121  

Section 8.05

   Notice of Default      121  

Section 8.06

   Non-Reliance on Agents and Other Lenders      121  

Section 8.07

   Indemnification      122  

Section 8.08

   Agent in Its Individual Capacity      122  

Section 8.09

   Successor Agent      122  

Section 8.10

   Lead Arrangers; Co-Syndication Agents; Co-Documentation Agents      123  
ARTICLE IX

 

Miscellaneous

 

Section 9.01

   Notices; Communications      123  

Section 9.02

   Survival of Agreement      124  

Section 9.03

   Binding Effect      124  

Section 9.04

   Successors and Assigns      124  

Section 9.05

   Expenses; Indemnity      131  

Section 9.06

   Right of Set-off      132  

Section 9.07

   Applicable Law      133  

Section 9.08

   Waivers; Amendment      133  

Section 9.09

   Interest Rate Limitation      135  

Section 9.10

   Entire Agreement      135  

Section 9.11

   WAIVER OF JURY TRIAL      135  

Section 9.12

   Severability      135  

 

iv


Section 9.13

   Counterparts      136  

Section 9.14

   Headings      136  

Section 9.15

   Jurisdiction; Consent to Service of Process      136  

Section 9.16

   Confidentiality      136  

Section 9.17

   Platform; Borrower Materials      137  

Section 9.18

   Release of Liens and Guarantees      137  

Section 9.19

   Release of Merger Sub as Borrower      138  

Section 9.20

   USA PATRIOT Act Notice      138  

Section 9.21

   Security Documents and Intercreditor Agreement      138  

Section 9.22

   Acknowledgements      138  

Section 9.23

   Acknowledgement and Consent to Bail-In of EEA Financial Institutions      139  

Section 9.24

   No Novation      139  

 

v


Exhibits and Schedules

 

Exhibit A

  

Form of Assignment and Acceptance

Exhibit B

  

Form of Solvency Certificate

Exhibit C

  

Form of Borrowing Request

Exhibit D

  

Form of Interest Election Request

Exhibit E

  

Form of Non-Debt Fund Affiliate Assignment and Acceptance

Exhibit F

  

Form of Promissory Note

Schedule 1.01B

  

Guarantors

Schedule 1.01C

  

Sale/Lease-Back Documents

Schedule 2.01

  

Closing Date Commitments

Schedule 3.04

  

Environmental Filings; Governmental Approvals

Schedule 3.08(a)

  

Subsidiaries

Schedule 3.08(b)

  

Outstanding Subscriptions, Options, Warrants, Calls, Rights, etc.

Schedule 3.09(a)

  

Litigation/Compliance with Laws

Schedule 3.13

  

Taxes

Schedule 3.16

  

Environmental Matters

Schedule 3.18

  

Material Real Property

Schedule 3.23

  

Intellectual Property

Schedule 5.02

  

Insurance

Schedule 5.14

  

Post-Closing Matters

Schedule 6.01(a)

  

Indebtedness

Schedule 6.02(a)

  

Liens

Schedule 6.04(h)

  

Investments

Schedule 6.06(m)

  

Restricted Payments

Schedule 6.07(e)

  

Transactions and Agreements

Schedule 9.01

  

Notice Information

 

vi


AMENDED AND RESTATED TERM LOAN CREDIT AGREEMENT, dated as of June 18, 2018 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Agreement”), among CPG International LLC, a Delaware limited liability company as the existing borrower (following the consummation of the Acquisition (as defined below), the “Borrower”) the Lenders party hereto from time to time, and Jefferies Finance LLC, as administrative agent (in such capacity, and as further defined in Section 1.01, the “Administrative Agent”), and as collateral agent (in such capacity, and as further defined in Section 1.01, the “Collateral Agent”).

A. Ares Corporate Opportunities Fund IV, L.P. (“Ares”) and Ontario Teachers’ Pension Plan Board (“Teachers”) (collectively, the “Sponsors”) formed CPG Newco LLC, the parent of the Borrower (“Holdings”) and Merger Sub, and pursuant to the Agreement and Plan of Merger, dated as of August 16, 2013 (the “Merger Agreement”), by and among Holdings, CPG Merger Sub LLC, a Delaware limited liability company (“Merger Sub” and the initial borrower hereunder, and prior to the consummation of the Acquisition, the “Borrower”), CPG International LLC, a Delaware limited liability company (as successor-in-interest to CPG International Inc., a Delaware corporation, “Target” and, together with its Subsidiaries, the “Acquired Business” ) and CPG International Holdings LP, a Delaware limited partnership, Holdings on the Closing Date acquired 100% of the issued and outstanding shares of common stock of Target, par value $0.01 per share pursuant to a reverse triangular merger (the “Acquisition”) whereby Merger Sub was merged with and into Target, with Target as the surviving entity and a Wholly Owned Subsidiary of Holdings.

B. Upon consummation of the Acquisition, Target acceded as successor in interest by operation of law to that certain Term Loan Credit Agreement, dated as of September 30, 2013 (as amended, supplemented or otherwise modified prior to the date hereof, the “Existing Term Loan Agreement”) and became the Borrower. Immediately after the Closing Date, Target was converted from a corporation to a limited liability company (the “Conversion”).

C. Promptly following consummation of the Acquisition, each of Holdings and the Subsidiary Loan Parties acceded to the Existing Term Loan Agreement and each other Loan Document (as appropriate) by execution of a joinder, supplement or other form of applicable agreement.

D. The parties hereto have agreed to amend and restate the Existing Term Loan Agreement as provided in this Agreement.

E. It is the intent of the parties hereto that this Agreement not constitute a novation of the obligations and liabilities existing under the Existing Term Loan Agreement or evidence repayment of any of such obligations and liabilities and that this Agreement amend and restate in its entirety the Existing Term Loan Agreement and re-evidence the obligations of the Borrower outstanding thereunder.

In consideration of the mutual covenants and agreements herein contained, the parties hereto covenant and agree that on the Incremental Amendment Effective Date (as defined below), the Existing Term Loan Agreement shall be amended and restated in its entirety as follows:

 

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ARTICLE I

Definitions

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

2018 Incremental Transactions” means the entering into the Incremental Amendment No. 1 by the Loan Parties, the borrowings thereunder on the Incremental Amendment Effective Date, and the application of proceeds thereof as contemplated hereby and in Incremental Amendment No. 1.

2018 Incremental Term Loan” means an Incremental Term Loan extended by a Lender on the Incremental Amendment Effective Date.

2018 Incremental Term Loan Commitment” means, in the case of a 2018 Incremental Term Loan Lender, the commitment of such Lender to make or otherwise fund a 2018 Incremental Term Loan as set forth in Incremental Amendment No. 1. On the Incremental Amendment Effective Date, the aggregate amount of 2018 Incremental Term Loan Commitments is $225,000,000.

2018 Incremental Term Loan Lender” means at any time, a Lender that has a 2018 Incremental Term Loan Commitment or holds a 2018 Incremental Term Loan, in each case, at such time.

ABL Commitments” shall mean “Commitments” as defined in the ABL Credit Agreement.

ABL Credit Agreement” shall mean the Amended and Restated Revolving Credit Agreement, dated as of March 9, 2017, among CPG International Inc., the guarantors thereto, the lenders party thereto and Deutsche Bank AG New York Branch, as administrative agent and collateral agent, in respect of up to $150.0 million of asset-based revolving credit facilities, as such document may be amended, restated, supplemented, replaced, refinanced or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement.

ABL Facility” shall mean the “Revolving Facility” as defined in the ABL Credit Agreement, as may be amended, restated, supplemented, replaced, refinanced or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement.

ABL Loan Documents” shall mean the ABL Credit Agreement and the other “Loan Documents” as defined in the ABL Credit Agreement, as each such document may be amended, restated, supplemented, replaced, refinanced or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement.

ABL Obligations” shall mean the “Obligations” as defined in the ABL Credit Agreement.

ABL Priority Collateral” shall have the meaning assigned to such term in the ABL/Term Loan Intercreditor Agreement.

ABL Priority Collateral Asset Sale” shall mean any Asset Sale that consists of or includes the disposition of ABL Priority Collateral outside the ordinary course of business.

ABL Security Documents” shall mean the “Security Documents” as defined in the ABL Credit Agreement.

ABL/Term Loan Intercreditor Agreement” shall mean the Intercreditor Agreement, dated as of the Closing Date, by and among the Administrative Agent, Deutsche Bank AG New York Branch, as collateral agent under the ABL Credit Agreement, Holdings, Borrower and the Subsidiary Loan Parties party thereto, as amended, restated, supplemented, replaced, refinanced or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement.

 

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ABR” shall mean, for any day, a fluctuating rate per annum equal to the highest of (a) the New York Federal Reserve Bank Rate as of such day plus 12 of 1.00%, (b) the prime commercial lending rate announced as of such day by the Administrative Agent as the “prime rate” as in effect on such day and (c) the LIBO Rate as of such day (or, if such day is not a Business Day, the next preceding Business Day) for a deposit in Dollars with a maturity of one month plus 1.00%, provided that in no event shall the ABR be less than 2.00%.

ABR Borrowing” shall mean a Borrowing comprised of ABR Loans.

ABR Loans” shall mean any Term Loan bearing interest at a rate determined by reference to the ABR.

Accounting Change” shall have the meaning assigned to such term in Section 1.03.

Acquired Business” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Acquisition” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Additional Lender” shall mean any person that makes an Incremental Term Loan or an Other Term Loan.

Adjusted LIBO Rate” shall mean, with respect to any Eurocurrency Borrowing for any Interest Period, an interest rate per annum equal to the greater of (a) the LIBO Rate in effect for such Interest Period divided by one, minus the Statutory Reserves applicable to such Eurocurrency Borrowing, if any, and (b) 1.0%.

Administrative Agent” shall mean Jefferies Finance LLC, in its capacity as administrative agent for itself and the Lenders hereunder, and any duly appointed successor in such capacity.

Administrative Agent Fees” shall have the meaning assigned to such term in Section 2.10(a).

Administrative Questionnaire” shall mean an Administrative Questionnaire in a form supplied by the Administrative Agent.

Affiliate” shall mean, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the person specified. For purposes of this Agreement and the other Loan Documents, Jefferies LLC and its Affiliates shall be deemed to be Affiliates of Jefferies Finance LLC and its Affiliates.

Affiliated Lender” shall mean each Sponsor and their respective Affiliates, other than (a) Holdings or any Subsidiary (including the Borrower) and (b) any natural person.

Agents” shall mean the Administrative Agent and the Collateral Agent, in their respective capacities as such.

 

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Agreement” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Annual Financial Statements” shall have the meaning assigned to such term in Section 5.04(a).

Applicable Margin” shall mean (a) with respect to any Effective Date Term Loans 3.75% per annum in the case of any Eurocurrency Loan and 2.75% per annum in the case of any ABR Loan, (b) with respect to any Incremental Term Loans (other than the 2018 Incremental Term Loans), the “Applicable Margin” set forth in the Incremental Facility Amendment establishing the terms thereof, (c) with respect to any Other Term Loans, the “Applicable Margin” set forth in the Refinancing Amendment establishing the terms thereof and (d) with respect to any Extended Term Loans, the “Applicable Margin” set forth in the Extension Amendment establishing the terms thereof.

Applicable Prepayment Percentage” shall have the meaning assigned to such term in Section 2.08(b).

Approved Fund” shall have the meaning assigned to such term in Section 9.04(b)

Ares” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Asset Sale” shall mean any sale, transfer or other disposition (including any Sale and Lease-Back Transaction) to any person of any asset or assets of the Borrower or any other Restricted Subsidiary; provided that the issuance of Equity Interests of (a) the Borrower or Holdings or (b) any Subsidiary of the Borrower to the Borrower, any Wholly Owned Subsidiary of the Borrower or on a pro rata basis to holders of Equity Interests of such Subsidiary, shall not, in each case, constitute an “Asset Sale”.

Asset Sale Proceeds Account” shall mean one or more deposit accounts or securities accounts (as such terms are defined in the Uniform Commercial Code) containing only the Net Cash Proceeds (or the cash proceeds that, but for the first proviso of the definition of “Net Cash Proceeds”, would constitute Net Cash Proceeds) of Asset Sales, any investments thereof in Permitted Investments and the proceeds thereof, pending the application of such Net Cash Proceeds in accordance with Section 2.09.

Assignee” shall have the meaning assigned to such term in Section 9.04(b).

Assignment and Acceptance” shall mean an assignment and acceptance entered into by a Lender and an Assignee, and accepted by the Administrative Agent and the Borrower (if required by Section 9.04), substantially in the form of Exhibit A or such other form as may be agreed between the Borrower and the Administrative Agent.

Authorized Guarantee” shall have the meaning assigned to such term in Section 4.01.

Available Amount” shall mean, at any date, an amount, not less than zero in the aggregate, determined on a cumulative basis, equal to (without duplication):

the sum of:

(a) $40.0 million; plus

 

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(b) 50% of Consolidated Net Income for the period (treated as one accounting period) commencing on October 1, 2013 to the end of the most recent fiscal quarter ending prior to such date for which internal consolidated financial statements of the Borrower are available (or, in the case such Consolidated Net Income is a deficit, minus 100% of such deficit); plus

(c) the cumulative amount of proceeds (including cash and the fair market value of property other than cash) from the sale of Equity Interests of the Borrower or any Parent Entity after the Closing Date and on or prior to such time (including upon exercise of warrants or options) which proceeds have been contributed as equity to the capital of the Borrower; provided that this clause (c) shall exclude issuances of Disqualified Stock, sales of Equity Interests financed as contemplated by Section 6.04(e), any amounts used to finance the payments or distributions in respect of any Junior Financing pursuant to Section 6.09(b)(i), Equity Interests issued in connection with a Cure Right (as defined in the ABL Loan Documents) and Equity Interests issued in connection with the incurrence of Indebtedness pursuant to Section 6.01(aa), sales of Equity Interests as contemplated by Section 6.06(d) and amounts used to fund charges, expenses, accruals or reserves in accordance with clause (l) of the definition of “Consolidated Net Income”; plus

(d) 100% of the aggregate amount of contributions (other than any such contributions received from Holdings or any Restricted Subsidiary) to the equity capital of the Borrower received in cash (and the fair market value of property other than cash) after the Closing Date (subject to the same exclusions as are applicable to clause (c) above); plus

(e) 100% of the aggregate principal amount of any Indebtedness (including the liquidation preference or maximum fixed repurchase price, as the case may be, of any Disqualified Stock) of Holdings or any Restricted Subsidiary issued after the Closing Date (other than Indebtedness issued to a Restricted Subsidiary), which has been converted into or exchanged for Equity Interests (other than Disqualified Stock) in the Borrower or Holdings; provided that this clause (e) shall exclude any conversions pursuant to Section 6.09(b)(i)(4); plus

(f) 100% of the aggregate amount received by the Borrower or any Restricted Subsidiary in cash (and the fair market value of property other than cash) after the Closing Date from (i) the sale (other than to Holdings or any Restricted Subsidiary) of the Equity Interests of an Unrestricted Subsidiary or (ii) any dividend or other distribution by an Unrestricted Subsidiary; plus

(g) in the event any Unrestricted Subsidiary has been redesignated as a Restricted Subsidiary or has been merged, consolidated or amalgamated with or into, or transfers or conveys its assets to, or is liquidated into, the Borrower or any other Restricted Subsidiary, the lesser of (i) fair market value of the Investments of the Borrower or any other Restricted Subsidiary in such Unrestricted Subsidiary at the time of such redesignation, combination or transfer (or of the assets transferred or conveyed, as applicable) and (ii) the fair market value of the original Investments by the Borrower or any other Restricted Subsidiary, in each case, as determined by the Borrower in good faith; plus

(h) any mandatory prepayment declined by a Lender under Section 2.09(c); plus

(i) an amount equal to any returns (including dividends, interest, distributions, returns of principal, profits on sale, repayments, income and similar amounts) actually received by the Borrower or any Restricted Subsidiary in cash or cash equivalents in respect of any Investments made pursuant to Section 6.04(j)(ii);

 

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minus the sum of

(a) the cumulative amount of Investments made pursuant to Section 6.04(j)(ii) prior to such time; plus

(b) the cumulative amount of Restricted Payments made pursuant to Section 6.06(f) prior to such time; plus

(c) payments or distributions in respect of Junior Financings pursuant to Section 6.09(b)(i)(7);

provided that contributions to equity capital of a Parent Entity or any Restricted Subsidiary resulting from a Restricted Payment made pursuant to Section 6.06(j) shall not be included in the calculation of the Available Amount.

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

Bail-In Legislation” means, 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 for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

Below Threshold Asset Sale Proceeds” shall have the meaning assigned to such term in the definition of “Net Cash Proceeds.”

Board” shall mean the Board of Governors of the Federal Reserve System of the United States of America.

Borrower” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Borrower Materials” shall have the meaning assigned to such term in Section 9.17.

Borrowing” shall mean a group of Term Loans of a single Type made on a single date under a single Term Facility and, in the case of Eurocurrency Loans, as to which a single Interest Period is in effect.

Borrowing Base” shall mean, as of any date of determination, an amount equal to the sum of (a) 85% of the book value of the eligible receivables of the Borrower and the other Subsidiary Loan Parties plus (b) the lesser of (i) 85% of the lower of cost or market of eligible inventory of the Borrower and the other Subsidiary Loan Parties and (ii) 85% of the appraised net orderly liquidation value of eligible inventory of the Borrower and the other Subsidiary Loan Parties. Book value shall be determined in accordance with GAAP and shall be calculated using amounts reflected on the most recent available balance sheet (it being understood that the accounts receivable and inventories of an acquired business may be included if such acquisition has been completed on or prior to such date of determination).

Borrowing Request” shall mean a request by the Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C (or such other form as may be agreed by the Borrower and the Administrative Agent from time to time).

Budget” shall have the meaning assigned to such term in Section 5.04(g).

 

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Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close; provided that when used in connection with a Eurocurrency Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in deposits in the London interbank market.

Capital Lease Obligations” shall mean, with respect to any person, the obligations of such person to pay rent or other amounts under any lease of (or other similar arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP (as in effect on the Closing Date, notwithstanding any modification or interpretative change thereto after the Closing Date (including without giving effect to any treatment of leases under Accounting Standards Codification 842 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect))) and, for purposes hereof, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP (as in effect on the Closing Date).

Cash Management Services” shall mean any treasury, depository, pooling, netting, overdraft, stored value card, purchase card (including so called “procurement card” or “P-card”), debit card, credit card, cash management, e-payables and similar services and any automated clearing house transfer of funds.

CFC” shall mean a controlled foreign corporation under Section 957 of the Code.

A “Change in Control” shall be deemed to occur if:

(a) at any time, Holdings shall fail to own, directly or indirectly, beneficially and of record, 100% of the issued and outstanding Equity Interests of the Borrower;

(b) at any time prior to the consummation of a Qualified IPO, the Permitted Holders, taken together, shall cease to own beneficially, directly or indirectly, Equity Interests representing at least a majority of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings (determined on a fully diluted basis but not giving effect to contingent voting rights that have not yet vested); or

(c) at any time upon or after the consummation of a Qualified IPO, any person or “group” (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act as in effect on the Closing Date) but excluding any employee benefit plan of such person and its subsidiaries and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan), other than the Permitted Holders or any underwriter participating in a Qualified IPO, shall have acquired beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 of the Exchange Act as in effect on the Closing Date) of Equity Interests of Holdings representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings (determined on a fully diluted basis but not giving effect to contingent voting rights that have not yet vested) and the percentage of the aggregate ordinary voting power so held by such person or “group” is greater than the percentage of the aggregate ordinary voting power represented by the Equity Interests of Holdings owned beneficially (within the meaning of Rules 13d-3 and 13d-5 of the Exchange Act as in effect on the Closing Date), directly or indirectly, in the aggregate by the Permitted Holders (determined on a fully diluted basis but not giving effect to contingent voting rights that have not yet vested), unless, in the case of either clause (b) or (c) above, the Permitted Holders have, at such time, the right or the ability by voting power, contract or otherwise to elect or designate for election at least a majority of the persons constituting the Governing Persons of Holdings.

 

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Notwithstanding the preceding or any provision of Rule 13d-3 of the Exchange Act (as in effect on the Closing Date), (i) a person or “group” shall not be deemed to beneficially own securities (1) subject to an equity or asset purchase agreement, merger agreement or similar agreement (or voting or option or similar agreement related thereto) until the consummation of the transactions contemplated by such agreement or (2) as a result of veto or approval rights in any joint venture agreement, shareholder agreement or other similar agreement and (ii) if any “group” includes one or more Permitted Holders, any issued and outstanding voting Equity Interests of Holdings beneficially owned, directly or indirectly, by any Permitted Holders that are a part of such “group” shall not be treated as being beneficially owned by any other member of such “group” for purposes of determining whether a Change in Control has occurred.

Change in Law” shall mean (a) the adoption of any law, rule, regulation or treaty after the Closing Date, (b) any change in law, rule, regulation or treaty or in the interpretation or application thereof by any Governmental Authority after the Closing Date or (c) compliance by any Lender (or, for purposes of Section 2.13(b), by any lending office of such Lender or by such Lender’s holding company, if any) with any written request, guideline or directive (whether or not having the force of law) of any Governmental Authority, made or issued after the Closing Date; provided that, notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives promulgated thereunder or issued in connection therewith and (ii) 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 of America or foreign regulatory authorities, in each case pursuant to Basel III, in each case shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted, promulgated, implemented or issued.

Charges” shall have the meaning assigned to such term in Section 9.09.

Class” shall mean, with respect to a Term Facility, (a) when used with respect to Lenders, the Lenders under such Term Facility, and (b) when used with respect to Loans or Borrowings, Loans or Borrowings under such Term Facility.

Closing” means the satisfaction (or waiver) of the applicable conditions set forth in Section 4.01.

Closing Date” shall mean September 30, 2013.

Closing Date First Lien Leverage Ratio” shall mean 4.50:1.00.

Closing Date Material Adverse Effect” shall have the meaning assigned to such term in Section 4.01(j).

Closing Date Senior Secured Leverage Ratio” shall mean 4.50:1.00.

Code” shall mean the Internal Revenue Code of 1986, as amended, modified, and supplemented.

Co-Documentation Agents” shall have the meaning assigned to such term in the introductory paragraphs hereof.

 

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Collateral” shall mean the “Collateral” as defined in the Collateral Agreement and shall also include all other property that is subject to any Lien in favor of the Administrative Agent for the benefit of the Secured Parties pursuant to any Security Document.

Collateral Agent” shall mean Jefferies Finance LLC, in its capacity as Collateral Agent for itself and the other Secured Parties, and any duly appointed successor in that capacity.

Collateral Agreement” shall mean the Guarantee and Collateral Agreement dated as of the Closing Date, among the Loan Parties and the Administrative Agent, as amended, supplemented or otherwise modified from time to time.

Collateral and Guarantee Requirement” shall mean the requirement that:

(a) (i) on the Closing Date, the Administrative Agent shall have received (A) a counterpart of the Collateral Agreement duly executed and delivered on behalf of such CPG Merger Sub LLC and (B) a supplement to the Collateral Agreement, substantially in the form specified therein, duly executed and delivered on behalf of each person that was a Subsidiary as of such date (other than any Unrestricted Subsidiary, Immaterial Subsidiary, Qualified CFC Holding Company, CFC or Domestic Subsidiary of a CFC that, in each case, was not a Subsidiary Loan Party under and as defined in the ABL Credit Agreement as of such date), (ii) on or prior to the Closing Date, the Administrative Agent shall have received the Security Documents required to be delivered pursuant to Section 5.14 and (iii) on or prior to the Second Amendment Effective Date, the Administrative Agent shall have received a supplement to the Collateral Agreement, substantially in the form specified therein, duly executed and delivered on behalf of each Subsidiary (other than any Unrestricted Subsidiary, Immaterial Subsidiary, Qualified CFC Holding Company, CFC or Domestic Subsidiary of a CFC that, in each case, is not a Subsidiary Loan Party under and as defined in the ABL Credit Agreement), if any, formed or acquired after the Closing Date and on or prior to the Second Amendment Effective Date;

(b) on the Second Amendment Effective Date, (i) the Administrative Agent (or a designated bailee thereof) shall have received, subject to the exceptions set forth in the Collateral Agreement, (A) a pledge of all the issued and outstanding Equity Interests of each Subsidiary (other than any Unrestricted Subsidiary, Immaterial Subsidiary, Qualified CFC Holding Company or CFC) owned on the Second Amendment Effective Date directly by any Loan Party and (B) a pledge of 100% of the outstanding non-voting Equity Interests and 65% of the outstanding voting Equity Interests of each (1) CFC directly owned by any Loan Party and (2) Qualified CFC Holding Company directly owned by any Loan Party and (ii) the Administrative Agent (or a designated bailee thereof) shall have received all certificates or other instruments (if any) representing such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank;

(c) (i) on the Second Amendment Effective Date all Indebtedness of Holdings, the Borrower and each other Subsidiary of Holdings having, in the case of each instance of Indebtedness, an aggregate principal amount in excess of $5.0 million (other than (A) intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings and its Subsidiaries or (B) to the extent that a pledge of such promissory note or instrument would violate applicable law) that is owing to any Loan Party shall be evidenced by a promissory note or an instrument and shall have been pledged pursuant to the Collateral Agreement (or other applicable Security Document as reasonably required by the Administrative Agent) and (ii) the Administrative Agent (or a designated bailee thereof) shall have received all such promissory notes or instruments, together with note powers or other instruments of transfer with respect thereto endorsed in blank;

 

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(d) in the case of any person that becomes a Subsidiary (other than an Unrestricted Subsidiary, an Immaterial Subsidiary, a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC that, in each case, is not a Subsidiary Loan Party under and as defined in the Term Loan Credit Agreement) after the Second Amendment Effective Date (with (i) any Subsidiary Redesignation resulting in an Unrestricted Subsidiary becoming a Restricted Subsidiary being deemed to constitute the acquisition of a Subsidiary, (ii) any Immaterial Subsidiary being designated a Material Subsidiary being deemed to constitute the acquisition of a Subsidiary and (iii) any transaction or event resulting in a Subsidiary ceasing to be a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC being deemed to constitute the acquisition of a Subsidiary), the Administrative Agent shall have received a supplement to the Collateral Agreement, substantially in the form specified therein, duly executed and delivered on behalf of such Subsidiary within the time period specified in Section 5.10(c);

(e) after the Second Amendment Effective Date, subject to the exceptions set forth in the Collateral Agreement, (i)(A) all the issued and outstanding Equity Interests of any person that becomes a Subsidiary Loan Party after the Second Amendment Effective Date and (B) all the Equity Interests that are acquired by a Loan Party after the Second Amendment Effective Date (with (i) any Subsidiary Redesignation resulting in an Unrestricted Subsidiary becoming a Restricted Subsidiary being deemed to constitute the acquisition of the Equity Interests of such redesignated Subsidiary, (ii) any Immaterial Subsidiary being designated a Material Subsidiary being deemed to constitute the acquisition of the Equity Interests of such redesignated Subsidiary and (iii) any transaction or event resulting in a Subsidiary ceasing to be a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC being deemed to constitute the acquisition of any Equity Interests of such Subsidiary not required to be pledged pursuant to the Loan Documents during the time such Subsidiary was a Qualified CFC Holding Company, CFC or Domestic Subsidiary of a CFC) and owned directly by such Loan Party, shall have been pledged pursuant to the Collateral Agreement; provided that in no event shall any Loan Party be required to pledge (1) the Equity Interests of any Subsidiary that is an Unrestricted Subsidiary or an Immaterial Subsidiary or (2) more than 65% of the issued and outstanding voting Equity Interests of any CFC or any Qualified CFC Holding Company directly owned by such Loan Party and (ii) the Administrative Agent (or a designated bailee thereof) shall have received all certificates or other instruments (if any) representing such Equity Interests, together with stock powers or other instruments of transfer with respect thereto endorsed in blank, to the extent required by the Collateral Agreement, in the case of each of clauses (i) and (ii), within the time period specified in Section 5.10(c);

(f) except as otherwise contemplated by the Security Documents, all documents and instruments, including Uniform Commercial Code financing statements and all other actions reasonably requested by the Administrative Agent to be filed, registered, recorded or delivered to create the Liens intended to be created by the Security Documents (in each case, including any supplements thereto) and perfect such Liens to the extent required by, and with the priority required by, the Security Documents, shall have been delivered to the Administrative Agent (or a designated bailee thereof) for filing, registration or the recording concurrently with, or promptly following, the execution and delivery of each such Security Document;

(g) except as otherwise contemplated by any Security Document, each Loan Party shall have obtained all consents and approvals required to be obtained by it in connection with (i) the execution and delivery of all Security Documents (or supplements thereto) to which it is a party and the granting by it of the Liens thereunder and (ii) the performance of its obligations thereunder; and

(h) after the Second Amendment Effective Date, the Administrative Agent shall have received (i) such other Security Documents as may be required to be delivered pursuant to Section 5.10 or Section 5.14 and (ii) upon reasonable request by the Administrative Agent, evidence of compliance with any other requirements of Section 5.10.

 

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Commitment” shall mean with respect to each Lender, (i) prior to the Second Amendment Effective Date, the commitment of such Lender to make Term Loans as set forth on Schedule 2.01 (as in effect on the Closing Date), (ii) on the Second Amendment Effective Date, the New Term Loan Commitment (as defined in the Second Amendment) of such Lender as set forth in the Second Amendment and (iii) on the Incremental Amendment Effective Date, the commitment of such Lender to make Incremental Term Loans as set forth on Annex I of the Incremental Amendment No. 1.

Consolidated Capital Expenditures” shall mean, for any period, the aggregate amount of all expenditures of the Borrower and the other Restricted Subsidiaries during such period determined on a consolidated basis that, in accordance with GAAP, are or should be included as “additions to property, plant or equipment” or similar items in the consolidated statement of cash flows of the Borrower. Notwithstanding the foregoing, Consolidated Capital Expenditures shall not include:

(a) the purchase price of assets that would otherwise be included in Consolidated Capital Expenditures for the relevant period in an amount equal to the proceeds of Asset Sales that are reinvested pursuant to Section 2.09(a),

(b) expenditures made with tenant allowances received by the Borrower or any other Restricted Subsidiary from landlords in the ordinary course of business and subsequently capitalized,

(c) expenditures made in connection with the Transactions and Permitted Business Acquisitions,

(d) expenditures to the extent they are (i) paid for in Equity Interests of any Parent Entity or (ii) made with proceeds of the issuance of Equity Interests of, or a cash capital contribution to, the Borrower after the Closing Date,

(e) expenditures that are accounted for as capital expenditures by the Borrower or any Restricted Subsidiary and that actually are paid for by a person other than the Borrower or any other Restricted Subsidiary to the extent none of the Borrower or any other Restricted Subsidiary has provided or is required to provide or incur, directly or indirectly, any consideration or obligation to such person or any other person (whether before, during or after such period),

(f) any expenditures which are contractually required to be, and are, advanced or reimbursed to the Borrower or any other Restricted Subsidiary in cash by a third party (including landlords) during such period of calculation,

(g) the book value of any asset owned by the Borrower or any other Restricted Subsidiary prior to or during such period to the extent that such book value is included as a capital expenditure during such period as a result of such person reusing or beginning to reuse such asset during such period without a corresponding expenditure actually having been made in such period; provided that (a) any expenditure necessary in order to permit such asset to be reused shall be included as a capital expenditure during the period in which such expenditure actually is made and (b) such book value shall have been included in Consolidated Capital Expenditures when such asset was originally acquired,

(h) that portion of interest on Indebtedness incurred for capital expenditures that is capitalized in accordance with GAAP,

 

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(i) expenditures made in connection with the replacement, substitution, restoration, upgrade, development or repair of assets to the extent financed with (x) insurance or settlement proceeds paid on account of the loss of or damage to the assets being replaced, substituted, restored, upgraded, developed or repaired or (y) awards of compensation arising from the taking by eminent domain or condemnation of the assets being replaced, in each case to the extent such expenditures are made within 24 months of receipt of such proceeds,

(j) in the event that any equipment is purchased simultaneously with the trade-in of existing equipment in the ordinary course of business, the gross amount of the credit granted by the seller of such equipment for the equipment being traded in at such time, or

(k) expenditures relating to the construction, acquisition, replacement, reconstruction, development, refurbishment, renovation or improvement of any property which has been transferred to a person other than the Borrower or any other Restricted Subsidiary during the same fiscal year in which such expenditures were made pursuant to a Sale and Lease-Back Transaction to the extent of the cash proceeds received by the Borrower or any other Restricted Subsidiary pursuant to such Sale and Lease-Back Transaction that are not required to prepay loans under the Credit Facilities.

Consolidated Depreciation and Amortization Expense” shall mean, with respect to the Borrower and the other Restricted Subsidiaries for any period, the total amount of depreciation and amortization expense, including the amortization of key money and other intangible assets and deferred financing fees and amortization of unrecognized prior service costs, of the Borrower and the other Restricted Subsidiaries as set forth on the most recently delivered Required Financial Statements for such period and otherwise determined in accordance with GAAP.

Consolidated EBITDA” shall mean, with respect to the Borrower and the other Restricted Subsidiaries for any period, the Consolidated Net Income of the Borrower and the other Restricted Subsidiaries for such period (without duplication):

(1) increased, in each case, to the extent deducted (and not added back) or, in the case of clause (j), not already included in Consolidated Net Income and, in each case, without duplication, by:

(a) provision for taxes based on income or, profits or capital, including state, franchise, excise and similar taxes and foreign withholding taxes of such person paid or accrued, including any penalties and interest relating to any tax examinations; plus

(b) Consolidated Interest Expense of the Borrower and the other Restricted Subsidiaries for such period (including (i) net losses on Hedge Agreements or other derivative instruments entered into for the purpose of hedging interest rate risk and (ii) expenses of surety bonds in connection with financing activities, in each case, to the extent included in Consolidated Interest Expense), together with items excluded from the definition of Consolidated Interest Expense pursuant to clauses (a)(i) and (a)(ii) thereof as well as items included under clause (4) of the definition of Fixed Charge Coverage Ratio; plus

(c) extraordinary, non-recurring or, unusual losses, charges and expenses (provided that such losses, charges or expenses shall not be of the type that may be added back pursuant to clauses (e) or (j) below); plus

(d) charges and expenses (including any printer expenses, filing fees, financial advisory fees, accounting fees, auditor fees, legal fees and other advisory and consulting fees and related out-of-pocket expenses and other fees, discounts and commissions, including with respect to underwriting, placement, arranging or syndication) relating to the Transactions (solely to the extent recorded on or prior to December 31, 2014), and the 2018 Incremental Transactions; plus

 

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(e) (i) business optimization expenses (including consolidation initiatives), relocation or integration; (ii) expenses, costs and charges related to consolidation or closing of distribution centers or other facilities or exiting lines of business; acquisitions and mergers after the Closing Date; initiatives aimed at profitability improvement; strategic initiatives; personnel relocation, restructuring, redundancy, severance, termination, settlement or judgment; (iii) one-time compensation charges and (iv) the amount of any signing, retention and completion bonuses; plus

(f) losses, charges and expenses attributable to asset dispositions or the sale or other disposition of any Equity Interests of the Borrower or any of the other Restricted Subsidiaries, in each case other than in the ordinary course of business, as determined in good faith by a Responsible Officer or Governing Person of the Borrower; plus

(g) losses, charges and expenses attributable to abandoned, closed, disposed or discontinued operations and losses, charges and expenses related to the disposal of disposed, abandoned, closed or discontinued operations; plus

(h) the amount of management, monitoring, consulting, transaction and advisory fees (including termination fees and distributions and dividends paid to Teachers to approximate management fees and transaction and advisory fees) and related indemnities, charges and expenses paid or accrued to or on behalf of any Parent Entity or any of the Permitted Holders, in each case, to the extent permitted under Section 6.06 and Section 6.07 of this Agreement; plus

(i) losses, charges and expenses related to internal software development that are expensed but could have been capitalized under alternative accounting policies in accordance with GAAP; plus

(j) the amount of cost savings and synergies projected by the Borrower in good faith to be realized as a result of specified actions taken or expected to be taken prior to or during such period (which cost savings or synergies shall be subject only to certification by an officer of the Borrower and shall be calculated on a Pro Forma Basis as though such cost savings or 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; provided that (A) such cost savings or synergies are reasonably identifiable and factually supportable and (B) such actions have been taken or are expected to be taken within 24 months after the date of determination to take such action; plus

(k) earn-out obligations incurred in connection with any Permitted Business Acquisition or other Investment, in each case consummated within the previous 24 months, and paid or accrued during the applicable period to the extent such earn-out is deducted from the calculation of Consolidated Net Income; plus

(l) business interruption insurance in an amount representing the earnings for the applicable period that such proceeds are intended to replace (whether or not received, so long as the Borrower in good faith expects to receive the same within the next four fiscal quarters (it being understood that to the extent not actually received within such four fiscal quarter period, such proceeds shall be deducted in calculating Consolidated EBITDA for the next four fiscal quarter period)); plus

 

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(m) charges and expenses related to payments made to option holders of the Borrower or any Parent Entity in connection with, or as a result of, any distribution being made to equity holders of such person or any of its direct or indirect parents, which payments are being made to compensate such option holders as though they were equityholders at the time of, and entitled to share in, such distribution; plus

(n) any other non-cash losses, charges and expenses, including any write offs or write downs, reducing Consolidated Net Income for such period, decreased by all cash payments during such period on account of accruals on or reserves added back to Consolidated EBITDA pursuant to this clause (n) in prior periods, excluding any such charge that represents an accrual or reserve for a cash expenditure for a future period; plus

(o) losses, charges and expenses attributable to the early extinguishment or conversion of Indebtedness or any Hedge Agreements or other derivative instruments, in each case entered into in the ordinary course of business (including deferred financing expenses written off and premiums paid); plus

(p) Consolidated Depreciation and Amortization Expense;

(2) decreased by (without duplication and to the extent increasing Consolidated Net Income for such period),

(a) non-cash gains, excluding any non-cash gains that represent the reversal of any accrual of, or cash reserve for, anticipated cash charges that were deducted (and not added back) in the calculation of Consolidated EBITDA for any prior period; plus

(b) extraordinary, unusual or exceptional income or gains; plus

(c) any gains attributable to asset dispositions or the sale or other disposition of any Equity Interests of the Borrower or any of the other Restricted Subsidiaries other than in the ordinary course of business, as determined in good faith by a Responsible Officer or the Governing Persons of the Borrower;

(d) gains attributable to abandoned, closed, disposed or discontinued operations and gains related to the disposal of disposed, abandoned, closed, or discontinued operations; plus

(e) gains attributable to the early extinguishment or conversion of Indebtedness or any Hedge Agreements or other derivative instruments, in each case entered into in the ordinary course of business.

Consolidated Interest Expense” shall mean, with respect to the Borrower and the other Restricted Subsidiaries for any period, the sum, without duplication, of:

(a) consolidated interest expense of the Borrower and the other Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including amortization of original issue discount, the interest component of Capital Lease Obligations, and net payments and receipts (if any) pursuant to interest rate Hedge Agreements but excluding (i) additional interest, if any, owing pursuant to a registration rights agreement, (ii) amortization of deferred financing fees, (iii) debt issuance costs, commissions, fees and expenses and (iv) non-cash expensing of any bridge, commitment or other financing fees that have been previously paid in cash (but solely to the extent not reducing Consolidated Interest Expense in any prior period) and (v) any original issue discount in respect of the Term Loans); plus

 

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(b) consolidated capitalized interest of the Borrower and the other Restricted Subsidiaries for such period, whether paid or accrued; minus

(c) interest income of the Borrower and the other Restricted Subsidiaries for such period.

For purposes of this definition, interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Borrower (or any Parent Entity on behalf of the Borrower) to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP.

Consolidated Maintenance Capital Expenditures” shall mean, for any period, the portion of the aggregate amount of all Consolidated Capital Expenditures of the Borrower and the other Restricted Subsidiaries during such period attributable to maintenance of property, plant and equipment of the Borrower and the other Restricted Subsidiaries, as determined in good faith by a Responsible Officer or Governing Person of the Borrower.

Consolidated Net Income” shall mean with respect to the Borrower and the other Restricted Subsidiaries for any period, the aggregate of the Net Income of the Borrower and the other Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided that, without duplication:

(a) the cumulative effect of a change in accounting principles shall be excluded;

(b) the net after-tax effect of extraordinary, non-recurring and unusual gains, losses, charges and expenses shall be excluded (provided that such losses, charges or expenses shall not be of the type that may be excluded pursuant to clause (d));

(c) the net after-tax effect of any charges and expenses (including any financial advisory fees, accounting fees, auditor fees, legal fees and other advisory and consulting fees and related out-of-pocket expenses and other fees, discounts and commissions, including with respect to underwriting, placement or syndication) related to (i) the 2018 Incremental Transactions, and (ii) solely to the extent recorded on or prior to December 31, 2014, the Transactions, shall be excluded;

(d) (i) business optimization expenses (including consolidation initiatives), relocation or integration; (ii) expenses, costs and charges related to consolidation or closing of distribution centers or other facilities or exiting lines of business; acquisitions and mergers after the Closing Date; initiatives aimed at profitability improvement; strategic initiatives; personnel relocation, restructuring, redundancy, severance, termination, settlement or judgment; (iii) one-time compensation charges and (iv) the amount of any signing, retention and completion bonuses shall in each case be excluded in an aggregate amount not to exceed the greater of (x) $50.0 million and (y) 25% of Consolidated Net Income (calculated after giving effect to this clause (d)) for such period;

(e) the net after-tax effect of gains, losses, charges and expenses attributable to asset dispositions or the sale or other disposition of any Equity Interests of the Borrower or any of the other Restricted Subsidiaries, in each case other than in the ordinary course of business, as determined in good faith by a Responsible Officer or the Governing Persons of the Borrower or any Parent Entity on behalf of the Borrower, shall be excluded;

 

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(f) the net after-tax effect of gains, losses, charges and expenses attributable to the early extinguishment or conversion of indebtedness, Hedge Agreements or other derivative instruments, in each case entered into in the ordinary course of business (including deferred financing expenses written off and premiums paid) shall be excluded;

(g) the Net Income for such period of any person that is not a Subsidiary, or is an Unrestricted Subsidiary, or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Borrower shall be increased by the amount of dividends or distributions or other payments that are actually paid to the Borrower or any other Restricted Subsidiary thereof in respect of such period in cash;

(h) solely for the purpose of determining the Available Amount, the Net Income for such period of any Restricted Subsidiary (other than any Guarantor) shall be excluded to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of its Net Income is not at the date of determination permitted without any prior Governmental Approval (which has not been obtained) or, directly or indirectly, by the operation of the terms of its charter or any agreement to which it is a party (other than any restriction permitted by Section 6.06(a)) or any judgment, decree, order, statute, rule, or governmental regulation applicable to such Restricted Subsidiary, unless such restriction with respect to the payment of dividends or similar distributions has been legally waived; provided that Consolidated Net Income of the Borrower will be increased by the amount of dividends or other distributions or other payments actually paid in cash by such Restricted Subsidiary to the Borrower or any other Restricted Subsidiary not subject to the restrictions contemplated by this clause (h) in respect of such period, to the extent not already included therein;

(i) the effects of adjustments (including the effects of such adjustments pushed down to the Borrower and the other Restricted Subsidiaries) in any line item in the Borrower’s consolidated financial statements pursuant to GAAP resulting from the application of recapitalization accounting or purchase accounting, as the case may be, in connection with the Transactions, any acquisition or any joint venture investments or the amortization or write off of any amounts thereof, net of taxes, shall be excluded;

(j) impairment charges, asset write offs and write downs, including impairment charges, asset write offs and write downs related to goodwill, intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case pursuant to GAAP shall be excluded;

(k) non-cash compensation charges and expenses, including any such charges and expenses arising from grants of stock appreciation or similar rights, phantom equity, stock options, restricted stock or other rights or equity incentive shall be excluded;

(l) (i) charges and expenses pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement, any stock subscription or shareholder agreement and (ii) charges, expenses, accruals and reserves in connection with the rollover, acceleration or payout of Equity Interests held by management of Holdings or any of its Restricted Subsidiaries, in the case of each of (i) and (ii), to the extent that (in the case of any cash charges and expenses) such charges, expenses, accruals and reserves are funded with cash proceeds contributed (other than from a Restricted Subsidiary) to the capital of Holdings or any direct or indirect parent of Holdings or Net Cash Proceeds of an issuance of Equity Interests (other than Disqualified Stock) of Holdings or (if such Net Cash Proceeds are contributed as common equity to the capital of Holdings) any direct or indirect parent of Holdings shall be excluded, in each case to the extent that such proceeds do not increase the amount pursuant to the definition of Available Amount and without duplication of proceeds applied in accordance with Section 6.01(aa), Section 6.06(d) or Section 6.09(b)(i)(3);

 

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(m) charges, expenses and fees incurred, including financial advisory, accounting, auditor, legal and other consulting and advisory fees and any SEC or other filling fees and expenses, public company preparation costs and expenses (including third party legal, auditor, consultant and advisor costs), or any amortization thereof, in connection with any equity offering, acquisition (including a Permitted Business Acquisition), merger, investment, recapitalization, asset disposition, incurrence or repayment of Indebtedness (including deferred financing expenses), refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction consummated prior to the Closing Date and any transaction undertaken but not completed) and any non-recurring charges and expenses (including non-recurring merger expenses) incurred as a result of any such transaction shall be excluded;

(n) accruals and reserves that are established or adjusted, in each case within 24 months of the subject transaction, including as a result of the Transactions, the 2018 Incremental Transactions, or any other acquisition, investment, asset disposition, write down or write off (including the related tax benefit) in accordance with GAAP (including any adjustment of estimated payouts on earn-outs) or charges as a result of the adoption or modification of accounting policies shall be excluded;

(o) any charge or expense resulting from the application of FAS-141R relating to the incurrence of obligations in respect of an “earn out” or other similar contingent obligations shall be excluded;

(p) to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a good faith determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that (i) such coverage is not denied by the applicable carrier or indemnifying party in writing within 270 days and (ii) such amount is in fact reimbursed within 365 days of the date of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so reimbursed within 365 days), losses, charges, expenses, accruals and reserves with respect to liability or casualty events or business interruption shall be excluded;

(q) losses, charges and expenses that are covered by indemnification or other reimbursement provisions in connection with any acquisition, investment or asset disposition, to the extent actually reimbursed, or, so long as the Borrower has made a determination that a reasonable basis exists for indemnification or reimbursement and only to the extent that such amount is in fact indemnified or reimbursed within 365 days of such determination (with a deduction in the applicable future period for any amount so added back to the extent not so indemnified or reimbursed within such 365 days), shall be excluded;

(r) (i) non-cash or unrealized gains or losses in respect of obligations under Specified Hedge Agreements (as defined in the ABL Credit Agreement as of the Closing Date) or any ineffectiveness recognized in earnings related to qualifying hedge transactions or the fair value of changes therein recognized in earnings for derivatives that do not qualify as hedge transactions, in each case, in respect of obligations under Hedge Agreements entered into in the ordinary course of business, and (ii) unrealized gains or losses resulting from currency translation gains or losses related to currency remeasurements of indebtedness (including gains or losses resulting from (A) Hedge Agreements entered into in the ordinary course of business for currency exchange risk and (B) intercompany Indebtedness) and all other unrealized foreign currency translation gains or losses to the extent such gains or losses are non-cash items shall be excluded;

 

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(s) the net after-tax effect of gains, losses, charges and expenses attributable to disposed or discontinued operations and any net after-tax gains, losses, charges and expenses related to the disposal of disposed, abandoned or discontinued operations shall be excluded;

(t) non-cash interest charges on defined benefit plans, defined contribution plans or other pension plans shall be excluded;

(u) deferred tax expenses associated with tax deductions or net operating losses arising as a result of the Transactions or the 2018 Incremental Transactions, or the release of any valuation allowance related to such item, shall be excluded (provided that they shall be deducted in any period in which such tax expense is incurred);

(v) any expenses or charges to the extent paid by a third party on behalf of the Borrower or any other Restricted Subsidiary shall be excluded;

(w) the Consolidated Net Income of the Borrower will be increased by the amount of (i) the amount of cost savings and synergies, (ii) business optimization expenses (including consolidation initiatives), relocation or integration expenses; (iii) cost savings from the consolidation or closing of distribution centers or other facilities or exiting lines of business; and (iv) costs of initiatives aimed at profitability improvement; strategic initiatives; personnel relocation, restructuring, redundancy, severance, termination, settlement or judgment; and one-time compensation charges, in each case, in connection with the TimberTech Acquisition and actions by Holdings or any Restricted Subsidiary in connection therewith, not to exceed $28.0 million during the period commencing on the Closing Date and ending on the Maturity Date; and

(x) costs and expenses in connection with the establishment and integration of enterprise resource planning systems shall be excluded.

Consolidated Total Assets” shall mean, as of any date of determination, the total amount of all assets of the Borrower and the other Restricted Subsidiaries, determined in accordance with GAAP as of such date.

Consolidated Total Debt” shall mean, as of any date of determination, without duplication, (i) the aggregate principal amount of funded Indebtedness for borrowed money, Capital Lease Obligations and debt obligations evidenced by promissory notes or similar instruments of the Borrower and the other Restricted Subsidiaries outstanding on such date, determined on a consolidated basis in accordance with GAAP (but excluding the effects of any discounting of Indebtedness resulting from the application of purchase accounting in connection with the Transactions or any Permitted Business Acquisitions) and (ii) guarantee obligations of the Borrower and the other Restricted Subsidiaries in respect of Indebtedness that, if incurred directly by the Borrower or any other Restricted Subsidiary, would constitute Indebtedness under clause (i) above; provided that Consolidated Total Debt shall not include (i) Indebtedness in respect of letters of credit, except to the extent of drawn and unreimbursed amounts thereunder, (ii) Indebtedness of Unrestricted Subsidiaries and (iii) obligations under Hedge Agreements.

Contract Consideration” shall have the meaning assigned to such term in the definition of “Excess Cash Flow”.

Control” shall mean 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 ownership of voting securities, by contract or otherwise, and “Controlling” and “Controlled” shall have meanings correlative thereto.

 

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Conversion” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Co-Syndication Agents” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Credit Agreement Refinancing Indebtedness” shall mean any (a) Permitted Pari Passu Secured Refinancing Debt, (b) Permitted Junior Secured Refinancing Debt, (c) Permitted Unsecured Refinancing Debt or (d) Indebtedness incurred pursuant to a Refinancing Amendment, in each case, issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, replace or refinance Term Loans in whole or part (including any successive Credit Agreement Refinancing Indebtedness) (“Refinanced Debt”); provided that (i) such exchanging, extending, renewing, replacing or refinancing Indebtedness is in an original aggregate principal amount not greater than the principal amount of the Refinanced Debt (plus the amount of unpaid accrued or capitalized interest and premiums thereon (including tender premiums), underwriting discounts, original issue discount, defeasance costs, fees (including upfront fees), commissions and expenses); (ii) the final maturity date of such Indebtedness shall be no earlier than the Maturity Date for the Refinanced Debt; (iii) the Weighted Average Life to Maturity of such Indebtedness is not less than the Weighted Average Life to Maturity of, the Term Loans (if any) in the Class being prepaid; (iv) the terms and conditions of such Indebtedness (other than (A) interest rate, fees, funding discounts and other pricing terms, redemption, prepayment or other premiums, optional prepayment terms and redemption terms, (B) subordination terms and (C) covenants or other provisions applicable only to periods after the then Latest Maturity Date at the time of incurrence of such Indebtedness) are substantially identical to, or, taken as a whole, no more favorable to the lenders or holders providing such Indebtedness, than those set forth in the Loan Documents are to the Lenders holding such Refinanced Debt; provided that a certificate of a Responsible Officer of the Borrower delivered to the Administrative Agent prior to or substantially concurrently with the incurrence of such Indebtedness, together with copies of substantially final drafts of the definitive credit documentation relating to such Indebtedness (it being understood that the Borrower shall have no obligation to deliver such drafts if it is bound by a confidentiality obligation with respect thereto, in which case a reasonably detailed description of the material terms and conditions of such Indebtedness shall be provided in lieu thereof), stating that the Borrower has determined in good faith that such terms and conditions satisfy the requirement of this clause (iv) shall be conclusive evidence (absent manifest error) that such terms and conditions satisfy such requirement; and provided, further, that the Borrower and the Administrative Agent shall be permitted to amend the terms of this Agreement and the other Loan Documents to provide for such terms more favorable to the Lenders as may be necessary in order to satisfy the condition set forth in the immediately preceding proviso, without the requirement for the consent of any Lender or any other person (a “Credit Agreement Refinancing Indebtedness Amendment”), (v) such Indebtedness is not secured by any assets or property of the Loan Parties that does not constitute Collateral (except, in the case of an escrow or similar arrangement with respect to the repayment of any such Indebtedness, for the proceeds thereof and subject to customary exceptions for cash collateral in favor of an agent, letter of credit issuer or similar “fronting” lender), (vi) such Indebtedness is not guaranteed by any Subsidiary of the Borrower other than the Loan Parties and (vii) such Refinanced Debt shall be repaid (in the case of Refinanced Debt consisting of Loans), defeased or satisfied and discharged, and all accrued interest, fees and premiums (if any) in connection therewith shall be paid.

Credit Agreement Refinancing Indebtedness Amendment” shall have the meaning assigned to such term in the definition of “Credit Agreement Refinancing Indebtedness”.

 

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Credit Facilities” shall mean each of the Term Facility (including any replacement or refinancing of any Term Loans permitted hereunder) and the ABL Facility.

Credit Party” shall mean any of the Administrative Agent, the Collateral Agent, any Lead Arranger (or any of its Affiliates) or any Lender.

Current Assets” shall mean, with respect to the Borrower and the other Restricted Subsidiaries on a consolidated basis at any date of determination, all assets (other than Permitted Investments or other cash equivalents) that would, in accordance with GAAP, be classified on a consolidated balance sheet of the Borrower and the other Restricted Subsidiaries as current assets at such date of determination, other than amounts related to current or deferred Taxes based on income or profits.

Current Liabilities” shall mean, with respect to the Borrower and the other Restricted Subsidiaries on a consolidated basis at any date of determination, all liabilities that would, in accordance with GAAP, be classified on the Required Financial Statements as current liabilities at such date of determination, other than (a) the current portion of any Indebtedness, (b) accruals of Consolidated Interest Expense (excluding Consolidated Interest Expense that is due and unpaid), (c) accruals for current or deferred Taxes based on income or profits, (d) accruals, if any, of transaction costs resulting from the Transactions or the 2018 Incremental Transactions, (e) accruals of any costs or expenses related to (i) severance or termination of employees prior to the Closing Date or (ii) bonuses, pension and other post-retirement benefit obligations, and (f) accruals for addbacks to Consolidated EBITDA included in clauses (d), (e), (j) and (n) of the definition thereof.

Debt Fund Affiliate” shall mean (a) any Sponsor Affiliate that is a bona fide bank, debt fund, distressed asset fund, hedge fund, mutual fund, insurance company, financial institution or an investment vehicle that is engaged in the business of investing in, acquiring or trading commercial loans, bonds and similar extensions of credit in the ordinary course of business, in each case, that is not organized primarily for the purpose of making equity investments with respect to which the relevant Sponsor does not possess the power to make investment decisions for such entity and either (i) information barriers are in place restricting the sharing of information between it and such Sponsor or (ii) the managers have fiduciary duties to the investors of such fund independent of their fiduciary duties to investors in such Sponsor, (b) any investment fund or account of a Permitted Debt Fund Affiliate Investor managed by third parties (including by way of a managed account, a fund or an index fund in which a Permitted Debt Fund Affiliate Investor has invested) that is not organized or used primarily for the purpose of making equity investments and (c) for purposes of any investment in Term Loans (or Participations therein) made by or on behalf of Teachers or any Affiliate of Teachers by persons at Teachers or such Affiliate that are not engaged in making, acquiring or holding equity investments in Holdings or any of its Subsidiaries or similar private equity investments, Teachers or such Affiliate.

Default” shall mean any event or condition which, but for the giving of notice, lapse of time or both, would constitute an Event of Default.

Designated Non-Cash Consideration” shall mean the fair market value of non-cash consideration received by the Borrower or any other Restricted Subsidiary in connection with an Asset Sale that is designated as Designated Non-Cash Consideration pursuant to a certificate of a Responsible Officer of the Borrower setting forth the basis of such valuation, less the amount of cash or cash equivalents received in connection with a subsequent sale of such Designated Non-Cash Consideration.

 

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Disqualified Institution” shall mean (i) the persons identified in writing to the Administrative Agent on or prior to the Second Amendment Effective Date as competitors of Holdings, the Borrower or any other Subsidiary (or, if after the Second Amendment Effective Date, that are mutually agreed upon between the Borrower and the Administrative Agent, each party acting reasonably), (ii) Affiliates of any such competitors clearly identifiable by similarity of name other than any such Affiliate that is a bona fide debt fund or investment vehicle that is engaged in the making, purchasing, holding or otherwise investing in fixed-income instruments, commercial loans, bonds and similar extensions of credit in the ordinary course of business with separate fiduciary duties to the investors in such fund or vehicle, (iii) certain banks, financial institutions and other institutional lenders and investors that have been specifically identified in writing to the Administrative Agent on or prior to the Closing Date, (iv) Affiliates of the Lead Arrangers engaged as principals primarily in private equity or venture capital (other than bona fide debt funds or investment vehicles that are engaged in the making, purchasing, holding or otherwise investing in fixed-income instruments, commercial loans, bonds and similar extensions of credit in the ordinary course of business with separate fiduciary duties to the investors in such funds or vehicles) or (v) such other persons identified in writing to the Administrative Agent on or prior to the Second Amendment Effective Date (other than, in each case, such persons engaged by the Borrower as part of the Transactions or persons identified in writing by the Borrower to the Administrative Agent that are to be no longer considered Disqualified Institutions); provided that any Person that is a Lender and subsequently becomes a Disqualified Institution (but was not a Disqualified Institution at the time it became a Lender) shall not retroactively be deemed to be a Disqualified Institution hereunder; provided, further, any Person that is a Lender that is designated as a Disqualified Institution after the date it became a Lender, once so designated, shall not be entitled to acquire any additional assignments of, or participations in, Commitments or Loans from any other Lender.

Disqualified Stock” shall mean, with respect to any person, any Equity Interests of such person that, by their terms (or by the terms of any security or other Equity Interests into which they are convertible or for which they are redeemable or exchangeable), or upon the happening of any event or condition (a) mature or are mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control, asset sale, condemnation or similar event so long as any rights of the holders thereof upon the occurrence of a change of control, asset sale, condemnation or similar event shall be subject to the prior repayment in full of the Term Loans and all other Obligations that are accrued and payable and the termination of the Commitments), (b) are redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (c) provide for the scheduled payments of dividends in cash or (d) either mandatorily or at the option of the holders thereof, are or become convertible into or exchangeable for Indebtedness or any other Equity Interests that would constitute Disqualified Stock, in each case, prior to the date that is 91 days after the earlier of (i) the Latest Maturity Date and (ii) the date on which the Term Loans and all other Obligations (other than contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) are repaid in full and the Commitments are terminated; provided that only the portion of the Equity Interests that so mature or are mandatorily redeemable, are so convertible or exchangeable or are so redeemable at the option of the holder thereof prior to such date shall be deemed to be Disqualified Stock; provided further, that if such Equity Interests are issued to any employee or to any plan for the benefit of employees of Holdings or its Restricted Subsidiaries or by any such plan to such employees, such Equity Interests shall not constitute Disqualified Stock solely because they may be required to be repurchased by Holdings or any of its Restricted Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death or disability; provided further, that any class of Equity Interests of such person that by its terms authorizes such person to satisfy its obligations thereunder by delivery of Equity Interests that are not Disqualified Stock shall not be deemed to be Disqualified Stock.

Dollars” or “$” shall mean lawful money of the United States of America.

Domestic Subsidiary” shall mean any Subsidiary that is not a Foreign Subsidiary.

 

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Dutch Auction” shall mean an auction of Term Loans conducted (a) pursuant to Section 9.04(k) to allow an Affiliated Lender to acquire Term Loans at a discount to par value and on a non pro rata basis or (b) pursuant to Section 9.04(o) to allow a Purchasing Borrower Party to prepay Term Loans at a discount to par value and on a non pro rata basis, in each case, in accordance with the applicable Dutch Auction Procedures.

Dutch Auction Procedures” shall mean, with respect to a purchase of Term Loans by an Affiliated Lender pursuant to Section 9.04(k) or with respect to a purchase or prepayment of Term Loans by a Purchasing Borrower Party pursuant to Section 9.04(o), Dutch auction procedures as reasonably agreed upon by such Affiliated Lender or Purchasing Borrower Party, as the case may be, and the Administrative Agent.

EEA Financial Institution” means (a) any institution 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 institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (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.

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 Term Loan Installment Date” shall have the meaning assigned to such term in Section 2.07(a).

Effective Date Term Loans” means the collective reference to (a) the Term Loans outstanding immediately prior to the Incremental Amendment Effective Date and (b) the 2018 Incremental Term Loans.

environment” shall mean ambient and indoor air, surface water and groundwater (including potable water, navigable water and wetlands), the land surface or subsurface strata, natural resources such as flora and fauna or as otherwise defined in any Environmental Law.

Environmental Laws” shall mean all applicable laws (including common law), statutes, rules, regulations, codes, ordinances, orders, binding agreements and final, binding decrees or judgments, in each case, promulgated or entered into by or with any Governmental Authority, relating to the environment, preservation or reclamation of natural resources, the generation, management, Release or threatened Release of, or exposure to, any harmful or deleterious substances or to occupational health and safety matters (to the extent relating to the environment or exposure to harmful or deleterious substances) but for the avoidance of doubt excluding any laws relating to products liability.

Equity Contribution” shall mean the equity contributions by the Sponsors and certain other investors in connection with the Transactions, in the manner contemplated by the Merger Agreement.

Equity Interests” shall mean, with respect to any person, any and all shares, interests, rights to purchase or otherwise acquire, warrants, options, participations or other equivalents of or interests in (however designated) equity or ownership of such person, including any preferred stock, any limited or general partnership interest and any limited liability company membership interest, and any securities or other rights or interests convertible into or exchangeable for any of the foregoing.

 

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ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time, and any final regulations promulgated and the rulings issued thereunder.

ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with the Borrower or any of its Subsidiaries, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

ERISA Event” shall mean (a) a Reportable Event, or the requirements of Section 4043(b) of ERISA apply, with respect to a Plan, (b) a withdrawal by Borrower or any of its Restricted Subsidiaries or, to the knowledge the Borrower, any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations by Borrower or any of its Restricted Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate that is treated as a termination under Section 4062(e) of ERISA, (c) a complete or partial withdrawal by the Borrower or any of its Restricted Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate from a Multiemployer Plan, receipt of written notification by the Borrower any of its Restricted Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate concerning the imposition of Withdrawal Liability or written notification that a Multiemployer Plan is, or is expected to be, insolvent, in reorganization within the meaning of Title IV of ERISA or endangered or in critical status within the meaning of Section 305 of ERISA, (d) the provision by a Plan administrator or the PBGC of notice of intent to terminate a Plan, the treatment of a Plan or Multiemployer Plan amendment as a termination under Sections 4041 or 4041A of ERISA or the commencement of proceedings by the PBGC to terminate a Plan or Multiemployer Plan, (e) the incurrence by the Borrower any of its Restricted Subsidiaries or, to the knowledge of the Borrower, any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan or Multiemployer Plan, other than for the payment of plan contributions or PBGC premiums due but not delinquent under Section 4007 of ERISA, (f) the application for a minimum funding waiver under Section 302(c) of ERISA with respect to a Plan, (g) the imposition of a lien under Section 303(k) of ERISA 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) a Foreign Benefit Event.

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.

Eurocurrency Borrowing” shall mean a Borrowing comprised of Eurocurrency Loans.

Eurocurrency Loan” shall mean any Term Loan bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

Event of Default” shall have the meaning assigned to such term in Section 7.01.

Excess Cash Flow” shall mean, for any period, an amount equal to the excess of:

(1) the Consolidated Net Income of the Borrower and the other Restricted Subsidiaries for such period determined on a consolidated basis (but not adjusted to exclude the results of discontinued operations), increased, in each case, without duplication, by

 

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(a) an amount equal to the amount of all non-cash charges (including depreciation and amortization) to the extent deducted in arriving at such Consolidated Net Income, but excluding any such non-cash charges representing an accrual or reserve for potential cash items in any future period and excluding amortization of a prepaid cash item that was paid in a prior period,

(b) decreases in Working Capital for such period,

(c) cash receipts in respect of Hedge Agreements entered into in the ordinary course of business during such fiscal year to the extent not otherwise included in such Consolidated Net Income;

(d) the aggregate amount of any non-cash loss recognized as a result of any Asset Sale or Recovery Event (other than any Asset Sale in the ordinary course of business) that resulted in a decrease to Consolidated Net Income (up to the amount of such decrease),

reduced by

(2) the sum, in each case, without duplication, of:

(a) an amount equal to the amount of all non-cash credits included in arriving at such Consolidated Net Income (but excluding any non-cash credit to the extent representing the reversal of an accrual or reserve described in clause (1)(a) above) and cash charges excluded by virtue of clauses (a) through (w) of the definition of Consolidated Net Income,

(b) without duplication of amounts deducted pursuant to clause (j) below in prior fiscal years, the amount of Consolidated Capital Expenditures and Investments (including Permitted Business Acquisitions, Investments in respect of joint ventures and Unrestricted Subsidiaries, and acquisitions of intellectual property) accrued or made in cash during such period, except to the extent financed with (x) the Net Cash Proceeds of Indebtedness ((i) excluding any drawings under the ABL Facility and (ii) except to the extent such Indebtedness has been repaid), (y) the Available Amount or (z) Net Cash Proceeds reinvested pursuant to Section 2.09(a),

(c) the aggregate amount of all scheduled principal payments of Indebtedness of the Borrower and the other Restricted Subsidiaries (including (i) the principal component of payments in respect of Capital Lease Obligations and (ii) the amount of any mandatory prepayments of Term Loans made during such period), in each case except to the extent financed with the Net Cash Proceeds of other Indebtedness of the Borrower or the other Restricted Subsidiaries,

(d) increases in Working Capital for such period,

(e) cash payments by the Borrower and the other Restricted Subsidiaries during such period in respect of the permanent reduction of long-term liabilities of the Borrower and the other Restricted Subsidiaries (other than Indebtedness) to the extent such payments are not expensed during such period and are not deducted in calculating Consolidated Net Income,

(f) cash payments by the Borrower and the other Restricted Subsidiaries during such period in respect of residual income liabilities of the Borrower and the other Restricted Subsidiaries to the extent such payments are not expensed during such period and are not deducted in calculating Consolidated Net Income,

(g) without duplication of amounts deducted pursuant to clause (b) above or clause (j) below in prior fiscal years, the aggregate amount of cash consideration paid by the Borrower and the other Restricted Subsidiaries in connection with investments constituting Permitted Business Acquisitions pursuant to Section 6.04(k) to the extent financed with internally generated cash flow of the Borrower and the other Restricted Subsidiaries and not made using the Available Amount,

 

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(h) the amount of Restricted Payments made in cash pursuant to clauses (b), (c), (d), (g), (h), (i), (k), (l), (m) and (o) of Section 6.06 paid during such period in each case to the extent such Restricted Payments were financed with internally generated cash flow of the Borrower and the other Restricted Subsidiaries and not made using the Available Amount,

(i) the aggregate amount of any premium, make-whole or penalty payments actually paid in cash by the Borrower and the other Restricted Subsidiaries during such period that are made in connection with any prepayment, early extinguishment or conversion of Indebtedness to the extent such payments are not expensed during such period and are not deducted in calculating Consolidated Net Income,

(j) without duplication of amounts deducted from Excess Cash Flow in prior periods, the aggregate consideration required to be paid in cash by the Borrower or any of the other Restricted Subsidiaries pursuant to binding contracts (the “Contract Consideration”) entered into prior to or during such period relating to Permitted Business Acquisitions, other permitted Investments in third parties made pursuant to Section 6.04(j)(i) or 6.04(bb), joint ventures, capital expenditures or acquisitions of intellectual property to be consummated or made during the period of four consecutive fiscal quarters of the Borrower following the end of such period; provided that, to the extent the aggregate amount of consideration actually utilized to finance such Permitted Business Acquisitions, joint ventures, capital expenditures or acquisitions of intellectual property during such period of four consecutive fiscal quarters is less than the Contract Consideration, the amount of such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters; provided further that any amounts deducted from Excess Cash Flow pursuant to this clause (j) may not be deducted from Excess Cash Flow in any period in which such consideration is actually paid,

(k) the amount of cash taxes (including penalties and interest) paid or tax reserves set aside or payable (without duplication) in such period to the extent they exceed the amount of tax expense deducted in determining Consolidated Net Income for such period,

(l) cash expenditures in respect of Hedge Agreements entered into in the ordinary course of business during such fiscal year to the extent not deducted in arriving at such Consolidated Net Income,

(m) proceeds of any Asset Sale or Recovery Event to the extent constituting Consolidated Net Income and to the extent the Borrower is in compliance with the applicable mandatory prepayment requirements set forth in Section 2.09,

(n) the aggregate amount of any non-cash gain recognized as a result of any Asset Sale or Recovery Event (other than any Asset Sale in the ordinary course of business) that resulted in an increase to Consolidated Net Income (up to the amount of such increase), and cash indemnity payments received pursuant to indemnification provisions in any Transaction Document, any acquisition or any other Investment permitted under this Agreement, in each case that resulted in an increase to Consolidated Net Income (up to the amount of such increase),

(o) the aggregate amount of fees, costs and expenses in connection with any, and any payments of, Transaction expenses or 2018 Incremental Transaction expenses, to the extent not expensed and not deducted in calculating Consolidated Net Income,

 

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(p) to the extent not already deducted in calculating Consolidated Net Income, losses, charges and expenses related to internal software development that are expenses but could have been capitalized under alternative accounting policies in accordance with GAAP, and

(q) the aggregate amount of internally generated cash used during such period pursuant to Section 6.04(j)(ii) in respect of the $40.0 million Available Amount basket set forth in clause (a) of the definition thereof.

Excess Cash Flow Calculation Date” shall have the meaning assigned to such term in Section 2.09(b).

Excess Cash Flow Period” shall mean each fiscal year of the Borrower, commencing with the fiscal year of the Borrower ending on December 31, 2014.

Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

Excluded Assets” shall have the meaning assigned to it in the Collateral and Guarantee Agreement.

Excluded Indebtedness” shall mean all Indebtedness not incurred in violation of Section 6.01 (other than Credit Agreement Refinancing Indebtedness).

Excluded Taxes” shall mean, with respect to any Recipient of any payment to be made by or on account of any obligation of any Loan Party hereunder, (a) income taxes imposed on or measured by its net income (however denominated), franchise taxes imposed in lieu of net income taxes or 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 making a Term Loan to the Borrower, any withholding tax (including any backup withholding tax) imposed by the United States that is in effect and would apply to amounts payable hereunder to such Lender at the time such Lender (i) acquires its interest in the Term Loans or Commitments (other than pursuant to Section 2.17) or (ii) designates a new lending office, except in each case to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from a Loan Party with respect to any withholding tax pursuant to Section 2.15(a) or Section 2.15(c), (c) Taxes attributable to such Lender’s failure to comply with Section 2.15(e) and (d) any U.S. federal withholding Taxes imposed under FATCA.

Executive Order” shall have the meaning assigned to such term in Section 3.22(b).

Existing Facilities” shall mean (i) that certain Loan and Security Agreement, dated as of September 21, 2012, by and among CPG International I Inc., Scranton Products Inc., Azek Building Products, Inc., Procell Decking Inc. and TimberTech Limited, as borrowers; CPG International Inc., Santana Products Inc., CPG Sub I Corporation, Vycom Corp. and Sanatec Sub I Corporation, as guarantors; the lenders and issuing bank from time to time party thereto; Wells Fargo Bank, National Association as administrative agent and collateral agent; Credit Suisse AG and Barclays Bank PLC, as co-documentation agents and co-syndication agents and Credit Suisse Securities (USA) LLC, Barclays Bank PLC and Wells Fargo Capital Finance, LLC as joint lead arrangers and joint lead bookrunners, (ii) that certain Term Loan and Security Agreement, dated as of September 21, 2012, by and among CPG International I Inc., Scranton Products Inc., Azek Building Products, Inc., Procell Decking Inc. and TImberTech Limited, as borrowers; CPG International Inc., Santana Products Inc., CPG Sub I

 

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Corporation, Vycom Corp. and Sanatec Sub I Corporation, as guarantors; the lenders from time to time party thereto; Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent; Barclays Bank PLC, as documentation agent and Credit Suisse Securities (USA) LLC and Barclays Bank PLC, as joint lead arrangers and joint lead bookrunners and (iii) that certain Note Purchase Agreement, dated as of September 21, 2012, by and among CPG International I Inc., as issuer; Scranton Products Inc., Azek Building Products, Inc., Procell Decking Inc., TimberTech Limited, CPG International Inc., Santana Products Inc., CPG Sub I Corporation, Vycom Corp. and Sanatec Sub I Corporation, as guarantors and Oaktree Mezzanine Fund III, L.P., AEA CPG Group Investors, LLC, NB PEP Holdings Limited, John Hancock Life Insurance Company (U.S.A.), Hancock Capital Partners IV, L.P., John Hancock Life & Health Insurance Company, Guggenheim Private Debt Fund Note Issuer, LLC, AEA Mezzanine II Funding LLC, Connecticut General Life Insurance Company and Life Insurance Company of North America, as purchasers.

Extended Term Loan Installment Date” shall have the meaning assigned to such term in Section 2.07(b).

Extended Term Loans” shall have the meaning assigned to such term in Section 2.21(a).

Extending Term Lender” shall have the meaning assigned to such term in Section 2.21(a).

Extension” shall have the meaning assigned to such term in Section 2.21(a).

Extension Amendment” shall have the meaning assigned to such term in Section 2.21(c).

Extension Offer” shall have the meaning assigned to such term in Section 2.21(a).

FATCA” shall mean 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 or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.

FCPA” shall mean the Foreign Corrupt Practices Act of 1977, as amended, modified, and supplemented thereto.

Federal Funds Effective Rate” shall mean, for any day, an interest rate per annum equal to the rate calculated by the New York Federal Reserve Bank based on such day’s federal funds transactions by depository institutions (as determined in such manner as the New York Federal Reserve Bank shall set forth on its public website from time to time) and published on the next succeeding Business Day by the New York Federal Reserve Bank as the federal funds effective rate.

Fee Letter” shall mean the Fee Letter, dated August 16, 2013, by and among Merger Sub, Barclays Bank PLC, Citigroup Global Markets Inc., Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities Inc., JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, The Royal Bank of Scotland plc, RBS Securities Inc., UBS Loan Finance LLC and UBS Securities LLC, as amended and supplemented prior to the Closing Date.

Fees” shall mean the Administrative Agent Fees and all other fees set forth in the Fee Letter and relating hereto.

 

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Financial Covenant Default” shall have the meaning assigned to such term in Section 7.01(f).

Financial Officer” shall mean, with respect to any person, the chief financial officer, principal accounting officer, director of financial services, treasurer, assistant treasurer or controller of such person.

First Lien Debt” shall mean, as of any date of determination, the aggregate principal amount of Consolidated Total Debt outstanding on such date that is secured by a Lien on the Term Loan Priority Collateral that is pari passu or senior with the Lien on the Term Loan Priority Collateral securing the Obligations or that is secured by a Lien on the ABL Priority Collateral that is senior to the Lien on the ABL Priority Collateral securing the Obligations.

First Lien Intercreditor Agreement” shall mean a “pari passu” intercreditor agreement between or among the Administrative Agent and one or more Senior Representatives for holders of Permitted Pari Passu Secured Refinancing Debt in form and substance reasonably satisfactory to the Administrative Agent.

First Lien Leverage Ratio” shall mean, as at any date of determination, the ratio of First Lien Debt (net of Unrestricted Cash and cash equivalents of the Borrower and the other Restricted Subsidiaries) as at such date to Consolidated EBITDA for the trailing four fiscal quarter period most recently ended prior to such date for which financial statements have been delivered pursuant to Section 5.04. For the avoidance of doubt, (i) debt incurred with respect to any Incremental Facilities and any Incremental Equivalent Term Debt (or any Permitted Refinancing Indebtedness in respect of the foregoing) shall, in each case, be treated as First Lien Debt for purposes of the calculation of the First Lien Leverage Ratio governing the incurrence of debt under the Incremental Facilities or Incremental Equivalent Term Debt even if incurred as unsecured or junior secured debt and (ii) for purposes of determining pro forma compliance with the First Lien Leverage Ratio in connection with the incurrence of Indebtedness (including any Incremental Facility), the cash proceeds to be received in connection with such incurrence shall not be included in the calculation of Unrestricted Cash and cash equivalents of the Borrower and the other Restricted Subsidiaries.

Fixed Charge Coverage Ratio” shall mean, the ratio of (i) trailing four-quarter Consolidated EBITDA of the Borrower and the other Restricted Subsidiaries minus unfinanced Consolidated Maintenance Capital Expenditures to (ii) the sum of (1) consolidated interest charges paid or payable currently in cash, but in any event to (A) exclude (w) fees and expenses associated with the Transactions and any annual agency fees, (x) costs associated with obtaining, or breakage costs in respect of, obligations under Hedge Agreements, (y) fees and expenses associated with any Asset Sales, acquisitions, Investments, equity issuances or debt issuances (in each case, whether or not consummated) and (z) amortization of deferred financing costs and (B) be net of interest income, (2) taxes paid or payable currently in cash (including any Restricted Payments made to the Borrower to enable the Borrower to pay taxes), (3) scheduled principal payments of Indebtedness for borrowed money (including payments in respect of Capital Lease Obligations but excluding payments in respect of intercompany Indebtedness and any payments due on the final maturity of any such Indebtedness) paid or payable currently in cash and (4) all cash dividend payments (excluding items eliminated in consolidation) on any Disqualified Stock of the Borrower and the other Restricted Subsidiaries.

Foreign Benefit Event” shall mean, with respect to any Foreign Benefit Plan, (a) the existence of unfunded liabilities in excess of the amount permitted under any applicable law, or in excess of the amount that would be permitted absent a waiver from a Governmental Authority, (b) the failure to make the required contributions or payments under any applicable law on or before the due date for such

 

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contributions or payments, (c) the receipt of a notice by a Governmental Authority relating to the intention to terminate any such Foreign Benefit Plan, which termination would reasonably be expected to give rise to liability for the Borrower or any of the other Restricted Subsidiaries or to appoint a trustee or similar official to administer any such Foreign Benefit Plan, or alleging insolvency or any such Foreign Benefit Plan, (d) the incurrence of any liability under applicable law on account of the complete or partial termination of such Foreign Benefit Plan or the complete or partial withdrawal of any participating employer therein, (e) the occurrence of any transaction that is prohibited under any applicable law and could reasonably be expected to result in the incurrence of any liability by the Borrower or any of the other Restricted Subsidiaries, or (f) the imposition on the Borrower or any of the other Restricted Subsidiaries of any fine, excise tax or penalty resulting from any noncompliance with any applicable law, in each case, that would result in a Material Adverse Effect.

Foreign Benefit Plan” shall mean any benefit plan (other than a Plan or a Multiemployer Plan) that is not governed by the laws of the United States and that, under applicable law, is required to be funded through a trust or other funding vehicle maintained exclusively by a Governmental Authority.

Foreign Lender” shall mean any Lender that is organized under the laws of a jurisdiction other than the United States of America. For purposes of this definition, the United States of America, each state thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

Foreign Subsidiary” shall mean any Subsidiary that is not organized under the laws of the United States or any state thereof or the District of Columbia.

GAAP” shall mean generally accepted accounting principles in effect from time to time in the United States, applied on a consistent basis, subject to the provisions of Section 1.03; provided that any reference to the application of GAAP in Section 3.13(b), Section 5.03, Section 5.07 and Section 6.02(e) to a Foreign Subsidiary (and not as a consolidated Subsidiary of the Borrower) shall mean generally accepted accounting principles in effect from time to time in the jurisdiction of organization of such Foreign Subsidiary.

Governing Person(s)” shall mean: (a) in the case of any corporation, the board of directors of such corporation; (b) in the case of any limited liability company, (i) if such limited liability company is a member-managed limited liability company, the member(s) of such limited liability company or (ii) if such limited liability company is not a member-managed limited liability company, the board of directors, board of managers or manager of such limited liability company; (c) in the case of any partnership, the general partner of such partnership; and (d) in case of any other entity, the functional equivalent of the foregoing as it relates to that entity.

Governmental Authority” shall mean any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory or legislative body with competent jurisdiction over a person.

Guarantee” of or by any person (the “guarantor”) shall mean (a) any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation payable or performable by another person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation (whether arising by virtue of partnership arrangements, by agreement to keep well, to purchase assets, goods, securities or services, to take or pay or otherwise) or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness or other obligations, (ii) to maintain working capital, equity capital or any other financial statement condition or liquidity of

 

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the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation, (iii) entered into for the purpose of assuring in any other manner the holders of such Indebtedness or other obligation of the payment thereof or to protect such holders against loss in respect thereof (in whole or in part) or (iv) as an account party in respect of any letter of credit, bank guarantee or other letter of credit guarantee issued to support such Indebtedness or other obligation, or (b) any Lien on any assets of the guarantor securing any Indebtedness (or any existing right, contingent or otherwise, of the holder of Indebtedness to be secured by such a Lien) of any other person, whether or not such Indebtedness or other obligation is assumed by the guarantor; provided, however, that the term “Guarantee” shall not include endorsements of instruments for deposit or collection in the ordinary course of business or customary and reasonable indemnity obligations in effect on the Second Amendment Effective Date or entered into in connection with any acquisition or disposition of assets permitted by this Agreement (other than such obligations with respect to Indebtedness). The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the Indebtedness in respect of which such Guarantee is made 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.

Guarantors” shall mean Holdings, each Restricted Subsidiary of the Borrower listed on Schedule 1.01B and each other Restricted Subsidiary of the Borrower that is or becomes, or is required to become, a party to the Collateral Agreement after the Incremental Amendment Effective Date.

Hazardous Materials” shall mean all pollutants, contaminants, wastes, chemicals, materials, substances and constituents, including explosive or radioactive substances or petroleum or petroleum byproducts or distillates, friable asbestos or friable asbestos containing materials, polychlorinated biphenyls or radon gas, in each case, that are regulated or would give rise to liability under any Environmental Law.

Hedge Agreement” shall mean 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, in each case, not entered into for speculative purposes; 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 Holdings or any of its Subsidiaries shall be a Hedge Agreement.

Historical Annual Financial Statements” shall mean the audited consolidated balance sheets and related statements of income and cash flows of the Borrower and its Subsidiaries for the fiscal years ended September 30, 2015 and September 30, 2016 and, to the extent such consolidated balance sheets and related statements of income and cash flows include the financial results of any person who is not a Restricted Subsidiary, supplements showing consolidating information for the Borrower and its Restricted Subsidiaries.

Historical Interim Financial Statements” shall mean unaudited interim consolidated balance sheets and related statements of income and cash flows of the Borrower and its Subsidiaries for the fiscal quarter ended December 31, 2016 and the comparative period in the preceding fiscal year (without footnote disclosure) and, to the extent such unaudited interim consolidated balance sheets and related statements of income and cash flows include the financial results of any person who is not a Restricted Subsidiary, supplements showing consolidating information for the Borrower and its Restricted Subsidiaries.

 

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Holdings” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Immaterial Subsidiary” shall mean any Subsidiary that (a) did not, as of the last day of the fiscal year of the Borrower most recently ended, have assets with a value in excess of 5.0% of the Consolidated Total Assets or revenues representing in excess of 5.0% of total revenues of the Borrower and the other Restricted Subsidiaries on a consolidated basis as of such date, and (b), when taken together with all Immaterial Subsidiaries as of the last day of the fiscal year of the Borrower most recently ended, have assets with a value in excess of 10.0% of Consolidated Total Assets or revenues representing in excess of 10.0% of total revenues of the Borrower and the other Restricted Subsidiaries as of such date; provided that the Borrower shall only be required to make such determination at the time it delivers Annual Financial Statements corresponding to such fiscal year pursuant to Section 5.04(a). The Borrower will designate in writing to the Administrative Agent the Subsidiaries that will cease to be treated as “Immaterial Subsidiaries” promptly after making any determination in order to comply with the foregoing limitation.

Incremental ABL Commitment” shall mean the “Incremental Revolving Commitment” as defined in the ABL Credit Agreement.

Incremental ABL Loans” shall mean revolving facility loans made by one or more lenders to the Borrower pursuant to Section 2.21 of the ABL Credit Agreement.

Incremental Amendment No. 1” means Incremental Amendment No. 1 to the Term Loan Agreement, dated as of June 18, 2018, by and among the Borrower, Holdings, the other Loan Parties thereto, the Lenders party thereto and the Administrative Agent.

Incremental Amendment Effective Date” shall have the meaning assigned to such term in Incremental Amendment No. 1.

Incremental Equivalent Term Debt” shall mean Indebtedness consisting of senior secured first lien or junior lien notes, junior lien term loans, subordinated notes or senior unsecured notes, in each case, issued in a public offering, Rule 144A or other private placement, a bridge facility in lieu of the foregoing or secured or unsecured “mezzanine” or high yield debt, in each case, subject to the terms set forth in Section 2.19(f).

Incremental Facility” shall have the meaning assigned to such term in Section 2.19(a).

Incremental Facility Amendment” shall have the meaning assigned to such term in Section 2.19(b).

Incremental Term Loans” shall have the meaning assigned to such term in Section 2.19(a).

Incremental Term Loan Installment Date” shall have the meaning assigned to such term in Section 2.07(b).

Incremental Yield” shall have the meaning assigned to such term in Section 2.19(c).

 

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Indebtedness” shall mean, with respect to any person, without duplication, (a) all obligations of such person for borrowed money, (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such person under conditional sale or title retention agreements relating to property or assets purchased by such person, (d) all obligations of such person issued or assumed as the deferred purchase price of property or services, to the extent the same would be required to be shown as a long-term liability on a balance sheet prepared in accordance with GAAP, (e) all Capital Lease Obligations of such person, (f) all net payments that such person would have to make in the event of an early termination, on the date Indebtedness of such person is being determined, in respect of outstanding Hedge Agreements, (g) the principal component of all obligations, contingent or otherwise, of such person as an account party in respect of letters of credit and bank guarantees, (h) the principal component of all obligations of such person in respect of bankers’ acceptances, (i) all Guarantees by such person of Indebtedness described in clauses (a) through (h) above) and (j) the amount of all obligations of such person with respect to the redemption, repayment or other repurchase of any Disqualified Stock (excluding accrued dividends that have not increased the liquidation preference of such Disqualified Stock); provided that Indebtedness shall not include (i) trade payables, accrued expenses and intercompany liabilities arising in the ordinary course of business, (ii) prepaid or deferred revenue arising in the ordinary course of business, (iii) purchase price holdbacks arising in the ordinary course of business in respect of a portion of the purchase prices of an asset to satisfy unperformed obligations of the seller of such asset, (iv) earn-out obligations until such obligations become a liability on the balance sheet of such person in accordance with GAAP or (v) obligations under or in respect of the Sale/Lease-Back Documents. The Indebtedness of any person shall include the Indebtedness of any partnership in which such person is a general partner, other than to the extent that the instrument or agreement evidencing such Indebtedness expressly limits the liability of such person in respect thereof.

Indemnified Taxes” shall mean (a) all 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), Other Taxes.

Indemnitee” shall have the meaning assigned to such term in Section 9.05(b).

Information” shall have the meaning assigned to such term in Section 3.14(a).

Information Memorandum” shall mean the Confidential Information Memorandum dated September 2013, as modified or supplemented prior to the Closing Date.

Insufficiency” with respect to any Plan, the amount, if any, of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of ERISA.

Intellectual Property Rights” shall have the meaning assigned to such term in Section 3.23.

Interest Election Request” shall mean a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.05.

Interest Payment Date” shall mean, (a) with respect to any Eurocurrency Loan, the last day of the Interest Period applicable to the Borrowing of which such Term Loan is a part and, in the case of a Eurocurrency Borrowing with an Interest Period of more than three months’ duration, each day that would have been an Interest Payment Date had successive Interest Periods of three months’ duration been applicable to such Borrowing and, in addition, the date of any refinancing or conversion of such Borrowing with or to a Borrowing of a different Type and (b) with respect to any ABR Loan, the last Business Day of each March, June, September and December.

 

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Interest Period” shall mean, as to any Eurocurrency Borrowing, the period commencing on the date of such Borrowing or on the last day of the immediately preceding Interest Period applicable to such Borrowing, as applicable, and ending on the numerically corresponding day (or, if there is no numerically corresponding day, on the last day) in the calendar month that is one, two, three or six months thereafter (or, if available to all Lenders, 12 months), as the Borrower may elect, or the date any Eurocurrency Borrowing is converted to an ABR Borrowing in accordance with Section 2.05 or repaid or prepaid in accordance with Section 2.07, Section 2.08 or Section 2.09; provided, however, that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period 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 (c) no Interest Period shall extend beyond the applicable Maturity Date. Interest shall accrue from and including the first day of an Interest Period to but excluding the last day of such Interest Period.

Investment” shall have the meaning assigned to such term in Section 6.04.

IRS” means the United States Internal Revenue Service.

Junior Financing” shall have the meaning assigned to such term in Section 6.09(b)(i).

Junior Lien Intercreditor Agreement” shall mean a “junior lien” intercreditor agreement between or among the Administrative Agent and one or more Senior Representatives for holders of Permitted Junior Secured Refinancing Debt in form and substance reasonably satisfactory to the Administrative Agent.

Latest Maturity Date” shall mean, at any date of determination, the latest Maturity Date of the Term Facilities in effect on such date.

LCE Election” shall have the meaning assigned to such term in Section 1.05.

LCE Test Date” shall have the meaning assigned to such term in Section 1.05.

Lead Arranger” shall mean each of the Bookrunners and Lead Arrangers identified on the cover page of this Agreement.

Lender” shall mean each financial institution listed on Schedule 2.01 (other than any such person that has ceased to be a party hereto pursuant to an Assignment and Acceptance in accordance with Section 9.04), as well as any person that becomes a Lender hereunder pursuant to Section 9.04 and any Additional Lender.

lending office” shall mean, as to any Lender, the applicable branch, office or Affiliate of such Lender designated by such Lender to make Term Loans.

Letter of Credit” shall have the meaning assigned to such term in the ABL Credit Agreement.

Leverage Ratio Debt” shall have the meaning assigned to such term in Section 6.01(d).

 

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LIBO Rate” shall mean, with respect to any Eurocurrency Borrowing for any Interest Period, the rate per annum equal to the arithmetic mean of the offered rates for deposits in Dollars with a term equivalent to such Interest Period that appears on the Reuters Screen LIBOR01 Page (or such other page as may replace such page on such service for the purpose of displaying the rates at which Dollar deposits are offered by leading banks in the London interbank deposit market as designated by the Administrative Agent from time to time) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period, for Dollar deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period; provided that if such rate is not available at such time for any reason, then the “LIBO Rate” for such Interest Period shall be the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurocurrency Loan being made, continued or converted by the Administrative Agent and with a term equivalent to such Interest Period would be offered by the Administrative Agent to major banks in the London interbank Eurocurrency market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the commencement of such Interest Period.

Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, hypothecation, pledge, charge, security interest or similar encumbrance in or on such asset or (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; provided that in no event shall an operating lease or an agreement to sell be deemed to constitute a Lien.

Limited Condition Event” shall have the meaning assigned to such term in Section 1.05.

Limited Conditionality Provisions” shall have the meaning assigned to such term in Section 4.01.

Loan Documents” shall mean this Agreement, the Security Documents, the ABL/Term Loan Intercreditor Agreement, any Note and, solely for the purposes of Section 3.01, Section 3.02, and Section 7.01 hereof, the Fee Letter, as each such document may be amended, restated, supplemented, replaced, refinanced or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement.

Loan Parties” shall mean Holdings, the Borrower and the other Subsidiary Loan Parties.

Management Group” shall mean the group consisting of the Governing Persons of Holdings and its Subsidiaries, as the case may be, on the Closing Date, or any replacements appointed or elected by the Sponsors or their Affiliates after the Closing Date.

Margin Stock” shall have the meaning assigned to such term in Regulation U.

Market Disruption Event” shall have the meaning assigned to such term in Section 2.12(b).

Material Adverse Effect” shall mean a material adverse effect on (i) the business, financial condition or results of operations, in each case, of Holdings and its Restricted Subsidiaries, taken as a whole, (ii) the ability of the Borrower and the Guarantors (taken as a whole) to perform their payment obligations under the Loan Documents or (iii) the legality, validity or enforceability of the Loan Documents or the rights and remedies of the Administrative Agent and the Lenders, taken as a whole, under the Loan Documents.

Material Indebtedness” shall mean Indebtedness (other than the Term Loans) of Holdings or any Subsidiary Loan Party in an aggregate principal amount exceeding $30.0 million.

 

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Material Real Property” shall mean Real Property having a value on an individual basis in excess of $5.0 million.

Material Subsidiary” shall mean any Restricted Subsidiary other than Immaterial Subsidiaries.

Maturity Date” shall mean, as the context may require, (a) with respect to Effective Date Term Loans, the earliest of (x) May 5, 2024 and (y) the date that is 181 days prior to the maturity of the Senior Unsecured Notes or any Permitted Refinancing Indebtedness in respect thereof, (b) with respect to any Incremental Term Loans other than the 2018 Incremental Term Loans, the final maturity date specified therefor in the applicable Incremental Facility Amendment, (c) with respect to any Other Term Loans, the final maturity date specified therefor in the applicable Refinancing Amendment and (d) with respect to any Extended Term Loans, the final maturity date specified therefor in the applicable Extension Amendment.

Maximum Rate” shall have the meaning assigned to such term in Section 9.09.

Merger Agreement” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Merger Agreement Representations” shall mean the representations and warranties made by the Target in the Merger Agreement as are material to the interests of the Lenders, but only to the extent that Merger Sub or Holdings has the right to terminate its obligation to consummate the Acquisition under the Merger Agreement (or the right not to consummate the Acquisition pursuant to the Merger Agreement) as a result of a breach of such representations and warranties.

Merger Sub” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Minimum Extension Condition” shall have the meaning assigned to such term in Section 2.21(b).

MNPI” shall mean any material Nonpublic Information regarding the Borrower and the Subsidiaries that has not been disclosed to the Lenders generally (other than Lenders who elect not to receive such information). For purposes of this definition “material Nonpublic Information” shall mean nonpublic information that would reasonably be expected to be material to a decision by any Lender to assign or acquire any Term Loans or to enter into any of the transactions contemplated thereby.

Moody’s” shall mean Moody’s Investors Service, Inc.

Mortgage Policies” shall have the meaning assigned to such term in Section 5.10(b).

Multiemployer Plan” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which the Borrower or any other Restricted Subsidiary or any ERISA Affiliate (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Code Section 414) is making or accruing an obligation to make contributions, or has within any of the preceding six plan years made or accrued an obligation to make contributions.

 

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Net Cash Proceeds” shall mean, (a) 100% of the cash proceeds actually received by the Borrower or any of the other Restricted Subsidiaries (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, but only as and when actually received) in respect of any Asset Sale (other than sales pursuant to Section 6.05(a), (b), (c), (d), (e), (m), (o), (p), (q) or (r)) or Recovery Event, net of (i) attorney, accountants, auditor, printer, SEC filing, brokerage, consultant, investment banking, advisory, placement, arranger or underwriting fees and expenses and any other customary fees and expenses actually incurred in connection therewith, (ii) search and recording charges, (iii) required debt payments and required payments of other obligations in respect of Indebtedness secured by a Lien permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document or a Lien which is expressly pari passu (in which case the pro rata portion (determined based on the then outstanding principal amount of the Term Loans that would otherwise be required to be prepaid with such Net Cash Proceeds and the aggregate amount of such principal) of such Net Cash Proceeds applied in respect of any such payments secured by such Lien shall not constitute Net Cash Proceeds for purposes hereof) or subordinate to the Liens pursuant to the Loan Documents), (iv) Taxes (and the amount of any distributions made pursuant to Section 6.06 to permit the Borrower or any Parent Entity to pay such Taxes), including sales, transfer, deed or mortgage recording taxes, paid or payable as a result thereof, and any other payment required by applicable law as a result of such Asset Sale, (v) any payment amounts required to be paid by law, rule or regulation upon receipt to a third party as a result of such Asset Sale or Recovery Event (including to labor unions and environmental trusts) and (vi) any reserve established in accordance with GAAP (provided that such reserved amounts shall be Net Cash Proceeds to the extent and at the time of any reversal (without the satisfaction of any applicable liabilities in cash in a corresponding amount)), in each case, as determined reasonably and in good faith by a Responsible Officer of the Borrower; provided that, with respect to any Asset Sale or Recovery Event, (A) no proceeds realized in a single transaction or series of related transactions shall constitute Net Cash Proceeds unless such proceeds shall exceed $5.0 million, (B) no proceeds shall constitute Net Cash Proceeds in any fiscal year until the aggregate amount of all such proceeds in such fiscal year shall exceed $15.0 million and (C) at any time during the reinvestment period contemplated in Section 2.09(a), if, on a Pro Forma Basis after giving effect to the Asset Sale or Recovery Event and the application of the proceeds thereof, the Total Leverage Ratio is less than or equal to 3.50 to 1.00, up to $50.0 million of such proceeds shall not constitute Net Cash Proceeds (the proceeds described in clauses (A) through (C), “Below Threshold Asset Sale Proceeds”) and

(b) 100% of the cash proceeds from the incurrence, issuance or sale by the Borrower or any other Restricted Subsidiary of any Indebtedness (other than Excluded Indebtedness), net of all taxes and fees (including attorney, accountants, auditor, printer, SEC filing, brokerage, consultant, investment banking, advisory, placement, arranger or underwriting fees and expenses and any other customary fees and expenses actually incurred in connection therewith).

For purposes of calculating the amount of any Net Cash Proceeds, fees, commissions and other costs and expenses payable to Holdings or any Affiliate of Holdings shall be disregarded, except for financial advisory fees customary in type and amount paid to a Sponsor or any Sponsor Affiliates and otherwise not prohibited from being paid hereunder.

Net Income” shall mean, with respect to any person, the net income (loss) of such person, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.

New York Courts” shall have the meaning assigned to such term in Section 9.15.

New York Federal Reserve Bank” shall mean the Federal Reserve Bank of New York.

 

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New York Federal Reserve Bank Rate” shall mean, for any day, the greater of (a) the Federal Funds Effective Rate in effect on such day and (b) the Overnight Bank Funding Rate in effect on such day (or for any day that is not a Business Day, for the immediately preceding Business Day); provided that if neither of such rates are published for any day that is a Business Day, the term “New York Federal Reserve Bank Rate” shall mean the rate for a federal funds transaction quoted at 11:00 a.m. on such day received to the Administrative Agent from a federal funds broker of recognized standing selected by it; provided, further, that if any of the aforesaid rates shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement.

No MNPI Representation” shall mean, with respect to any person, a representation that such person is not in possession of any MNPI.

Non-Consenting Lender” shall have the meaning assigned to such term in Section 2.17(c).

Non-Debt Fund Affiliate” shall mean any Affiliated Lender other than a Debt Fund Affiliate.

Non-Debt Fund Affiliate Assignment and Acceptance” shall have the meaning assigned to such term in Section 9.04(k).

Non-Ratio-Based Incremental Facility Cap” shall have the meaning assigned to such term in Section 2.19(a).

Note” shall have the meaning assigned to such term in Section 2.06(e).

Obligations” shall mean all amounts owing to any Agent or any Lender pursuant to the terms of this Agreement or any other Loan Document, including all interest and expenses accrued or accruing (or that would, absent the commencement of an insolvency or liquidation proceeding, accrue) after the commencement by or against any Loan Party of any proceeding under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law naming such Loan Party as the debtor in such proceeding, in accordance with and at the rate specified in this Agreement, whether or not the claim for such interest or expense is allowed or allowable as a claim in such proceeding.

OFAC” shall have the meaning assigned to such term in Section 3.22(b).

Other Applicable Indebtedness” shall have the meaning assigned to such term in Section 2.09(a).

Other Connection Taxes” shall mean, 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 solely 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).

Other Taxes” shall mean any and all present or future stamp or documentary taxes or any other excise, transfer, sales, property, 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 2.17).

 

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Other Term Loans” shall have the meaning assigned to such term in Section 2.20.

Other Term Loan Installment Date” shall have the meaning assigned to such term in Section 2.07(b).

Overnight Bank Funding Rate” shall mean, for any day, an interest rate per annum equal to the rate comprised of both overnight federal funds and overnight eurodollar borrowings by U.S. managed banking offices of depository institutions (as such composite rate shall be determined by the New York Federal Reserve Bank as set forth on its public website from time to time) and published on the next succeeding Business Day by the New York Federal Reserve Bank as an overnight bank funding rate (from and after such date as the New York Federal Reserve Bank shall commence to publish such composite rate).

Parent Entity” shall mean any direct or indirect parent of the Borrower.

Participant” shall have the meaning assigned to such term in Section 9.04(d).

Participant Register” shall have the meaning assigned to such term in Section 9.04(d).

Payment Office” shall mean the office of the Administrative Agent located at 70 Hudson Street, Jersey City, New Jersey 07302, or such other office as the Administrative Agent may designate to the Borrower and the Lenders from time to time.

PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA, or any successor thereto.

Permitted Amendment” shall mean any Incremental Facility Amendment, Refinancing Amendment or Extension Amendment.

Permitted Business Acquisition” shall mean (i) any acquisition of Equity Interests of a person that becomes a Restricted Subsidiary or (ii) any acquisition (including through a merger, consolidation or amalgamation) of a division or line of business or all or substantially all of the assets of a person by the Borrower or a Restricted Subsidiary (or any subsequent investment made in a person, division or line of business previously acquired in a Permitted Business Acquisition by the Borrower or a Restricted Subsidiary), if immediately after giving effect thereto, any assets acquired shall be utilized in, and if the acquisition involves a merger, consolidation or stock acquisition, the person that is the subject of such acquisition shall be engaged in, a business otherwise permitted to be engaged in by the Borrower under this Agreement.

Permitted Debt Fund Affiliate Investors” shall mean (a) either Sponsor, (b) each of the Affiliates and investment managers of a Sponsor, (c) any fund or account managed by any of the persons described in clause (a) or (b) of this definition, (d) any employee benefit plan of the Borrower or any of the other Restricted Subsidiaries and any person acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan and (e) investment vehicles of members of management of Holdings or the Borrower, but excluding natural persons.

Permitted Holder” shall mean any of (a) the Sponsors and any of their Affiliates, (b) funds or partnerships managed or advised by any of the persons described in clause (a) of this definition (but not including any portfolio company of any of the foregoing), (c) the Management Group, (d) family members or trusts of any person listed in clauses (a) and (c) and (e) any person that forms a group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision) with any of the persons listed in clauses (a), (c) and (d); provided that persons described in clauses (a), (c) and (d) shall form the majority in interest of any group formed pursuant to this clause (e).

 

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Permitted Indebtedness” shall mean all Indebtedness not incurred in violation of Section 6.01.

Permitted Investments” shall mean:

(a) Dollars, Canadian dollars, pounds sterling, euros or, in the case of any Foreign Subsidiary, such local currencies held by it from time to time in the ordinary course of business and not for speculation;

(b) direct obligations of the United States of America or any member of the European Union or any agency thereof or obligations guaranteed by the United States of America or any member of the European Union or any agency thereof, in each case, with maturities not exceeding two years;

(c) time deposits, eurodollar time deposits, certificates of deposit and money market deposits, in each case, with maturities not exceeding one year from the date of acquisition thereof, and overnight bank deposits, in each case, with any commercial bank having capital, surplus and undivided profits of not less than $250.0 million and whose long term debt, or whose parent holding company’s long term debt, is rated at least “A-2” by Moody’s or at least “A” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

(d) repurchase obligations for underlying securities of the types described in clauses (b) and (c) above entered into with a bank meeting the qualifications described in clause (c) above;

(e) commercial paper maturing not more than one year after the date of acquisition issued by a corporation (other than an Affiliate of the Borrower) organized and in existence under the laws of the United States of America or any foreign country recognized by the United States of America with a rating, at the time any investment therein is made, of at least “P-1” by Moody’s or at least “A-1” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

(f) securities with maturities of two years or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, having one of the two highest rating categories obtainable from either Moody’s or S&P (or reasonably equivalent ratings of another internationally recognized rating agency);

(g) Indebtedness issued by persons (other than a Sponsor or any Sponsor Affiliate) with a rating of at least “A-2” by Moody’s or “A” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency), in each case, with maturities not exceeding one year from the date of acquisition;

(h) shares of or interests in mutual funds substantially all of the assets of which comprise investments satisfying any of the provisions of clauses (a) through (g) above;

(i) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated “Aaa” by Moody’s and “AAA” by S&P (or reasonably equivalent ratings of another internationally recognized rating agency) and (iii) have portfolio assets of at least $250.0 million; and

 

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(j) instruments equivalent to those referred to in clauses (a) through (i) above denominated in any foreign currency comparable in credit quality and tenor to those referred to above and commonly used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Subsidiary organized in such jurisdiction.

Permitted Junior Secured Refinancing Debt” shall mean any secured Indebtedness incurred by the Borrower in the form of one or more series of junior lien secured notes or junior lien secured loans; provided that (i) such Indebtedness is secured by the Collateral on a junior priority basis to the Obligations and is not secured by any property or assets of the Borrower or any other Restricted Subsidiary other than the Collateral, (ii) such Indebtedness constitutes Credit Agreement Refinancing Indebtedness, (iii) the security agreements relating to such Indebtedness are substantially similar to or the same as the Security Documents (as reasonably determined by the Borrower); and (iv) a Senior Representative acting on behalf of the holders of such Indebtedness shall have become party to or otherwise subject to the provisions of a Junior Lien Intercreditor Agreement; provided that if such Indebtedness is the initial Permitted Junior Secured Refinancing Debt incurred by the Borrower, then the Administrative Agent and the Senior Representative for such Indebtedness shall have executed and delivered a Junior Lien Intercreditor Agreement. Permitted Junior Secured Refinancing Debt will include any Registered Equivalent Notes issued in exchange therefor.

Permitted Liens” shall have the meaning assigned to such term in Section 6.02.

Permitted Pari Passu Secured Refinancing Debt” shall mean any secured Indebtedness incurred by the Borrower in the form of one or more series of senior secured notes or loans; provided that (i) such Indebtedness is secured by the Collateral on a pari passu basis with the Obligations, (ii) such Indebtedness constitutes Credit Agreement Refinancing Indebtedness, (iii) the security agreements relating to such Indebtedness are substantially similar to or the same as the Security Documents (as reasonably determined by the Borrower) and (iv) a Senior Representative acting on behalf of the holders of such Indebtedness shall have become party to or otherwise subject to the provisions of a First Lien Intercreditor Agreement; provided that if such Indebtedness is the initial Permitted Pari Passu Secured Refinancing Debt incurred by the Borrower, then the Administrative Agent and the Senior Representative for such Indebtedness shall have executed and delivered a First Lien Intercreditor Agreement. Permitted Pari Passu Secured Refinancing Debt will include any Registered Equivalent Notes issued in exchange therefor.

Permitted Refinancing Indebtedness” shall mean any Indebtedness issued in exchange for, or the net proceeds of which are used to extend, refinance, renew, replace, defease or refund (collectively, to “Refinance”) the Indebtedness being Refinanced (or previous refinancings thereof constituting Permitted Refinancing Indebtedness); provided that (a) the principal amount (or accreted value, if applicable) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so Refinanced (plus the amount of unpaid accrued or capitalized interest and premiums thereon (including tender premiums), underwriting discounts, original issue discount, defeasance costs, fees (including upfront fees), commissions and expenses), (b) except with respect to Section 6.01(j), the Weighted Average Life to Maturity of such Permitted Refinancing Indebtedness is greater than or equal to the shorter of (i) the Weighted Average Life to Maturity of the Indebtedness being Refinanced and (ii) the Weighted Average Life to Maturity that would result if all payments of principal on the Indebtedness being Refinanced that were due on or after the date that is one year following the Latest Maturity Date were instead due on the date that is one year following the Latest Maturity Date; provided that no Permitted Refinancing Indebtedness incurred in reliance on this subclause (ii) shall have any scheduled principal payments due prior to the Latest Maturity Date in excess of, or prior to, the scheduled principal payments due prior to such Latest Maturity Date for the

 

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Indebtedness being Refinanced; provided, further, that this requirement shall not apply to Permitted Refinancing Indebtedness in the form of one-year bridge loans that are automatically convertible or exchangeable without conditions into other instruments meeting the requirements set forth in this definition (but for the avoidance of doubt, this requirement shall apply to any loans, securities or other debt into which such bridge loans are exchanged or that otherwise replace such bridge loans), (c) if the Indebtedness being Refinanced is subordinated in right of payment to the Obligations under this Agreement, such Permitted Refinancing Indebtedness shall be subordinated in right of payment to such Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being Refinanced and (d) no Permitted Refinancing Indebtedness shall have different obligors, or greater guarantees or security, than the Indebtedness being Refinanced; provided, further, that (i) with respect to a Refinancing of any Indebtedness permitted hereunder that is subordinated, such Permitted Refinancing Indebtedness shall (A) be subordinated to the guarantee by Holdings and the Subsidiary Loan Parties of the Term Facility and (B) be otherwise on terms not materially less favorable to the Lenders than those contained in the documentation governing the Indebtedness being Refinanced and (ii) with respect to a Refinancing of the ABL Obligations, the Liens, if any, securing such Permitted Refinancing Indebtedness shall be (A) subject to the ABL/Term Loan Intercreditor Agreement or another intercreditor agreement that is substantially consistent with and no less favorable to the Lenders in any material respect than the ABL/Term Loan Intercreditor Agreement and (B) on terms not materially less favorable to the Lenders than those contained in the documentation governing the Indebtedness being Refinanced; provided, further, that Indebtedness constituting Permitted Refinancing Indebtedness shall not cease to constitute Permitted Refinancing Indebtedness as a result of the subsequent extension of the Latest Maturity Date.

Permitted Unsecured Refinancing Debt” shall mean any unsecured Indebtedness incurred by the Borrower in the form of one or more series of unsecured notes or loans; provided that (i) such Indebtedness is not secured by any property or assets of the Borrower or any other Restricted Subsidiary and (ii) such Indebtedness constitutes Credit Agreement Refinancing Indebtedness. Permitted Unsecured Refinancing Debt will include any Registered Equivalent Notes issued in exchange therefor.

person” shall mean any natural person, corporation, business trust, joint venture, association, company, partnership, limited liability company, government, individual or family trust, Governmental Authority or other entity of whatever nature.

Plan” shall mean any “employee pension benefit plan” as defined in Section 3(2) of ERISA (other than a Multiemployer Plan) that is (a) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA and (b) either (i) sponsored or maintained (at the time of determination or at any time within the five years prior thereto) by Holdings or any of its Restricted Subsidiaries or any ERISA Affiliate or (ii) in respect of which Holdings or any of its Restricted Subsidiaries or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

Platform” shall have the meaning assigned to such term in Section 9.17(a).

Pledged Collateral” shall have the meaning assigned to such term in the Collateral Agreement.

Prepayment Premium” shall have the meaning assigned to such term in Section 2.08(b).

 

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Pro Forma Basis” shall mean, for purposes of determining compliance with any provision of this Agreement, including the determination of any financial ratio or test, that the applicable Specified Transaction shall be deemed to have occurred as of the first day of the relevant period, including pro forma adjustments arising out of events attributable to the Specified Transactions (including giving effect to those specified in accordance with the definition of Consolidated EBITDA and Consolidated Net Income). Upon giving effect to a transaction on a “Pro Forma Basis,” (i) any indebtedness incurred by the Borrower or any of the other Restricted Subsidiaries in connection with such Specified Transaction (or any other transaction which occurred during the relevant period) shall be deemed to have been incurred as of the first day of the relevant period, (ii) if such Indebtedness has a floating or formula rate, then the rate of interest for such Indebtedness for the applicable period for purposes of the calculations contemplated by this definition shall be determined by utilizing the rate which is or would be in effect with respect to such Indebtedness as at the relevant date of such calculations, (iii) income statement items (whether positive or negative) attributable to all property acquired in such Specified Transaction or to the Investment constituting such Specified Transaction, as applicable, shall be included as if such Specified Transaction has occurred as of the first day of the relevant period, (iv) income statement items (whether positive or negative) attributable to all property disposed of in any Specified Transaction (including any income statement items attributable to disposed, abandoned or discontinued operations), shall be excluded as if such Specified Transaction has occurred as of the first day of the relevant period, (v) such other pro forma adjustments which would be permitted or required by Regulations S-K and S-X under the Securities Act of 1933, as amended, shall be taken into account and (vi) such other adjustments made by the Borrower with the consent of the Administrative Agent (not to be unreasonably withheld) shall be taken into account. Interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by a responsible financial officer of the Borrower to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be determined to have been based upon the rate actually chosen, or if none, then based upon such optional rate chosen as the Borrower or the applicable Restricted Subsidiary may designate. Any such adjustments included in calculations made on a Pro Forma Basis shall continue to apply to subsequent calculations of any applicable financial ratios or tests, including during any subsequent test periods in which the effects thereof are expected to be realized.

Pro Forma Financial Statements” shall have the meaning assigned to such term in Section 4.01(d).

Projections” shall mean the projections of the Acquired Business included in the Information Memorandum and any other projections and any forward looking statements of such entities furnished to the Lenders or the Administrative Agent by or on behalf of Holdings or any of the Restricted Subsidiaries prior to the Closing Date.

Public Lender” shall have the meaning assigned to such term in Section 9.17(b).

Purchasing Borrower Party” shall mean Holdings or any Restricted Subsidiary that becomes an Assignee or Participant pursuant to Section 9.04.

Qualified CFC Holding Company” shall mean a Subsidiary of Holdings that has no material assets other than Equity Interests of one or more CFCs or Qualified CFC Holding Companies.

Qualified Equity Interests” shall mean any Equity Interests other than Disqualified Stock.

 

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Qualified Holding Company Debt” shall mean unsecured Indebtedness of Holdings that (a) does not benefit from any Guarantee of any Subsidiary, (b) will not mature prior to the date that is six months after the Latest Maturity Date in effect on the date of issuance or incurrence thereof, (c) has no scheduled amortization or scheduled payments of principal and is not subject to mandatory redemption, repurchase, prepayment or sinking fund obligation (it being understood that such Indebtedness may have mandatory prepayment, repurchase or redemption provisions satisfying the requirements of clause (e) below), (d) does not require any payments in cash of interest or other amounts in respect of the principal thereof prior to the date that is six months after the Latest Maturity Date in effect on the date of such issuance or incurrence and (e) that has mandatory prepayment, repurchase or redemption, covenant, default and remedy provisions that are no more restrictive (taken as a whole) to Holdings than those set forth in this Agreement or that are customary for senior discount notes of an issuer that is the parent of a borrower under senior secured credit facilities; provided, that any such Indebtedness shall constitute Qualified Holding Company Debt only if immediately after giving effect to the issuance or incurrence thereof and the use of proceeds thereof, no Event of Default shall have occurred and be continuing.

Qualified IPO” shall mean (i) an underwritten primary or secondary (or combination of primary or secondary) public offering (other than a public offering pursuant to a Registration Statement on Form S-8) of the Equity Interests of the Borrower or any Parent Entity that generates gross cash proceeds of at least $100.0 million or (ii) any merger, consolidation or amalgamation following which the Borrower or Holdings merges with or into or becomes a Wholly Owned Subsidiary of another person, and such person, has equity securities listed on a national securities exchange, regardless of whether the Borrower or Holdings, as the case may be, is the surviving entity.

Quarterly Financial Statements” shall have the meaning assigned to such term in Section 5.04(b).

Ratio-Based Incremental Facility” shall have the meaning assigned to such term in Section 2.19(a).

Ratio Debt” shall have the meaning assigned to such term in Section 6.01(r).

Real Property” shall mean, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned in fee or leased by any Loan Party, together with, in each case, all easements, hereditaments and appurtenances relating thereto, and all improvements and appurtenant fixtures incidental to the ownership or lease thereof.

Recipient” shall mean the Administrative Agent and any Lender, as applicable.

Recovery Event” shall mean any settlement of, or payment in respect of, any property or casualty insurance claim or any condemnation proceeding relating to any asset of Holdings or any Restricted Subsidiary.

Refinance” shall have the meaning assigned to such term in the definition of the term “Permitted Refinancing Indebtedness”, and “Refinanced” shall have a meaning correlative thereto.

Refinanced Debt” shall have the meaning assigned to such term in the definition of the term “Credit Agreement Refinancing Indebtedness”.

Refinancing Amendment” shall mean an amendment to this Agreement executed by each of (a) the Borrower and Holdings, (b) the Administrative Agent and (c) each Lender that agrees to provide any portion of the Credit Agreement Refinancing Indebtedness being incurred pursuant thereto, in accordance with Section 2.20.

Register” shall have the meaning assigned to such term in Section 9.04(b)(iv).

 

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Registered Equivalent Notes” shall mean, with respect to any notes originally issued in a Rule 144A or other private placement transaction under the Securities Act of 1933, as amended, substantially identical notes (having the same guarantees and collateral provisions) issued in a dollar-for-dollar exchange therefor pursuant to an exchange offer registered with the SEC.

Regulation S-K” shall mean Regulation S-K in the Exchange Act, as amended, modified, and supplemented thereby.

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

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

Reinvestment Deferred Amount” shall mean, with respect to any Reinvestment Event, the aggregate amount of Net Cash Proceeds received by Holdings or any Restricted Subsidiary in connection therewith that are not applied to prepay the Term Loans as a result of the delivery of a Reinvestment Notice.

Reinvestment Event” shall mean any Asset Sale or Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice.

Reinvestment Notice” shall mean a written notice executed by a Responsible Officer of the Borrower stating that the Borrower or any other Restricted Subsidiary intends and expects to use all or a portion of the amount of Net Cash Proceeds of an Asset Sale or Recovery Event to restore, rebuild, repair, construct, improve, replace or otherwise acquire assets useful in the Borrower’s or such other Restricted Subsidiary’s business.

Reinvestment Prepayment Amount” shall mean, with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment Prepayment Date to restore, rebuild, repair, construct, improve, replace or otherwise acquire assets useful in the Borrower’s or any other Restricted Subsidiary’s business.

Reinvestment Prepayment Date” shall mean, with respect to any Reinvestment Event, the earlier of (a) the date (which shall be a Business Day) occurring one year after such Reinvestment Event (or, if the Borrower or any other Restricted Subsidiary shall have entered into a legally binding commitment within one year after such Reinvestment Event to restore, rebuild, repair, construct, improve, replace or otherwise acquire assets useful in the Borrower’s or such other Restricted Subsidiary’s business with the applicable Reinvestment Deferred Amount, the date occurring eighteen months after such Reinvestment Event) and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, restore, rebuild, repair, construct, improve, replace or otherwise acquire assets useful in the Borrower’s or such other Restricted Subsidiary’s business with all or any portion of the relevant Reinvestment Deferred Amount.

Related Parties” shall mean, with respect to any specified person, such person’s Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such person and such person’s Affiliates.

Related Sections” shall have the meaning assigned to such term in Section 6.04.

 

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Release” shall mean any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, emanating or migrating in, into, upon, onto or through the environment.

Remaining Present Value” shall mean, as of any date with respect to any lease, the present value as of such date of the scheduled future lease payments with respect to such lease, determined with a discount rate equal to a market rate of interest for such lease reasonably determined at the time such lease was entered into.

Reportable Event” shall mean any reportable event as defined in Section 4043(c) of ERISA or the regulations issued thereunder, other than those events as to which the 30 day notice period referred to in Section 4043(c) of ERISA has been waived, with respect to a Plan (other than a Plan maintained by an ERISA Affiliate that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code).

Repricing Transaction” shall mean, in connection with a transaction the primary purpose of which is to prepay, refinance, substitute or replace the Term Loans or to amend the Loan Documents to reduce the yield on the Term Loans, the prepayment, refinancing, substitution or replacement of all or a portion of the Term Loans with the incurrence of any long-term debt financing by the Borrower or any of its Restricted Subsidiaries having an “effective yield” at the time of incurrence thereof (with the comparative determinations to be made by the Administrative Agent in good faith and in consultation with the Borrower consistent with generally accepted financial practices, after giving effect to, among other factors, margin, interest rate floors, upfront or similar fees or original issue discount shared with all providers of such financing, but excluding the effect of any arrangement, structuring, syndication or other fees payable in connection therewith that are not shared with all providers of such financing) that is less than the “effective yield” (as determined by the Administrative Agent on the same basis as provided in the preceding parenthetical) of such Term Loans at the time of incurrence thereof, including, as may be effected through any amendment to this Agreement relating to the interest rate for, or weighted average yield of, such Term Loans.

Required Financial Statements” shall have the meaning assigned to such term in Section 5.04(b).

Required Lender Consent Items” shall have the meaning assigned to such term in Section 9.04(m).

Required Lenders” shall mean, at any time, Lenders having Term Loans outstanding and unused Commitments that, taken together, represent more than 50.0% of the sum of all Term Loans outstanding and Commitments at such time.

Required Mortgages” shall have the meaning assigned to such term in Section 5.10(f).

Required Percentage” shall mean, with respect to any Excess Cash Flow Period, 50.0%; provided that (a) if the First Lien Leverage Ratio at the end of the applicable Excess Cash Flow Period is less than or equal to 3.75 to 1.00 but greater than 3.00 to 1.00, such percentage shall be 25.0%, and (b) if the First Lien Leverage Ratio at the end of the applicable Excess Cash Flow Period is less than or equal to 3.00 to 1.00, such percentage shall be 0%.

 

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Responsible Officer” shall mean, with respect to any Loan Party, the chief executive officer, president, vice president, secretary, assistant secretary or any Financial Officer of such Loan Party or any other individual designated in writing to the Administrative Agent by an existing Responsible Officer of such Loan Party as an authorized signatory of any certificate or other document to be delivered hereunder. 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 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 Payments” shall have the meaning assigned to such term in Section 6.06.

Restricted Subsidiary” shall mean any Subsidiary of Holdings that is not an Unrestricted Subsidiary.

S&P” shall mean Standard & Poor’s Financial Services LLC or any successor entity thereto.

Sale and Lease-Back Transaction” shall have the meaning assigned to such term in Section 6.03.

Sale/Lease-Back Documents” shall mean each of the documents set forth on Schedule 1.01C.

SEC” shall mean the Securities and Exchange Commission or any successor thereto.

Second Amendment” shall mean the Second Amendment, dated as of May 5, 2017, among Holdings, the Borrower, the New Term Lenders, the Administrative Agent and the Collateral Agent.

Second Amendment Effective Date” shall have the meaning assigned to such term in the Second Amendment.

Secured Parties” shall mean the collective reference to the “Secured Parties” as defined in the Collateral Agreement.

Security Documents” shall mean the Collateral Agreement, any mortgages required to be delivered pursuant to Section 5.14 or otherwise granted pursuant to the terms hereof and each of the security agreements and other instruments and documents executed and delivered by any Loan Party pursuant to the Collateral Agreement or pursuant to Section 5.10 hereof.

Senior Representative” shall mean, with respect to any series of Permitted Pari Passu Secured Refinancing Debt or Permitted Junior Secured Refinancing Debt, the trustee, administrative agent, collateral agent, security agent or similar agent under the indenture or agreement pursuant to which such Indebtedness is issued, incurred or otherwise obtained, as the case may be, and each of their successors in such capacities.

Senior Secured Debt” shall mean, as of any date of determination, the aggregate principal amount of Consolidated Total Debt outstanding on such date that is secured by a Lien on any assets of Holdings or any Restricted Subsidiary.

Senior Secured Leverage Ratio” shall mean the ratio of Senior Secured Debt to Consolidated EBITDA for the trailing four fiscal quarter period most recently ended prior to the date of determination for which financial statements have been delivered pursuant to Section 5.04.

 

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Senior Unsecured Notes” shall mean the senior unsecured notes in an aggregate amount not to exceed $315.0 million issued on the Closing Date to finance, in part, the Transactions.

Senior Unsecured Notes Refinancing Date” shall mean the date on which the entire aggregate principal amount of the Senior Unsecured Notes has been repaid or Refinanced and, to the extent Refinanced with Indebtedness, such Indebtedness has a final maturity date at least 181 days after May 5, 2024.

Specified Event of Default” shall mean any Event of Default under Section 7.01(b), Section 7.01(c), Section 7.01(h) or Section 7.01(i).

Specified Representations” shall mean the representations and warranties with respect to the Borrower and the Subsidiary Loan Parties set forth in Section 3.01 (but solely with respect to organizational status and organizational power and authority to execute, deliver and perform obligations under the applicable Loan Documentation), Section 3.02 (but solely with respect to clause (a) and clause (b)(i) thereof), Section 3.03 (but solely with respect to the Loan Documents), Section 3.10 (but solely with respect to clause (b)(ii) thereof), Section 3.11, Section 3.12, Section 3.17 (subject to the Limited Conditionality Provisions), Section 3.19 and Section 3.22.

Specified Transaction” shall mean with respect to any period, any (i) Investment involving the acquisition of an operating unit of a business or that constitutes an acquisition of all or substantially all of the common stock of a person and involves the payment of consideration by the Borrower and its Restricted Subsidiaries in excess of $5.0 million, (ii) sale or transfer of assets or property or other asset disposition (including any disposal, abandonment or discontinuance of operations) that yields gross proceeds to the Borrower or any of its Restricted Subsidiaries in excess of $5.0 million or involves the abandonment or discontinuation of operations with a value in excess of $5.0 million, (iii) incurrence, repayment or refinancing of Indebtedness, (iv) Restricted Payment, (v) designation or redesignation of an Unrestricted Subsidiary or Restricted Subsidiary, (vi) provision of incremental revolving commitment increases (vii) any Limited Condition Event or (viii) other event, in each case that by the terms of the Loan Documents requires pro forma compliance with a test or covenant hereunder or requires such test or covenant to be calculated on a “Pro Forma Basis.”

Sponsors” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Sponsor Affiliate” shall mean each Affiliate of a Sponsor and each individual who is a partner or employee of a Sponsor.

Statutory Reserves” shall mean, with respect to any currency, any reserve, liquid asset or similar requirements established by any Governmental Authority of the United States of America or of the jurisdiction of such currency or any jurisdiction in which Term Loans in such currency are made to which banks in such jurisdiction are subject for any category of deposits or liabilities customarily used to fund loans in such currency or by reference to which interest rates applicable to Term Loans in such currency are determined.

Subagent” shall have the meaning assigned to such term in Section 8.02.

Subsidiary” shall mean, with respect to any person (herein referred to as the “parent”), any corporation, partnership, limited liability company or other entity of which (a) Equity Interests having ordinary voting power (other than Equity Interests having such power only by reason of the happening of a contingency) to elect a majority of the Governing Persons of such corporation, partnership, limited liability company or other entity are at the time owned by such parent or (b) more than 50.0% of the Equity Interests are at the time owned by such parent. Unless the context otherwise requires, “Subsidiary” shall mean a Subsidiary of Holdings.

 

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Subsidiary Loan Parties” shall mean the Borrower and each Guarantor.

Subsidiary Redesignation” shall have the meaning assigned to such term in the definition of “Unrestricted Subsidiary”.

Target” shall have the meaning assigned to such term in the introductory paragraphs hereof (and, following the Conversion, its successor, a Delaware limited liability company).

Target Audited Financial Statements” shall have the meaning assigned to such term in Section 4.01(d).

Target Unaudited Financial Statements” shall have the meaning assigned to such term in Section 4.01(d).

Taxes” shall mean any and all present or future taxes, levies, imposts, duties, deductions, withholdings or similar charges imposed by any Governmental Authority and any and all interest and penalties related thereto.

Teachers” shall have the meaning assigned to such term in the introductory paragraphs hereof.

Term Facility” shall mean the facility and commitments utilized in making Term Loans hereunder, as may be amended, restated, supplemented, replaced, refinanced or otherwise modified from time to time in accordance with the requirements thereof and of this Agreement. Following the establishment of any Incremental Term Loans, Other Term Loans or Extended Term Loans, such Incremental Term Loans, Other Term Loans or Extended Term Loans shall be considered a separate Term Facility hereunder.

Term Loan Installment Date” shall mean, as the context requires, an Effective Date Term Loan Installment Date, an Incremental Term Loan Installment Date, an Other Term Loan Installment Date or an Extended Term Loan Installment Date.

Term Loan Priority Collateral” shall have the meaning assigned to such term in the ABL/Term Loan Intercreditor Agreement.

Term Loans” shall mean (i) prior to the Second Amendment Effective Date, the term loans made to the Borrower on the Closing Date pursuant hereto, (ii) on and after the Incremental Amendment Effective Date, the Effective Date Term Loans, (iii) any other Incremental Term Loans (excluding 2018 Incremental Term Loans), (iv) any Other Term Loans and (v) any Extended Term Loans, collectively (or if the context so requires, any of them individually).

TimberTech Acquisition” shall refer to the acquisition of TimberTech Limited, an Ohio limited liability company, by CPG International Inc., which was consummated on September 21, 2012.

Total Leverage Ratio” shall mean, as at any date of determination, the ratio of Consolidated Total Debt as at such date to Consolidated EBITDA for the trailing four fiscal quarter period most recently ended prior to the date of determination for which financial statements have been delivered pursuant to Section 5.04.

 

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Transaction Documents” shall mean the Merger Agreement, the Loan Documents, the ABL Loan Documents, and documentation with respect to the Senior Unsecured Notes.

Transactions” shall mean, collectively, the transactions to occur pursuant to the Transaction Documents, including (a) the consummation of the Acquisition, (b) the execution and delivery of the Loan Documents, the creation of the Liens pursuant to the Security Documents and the initial borrowings hereunder, (c) the issuance of the Senior Unsecured Notes and the execution and delivery of the documents in connection with the Senior Unsecured Notes, (d) the Equity Contribution, and the execution and delivery of the documents in connection with the Equity Contribution, (e) the execution and delivery of the ABL Loan Documents, the creation of the Liens pursuant to the ABL Security Documents and the initial borrowings under the ABL Credit Agreement (f) the redemption by the Borrower of the Class B LLC interest held by Ares immediately after the Closing Date, and (g) the payment of all fees and expenses incurred or paid in connection with the foregoing.

Type” shall mean, when used in respect of any Term Loan or Borrowing, the Rate by reference to which interest on such Term Loan or on the Term Loans comprising such Borrowing is determined. For purposes hereof, the term “Rate” shall mean Adjusted LIBO Rate or ABR, as applicable.

Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction, to the extent it may be required to apply to any item or items of Collateral.

Unrestricted Cash” shall mean cash or cash equivalents of the Borrower or any of the other Restricted Subsidiaries that would not appear as “restricted” on the Required Financial Statements.

Unrestricted Subsidiary” shall mean any Subsidiary of Holdings (other than the Borrower) designated by the Borrower as an Unrestricted Subsidiary hereunder by written notice to the Administrative Agent; provided that the Borrower shall only be permitted to so designate a new Unrestricted Subsidiary after the Closing Date if (i) no Default or Event of Default has occurred and is continuing or would result therefrom, (ii) such Unrestricted Subsidiary is capitalized (to the extent capitalized by Holdings or any of the Subsidiaries) through Investments as permitted by, and in compliance with, Section 6.04(j), and any prior or concurrent Investments in such Subsidiary by Holdings or any of its Restricted Subsidiaries shall be deemed to have been made under Section 6.04(j), (iii) without duplication of clause (ii), any assets owned by such Unrestricted Subsidiary at the time of the initial designation thereof are treated as Investments pursuant to Section 6.04(j), (iv) at the time such Subsidiary is designated an Unrestricted Subsidiary, the Fixed Charge Coverage Ratio, determined on a Pro Forma Basis, is not less than 2.00:1.00 and (v) such Subsidiary has been designated an “unrestricted subsidiary” (or otherwise not be subject to the covenants and defaults) under the ABL Credit Agreement, all other Indebtedness permitted to be incurred hereunder and all Permitted Refinancing Indebtedness in respect of any of the foregoing and all Disqualified Stock; provided further that at the time of designation of any Unrestricted Subsidiary, such Unrestricted Subsidiary, when taken together with all Unrestricted Subsidiaries as of the last day of the fiscal quarter of the Borrower most recently ended, shall not have assets with a value in excess of 10.0% of Consolidated Total Assets (calculated with respect to the Borrower and the other Restricted Subsidiaries) or revenue representing in excess of 10.0% of Consolidated EBITDA of the Borrower and the other Restricted Subsidiaries as of such date. The Borrower may designate any Unrestricted Subsidiary to be a Restricted Subsidiary for purposes of this Agreement (each, a “Subsidiary Redesignation”); provided that (a) such Unrestricted Subsidiary, after

 

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giving effect to such designation, shall be a Wholly Owned Subsidiary of Holdings, (b) no Default or Event of Default shall have occurred and be continuing or would result therefrom, (c) all representations and warranties contained herein and in the Loan Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Subsidiary Redesignation (both before and after giving effect thereto), unless stated to relate to a specific earlier date, in which case such representations and warranties shall be true and correct in all material respects as of such earlier date, (d) at the time of such Subsidiary Redesignation, the Fixed Charge Coverage Ratio, determined on a Pro Forma Basis, is not less than 2.00:1.00 and (e) the Borrower shall have delivered to the Administrative Agent an officer’s certificate executed by a Responsible Officer of the Borrower, certifying to the best of such officer’s knowledge, compliance with the requirements of preceding clauses (a) through (d), inclusive.

U.S. Tax Compliance Certificate” has the meaning assigned to such term in Section 2.15(e).

USA PATRIOT Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. No. 107-56 (signed into law October 26, 2001)).

Weighted Average Life to Maturity” shall mean, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal (excluding nominal amortization), including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest 1/12) that will elapse between such date and the making of such payment by (b) the then outstanding principal amount of such Indebtedness.

Wholly Owned Subsidiary” shall mean, with respect to any person, a Subsidiary of such person, all of the Equity Interests of which (other than directors’ qualifying shares or nominee or other similar shares required pursuant to applicable law) are owned by such person or another Wholly Owned Subsidiary of such person.

Withdrawal Liability” shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

Working Capital” shall mean, with respect to Holdings and its Restricted Subsidiaries on a consolidated basis at any date of determination, Current Assets at such date of determination minus Current Liabilities at such date of determination; provided that, increases or decreases in Working Capital shall be calculated without regard to any changes in Current Assets or Current Liabilities as a result of (a) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and non-current or (b) the effects of purchase accounting.

Write-Down and Conversion Powers” means, 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.

Section 1.02 Terms Generally. The definitions set forth or referred to in Section 1.01 shall apply equally to both 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. Unless the context requires otherwise, (a) the words “include”, “includes” and “including” shall be deemed to be

 

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followed by the phrase “without limitation”, (b) in the computation of periods of time from a specified date to a later specified date, the word “from” shall mean “from and including”; the words “to” and “until” each mean “to but excluding” and the word “through” shall mean “to and including”, (c) the word “will” shall be construed to have the same meaning and effect as the word “shall”, (d) the word “incur” shall be construed to mean incur, create, issue, assume or become liable in respect of (and the words “incurred” and “incurrence” shall have correlative meanings), (e) the word “or” shall be construed to mean “and/or”, (f) any reference to any person shall be construed to include such person’s legal successors and permitted assigns and (g) the words “asset” and “property” shall be construed to have the same meaning and effect. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Except as otherwise expressly provided herein, any reference in this Agreement to any Loan Document or organizational document of the Loan Parties shall mean such document as amended, restated, supplemented or otherwise modified from time to time (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document). Any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time.

Section 1.03 Accounting Terms; GAAP. Except as otherwise expressly provided herein (including pursuant to the definition of Capital Lease Obligations and Consolidated Capital Expenditures), all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, (i) notwithstanding anything to the contrary herein, all accounting or financial terms used herein shall be construed, and all financial computations pursuant hereto shall be made, without giving effect to any election under Statement of Financial Accounting Standards Board Accounting Standards Codification 825-10 (or any other Statement of Financial Accounting Standards Board Accounting Standards Codification having a similar effect) to value any Indebtedness or other liabilities of Holdings or any Restricted Subsidiary at “fair value”, as defined therein, (ii) for purposes of determinations of the Fixed Charge Coverage Ratio, the First Lien Leverage Ratio, the Senior Secured Leverage Ratio and the Total Leverage Ratio, GAAP shall be construed as in effect on the Closing Date and (iii) for purposes of determining compliance with any provision of this Agreement and any related definitions, the determination of whether a lease is to be treated as an operating lease or capital lease shall be made without giving effect to any change in GAAP that becomes effective on or after the Closing Date, notwithstanding any modification or interpretative change thereto after the Closing Date (including without giving effect to any treatment of leases under Accounting Standards Codification 842 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect)) that would require treating any lease (or similar arrangement) as a capital lease where such lease (or similar arrangement) would not have been required to be so treated under GAAP as in effect on the Closing Date. In the event that any Accounting Change (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then upon the written request of the Borrower or the Administrative Agent, the Borrower, the Administrative Agent and the Lenders shall enter into good faith negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Change with the desired result that the criteria for evaluating the Borrower’s financial condition shall be the same after such Accounting Change as if such Accounting Change had not occurred; provided that if such notice is given then the provisions of this Agreement in effect on the date of such Accounting Change shall remain in effect until the effective date of such amendment. “Accounting Change” shall mean any change in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the Financial Accounting Standards Board of the American Institute of Certified Public Accountants. Effectuation of Transfers. Each of the representations and warranties of Holdings and the Borrower contained in this Agreement (and all corresponding definitions) is made after giving effect to the Transactions, unless the context otherwise requires.

 

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Section 1.04 Currencies. Unless otherwise specifically set forth in this Agreement, monetary amounts shall be in Dollars. For purposes of determining compliance with any Dollar-denominated restriction on the incurrence of Indebtedness or determining the amount of any Indebtedness or judgment pursuant to clauses (f) or (j) of Section 7.01, the Dollar-equivalent principal amount of any Indebtedness or judgment denominated in a foreign currency will be calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred or such judgment was entered.

Section 1.05 Limited Condition Event.

(a) For purposes of determining (i) compliance under this Agreement with any financial ratio, test or basket, including the First Lien Leverage Ratio, the Senior Secured Leverage Ratio, the Fixed Charge Coverage Ratio, the Total Leverage Ratio and Consolidated Total Assets, (ii) the absence of any Default or Event of Default or (iii) compliance under this Agreement with any basket expressed as a percentage of Consolidated EBITDA or Consolidated Total Assets, in each case, as a condition to (w) the consummation of any transaction in connection with an acquisition of, or Investment in, any assets, business or person by one or more of the Borrower and the other Restricted Subsidiaries, in each case, that is not conditioned on the availability of, or on obtaining, third party financing, (x) the incurrence by one or more of the Borrower and the other Restricted Subsidiaries of any Indebtedness (and any Liens with respect thereto) the proceeds of which are used to finance an acquisition or Investment described in clause (w) above, (y) the making by one or more of the Borrower and the other Restricted Subsidiaries of any Restricted Payment in connection with any acquisition or Investment or (z) designation by the Borrower of any Subsidiary as a Restricted Subsidiary, Unrestricted Subsidiary or Immaterial Subsidiary in connection with any acquisition or Investment, in each case, permitted by this Agreement (any such acquisition, Investment, incurrence of Indebtedness or Liens, making of a Restricted Payment or designation of a Subsidiary, a “Limited Condition Event”), at the option of the Borrower (the Borrower’s election to exercise such option in connection with any Limited Condition Event, an “LCE Election”), the date of determination of whether any such action is permitted hereunder, shall be deemed to be (1) in the case of any such acquisition or Investment described in clause (w) above and any related incurrences of Indebtedness and/or Liens, either (I) on the date of the execution of the definitive agreement with respect to such acquisition or Investment or (II) on the date of the consummation of such acquisition or Investment, in either case of clause (I) or (II) after giving effect to such acquisition or Investment and any related incurrences of Indebtedness and/or Liens on a Pro Forma Basis, (2) in the case of any Restricted Payment made in connection with an acquisition or Investment, either (I) on the date of the execution of the definitive agreement with respect to such acquisition or Investment or (II) on the date of making such Restricted Payment, in either case of clause (I) or (II) after giving effect to the relevant Restricted Payment on a Pro Forma Basis, (3) in the case of a designation of a Subsidiary in connection with any acquisition or Investment, either (I) on the date of the execution of the definitive agreement for such acquisition or Investment which would result in such Subsidiary becoming a Restricted Subsidiary, Unrestricted Subsidiary or Immaterial Subsidiary, as applicable, or (II) on the date of the consummation of such acquisition or Investment on a Pro Forma Basis (each such date of determination, an “LCE Test Date”), and if, after giving effect to the Limited Condition Event and the other transactions to be entered into in connection therewith on a Pro Forma Basis as if they had occurred at the beginning of the trailing four fiscal quarter period most recently ended prior to the LCE Test Date for which financial statements have been delivered pursuant to Section 5.04, the Borrower could have taken such action on the relevant LCE Test Date in compliance with such financial ratio or test, default or event of default or basket, such financial ratio or test, default or event of default or basket shall be deemed to have been complied with.

 

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(b) For the avoidance of doubt, if the Borrower has made an LCE Election and any of the financial ratios, tests or baskets for which compliance was determined or tested as of the LCE Test Date are exceeded as a result of fluctuations in any such financial ratio, test or basket at or prior to the consummation of the relevant transaction or action, such financial ratio, test or basket will not be deemed to have been exceeded as a result of such fluctuations. If the Borrower has made an LCE Election for any Limited Condition Event, then in connection with any subsequent calculation of such financial ratios, tests or baskets on or following the relevant LCE Test Date and prior to the earlier of (i) the date on which such Limited Condition Event is consummated and (ii) the date that the definitive agreement for such Limited Condition Event is terminated or expires without consummation of such Limited Condition Event, any such financial ratio, test or basket shall be calculated on a pro forma basis assuming such Limited Condition Event and other transactions in connection therewith (including any incurrence of debt and the use of proceeds thereof) have been consummated, except that (other than solely with respect to any incurrence test under which such Limited Condition Event is being made) Consolidated EBITDA, Consolidated Total Assets and Consolidated Net Income of any target of such Limited Condition Event can only be used in the determination of the relevant financial ratios, tests and baskets if and when such acquisition has closed.

ARTICLE II

The Credits

Section 2.01 [Reserved].

Section 2.02 Term Loans and Borrowings.

(a) Subject to the terms and conditions set forth herein, (i) each Lender severally agrees to make to the Borrower Term Loans denominated in Dollars equal to such Lender’s Commitment on the Closing Date and (ii) each 2018 Incremental Term Loan Lender agrees to make to the Borrower Incremental Term Loans denominated in Dollars equal to such Lender’s 2018 Incremental Term Loan Commitment on the Incremental Amendment Effective Date. The failure of any Lender to make any Term 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 Term Loans as required. Amounts paid or prepaid in respect of Term Loans may not be reborrowed. The 2018 Incremental Term Loan Commitments will terminate in full upon the making of the 2018 Incremental Term Loans on the Incremental Amendment Effective Date.

(b) Subject to Section 2.12, each Borrowing shall be comprised entirely of ABR Loans or Eurocurrency Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any ABR Loan or Eurocurrency Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Term Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Term Loan in accordance with the terms of this Agreement and such Lender shall not be entitled to any amounts payable under Section 2.13 or Section 2.15 solely in respect of increased costs resulting from such exercise and existing at the time of such exercise.

(c) Notwithstanding any other provision of this Agreement, the Borrower shall not 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 Maturity Date.

 

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Section 2.03 Request for Borrowing. Unless otherwise set forth in the applicable Incremental Facility Amendment or Refinancing Amendment, the Borrower shall deliver to the Administrative Agent a Borrowing Request not later than 2:00 p.m., New York City time (i) in the case of an ABR Borrowing, one Business Day before the anticipated funding date for such Borrowing and (ii) in the case of a Eurocurrency Borrowing, three Business Days before the anticipated funding date for such Borrowing, requesting that the Lenders make Term Loans on such anticipated funding date. The Borrowing Request must specify (A) the principal amount of Term Loans to be borrowed, (B) the requested date of the Borrowing (which shall be a Business Day), (C) the Type of Term Loans to be borrowed, (D) in the case of a Eurocurrency Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period” and (E) the location and number of the Borrower’s account to which funds are to be disbursed. Upon receipt of such Borrowing Request, the Administrative Agent shall promptly notify each Lender thereof. The proceeds of the Term Loans requested under this Section 2.03 shall be disbursed by the Administrative Agent in immediately available funds by wire transfer to such bank account or accounts as designated by the Borrower in the Borrowing Request.

Section 2.04 Funding of Borrowings.

(a) Each Lender shall make each Term Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 10:00 a.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. The Administrative Agent will make such Term Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower as specified in the Borrowing Request.

(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed funding date of any 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 2.04 and may, in reliance upon such assumption, make available to the 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 Borrower severally agree to pay to the Administrative Agent, forthwith on demand (without duplication) such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent at (i) in the case of such Lender, the greater of (A) the New York Federal Reserve Bank Rate and (B) a rate reasonably determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans at such time. If such Lender pays such amount to the Administrative Agent then such amount shall constitute such Lender’s Term Loan included in such Borrowing.

Section 2.05 Interest Elections. (a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurocurrency Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurocurrency Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.05. The 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 Term Loans comprising such Borrowing, and the Term Loans comprising each such portion shall be considered a separate Borrowing. To make an election pursuant to this Section 2.05, the Borrower shall notify the Administrative Agent of such election by telephone (i) in the case of an election to convert to or continue a Eurocurrency Borrowing, not later than 2:00 p.m., New York City time, three Business Days before the effective date of such election, (ii) in the case of an election to convert to an ABR Borrowing, not later

 

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than 2:00 p.m., New York City time, three Business Days before the effective date of such election, or (iii) in the case of an election to continue an ABR Borrowing, not later than 2:00 p.m., New York City time, one Business Day before the effective date of such election. Each such telephonic Interest Election Request shall be confirmed promptly by hand delivery, facsimile transmission or PDF attachment to an e-mail to the Administrative Agent of a written Interest Election Request substantially in the form of Exhibit D (or such other form as may be agreed between the Borrower and the Administrative Agent) and signed by the Borrower.

(b) Each telephonic and written Interest Election Request shall be irrevocable and shall specify the following information in compliance with Section 2.02:

(i) 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 or a Eurocurrency Borrowing; and

(iv) if the resulting Borrowing is a Eurocurrency Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of “Interest Period”.

If any such Interest Election Request requests a Eurocurrency Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(c) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each applicable Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(d) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurocurrency Borrowing two Business Days prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be continued as a Eurocurrency Borrowing having an Interest Period of one month’s duration. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the written request (including a request through electronic means) of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing, (i) no outstanding Borrowing may be converted to or continued as a Eurocurrency Borrowing and (ii) unless repaid, each Eurocurrency Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

Section 2.06 Promise to Pay; Evidence of Debt.

(a) The Borrower hereby unconditionally promises to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Term Loan of such Lender as provided in Section 2.07.

 

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(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Term Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Term Loan made hereunder, the Type thereof and the Interest Period (if any) applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) any amount received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section 2.06 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 obligation of the Borrower to repay the Term Loans in accordance with the terms of this Agreement.

(e) Any Lender may request that Term Loans made by it be evidenced by a promissory note (a “Note”). In such event, the Borrower shall prepare, execute and deliver to such Lender a Note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in substantially the form attached hereto as Exhibit F (or such other form as may be agreed between the Administrative Agent and the Borrower). Thereafter, the Term Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more Notes in such form payable to the payee named therein (or, if requested by such payee, to such payee and its registered assigns).

Section 2.07 Repayment of Term Loans.

(a) The Borrower shall repay to the Administrative Agent for the ratable account of the Lenders on the last Business Day of each March, June, September and December, commencing with the last Business Day of December 2013, an aggregate principal amount equal to 0.25253% of the aggregate principal amount of the Effective Date Term Loans outstanding on the Incremental Amendment Effective Date (which payments shall be reduced as a result of the application of prepayments in accordance with the order of priority set forth in Section 2.08 or Section 2.09, as applicable) (each such date being referred to as an “Effective Date Term Loan Installment Date”);

(b) (i) in the event that any Incremental Term Loans (other than 2018 Incremental Term Loans) are made, the Borrower shall repay Borrowings consisting of Incremental Term Loans on the dates (each an “Incremental Term Loan Installment Date”) and in the amounts set forth in the applicable Incremental Facility Amendment, (ii) in the event that any Other Term Loans are made, the Borrower shall repay Borrowings consisting of Other Term Loans on the dates (each an “Other Term Loan Installment Date”) and in the amounts set forth in the applicable Refinancing Amendment and (iii) in the event that any Extended Term Loans are made, the Borrower shall repay Borrowings consisting of Extended Term Loans on the dates (each an “Extended Term Loan Installment Date”) and in the amounts set forth in the applicable Extension Amendment; and

(c) to the extent not previously paid, all outstanding Term Loans shall be due and payable on the applicable Maturity Date.

 

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Section 2.08 Optional Prepayment of Term Loans.

(a) The Borrower shall have the right at any time and from time to time to prepay the Term Loans in whole or in part, without premium or penalty, other than the Prepayment Premium (but subject to Section 2.14), in an aggregate principal amount, (i) in the case of Eurocurrency Loans, that is an integral multiple of $500,000 and not less than $2.5 million, and (ii) in the case of ABR Loans, that is an integral multiple of $100,000 and not less than $1.0 million, or, if less, the amount outstanding. The Borrower shall notify the Administrative Agent by telephone (confirmed by hand delivery, facsimile transmission or PDF attachment to an e-mail) of such election not later than 2:00 p.m., New York City time, (i) in the case of an ABR Borrowing, one Business Day before the anticipated date of such prepayment and (ii) in the case of a Eurocurrency Borrowing, three Business Days before the anticipated date of such prepayment. Any such notice shall be irrevocable except to the extent conditioned on a refinancing of all or any portion of the Term Facility. Any optional prepayments of Term Loans pursuant to this Section 2.08 shall be applied to the remaining scheduled amortization payments as directed by the Borrower (or in the absence of such direction, in direct order of maturity).

(b) If the Borrower (i) prepays, refinances, substitutes or replaces any Term Loans in connection with a Repricing Transaction or (ii) effects any amendment of this Agreement resulting in a Repricing Transaction, in each case, on or prior to, the six-month anniversary of the Incremental Amendment Effective Date, the Borrower shall pay to the Administrative Agent, for the ratable account of each of the Lenders holding Term Loans immediately prior to the consummation of such Repricing Transaction (including each Lender holding Term Loans immediately prior to the consummation of such Repricing Transaction that withholds its consent to such Repricing Transaction and is replaced pursuant to Section 2.17), (A) in the case of clause (i), a prepayment premium equal to 1.0% of the aggregate principal amount of the Term Loans so prepaid, refinanced, substituted or replaced (the “Applicable Prepayment Percentage”) and (B) in the case of clause (ii), a fee equal to the Applicable Prepayment Percentage of the aggregate principal amount of the applicable Term Loans outstanding immediately prior to such amendment. Such amounts (as applicable, the “Prepayment Premium”) shall be due and payable on the date of effectiveness of the applicable Repricing Transaction; provided that the Borrower shall not be subject to the requirements of this Section 2.08(b) with respect to any Repricing Transaction occurring after the six-month anniversary of the Incremental Amendment Effective Date.

Section 2.09 Mandatory Prepayment of Term Loans.

(a) The Borrower shall apply all Net Cash Proceeds (other than Net Cash Proceeds of ABL Priority Collateral Asset Sales) to prepay Term Loans:

(i) within five Business Days following actual receipt of such Net Cash Proceeds from an Asset Sale or Recovery Event (unless the Borrower shall have delivered a Reinvestment Notice on or prior to such fifth Business Day); provided that (A) on or prior to the fifth Business Day following receipt thereof, such Net Cash Proceeds shall be deposited in an Asset Sale Proceeds Account, and (B) notwithstanding the foregoing, on each Reinvestment Prepayment Date an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied to the prepayment of the Term Loans (together with accrued interest thereon); and

(ii) within one Business Day following receipt of Net Cash Proceeds from the incurrence, issuance or sale by the Borrower or any Restricted Subsidiary of any Indebtedness (other than Excluded Indebtedness);

 

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provided, in the case of both (i) and (ii) above, if at the time that any such prepayment would be required, the Borrower shall be required to, or to offer to, repurchase or redeem or repay or prepay Credit Agreement Refinancing Indebtedness or Indebtedness permitted under Section 6.01(b), in each case, that is secured on a pari passu basis with or senior to the Obligations pursuant to the terms of the documentation governing such Indebtedness with the proceeds of such Asset Sale, Recovery Event or incurrence, issuance or sale of Indebtedness (such Credit Agreement Refinancing Indebtedness required to be offered to be so repurchased, “Other Applicable Indebtedness”)), then the Borrower may apply such Net Cash Proceeds on a pro rata basis (determined on the basis of the aggregate outstanding principal amount of the Term Loans and Other Applicable Indebtedness at such time); provided, further, that the portion of such Net Cash Proceeds allocated to the Other Applicable Indebtedness shall not exceed the amount of such Net Cash Proceeds required to be allocated to the Other Applicable Indebtedness pursuant to the terms thereof, and the remaining amount, if any, of such Net Cash Proceeds shall be allocated to the Term Loans (in accordance with the terms hereof); provided, further, that to the extent the holders of Other Applicable Indebtedness decline to have such Indebtedness repurchased or repaid with such Net Cash Proceeds, the declined amount of such Net Cash Proceeds shall promptly (and in any event within 10 Business Days after the date of such rejection) be applied to prepay the Term Loans in accordance with the terms hereof (to the extent such Net Cash Proceeds would otherwise have been required to be so applied if such Other Applicable Indebtedness was not then outstanding).

(b) Commencing with the fiscal year ending December 31, 2014, not later than five Business Days after the date on which the Borrower is required to deliver financial statements with respect to the end of such Excess Cash Flow Period under Section 5.04(a), the Borrower shall calculate Excess Cash Flow for the relevant Excess Cash Flow Period (the “Excess Cash Flow Calculation Date”) and shall prepay the Term Loans in an amount equal to (i) the Required Percentage times the amount of such Excess Cash Flow, minus (ii) to the extent not financed with the proceeds of the incurrence of Indebtedness having a maturity not less than 12 months from the date of incurrence thereof and not previously deducted pursuant to this clause (b) in any prior period, the amount of any voluntary prepayments during such Excess Cash Flow Period or on or prior to the Excess Cash Flow Calculation Date of (A) Term Loans (provided, that with respect to any prepayment of Term Loans below the par value thereof, the aggregate amount of such prepayment for purposes of this clause shall be the amount of the Borrower’s cash payment in respect of such prepayment), (B) revolving loans under the ABL Credit Agreement or any Incremental ABL Loans (in each case, to the extent commitments in respect thereof are permanently reduced by the amount of such prepayments), (C) Credit Agreement Refinancing Indebtedness, Indebtedness created under Incremental Facilities, Incremental Equivalent Term Debt and Indebtedness permitted under Section 6.01(b) that in each case is secured by the Collateral on a pari passu basis with the Obligations and (D) any Permitted Refinancing Indebtedness in respect of any of the foregoing that is secured by the same collateral, and with the same priority, as the Indebtedness being refinanced, in each case, permitted hereunder.

(c) Notwithstanding anything in this Section 2.09 to the contrary, any Lender may elect, by notice to the Administrative Agent by telephone (confirmed by hand delivery, facsimile transmission or PDF attachment to an e-mail) at least one Business Day prior to the required prepayment date, to decline all or any portion of any mandatory prepayment of its Term Loans pursuant to this Section 2.09, in which case the aggregate amount of the prepayment that would have been applied to prepay Term Loans but was so declined may be retained by the Borrower and used for any general corporate purpose not prohibited by this Agreement.

(d) Prepayment of the Term Loans from Net Cash Proceeds and Excess Cash Flow shall be applied without penalty or premium (but subject to Section 2.14) as directed by the Borrower (or, absent such direction, in direct order of maturity of Term Loans under Section 2.07(a)); provided that any Incremental Term Loans, Other Term Loans or Extended Term Loans shall be applied in the order specified in the applicable Permitted Amendment.

 

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(e) Notwithstanding the foregoing provisions of this Section 2.09, to the extent any Net Cash Proceeds or Excess Cash Flow is attributable to a Foreign Subsidiary, each payment pursuant to Section 2.09(a) and Section 2.09(b) shall not be required to the extent repatriation of such amounts (a) would be prohibited or restricted under applicable local law and (b) would result or reasonably be expected to result in material adverse tax consequences (including, as a result of any withholding tax or the upstreaming of cash) to any Parent Entity, the Borrower or any Subsidiary as determined in good faith by the Borrower at the time the corresponding payments would otherwise be required to be made pursuant to Section 2.09(a) or 2.09(b). The non-application of the prepayment amounts as a consequence of this Section 2.09(e) will not, for the avoidance of doubt, constitute a Default or an Event of Default, and such amounts shall be available for working capital or other purposes of the applicable Foreign Subsidiary (or any other Foreign Subsidiary).

(f) Any prepayments required after the application of this Section 2.09 shall be net of any costs, expenses or Taxes incurred by the Borrower or any of its Affiliates or Restricted Subsidiaries as a result of complying with this Section 2.09, and the Borrower and the Restricted Subsidiaries be permitted to make, directly or indirectly, dividends or distributions, to their Affiliates and Parent Entities to cover such Tax liability, costs or expenses.

Section 2.10 Fees.

(a) The Borrower agrees to pay to the Administrative Agent, for its own account, the agency fees set forth in the Fee Letter at the times specified therein (the “Administrative Agent Fees”).

(b) All Fees shall be paid on the dates due, in immediately available funds, to the Administrative Agent at the Payment Office for distribution, if and as appropriate, among the Lenders. Once paid, none of the Fees shall be refundable under any circumstances.

Section 2.11 Interest.

(a) The Term Loans comprising each ABR Borrowing shall bear interest at the ABR plus the Applicable Margin.

(b) The Term Loans comprising each Eurocurrency Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin.

(c) Following the occurrence and during the continuation of a Specified Event of Default from the date the Borrower receives written notice of such Specified Event of Default from the Administrative Agent, the Borrower shall pay interest on overdue amounts hereunder at a rate per annum equal to (i) in the case of overdue principal of, or interest on, any Term Loan, 2.0% plus the rate otherwise applicable to such Term Loan as provided in the preceding paragraphs of this Section 2.11 or (ii) in the case of any other overdue amount, 2.0% plus the rate applicable to ABR Loans as provided in clause (a) of this Section 2.11.

(d) Accrued interest on each Term Loan shall be payable in arrears (i) on each Interest Payment Date for such Term Loan and (ii) on the applicable Maturity Date; provided that (A) default interest accrued pursuant to paragraph (c) of this Section 2.11 shall be payable on demand, (B) in the event of any repayment or prepayment of any Term Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (C) in the event of any conversion of any Eurocurrency Loan prior to the end of the current Interest Period therefor, accrued interest on such Term 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 computed by reference to the ABR at times when the ABR 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), and, in each case, shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable ABR, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

Section 2.12 Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurocurrency Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period; or

(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Term Loans included in such Borrowing for such Interest Period (each of clause (a) and (b), a “Market Disruption Event”);

then the Administrative Agent shall give notice thereof to the Borrower and the applicable Lenders by telephone, facsimile transmission or PDF attachment to an e-mail as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any applicable Borrowing to, or continuation of any such Borrowing as, a Eurocurrency Borrowing shall be ineffective and such Borrowing shall be converted to or continued as on the last day of the Interest Period applicable thereto an ABR Borrowing and (ii) if any Borrowing Request requests a Eurocurrency Borrowing, such Borrowing shall be made as an ABR Borrowing. During any period in which a Market Disruption Event is in effect, Borrower may request that the Administrative Agent request the Required Lenders to confirm that the circumstances giving rise to the Market Disruption Event continue to be in effect; provided that (A) Borrower shall not be permitted to submit any such request more than once in any 30-day period and (B) nothing contained in this Section 2.12 or the failure to provide confirmation of the continued effectiveness of such Market Disruption Event shall in any way affect the Administrative Agent’s or Required Lenders’ right to provide any additional notices of a Market Disruption Event as provided in this Section 2.12. If the Required Lenders have not confirmed within 10 Business Days after request of such report from the Borrower that a Market Disruption Event has occurred, then such Market Disruption Event shall be deemed to be no longer existing.

Section 2.13 Increased Costs.

(a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate);

 

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(ii) subject any Recipient to any Taxes (other than Indemnified Taxes and Excluded Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii) impose on any Lender or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or Loans made by such Lender

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan (or of maintaining its obligation to make any such Term Loan) or to reduce the amount of any sum received or receivable by such Lender or Recipient hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or Recipient such additional amount or amounts as will compensate such Lender or Recipient for such additional costs incurred or reduction suffered.

(b) If any Lender 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 capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Term Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy or liquidity), then from time to time the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered. Notwithstanding any other provision herein, no Lender shall demand compensation pursuant to this Section 2.13(b) as a result of a change in law resulting from Basel III or the Dodd-Frank Wall Street Reform and Consumer Protection Act if it shall not at the time be the general policy or practice of such Lender to demand such compensation from similarly situated borrowers (to the extent that, with respect to such change in law, such Lender has the right to do so under its credit facilities with similarly situated borrowers).

(c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as applicable, as specified in paragraph (a) or (b) of this Section 2.13 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

(d) Promptly after any Lender has determined that it will make a request for increased compensation pursuant to this Section 2.13, such Lender shall notify the Borrower thereof. Failure or delay on the part of any Lender to demand compensation pursuant to this Section 2.13 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender pursuant to this Section 2.13 for any increased costs or reductions incurred more than 180 days prior to the date that such Lender notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided, further, that if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 180 day period referred to above shall be extended to include the period of retroactive effect thereof.

Section 2.14 Break Funding Payments. In the event of (a) the payment of any principal of any Eurocurrency Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurocurrency Loan on the date specified in any notice delivered pursuant hereto or (d) the assignment

 

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of any Eurocurrency Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.17, then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurocurrency Loan, such loss, cost or expense to any Lender shall be deemed to be the amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Term Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Term Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue a Eurocurrency Loan, for the period that would have been the Interest Period for such Term Loan) over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for deposits in Dollars of a comparable amount and period from other banks in the Eurocurrency market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.14 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender the amount shown as due on any such certificate within 10 days after receipt thereof.

Section 2.15 Taxes.

(a) Any and all payments by or on account of any obligation of any Loan Party hereunder or under any Loan Document shall be made free and clear of and without deduction for any Taxes, except as required by applicable law; provided that if a Loan Party or the Administrative Agent shall be required to deduct any Indemnified Taxes from such payments, then (i) the sum payable by such Loan Party shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.15) the Administrative Agent or any Lender, as applicable, receives an amount equal to the amount it would have received had no such deductions been made, (ii) such Loan Party shall make such deductions and (iii) such Loan Party shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law.

(b) In addition, the Loan Parties shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(c) Each Loan Party shall indemnify the Administrative Agent and each Lender, within 10 days after written demand therefor, for the full amount of any Indemnified Taxes imposed on the Administrative Agent or such Lender, as applicable (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.15) 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 such Loan Party by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(d) As soon as practicable after any payment of Taxes by a Loan Party to a Governmental Authority, such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

 

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(e) (i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the 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 Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.15(e)(ii)(A), (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower,

(A) any Lender that is a U.S. Person shall deliver to the 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 Borrower or the Administrative Agent), executed copies 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 entitled to do so, deliver to the 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 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 (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W-8BEN or W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2) executed copies 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 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 the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN or W-8BEN-E, as applicable; or

(4) to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BEN-E, as applicable, a U.S. Tax Compliance Certificate, 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 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 on behalf of each such direct and indirect partner;

 

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(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the 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 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 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 Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the 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 Borrower or the Administrative Agent as may be necessary for the 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 clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(f) For purposes of determining withholding Taxes imposed under FATCA, from and after the effective date of this Agreement, the Borrower and the Administrative Agent shall treat (and the Lenders hereby authorize the Administrative Agent to treat) the Term Loans as not qualifying as “grandfathered obligations” within the meaning of Treasury Regulation Section 1.1471-2(b)(2)(i).

(g) If the Administrative Agent or any Lender receives a refund of any Indemnified Taxes or Other Taxes as to which it has been indemnified by a Loan Party or with respect to which such Loan Party has paid additional amounts, in each case pursuant to this Section 2.15, it shall pay an amount equal to such refund to such Loan Party (but only to the extent of indemnity payments made, or additional amounts paid, by such Loan Party under this Section 2.15 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender (including any Taxes imposed with respect to such refund) as is determined by the Administrative Agent or such Lender in good faith, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that such Loan Party, upon the request of the Administrative Agent or such Lender, agrees to repay as soon as reasonably practicable the amount paid over to such Loan Party (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this paragraph (g), in no event will the Administrative Agent or any Lender be required to pay any amount to a Loan Party pursuant to this paragraph (g) the payment of which would

 

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place the Administrative Agent or such Lender in a less favorable net after-Tax position than the Administrative Agent or such Lender 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 2.15 shall not be construed to require the Administrative Agent or any Lender to make available its Tax returns (or any other information relating to its Taxes which it deems, in good faith, to be confidential) to the Loan Parties or any other person.

(h) Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so) and (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.04(d) relating to the maintenance of a Participant Register, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such 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 any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender against any amount due to the Administrative Agent under this paragraph (h).

Section 2.16 Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) Unless otherwise specified, the Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or otherwise) prior to 2:00 p.m., New York City time, at the Payment Office, except that payments pursuant to Section 2.13, Section 2.14, Section 2.15 and Section 9.05 shall be made directly to the persons entitled thereto, on the date when due, in immediately available funds, without condition or deduction for any defense, recoupment, set-off or counterclaim. 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. The Administrative Agent shall distribute any such payments received by it for the account of any other person to the appropriate recipient promptly following receipt thereof and shall make settlements with the Lenders with respect to other payments at the times and in the manner provided in this Agreement. 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. Any payment required to be made by the Administrative Agent hereunder shall be deemed to have been made by the time required if the Administrative Agent shall, at or before such time, have taken the necessary steps to make such payment in accordance with the regulations or operating procedures of the clearing or settlement system used by the Administrative Agent to make such payment.

(b) Except as otherwise provided in this Agreement, if (i) at any time insufficient funds are received by and available to the Administrative Agent from the Borrower to pay fully all amounts of principal, interest and fees then due from the Borrower hereunder or (ii) at any time an Event of Default shall have occurred and be continuing and the Administrative Agent shall receive proceeds of Term Loan Priority Collateral in connection with the exercise of remedies, such funds shall be applied in accordance with Section 5.02 of the Collateral Agreement (subject to the application of proceeds provisions contained in the ABL/Term Loan Intercreditor Agreement).

 

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(c) Except as otherwise provided in this Agreement, if any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Class of Term Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Class of Term Loans than the proportion received by any other Lender in such Class, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Term Loans of such Class of other Lenders in such Class to the extent necessary so that the benefit of all such payments shall be shared by the Lenders in such Class ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Term Loans of such Class; 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 (c) shall not be construed to apply to any payment made by the Borrower 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 Term Loans to any assignee or participant, other than to the Borrower or any other Subsidiary or Affiliate thereof in an assignment not permitted by this Agreement (as to which the provisions of this paragraph (c) shall apply). The 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 Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

(d) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender 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 New York Federal Reserve Bank Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b) or Section 2.16(d), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under Section 2.04(b) or Section 2.16(d), as applicable, until all such unsatisfied obligations are fully paid.

Section 2.17 Mitigation Obligations; Replacement of Lenders.

(a) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Term Loans hereunder or assign its rights and obligations hereunder to another of its offices, branches or Affiliates if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.13 or 2.15, as applicable, in the future and (ii) would not subject such Lender to any material unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender in any material respect. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

 

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(b) If any Lender requests compensation under Section 2.13, or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.15, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, either (i) so long as no Default or Event of Default has occurred and is continuing, prepay such Lender’s outstanding Term Loans hereunder in full on a non-pro rata basis without premium or penalty or (ii) 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 and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (A) in the case of clause (ii) above, the Borrower shall have received the prior written consent of the Administrative Agent, which consent shall not unreasonably be withheld, (B) such Lender shall have received payment of an amount equal to the outstanding principal of its Term 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 Borrower (in the case of all other amounts) and (iii) in the case of any such assignment resulting from a claim for compensation under Section 2.13 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments. No action by or consent of the replaced Lender shall be necessary in connection with such removal or assignment, in the case of clause (ii) above, which shall be immediately and automatically effective upon payment of such purchase price. In connection with any such assignment, the Borrower, the Administrative Agent, such replaced Lender and the replacement Lender shall otherwise comply with Section 9.04; provided that if such replaced Lender does not comply with Section 9.04 within three Business Days after the Borrower’s request, compliance with Section 9.04 shall not be required to effect such assignment.

(c) If any Lender (such Lender, a “Non-Consenting Lender”) has failed to consent to a proposed amendment, waiver, discharge or termination which, pursuant to the terms of Section 9.08, requires the consent of all of the Lenders affected or all Lenders and with respect to which the Required Lenders shall have granted their consent, then the Borrower shall have the right (unless such Non-Consenting Lender grants such consent) at its sole expense, to either (i) so long as no Default or Event of Default has occurred and is continuing, prepay such Lender’s outstanding Term Loans hereunder in full on a non-pro rata basis without premium or penalty (including with respect to the processing and recordation fee referred to in Section 9.04(b)(ii)(B)) or (ii) replace such Non-Consenting Lender by deeming such Non-Consenting Lender to have assigned its Term Loans and its Commitments hereunder to one or more assignees reasonably acceptable to the Administrative Agent; provided that (A) all Obligations of the Borrower owing to such Non-Consenting Lender (including accrued Fees and any amounts due under Section 2.08(b), Section 2.13, Section 2.14 or Section 2.15) being removed or replaced shall be paid in full to such Non-Consenting Lender concurrently with such removal or assignment and (B) in the case of clause (ii) above, the replacement Lender shall purchase the foregoing by paying to such Non-Consenting Lender a price equal to the principal amount thereof plus accrued and unpaid interest thereon. No action by or consent of the Non-Consenting Lender shall be necessary in connection with such removal or assignment, in the case of clause (ii) above, which shall be immediately and automatically effective upon payment of such purchase price. In connection with any such assignment, the Borrower, the Administrative Agent, such Non-Consenting Lender and the replacement Lender shall otherwise comply with Section 9.04; provided that if such Non-Consenting Lender does not comply with Section 9.04 within three Business Days after the Borrower’s request, compliance with Section 9.04 shall not be required to effect such assignment.

Section 2.18 Illegality. If any Lender reasonably determines that any change in law has made it unlawful, or if any Governmental Authority has asserted after the Closing Date that it is unlawful, for any Lender or its applicable lending office to make or maintain any Eurocurrency Loans, then, upon notice thereof by such Lender to the Borrower through the Administrative Agent, any

 

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obligations of such Lender to make or continue Eurocurrency Loans or to convert ABR Borrowings to Eurocurrency Borrowings shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist. Upon receipt of such notice, the Borrower shall upon demand from such Lender (with a copy to the Administrative Agent), either convert all Eurocurrency Borrowings of such Lender to ABR Borrowings, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurocurrency Borrowings to such day, or immediately, if such Lender may not lawfully continue to maintain such Term Loans. Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.

Section 2.19 Incremental Term Facilities.

(a) At any time and from time to time, subject to the terms and conditions set forth herein, the Borrower may, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), add additional Term Loans or add one or more additional tranches of term loans (the “Incremental Term Loans”; each such increase or tranche, an “Incremental Facility). Notwithstanding anything to the contrary herein, the aggregate amount of the Incremental Facilities shall not exceed an amount equal to the sum of (x) so long as the proceeds of the applicable Incremental Facility are not used to repay or prepay any Junior Financing (provided that such requirement shall only apply on and prior to the Senior Unsecured Notes Refinancing Date), $150.0 million plus amounts incurred under the Incremental Amendment No. 1, plus (y) amounts previously prepaid pursuant to Section 2.08 (the “Non-Ratio-Based Incremental Facility Cap”); provided that the Borrower may incur additional Incremental Facilities without regard to the Non-Ratio-Based Incremental Facility Cap and such amounts so incurred shall not count toward the Non-Ratio-Based Incremental Facility Cap (each such Incremental Facility, a “Ratio-Based Incremental Facility”) so long as after the incurrence of such Incremental Term Loan (calculated without giving effect to any incurrence under clause (x)), the First Lien Leverage Ratio, determined on a Pro Forma Basis, is equal to or less than 4.50:1.00. The Borrower shall be entitled to incur amounts under the Non-Ratio-Based Incremental Facility Cap, any Ratio-Based Incremental Facility or any combination thereof. Each tranche of Incremental Term Loans shall be in an integral multiple of $1.0 million and in an aggregate principal amount that is not less than $15.0 million (or such lesser minimum amount approved by the Administrative Agent in its reasonable discretion); provided that such amount may be less than the applicable minimum amount or integral multiple amount if such amount represents all the remaining availability under the Non-Ratio-Based Incremental Facility Cap or in respect of Ratio-Based Incremental Facilities.

(b) Each notice from the Borrower pursuant to this Section 2.19 shall set forth the requested amount and proposed terms of the relevant Incremental Term Loans. Incremental Term Loans may be provided by any existing Lender (it being understood that no existing Lender will have an obligation to provide, and the Borrower shall have no obligation to offer any existing Lender the opportunity to provide any commitment for, Incremental Term Loans), in each case, on terms permitted under this Section 2.19, or any Additional Lender; provided that the Administrative Agent shall have consented (in each case, such consent not to be unreasonably withheld, delayed or conditioned) to any Additional Lender’s providing such Incremental Term Loans if such consent by the Administrative Agent would be required under Section 9.04 for an assignment of Term Loans to such Additional Lender; provided further that the making of any Incremental Term Loans by any Non-Debt Fund Affiliate shall be subject to the terms and conditions applicable to any assignment of Term Loans to such Affiliated Lender as if such Incremental Term Loans were assigned to such Affiliated Lender. Each Incremental Facility shall become effective pursuant to an amendment (each, an “Incremental Facility Amendment”) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Lender or Additional Lender providing such Incremental Facility (but without the consent of any other Lender) and

 

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the Administrative Agent. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Incremental Facility Amendment. Each of the parties hereto hereby agrees that, upon the effectiveness of any Incremental Facility Amendment, this Agreement and the other Loan Documents, as applicable, shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Incremental Facility and the Incremental Term Loans evidenced thereby.

(c) Any Incremental Facility shall be subject to the following terms and conditions (i) no Default or Event of Default shall have occurred and be continuing or would result from the incurrence of such Incremental Facility; provided that if the proceeds of such Incremental Facility are, substantially concurrently with the receipt thereof, to be used by the Borrower or any Loan Party to finance, in whole or in part, a Permitted Business Acquisition or investments in equity, then the foregoing shall be limited to Specified Events of Default, (ii) without the prior written consent of the Required Lenders, (A) the final maturity date of any Incremental Facility shall be no earlier than the Latest Maturity Date, (B) the Weighted Average Life to Maturity of any Incremental Facility shall be no shorter than the remaining Weighted Average Life to Maturity of the then outstanding Term Facility with the longest Weighted Average Life to Maturity and (C) subject to clauses (A) and (B), the amortization schedules applicable to such Incremental Facility shall be as determined by the Borrower and the Lenders or Additional Lenders thereunder, (iii) such Incremental Facility shall, at the discretion of the Borrower, (A) rank pari passu in right of payment with the Obligations, (B) be subordinated in right of payment to the Obligations, (C) be secured on a pari passu basis with the Obligations, (D) be secured on a junior basis to the Obligations or (E) be unsecured; provided that (1) if subordinated or secured (except to the extent incurred under the terms of this Agreement), any intercreditor or lien subordination arrangements shall be reasonably satisfactory to the Administrative Agent and (2) if secured on a pari passu basis with the Obligations, such Incremental Facility shall be on terms and pursuant to documentation applicable to the Obligations (and if not secured on a pari passu basis with the Obligations, shall be pursuant to separate documentation reasonably acceptable to the Administrative Agent), (iv) any Incremental Facility may provide for the ability of the Lenders or Additional Lenders providing such Incremental Facility to participate on a pro rata basis or less than pro rata basis (but not greater than pro rata basis) in any voluntary or mandatory prepayments of the Term Loans; (v) the interest rate, upfront fees and original issue discount for any Incremental Term Loans shall be as determined by the Borrower and the Lenders or Additional Lenders providing such Incremental Facility; provided that with respect to any Incremental Facility (other than an Incremental Facility of the type referenced to in (B), (D) or (E) of clause (iii) above) in the event that the yield on such Incremental Facility (taking into account interest margins, minimum Adjusted LIBO Rate, minimum ABR, upfront fees and original issue discount on such Incremental Term Loans, with upfront fees and original issue discount being equated to interest margins based on an assumed four year life to maturity, but exclusive of any arrangement, syndication, structuring, commitment or other fees payable in connection therewith) (the “Incremental Yield”) exceeds the yield on the Term Loans hereunder (determined as provided in the immediately preceding parenthetical) by more than 0.50%, then the interest margins for the Term Loans hereunder shall automatically be increased to a level such that the yield on such Term Loans is 0.50% below the Incremental Yield (it being agreed that any increase in yield to any existing facility required due to the application of an Adjusted LIBO Rate or ABR “floor” on any Incremental Facility shall be effected solely through an increase therein (or implementation thereof, as applicable)), (vi) any other fees payable in connection with any Incremental Term Loans shall be as determined by the Borrower and the Lenders or Additional Lenders providing such Incremental Facility and (vii) except as otherwise provided in clauses (i) through (vi), all other terms of such Incremental Facility, if not substantially consistent with the terms of the then existing Term Loans, shall be reasonably satisfactory to the Administrative Agent (it being understood that, to the extent any financial maintenance covenant is added for the benefit of any Incremental Facility, no consent shall be required from the Administrative Agent or the Lenders to the extent that such then existing financial maintenance covenant is (x) added for the benefit of the Term Loans hereunder or (y) only applicable after the Latest Maturity Date of the Term Loans).

 

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(d) The proceeds of any Incremental Term Loans will be used for general corporate purposes (including financing capital expenditures, Permitted Business Acquisitions, Restricted Payments, refinancing of Indebtedness and any other transaction not prohibited hereunder).

(e) At any time and from time to time, subject to the terms and conditions set forth herein, the Borrower may, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy of such notice to each of the Lenders), request to issue one or more series of Incremental Equivalent Term Debt in an aggregate principal amount not to exceed, as of the date of and after giving effect to the issuance of any such Incremental Equivalent Term Debt, the aggregate amount of Incremental Facilities then permitted to be incurred under Section 2.19 (determined assuming that the proceeds of any such Incremental Facilities would have been used for the same purposes as the proceeds of such Incremental Equivalent Term Debt); provided that the incurrence of any Incremental Equivalent Term Debt shall reduce, on a dollar-for-dollar basis, the aggregate amount of Incremental Facilities permitted to be incurred under Section 2.19.

(f) The issuance of any Incremental Equivalent Term Debt pursuant to this Section 2.19(f), shall be subject to the following terms and conditions (i) the Borrower shall deliver to the Administrative Agent a certificate of the Borrower dated as of the date of issuance of the Incremental Equivalent Term Debt signed by a Responsible Officer of the Borrower, certifying and attaching the resolutions adopted by the Borrower approving or consenting to the execution and delivery of the applicable financing documentation in respect of such Incremental Equivalent Term Debt and the issuance of such Incremental Equivalent Term Debt, (ii) no Default or Event of Default shall have occurred and be continuing or would result from the incurrence of such Incremental Equivalent Term Debt; provided that if the proceeds of such Incremental Equivalent Term Debt are, substantially concurrently with the receipt thereof, to be used by the Borrower or any Loan Party to finance, in whole or in part, a Permitted Business Acquisition or investments in equity, then the foregoing shall be limited to Specified Events of Default, (iii) without the prior written consent of the Required Lenders, (A) the final maturity date of any Incremental Equivalent Term Debt shall be no earlier than the Latest Maturity Date, (B) the Weighted Average Life to Maturity of any Incremental Equivalent Term Debt shall be no shorter than the remaining Weighted Average Life to Maturity of the then outstanding Term Facility with the longest Weighted Average Life to Maturity and (C) subject to clauses (A) and (B), the amortization schedules applicable to such Incremental Equivalent Term Debt shall be as determined by the Borrower and the Lenders or Additional Lenders thereunder, (iii) such Incremental Equivalent Term Debt shall, at the discretion of the Borrower, (A) rank pari passu in right of payment with the Obligations, (B) be subordinated in right of payment to the Obligations, (C) be secured on a pari passu basis with the Obligations, (D) be secured on a junior basis to the Obligations or (E) be unsecured; provided that if subordinated or secured, any intercreditor or lien subordination arrangements shall be reasonably satisfactory to the Administrative Agent, (iv) any fees payable in connection with such Incremental Equivalent Term Debt shall be determined by the Borrower and the arrangers or lenders providing such Incremental Equivalent Term Debt, (v) any Incremental Equivalent Term Debt may provide for the ability of the lenders providing such Incremental Equivalent Term Debt to participate on a pro rata basis or less than pro rata basis (but not greater than pro rata basis) in any voluntary or mandatory prepayments of the Term Loans; (vi) the interest rate, upfront fees and original issue discount for any Incremental Equivalent Term Debt shall be as determined by the Borrower and the lenders providing such Incremental Equivalent Term Debt; provided that, with respect to (x) any Incremental Equivalent Term Debt incurred on or prior to the Senior Unsecured Notes Refinancing Date that is secured on a pari passu basis with the Obligations and (y) any Incremental Equivalent Term Debt in the form of term loans incurred after the Senior Unsecured Notes Refinancing Date that is secured on a pari passu basis with the Obligations, in the event

 

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that the Incremental Yield on such Incremental Equivalent Term Debt exceeds the yield on the Term Loans hereunder (determined in accordance with the calculation of “Incremental Yield”) by more than 0.50%, then the interest margins for the Term Loans hereunder shall automatically be increased to a level such that the yield on such Term Loans is 0.50% below the Incremental Yield (it being agreed that any increase in yield to any existing facility required due to the application of an Adjusted LIBO Rate or ABR “floor” on any Incremental Equivalent Term Debt shall be effected solely through an increase therein (or implementation thereof, as applicable)), (vii) all other terms of such Incremental Equivalent Term Debt, will be as agreed between the Borrower and the lenders providing such Incremental Equivalent Term Debt, provided that, with respect to Incremental Equivalent Term Debt that is secured on a pari passu basis with the Obligations only, except as otherwise provided in clauses (i) through (vi), all other terms of such Incremental Equivalent Term Debt, if not substantially consistent with the terms of the then existing Term Facility, shall be reasonably satisfactory to the Administrative Agent (it being understood that, to the extent any financial maintenance covenant is added for the benefit of any Incremental Equivalent Term Debt no consent shall be required from the Administrative Agent or the Lenders to the extent that such then existing financial maintenance covenant is (x) added for the benefit of the Term Loans hereunder or (y) only applicable after the Latest Maturity Date of the Term Loans). This Section 2.19 shall supersede any provisions in Section 9.08 to the contrary. For the avoidance of doubt, no existing Lender will be required to provide any Incremental Equivalent Term Debt and the Borrower shall have no obligation to offer any existing Lender the opportunity to provide any commitment for any Incremental Equivalent Term Debt.

Section 2.20 Refinancing Amendments.

At any time and from time to time, the Borrower may obtain, from any Lender or any Additional Lender, Credit Agreement Refinancing Indebtedness in respect of all or any portion of the Term Loans or Commitments then outstanding under this Agreement, in each case, pursuant to a Refinancing Amendment, which Credit Agreement Refinancing Indebtedness may, at the election of the Borrower, take the form of (i) new Term Loans under an additional or replacement Term Facility hereunder (“Other Term Loans”), or (ii) one or more additional series of unsecured or subordinated notes or loans or senior secured loans or notes that will be secured by the Collateral on a pari passu basis with the Term Facility, or junior lien secured or unsecured notes or loans that will be secured on a junior basis to the Term Facility. Any Other Term Loans may participate on a pro rata basis or on a less than pro rata basis (but not on a greater than pro rata basis) in any voluntary or mandatory prepayments hereunder, as specified in the applicable Refinancing Amendment (provided that if the Lenders or Additional Lenders providing such Credit Agreement Refinancing Indebtedness have the ability to decline mandatory prepayments, any such mandatory prepayment that is not accepted by such Lenders or Additional Lenders shall be applied, subject to the right of any applicable Lender to decline mandatory prepayments (if any), to the non-refinanced Term Loans of the Class being refinanced). The effectiveness of any Refinancing Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 4.01 (including, solely to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of customary legal opinions, board resolutions, officers’ certificates or reaffirmation agreements consistent with those delivered on the Closing Date under Section 4.01 (other than changes to such legal opinions resulting from a change in law, change in fact or change to counsel’s form of opinion reasonably satisfactory to the Administrative Agent)). Each incurrence of Credit Agreement Refinancing Indebtedness under this Section 2.20 shall be in an aggregate principal amount of not less than $25.0 million. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Refinancing Amendment. Each of the parties hereto hereby agrees that, upon the effectiveness of any Refinancing Amendment, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Credit Agreement Refinancing Indebtedness incurred pursuant thereto (including any amendments necessary to treat the Term Loans subject thereto as Other Term Loans). Any Refinancing Amendment

 

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may, without the consent of any person other than the Administrative Agent, the Borrower and the Lenders or Additional Lenders providing the applicable Credit Agreement Refinancing Indebtedness, 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 Borrower, to effect the provisions of this Section 2.20. This Section 2.20 shall supersede any provisions in Section 9.08 to the contrary. It is understood that (a) any Lender approached to provide all or a portion of Credit Agreement Refinancing Indebtedness may elect or decline, in its sole discretion, to provide such Credit Agreement Refinancing Indebtedness (it being understood that there is no obligation to approach any existing Lenders to provide any such commitment to provide Other Term Loans), (b) the Administrative Agent shall have consented (such consent not to be unreasonably withheld, delayed or conditioned) to such person’s providing such Credit Agreement Refinancing Indebtedness if such consent would be required under Section 9.04 for an assignment of Term Loans to such person and (c) the making of any Other Term Loans by any Non-Debt Fund Affiliate shall be subject to the terms and conditions applicable to any assignment of Term Loans to such Affiliated Lender as if such Other Term Loans were assigned to such Affiliated Lender.

Section 2.21 Extensions of Term Loans.

(a) Notwithstanding anything to the contrary in this Agreement, pursuant to one or more offers (each, an “Extension Offer”) made from time to time by the Borrower to all Lenders of Term Loans with a like Maturity Date on a pro rata basis (based on the aggregate outstanding principal amount of the respective Term Loans with a like Maturity Date) and on the same terms to each such Lender, the Borrower is hereby permitted to consummate from time to time transactions with individual Lenders that accept the terms contained in such Extension Offers to extend the Maturity Date of each such Lender’s Term Loans and otherwise modify the terms of such Term Loans pursuant to the terms of the relevant Extension Offer (including by increasing the interest rate or fees payable in respect of such Term Loans or modifying the amortization schedule in respect of such Lender’s Term Loans) (each, an “Extension”, and each group of Term Loans so extended, as well as the original Term Loans not so extended, being a “tranche”). Any Extended Term Loans shall constitute a separate tranche of Term Loans from the tranche of Term Loans from which they were converted, so long as the following terms are satisfied: (i) no Event of Default shall have occurred and be continuing at the time the offering document in respect of an Extension Offer is delivered to the Lenders; (ii) except as to pricing (interest rate, fees, funding discounts and prepayment premiums) and maturity (which shall be set forth in the relevant Extension Offer), the Term Loans of any Lender that agrees to an Extension with respect to such Term Loans (an “Extending Term Lender”) extended pursuant to any Extension (“Extended Term Loans”) shall have the same terms as the tranche of Term Loans subject to such Extension Offer (except for covenants or other provisions contained therein applicable only to periods after the then Latest Maturity Date of the Term Loans); (iii) the final maturity date of any Extended Term Loans shall be no earlier than the then Latest Maturity Date of the Term Loans; (iv) the Weighted Average Life to Maturity of any Extended Term Loans shall be no shorter than the remaining Weighted Average Life to Maturity of the Class extended thereby; (v) any Extended Term Loans may participate on a pro rata basis or a less than pro rata basis (but not greater than a pro rata basis) in any voluntary or mandatory repayments or prepayments hereunder, in each case, as specified in the respective Extension Offer (provided that if the applicable Extending Term Lenders have the ability to decline mandatory prepayments, any such mandatory prepayment that is not accepted by the applicable Extending Term Lenders shall be applied, subject to the right of any applicable Lender to decline mandatory prepayments (if any), to the non-extended Term Loans of the Class being extended); (vi) if the aggregate principal amount of Term Loans (calculated on the face amount thereof) in respect of which Lenders shall have accepted the relevant Extension Offer shall exceed the maximum aggregate principal amount of Term Loans offered to be extended by the Borrower pursuant to such Extension Offer, then the Term Loans of such Lenders shall be extended ratably up to such maximum amount based on the respective principal amounts (but not to exceed actual holdings of record) with respect to which

 

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such Lenders have accepted such Extension Offer; (vii) the Extended Term Loans may not be guaranteed by any Subsidiary of the Borrower other than the Loan Parties; (viii) no assets or property shall secure the Extended Term Loans unless such assets or property constitute Collateral; and (ix) any applicable Minimum Extension Condition shall be satisfied unless waived by the Borrower.

(b) With respect to all Extensions consummated by the Borrower pursuant to this Section 2.21, (i) such Extensions shall not constitute voluntary or mandatory payments or prepayments for purposes of this Agreement and (ii) each Extension Offer shall specify the minimum amount of Term Loans to be tendered, which shall be with respect to Term Loans of a Class an integral multiple of $1.0 million and an aggregate principal amount that is not less than $25.0 million (or if less, the remaining outstanding principal amount thereof) (or such lesser minimum amount reasonably approved by the Administrative Agent) (a “Minimum Extension Condition”). The transactions contemplated by this Section 2.21 (including, for the avoidance of doubt, payment of any interest, fees or premium in respect of any Extended Term Loans on such terms as may be set forth in the relevant Extension Offer) shall not require the consent of any Lender or any other person (other than as set forth in clause (c) of this Section 2.21), and the requirements of any provision of this Agreement (including Section 2.09 and Section 2.16) or any other Loan Document that may otherwise prohibit any such Extension or any other transaction contemplated by this Section 2.21 shall not apply to any of the transactions effected pursuant to this Section 2.21.

(c) The consent (such consent not to be unreasonably withheld, delayed or conditioned) of the Administrative Agent shall be required to effectuate any Extension. No consent of any Lender or any other person shall be required to effectuate any Extension, other than the consent of the Borrower and each Lender agreeing to such Extension with respect to one or more of its Term Loans (or a portion thereof). The Lenders hereby irrevocably authorize the Administrative Agent to enter into amendments to this Agreement and the other Loan Documents (an “Extension Amendment”) with the Borrower as may be necessary in order to establish new tranches in respect of Term Loans so extended and such technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower in connection with the establishment of such new tranches or sub-tranches, in each case on terms consistent with this Section 2.21. This Section 2.21 shall supersede any provisions in Section 9.08 to the contrary. For the avoidance of doubt, it is understood that no existing Lenders will have any obligation to commit to any such extension.

ARTICLE III

Representations and Warranties

Each of Holdings (solely in respect of Sections 3.01, 3.02, 3.03, 3.04, 3.05, and 3.17, and solely regarding Holdings as such provision relates to its respective Guarantee of the Obligations, its respective pledge of the Equity Interests of the Borrower, financial statements, Article VI and Article VIA) and the Borrower, with respect to itself and each of its Restricted Subsidiaries, represents and warrants to each Agent and to each of the Lenders that:

Section 3.01 Organization; Powers. Each of Holdings, the Borrower and the other Restricted Subsidiaries (i) is a partnership, limited liability company or corporation duly organized, validly existing and in good standing (or in any foreign jurisdiction where an equivalent status exists, enjoys the equivalent status under the laws of such foreign jurisdiction of organization) under the laws of the jurisdiction of its organization, (ii) has all requisite power and authority to own its property and assets and to carry on its business as now conducted, except where the failure to do so would not reasonably be expected to have a Material Adverse Effect, (iii) is qualified to do business in each jurisdiction where such qualification is required, except where the failure so to qualify would not reasonably be expected to have a Material Adverse Effect, and (iv) has the power and authority to execute, deliver and perform its obligations under each of the Loan Documents and each other agreement or instrument contemplated thereby to which it is or will be a party and, in the case of the Borrower, to borrow and otherwise obtain credit hereunder.

 

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Section 3.02 Authorization. The execution, delivery and performance by each Loan Party of each of the Loan Documents to which it is a party, the borrowings hereunder and the Transactions (a) have been duly authorized by all corporate, stockholder, partnership or limited liability company action required to be taken by the Loan Parties and (b) will not violate (i) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents (including any partnership, limited liability company or operating agreement or by-laws) of any Loan Party or (ii) any applicable order of any court or any rule, regulation or order of any Governmental Authority, where any such violation referred to in this Section 3.02(b) would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, or (c) will not result in the creation or imposition of any Lien upon any property or assets of any Loan Party, other than the Liens created by the Loan Documents and Permitted Liens.

Section 3.03 Enforceability. This Agreement has been duly executed and delivered by each Loan Party that is party hereto and constitutes, and each other Loan Document when executed and delivered by each Loan Party that is party thereto will constitute, a legal, valid and binding obligation of such Loan Party enforceable against each such Loan Party in accordance with its terms, subject to (a) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally, (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law), (c) implied covenants of good faith and fair dealing and (d) any foreign laws, rules and regulations as they relate to pledges of Equity Interests in Foreign Subsidiaries that are not Loan Parties.

Section 3.04 Governmental Approvals. No action, consent or approval of, registration or filing with or any other action by any Governmental Authority or third party is or will be required in connection with the Transactions, the perfection or maintenance of the Liens created under the Security Documents or the exercise by the Administrative Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral, except for (a) the filing of Uniform Commercial Code financing statements and equivalent filings in foreign jurisdictions, (b) filings with the United States Patent and Trademark Office and the United States Copyright Office and comparable offices in foreign jurisdictions and equivalent filings in foreign jurisdictions, (c) filings required under Environmental Laws as set forth on Schedule 3.04, (d) such as have been made or obtained and are in full force and effect, (e) such actions, consents and approvals the failure of which to be obtained or made would not reasonably be expected to have a Material Adverse Effect and (f) filings or other actions listed on Schedule 3.04.

Section 3.05 Financial Statements.

(a) The Pro Forma Financial Statements, copies of which have heretofore been furnished to each Lender, have been prepared giving effect to the Transactions. The Pro Forma Financial Statements have been prepared based on the best information available to the Borrower as of the date of delivery thereof, and present fairly on a pro forma basis the estimated financial position of Holdings and its consolidated Subsidiaries as at June 30, 2013, assuming that the events specified in the preceding sentence had actually occurred at such date.

 

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(b) Each of the Historical Annual Financial Statements and the Historical Interim Financial Statements fairly present in all material respects the consolidated financial condition of the Borrower and its Restricted Subsidiaries as of the dates thereof and the results of operation of the Borrower and its Restricted Subsidiaries for the periods covered thereby in accordance with GAAP consistently applied throughout the periods covered thereby, except as otherwise expressly noted therein and subject to normal year-end audit adjustments. As of the Second Amendment Effective Date, none of Holdings nor any Restricted Subsidiary has any material Guarantee obligations, known contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph. During the period from September 30, 2016 to and including the Second Amendment Effective Date there has been no disposition by Holdings or any Restricted Subsidiary of any material part of its business or property.

Section 3.06 Labor Matters. Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Restricted Subsidiary pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees of each Restricted Subsidiary have not been in violation of the Fair Labor Standards Act or any other applicable law dealing with such matters; and (c) all payments due from any Restricted Subsidiary on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant Restricted Subsidiary.

Section 3.07 Title to Properties. Each of the Borrower and the Restricted Subsidiaries has valid fee simple title to, or valid leasehold interests in, or easements or other limited property interests in, all of its Real Properties and has valid title to its personal property and assets, in each case, except for Permitted Liens and defects in title that do not materially interfere with its ability to conduct its business as currently conducted or to utilize such properties and assets for their intended purposes and except where the failure to have such title would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. All such properties and assets are free and clear of Liens, other than Permitted Liens.

Section 3.08 Subsidiaries.

(a) Schedule 3.08(a) sets forth as of the Incremental Amendment Effective Date the name and jurisdiction of incorporation, formation or organization of each direct or indirect Subsidiary of Holdings and, as to each such Subsidiary, the percentage of each class of Equity Interests owned by Holdings or by any such Subsidiary.

(b) As of the Incremental Amendment Effective Date and except as set forth on Schedule 3.08(b), there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to employees or directors and directors’ qualifying shares) of any nature relating to any Equity Interests owned or held by Holdings, the Borrower or any of the Restricted Subsidiaries.

Section 3.09 Litigation; Compliance with Laws.

(a) Except as set forth on Schedule 3.09(a), there are no actions, suits or proceedings at law or in equity or by or on behalf of any Governmental Authority or in arbitration now pending, or, to the knowledge of the Borrower, threatened in writing against or affecting the Borrower or any of the Restricted Subsidiaries or any business, property or rights of any such person (but excluding any actions, suits or proceedings arising under or relating to any Environmental Laws, which are subject to Section 3.16) which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

 

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(b) To the knowledge of the Borrower, none of the Borrower, the Restricted Subsidiaries or their respective properties or assets is in violation of (nor will the continued operation of their material properties and assets as currently conducted violate) any law, rule or regulation (including any zoning, building, ordinance, code or approval, or any building permit, but excluding any Environmental Laws, which are subject to Section 3.16) or any restriction of record or agreement affecting any property, or is in default with respect to any judgment, writ, injunction or decree of any Governmental Authority, where such violation or default would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 3.10 Federal Reserve Regulations.

(a) Neither the Borrower nor any of the Restricted Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock.

(b) No part of the proceeds of any Term Loan will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, (i) to purchase or carry Margin Stock or to extend credit to others for the purpose of purchasing or carrying Margin Stock or to refund indebtedness originally incurred for such purpose or (ii) for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Board, including Regulation U or Regulation X.

Section 3.11 Investment Company Act. None of Holdings nor any of the Restricted Subsidiaries is an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

Section 3.12 [Reserved.]

Section 3.13 Tax Returns. Except as set forth on Schedule 3.13:

(a) Except as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each of Holdings and the Restricted Subsidiaries has filed or caused to be filed all federal, state, local and non-U.S. Tax returns required to have been filed by it and each such Tax return is true and correct;

(b) Each of Holdings and the Restricted Subsidiaries has timely paid or caused to be timely paid all Taxes shown to be due and payable by it on the returns referred to in clause (a) of this Section 3.13 and all other Taxes or assessments (or made adequate provision (in accordance with GAAP) for the payment of all Taxes due) with respect to all periods or portions thereof ending on or before the Second Amendment Effective Date (except Taxes or assessments that are being contested in good faith by appropriate proceedings in accordance with Section 5.03 and for which Holdings or any of the Restricted Subsidiaries (as the case may be) has set aside on its books adequate reserves in accordance with GAAP), which Taxes, if not paid or adequately provided for, would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and

(c) Other than as would not be in, individually or in the aggregate, reasonably expected to have a Material Adverse Effect, as of the Incremental Amendment Effective Date, with respect to each of Holdings and any of the Restricted Subsidiaries, there are no claims being asserted in writing with respect to any Taxes.

 

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Section 3.14 No Material Misstatements.

(a) All written information (other than the Projections, estimates and information of a general economic nature or general industry nature) (the “Information”) concerning Holdings, or any of its Subsidiaries and any transactions contemplated hereby or by the Second Amendment prepared by or on behalf of the foregoing or their representatives and made available to any Lender, any Lead Arranger or the Administrative Agent in connection with the transactions contemplated hereby or by the Second Amendment, when taken as a whole, was true and correct in all material respects as of the date such Information was furnished to such person and as of the Second Amendment Effective Date and did not, taken as a whole, contain any untrue statement of a material fact as of any such date or omit to state a material fact necessary in order to make the statements contained therein, taken as a whole, not materially misleading in light of the circumstances under which such statements were made.

(b) The Projections and estimates and information of a general economic nature prepared by or on behalf of the Borrower or any of its representatives and that have been made available to any Lenders, any Lead Arranger or the Administrative Agent in connection with the Transactions or the other transactions contemplated hereby have been prepared in good faith based upon assumptions believed by the Borrower to be reasonable as of the date thereof (it being understood that actual results may vary materially from the Projections), as of the date such Projections and estimates were furnished to the Lenders and as of the Closing Date.

Section 3.15 Employee Benefit Plans.

(a) Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect: (i) each Plan is in compliance with the applicable provisions of ERISA and the Code; (ii) no Reportable Event has occurred during the past five years as to which Holdings or any of the Restricted Subsidiaries or any ERISA Affiliate was required to file a report with the PBGC; (iii) no ERISA Event has occurred or is reasonably expected to occur; (iv) none of Holdings or the Restricted Subsidiaries has engaged in a “prohibited transaction” (as defined in Section 406 of ERISA and Code Section 4975) in connection with any employee pension benefit plan (as defined in Section 3(2) of ERISA) that would subject Holdings or any of the Restricted Subsidiaries to tax or other penalty; (v) none of Holdings, any of the Restricted Subsidiaries or, to the knowledge of the Borrower or any of the Restricted Subsidiaries, any ERISA Affiliate has received any written notification that any Multiemployer Plan is in reorganization or has been terminated within the meaning of Title IV of ERISA, or has knowledge that any Multiemployer Plan is reasonably expected to be in reorganization (within the meaning of Section 4242 of ERISA), terminated, insolvent (within the meaning of Section 4245 of ERISA), or in endangered or in, or reasonably expected to be in, critical status (within the meaning of Section 305 of ERISA); and (vi) none of Holdings, any of the Restricted Subsidiaries or, to the knowledge of the Borrower and the Restricted Subsidiaries, any ERISA Affiliate has incurred, and neither Holdings nor any of the Restricted Subsidiaries is reasonably expected to incur, any Withdrawal Liability to any Multiemployer Plan.

(b) Each of Holdings and the Restricted Subsidiaries is in compliance with (i) all applicable provisions of law and all applicable regulations and published interpretations thereunder with respect to any employee pension benefit plan or other employee benefit plan governed by the laws of a jurisdiction other than the United States and (ii) the terms of any such plan, except, in each case, for such noncompliance that would not reasonably be expected to have a Material Adverse Effect.

 

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(c) Within the last five years, no Plans of Holdings or any of the Restricted Subsidiaries or, to the knowledge of the Borrower or any of the Restricted Subsidiaries, ERISA Affiliates have been terminated, whether or not in a “standard termination” (as such term is used in Section 404(b)(1) of ERISA) that would reasonably be expected to result in liability to Holdings, the Restricted Subsidiaries or the ERISA Affiliates in excess of $15.0 million, nor has any Plan of the Borrower or any of the Restricted Subsidiaries or, to the knowledge of the Borrower or the Restricted Subsidiaries, the ERISA Affiliates (determined at any time within the past five years) with an Insufficiency been transferred outside of the “controlled group” (within the meaning of Section 4001(a)(14) of ERISA) of Holdings, the Restricted Subsidiaries or the ERISA Affiliates that has or would reasonably be expected to result in a Material Adverse Effect.

(d) Except as would not reasonably be expected to result in a Material Adverse Effect, there are no pending, or to the knowledge of the Borrower, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against any Plan or any person as fiduciary or sponsor of any Plan that could result in liability to Holdings or any of the Restricted Subsidiaries.

(e) Except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect, each Foreign Benefit Plan is in compliance in all material respects with all requirements of law applicable thereto and the respective requirements of the governing documents of such plan. With respect to each Foreign Benefit Plan, none of Holdings or any of the Restricted Subsidiaries or Affiliates or any of their respective directors, officers, employees or agents has engaged in a transaction which would subject Holdings or any of the Restricted Subsidiaries or Affiliates, directly or indirectly, to a tax or civil penalty which can reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

Section 3.16 Environmental Matters. Except as set forth on Schedule 3.16 or as to matters that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, (a) the Borrower and each of the Restricted Subsidiaries is in compliance with all Environmental Laws (including having obtained all permits, licenses and other approvals required under any Environmental Law for the operation of its business as currently conducted and being in compliance with the terms of such permits, licenses and other approvals), (b) neither the Borrower nor any of the Restricted Subsidiaries has received notice of or is subject to any pending, or to the Borrower’s knowledge, threatened action, suit or proceeding alleging a violation of, or liability under, any Environmental Law that remains outstanding or unresolved, (c) to the Borrower’s knowledge, there is and has been no Release or threatened Release of Hazardous Material at, on or under any property currently or formerly owned, operated or leased by the Borrower or any of the Restricted Subsidiaries and no Hazardous Material has been generated, owned, treated, stored, handled or controlled by the Borrower or any of the Restricted Subsidiaries and transported to or Released at any location which, in each case, described in this clause (c), would reasonably be expected to result in liability to the Borrower or the Restricted Subsidiaries and (d) there are no agreements in which the Borrower or any of the Restricted Subsidiaries has expressly assumed or undertaken responsibility for any known or reasonably likely liability or obligation of any other person arising under or relating to Environmental Laws or any Hazardous Materials.

Section 3.17 Security Documents.

(a) The Collateral Agreement is effective to create in favor of the Administrative Agent (for the benefit of the Secured Parties) a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Collateral described in the Collateral Agreement, when certificates or promissory notes, as applicable, representing such Pledged Collateral are delivered to the Administrative Agent (or a designated bailee thereof), and in the case of the other Collateral described in the Collateral Agreement (other than the Intellectual Property (as defined in the Collateral Agreement)), when financing statements and other filings specified in the Collateral

 

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Agreement are filed in the offices specified in the schedules to the Collateral Agreement, the Administrative Agent (for the benefit of the Secured Parties) shall have a perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and, subject to Section 9-315 of the New York Uniform Commercial Code, the proceeds thereof, as security for the Obligations to the extent perfection can be obtained by filing Uniform Commercial Code financing statements, in each case prior and superior in right to the Lien of any other person (except for Permitted Liens).

(b) When the Collateral Agreement or a summary thereof is properly filed in the United States Patent and Trademark Office and the United States Copyright Office, and, with respect to Collateral in which a security interest cannot be perfected by such filings, upon the proper filing of the financing statements referred to in paragraph (a) of this Section 3.17, the Administrative Agent (for the benefit of the Secured Parties) shall have, solely if and to the extent that a security interest may be perfected by making such filings, a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties thereunder in the domestic Intellectual Property, in each case prior and superior in right to the Lien of any other person (except for Permitted Liens) (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks and patents, trademark and patent applications and registered copyrights acquired by the grantors after the Second Amendment Effective Date).

(c) Notwithstanding anything herein (including this Section 3.17) or in any other Loan Document to the contrary, neither the Borrower nor any Restricted Subsidiary makes any representation or warranty as to the effects of perfection or non-perfection, the priority or the enforceability of any pledge of or security interest in any Equity Interests of any Foreign Subsidiary that is not a Loan Party, or as to the rights and remedies of the Agents or any Lender with respect thereto, under foreign law.

Section 3.18 Location of Real Property and Leased Premises.

(a) Schedule 3.18 correctly identifies, in all material respects, as of the Incremental Amendment Effective Date, all Material Real Property owned by the Loan Parties. As of the Incremental Amendment Effective Date, the Loan Parties own in fee all the Real Property set forth as being owned by them on Schedule 3.18.

(b) Schedule 3.18 lists correctly in all material respects, as of the Incremental Amendment Effective Date, all Material Real Property leased by any Loan Party and the addresses thereof.

Section 3.19 Solvency. On the Incremental Amendment Effective Date, after giving effect to the consummation of the transactions contemplated by the Incremental Amendment No. 1, including the making of the 2018 Incremental Term Loans hereunder, and after giving effect to the application of the proceeds of such Indebtedness: (a) the fair value of the assets of Holdings and its Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, direct, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of Holdings and its Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) Holdings and its Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured; and (d) Holdings and its Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital. For purposes of determining solvency, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.

 

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Section 3.20 No Material Adverse Effect. Since September 30, 2017, there has been no change in the financial condition, business, operations, assets or liabilities of Holdings and the Restricted Subsidiaries that, taken as a whole, has had, or could reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

Section 3.21 [Reserved].

Section 3.22 USA PATRIOT Act; FCPA; OFAC.

(a) To the extent applicable, each of Holdings and the Restricted Subsidiaries is in compliance, in all material respects, with the USA PATRIOT Act.

(b) Neither Holdings nor any of the Restricted Subsidiaries is any of the following:

(i) a person that is listed in the annex to, or it otherwise subject to the provisions of, Executive Order No. 13224 on Terrorist Financing effective September 24, 2001 (the “Executive Order”);

(ii) a person owned or Controlled by, or acting for or on behalf of, any person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

(iii) a person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any laws with respect to terrorism or money laundering;

(iv) a person that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

(v) a person that is named as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”) at its official website or any replacement website or other replacement official publication of such list and none of the proceeds of the Term Loans will be, directly or indirectly, offered, lent, contributed or otherwise made available to any Subsidiary, joint venture partner or other person (A) for the purpose of financing the activities of any person, or in any country or territory, that, at the time of such financing, is the subject of sanctions administered by OFAC or by any other authority applicable to Holdings or any of the Restricted Subsidiaries or (B) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of FCPA or any other anti-corruption law, rule or regulation applicable to Holdings or any of the Restricted Subsidiaries.

Section 3.23 Intellectual Property; Licenses, Etc. Except as would not reasonably be expected to have a Material Adverse Effect or as set forth on Schedule 3.23, (a) the Borrower and each of the Subsidiary Loan Parties owns, or possesses the right to use, all intellectual property, including all of the patents, patent rights, trademarks, service marks, trade names, trade dress, copyrights or mask works, domain names, applications and registrations for any of the foregoing (collectively, “Intellectual Property Rights”) that are reasonably necessary for the operation of their respective businesses, (b) neither the

 

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Borrower nor any of the Subsidiary Loan Parties nor any product, process, method, substance, part or other material now employed, sold or offered by the Borrower or the Subsidiary Loan Parties is infringing, misappropriating or otherwise violating Intellectual Property Rights of any person, (c) no claim or litigation regarding any of the foregoing is pending or, to the knowledge of the Borrower, threatened, and (d) no person is infringing, misappropriating or otherwise violating the Intellectual Property Rights owned by the Borrower or by any of the Subsidiary Loan Parties.

Section 3.24 EEA Financial Institutions. No Loan Party is an EEA Financial Institution.

It is understood and agreed that the only representations and warranties contained in this Article III that are required to be made on the Closing Date are the Specified Representations in accordance with Section 4.01(n).

ARTICLE IV

Conditions of Lending

Section 4.01 Conditions Precedent. The agreement of each Lender to make Term Loans on the Closing Date is subject to the satisfaction and waiver by the Requisite Lead Arrangers (as defined in the Fee Letter), prior to or concurrently with the making of the Term Loans on the Closing Date, of the following conditions precedent (unless otherwise provided by Section 5.14):

(a) Loan Documents. Subject to the Limited Conditionality Provisions, the Administrative Agent shall have received (i) this Agreement, the Collateral Agreement, the ABL/Term Loan Intercreditor Agreement and each other Security Document required to be delivered on the Closing Date, in each case, duly executed and delivered by a Responsible Officer of each Loan Party party thereto and (ii) for the account of each Lender that has requested the same at least three Business Days prior to the Closing Date, a Note executed and delivered by a Responsible Officer of the Borrower.

(b) Borrowing Request. Prior to the Closing Date, the Administrative Agent shall have received a Borrowing Request meeting the requirements of Section 2.03(a).

(c) Acquisition Transactions. The following transactions shall have been consummated or shall have consummated substantially concurrently with the initial Borrowing on the Closing Date:

(i) the Acquisition shall have been consummated in all material respects in accordance with the terms of the Merger Agreement and the Merger Agreement (including all schedules and exhibits thereto) shall not have been altered, amended or otherwise changed or supplemented or waived in any material respect and no consent shall have been given, in the case of any of the foregoing in a manner which would be materially adverse to the Lenders or the Lead Arrangers without the prior written consent of the Lead Arrangers, such consent not to be unreasonably withheld, delayed or conditioned;

(ii) the Equity Contribution in accordance with the definition thereof; and

(iii) the refinancing of the Existing Facilities (and the Borrower shall have provided to the Administrative Agent reasonable evidence thereof, including reasonably satisfactory payoff letters, mortgage releases, Intellectual Property Rights releases and UCC-3 termination statements).

 

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(d) Pro Forma Consolidated Income Statement and Balance Sheet; Financial Statements. The Lead Arrangers shall have received (i) audited consolidated balance sheets and related statements of income and cash flows of the Target for the years ended December 31, 2010, December 31, 2011 and December 31, 2012 (the “Target Audited Financial Statements”) (ii) unaudited consolidated balance sheets and related statements of income and cash flows of the Target for each subsequent fiscal quarter ended at least 45 days prior to the Closing Date (the “Target Unaudited Financial Statements”) and the comparative period in the preceding year and (iii) a pro forma consolidated income statement and balance sheet (the “Pro Forma Financial Statements”) of Holdings and its consolidated Subsidiaries for the 12 month period ending on the last day of the most recently ended four fiscal quarter period ended at least 45 days prior to the Closing Date, prepared after giving effect to the Transactions.

(e) Fees. All accrued fees of the Administrative Agent, all fees owed to the Lenders and all reasonable, documented and invoiced out-of-pocket expenses required to be paid by the Borrower to the Lenders, the Lead Arrangers and the Agents on or before the Closing Date (to the extent invoiced at least two Business Days prior to the Closing Date except as otherwise agreed by the Borrower) shall have been paid to the extent due and payable.

(f) Solvency Certificate. The Administrative Agent shall have received a solvency certificate substantially in the form attached hereto as Exhibit B executed by a Financial Officer of CPG International Inc.

(g) Closing Date Certificates. Subject to the Limited Conditionality Provisions, the Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower with respect to each Loan Party dated the Closing Date and certifying:

(i) that attached thereto is a true and complete copy of the charter or other similar organizational document of each Loan Party and each amendment thereto, certified (as of a date reasonably near the date of the initial extension of credit) as being a true and correct copy thereof by the Secretary of State or other applicable Governmental Authority of the jurisdiction in which each such Loan Party is organized;

(ii) that attached thereto is a true and complete copy of a certificate of the Secretary of State or other applicable Governmental Authority of the jurisdiction in which each such Loan Party is organized, dated reasonably near the date of the initial extension of credit, listing the charter or other similar organizational document of such Loan Party and each amendment thereto on file in such office and, if available, certifying that (A) such amendments are the only amendments to such person’s charter on file in such office, (B) such person has paid all franchise taxes to the date of such certificate and (C) such person is duly organized and in good standing or full force and effect under the laws of such jurisdiction;

(iii) that attached thereto is a true and complete copy of resolutions duly adopted by the Governing Persons of such Loan Party authorizing the execution, delivery and performance of the Loan Documents to which it is a party or any other document delivered in connection herewith and that such resolutions have not been modified, rescinded or amended and are in full force and effect; and

 

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(iv) as to the incumbency and specimen signature of each Responsible Officer executing the Loan Documents or any other document delivered in connection herewith on behalf of such Loan Party (together with a certificate of another officer as to the incumbency and specimen signature of the Responsible Officer executing the certificate pursuant to this Section 4.01(g)).

(h) Legal Opinions. The Administrative Agent shall have received a customary legal opinion, in form and substance reasonably acceptable to the Administrative Agent, of (i) Sullivan & Cromwell LLP, New York counsel to the Loan Parties and (ii) Buchanan Ingersoll & Rooney PC, Ohio counsel to the Loan Parties.

(i) Pledged Equity Interests; Pledged Notes. Subject to the Limited Conditionality Provisions and except as otherwise agreed by the Administrative Agent, the Administrative Agent shall have received (i) the certificates representing the Equity Interests pledged pursuant to the Collateral Agreement (if such Equity Interests are certificated), together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note required to be delivered by the Loan Parties pursuant to the Collateral Agreement endorsed in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof.

(j) No Material Adverse Effect. Since December 31, 2012, no event or development shall have occurred that has had, or would reasonably be expected to have, individually, or in the aggregate, any Closing Date Material Adverse Effect. For purposes of this condition precedent, “Closing Date Material Adverse Effect” shall mean (1) any event, change, development, effect, condition, circumstance, matter, occurrence, or state of fact that has had or would reasonably be expected to have a material adverse effect on (a) the business, properties, assets, liabilities, results of operations or financial condition of the Company and its Subsidiaries taken as a whole or (b) the ability of the Company or the Stockholder to perform its obligations under this Agreement or to consummate the Contemplated Transactions; provided, that any event, change, development, effect, condition, circumstance, matter, occurrence or state of facts, directly or indirectly, arising out of, related to or attributable to the following shall not be taken into account in determining whether there has been or would reasonably expected to be a Company Material Adverse Effect: (i) any change, circumstance or development in global or national economic, monetary or financial conditions, including changes, circumstances or developments in prevailing interest rates, credit markets, securities markets, general economic or business conditions or currency exchange rates, or political or regulatory conditions, (ii) any act of God, war, armed hostilities or terrorism, (iii) any change, circumstance or development in the industries in which the Company or its Subsidiaries operate, (iv) any change in Law or GAAP or the interpretation or enforcement of either, (v) the negotiation, execution, delivery, performance or announcement of this Agreement or the Contemplated Transactions, (vi) any change resulting from any action taken or failed to be taken by the Company or its Affiliates at the request of Parent (vii) any failure of the Company or any of its Subsidiaries to meet, with respect to any period or periods, any internal or industry analyst projections, forecasts, estimates of earnings or revenues, or business plans (it being understood that the facts and circumstances giving rise or contributing to any such failure may, unless otherwise excluded by another clause in this definition of “Company Material Adverse Effect,” be taken into account in determining whether a “Company Material Adverse Effect” has occurred or would be reasonably be expected to occur); provided, that any events, changes, developments, effects, conditions, circumstances, matters, occurrences or state of facts arising out of the matters set forth in the foregoing clauses (i), (ii), (iii) and (iv) may be taken into account in determining whether there has been or would reasonably be expected to be a Company Material Adverse Effect to the extent such events, changes, developments, effects, conditions, circumstances, matters, occurrences or state of facts adversely affect the Company and its Subsidiaries in a materially disproportionate manner relative to the other participants in the industries in which the Company and its Subsidiaries operate. All terms capitalized in the definition of “Closing Date Material Adverse Effect” shall have the meaning given in the Merger Agreement. The definition of “Closing Date Material Adverse Effect” shall be as applied and interpreted in accordance with the governing law of the Merger Agreement.

 

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(k) Security Interests. The Administrative Agent shall have received the results of a search of the Uniform Commercial Code (or equivalent) filings made with respect to the Loan Parties in the applicable jurisdiction of organization of each Loan Party (subject to the Limited Conditionality Provisions) and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to the Administrative Agent that the Liens indicated by such financing statements (or similar documents) are permitted by Section 6.02 or have been or will contemporaneously with the initial funding of the Loans on the Closing Date be released or terminated. Subject to the Limited Conditionality Provisions, each document (including any UCC financing statement) required by the Security Documents or reasonably requested by the Administrative Agent (subject to the terms of the Collateral Agreement) to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien on the Collateral described therein, prior and superior in right to any other person (other than with respect to Permitted Liens), shall have been filed, registered or recorded or shall have been delivered to the Administrative Agent in proper form for filing, registration or recordation.

(l) Know Your Customer and Other Required Information. To the extent reasonably requested in writing (which shall include any requests by e-mail) at least 10 Business Days prior to the Closing Date, the Lenders shall have received, no later than three Business Days prior to the Closing Date, all documentation and other information about the Loan Parties that is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act.

(m) Indebtedness of Holdings. Immediately following the Transactions, neither Holdings nor any of its Subsidiaries will have any indebtedness other than Indebtedness outstanding under the Credit Facilities, the Senior Unsecured Notes and other Permitted Indebtedness.

(n) Representations and Warranties. The Merger Agreement Representations and the Specified Representations shall be true and correct in all material respects as of the Closing Date, except in the case of any Merger Agreement Representation or Specified Representation which expressly relates to a given date or period, in which case such representation and warranty shall be true and correct in all material respects as of the respective date or respective period, as the case may be (provided that, in each case such materiality qualifier shall not be applicable to any representations or warranties that already are qualified by materiality or Material Adverse Effect (as defined in the Merger Agreement)).

Notwithstanding anything to the contrary herein or otherwise, to the extent any Authorized Guarantee (as defined below), lien search or security interest in the intended Collateral (other than (x) UCC lien searches in an entity’s jurisdiction of organization, (y) any Collateral the security interest in which may be perfected by the filing of a UCC financing statement or (z) the delivery of certificates evidencing equity interests for the Borrower and Subsidiary Loan Parties) is not or cannot be provided or perfected on the Closing Date after use by the Borrower of commercially reasonable efforts to do so or without undue burden or expense, or in the case of Authorized Guarantees, cannot be provided because the directors or managers of such guarantor have not authorized such guarantee and the election of new directors or managers has not occurred prior to the funding of the Term Loans (such guarantees, “Authorized Guarantees”), then the provision of any such Authorized Guarantee, lien search or the provision or perfection of security interests in such Collateral shall not constitute a condition precedent to the availability of the Term Loans on the Closing Date, but (a) in the case of Authorized Guarantees, shall be required as promptly as practicable after the closing, but in any event no event later than 5:00 p.m. on the Closing Date and (b) in all other cases, may instead be delivered or perfected after the Closing Date in accordance with Section 5.14. The provisions in this paragraph are referred to as the “Limited Conditionality Provisions.”

 

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ARTICLE V

Affirmative Covenants

Each of Holdings and the Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Obligations (other than contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) shall have been paid in full, the Borrower will, and will cause the Restricted Subsidiaries to (and solely in respect of Sections 5.01(a), 5.11 and 5.14, Holdings will):

Section 5.01 Existence; Businesses and Properties.

(a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except, in the case of a Restricted Subsidiary other than the Borrower, where the failure to do so would not reasonably be expected to have a Material Adverse Effect, and except as otherwise expressly permitted under Section 6.05.

(b) Except where the failure to do so would not reasonably be expected to have a Material Adverse Effect, do or cause to be done all things necessary to (i) lawfully obtain, preserve, renew, extend and keep in full force and effect the permits, franchises, authorizations, Intellectual Property Rights, licenses and rights with respect thereto necessary to the normal conduct of its business and (ii) at all times maintain and preserve all property necessary to the normal conduct of its business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith, if any, may be properly conducted at all times (in each case except as expressly permitted by this Agreement).

Section 5.02 Insurance.

(a) Maintain insurance in such amounts and against such risks as are customarily maintained by similarly situated companies engaged in the same or similar businesses operating in the same or similar locations either with (or combination of), at the Borrower’s option, (i) financially sound and reputable insurance companies, in which case the Borrower shall use its commercially reasonable efforts to cause the Administrative Agent to be listed as a co-loss payee on property and casualty policies and as an additional insured on liability policies, or (ii) maintain a sufficient amount of funds to effect self-insurance in an amount customarily maintained by similarly situated companies engaged in the same or similar business. Schedule 5.02 sets forth a true, complete and correct description of all material insurance maintained by or on behalf of Holdings, the Borrower or the other Loan Parties as of the Incremental Amendment Effective Date.

(b) In connection with the covenants set forth in this Section 5.02, it is understood and agreed that:

(i) neither the Agents, the Lenders, nor their respective agents or employees shall be liable for any loss or damage insured by the insurance policies required to be maintained under this Section 5.02, it being understood that (A) the Borrower and the Restricted Subsidiaries shall look solely to their insurance companies or any other parties

 

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other than the aforesaid parties for the recovery of such loss or damage and (B) such insurance companies shall have no rights of subrogation against the Agents, the Lenders or their agents or employees. If, however, the insurance policies, as a matter of the internal policy of such insurer, do not provide waiver of subrogation rights against such parties, as required above, then the Borrower hereby agrees, to the extent permitted by law, to waive, and further agrees to cause each of the Restricted Subsidiaries, to the extent permitted by law, to waive, its right of recovery, if any, against the Administrative Agent, the Lenders and their agents and employees;

(ii) the designation of any form, type or amount of insurance coverage by the Administrative Agent or the Collateral Agent under this Section 5.02 shall in no event be deemed a representation, warranty or advice by the Agents or the Lenders that such insurance is adequate for the purposes of the business of the Borrower and the Restricted Subsidiaries or the protection of their properties; and

(iii) if insurance is procured from insurance companies, the Borrower shall use commercially reasonable efforts to obtain endorsements reasonably acceptable to the Administrative Agent with respect to property and casualty insurance. Each insurance policy referred to in this Section 5.02 and procured from an insurance company shall provide that it shall not be canceled, modified or not renewed (x) by reason of nonpayment of premium except upon not less than 10 days’ prior written notice thereof by the insurer to the Administrative Agent (giving the Administrative Agent the right to cure defaults in the payment of premiums) or (y) for any other reason except upon not less than 30 days’ prior written notice thereof by the insurer to the Administrative Agent. The Borrower shall deliver to the Administrative Agent, prior to the cancellation, modification or non-renewal of any such policy of insurance, a copy of a renewal or replacement policy (or other evidence of renewal of a policy previously delivered to the Administrative Agent, including an insurance binder) together with evidence reasonably satisfactory to the Administrative Agent of payment of the premium therefor.

Section 5.03 Taxes. Pay and discharge promptly when due all material Taxes imposed upon it or its income or profits or in respect of its property, before the same shall become delinquent or in default; provided that such payment and discharge shall not be required with respect to any Tax, assessment, charge or levy so long as (a) the validity or amount thereof shall be contested in good faith by appropriate proceedings and (b) Holdings, the Borrower or any affected Restricted Subsidiary, as applicable, shall have set aside on its books reserves in accordance with GAAP with respect thereto.

Section 5.04 Financial Statements, Reports, etc. Furnish to the Administrative Agent (which will promptly furnish such information to the Lenders):

(a) within 120 days following the end of the fiscal year ending December 31, 2013, and within 90 days following the end of each fiscal year thereafter, (i) a consolidated balance sheet and related statements of operations, cash flows and owners’ equity showing the financial position of the Borrower and its Subsidiaries as of the close of such fiscal year and the consolidated results of its operations during such year (the “Annual Financial Statements”); provided that if the Borrower includes the financial results of any person that is not a Restricted Subsidiary in such Annual Financial Statements, the Borrower shall also provide a supplement showing consolidating information for the Borrower and its Restricted Subsidiaries, (ii) a narrative discussion of management’s discussion and analysis of results (which need not be compliant with Regulation S-K) and (iii) starting with the fiscal year ending December 31, 2014, setting forth in comparative form the corresponding figures for the prior fiscal year,

 

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which consolidated balance sheet and related statements of operations, cash flows and owners’ equity shall be audited by the Borrower’s (or any Parent Entity’s) independent public accountants of recognized national standing and accompanied by an opinion of such accountants (which shall not be qualified as to scope of audit or as to the status of the Borrower or its Subsidiaries as a going concern other than any such qualification or exception that is solely with respect to, or resulting solely from, an upcoming maturity date under the Credit Facilities or the Senior Unsecured Notes occurring within one year from the time such report is delivered or any prospective default of any financial covenant) to the effect that such consolidated financial statements fairly present, in all material respects, the financial position and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP (it being understood that the delivery of annual reports on Form 10-K of Holdings, any Parent Entity or the Borrower and their respective consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(a) to the extent such annual reports include the information specified herein);

(b) within 45 days (except 90 days in the case of the first fiscal quarter after the Closing Date for which quarterly financial statements are required to be delivered hereunder) following the end of each of the first three fiscal quarters of each fiscal year, (i) a consolidated balance sheet and related statements of operations and cash flows showing (x) the financial position of the Borrower and its Subsidiaries as of the close of such fiscal quarter and the consolidated and consolidating results of its operations during such fiscal quarter and (y) the then-elapsed portion of the fiscal year and setting forth in comparative form the corresponding figures for the corresponding periods of the prior fiscal year (the “Quarterly Financial Statements” and, together with the Annual Financial Statements, the “Required Financial Statements”); provided that if the Borrower includes the financial results of any person that is not a Restricted Subsidiary in such Quarterly Financial Statements, the Borrower shall also provide (i) a supplement showing consolidating information for the Borrower and its Restricted Subsidiaries and (ii) a narrative discussion of management’s discussion and analysis of results (which need not be compliant with Regulation S-K);

(c) notwithstanding the above, the Required Financial Statements shall be certified by a Responsible Officer of the Borrower on behalf of the Borrower as fairly presenting, in all material respects, the financial position and results of operations of the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes) (it being understood that the delivery of quarterly reports on Form 10-Q of Holdings or any Parent Entity and their respective consolidated Subsidiaries shall satisfy the requirements of this Section 5.04(b) to the extent such quarterly reports include the information specified herein);

(d) concurrently with any delivery of Required Financial Statements under paragraphs (a) and (b) of this Section 5.04, a certificate of a Financial Officer of the Borrower (i) certifying that no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto, (ii) setting forth the calculation and uses of the Available Amount for the fiscal period then ended if the Borrower shall have used the Available Amount for any purpose during such fiscal period, (iii) certifying a list of all Immaterial Subsidiaries, that each Subsidiary set forth on such list individually qualifies as an Immaterial Subsidiary and that all such Subsidiaries in the aggregate do not exceed the limitation set forth in clause (b) of the definition of the term “Immaterial Subsidiary” and (iv) certifying a list of all Unrestricted Subsidiaries at such time and that each Subsidiary set forth on such list qualifies as an Unrestricted Subsidiary;

(e) promptly after the same become publicly available, copies of all periodic and other publicly available reports, proxy statements and, to the extent requested by the Administrative Agent, other materials filed by the Borrower or its Subsidiaries with the SEC or, after an initial public offering, distributed to its stockholders generally, as applicable;

 

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(f) upon the reasonable request of the Administrative Agent, concurrently with the delivery of the Annual Financial Statements, provide an update to the information set forth on the schedules to the Collateral Agreement, together with (i) information about deposit accounts, securities accounts and commodities accounts entered into by the Borrower or any of the Loan Parties and (ii) information regarding Material Real Property acquired by the Borrower or any of the Loan Parties, in the case of each of (i) and (ii), since the Closing Date or the delivery of the previous year’s Annual Financial Statements, as applicable, to the extent not previously notified to the Administrative Agent.

(g) within 120 days following the end of the fiscal year ending December 31, 2013, and within 90 days following the end of each fiscal year thereafter, a reasonably detailed consolidated annual budget for the succeeding fiscal year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of each fiscal quarter for such fiscal year and annual consolidated statements of projected cash flow and projected income), including a description of underlying assumptions with respect thereto (collectively, the “Budget”), which Budget shall in each case be accompanied by the statement of a Financial Officer of the Borrower to the effect that the Budget is based on assumptions believed by such Financial Officer to be reasonable as of the date of delivery thereof;

(h) promptly, from time to time, such other information regarding the operations, business affairs and financial condition of the Borrower and its Subsidiaries, or compliance with the terms of any Loan Document, in each case, as the Administrative Agent may reasonably request (for itself or on behalf of any Lender);

(i) promptly upon request by the Administrative Agent (so long as the following are obtainable using commercially reasonable measures), copies of (i) each Schedule SB (Single-Employer Defined Benefit Plan Actuarial Information) to the most recent annual report (Form 5500 Series) filed with the IRS with respect to a Plan, (ii) the most recent actuarial valuation report for any Plan, (iii) all notices received from a Multiemployer Plan sponsor, a plan administrator or any governmental agency, or provided to any Multiemployer Plan by the Borrower its Subsidiaries or any ERISA Affiliate, concerning an ERISA Event and (iv) with respect to each Foreign Benefit Plan, any available annual reports, actuarial valuation reports or notices from plan sponsors, plan administrators or any Governmental Authority with respect to such plan; and

(j) promptly following any request therefor by the Administrative Agent (so long as the following are obtainable using commercially reasonable measures), copies of (i) any documents described in Section 101(k)(1) of ERISA that the Borrower, its Subsidiaries or any ERISA Affiliate may request with respect to any Multiemployer Plan and (ii) any notices described in Section 101(l)(1) of ERISA that the Borrower, its Subsidiaries or any ERISA Affiliate may request with respect to any Multiemployer Plan; provided that if the Borrower, its Subsidiaries or any ERISA Affiliate has not requested such documents or notices from the administrator or sponsor of the applicable Multiemployer Plan, the Borrower, its Subsidiaries or such ERISA Affiliate shall promptly make a request for such documents or notices from the such administrator or sponsor and shall provide copies of such documents and notices promptly after receipt thereof;

provided that (x) in the event that any Parent Entity, as applicable, is not engaged in any business or activity, and does not own any assets or have other liabilities, other than those incidental to its ownership directly or indirectly of the Equity Interests of the Borrower and its Subsidiaries, such consolidated reporting at a Parent Entity’s level in a manner consistent with that described in paragraphs (a) and (b) of this Section 5.04 for the Borrower will satisfy the requirements of such paragraphs and (y) the financial statements, information and other documents required to be provided as described above, may be those of (i) the Borrower or (ii) any Parent Entity rather than those of the Borrower; so long as the same is accompanied by consolidating information that explains in reasonable detail the differences between the information relating to such Parent Entity, on the one hand, and the information relating to the Borrower and the Restricted Subsidiaries on a standalone basis, on the other hand.

 

 

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Documents required to be delivered pursuant to this Section 5.04 may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which such documents are transmitted by electronic mail to the Administrative Agent or (ii) on which such documents are filed of record with the SEC.

Section 5.05 Litigation and Other Notices. Furnish to the Administrative Agent (which will promptly thereafter furnish to the Lenders) written notice of the following promptly after any Responsible Officer of the Borrower obtains actual knowledge thereof:

(a) any Default or Event of Default, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto;

(b) the filing or commencement of, or any written threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity or by or before any Governmental Authority or in arbitration, against Holdings or any of its Restricted Subsidiaries as to which an adverse determination is reasonably probable and which, if adversely determined, could reasonably be expected to have a Material Adverse Effect;

(c) any other development, the subject matter of which is not covered by Section 5.05(a), Section 5.05(b), or Section 5.05(d), specific to the Borrower or any of its Restricted Subsidiaries that is not a matter of general public knowledge and that has had, or would reasonably be expected to have, a Material Adverse Effect; and

(d) the development of any ERISA Event that, together with all other ERISA Events that have developed or occurred, would reasonably be expected to have a Material Adverse Effect.

Section 5.06 Compliance with Laws. Comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its property (including ERISA), except where the failure to do so, individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect; provided that this Section 5.06 shall not apply to Environmental Laws, which are the subject of Section 5.09, or laws related to Taxes, which are the subject of Section 5.03.

Section 5.07 Maintaining Records; Access to Properties and Inspections. Maintain all financial records in accordance with GAAP in all material respects and permit any persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender, to visit and inspect the financial records and the properties of the Borrower or any of the Restricted Subsidiaries at reasonable times, upon reasonable prior notice to the Borrower, and as often as reasonably requested, to make extracts from and copies of such financial records, and permit any persons designated by the Administrative Agent or, upon the occurrence and during the continuance of an Event of Default, any Lender, upon reasonable prior notice to the Borrower to discuss the affairs, finances and condition of Holdings or any of the Restricted Subsidiaries with the officers thereof and independent accountants therefor (subject to reasonable requirements of confidentiality, including requirements imposed by law or by contract); provided that any visit or inspection permitted pursuant to this Section 5.07 shall be limited to once per year in the absence of an Event of Default.

 

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Section 5.08 Use of Proceeds. Use the proceeds of the Term Loans made on the Closing Date for the following purposes: (i) to finance a portion of the consideration for the Acquisition, (ii) to repay certain existing indebtedness of the Acquired Business, (iii) to pay costs and expenses related to the Transactions and (iv) working capital and general corporate purposes. Use the proceeds of the Term Loans made on the Second Amendment Effective Date to refinance all of the Term Loans outstanding immediately prior to the Second Amendment Effective Date. Use the proceeds of the Incremental Term Loans made on the Incremental Amendment Effective Date, together with any equity contribution from the Sponsors and other equity investors and cash on hand, for the following purposes: (i) effect the Acquisition and the Debt Repayment (each as defined in Incremental Amendment No. 1), (ii) pay costs and expenses related to the 2018 Incremental Transactions and (iii) for working capital and general corporate purposes.

Section 5.09 Compliance with Environmental Laws. Comply, and make reasonable efforts to cause all lessees and other persons occupying its Real Properties to comply, with all Environmental Laws applicable to its operations and properties, and obtain and renew all material authorizations and permits required pursuant to Environmental Law for its operations and properties, in each case in accordance with Environmental Laws, except, in each case, to the extent the failure to do so would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

Section 5.10 Further Assurances; Additional Security.

(a) Execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements and other documents and recordings of Liens in stock registries), that may be required under any applicable law, or that the Administrative Agent may reasonably request, to satisfy the Collateral and Guarantee Requirement and to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Borrower, and provide to the Administrative Agent, from time to time upon reasonable request, evidence reasonably satisfactory to the Administrative Agent as to the perfection and priority of the Liens created or intended to be created by the Security Documents.

(b) If the Borrower or any Subsidiary Loan Party directly or indirectly acquires fee-owned Real Property after the Second Amendment Effective Date (with any fee-owned Real Property of (x) any Restricted Subsidiary that is acquired after the Second Amendment Effective Date and becomes a Loan Party, (y) any Subsidiary that is designated a Restricted Subsidiary pursuant to a Subsidiary Redesignation and becomes a Loan Party and (z) any Immaterial Subsidiary that is designated a Material Subsidiary and becomes a Loan Party being deemed to have been acquired after the Second Amendment Effective Date) that has a fair market value of $5.0 million or more on an individual basis (i) notify the Administrative Agent within 10 Business Days of the acquisition thereof, (ii) cause each such fee-owned Real Property to be subject to a mortgage or deed of trust securing the Obligations, in form and substance reasonably acceptable to the Administrative Agent within 90 days of the date of such acquisition (or such later date as may be agreed to by the Administrative Agent in its reasonable discretion, (iii) obtain fully paid American Land Title Association Lender’s Extended Coverage title insurance policies in form and substance, with endorsements (including zoning endorsements where available) and in amounts reasonably acceptable to the Administrative Agent (the “Mortgage Policies”), (iv) to the extent reasonably requested by the Administrative Agent, obtain American Land Title Association/American Congress on Surveying and Mapping form surveys, dated no more than 30 days before the date of their delivery to the Administrative Agent, certified to the Administrative Agent and the issuer of the Mortgage Policies in a manner reasonably satisfactory to the Administrative Agent, (v) provide evidence of insurance as required by Section 5.02 (including all insurance required to comply with applicable flood insurance laws) and, to the extent required by Section 5.02, naming the Administrative Agent as loss payee and additional insured, and in such amounts and covering such risks, as are reasonably satisfactory to the Administrative Agent, including the insurance required by the terms of any mortgages or deeds of trust (vi) obtain customary mortgage or deed of trust enforceability opinions of local counsel for the Borrower and the

 

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Subsidiary Loan Parties in the states in which such fee-owned Real Properties are located and (vii) take, and cause the applicable Subsidiary Loan Party to take, such actions as shall be necessary or reasonably requested by the Administrative Agent to perfect such Liens, including actions described in paragraph (a) of this Section 5.10, in each case, at the expense of the Loan Parties, subject to paragraph (e) of this Section 5.10.

(c) If any additional Subsidiary of the Borrower (other than an Immaterial Subsidiary, an Unrestricted Subsidiary, a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC) is formed or acquired after the Second Amendment Effective Date (with (i) any Subsidiary Redesignation resulting in an Unrestricted Subsidiary becoming a Restricted Subsidiary being deemed to constitute the acquisition of a Subsidiary, (ii) any Immaterial Subsidiary being designated a Material Subsidiary being deemed to constitute the acquisition of a Subsidiary and (iii) any transaction or event resulting in a Subsidiary ceasing to be a Qualified CFC Holding Company, a CFC or a Domestic Subsidiary of a CFC being deemed to constitute the acquisition of a Subsidiary), within 10 Business Days after the date such Subsidiary is formed or acquired, notify the Administrative Agent and the Lenders thereof and, within 30 Business Days after the date such Subsidiary is formed or acquired (or such longer period as the Administrative Agent shall agree), cause the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary and with respect to any Equity Interest in or Indebtedness of such Subsidiary owned by or on behalf of the Borrower or any other Subsidiary Loan Party, subject to paragraph (e) of this Section 5.10.

(d) (i) In each case other than in connection with the Acquisition, furnish to the Administrative Agent within 30 Business Days thereafter written notice of any change in (A) corporate or organization name, (B) organizational structure or (C) organizational identification number (or equivalent) with respect to Holdings, the Borrower and the Subsidiary Loan Parties; provided that the Borrower shall not effect or permit any such change unless all filings have been made, or will have been made within any statutory period, under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected security interest in all Collateral for the benefit of the applicable Secured Parties and (ii) promptly notify the Administrative Agent if any material portion of the Collateral is damaged or destroyed.

(e) The Collateral and Guarantee Requirement and the other provisions of this Section 5.10 need not be satisfied with respect to any Excluded Assets or Excluded Equity Interests (each as defined in the Collateral Agreement) or any exclusions and carve-outs from the perfection requirements set forth in the Collateral Agreement.

(f) Nothing in this Section 5.10 shall require Holdings, the Borrower or any other Loan Party to take any action outside the United States to create or perfect any security interests in any Collateral located outside of the United States or of a Foreign Subsidiary (it being understood that there shall be no security agreements or pledge agreements governed under the laws of any foreign jurisdiction). Furthermore, with respect to real property, no perfection steps shall be required by any means other than (1) solely with respect to any properties subject to any mortgages on fee-owned Real Property not excluded from the Collateral pursuant to this Agreement (“Required Mortgages”), fixture filings pursuant to the UCC in the applicable UCC filing office of the relevant jurisdiction in which such fee-owned Real Property is located and (2) the recording of Required Mortgages in the applicable county offices referred to in the foregoing clause (1).

Section 5.11 Fiscal Year; Accounting. In the case of Holdings or any Restricted Subsidiary, cause the fiscal year to end on September 30, unless prior written notice of a change is given to the Administrative Agent.

 

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Section 5.12 Credit Ratings. Use commercially reasonable efforts to maintain at all times a credit rating by each of S&P and Moody’s in respect of the Term Facility and a corporate rating by S&P and a corporate family rating by Moody’s for the Borrower, in each case, with no requirement to maintain any specific minimum rating.

Section 5.13 Lender Calls. Following receipt by the Borrower of a request by the Administrative Agent (which request may only be given by the Administrative Agent to the Borrower no later than 30 days following delivery of the Annual Financial Statements pursuant to Section 5.04(a)), use commercially reasonable efforts to hold an update call (which call shall take place on or prior to the date that is 10 Business Days following the receipt of such notice) with a Financial Officer of the Borrower and such other members of senior management of the Borrower as the Borrower deems appropriate (with such other details to be reasonably agreed between the Borrower and the Administrative Agent) and the Lenders and their respective representatives and advisors to discuss the state of the Borrower’s business, including, but not limited, to recent performance, cash and liquidity management, operational activities, current business and market conditions and material performance changes; provided that in no event shall more than one such call be requested in any fiscal year (in total with respect to this Agreement and the ABL Credit Agreement). Notwithstanding the foregoing, if more than one such call per fiscal year is required pursuant to the Senior Unsecured Notes, the Administrative Agent shall be entitled to request additional update calls, it being understood that the frequency of calls hereunder shall at no time exceed the frequency of calls required with respect to the Senior Unsecured Notes; provided that the obligations of the Borrower to hold such additional update calls shall be satisfied by inviting the Administrative Agent and the Lenders to join any call held pursuant to the terms of the Senior Unsecured Notes.

Section 5.14 Post-Closing Matters. Deliver to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, the items described on Schedule 5.14 of this Agreement (as in effect on the Closing Date) on or before the date that is 90 days after the Closing Date (or, in each case, such later date as may be reasonably agreed to by the Administrative Agent, or with respect to matters relating primarily to the ABL Priority Collateral, as may be reasonably agreed to by the administrative agent under the ABL Credit Agreement). Deliver to the Administrative Agent, in form and substance reasonably satisfactory to the Administrative Agent, the items described on Schedule 5.14 hereof (as in effect on the Incremental Amendment Effective Date, after giving effect to the Incremental Amendment) within the time periods specified thereon. All representations and warranties contained in this Agreement and the other Loan Documents shall be deemed modified to the extent necessary to effect the foregoing (and to permit the taking of the actions described on Schedule 5.14 within the time periods specified thereon, rather than as elsewhere provided in the Loan Documents).

Section 5.15 Patriot Act, OFAC, FCPA. Now or hereafter to the extent applicable to this Agreement, the transactions contemplated hereby or the Loan Parties’ execution, delivery and performance of the Loan Documents, comply in all material respects with the USA PATRIOT Act, OFAC and FCPA, and with respect to each statute, any successor statute thereto.

ARTICLE VI

Negative Covenants

The Borrower covenants and agrees with each Lender that so long as this Agreement shall remain in effect and until the Obligations (other than contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) shall have been paid in full, unless the Required Lenders shall otherwise consent in writing, the Borrower will not, and will not permit any of the other Restricted Subsidiaries to:

 

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Section 6.01 Indebtedness. Incur, create or assume any Indebtedness, except:

(a) any Indebtedness listed on Schedule 6.01(a) and any Permitted Refinancing Indebtedness in respect thereof;

(b) Indebtedness created hereunder or under the other Loan Documents (including the 2018 Incremental Term Loans incurred on the Incremental Amendment Effective Date), Credit Agreement Refinancing Indebtedness, Indebtedness created under Incremental Facilities, Incremental Equivalent Term Debt and any Permitted Refinancing Indebtedness incurred to Refinance any of the foregoing Indebtedness;

(c) Indebtedness pursuant to Hedge Agreements other than for speculative purposes;

(d) (i) so long as no Default or Event of Default has occurred and is continuing or would result from the incurrence of such Indebtedness, other Indebtedness secured by Liens permitted by Section 6.02(u) so long as, on a Pro Forma Basis, the Senior Secured Leverage Ratio is not greater than 5.25:1.00 (the “Leverage Ratio Debt”) and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Leverage Ratio Debt;

(e) Indebtedness 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 (including self-insurance) to the Borrower or any of the Restricted Subsidiaries pursuant to reimbursement or indemnification obligations to such person, in each case, in the ordinary course of business; provided that upon the incurrence of Indebtedness with respect to reimbursement obligations regarding workers’ compensation claims, such obligations shall be reimbursed not later than 30 days following such incurrence;

(f) intercompany Indebtedness between or among the Borrower and the Restricted Subsidiaries or between and among Restricted Subsidiaries; provided that (i) Indebtedness owing by any Restricted Subsidiary of the Borrower that is not a Loan Party to the Borrower or another Subsidiary Loan Party is permitted under Section 6.04(b) and (ii) Indebtedness owing by the Borrower or any other Subsidiary Loan Party to any Restricted Subsidiary that is not a Loan Party is subordinated to the Obligations pursuant to customary subordination provisions;

(g) Indebtedness in respect of performance bonds, bid bonds, appeal bonds, surety bonds and completion guarantees and similar obligations, in each case, provided in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;

(h) (i) Indebtedness in respect of Cash Management Services in the ordinary course of business, (ii) other Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds, so long as such Indebtedness (other than credit or purchase cards) is extinguished within 10 Business Days after notification is received by the Borrower of its incurrence and (iii) any other cash management or treasury services entered in the ordinary course of business;

(i) (i) Indebtedness incurred or assumed in connection with a Permitted Business Acquisition; provided, in each case, (1) no Event of Default shall have occurred and be continuing immediately before such Permitted Business Acquisition or would result immediately after giving pro forma effect to such Permitted Business Acquisition and any related transactions, (2) the Borrower shall be able to incur $1 of Ratio Debt, (3)(x) if such Indebtedness incurred or assumed is First Lien Debt, the

 

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First Lien Leverage Ratio shall not exceed the Closing Date First Lien Leverage Ratio and (y) if such Indebtedness incurred or assumed is secured Indebtedness other than First Lien Debt, the Senior Secured Leverage Ratio shall not exceed the Closing Date Senior Secured Leverage Ratio, in each case, immediately after giving pro forma effect to such incurrence or assumption of Indebtedness and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness; provided that at the time of the incurrence or assumption of any Indebtedness pursuant to clause (i) above (and after giving effect thereto), the aggregate outstanding amount of Indebtedness incurred under this Section 6.01(i) together with any amounts incurred under Section 6.01(r), in each case, by Restricted Subsidiaries that are not Guarantors does not exceed $50.0 million;

(j) Capital Lease Obligations, Indebtedness incurred with respect to installations, repairs, improvement and removal of Real Property, purchase money Indebtedness, Indebtedness with respect to mortgage financings and Indebtedness with respect to additions or improvements to Real Property in an aggregate outstanding principal amount not to exceed, at the time of incurrence of such Indebtedness (and after giving effect thereto), and together with the Remaining Present Value of outstanding leases entered into pursuant to Section 6.03, the greater of (i) $80.0 million and (ii) 4.5% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date such Indebtedness is incurred for which Required Financial Statements have been delivered pursuant to Section 5.04, at any time outstanding, and any Permitted Refinancing Indebtedness incurred to Refinance such Indebtedness; provided that (i) such Indebtedness shall be incurred within 270 days after the acquisition, lease or improvement of the property that is the subject of such Indebtedness and (ii) the Remaining Present Value of outstanding leases entered into pursuant to Section 6.03 shall not apply for purposes of calculating Permitted Indebtedness under this clause (j) or permitted Sale and Lease-Back Transactions under Section 6.03 if the proceeds of the related Sale and Lease-Back Transactions are used to prepay Term Loans or revolving loans under the ABL Credit Agreement or any Incremental ABL Loans (in each case, to the extent commitments in respect thereof are permanently reduced by the amount of such prepayments);

(k) [Reserved];

(l) other unsecured Indebtedness; provided that the aggregate outstanding principal amount of Indebtedness incurred pursuant to this clause (l) shall not exceed, at the time of incurrence of such Indebtedness (and after giving effect thereto) the greater of (i) $80.0 million and (ii) 4.5% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such incurrence for which Required Financial Statements have been delivered pursuant to Section 5.04;

(m) Indebtedness consisting of (i) (A) ABL Commitments (including any ABL Commitments drawn) on the Closing Date, (B) Incremental ABL Commitments and (C) additional revolving Indebtedness and (ii) Permitted Refinancing Indebtedness incurred to Refinance any of the foregoing Indebtedness; provided that at the time of the incurrence of any Indebtedness pursuant to clause (i) above (and after giving effect thereto), the aggregate amount of Indebtedness outstanding under this Section 6.01(m) does not exceed the greater of (x) $225.0 million and (y) the Borrowing Base.

(n) Guarantees (i) of the Indebtedness of the Borrower described in clause (m) of this Section 6.01 so long as any Liens securing the ABL Obligations or any Permitted Refinancing Indebtedness in respect thereof are subject to the ABL/Term Loan Intercreditor Agreement (in the case of ABL Obligations) or other intercreditor agreement(s) substantially consistent with and no less favorable to the Lenders in any material respect than the ABL/Term Loan Intercreditor Agreement, as applicable, (ii) of any Indebtedness of the Borrower or any other Subsidiary Loan Party permitted to be incurred under this Agreement, (iii) of Indebtedness otherwise permitted hereunder of any Restricted Subsidiary that is not a Subsidiary Loan Party to the extent such Guarantees are permitted by Section 6.04 (other than

 

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Section 6.04(t)); (iv) by any Restricted Subsidiary that is not a Loan Party of Indebtedness of another Restricted Subsidiary that is not a Loan Party and (v) of Indebtedness of Foreign Subsidiaries incurred for working capital purposes in the ordinary course of business on ordinary business terms so long as such Indebtedness is permitted to be incurred under Section 6.01(s) to the extent such Guarantees are permitted by Section 6.04 (other than Section 6.04(t)); provided that Guarantees by Borrower or any other Loan Party under this clause (n) of any Indebtedness of a person that is subordinated to other Indebtedness of such person shall be expressly subordinated to the Obligations to at least the same extent as such underlying Indebtedness is subordinated;

(o) Indebtedness arising from agreements of the Borrower or any of the other Restricted Subsidiaries providing for indemnification, contribution, earn-out, adjustment of purchase or acquisition price or similar obligations, in each case, incurred or assumed in connection with the Transactions, any Permitted Business Acquisition, Permitted Investment or the disposition of any business, assets or Subsidiaries not prohibited by this Agreement, other than Guarantees of Indebtedness incurred by any person acquiring all or any portion of such business, assets or Subsidiaries for the purpose of financing any such Permitted Business Acquisition;

(p) Indebtedness supported by a Letter of Credit, in a principal amount not in excess of the stated amount of such Letter of Credit;

(q) Indebtedness consisting of (i) the financing of insurance premiums or (ii) take or pay obligations contained in supply arrangements, in each case, in the ordinary course of business;

(r) (i) so long as no Default or Event of Default has occurred and is continuing or would result from the incurrence of such Indebtedness, other Indebtedness so long as the Fixed Charge Coverage Ratio, on a Pro Forma Basis, is 2.00 to 1.00 or greater (“Ratio Debt”) and (ii) any Permitted Refinancing Indebtedness incurred to Refinance such Ratio Debt; provided that at the time of the incurrence of any Indebtedness pursuant to clause (i) above (and after giving effect thereto), the aggregate outstanding amount of Indebtedness incurred under this Section 6.01(r) together with any amounts incurred under Section 6.01(i), in each case, by Restricted Subsidiaries that are not Guarantors does not exceed $50.0 million.

(s) (i) Indebtedness of Foreign Subsidiaries and (ii) Indebtedness incurred on behalf of, or representing Guarantees of Indebtedness of, joint ventures; provided that the aggregate outstanding principal amount of Indebtedness incurred pursuant to this clause (s) shall not exceed, at the time of incurrence of such Indebtedness (and after giving effect thereto) the greater of (i) $45.0 million and (ii) 2.5% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such incurrence for which Required Financial Statements have been delivered pursuant to Section 5.04;

(t) unsecured Indebtedness in respect of obligations to pay the deferred purchase price of goods or services or progress payments in connection with such goods and services so long as such obligations are incurred in connection with open accounts extended by suppliers on customary trade terms (which require that all such payments be made within 60 days after the incurrence of the related obligations) in the ordinary course of business and not in connection with the borrowing of money or any Hedge Agreements;

(u) Indebtedness representing deferred compensation to employees, directors and officers incurred in the ordinary course of business;

 

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(v) Indebtedness arising from customer deposits and advance payments received in the ordinary course of business from customers for goods and services purchased in the ordinary course of business;

(w) Indebtedness consisting of reimbursement obligations related to bank guarantees to the extent that such obligations are collateralized by cash or cash equivalents;

(x) Indebtedness consisting of promissory notes issued by the Borrower or any Restricted Subsidiary to current or former officers, managers, directors and consultants thereof or employees, their respective estates or family members to finance the purchase or redemption of Equity Interests of the Borrower or any Parent Entity permitted by Section 6.06;

(y) Guarantees by the Borrower or any Restricted Subsidiary of any lease or sublease permitted hereunder of real property entered into by the Borrower or any Restricted Subsidiary in the ordinary course of business;

(z) Indebtedness consisting of obligations under deferred compensation or other similar arrangements incurred by Borrower or any of the other Restricted Subsidiaries in connection with the Transactions or Permitted Business Acquisitions or any other Investment permitted hereunder;

(aa) unsecured Indebtedness in a principal amount not to exceed an amount equal to the Net Cash Proceeds received from the issuance or sale of Equity Interests (other than Disqualified Stock or Permitted Cure Securities (as defined in the ABL Credit Agreement)) of the Borrower or any of the other Restricted Subsidiaries (other than any such sale to Holdings or any of the Restricted Subsidiaries) and any cash or cash equivalents consisting of a capital contribution received from equityholders (other than Holdings or any Restricted Subsidiary) of the Borrower or any of the Restricted Subsidiaries (other than in respect of Disqualified Stock or any equity contributed as Permitted Cure Securities (as defined in the ABL Credit Agreement) or any such proceeds used for the Available Amount or any such proceeds used in connection with Section 6.06(d) or Section 6.09(b)(i)(3) or used to fund charges, expenses, accruals or reserves in accordance with clause (l) of the definition of “Consolidated Net Income”) so long as (i) such Indebtedness does not require any scheduled payment of principal (including pursuant to a sinking fund obligation) other than amortization or mandatory redemption or redemption at the option of the holders thereof or similar prepayment (other than (A) upon the occurrence of an Asset Sale or other asset sale or Recovery Event, (B) upon the occurrence of a change of control event, (C) customary acceleration rights following an event of default and (D) upon the incurrence of Indebtedness that is not permitted thereunder) prior to the then Latest Maturity Date of the Term Loans and (ii) the Weighted Average Life to Maturity of such Indebtedness is not less than the then Weighted Average Life to Maturity of the Term Loans;

(bb) Indebtedness in respect of Senior Unsecured Notes and any Permitted Refinancing Indebtedness in respect thereof; and

(cc) all premium (if any, including tender premiums), defeasance costs, interest (including post petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (a) through (bb) of this Section 6.01.

For purposes of determining compliance with this Section 6.01, (A) Indebtedness need not be permitted solely by reference to one category of Permitted Indebtedness described in Sections 6.01(a) through Sections 6.01(cc) but may be permitted in part under any combination thereof and (B) in the event that an item of Indebtedness (other than any item of Indebtedness set forth in Section 6.01(a), (b), (d), (m) or (bb) meets the criteria of another category of Permitted Indebtedness described in Section 6.01 (other than

 

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Sections 6.01(a), (b), (d), (m) or (bb)), the Borrower may, in its sole discretion, reclassify such item of Indebtedness and such item of Indebtedness shall be treated as having been incurred or existing pursuant to such other clause; provided that such reclassification shall take place no more than once with respect to each item of Indebtedness.

Section 6.02 Liens. Create, incur or assume any Lien on any of its property or assets (including Equity Interests or other securities of any person) at the time owned by it or on any income or revenues or rights in respect of any thereof, except the following (collectively, “Permitted Liens”):

(a) (i) Liens existing on the Incremental Amendment Effective Date (or created following the Second Amendment Effective Date pursuant to agreements in existence on the Second Amendment Effective Date requiring the creation of such Liens) and, in each case, set forth on Schedule 6.02(a); provided that such Liens shall secure only those obligations that they secure on the Incremental Amendment Effective Date (and any Permitted Refinancing Indebtedness in respect of such obligations permitted by Section 6.01(a)) and shall not subsequently apply to any other property or assets of the Borrower or any of the other Restricted Subsidiaries other than (A) after-acquired property that is affixed to or incorporated into the property covered by such Lien and (B) proceeds and products thereof and (ii) Liens existing on the Incremental Amendment Effective Date securing property or assets having a fair market value not to exceed $5.0 million in the aggregate and, in each case, any modifications, replacements, renewals or extensions thereof;

(b) any Lien created under the Loan Documents, and any Lien created under the definitive documentation evidencing any other Indebtedness permitted under Section 6.01(b);

(c) any Lien securing Indebtedness or Permitted Refinancing Indebtedness permitted by Section 6.01(i); provided that in the case of a Lien securing Permitted Refinancing Indebtedness, such Lien shall be permitted subject to compliance with clause (d) of the definition of “Permitted Refinancing Indebtedness”;

(d) Liens for Taxes, assessments or other governmental charges or levies not yet delinquent or that are being contested in compliance with Section 5.03;

(e) Liens imposed by law, including landlord’s, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s, construction or other like Liens arising in the ordinary course of business securing obligations that are not overdue by more than 30 days or that are being contested in good faith by appropriate proceedings and in respect of which, if applicable, the Borrower or any of the other Restricted Subsidiaries shall have set aside on its books reserves in accordance with GAAP;

(f) (i) pledges and deposits and other Liens made in the ordinary course of business in compliance with the Federal Employers Liability Act or any other workers’ compensation, unemployment insurance and other social security laws or regulations and deposits securing liability to insurance carriers under insurance or self-insurance arrangements in respect of such obligations and (ii) 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 Borrower or any of its Restricted Subsidiaries;

(g) deposits to secure the performance of bids, trade contracts (other than for Indebtedness), leases (other than Capital Lease Obligations), statutory obligations, surety and appeal bonds, performance and return of money bonds, bids, leases, government contracts, trade contracts, agreements with utilities, and other obligations of a like nature (including letters of credit in lieu of any such bonds or to support the issuance thereof) incurred by the Borrower or any of the other Restricted Subsidiaries in the ordinary course of business, including those incurred to secure health, safety and environmental obligations in the ordinary course of business;

 

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(h) zoning restrictions, survey exceptions and such matters as an accurate survey would disclose, easements, trackage rights, leases (other than Capital Lease Obligations), licenses, special assessments, rights of way covenants, conditions, restrictions and declarations on or with respect to the use of Real Property, servicing agreements, development agreements, site plan agreements and other similar encumbrances incurred in the ordinary course of business and title defects or irregularities that are of a minor nature and that, in the aggregate, do not interfere in any material respect with the ordinary conduct of the business of the Borrower or the other Restricted Subsidiaries;

(i) Liens securing Indebtedness permitted by Section 6.01(j) (limited to the assets subject to such Indebtedness or accessions to such property or the proceeds therefrom);

(j) Liens arising out of Sale and Lease-Back Transactions permitted under Section 6.03, so long as such Liens attach only to the property sold and being leased in such Sale and Lease-Back Transaction and any accessions thereto or proceeds thereof and related property;

(k) Liens securing judgments that do not constitute an Event of Default under Section 7.01(j);

(l) Liens disclosed by the title insurance policies delivered on or subsequent to the Closing Date pursuant to Section 5.10 and any replacement, extension or renewal of any such Lien (so long as the Indebtedness and other obligations secured by such replacement, extension or renewal Lien are permitted by this Agreement); provided that such replacement, extension or renewal Lien shall not cover any property other than the property that was subject to such Lien prior to such replacement, extension or renewal and any after-acquired property that is affixed to or incorporated into the property covered by such Lien;

(m) any interest or title of a lessor or sublessor under any leases or subleases entered into by the Borrower or any of the other Restricted Subsidiaries in the ordinary course of business;

(n) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks not given in connection with the issuance of Indebtedness, (ii) relating to pooled deposit or sweep accounts of the Borrower or any of the other Restricted Subsidiaries to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower or any of the other Restricted Subsidiaries or (iii) relating to purchase orders and other agreements entered into with customers of the Borrower or any of the other Restricted Subsidiaries in the ordinary course of business;

(o) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights;

(p) leases or subleases, licenses or sublicenses (including with respect to intellectual property and software) granted to others in the ordinary course of business that do not interfere in any material respect with the business of the Borrower and any of the other Restricted Subsidiaries taken as a whole;

(q) 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;

 

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(r) Liens solely on any cash earnest money deposits made by the Borrower or any of the other Restricted Subsidiaries in connection with any letter of intent or purchase agreement in respect of any Investment permitted hereunder;

(s) Liens with respect to property or assets of any Restricted Subsidiary that is not a Loan Party securing Indebtedness of any Restricted Subsidiary that is not a Loan Party permitted under Section 6.01;

(t) Liens with respect to property or assets of a Foreign Subsidiary securing Indebtedness of such Foreign Subsidiary permitted under Section 6.01(s);

(u) Liens securing Leverage Ratio Debt; provided such Liens (i) apply only to property or assets of a Foreign Subsidiary, (ii) apply only to the Collateral and are (A) with respect to the Term Loan Priority Collateral, junior in priority to the Liens on the Term Loan Priority Collateral securing the Obligations, but senior in priority to the Liens on the Term Loan Priority Collateral securing the ABL Obligations and (B) with respect to the ABL Priority Collateral, junior in priority to the Liens on the ABL Priority Collateral securing the Obligations and the ABL Obligations or (iii) apply only to the Collateral and are junior in priority to the Liens on the Collateral securing the Obligations and the ABL Obligations; provided further any such Liens on Collateral are governed by an intercreditor agreement in form and substance reasonably satisfactory to the Administrative Agent;

(v) the prior rights of consignees and their lenders under consignment arrangements entered into in the ordinary course of business;

(w) Liens arising from precautionary Uniform Commercial Code financing statements;

(x) Liens on Equity Interests of any joint venture or Unrestricted Subsidiary (i) securing obligations of such joint venture or Unrestricted Subsidiary, as the case may be, or (ii) pursuant to the relevant joint venture agreement or arrangement;

(y) Liens on securities that are the subject of repurchase agreements constituting Permitted Investments under clause (d) of the definition thereof;

(z) Liens securing obligations in respect of trade-related letters of credit, trade-related bank guarantees or similar trade-related obligations permitted under Section 6.01(w) and covering the goods (or the documents of title in respect of such goods) financed by such letters of credit, bank guarantees or similar obligations and the proceeds and products thereof;

(aa) Liens securing insurance premium financing arrangements so long as such Liens are limited to the applicable unearned insurance premiums;

(bb) Liens in favor of the Borrower or any of the Restricted Subsidiaries; provided that if any such Lien shall cover any Collateral, the holder of such Lien shall execute and deliver to the Administrative Agent a subordination agreement in form and substance reasonably satisfactory to the Administrative Agent;

(cc) Liens securing obligations permitted under Section 6.01(m) (including Liens created under the ABL Security Documents securing obligations in respect of (i) Specified Hedge Agreements (as defined in the ABL Credit Agreement as of the Closing Date)) and (ii) Cash Management Obligations (as defined in the ABL Credit Agreement as of the Closing Date), to the extent such Liens are subject to the ABL/Term Loan Intercreditor Agreement or, in each case, other intercreditor agreement(s) reasonably satisfactory to the Administrative Agent and substantially consistent with and no less favorable to the Lenders in any material respect than the ABL/Term Loan Intercreditor Agreement;

 

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(dd) Liens to secure any refinancing, refunding, extension, renewal or replacement (or successive refinancings, refundings, extensions, renewals, or replacements) as a whole, or in part, of any Indebtedness secured by any Lien permitted by the foregoing clauses; provided, however, that (x) such new Lien pursuant to this clause (dd) shall be limited to all or part of the same property (which, for the avoidance of doubt, may include after-acquired property to the extent such after-acquired property would be subject to the existing Lien) that secured the original Lien (plus improvements on and accessions to such property), and (y) the Indebtedness secured by such Lien at such time pursuant to this clause (dd) is not increased to any amount greater than the sum of (A) the outstanding principal amount or, if greater, committed amount of the applicable Indebtedness at the time the original Lien became a Lien permitted hereunder, plus accrued interest, and (B) an amount necessary to pay any fees and expenses, including premiums, related to such refinancing, refunding, extension, renewal or replacement; provided further that if any original Lien was subject to an intercreditor agreement with the Administrative Agent, such new Lien shall be subject to an intercreditor agreement substantially consistent with and no less favorable to the Lenders in any material respect than such original intercreditor agreement; and

(ee) other Liens securing obligations in an aggregate principal amount outstanding at any time not to exceed, at the time of incurrence of such Lien (and after giving effect thereto), the greater of (i) $50.0 million and (ii) 3.0% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such incurrence for which the Required Financial Statements have been delivered pursuant to Section 5.04.

For purposes of determining compliance with this Section 6.02, (A) a Lien securing an item of Indebtedness need not be permitted solely by reference to one category of Permitted Liens described in Section 6.02(a) through Section 6.02(ee) but may be permitted in part under any combination thereof and (B) in the event that a Lien securing an item of Indebtedness (or any portion thereof) (other than any Lien permitted by Section 6.02(b), (u) or (cc)) meets the criteria of another category of Permitted Liens described in Section 6.02 (other than Section 6.02(b), (u) or (cc)), the Borrower may, in its sole discretion, reclassify such Lien securing such item of Indebtedness (or any portion thereof) and such Lien securing such item of Indebtedness will be treated as being incurred or existing pursuant to such other clause; provided that such reclassification shall take place no more than once with respect to any Lien securing an item of Indebtedness.

Section 6.03 Sale and Lease-Back Transactions. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred (a “Sale and Lease-Back Transaction”); provided that Sale and Lease-Back Transactions shall be permitted (a) pursuant to the Sale/Lease-Back Documents, (b) with respect to property owned (i) by the Borrower or any of its Domestic Subsidiaries that is acquired after the Second Amendment Effective Date so long as such Sale and Lease-Back Transaction is consummated within 270 days of the acquisition of such property or (ii) by any Foreign Subsidiary of the Borrower regardless of when such property was acquired and (c) so long as at the time of any such Sale and Lease-Back Transaction (and after giving effect thereto), the Remaining Present Value of outstanding leases entered into pursuant to this Section 6.03, together with the outstanding amount of Indebtedness pursuant to Section 6.01(j) shall not exceed the greater of (i) $50.0 million and (ii) 3.0% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such Sale and Lease-Back Transaction for which Required Financial Statements have been delivered pursuant to Section 5.04; provided that the

 

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Remaining Present Value of outstanding leases entered into pursuant to this Section 6.03 shall not apply for purposes of calculating Permitted Indebtedness under Section 6.01(j) or permitted Sale and Lease-Back Transactions under this Section 6.03 if the proceeds of the related Sale and Lease-Back Transactions are used to prepay Term Loans or revolving loans under the ABL Credit Agreement or any Incremental ABL Loans (in each case, to the extent commitments in respect thereof are permanently reduced by the amount of such prepayments).

Section 6.04 Investments, Loans and Advances. Purchase, hold or acquire (including pursuant to any merger, consolidation or amalgamation with a person that is not a Wholly Owned Subsidiary immediately prior to such merger, consolidation or amalgamation) any Equity Interests, evidences of Indebtedness or other securities of, make or permit to exist any loans or advances to or Guarantees of the obligations of, or make or permit to exist any investment or any other interest in (each, an “Investment”), any other person except:

(a) the Transactions (including payment of the purchase consideration under the Merger Agreement);

(b) (i) Investments in the Equity Interests of Holdings, the Borrower or any other Restricted Subsidiary, (ii) intercompany loans to the Borrower or any other Restricted Subsidiary and (iii) Guarantees of Indebtedness expressly permitted hereunder; provided that in the case of an Investment by the Borrower or any of the other Restricted Subsidiaries in a Restricted Subsidiary that is not a Loan Party, at the time such Investment is made, no Event of Default shall have occurred and be continuing; provided further, that, at the time of the making of any such Investment (and after giving effect thereto), the sum of (A) outstanding Investments (valued at the time of the making thereof and without giving effect to any write downs or write offs thereof) made after the Closing Date in Restricted Subsidiaries that are not Loan Parties pursuant to clause (i) plus (B) outstanding intercompany loans made after the Closing Date to Subsidiaries that are not Loan Parties pursuant to clause (ii) plus (C) outstanding Guarantees of Indebtedness after the Closing Date of Subsidiaries that are not Loan Parties pursuant to clause (iii) shall not exceed an aggregate net amount equal to the greater of (1) $35.0 million and (2) 2.00% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such Investment for which Required Financial Statements have been delivered pursuant to Section 5.04;

(c) Permitted Investments and Investments that were Permitted Investments when made;

(d) Investments arising out of the receipt by the Borrower or any of the other Restricted Subsidiaries of non-cash consideration for the sale or other disposition of assets permitted under Section 6.05;

(e) loans and advances to officers, directors, managers and employees or consultants of any Parent Entity or any of its Restricted Subsidiaries (i) not to exceed $15.0 million in the aggregate at any time outstanding (calculated without regard to write downs or write offs thereof), (ii) in respect of payroll payments and expenses, moving expenses and other similar expenses, in each case incurred in the ordinary course of business or (iii) in connection with the purchase of Equity Interests of any Parent Entity solely to the extent that the amount of such loans and advances shall be contributed to Holdings or any of its Restricted Subsidiaries in cash as common equity;

(f) accounts receivable, security deposits and prepayments arising and trade credit granted in the ordinary course of business and any assets or securities received in satisfaction or partial satisfaction thereof from financially troubled account debtors to the extent reasonably necessary in order to prevent or limit loss and any prepayments and other credits to suppliers made in the ordinary course of business;

 

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(g) Hedge Agreements permitted by Section 6.01(c);

(h) Investments existing on, or contractually committed as of, the Incremental Amendment Effective Date and set forth on Schedule 6.04(h) and any extensions, renewals or reinvestments thereof, so long as the aggregate amount of all Investments pursuant to this clause (h) is not increased at any time above the amount of such Investments existing or committed on the Incremental Amendment Effective Date (other than pursuant to an increase as required by the terms of any such Investment as in existence on the Incremental Amendment Effective Date);

(i) Investments resulting from pledges and deposits under the following clauses of Section 6.02: (a), (f), (g), (k), (q), (r) and (ee);

(j) other Investments in an aggregate amount (valued at the time of the making thereof, and without giving effect to any write downs or write offs thereof) not to exceed (i) at the time of the making of such Investment (and after giving effect thereto) and together with all outstanding Investments pursuant to this Section 6.04(j)(i), the greater of (A) $80.0 million and (B) 4.5% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such Investment for which Required Financial Statements have been delivered pursuant to Section 5.04 (plus any returns of capital actually received by the respective investor in respect of Investments theretofore made by it pursuant to this clause (j)(i)) plus (ii) so long as no Event of Default has occurred and is continuing as of the making of such Investment, the portion, if any, of the Available Amount on the date of such election that the Borrower elects to apply to this Section 6.04(j)(ii);

(k) Investments constituting Permitted Business Acquisitions;

(l) intercompany loans among Foreign Subsidiaries and Guarantees by Foreign Subsidiaries permitted by Section 6.01(n);

(m) Investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with or judgments against, customers and suppliers, in each case, in the ordinary course of business and Investments acquired as a result of a foreclosure by the Borrower or any of the other Restricted Subsidiaries with respect to any secured Investments or other transfer of title with respect to any secured Investment in default;

(n) Investments of a Subsidiary of the Borrower acquired after the Second Amendment Effective Date or of an entity merged into, or consolidated or amalgamated with, the Borrower or any other Restricted Subsidiary after the Second Amendment Effective Date, in each case, (i) to the extent permitted under this Section 6.04, (ii) in the case of any acquisition, merger, consolidation or amalgamation, in accordance with Section 6.05, and (iii) to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger, consolidation or amalgamation and were in existence on the date of such acquisition, merger, consolidation or amalgamation;

(o) acquisitions of obligations of one or more directors, officers, managers or other employees of any Parent Entity, the Borrower or any other Restricted Subsidiary in connection with such director’s, officer’s, manager’s or employee’s acquisition of Equity Interests of any Parent Entity, so long as no cash is actually advanced by the Borrower or any of the other Restricted Subsidiaries to such directors, officers, managers or employees in connection with the acquisition of any such obligations;

 

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(p) Guarantees of operating leases (for the avoidance of doubt, excluding Capital Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case, entered into by the Borrower or any of the other Restricted Subsidiaries in the ordinary course of business;

(q) Investments to the extent that payment for such Investments is made with Equity Interests of any Parent Entity;

(r) Investments consisting of the redemption, purchase, repurchase or retirement of any Equity Interests permitted under Section 6.06;

(s) Investments in the ordinary course of business consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Uniform Commercial Code Article 4 customary trade arrangements with customers consistent with past practices;

(t) Guarantees permitted under Section 6.01 (except to the extent such Guarantee is expressly subject to Section 6.04);

(u) advances in the form of a prepayment of expenses, so long as such expenses are being paid in accordance with customary trade terms of the Borrower or any of the other Restricted Subsidiaries;

(v) Investments, including loans and advances, to any Parent Entity so long as Borrower or any of the other Restricted Subsidiaries would otherwise be permitted to make a Restricted Payment in such amount; provided that the amount of any such Investment shall also be deemed to be a Restricted Payment under the appropriate clause of Section 6.06 for all purposes of this Agreement;

(w) Investments consisting of the licensing or contribution of intellectual property pursuant to joint marketing arrangements with other persons;

(x) purchases and acquisitions of inventory, supplies, materials and equipment or purchases of contract rights or licenses or leases of intellectual property in each case in the ordinary course of business, to the extent such purchases and acquisitions constitute Investments;

(y) Investments received substantially contemporaneously in exchange for Equity Interests of any Parent Entity;

(z) Investments in (i) joint ventures and Unrestricted Subsidiaries, (ii) the Equity Interests of one or more newly formed persons that are received in consideration of the contribution by the Borrower or any of the other Restricted Subsidiaries of assets (including Equity Interests and cash) to such person or persons and (iii) Foreign Subsidiaries, in each case, valued at the fair market value of such Investment at the time such Investment is made, in the aggregate at any time outstanding not to exceed the greater of (x) $45.0 million and (y) 2.50% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such Investment for which Required Financial Statements have been delivered pursuant to Section 5.04 (calculated without regard to write downs or write offs thereof); provided that if any Investment pursuant to this clause (z) is made in any person that is not a Restricted Subsidiary at the date of the making of such Investment and such person becomes a Restricted Subsidiary after such date pursuant to another Investment (including a Subsidiary Redesignation) the amount of which, when taken together with the amount of the prior Investment, would be permitted under another provision of this Section 6.04, any Investment in such person outstanding under this Section 6.04(z) shall thereafter be deemed to have been made pursuant to such other provision and shall cease to have been made pursuant to this clause (z) for so long as such person continues to be a Restricted Subsidiary;

 

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(aa) Investments in assets useful in the business of the Borrower and any of its Subsidiaries made with the proceeds of any Reinvestment Deferred Amount or Below Threshold Asset Sale Proceeds; provided, that if the underlying Asset Sale or Recovery Event was with respect to Holdings or a Subsidiary Loan Party, then such Investment shall be consummated by a Subsidiary Loan Party;

(bb) any Investment, so long as, after giving effect to such Investment on a Pro Forma Basis, the Total Leverage Ratio is no greater than 4.25:1.00;

(cc) Investments in the Term Loans, the ABL Loans, the Senior Unsecured Notes and other Permitted Indebtedness of the Borrower, in each case to the extent such purchases or repurchases are not otherwise prohibited hereunder;

(dd) the 2018 Incremental Transactions (including payment of the consideration under the Acquisition Agreement (as defined in Incremental Amendment No. 1).

The amount of Investments that may be made at any time in Subsidiaries of the Borrower that are not Subsidiary Loan Parties pursuant to Section 6.04(b) or Section 6.04(j) (the “Related Sections”) may, at the election of the Borrower, be increased by the amount of Investments that could be made at such time under the other Related Section; provided that the amount of each such increase in respect of one Related Section shall be treated as having been used under the other Related Section.

Section 6.05 Mergers, Consolidations, Sales of Assets and Acquisitions. Merge into, or consolidate or amalgamate with, any other person, or permit any other person to merge into or consolidate with it, or sell, transfer or otherwise dispose of (in one transaction or in a series of transactions) all or any part of its assets (whether now owned or hereafter acquired), or issue, sell, transfer or otherwise dispose of any Equity Interests of any Restricted Subsidiary, or purchase, lease or otherwise acquire (in one transaction or a series of transactions) all or any substantial part of the assets of any other person or any division, unit or business of any other person, except that this Section 6.05 shall not prohibit:

(a) (i) the purchase and sale of inventory or equipment in the ordinary course of business, (ii) the acquisition or lease (pursuant to an operating lease) of any other asset in the ordinary course of business, (iii) the disposition of surplus, obsolete, damaged or worn out equipment or other property in the ordinary course of business or (iv) the disposition of Investments;

(b) if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing or would result therefrom, (i) the merger, consolidation or amalgamation of any Restricted Subsidiary into (or with) the Borrower in a transaction in which the Borrower is the survivor, (ii) the merger, consolidation or amalgamation of any Restricted Subsidiary into or with any Restricted Subsidiary of the Borrower (or person that will become a Restricted Subsidiary of the Borrower) that is or will become, substantially contemporaneously with the closing of the relevant transaction, a Subsidiary Loan Party in a transaction in which the surviving or resulting entity is a Restricted Subsidiary of the Borrower that is or becomes a Subsidiary Loan Party, (iii) the merger, consolidation or amalgamation of any Restricted Subsidiary that is not a Loan Party into or with any other Restricted Subsidiary that is not a Loan Party, (iv) the liquidation or dissolution or change in form of entity of any Restricted Subsidiary (other than the Borrower) if the Borrower or any Parent Entity on behalf of the Borrower determines in good faith that such liquidation, dissolution or change in form is in the best interests of the Borrower and (with respect to any liquidation or dissolution of a Loan Party, to the extent the residual assets of such Loan Party or proceeds thereof are not transferred to another Loan Party) is not materially disadvantageous to the Lenders or (v) the merger, consolidation or amalgamation

 

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of any Restricted Subsidiary of Holdings (other than the Borrower) with or into any other person in order to effect an Investment permitted under Section 6.04 so long as the continuing or surviving person shall be or become a Restricted Subsidiary of the Borrower that is a Subsidiary Loan Party if the merging, consolidating or amalgamating Restricted Subsidiary was a Loan Party and which, together with each of its Restricted Subsidiaries, shall have complied with the requirements of Section 5.10;

(c) sales, transfers, leases or other dispositions to the Borrower or any of the other Restricted Subsidiaries (upon voluntary liquidation or otherwise); provided that any sales, transfers, leases or other dispositions by a Loan Party to a Restricted Subsidiary that is not a Loan Party in reliance on this clause (c) shall be made in compliance with Section 6.07 and the aggregate gross proceeds (including non-cash proceeds) of any and all assets sold, leased, transferred or leased shall not in the aggregate exceed, as of the date of any such disposition (and after giving effect thereto), in any fiscal year of Holdings, the greater of (i) $20.0 million and (ii) 1.0% of Consolidated Total Assets as of the end of the fiscal quarter immediately prior to the date of such sale, transfer or other disposition for which Required Financial Statements have been delivered pursuant to Section 5.04;

(d) Sale and Lease-Back Transactions permitted by Section 6.03;

(e) Investments permitted by Section 6.04, Permitted Liens and Restricted Payments permitted by Section 6.06;

(f) Dispositions of Investments in joint ventures to the extent required by, or made pursuant to, contractual buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements;

(g) Transfers of property subject to casualty, eminent domain or condemnation proceedings (including in lieu thereof);

(h) the sale, lease, sublease, license, sublicense, consignment, conveyance or other disposition of equipment, inventory or other assets (including leasehold interests in real property) with respect to facilities that are temporarily not in use, held for sale or closed;

(i) sales of non-core assets acquired in connection with an acquisition permitted hereunder and sales of real estate assets acquired in an acquisition permitted hereunder which, in each case, within 90 days of the date of the acquisition, are designated in writing to the Administrative Agent as being held for sale and not for the continued operation of the Borrower or any of the other Restricted Subsidiaries or any of their respective businesses;

(j) terminations of Hedge Agreements;

(k) sales or dispositions of Equity Interests of Unrestricted Subsidiaries;

(l) (i) licensing and cross-licensing arrangements involving any technology, intellectual property or intellectual property rights of the Borrower or any other Restricted Subsidiary in the ordinary course of business, other than any such exclusive licensing arrangement that prevents the Borrower or any other Restricted Subsidiary from conducting its business in any material respect, and (ii) the sale, disposal, abandonment, cancellation or lapse of intellectual property rights, or any issuances or registrations, or applications for issuances or registrations, of any intellectual property rights, which, in the reasonable good faith determination of the Borrower or any Parent Entity on behalf of the Borrower, are uneconomical, negligible, or not material to the conduct of the business of the Borrower or the other Restricted Subsidiaries;

 

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(m) the sale of defaulted receivables in the ordinary course of business and not as part of an accounts receivables financing transaction;

(n) sales, transfers or other dispositions of assets not otherwise permitted by this Section 6.05; provided that (A) no Event of Default shall have occurred and be continuing or would result therefrom, (B) the Net Cash Proceeds thereof shall be applied in accordance with Section 2.09, (C) at least 75.0% of the consideration therefor shall be in the form of cash and cash equivalents and (D) such sale, transfer or disposition shall be made for fair value (as determined by the Borrower in good faith); provided, further, that (A) any liabilities (as shown on the most recent Required Financial Statements or in the notes thereto) of the Borrower or any of its Subsidiaries, other than liabilities that are by their terms subordinated to the Obligations, that are assumed by the transferee with respect to the applicable disposition and for which the Borrower and its Subsidiaries shall have been validly released by all applicable creditors in writing, (B) any securities received by the Borrower or its Subsidiaries from such transferee that are converted by the Borrower or such Subsidiary into cash (to the extent of the cash received) within 180 days following the closing of the applicable disposition and (C) any Designated Non-Cash Consideration received in respect of such disposition having an aggregate fair market value as determined by the Borrower in good faith, taken together with all other Designated Non-Cash Consideration received pursuant to this clause (C) that is then outstanding, shall not exceed the greater of (x) $35.0 million and (y) 2.0% of Consolidated Total Assets (measured at the time such Designated Non-Cash Consideration is received), with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value, shall be deemed for purposes of this clause (n) to be cash;

(o) Permitted Business Acquisitions (including any merger, consolidation or amalgamation in order to effect a Permitted Business Acquisition; provided that following any such merger, consolidation or amalgamation involving the Borrower, the Borrower shall be the surviving entity;

(p) leases, licenses, or subleases or sublicenses of any real or personal property in the ordinary course of business;

(q) sales, leases or other dispositions of inventory of the Borrower or any of its Subsidiaries determined by the management of the Borrower to be no longer useful or necessary in the operation of the business of the Borrower or such Subsidiary;

(r) any exchange or swap, including transactions covered by Section 1031 of the Code, of assets for services or other assets of comparable or greater value; provided that (i) no Event of Default shall exist or would result therefrom and (ii) in the event of an exchange or swap with a fair market value in excess of $15.0 million, such exchange or swap shall have been approved by at least a majority of the Governing Persons of the Borrower or any Parent Entity on behalf of the Borrower; and

(s) (i) termination of leases in the ordinary course of business, (ii) the expiration of any option agreement in respect of real or personal property and (iii) any surrender or waiver of contractual rights or the settlement, release or surrender of contractual rights or other litigation claims in the ordinary course of business.

To the extent any Collateral is disposed of in a transaction expressly permitted by this Section 6.05 to any person other than Holdings, the Borrower or any other Restricted Subsidiary, such Collateral shall be sold free and clear of the Liens created by the Loan Documents, and the Administrative Agent shall take, and shall be authorized by each Lender to take, any actions reasonably requested by the Borrower in order to evidence the foregoing, in each case, in accordance with Section 9.18.

 

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Section 6.06 Restricted Payments. Declare or pay any dividend or make any other distribution (by reduction of capital or otherwise), directly or indirectly, whether in cash, property, securities or a combination thereof, with respect to any of its Equity Interests (other than dividends and distributions on Equity Interests payable solely by the issuance of additional Equity Interests (other than Disqualified Stock) of the person paying such dividends or distributions) or directly or indirectly redeem, purchase, retire or otherwise acquire for value any of its Equity Interests or set aside any amount for any such purpose (other than through the issuance of additional Equity Interests (other than Disqualified Stock) of the person redeeming, purchasing, retiring or acquiring such shares) (the foregoing, “Restricted Payments”) other than:

(a) Restricted Payments to Holdings, the Borrower or any other Subsidiary of Holdings (or, in the case of non-Wholly Owned Subsidiaries, to Holdings and to each other owner of Equity Interests of such Subsidiary on a pro rata basis (or more favorable basis from the perspective of Holdings, the Borrower or such Subsidiary) based on their relative ownership interests so long as any repurchase of its Equity Interests from a person that is not Holdings or a Restricted Subsidiary of Holdings is permitted under Section 6.04);

(b) Restricted Payments to permit any Parent Entity to (i) pay operating, overhead, legal, accounting and other professional fees and expenses (including directors’ fees and expenses and administrative, legal, accounting, filings and similar expenses), (ii) pay fees and expenses related to any public offering or private placement of debt or equity securities of any Parent Entity whether or not consummated or any Investment permitted hereunder, (iii) pay fees, non-income taxes and expenses in connection with any Parent Entity’s ownership of any Subsidiary or the maintenance of its legal existence, (iv) make payments permitted by Section 6.07 (other than Section 6.07(g)) or (v) pay customary salary, bonus and other benefits payable to, and indemnities provided on behalf of, officers and employees of any Parent Entity, in each case, in order to permit such Parent Entity to make such payments;

(c) (i) Restricted Payments to any Parent Entity that files, or to any Parent Entity for the purpose of paying to any other Parent Entity that files, a consolidated U.S. federal or combined or unitary state tax return that includes Holdings and its Subsidiaries (or the taxable income thereof), in each case, to the extent income taxes reportable on such return are attributable to Holdings and its Restricted Subsidiaries, in an amount not to exceed the amount that Holdings and its Restricted Subsidiaries would have been required to pay in respect of U.S. federal, state or local taxes (as the case may be) in respect of such fiscal year if Holdings and its Restricted Subsidiaries paid such taxes directly as a stand-alone taxpayer (or stand-alone group) and (ii) to the extent of amounts paid by Unrestricted Subsidiaries to Holdings or any of its Subsidiaries (unless (A) such cash distribution by an Unrestricted Subsidiary is prohibited or restricted by any law, (B) the Borrower is unable to obtain, through commercially reasonable efforts, any required consent, approval or authorization of any Governmental Authority for such cash distribution, or (C) such cash distribution is prohibited by any contractual obligation or the terms of any security that the Borrower, through commercially reasonable efforts, is unable to avoid), Restricted Payments to any Parent Entity necessary to pay the tax liabilities of Unrestricted Subsidiaries or of any Parent Entity attributable to Unrestricted Subsidiaries;

(d) Restricted Payments to any Parent Entity the proceeds of which are used to purchase or redeem, or to any Parent Entity for the purpose of paying to any other Parent Entity to purchase or redeem, the Equity Interests of such Parent Entity (including related stock appreciation rights or similar securities) held by then present or former directors, consultants, officers or employees of the Borrower or any of its Restricted Subsidiaries, their respective estates or family members, or by any Plan or any shareholders’ agreement then in effect upon such person’s death, disability, retirement or termination of employment or under the terms of any such Plan or any other agreement under which such

 

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shares of stock or related rights were issued; provided that the aggregate amount of such purchases or redemptions under this clause (d) shall not exceed (i) $10.0 million in the aggregate in any fiscal year of Holdings (with any unused amounts in any fiscal year being carried over to the immediately succeeding fiscal year) plus (ii) the amount of Net Cash Proceeds (other than amounts included in the Available Amount, amounts used for purposes of Section 6.01(aa) or Section 6.09(b)(i)(3) or used to fund charges, expenses, accruals or reserves in accordance with clause (l) of the definition of “Consolidated Net Income”) contributed to the Borrower or Holdings that were received by any Parent Entity during such fiscal year from sales of Equity Interests of any Parent Entity to directors, managers, consultants, officers or employees of the Borrower or any of its Subsidiaries in connection with permitted employee compensation and incentive arrangements, plus (iii) the amount of net proceeds of any key man life insurance policies received during such calendar year plus (iv) the amount of any bona fide cash bonuses otherwise payable to members of management, directors or consultants of the Borrower or any of its Subsidiaries in connection with the Transactions that are foregone in return for the receipt of Equity Interests, the fair market value of which is equal to or less than the amount of such cash bonuses, which, if not used in any year, may be carried forward to any subsequent fiscal year; provided, further, that cancellation of Indebtedness owing to Holdings, the Borrower or any of its Subsidiaries from any future, present or former employees, directors, managers or consultants (or any of their respective estates or family members) of the Borrower or any of its Subsidiaries in connection with a repurchase of Equity Interests of any Parent Entity will not be deemed to constitute a Restricted Payment for purposes of this Section 6.06;

(e) non-cash repurchases of Equity Interests of Holdings, the Borrower or any of the Restricted Subsidiaries deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price of such options or warrants;

(f) Restricted Payments in an amount not to exceed the portion, if any, of the Available Amount on such date that the Borrower elects to apply to this Section 6.06(f), such election to be specified in a written notice of a Responsible Officer of the Borrower calculating in reasonable detail the amount of the Available Amount immediately prior to such election and the amount thereof elected to be so applied; provided that (i) at the time such Restricted Payments are made, no Event of Default shall have occurred and be continuing or would result therefrom and (ii) after giving effect to such Restricted Payments on a Pro Forma Basis, the Fixed Charge Coverage Ratio shall be no less than 2.00:1.00.

(g) Restricted Payments to consummate the Transactions and to pay any amounts pursuant to the Merger Agreement, and Restricted Payments made by any Subsidiary in exchange for the assumption and contribution of the Obligations in connection with the Equity Contribution;

(h) Restricted Payments to allow any Parent Entity to make, or to any Parent Entity for the purpose of paying to any other Parent Entity 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; provided that any such payment is not for the purpose of evading the limitations of this Section 6.06;

(i) after a Qualified IPO, Restricted Payments to any Parent Entity in an amount equal to the greater of (x) 6.0% per annum of the net cash proceeds received from any public offering of the Equity Interests of Holdings or any Parent Entity that are contributed to or received by Holdings or the Borrower and (y) 5.0% of market capitalization (calculated based on the average closing price per share of the common equity interests of the Borrower, Holdings or Parent Entity, as applicable, for the 30 consecutive trading days immediately preceding the date of declaration of the Restricted Payment (it being understood that with respect to market capitalization based on the closing price per share of the common equity interests of a Parent Entity, such calculation shall be adjusted by the Borrower in good faith to reflect the portion of such market capitalization attributable to the Borrower and its Subsidiaries)), so long as no Default or Event of Default has occurred or is continuing;

 

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(j) Restricted Payments to any Parent Entity to finance, or to any Parent Entity for the purpose of paying to any other Parent Entity to finance, any Investment permitted to be made pursuant to Section 6.04; provided that (i) such Restricted Payment shall be made substantially concurrently with the closing of such Investment and (ii) such Parent Entity shall, immediately following the closing thereof, cause (A) all property acquired (whether assets or Equity Interests) to be contributed to the Borrower or any other Subsidiary or (B) the merger, consolidation or amalgamation (to the extent permitted by Section 6.05) of the person formed or acquired into the Borrower or any other Subsidiary in order to consummate such Permitted Business Acquisition or Investment, in each case, in accordance with the requirements of Section 5.10;

(k) so long as no Event of Default has occurred and is continuing, Restricted Payments to any Parent Entity not to exceed (i) $2.0 million in any fiscal year to pay, or to any Parent Entity for the purpose of paying to any other Parent Entity to pay, monitoring, consulting, management, transaction, advisory, termination or similar fees payable to a Sponsor or any Sponsor Affiliate in accordance with the terms of any management or similar agreement with terms reasonably consistent with the terms of similar agreements entered into by similar financial sponsors and portfolio companies as determined in good faith by the Borrower or any Parent Entity on behalf of the Borrower at the time such management or similar agreement is entered into by the Sponsors and the Borrower (or, in the case of Teachers, distributions and dividends paid to Teachers to approximate management fees and transaction and advisory fees) (it being understood that any amounts that are not paid due to the existence of an Event of Default shall accrue and may be paid when the applicable Event of Default ceases to exist or is otherwise waived) and (ii) indemnities, reimbursements and reasonable and documented out-of-pocket fees and expenses of a Sponsor or any Sponsor Affiliate in connection therewith; provided that with respect to this clause (ii), such payments shall be on terms reasonably consistent with arrangements entered into between similar financial sponsors and portfolio companies as determined in good faith by the Borrower or any Parent Entity on behalf of the Borrower;

(l) Restricted Payments in an amount sufficient to make, to the extent permitted pursuant to Section 6.09(b), scheduled payments of interest on, prepayments of, or other payments in respect of, any Junior Financing;

(m) Restricted Payments required by the terms of agreements as in effect on the Incremental Amendment Effective Date (or as amended, to the extent such amendment is not adverse to the Lenders in any material respect) and listed on Schedule 6.06(m);

(n) any Restricted Payment, so long as, (i) after giving effect to such Restricted Payment on a Pro Forma Basis the Total Leverage Ratio is no greater than 4.25:1.00 and (ii) no Event of Default has occurred and is continuing; and

(o) so long as no Event of Default has occurred and is continuing, payments to a Sponsor or any Sponsor Affiliate for any financial advisory, financing, underwriting or placement services or in respect of other investment banking or transaction advisory activities, including in connection with (i) the Transactions, acquisitions or divestitures, which payments are approved by the majority of the Governing Persons of the Borrower or any Parent Entity on behalf of the Borrower, in good faith and (ii) distributions and dividends paid to Teachers to approximate management fees and transaction and advisory fees; provided that such payments shall be on terms reasonably consistent with arrangements entered into between similar financial sponsors and portfolio companies as determined in good faith by the Borrower or any Parent Entity on behalf of the Borrower.

 

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Section 6.07 Transactions with Affiliates. Sell or transfer any property or assets to, or purchase or acquire any property or assets from, or otherwise engage in any other transaction with, any of its Affiliates in a transaction involving aggregate consideration in excess of $5.0 million, unless such transaction is (i) otherwise permitted (or required) under this Agreement or (ii) upon terms not materially less favorable to Holdings or its Restricted Subsidiaries, as applicable, than would be obtained in a comparable arm’s length transaction with a person that is not an Affiliate, except that this Section 6.07 shall not prohibit:

(a) 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 Governing Persons of the Borrower or any Parent Entity;

(b) loans or advances to directors, officers, managers, employees or consultants of any Parent Entity, the Borrower or any of its Subsidiaries in accordance with Section 6.04(e);

(c) transactions between or among the Borrower and any other Restricted Subsidiary or any entity that becomes a Restricted Subsidiary as a result of such transaction (including via merger, consolidation or amalgamation in which a Loan Party is the surviving entity);

(d) the payment of fees, customary benefits, reasonable out of pocket costs and indemnities to directors, officers, consultants and employees of a Parent Entity, the Borrower or any of the other Restricted Subsidiaries in the ordinary course of business (limited, in the case of any Parent Entity, to the portion of such fees and expenses that are allocable to Holdings and its Restricted Subsidiaries (which shall be 100% for so long as such Parent Entity owns no assets other than, directly or indirectly, the Equity Interests in Holdings and its Restricted Subsidiaries and assets incidental to the ownership of Holdings and its Restricted Subsidiaries);

(e) the Transactions pursuant to the Transaction Documents and other transactions, agreements and arrangements in existence on the Incremental Amendment Effective Date and set forth on Schedule 6.07(e) or any amendment thereto to the extent such amendment is not adverse to the Lenders in any material respect;

(f) (i) any employment agreements entered into by Holdings or any of its Restricted Subsidiaries in the ordinary course of business, (ii) 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 (iii) 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;

(g) Restricted Payments permitted under Section 6.06, including payments to any Parent Entity;

(h) any purchase by Parent Entity or its Subsidiaries of the Equity Interests of any Wholly-Owned Subsidiary; provided that any Equity Interests of any Wholly-Owned Subsidiary purchased by such Parent Entity shall be pledged to the Administrative Agent on behalf of the Lenders pursuant to the Collateral Agreement;

 

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(i) so long as no Specified Event of Default has occurred and is continuing, any agreement to pay, and the payment of, monitoring, consulting, management, transaction, advisory, termination or similar fees payable to a Sponsor or any Sponsor Affiliate pursuant to a management agreement or another similar or related agreement entered into with a Sponsor or any Sponsor Affiliate, which agreement has terms reasonably consistent with the terms of similar agreements entered into by similar financial sponsors and portfolio companies as determined in good faith by the Borrower or any Parent Entity on behalf of the Borrower at the time such management or similar agreement is entered into (or, in the case of Teachers, distributions and dividends paid to Teachers to approximate management fees and transaction and advisory fees), provided that amounts paid pursuant to this Section 6.07 shall not exceed $2.0 million in any fiscal year, and provided, further, that to the extent any such fees are not paid due to the occurrence of a Specified Event of Default, such fees shall accrue during the continuance of such Specified Event of Default and paid immediately upon the cure, cessation or waiver of such Specified Event of Default;

(j) [Reserved];

(k) any transaction in respect of which the Borrower delivers to the Administrative Agent (for delivery to the Lenders) a letter addressed to the Governing Persons of Holdings or the Borrower from an accounting, appraisal or investment banking firm, in each case, of nationally recognized standing which letter states that such transaction is on terms that are no less favorable to Holdings or its Subsidiaries, as applicable, than would be obtained in a comparable arm’s length transaction with a person that is not an Affiliate or is fair from a financial point of view;

(l) subject to clause (i) of this Section 6.07, the payment of all fees, expenses, bonuses and awards related to the Transactions contemplated by the Information Memorandum, including fees to a Sponsor or any Sponsor Affiliate;

(m) transactions with a joint venture, partnership, limited liability company or other entity for the purchase or sale of goods, equipment and services entered into in the ordinary course of business and in a manner consistent with past practice;

(n) the issuance, sale or transfer of Equity Interests of Holdings or the Borrower to any Parent Entity and capital contributions by any Parent Entity to Holdings or the Borrower;

(o) the issuance of Equity Interests to the management of Holdings or any of its Subsidiaries in connection with the Transactions;

(p) payments by Holdings or any of the Restricted Subsidiaries pursuant to tax sharing agreements among Holdings and any of the Restricted Subsidiaries on customary terms that require each party to make payments when such taxes are due or refunds received of amounts equal to the income tax liabilities and refunds generated by each such party calculated on a separate return basis, and payments to the party generating tax benefits and credits of amounts equal to the value of such tax benefits and credits made available to the group by such party;

(q) payments or loans (or cancellation of loans) to employees, directors, officers or consultants that are (i) approved by a majority of the Governing Persons (excluding any interested persons) of Holdings or the Borrower, in good faith, (ii) made in compliance with applicable law and (iii) otherwise permitted under this Agreement;

(r) transactions with customers, clients, suppliers, or purchasers or sellers or licensors or licensees of goods or services, licenses or sublicenses of intellectual property or lease or sublease of assets, in each case, in the ordinary course of business and otherwise in compliance with the terms of this Agreement that are fair to Holdings and its Subsidiaries;

 

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(s) transactions between or among Holdings or any of its Subsidiaries and any person, a director of which is also a director of the Borrower or any Parent Entity, so long as (i) such director abstains from voting as a director of the Borrower or such Parent Entity, as the case may be, on any matter involving such other person and (ii) such person is not an Affiliate of the Borrower for any reason other than such director’s acting in such capacity;

(t) transactions permitted by, and complying with, the provisions of Section 6.04(b) and Section 6.05(b); and

(u) intercompany transactions undertaken in good faith (as certified by a Responsible Officer of the Borrower) for the purpose of improving the consolidated tax efficiency of Holdings and its Subsidiaries and not for the purpose of circumventing any covenant set forth herein.

Section 6.08 Business of Borrower.

(a) Notwithstanding any other provisions hereof, engage at any time in any business or business activity other than any business or business activity conducted by the Borrower or any other Restricted Subsidiary on the Second Amendment Effective Date and any similar, corollary, related, incidental or complementary businesses or business activities or a reasonable extension, development or expansion thereof or ancillary thereto.

Section 6.09 Limitation on Payments and Modifications of Indebtedness; Modifications of Certificate of Incorporation, By Laws and Certain Other Agreements; etc.

(a) Amend or modify in any manner materially adverse to the Lenders or the Administrative Agent, or grant any waiver or release under or terminate in any manner (if such granting or termination shall be materially adverse to the Lenders), the articles or certificate of incorporation (or similar document), by-laws, limited liability company operating agreement, partnership agreement or other organizational documents of the Borrower or any other Restricted Subsidiary or the Merger Agreement, except that this Section 6.09(a) shall not prohibit the Conversion.

(b) (i) Make, or agree or offer in writing to pay or make, directly or indirectly, any payment or other distribution (other than any consent or amendment fee) in cash in respect of (A) any Indebtedness permitted to be incurred hereunder that is subordinated in right of payment of the Obligations, (B) Senior Unsecured Notes or unsecured Indebtedness incurred pursuant to Section 6.01(aa) or (C) any Permitted Refinancing Indebtedness in respect of any of the foregoing (“Junior Financing”) or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination in respect of such Junior Financing except for (1) the incurrence of Permitted Refinancing Indebtedness in respect thereof, (2) payments of regularly scheduled principal and interest, mandatory offers to repay, mandatory prepayments of principal, premium and interest and payments of fees, expenses and indemnification obligations with respect to such Junior Financing, (3) payments or distributions in respect of all or any portion of such Junior Financing with the proceeds (other than any proceeds included in the Available Amount, used in connection with Section 6.01(aa) or Section 6.06(d) or used to fund charges, expenses, accruals or reserves in accordance with clause (l) of the definition of “Consolidated Net Income”) contributed directly or indirectly to the Borrower or Holdings by any Parent Entity from the issuance, sale or exchange by any Parent Entity of Equity Interests made within 18 months prior thereto, (4) the conversion of any such Junior Financing to Equity Interests of any Parent Entity (without duplication of amounts included in the Available Amount), (5) so long as no Event of Default has occurred and is continuing, any payment that is intended to prevent such Junior Financing or any Term Facility from being treated as an “applicable high yield discount obligation” within the meaning

 

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of Section 163(i)(1) of the Code, (7) so long as (x) no Event of Default has occurred and is continuing or would result therefrom and (y) the Fixed Charge Coverage Ratio, on a Pro Forma Basis, is 2.00 to 1.00 or greater, payments or distributions in respect of Junior Financings made with the portion, if any, of the Available Amount that the Borrower elects to apply to this Section 6.09(b)(i), (8) any payment, so long as, on a Pro Forma Basis, the Total Leverage Ratio does not exceed 4.25 to 1.00, and (9) otherwise in an amount up to $25.0 million; or

(ii) amend or modify, or permit the amendment or modification of, any provision of any Junior Financing or any agreement, document or instrument evidencing or relating thereto, other than amendments or modifications that (A) are not materially adverse to the Lenders (as reasonably determined by the Borrower) or (B) otherwise comply with the definition of “Permitted Refinancing Indebtedness”.

(c) Permit any Restricted Subsidiary to enter into any agreement or instrument that by its terms restricts (1) the payment of dividends or distributions or the making of cash advances to the Borrower or any of its Subsidiaries that is a direct or indirect parent of such Restricted Subsidiary or (2) the granting of Liens by the Borrower or such other Restricted Subsidiary pursuant to the Security Documents, in each case other than those arising under any Loan Document, except, in each case, restrictions existing by reason of:

(i) restrictions imposed by applicable law;

(ii) contractual encumbrances or restrictions (A) under the ABL Loan Documents, (B) under the Senior Unsecured Notes, (C) under the definitive documentation evidencing any Credit Agreement Refinancing Indebtedness or Credit Agreement Refinancing Indebtedness (as defined in each of the ABL Credit Agreement), (D) under Indebtedness created under Incremental Facilities, Incremental Equivalent Term Debt, Indebtedness created under Incremental Facilities (as defined in the ABL Credit Agreement), Indebtedness permitted under Section 6.01(b) or Indebtedness secured by a Lien permitted under Section 6.02(u) or 6.02(ee) and (E) under any Permitted Refinancing Indebtedness in respect of any of the foregoing or any agreements related to any Permitted Refinancing Indebtedness in respect of any such Indebtedness that does not expand the scope of any such encumbrance or restriction;

(i) any restriction on a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of the Equity Interests or assets of a Restricted Subsidiary pending the closing of such sale or disposition;

(ii) customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business;

(iii) any restrictions imposed by any agreement relating to secured Indebtedness permitted by this Agreement to the extent that such restrictions apply only to the property or assets securing such Indebtedness;

(iv) any restrictions imposed by any agreement relating to Indebtedness incurred pursuant to Sections 6.01(i), (j), (l), (n), (r), (s) or (aa) or Permitted Refinancing Indebtedness in respect thereof;

(v) customary provisions contained in leases or licenses of intellectual property and other similar agreements entered into in the ordinary course of business;

 

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(vi) customary provisions restricting subletting or assignment of any lease governing a leasehold interest;

(vii) customary provisions restricting assignment of any agreement or any rights thereunder, in each case, entered into in the ordinary course of business;

(viii) customary restrictions and conditions contained in any agreement relating to the sale, transfer or other disposition of any asset permitted under Section 6.05 pending the consummation of such sale, transfer or other disposition;

(ix) customary restrictions and conditions contained in the document relating to any Lien, so long as (1) such Lien is a Permitted Lien and such restrictions or conditions relate only to the specific asset subject to such Lien and (2) such restrictions and conditions are not created for the purpose of avoiding the restrictions imposed by this Section 6.09;

(x) customary net worth provisions contained in Real Property leases entered into by Restricted Subsidiaries, so long as the Borrower or any Parent Entity on behalf of the Borrower has determined in good faith that such net worth provisions would not reasonably be expected to impair the ability of the Borrower and the other Restricted Subsidiaries to meet their ongoing obligations;

(xi) any agreement in effect at the time any person becomes a Restricted Subsidiary, so long as such agreement was not entered into in contemplation of such person becoming a Restricted Subsidiary;

(xii) restrictions in agreements representing Indebtedness permitted under Section 6.01 of a Restricted Subsidiary of the Borrower that is not a Subsidiary Loan Party;

(xiii) customary restrictions on leases, subleases, licenses or Equity Interests or asset sale agreements otherwise permitted hereby as long as such restrictions relate to the Equity Interests and assets subject thereto;

(xiv) restrictions on cash or other deposits or net worth imposed by customers or suppliers under contracts entered into in the ordinary course of business; or

(xv) any encumbrances or restrictions of the type referred to in Section 6.09(c)(1) and Section 6.09(c)(2) imposed by any amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings of the contracts, instruments or obligations referred to in clauses (i) through (xvi) above, so long as such amendments, modifications, restatements, renewals, increases, supplements, refundings, replacements or refinancings are, in the good faith judgment of the Borrower or any Parent Entity on behalf of the Borrower, no more restrictive in any material respect with respect to or such Lien, dividend and other payment restrictions than those contained in the Lien, dividend or other payment restrictions prior to such amendment, modification, restatement, renewal, increase, supplement, refunding, replacement or refinancing.

 

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ARTICLE VIA

Holdings Covenant

Holdings covenants and agrees with each Lender that, so long as this Agreement shall remain in effect:

(a) Holdings shall not conduct, transact or otherwise engage in any material operating or business activities; provided that the following and any activities incidental thereto shall be permitted in any event: (i) its ownership of the Equity Interests of the Borrower, including payment of dividends and other amounts in respect of its Equity Interests, (ii) the maintenance of its legal existence (including the ability to incur fees, costs and expenses relating to such maintenance), (iii) the performance of its obligations with respect to the Loan Documents, the ABL Loan Documents, the documents relating to the Senior Unsecured Notes, Qualified Holding Company Debt and any documentation relating to any incremental facilities or refinancing of the foregoing and any management agreement entered into with a Sponsor or a Sponsor Affiliate, which management agreement has terms reasonably consistent with the terms of similar agreements entered into by financial sponsors and portfolio companies at the time such management agreement is entered into, (iv) any public offering of its common stock or any other issuance or sale of its Equity Interests and related activities to becoming and maintaining any requirements as a public reporting company or registrant with the SEC or any other securities regulatory authorities, (v) the issuance of securities, payment of dividends, making contributions to the capital of the Borrower and guaranteeing the obligations of the Borrower and the other Restricted Subsidiaries to the extent not prohibited under this Agreement, (vi) participating in tax, accounting and other administrative matters (x) as a member of the Borrower, (y) as a member of any unitary, combined or similar group including Holdings and the Borrower, or (z) with respect to its own business and activities, (vii) holding any cash or property (but not operate any property) received in connection with permitted Restricted Payments pending application of the proceeds thereof and (viii) providing indemnification to officers and directors.

(b) Holdings may merge, amalgamate or consolidate with or into any other person; provided that (i) (x) such person is organized under the laws of the United States or any state or other political subdivision thereof (including any territory or the District of Columbia) and (y) such person upon the consummation of such merger, consolidation or amalgamation becomes a party to this agreement and assumes the obligations of Holdings hereunder and from and after such time such person shall be deemed to be Holdings for all purposes hereunder or (ii) following such merger, amalgamation or consolidation, Holdings shall be the surviving entity.

ARTICLE VII

Events of Default

Section 7.01 Events of Default. In case of the happening of any of the following events (each, an “Event of Default”):

(a) any representation or warranty made or deemed made by Holdings, the Borrower or any other Subsidiary Loan Party herein or in any other Loan Document or any certificate or document delivered pursuant hereto or thereto shall prove to have been false or misleading in any material respect when so made or deemed made;

(b) default shall be made in the payment of any principal of any Term Loan when and as the same shall become due and payable, whether at the due date thereof, at a date fixed for prepayment thereof, by acceleration thereof or otherwise;

 

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(c) default shall be made in the payment of any interest on any Term Loan or in the payment of any Fee or any other amount (other than an amount referred to in clause (b) of this Section 7.01) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days;

(d) default shall be made in the due observance or performance by Holdings, the Borrower or any Subsidiary Loan Party of any covenant, condition or agreement contained in Section 5.01(a), Section 5.05(a) or Section 5.08 or in Article VI or Article VIA (in each case solely to the extent applicable to such person);

(e) default shall be made in the due observance or performance by Holdings, the Borrower or any other Subsidiary Loan Party of any covenant, condition or agreement contained in any Loan Document (other than those specified in clauses (b), (c) and (d) of this Section 7.01) (in each case solely to the extent applicable to such person) and such default shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower;

(f) (i) any event or condition shall occur that (A) results in any Material Indebtedness becoming due prior to its scheduled maturity or (B) enables or permits (after all applicable grace periods have actually expired) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity or (ii) the Borrower or any Restricted Subsidiary shall fail to pay the principal of any Material Indebtedness at the stated final maturity thereof; provided that this clause (f) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; provided, further, that the failure to observe or perform the financial maintenance covenant under the ABL Credit Agreement (a “Financial Covenant Default”) shall not in and of itself constitute an Event of Default hereunder until the earlier of (1) 60 days following the date of such Financial Covenant Default and (2) the date on which the lenders under the ABL Credit Agreement shall have accelerated payment of the ABL Obligations and terminated the ABL Commitments or foreclosed upon the ABL Priority Collateral; and provided, further, that prior to the time it becomes an Event of Default hereunder, any Financial Covenant Default may be waived, amended, terminated or otherwise modified or cured from time to time by the Borrower and the Required Lenders (as defined in the ABL Credit Agreement) and then shall not constitute an Event of Default hereunder;

(g) a Change in Control shall have occurred;

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of Holdings, the Borrower or any of the Material Subsidiaries, or of a substantial part of the property or assets of Holdings, the Borrower or any Material Subsidiary, under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Material Subsidiary or for a substantial part of the property or assets of Holdings, the Borrower or any Material Subsidiary or (iii) the winding up or liquidation of Holdings, the Borrower or any Material Subsidiary (except, in the case of any Material Subsidiary, in a transaction permitted by Section 6.05) and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

 

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(i) Holdings, the Borrower or any Material Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in clause (h) of this Section 7.01, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Material Subsidiary or for a substantial part of the property or assets of Holdings, the Borrower or any Material Subsidiary, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) become unable or admit in writing its inability or fail generally to pay its debts as they become due;

(j) the failure by the Borrower or any other Material Subsidiary to pay one or more final judgments aggregating in excess of $30.0 million (to the extent not covered by insurance and which are not vacated, discharged, effectively waived or stayed or bonded pending appeal within 30 days from entry thereof), or any action shall be legally taken by a judgment creditor to levy upon assets or properties of the Borrower or any other Subsidiary Loan Party to enforce any such judgment;

(k) (i) a trustee shall be appointed by a United States district court to administer any Plan, (ii) an ERISA Event or ERISA Events shall have occurred with respect to any Plan or Multiemployer Plan, (iii) the PBGC shall institute proceedings (including giving notice of intent thereof) to terminate any Plan or Plans, (iv) Holdings, the Borrower or any other Restricted Subsidiary or any ERISA Affiliate shall have been notified by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in reorganization (within the meaning of Section 4242 of ERISA), is being terminated, is insolvent (within the meaning of Section 4245 of ERISA) or is in endangered or critical status (within the meaning of Section 305 of ERISA) or (v) Holdings, the Borrower or any other Restricted Subsidiary shall engage in any “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan (other than any “prohibited transaction” for which a statutory or administrative exemption is available) and, in each case, with respect to clauses (i) through (v) above, such event or condition, together with all other such events or conditions, if any, would reasonably be expected to have a Material Adverse Effect; and

(l) (i) any material provision of any Loan Document shall cease to be, or be asserted in writing by Holdings, the Borrower or any other Restricted Subsidiary not to be, for any reason, a legal, valid and binding obligation of any party thereto, (ii) any security interest purported to be created by any Security Document and to extend to assets that are not immaterial to Holdings, the Borrower and the other Restricted Subsidiaries on a consolidated basis shall cease to be, or shall be asserted in writing by the Borrower or any other Loan Party not to be, a valid and perfected security interest (perfected as or having the priority required by this Agreement or the relevant Security Document and subject to such limitations and restrictions as are set forth herein and therein) in the securities, assets or properties covered thereby, except to the extent that any such loss of perfection or priority results from the limitations of foreign laws, rules and regulations as they apply to pledges of Equity Interests in Foreign Subsidiaries or the application thereof, or from the failure of the Administrative Agent to maintain possession of certificates actually delivered to it representing securities pledged under a Security Document or to file Uniform Commercial Code continuation statements or take the actions described on Schedule 3.04 and except to the extent that such loss is covered by a lender’s title insurance policy and the Administrative Agent shall be reasonably satisfied with the credit of such insurer or (iii) the Guarantees pursuant to the Security Documents by any Loan Party of any of the Obligations shall cease to be in full force and effect (other than in accordance with the terms thereof) or shall be asserted in writing by Holdings, the Borrower or any other Subsidiary Loan Party not to be in effect or not to be legal, valid and binding obligations;

 

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then, (i) in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Section 7.01), and at any time thereafter during the continuance of such event, the Administrative Agent, at the request of the Required Lenders, shall, by notice to the Borrower, take any or all of the following actions, at the same or different times: (A) declare the Term Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Term Loans so declared to be due and payable, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding; and (B) exercise all rights and remedies granted to it under any Loan Document and all of its rights under any other applicable law or in equity, and (ii) in any event with respect to the Borrower described in clause (h) or (i) of this Section 7.01, the principal of the Term Loans then outstanding, together with accrued interest thereon and any unpaid accrued Fees and all other liabilities of the Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Borrower, anything contained herein or in any other Loan Document to the contrary notwithstanding.

ARTICLE VIII

The Agents

Section 8.01 Appointment.

(a) Each Lender hereby irrevocably designates and appoints the Administrative Agent as agent of such Lender under this Agreement and the other Loan Documents, as applicable, including as the Collateral Agent for such Lender and the other applicable Secured Parties under the applicable Security Documents, and each such Lender irrevocably authorizes the Administrative Agent, in such capacities, to enter into and take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. In addition, to the extent required under the laws of any jurisdiction other than the United States, each of the Lenders hereby grants to the Administrative Agent any required powers of attorney to execute any Security Document governed by the laws of such jurisdiction on such Lender’s behalf. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding Tax. If the IRS or any other Governmental Authority asserts a claim that the Administrative Agent did not properly withhold Tax from amounts paid to or for the account of any Lender because the appropriate form was not delivered or was not properly executed or because such Lender failed to notify the Administrative Agent of a change in circumstance which rendered the exemption from, or reduction of, withholding Tax ineffective or for any other reason, such Lender shall indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as Tax or otherwise, including any penalties or interest and together with all expenses (including legal expenses, allocated internal costs and out-of-pocket expenses) incurred. For the avoidance of doubt, the Borrower shall have no liability for the actions of the Administrative Agent pursuant to the immediately preceding sentence.

 

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(b) In furtherance of the foregoing, each Lender hereby appoints and authorizes the Administrative Agent to act as the agent of such Lender for purposes of acquiring, holding and enforcing any and all Liens on the 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 connection therewith, the Administrative Agent (and any Subagents appointed by the Administrative Agent pursuant to Section 8.02 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights or remedies thereunder at the direction of the Administrative Agent) shall be entitled to the benefits of this Article VIII (including Section 8.07) as though the Administrative Agent (and any such Subagents) were an “Agent” under the Loan Documents, as if set forth in full herein with respect thereto.

(c) Each Lender irrevocably authorizes the Administrative Agent, at its option and in its discretion: (i) to release any Lien on any property granted to or held by the Administrative Agent under any Loan Document (A) upon termination of the Commitments and payment in full of all Obligations (other than contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted), (B) that is sold or to be sold as part of or in connection with any sale permitted hereunder or under any other Loan Document or (C) if approved, authorized or ratified in writing in accordance with Section 9.08 hereof; (ii) to release any Loan Party from its obligations under the Loan Documents if such person ceases to be a Subsidiary as a result of a transaction permitted hereunder or is designated as an Unrestricted Subsidiary; and (iii) 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 6.02(i) or (j). Upon request by the Administrative Agent at any time, the Required Lenders will confirm in writing the Administrative Agent’s authority to release its interest in particular types or items of property, or to release any Loan Party from its obligations under the Loan Documents.

(d) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Loan Party, (i) the Administrative Agent (irrespective of whether the principal of any Obligation 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 the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise (A) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of any or all of the 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 and the Agents and any Subagents allowed in such judicial proceeding and (B) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and (ii) any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under the Loan Documents. 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 any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

Section 8.02 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement and the other Loan Documents (including for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of the agents or attorneys-in-fact selected by it with reasonable care. The Administrative

 

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Agent may also from time to time, when the Administrative Agent deems it to be necessary or desirable, appoint one or more trustees, co-trustees, collateral co-agents, collateral subagents or attorneys-in-fact (each, a “Subagent”) with respect to all or any part of the Collateral; provided that no such Subagent shall be authorized to take any action with respect to any Collateral unless and except to the extent expressly authorized in writing by the Administrative Agent. Should any instrument in writing from the Borrower or any other Loan Party be required by any Subagent so appointed by the Administrative Agent to more fully or certainly vest in and confirm to such Subagent such rights, powers, privileges and duties, the Borrower shall, or shall cause such Loan Party to, execute, acknowledge and deliver any and all such instruments promptly upon request by the Administrative Agent. If any Subagent, or successor thereto, shall die, become incapable of acting, resign or be removed, all rights, powers, privileges and duties of such Subagent, to the extent permitted by law, shall automatically vest in and be exercised by the Administrative Agent until the appointment of a new Subagent. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent, attorney-in-fact or Subagent that it selects in accordance with the foregoing provisions of this Section 8.02 in the absence of the Administrative Agent’s gross negligence or willful misconduct.

Section 8.03 Exculpatory Provisions. None of the Administrative Agent, its Affiliates or any of their respective officers, directors, employees, agents or attorneys-in-fact shall be (a) liable for any action lawfully taken or omitted to be taken by it or such person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such person’s own gross negligence or willful misconduct) or (b) 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 Agents 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 or for any failure of any Loan Party party thereto to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party. The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents. Without limiting the generality of the foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default or Event of Default has occurred and is continuing, and (b) the Administrative Agent shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Administrative Agent or any of its Affiliates in any capacity. 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 this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Security Documents, (v) the value or the sufficiency of any Collateral or (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

 

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Section 8.04 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, Internet or intranet website posting or other distribution) or conversation believed in good faith by it to be genuine and to have been signed, sent or otherwise authenticated by the proper person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed in good faith by it to have been made by the proper person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to any Borrowing that by its terms must be fulfilled to the satisfaction of a Lender, the Administrative Agent may presume that such condition is satisfactory to such Lender unless the Administrative Agent shall have received notice to the contrary from such Lender prior to such Borrowing. The Administrative Agent may consult with legal counsel (including counsel to Holdings and the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all or other Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all or other Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Term Loans.

Section 8.05 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received written notice from a Lender, Holdings or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all or other Lenders); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

Section 8.06 Non-Reliance on Agents and Other Lenders. Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including any review of the affairs of a Loan Party or any Affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by the Administrative Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their Affiliates and made its own decision to make its Term Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon the Administrative Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of

 

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the Loan Parties and their Affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any Affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.

Section 8.07 Indemnification. The Lenders agree to indemnify each Agent (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), in the amount of its pro rata share (based on its aggregate outstanding Term Loans) (determined at the time such indemnity is sought), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Term Loans) be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the Administrative Agent’s gross negligence or willful misconduct. The failure of any Lender to reimburse the Administrative Agent promptly upon demand for its ratable share of any amount required to be paid by the Lenders to the Administrative Agent as provided herein shall not relieve any other Lender of its obligation hereunder to reimburse the Administrative Agent for its ratable share of such amount, but no Lender shall be responsible for the failure of any other Lender to reimburse the Administrative Agent for such other Lender’s ratable share of such amount. The agreements in this Section 8.07 shall survive the payment of the Term Loans and all other amounts payable hereunder.

Section 8.08 Agent in Its Individual Capacity. Each Agent and its affiliates may make loans to, accept deposits from, and generally engage in any kind of business with any Loan Party as though the Administrative Agent were not the Administrative Agent. With respect to its Term Loans made or renewed by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not the Administrative Agent, and the terms “Lender” and “Lenders” shall include each Agent in its individual capacity.

Section 8.09 Successor Agent. The Administrative Agent may resign as Administrative Agent upon 10 days’ notice to the Lenders and the Borrower. If the Administrative Agent resigns as the Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless a Specified Event of Default shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed if such successor is a commercial bank with a combined capital and surplus of at least $5.0 billion, and otherwise may be withheld in the Borrower’s sole discretion), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the reference to the resigning Administrative Agent shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent’s rights, powers and duties as Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is 10 days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective, and the retiring Administrative Agent hereunder shall, on behalf of the Lenders, appoint a

 

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successor agent which shall (unless a Specified Event of Default shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed). After any retiring Administrative Agent’s resignation as Administrative Agent, the provisions of this Section 8.09 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents. The Borrower shall have no obligation to pay any annual fee to any successor that is greater than or in addition to the annual fees payable to the Administrative Agent as in effect on the Second Amendment Effective Date.

Section 8.10 Lead Arrangers; Co-Syndication Agents; Co-Documentation Agents. None of the Lead Arrangers, Co-Syndication Agents or Co-Documentation Agents shall have any duties or responsibilities hereunder in their respective capacities as such.

ARTICLE IX

Miscellaneous

Section 9.01 Notices; Communications.

(a) Except in the case of notices and other communications expressly permitted to be given by telephone (and except as provided in Section 9.01(b)), 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 e-mail, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made to the applicable telephone number, in each case, as follows:

(i) if to any Loan Party or the Administrative Agent, to the address, facsimile number, e-mail address or telephone number specified for such person on Schedule 9.01; and

(ii) if to any other Lender, to the address, facsimile number, e-mail address or telephone number specified in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender pursuant to Article II if such Lender has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication. The Administrative Agent or the 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) 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 electronic communications to the extent provided in Section 9.01(b) shall be effective as provided in such Section 9.01(b).

(d) Any party hereto may change its address, facsimile number or e-mail address for notices and other communications hereunder by notice to the other parties hereto.

 

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(e) Documents required to be delivered pursuant to Section 5.04 (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically (including as set forth in Section 9.17) and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 9.01 or (ii) on which such documents are posted on the 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); provided that the Borrower shall notify the Administrative Agent and each Lender (by facsimile or e-mail) of the posting of any such documents and provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents; provided, further, that, upon reasonable request by the Administrative Agent, the Borrower shall also provide a hard copy to the Administrative Agent of any such document; provided further, that any documents posted for which a link is provided after normal business hours for the recipient shall be deemed to have been given at the opening of business on the next Business Day for such recipient. 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 Loan Parties 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.

Section 9.02 Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the Lenders and shall survive the making by the Lenders of the Term Loans and the execution and delivery of the Loan Documents, regardless of any investigation made by such persons or on their behalf, and shall continue in full force and effect as long as the principal of or any accrued interest on any Term Loan or any Fee or any other amount payable under this Agreement or any other Loan Document is outstanding and unpaid and so long as the Commitments have not been terminated. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein (including pursuant to Section 2.15, Section 2.17 and Section 9.05) shall survive the payment in full of the principal and interest hereunder and the termination of the Commitments or this Agreement.

Section 9.03 Binding Effect. This Agreement shall become effective when it has been executed by Holdings, the Borrower and the Administrative Agent and when the Administrative Agent has received copies 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 Holdings, the Borrower, each Agent, each Lender and their respective permitted successors and assigns.

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, except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void), except pursuant to the Acquisition, and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 9.04. 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, Participants (to the extent provided in paragraph (c) of this Section 9.04) and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement or the other Loan Documents.

 

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(b) (i) Subject to the conditions set forth in paragraph (b)(ii) of this Section 9.04, any Lender may assign to one or more assignees (other than a natural person or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person) (each, an “Assignee”) all or a portion of its rights and obligations under this Agreement (including all or a portion of the Term Loans at the time owing to it with the prior written consent (such consent not to unreasonably withheld) of:

(A) the Borrower; provided that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if a Specified Event of Default has occurred and is continuing, any other person; provided, further, that such consent shall be deemed to have been given if the Borrower has not responded within 10 Business Days after notice by the Administrative Agent or the respective assigning Lender; and

(B) the Administrative Agent; provided that no consent of the Administrative Agent shall be required for an assignment of all or any portion of a Term Loan to a Lender, an Affiliate of a Lender or an Approved Fund.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Term Loans, the amount of the Term Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1.0 million, unless each of the Borrower and the Administrative Agent otherwise consent; provided that (1) no such consent of the Borrower shall be required if a Specified Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its Affiliates or Approved Funds (with simultaneous assignments to or by two or more Approved Funds shall be treated as one assignment for purposes of meeting the minimum assignment amount requirement), if any;

(B) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Acceptance via an electronic settlement system acceptable to the Administrative Agent (or, if previously agreed with the Administrative Agent, manually), and shall pay to the Administrative Agent a processing and recordation fee of $3,500 (which fee may be waived or reduced in the sole discretion of the Administrative Agent);

(C) the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire and any tax forms required to be delivered pursuant to Section 2.15; and

(D) the Assignor shall deliver to the Administrative Agent any Note issued to it with respect to the assigned Term Loan.

For the purposes of this Section 9.04, “Approved Fund” shall mean 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 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.

 

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(iii) Subject to acceptance and recording thereof pursuant to paragraph (b)(v) of this Section 9.04, from and after the effective date specified in each Assignment and Acceptance, the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, 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 Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance 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 Section 2.13, 2.14, 2.15 and 9.05). 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 9.04.

(iv) The Administrative Agent, acting for this purpose as the Administrative Agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Acceptance delivered to it and a register for the recordation of the names and addresses of the Lenders, and the principal amount of the Term 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 Borrower, the Administrative Agent and the Lenders may 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 Borrower and any Lender (solely with respect to such Lender’s Loans) at any reasonable time and from time to time upon reasonable prior notice.

(v) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an Assignee, the Assignee’s completed Administrative Questionnaire (unless the Assignee shall already be a Lender hereunder), all applicable tax forms, any Note outstanding with respect to the assigned Term Loan, the processing and recordation fee referred to in paragraph (B) of Section 9.04(b)(ii) and any written consent to such assignment required by paragraph (b) of this Section 9.04, the Administrative Agent promptly shall accept such Assignment and Acceptance and record the information contained therein in the Register. No assignment, whether or not evidenced by a promissory note, shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph (b)(v).

(c) By executing and delivering an Assignment and Acceptance, the assigning Lender thereunder and the Assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (i) such assigning Lender warrants that it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim and that the outstanding balances of its Term Loans, in each case, without giving effect to assignments thereof which have not become effective, are as set forth in such Assignment and Acceptance; (ii) except as set forth in clause (i) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Agreement, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto, or the financial condition of Holdings, the Borrower or any other Subsidiary or the performance or observance by Holdings, the Borrower or any other Subsidiary of any of its obligations under this Agreement, any other Loan Document or any other instrument or document furnished pursuant hereto; (iii) the Assignee represents and warrants that it is legally authorized to enter into such Assignment and

 

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Acceptance; (iv) the Assignee confirms that it has received a copy of this Agreement, together with copies of the most recent Required Financial Statements delivered pursuant to Section 5.04, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such Assignment and Acceptance; (v) the Assignee will independently and without reliance upon the Administrative Agent or the Collateral Agent, such assigning Lender or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement; (vi) the Assignee appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms of this Agreement, together with such powers as are reasonably incidental thereto; and (vii) the Assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Agreement are required to be performed by it as a Lender.

(d) (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (other than a natural person or a holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person) (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of the Term 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 Borrower, the Administrative Agent 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 pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and the other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents; provided that (x) such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to Section 9.04(b)(i) or clauses (i), (ii), (iii), (iv), (v) or (vi) of the first proviso to Section 9.08(b) and (2) directly affects such Participant and (y) no other agreement with respect to amendment, modification or waiver may exist between such Lender and such Participant. Subject to clause (d)(ii) of this Section 9.04, the Borrower agrees that each Participant shall be entitled to the benefits of Section 2.13, Section 2.14 and Section 2.15 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section 9.04. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.06 as though it were a Lender; provided that such Participant shall be subject to Section 2.16(c) 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 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, letters of credit 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, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. 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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(ii) A Participant shall not be entitled to receive any greater payment under Section 2.13, Section 2.14 or Section 2.15 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower’s prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.15 to the extent such Participant fails to comply with Section 2.15(e) as though it were a Lender.

(e) 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 or other central banking authority and in the case of any Lender that is an Approved Fund, any pledge or assignment to any holders of obligations owed, or securities issued, by such Lender, including to any trustee for, or any other representative of, such holders, and this Section 9.04 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.

(f) The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (e) of this Section 9.04.

(g) [Reserved].

(h) If the Borrower wishes to replace the Term Loans with ones having different terms, it shall have the option, with the consent of the Administrative Agent and subject to at least three Business Days’ advance notice to the Lenders, instead of prepaying the Term Loans to be replaced, to (i) require the Lenders to assign such Term Loans to the Administrative Agent or its designees and (ii) amend the terms thereof in accordance with Section 9.08 (with such replacement, if applicable, being deemed to have been made pursuant to Section 9.08(d)). Pursuant to any such assignment, all Term Loans to be replaced shall be purchased at par (allocated among the Lenders in the same manner as would be required if such Term Loans were being optionally prepaid), accompanied by payment of any accrued interest and fees thereon and any amounts owing pursuant to Section 9.05(b). By receiving such purchase price, the Lenders shall automatically be deemed to have assigned the Term Loans pursuant to the terms of the form of Assignment and Acceptance attached hereto as Exhibit A, and accordingly no other action by such Lenders shall be required in connection therewith. The provisions of this paragraph (h) are intended to facilitate the maintenance of the perfection and priority of existing security interests in the Collateral during any such replacement.

(i) Notwithstanding the foregoing, no assignment may be made or participation sold to a Disqualified Institution without the prior written consent of the Borrower. For the avoidance of doubt, the list of Disqualified Institutions shall be made available to the Lenders. 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 hereof relating to Disqualified Institutions. 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 Participant or prospective Lender or Participant is a Disqualified Institution or (y) have any liability with respect to or arising out of any assignment or participation of Loans or Commitments, or disclosure of confidential information, to any Disqualified Institution.

(j) Notwithstanding anything to the contrary contained herein, no Non-Debt Fund Affiliate shall have any right to (i) attend (including by telephone) any meeting or discussions (or portion thereof) among the Administrative Agent or any Lender to which representatives of Holdings or the Borrower are not then present, (ii) receive any information or material prepared by the Administrative

 

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Agent or any Lender or any communication by or among Administrative Agent and one or more Lenders, except to the extent such information or materials have been made available to the Borrower or its representatives (and in any case, other than the right to receive notices of prepayments and other administrative notices in respect of its Loans required to be delivered to Lenders pursuant to this Agreement), (iii) make or bring (or participate in, other than as a passive participant in or recipient of its pro rata benefits of) any claim, in its capacity as a Lender, against Administrative Agent or any other Lender with respect to any duties or obligations or alleged duties or obligations of such Agent or any other such Lender under the Loan Documents in the absence, with respect to any such person, of the gross negligence, bad faith (including a material breach of obligations under the Loan Documents) or willful misconduct by such person and its Primary Related Parties (as determined by a court of competent jurisdiction by final and nonappealable judgment) or (iv) receive advice of counsel to the Administrative Agent or the Lenders or challenge the Lenders’ attorney-client privilege.

(k) Notwithstanding anything to the contrary contained herein, any Lender may assign all or any portion of its Term Loans hereunder to any person who, after giving effect to such assignment, would be an Affiliated Lender; provided that:

(i) such assignment shall be made pursuant to (A) an open market purchase (including, for the avoidance of doubt, any purchase made during the initial syndication of the Term Loans) on a non-pro rata basis or (B) a Dutch Auction open to all Lenders of the applicable Class on a pro rata basis;

(ii) in the case of an assignment to a Non-Debt Fund Affiliate, the assigning Lender and such Non-Debt Fund Affiliate purchasing such Lender’s Term Loans shall execute and deliver to the Administrative Agent an assignment agreement substantially in the form of Exhibit E (a “Non-Debt Fund Affiliate Assignment and Acceptance”) in lieu of an Assignment and Acceptance;

(iii) in the case of an assignment to a Non-Debt Fund Affiliate, at the time of such assignment and after giving effect to such assignment, Non-Debt Fund Affiliates shall not, in the aggregate, hold Term Loans (and participating interests in Term Loans) with an aggregate principal amount in excess of 25.0% of the principal amount of all Term Loans then outstanding; and

(iv) the applicable assignor shall provide a customary “big boy” letter.

(l) To the extent not previously disclosed to the Administrative Agent, the Borrower shall, upon reasonable request of the Administrative Agent (but not more frequently than once per calendar quarter), report to the Administrative Agent the amount and Class of Term Loans held by Non-Debt Fund Affiliates and the identity of such holders. Notwithstanding the foregoing, any Affiliated Lender shall be permitted to contribute any Term Loan so assigned to such Affiliated Lender pursuant to this Section 9.04(k) to the Borrower or any of the Subsidiaries for purposes of cancellation, which contribution may be made, subject to Section 6.07, in exchange for Equity Interests (other than Disqualified Stock) of any Parent Entity or Indebtedness of the Borrower to the extent such Indebtedness is permitted to be incurred pursuant to Section 6.01 at such time; provided that any Term Loans so contributed shall be automatically and permanently canceled upon the effectiveness of such contribution and will thereafter no longer be outstanding for any purpose hereunder.

 

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(m) Notwithstanding anything in Section 9.04 or the definition of “Required Lenders” to the contrary, for purposes of determining whether the Required Lenders, all affected Lenders or all Lenders have (i) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom, (ii) otherwise acted on any matter related to any Loan Document or (iii) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document (collectively, “Required Lender Consent Items”):

(A) a Non-Debt Fund Affiliate shall be deemed to have voted its interest as a Lender in the same proportion as the allocation of voting with respect to such matter by Lenders who are not Non-Debt Fund Affiliates, unless the result of such Required Lender Consent Item would reasonably be expected to deprive such Non-Debt Fund Affiliate of its pro rata share (compared to Lenders which are not Non-Debt Fund Affiliates) of any payments to which such Non-Debt Fund Affiliate is entitled under the Loan Documents without such Non-Debt Fund Affiliate providing its consent or such Non-Debt Fund Affiliate is otherwise adversely affected thereby compared to Term Loan Lenders which are not Non-Debt Fund Affiliates (in which case for purposes of such vote such Non-Debt Fund Affiliate shall have the same voting rights as other Term Loan Lenders which are not Non-Debt Fund Affiliates); and

(B) Term Loans held by Debt Fund Affiliates may not account for more than 49.9% of the Term Loans of consenting Lenders included in determining whether the Required Lenders have consented to any action pursuant to Section 9.04.

(n) Additionally, the Loan Parties and each Non-Debt Fund Affiliate hereby agree that, and each Non-Debt Fund Affiliate Assignment and Assumption by a Non-Debt Fund Affiliate shall provide a confirmation that, if a case under Title 11 of the United States Code is commenced against any Loan Party, such Loan Party shall seek (and each Non-Debt Fund Affiliate shall consent) to provide that the vote of any Non-Debt Fund Affiliate (in its capacity as a Lender) with respect to any plan of reorganization of such Loan Party shall not be counted except that such Non-Debt Fund Affiliate’s vote (in its capacity as a Lender) may be counted to the extent any such plan of reorganization proposes to treat the Obligations or claims held by such Non-Debt Fund Affiliate in a manner that is less favorable to such Non-Debt Fund Affiliate than the proposed treatment of the Term Loans or claims held by Lenders that are not Affiliates of the Borrower.

(o) Notwithstanding anything to the contrary contained in this Agreement, any Lender may assign all or a portion of its Term Loans to any Purchasing Borrower Party; provided that:

(i) the assigning Lender and the Purchasing Borrower Party purchasing such Lender’s Term Loans, as applicable, shall execute and deliver to the Administrative Agent a Non-Debt Fund Affiliate Assignment and Assumption in lieu of an Assignment and Assumption;

(ii) such assignment shall be made pursuant to a Dutch Auction open to all Lenders of the applicable Class on a pro rata basis;

(iii) any Term Loans assigned to any Purchasing Borrower Party shall be automatically and permanently cancelled upon the effectiveness of such assignment and will thereafter no longer be outstanding for any purpose hereunder;

(iv) immediately after giving effect to any such purchase, no Event of Default shall exist;

 

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(v) the applicable Purchasing Borrower Party shall in the relevant offer document delivered by it with respect to such Dutch Auction and at the time of consummation of any purchase of Term Loans pursuant thereto affirm the No MNPI Representation;

(vi) no proceeds from revolving loans under the ABL Credit Agreement shall be used to fund any such purchase; and

(vii) the aggregate outstanding principal amount of the Term Loans of the applicable Class shall be deemed reduced by the full par value of the aggregate principal amount of the Term Loans purchased pursuant to this Section 9.04(o) and each principal repayment installment with respect to the Term Loans of such Class shall be reduced pro rata by the aggregate principal amount of Term Loans purchased.

Section 9.05 Expenses; Indemnity.

(a) The Borrower agrees to pay all reasonable, documented and invoiced out-of-pocket expenses incurred by the Administrative Agent and the Lead Arrangers in connection with the preparation of this Agreement and the other Loan Documents, or by the Administrative Agent (and in the case of enforcement of this Agreement, the Lenders) in connection with the preparation, execution and delivery, amendment, modification, waiver or enforcement of this Agreement (including expenses incurred in connection with due diligence and initial and ongoing Collateral examination to the extent incurred with the reasonable prior approval of the Borrower or provided for in this Agreement) or in connection with the administration of this Agreement and any amendments, modifications or waivers of the provisions hereof or thereof (whether or not the Transactions hereby contemplated shall be consummated), including the reasonable, documented and invoiced fees, charges and disbursements of a single counsel for the Administrative Agent and the Lead Arrangers (and in the case of enforcement of this Agreement, the Lenders) (which shall be, other than with respect to enforcement of this Agreement, Simpson Thacher & Bartlett LLP), one firm of local counsel in each appropriate jurisdiction and, in the case of any actual or perceived conflict of interest, one additional firm of counsel for the Administrative Agent and the Lead Arrangers (and in the case of enforcement of this Agreement, the Lenders).

(b) The Borrower agrees to indemnify the Administrative Agent, each Lead Arranger, each Lender, each of their respective Affiliates and each of their respective directors, officers, employees, agents, advisors, controlling persons, equityholders, partners, members and other representatives and each of their respective successors and permitted assigns (each such person being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and reasonable, documented and invoiced fees, charges and disbursements of one firm of counsel for all Indemnitees, taken as a whole, and, if necessary, one firm of counsel in each appropriate jurisdiction (which may include a single special counsel in multiple jurisdictions) for all Indemnitees taken as a whole (and, in the case of an actual or perceived conflict of interest, an additional counsel for all Indemnitees subject to such conflict taken as a whole), incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) the execution or delivery of this Agreement or any other Loan Document, the performance by the parties hereto and thereto of their respective obligations thereunder or the consummation of the Transactions and the other transactions contemplated hereby, (ii) the use of the proceeds of the Term Loans or (iii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto and regardless of whether such matter is initiated by a third party or by Holdings, the Borrower or any of their Subsidiaries or Affiliates; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (A) are determined by a final, non appealable judgment of a court of competent jurisdiction to have resulted from (1) the gross negligence,

 

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bad faith or willful misconduct of such Indemnitee or any of its Related Parties or (2) a material breach of the obligations of such Indemnitee hereunder or (B) result from any proceeding between or among Indemnitees that does not involve an act or omission by the Borrower or the other Restricted Subsidiaries (other than claims against the Administrative Agent or any Arranger in its capacity or in fulfilling its role as the Administrative Agent or an Arranger or any similar role hereunder (excluding its role as a Lender)).

(c) Subject to and without limiting the generality of the foregoing sentence, the Borrower agrees to indemnify each Indemnitee against, and hold each Indemnitee harmless from, any and all losses claims, damages, liabilities and related expenses, including reasonable, documented and invoiced fees, charges and disbursements of one firm of counsel for all Indemnitees, taken as a whole, and, if necessary, one firm of counsel in each appropriate jurisdiction (which may include a single special counsel in multiple jurisdictions) for all Indemnitees subject to such conflict taken as a whole (and, in the case of an actual or perceived conflict of interest, an additional counsel for all Indemnitees taken as a whole) and reasonable, documented and invoiced consultant fees, in each case, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of any claim related to Environmental Laws and the Borrower or any of the Restricted Subsidiaries, or any actual or alleged presence, Release or threatened Release of Hazardous Materials at, under, on or from any property for which the Borrower or any of its Restricted Subsidiaries is, or is alleged to be, liable under Environmental Laws; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a final, non appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee or any of its Related Parties.

(d) Any indemnification or payments required by the Loan Parties under this Section 9.05 shall not be duplicative of any indemnification or payments required by the Loan Parties under Section 2.15.

(e) To the fullest extent permitted by applicable law, Holdings and the Borrower shall not assert, and hereby waive, any claim against any Indemnitee, 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, the transactions contemplated hereby or thereby, any Term Loan or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.

(f) The agreements in this Section 9.05 shall survive the resignation of the Administrative Agent, the replacement of any Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all the other Obligations and the termination of this Agreement. All amounts due under this Section 9.05 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested.

Section 9.06 Right of Set-off. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by such Lender to or for the credit or the account of Holdings or any Subsidiary Loan Party against any of and all the obligations of Holdings or any Subsidiary Loan Party now or hereafter existing under this Agreement or any other Loan Document held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement or such other Loan Document and although the obligations may be unmatured. The rights of each Lender under this Section 9.06 are in addition to other rights and remedies (including other rights of set-off) that such Lender may be exercised only at the direction of the Administrative Agent or the Required Lenders.

 

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Section 9.07 Applicable Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (OTHER THAN AS EXPRESSLY SET FORTH IN OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

Section 9.08 Waivers; Amendment.

(a) No failure or delay of the Administrative Agent or any Lender in exercising any right or power hereunder or under any 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 each Agent 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 any other Loan Document or consent to any departure by Holdings, the Borrower or any other Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 9.08, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on Holdings, the Borrower or any other Loan Party in any case shall entitle such person to any other or further notice or demand in similar or other circumstances.

(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (x) as provided in Section 2.19, Section 2.20 and Section 2.21, (y) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders, and (z) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by each party thereto and the Administrative Agent and consented to by the Required Lenders; provided, however, that except as provided in Section 2.18, Section 2.19 and Section 2.20, no such agreement shall:

(i) decrease, forgive, waive or excuse the principal amount of, or any interest on, or any fees in respect of, or extend the final maturity of, or decrease the rate of interest on, any Term Loan (other than by waiver or modification of a condition precedent, Default, Event of Default or covenant), without the prior written consent of each Lender directly affected thereby;

(ii) increase or extend the Commitment of any Lender or decrease, forgive, waive or excuse the fees of any Agent without the prior written consent of such Lender or Agent (it being understood that waivers or modifications of conditions precedent, covenants, Defaults or Events of Default shall not constitute an increase or extension of the Commitments of any Lender);

(iii) extend or waive any Term Loan Installment Date or reduce the amount due on any Term Loan Installment Date or extend any date on which payment of principal or interest on any Term Loan or any Fee is due, without the prior written consent of each Lender adversely affected thereby;

(iv) amend the provisions of Section 2.16(b) or (c) of this Agreement, Section 5.02 of the Collateral Agreement or any analogous provision of any other Loan Document, in a manner that would by its terms alter the pro rata sharing of payments required thereby, without the prior written consent of each Lender adversely affected thereby;

 

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(v) amend or modify the provisions of this Section 9.08 or the definition of the term “Required 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 prior written consent of each Lender (it being understood that, with the consent of the Required Lenders, additional extensions of credit pursuant to this Agreement may be included in the determination of the Required Lenders on substantially the same basis as the Term Loans are included on the Second Amendment Effective Date); or

(vi) release all or substantially all of the Collateral (or subordinate the Liens in favor of the Administrative Agent on all or substantially all of the Collateral) or release any of Holdings or all or substantially all of the Subsidiary Loan Parties from their respective Guarantees under the Collateral Agreement, without the prior written consent of each Lender;

(vii) provided that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent hereunder without the prior written consent of the Administrative Agent acting as such at the effective date of such agreement, as applicable. Each Lender shall be bound by any waiver, amendment or modification authorized by this Section 9.08 and any consent by any Lender pursuant to this Section 9.08 shall bind any assignee of such Lender.

(c) Without the consent of the Administrative Agent or any Lender, the Loan Parties and the Administrative Agent may (in their respective sole discretion, or shall, to the extent required by any Loan Document) enter into any amendment, modification or waiver of any Loan Document, or enter into any new agreement or instrument, to effect the granting, perfection, protection, expansion or enhancement of any security interest in any Collateral or additional property to become Collateral for the benefit of the Secured Parties, or as required by local law to give effect to, or protect any security interest for the benefit of the Secured Parties, in any property or so that the security interests therein comply with applicable law.

(d) This Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent, Holdings and the Borrower (i) to add one or more additional credit facilities to this Agreement and to permit the 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 Term Loans and the accrued interest and fees in respect thereof and (ii) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders.

(e) Notwithstanding anything in this Agreement or any other Loan Document to the contrary, the Borrower may enter into Incremental Facility Amendments in accordance with Section 2.19, Refinancing Amendments in accordance with Section 2.20, Extension Amendments in accordance with Section 2.21 and Credit Agreement Refinancing Indebtedness Amendments, and such Incremental Facility Amendments, Refinancing Amendments, Extension Amendments and Credit Agreement Refinancing Indebtedness Amendments shall be effective to amend the terms of this Agreement and the other applicable Loan Documents, in each case, without any further action or consent of any other party to any Loan Document.

 

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(f) Notwithstanding the foregoing, the Administrative Agent, with the consent of the Borrower, may amend, modify or supplement any Loan Document without the consent of any Lender or the Required Lenders in order to correct, amend or cure any ambiguity, inconsistency or defect or correct any typographical error or other manifest error in any Loan Document; provided that the Administrative Agent shall promptly give the Lenders notice of any such amendment, modification or supplement.

(g) Notwithstanding the foregoing, Repricing Transactions shall be permitted without the approval or consent of the Lenders other than any Lender holding Term Loans subject to such Repricing that will continue as a Lender hereunder in respect of the repriced tranche of Term Loans or modified Term Loans.

(h) Notwithstanding the foregoing, the Borrower shall enter into such amendments to this Agreement as may be reasonably required by the Lead Arrangers to document any modifications to this Agreement made in accordance with the rights of the Lead Arrangers set forth in the Fee Letter.

Section 9.09 Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the applicable interest rate, together with all fees and charges that are treated as interest under applicable law (collectively, the “Charges”), as provided for herein or in any other document executed in connection herewith, or otherwise contracted for, charged, received, taken or reserved by any Lender, shall exceed the maximum lawful rate (the “Maximum Rate”) that may be contracted for, charged, taken, received or reserved by such Lender in accordance with applicable law, the rate of interest payable hereunder, together with all Charges payable to such Lender, shall be limited to the Maximum Rate; provided that such excess amount shall be paid to such Lender on subsequent payment dates to the extent not exceeding the legal limitation.

Section 9.10 Entire Agreement. This Agreement, the other Loan Documents and the agreements regarding certain Fees referred to herein constitute the entire contract between the parties relative to the subject matter hereof. Any previous agreement among or representations from the parties or their Affiliates with respect to the subject matter hereof is superseded by this Agreement and the other Loan Documents. Notwithstanding the foregoing, the Fee Letter shall survive the execution and delivery of this Agreement and remain in full force and effect. Nothing in this Agreement or in the other Loan Documents, expressed or implied, is intended to confer upon any party other than the parties hereto and thereto any rights, remedies, obligations or liabilities under or by reason of this Agreement or the other Loan Documents.

Section 9.11 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 RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. 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 AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

Section 9.12 Severability. In the event any one or more of the provisions contained in this Agreement or in any other Loan Document should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. The parties shall endeavor in good faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

 

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Section 9.13 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which, when taken together, shall constitute but one contract, and shall become effective as provided in Section 9.03. Delivery of an executed counterpart to this Agreement by facsimile or other electronic transmission (e.g., “PDF” or “TIFF”) shall be as effective as delivery of a manually signed original.

Section 9.14 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 are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

Section 9.15 Jurisdiction; Consent to Service of Process.

(a) Each of the parties hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and any appellate court from any thereof (collectively, “New York Courts”), in any action or proceeding arising out of or relating to this Agreement or the other Loan Documents, 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 shall be heard and determined in such New York State court or, to the extent permitted by law, in such federal 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 shall affect any right that any party may otherwise have to bring any action or proceeding relating to this Agreement or any of the other Loan Documents in the courts of any jurisdiction, except that each of the Loan Parties agrees that (a) it will not bring any such action or proceeding in any court other than New York Courts (it being acknowledged and agreed by the parties hereto that any other forum would be inconvenient and inappropriate in view of the fact that more of the Lenders who would be affected by any such action or proceeding have contacts with the State of New York than any other jurisdiction), and (b) in any such action or proceeding brought against any Loan Party in any other court, it will not assert any cross-claim, counterclaim or setoff, or seek any other affirmative relief, except to the extent that the failure to assert the same will preclude such Loan Party from asserting or seeking the same in the New York Courts.

(b) 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 the other Loan Documents in any New York State or federal court. 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.

Section 9.16 Confidentiality. Each of the Lenders and each of the Agents agrees that it shall maintain in confidence any information relating to Holdings, the Borrower and any Subsidiary furnished to it by or on behalf of Holdings, the Borrower or any other Subsidiary (other than information that (a) has become generally available to the public other than as a result of a disclosure by such party, (b) has been independently developed by such Lender or the Administrative Agent without violating this Section 9.16 or (c) was available to such Lender or the Administrative Agent from a third party having, to such person’s knowledge, no obligations of confidentiality to Holdings, the Borrower or any other Loan Party) and shall not reveal the same other than to its directors, trustees, officers, employees and advisors with a need to know or to any person that approves or administers the Term Loans on behalf of such

 

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Lender (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.16), except: (A) to the extent necessary to comply with law or any legal process or the requirements of any Governmental Authority, the National Association of Insurance Commissioners or of any securities exchange on which securities of the disclosing party or any Affiliate of the disclosing party are listed or traded, (B) as part of normal reporting or review procedures to, or examinations by, Governmental Authorities or self regulatory authorities, (C) to its parent companies, Affiliates or auditors (so long as each such person shall have been instructed to keep the same confidential in accordance with this Section 9.16), (D) in order to enforce its rights under any Loan Document in a legal proceeding, (E) to any pledge under Section 9.04(d) or any other prospective assignee of, or prospective Participant in, any of its rights under this Agreement (so long as such person shall have been instructed to keep the same confidential in accordance with this Section 9.16) and (F) to any direct or indirect contractual counterparty in Hedge Agreements or such contractual counterparty’s professional advisor (so long as such contractual counterparty or professional advisor to such contractual counterparty agrees to be bound by the provisions of this Section 9.16). Notwithstanding the foregoing, no such information shall be disclosed to a Disqualified Institution that constitutes a Disqualified Institution at the time of such disclosure without the Borrower’s prior written consent.

Section 9.17 Platform; Borrower Materials. The Borrower hereby acknowledges that (a) the Administrative Agent or the Lead Arrangers will make available to the Lenders materials or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”), and (b) certain of the Lenders may be “public-side” Lenders (i.e., Lenders that do not wish to receive material non-public information with respect to the Borrower or its securities) (each, a “Public Lender”). The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (i) all the Borrower Materials 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, (ii) by marking Borrower Materials “PUBLIC”, the Borrower shall be deemed to have authorized the Administrative Agent, the Arrangers and the Lenders to treat the Borrower Materials as either publicly available information or not material information (although it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States Federal and state securities laws, (iii) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Investor;” and (iv) the Administrative Agent and the Lead Arrangers shall be entitled to treat the Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Investor”.

Section 9.18 Release of Liens and Guarantees. In the event that any Loan Party is designated as an Unrestricted Subsidiary or conveys, sells, leases, assigns, transfers or otherwise disposes of all or any portion of any of the Equity Interests or assets of any Loan Party to a person that is not (and is not required to become) a Loan Party in a transaction not prohibited by Section 6.05, any Liens created by any Loan Document in respect of such Unrestricted Subsidiary or Equity Interests or assets shall be automatically released and the Administrative Agent shall promptly (and the Lenders hereby authorize the Administrative Agent to) take such action and execute any such documents as may be reasonably requested by the Borrower and at the Borrower’s expense in connection with the release of any Liens created by any Loan Document in respect of such Unrestricted Subsidiary or Equity Interests or assets, and, in the case of either an Unrestricted Subsidiary or a disposition of the Equity Interests of any Subsidiary Loan Party (other than the Borrower) in a transaction permitted by Section 6.05 (including through merger, consolidation, amalgamation or otherwise) and as a result of which such Subsidiary Loan Party would cease to be a Subsidiary, such Subsidiary Loan Party’s obligations under the Collateral Agreement shall be automatically terminated and the Administrative Agent shall promptly (and the Lenders hereby authorize the Administrative Agent to) take such action and execute any such documents

 

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as may be reasonably requested by the Borrower to terminate such Subsidiary Loan Party’s obligations under the Collateral Agreement. In addition, the Administrative Agent agrees to take such actions as are reasonably requested by the Borrower and at the Borrower’s expense to terminate the Liens and security interests created by the Loan Documents when all the Obligations (other than contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) are paid in full and the Commitments are terminated.

Section 9.19 Release of Merger Sub as Borrower. From and after the effectiveness of the Merger, Merger Sub shall be released, automatically and without further action, from its obligations as the “Borrower” under this Agreement and each of the other Loan Documents; provided that such release shall be effective upon delivery by Target of an executed joinder (in form and substance reasonably satisfactory to the Administrative Agent) pursuant to which it accedes to this Agreement and each of the other Loan Documents and becomes the “Borrower” hereunder and thereunder.

Section 9.20 USA PATRIOT Act Notice. Each Lender that is subject to the USA PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the USA PATRIOT Act.

Section 9.21 Security Documents and Intercreditor Agreement. The parties hereto acknowledge and agree that any provision of any Loan Document to the contrary notwithstanding, prior to the discharge in full of all ABL Priority Claims, the Loan Parties shall not be required to act or refrain from acting under any Security Document with respect to the ABL Priority Collateral in any manner that would result in a “Default” or “Event of Default” (as defined in any ABL Loan Document) under the terms and provisions of the ABL Loan Documents. Each Lender hereunder (a) consents to the subordination of Liens provided for in the ABL/Term Loan Intercreditor Agreement, (b) agrees that it will be bound by and will take no actions contrary to the provisions of the ABL/Term Loan Intercreditor Agreement and (c) authorizes and instructs the Administrative Agent to enter into the ABL/Term Loan Intercreditor Agreement as Term Loan Agent (as defined in the ABL/Term Loan Intercreditor Agreement) and on behalf of such Lender. The foregoing provisions are intended as an inducement to the lenders under the ABL Credit Agreement to extend credit and such lenders are intended third party beneficiaries of such provisions and the provisions of the ABL/Term Loan Intercreditor Agreement.

Section 9.22 Acknowledgements. Each of Holdings and the Borrower hereby acknowledges and agrees that (a) no fiduciary, advisory or agency relationship between the Loan Parties and the Credit Parties is intended to be or has been created in respect of any of the transactions contemplated by this Agreement or the other Loan Documents, irrespective of whether the Credit Parties have advised or are advising the Loan Parties on other matters, and the relationship between the Credit Parties, on the one hand, and the Loan Parties, on the other hand, in connection herewith and therewith is solely that of creditor and debtor, (b) the Credit Parties, on the one hand, and the Loan Parties, on the other hand, have an arm’s length business relationship that does not directly or indirectly give rise to, nor do the Loan Parties rely on, any fiduciary duty to the Loan Parties or their affiliates on the part of the Credit Parties, (c) the Loan Parties are capable of evaluating and understanding, and the Loan Parties understand and accept, the terms, risks and conditions of the transactions contemplated by this Agreement and the other Loan Documents, (d) the Loan Parties have been advised that the Credit Parties are engaged in a broad range of transactions that may involve interests that differ from the Loan Parties’ interests and that the Credit Parties have no obligation to disclose such interests and transactions to the Loan Parties, (e) the Loan Parties have consulted their own legal, accounting, regulatory and tax advisors to the extent the Loan Parties have deemed appropriate in the negotiation, execution and delivery of this Agreement

 

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and the other Loan Documents, (f) each Credit Party has been, is, and will be acting solely as a principal and, except as otherwise expressly agreed in writing by it and the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Loan Parties, any of their affiliates or any other person, (g) none of the Credit Parties has any obligation to the Loan Parties or their affiliates with respect to the transactions contemplated by this Agreement or the other Loan Documents except those obligations expressly set forth herein or therein or in any other express writing executed and delivered by such Credit Party and the Loan Parties or any such affiliate and (h) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Credit Parties or among the Loan Parties and the Credit Parties.

Section 9.23 Acknowledgement and Consent to Bail-In of EEA 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 EEA Financial Institution arising under any Loan Document may be subject to the Write-Down and Conversion Powers of an EEA 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 an EEA Resolution Authority to any such liabilities arising hereunder which may be payable to it by any party hereto that is an EEA Financial Institution; and

(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 EEA 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 any EEA Resolution Authority.

Section 9.24 No Novation. This Agreement shall amend and restate the Existing Term Loan Agreement in its entirety, with the parties hereby agreeing that there is no novation of the Existing Term Loan Agreement and from and after the effectiveness of this Agreement, the rights and obligations of the parties under the Existing Term Loan Agreement shall be subsumed and governed by this Agreement. From and after the effectiveness of this Agreement, the Obligations under the Existing Term Loan Agreement shall continue as Obligations under this Agreement until otherwise paid in accordance with the terms hereof. Without limiting the generality of the foregoing, the Security Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations of the Loan Parties under the Loan Documents, in each case, as amended by this Agreement. On and after the effectiveness of this Agreement, each reference to the “Credit Agreement” in any other Loan Document shall mean and be a reference to this Agreement.

 

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EXHIBIT B

EXHIBITS


EXHIBIT A

[FORM OF]

ASSIGNMENT AND ACCEPTANCE

This Assignment and Acceptance (this “Assignment and Acceptance”) is dated as of the Effective Date set forth below and is entered into by and between [the][each]1 Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each]2 Assignee identified in item 2 below ([the][each, an] “Assignee”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]3 hereunder are several and not joint.]4 Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and the other Loan Documents to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the Facility identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other Loan Documents or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Acceptance, without representation or warranty by [the][any] Assignor.

 

1.    Assignor[s]:                                            
                                              
2.    Assignee[s]:                                            
                                              

 

1 

For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.

2 

For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language.

3 

Select as appropriate.

4 

Include bracketed language if there are either multiple Assignors or multiple Assignees.


3.

Borrower: CPG International LLC, a Delaware limited liability company (as successor-in-interest to CPG International Inc., a Delaware corporation).

 

4.

Administrative Agent: Jefferies Finance LLC, as the administrative agent under the Credit Agreement.

 

5.

Credit Agreement: Amended and Restated Term Loan Credit Agreement, dated as of June 18, 2018 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), the Lenders party thereto from time to time, and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”), and as collateral agent (in such capacity, the “Collateral Agent”).

 

6.

Assigned Interest[s]:

 

Assignor[s]5

   Assignee[s]6      Facility
Assigned7
     Amount of
Assignor’s
Commitment/
Loans8
     Amount of
Commitment/
Loans
Assigned9
     Percentage
of Assignor’s
Commitment/
Loans
Assigned10
    Resulting
Commitment/
Loans
Amount for
Assignor
     Resulting
Commitment/
Loans Amount
for
Assignee
 
         $ _________      $ ______        _________   $ ______      $ _______  
         $ _________      $ ______        _________   $ ______      $ _______  
         $ _________      $ ______        _________   $ ______      $ _______  

 

[7.

Trade Date: __________________]11

 

5 

List each Assignor, as appropriate.

6 

List each Assignee, as appropriate.

7 

Fill in appropriate terminology for each applicable type of facility under the Credit Agreement that is being assigned under this Assignment, i.e., “Extended Term Loans”, “Incremental Term Loans” or “Other Term Loans.”

8 

Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.

9 

Subject to minimum amount requirements pursuant to Section 9.04(b) of the Credit Agreement.

10 

Set forth, to at least 9 decimals, as a percentage of the Commitments/Loans of all Lenders thereunder.

11 

To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.


Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Acceptance are hereby agreed to:

 

ASSIGNOR
[NAME OF ASSIGNOR]
By:  

         

Name:
Title:
ASSIGNEE
[NAME OF ASSIGNEE]
By:  

 

Name:
Title:

 

[Signature Page to Assignment and Acceptance]


[Consented to and]12 Accepted:
Jefferies Finance LLC, as
Administrative Agent
By:  

                     

Name:
Title:
[Consented to:]13
CPG INTERNATIONAL LLC, as Borrower
By:  

 

Name:
Title:

 

12 

To the extent required under Section 9.04 of the Credit Agreement.

13 

To the extent required under Section 9.04 of the Credit Agreement.

 

[Signature Page to Assignment and Acceptance]


ANNEX 1 TO ASSIGNMENT AND ACCEPTANCE

Reference is made to the Amended and Restated Term Loan Credit Agreement, dated as of June 18, 2018 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), the Lenders party thereto from time to time, and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”), and as collateral agent (in such capacity, the “Collateral Agent”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement.

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ACCEPTANCE

1. Representations and Warranties.

1.1. Assignor. [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Loan Parties or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Loan Parties or any other Person of any of their respective obligations under any Loan Document.

1.2. Assignee. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an Assignee under the Credit Agreement (subject to such consents, if any, as may be required under Section 9.04 of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 5.04 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent, Collateral Agent, or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, and (vii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, the Collateral Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.


2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued up to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Acceptance by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. This Assignment and Acceptance shall be construed in accordance with and governed by the laws of the State of New York.

4. Fees. This Assignment and Acceptance shall be delivered to the Administrative Agent with a processing and recordation fee of $3,500.00.

5. Administrative Questionnaire. If the Assignee is not a Lender, annexed hereto as Exhibit A is a completed administrative questionnaire, in form and substance satisfactory to the Administrative Agent, providing such information (including, without limitation, credit contact information and wiring instructions) of the Assignee as the Administrative Agent may reasonably require.


Exhibit A

Administrative Questionnaire

[provided by Administrative Agent]


EXHIBIT B

[FORM OF]

SOLVENCY CERTIFICATE

OF CPG INTERNATIONAL INC.

AND ITS SUBSIDIARIES

June [    ], 2018

This Solvency Certificate is delivered pursuant to Section 4.01(f) of the Amended and Restated Term Loan Credit Agreement, dated as of June 18, 2018 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), the Lenders party thereto from time to time, and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”), and as collateral agent (in such capacity, the “Collateral Agent”).

The undersigned hereby certifies, solely in such undersigned’s capacity as [chief financial officer][chief accounting officer][specify other officer with equivalent duties] of CPG International Inc., and not individually, as follows:

As of the date hereof, after giving effect to the consummation of the Transactions including the making of the Term Loans under the Credit Agreement on the date hereof and the issuance of the Senior Unsecured Notes on the date hereof, and after giving effect to the application of the proceeds of such Indebtedness:

 

  a.

The fair value of the assets of Borrower and its Subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, subordinated, contingent or otherwise;

 

  b.

The present fair saleable value of the property of Borrower and its Subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured;

 

  c.

Borrower and its Subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured; and

 

  d.

Borrower and its Subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital.

For purposes of this Solvency Certificate, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability.


IN WITNESS WHEREOF, the undersigned has executed this Solvency Certificate on the date first written above.

 

CPG INTERNATIONAL LLC
By:  

         

  Name:
  Title:

 

[Signature Page to Solvency Certificate]


EXHIBIT C

[FORM OF]

BORROWING REQUEST

 

To:    Jefferies Finance LLC,   
  

as Administrative Agent for

the Lenders referred to below

   [•], 20[    ]

Ladies and Gentlemen:

Reference is made to the Amended and Restated Term Loan Credit Agreement, dated as of June 18, 2018 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), the Lenders party thereto from time to time, and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”), and as collateral agent (in such capacity, the “Collateral Agent”).

The undersigned hereby gives you notice pursuant to Section 2.03 of the Credit Agreement that it requests a Borrowing under the Credit Agreement, and in that connection sets forth below the terms on which such Borrowing is requested to be made:

 

(A)    Date of Borrowing (the “Proposed Borrowing Date”)  
   (which shall be a Business Day)                                            
(B)    Principal Amount of Borrowing                                            
(C)    Type of Borrowing1                                            
(D)    Interest Period and the last day thereof2                                            
   (in the case of a Eurocurrency Borrowing)                                            
(E)    Account Number and Location                                            

The Borrower hereby agrees that if for any reason the Borrowing shall not be made on the Proposed Borrowing Date, Section 2.14 of the Credit Agreement shall be applicable and the Borrower shall pay any amounts under Section 2.14 of the Credit Agreement that it would be required to pay if the Credit Agreement were effective.

 

1 

Specify an ABR Borrowing or a Eurocurrency Borrowing.

2 

The initial Interest Period applicable to a Eurocurrency Borrowing shall be subject to the definition of “Interest Period”.


CPG INTERNATIONAL LLC
By:  

 

  Name:
  Title:

 

 

[Signature Page to Borrowing Request]


EXHIBIT D

[FORM OF]

INTEREST ELECTION REQUEST

 

To:    Jefferies Finance LLC,   
  

as Administrative Agent

for the Lenders referred to below

  
      [•], 201[•]16

Ladies and Gentlemen:

Reference is made to the Amended and Restated Term Loan Credit Agreement, dated as of June 18, 2018 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), the Lenders party thereto from time to time, and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”), and as collateral agent (in such capacity, the “Collateral Agent”).

Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement.

This notice constitutes a notice of conversion or notice of continuation, as applicable, under Section 2.05 of the Credit Agreement, and the Borrower hereby irrevocably notifies the Administrative Agent of the following information with respect to the conversion or continuation requested hereby:

 

  a.

The Borrowing to which this Interest Election Request applies17 is [•];

 

  b.

The effective date of the election (which shall be a Business Day) made pursuant to this Interest Election Request is [•], 201[•];

 

  c.

The resulting Borrowing is to be [an ABR Borrowing][a Eurocurrency Borrowing][; and]

 

  [d.

The Interest Period applicable to the resulting Borrowing after giving effect to such election is [•]18].

 

16 

Administrative Agent must be notified as indicated in Section 2.05 of the Credit Agreement in the case of an election to convert to or continue a Eurocurrency Borrowing election, not later than 2:00 p.m. New York City time, three Business Days before the effective date of such election or, in the case of an election to convert or continue an ABR Borrowing, not later than 2:00 p.m., New York City time, one Business Day before the effective date of such election.

17 

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 specified pursuant to (d) below shall be specified for each resulting Borrowing).

18 

Include this clause (d) if the resulting Borrowing is a Eurocurrency Borrowing. Such Interest Period shall be a period contemplated by the definition of the term “Interest Period” as set forth in the Credit Agreement. In the case of a Eurocurrency Borrowing that does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration pursuant to Section 2.05(b).


CPG INTERNATIONAL LLC
By:  

 

  Name:
  Title:

 

[Signature Page to Interest Election Request]


EXHIBIT E

[FORM OF]

NON-DEBT FUND AFFILIATE ASSIGNMENT AND ACCEPTANCE

This Non-Debt Fund Affiliate Assignment and Acceptance (this “Assignment and Acceptance”) is dated as of the Effective Date set forth below and is entered into by and between [the][each]19 Assignor identified in item 1 below ([the][each, an] “Assignor”) and [the][each]20 Assignee identified in item 2 below ([the][each, an] “Assignee”). [It is understood and agreed that the rights and obligations of [the Assignors][the Assignees]21 hereunder are several and not joint.]22 Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Acceptance as if set forth herein in full.

For an agreed consideration, [the][each] Assignor hereby irrevocably sells and assigns to [the Assignee][the respective Assignees], and [the][each] Assignee hereby irrevocably purchases and assumes from [the Assignor][the respective Assignors], subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by the Administrative Agent as contemplated below (i) all of [the Assignor’s][the respective Assignors’] rights and obligations in [its capacity as a Lender][their respective capacities as Lenders] under the Credit Agreement and the other Loan Documents to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of [the Assignor][the respective Assignors] under the Facility identified below and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of [the Assignor (in its capacity as a Lender)][the respective Assignors (in their respective capacities as Lenders)] against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other Loan Documents or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by [the][any] Assignor to [the][any] Assignee pursuant to clauses (i) and (ii) above being referred to herein collectively as [the][an] “Assigned Interest”). Each such sale and assignment is without recourse to [the][any] Assignor and, except as expressly provided in this Assignment and Acceptance, without representation or warranty by [the][any] Assignor.

 

19 

For bracketed language here and elsewhere in this form relating to the Assignor(s), if the assignment is from a single Assignor, choose the first bracketed language. If the assignment is from multiple Assignors, choose the second bracketed language.

20 

For bracketed language here and elsewhere in this form relating to the Assignee(s), if the assignment is to a single Assignee, choose the first bracketed language. If the assignment is to multiple Assignees, choose the second bracketed language.

21 

Select as appropriate.

22 

Include bracketed language if there are either multiple Assignors or multiple Assignees.


1.

Assignor[s]

 

2.

Assignee[s]                                                              

[and is an Affiliate/Approved Fund of [identify Lender]23 ]

 

3.

Borrower: CPG International LLC, a Delaware limited liability company (as successor-in-interest to CPG International Inc., a Delaware corporation)

 

4.

Administrative Agent: Jefferies Finance LLC, as the administrative agent under the Credit Agreement

 

5.

Credit Agreement: Amended and Restated Term Loan Credit Agreement, dated as of June 18, 2018 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), the Lenders party thereto from time to time, and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”), and as collateral agent (in such capacity, the “Collateral Agent”).

 

6.

Assigned Interest[s]:

 

Assignor[s]24

   Assignee[s]25      Facility
Assigned26
     Amount of
Assignor’s
Commitment/
Loans27
     Amount of
Commitment/
Loans
Assigned28
     Percentage
of Assignor’s
Commitment/
Loans
Assigned29
    Resulting
Commitment/
Loans Amount
for
Assignor
     Resulting
Commitment/
Loans Amount
for
Assignee
 
         $ _________      $ ______        _________   $ ______      $ _______  
         $ _________      $ ______        _________   $ ______      $ _______  
         $ _________      $ ______        _________   $ ______      $ _______  

 

23 

Select as applicable.

24 

List each Assignor, as appropriate.

25 

List each Assignee, as appropriate.

26 

Fill in appropriate terminology for each applicable type of facility under the Credit Agreement that is being assigned under this Assignment, i.e., “Extended Term Loans”, “Incremental Term Loans” or “Other Term Loans.”

27 

Amounts in this column and in the column immediately to the right to be adjusted by the counterparties to take into account any payments or prepayments made between the Trade Date and the Effective Date.

28 

Subject to minimum amount requirements pursuant to Section 9.04(b) of the Credit Agreement.

29 

Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans of all Lenders thereunder.


[7.

Trade Date: __________________]30

Effective Date: __________________, 20__ [TO BE INSERTED BY ADMINISTRATIVE AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

The terms set forth in this Assignment and Acceptance are hereby agreed to:

 

ASSIGNOR
[NAME OF ASSIGNOR]
By:  

             

Name:  
Title:  
ASSIGNEE
[NAME OF ASSIGNEE]
By:  

             

Name:  
Title:  

 

30 

To be completed if the Assignor and the Assignee intend that the minimum assignment amount is to be determined as of the Trade Date.

 

[Signature Page to Non-Debt Fund Affiliate Assignment And Acceptance]


[Consented to and]31 Accepted:
JEFFERIES FINANCE LLC, as
Administrative Agent
By:  

                          

Name:  
Title:  
[Consented to:]32
CPG INTERNATIONAL LLC, as Borrower
By:  

                          

Name:  
Title:  

 

31 

To the extent required under Section 9.04 of the Credit Agreement.

32 

To the extent required under Section 9.04 of the Credit Agreement.

 

[Signature Page to Non-Debt Fund Affiliate Assignment And Acceptance]


ANNEX 1 TO ASSIGNMENT AND ACCEPTANCE

Reference is made to the Amended and Restated Term Loan Credit Agreement, dated as of June 18, 2018 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), the Lenders party thereto from time to time, and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”), and as collateral agent (in such capacity, the “Collateral Agent”).

Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement.

STANDARD TERMS AND CONDITIONS FOR

NON-DEBT FUND AFFILIATE ASSIGNMENT AND ACCEPTANCE

1. Representations and Warranties.

1.1 Assignor. [The][Each] Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of [the][[the relevant] Assigned Interest, (ii) [the][such] Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Loan Parties or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Loan Parties or any other Person of any of their respective obligations under any Loan Document.

1.2. Assignee. [The][Each] Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Acceptance and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it is a [Non-Debt Fund Affiliate][Purchasing Borrower Party] pursuant to Section [9.04(k)(ii)][9.04(o)] of the Credit Agreement, (iii) it meets all the requirements to be an Assignee under the Credit Agreement (subject to such consents, if any, as may be required under Section 9.04 of the Credit Agreement), (iv) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of [the][the relevant] Assigned Interest, shall have the obligations of a Lender thereunder, (v) it is sophisticated with respect to decisions to acquire assets of the type represented by [the][such] Assigned Interest and either it, or the Person exercising discretion in making its decision to acquire [the][such] Assigned Interest, is experienced in acquiring assets of such type, (vi) it has received a copy of the Credit Agreement, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Section 5.04 thereof, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, (vii) it has, independently and without reliance upon the Administrative Agent, Collateral Agent, or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and


decision to enter into this Assignment and Acceptance and to purchase [the][such] Assigned Interest, and (viii) if it is a Foreign Lender, attached hereto is any documentation required to be delivered by it pursuant to the terms of the Credit Agreement, duly completed and executed by [the][such] Assignee; and (b) agrees that (i) it will, independently and without reliance upon the Administrative Agent, the Collateral Agent, [the][any] Assignor or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

1.3. [Non-Debt Fund Affiliate.

The Assignee consents to the provisions of Section 9.04 of the Credit Agreement that apply to a Non-Debt Fund Affiliate in its capacity as a Lender with respect to the Assigned Interest.

The Assignee affirms that it has received from the assignor a customary “big boy” letter.]

[Purchasing Borrower Party. The Assignee [affirms the No MNPI Representation as of the Effective Date and further represents and warrants that (a) immediately after giving effect to this Assignment and Acceptance, no Event of Default will exist, (b) no proceeds from revolving loans under the ABL Credit Agreement shall be used to fund any such purchase and (c) this Assignment and Acceptance is being entered into in connection with an offer by the Assignee to purchase or take by assignment Term Loans pursuant to a Dutch Auction open to all Lenders of the applicable Class on a pro rata basis. The Assignee consents to the provisions of the Credit Agreement that apply to the purchase by or assignment to a Purchasing Borrower Party of Term Loans included in the Assigned Interest.]

2. Payments. From and after the Effective Date, the Administrative Agent shall make all payments in respect of [the][each] Assigned Interest (including payments of principal, interest, fees and other amounts) to [the][the relevant] Assignor for amounts which have accrued up to but excluding the Effective Date and to [the][the relevant] Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Acceptance shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Acceptance may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Acceptance by telecopy shall be effective as delivery of a manually executed counterpart of this Assignment and Acceptance. This Assignment and Acceptance shall be construed in accordance with and governed by the laws of the State of New York.

4. Fees. This Assignment and Acceptance shall be delivered to the Administrative Agent with a processing and recordation fee of $3,500.00.

5. Administrative Questionnaire. If the Assignee is not a Lender, annexed hereto as Exhibit A is a completed administrative questionnaire, in form and substance satisfactory to the Administrative Agent, providing such information (including, without limitation, credit contact information and wiring instructions) of the Assignee as the Administrative Agent may reasonably require.


Exhibit A

Administrative Questionnaire

[provided by Administrative Agent]


EXHIBIT F

[Form of]

TERM NOTE

 

$_______________   

New York, New York

[Date]

FOR VALUE RECEIVED, the undersigned CPG International LLC, a Delaware limited liability company (the “Borrower”), hereby promises to pay to [                    ] (the “Lender”) on the Maturity Date (as defined in the Credit Agreement referred to below) in lawful money of the United States and in immediately available funds, the principal amount of ____________ DOLLARS ($____________), or, if less, the aggregate unpaid principal amount of all Loans of the Lender outstanding under the Credit Agreement referred to below, which sum shall be due and payable in such amounts and on such dates as are set forth in the Credit Agreement. The Borrower further agrees to pay interest in like money at such office specified pursuant to Section 9.01(a)(ii) of the Credit Agreement on the unpaid principal amount hereof from time to time from the date hereof at the rates, and on the dates, specified in Section 2.11 of such Credit Agreement.

The holder of this Note may endorse and attach a schedule to reflect the date, Type and amount of each Loan of the Lender outstanding under the Credit Agreement, the date and amount of each payment or prepayment of principal hereof, and the date of each interest rate conversion or continuation pursuant to Section 2.05 of the Credit Agreement and the principal amount subject thereto; provided that the failure of the Lender to make any such recordation (or any error in such recordation) shall not affect the obligations of the Borrower hereunder or under the Credit Agreement.

This Note is one of the Notes referred to in the Amended and Restated Term Loan Credit Agreement, dated as of June 18, 2018 (as it may be amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), the Lenders party thereto from time to time, and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”), and as collateral agent (in such capacity, the “Collateral Agent”). Terms used herein which are defined in the Credit Agreement shall have such defined meanings unless otherwise defined herein or unless the context otherwise requires.

This Note is secured and guaranteed as provided in the Credit Agreement and the Security Documents. Reference is hereby made to the Credit Agreement and the Security Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and guarantees, the terms and conditions upon which the security interest and each guarantee was granted and the rights of the holder of this Note in respect thereof.

Upon the occurrence of any one or more of the Events of Default specified in the Credit Agreement, all amounts then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable all as provided therein.

All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.


THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE CREDIT AGREEMENT.

THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

[Signature Page Follows]


CPG INTERNATIONAL LLC, as Borrower
By:  

         

  Name:
  Title:

 

[Signature Page to Term Note]


EXHIBIT C

SCHEDULES


EXHIBIT D

SOLVENCY CERTIFICATE


SOLVENCY CERTIFICATE

OF CPG INTERNATIONAL LLC

AND ITS SUBSIDIARIES

June 18, 2018

This Solvency Certificate is delivered pursuant to Section 5(i) of the Incremental Amendment No. 1, dated as of the date hereof (the “Incremental Amendment No. 1”), to the Term Loan Credit Agreement, dated as of September 30, 2013 (as amended by the First Amendment, dated as of February 6, 2014 and the Second Amendment, dated as of May 5, 2017 and as may be further amended and restated pursuant to the Incremental Amendment No. 1 and as may be amended, restated, supplemented, waived or otherwise modified from time to time, the “Amended and Restated Credit Agreement”), by and among CPG International LLC, as borrower (the “Borrower”), CPG Newco LLC, as guarantor, the Lenders party thereto from time to time, and Jefferies Finance LLC, as administrative agent and collateral agent.

The undersigned hereby certifies, solely in such undersigned’s capacity as Chief Financial Officer of the Borrower, and not individually, as follows:

As of the date hereof, after giving effect to the consummation of the Transactions, including the making of the 2018 Incremental Term Loans, and after giving effect to the application of the proceeds of such indebtedness:

 

  a.

The fair value of the assets of the Borrower and its subsidiaries, on a consolidated basis, exceeds, on a consolidated basis, their debts and liabilities, subordinated, contingent or otherwise;

 

  b.

The present fair saleable value of the property of the Borrower and its subsidiaries, on a consolidated basis, is greater than the amount that will be required to pay the probable liability, on a consolidated basis, of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured;

 

  c.

The Borrower and its subsidiaries, on a consolidated basis, are able to pay their debts and liabilities, subordinated, contingent or otherwise, as such liabilities become absolute and matured; and

 

  d.

The Borrower and its subsidiaries, on a consolidated basis, are not engaged in, and are not about to engage in, business for which they have unreasonably small capital.

For purposes of this Certificate, the amount of any contingent liability at any time shall be computed as the amount that would reasonably be expected to become an actual and matured liability. Capitalized terms used but not otherwise defined herein shall have the meanings assigned to them in the Amended and Restated Credit Agreement.

[Signature Page Follows]


IN WITNESS WHEREOF, the undersigned has executed this Certificate in such undersigned’s capacity as Chief Financial Officer of the Borrower, on behalf of the Borrower, and not individually, as of the date first stated above.

 

CPG INTERNATIONAL LLC
By   /s/ Chris Eppel
  Name: Chris Eppel
  Title:   Chief Financial Officer

[Signature Page to Solvency Certificate (Incremental Amendment No. 1)]


ANNEX I

INCREMENTAL TERM LOAN COMMITMENTS

 

2018 Incremental Term Lender

   Incremental Term Loan Commitment  

Jefferies Finance LLC

   $ 225,000,000  

TOTAL

   $ 225,000,000  

Exhibit 10.13

TERM LOAN GUARANTEE AND COLLATERAL AGREEMENT,

dated as of September 30, 2013,

among

CPG MERGER SUB LLC,

as the Borrower,

each other Subsidiary of Holdings

identified herein

and

BARCLAYS BANK PLC,

as Administrative Agent and Collateral Agent

Reference is made to the ABL/Term Loan Intercreditor Agreement, dated as of September 30, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “ABL/Term Loan Intercreditor Agreement”) among Deutsche Bank AG New York Branch, as administrative agent under the ABL Credit Agreement (the “ABL Administrative Agent”), Barclays Bank PLC, as administrative agent under the Term Loan Credit Agreement (the “Term Loan Administrative Agent”), the Borrower and the other parties thereto. Notwithstanding anything herein to the contrary, the lien and security interest granted to the Term Loan Administrative Agent, for the benefit of the secured parties hereunder, pursuant to this Term Loan Guarantee and Collateral Agreement (this “Agreement”) and the exercise of any right or remedy by the Term Loan Administrative Agent hereunder are subject to the provisions of the ABL/Term Loan Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of the ABL/Term Loan Intercreditor Agreement and this Agreement regarding the relative priorities of the liens granted to the ABL Administrative Agent and the Term Loan Administrative Agent in the collateral, the provisions of the ABL/Term Loan Intercreditor Agreement shall govern and control.

 


TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITIONS

  

Section 1.01.

  Credit Agreement      1  

Section 1.02.

  Other Defined Terms      1  

ARTICLE II GUARANTEE

  

Section 2.01.

  Guarantee      4  

Section 2.02.

  Guarantee of Payment      4  

Section 2.03.

  No Limitations, Etc.      4  

Section 2.04.

  Reinstatement      6  

Section 2.05.

  Agreement To Pay; Contribution; Subrogation      6  

Section 2.06.

  Information      6  

Section 2.07.

  Maximum Liability      6  

Section 2.08.

  Taxes      7  

ARTICLE III PLEDGE OF SECURITIES

  

Section 3.01.

  Pledge      7  

Section 3.02.

  Delivery of the Pledged Collateral      8  

Section 3.03.

  Representations, Warranties and Covenants      9  

Section 3.04.

  Registration in Nominee Name; Denominations      11  

Section 3.05.

  Voting Rights; Dividends and Interest, Etc.      11  

ARTICLE IV SECURITY INTERESTS IN OTHER PERSONAL PROPERTY

  

Section 4.01.

  Security Interest      13  

Section 4.02.

  Representations and Warranties      16  

Section 4.03.

  Covenants      18  

Section 4.04.

  Other Actions      20  

Section 4.05.

  Covenants Regarding Patent, Trademark and Copyright Collateral      20  

Section 4.06.

  ABL/Term Intercreditor Relations      21  

ARTICLE V REMEDIES

  

Section 5.01.

  Remedies Upon Default      22  

Section 5.02.

  Application of Proceeds      24  

Section 5.03.

  Securities Act, Etc.      25  

ARTICLE VI INDEMNITY, SUBROGATION AND SUBORDINATION

  

Section 6.01.

  Indemnity      25  

Section 6.02.

  Contribution and Subrogation      25  

Section 6.03.

  Subordination      26  

ARTICLE VII MISCELLANEOUS

  

Section 7.01.

  Notices      26  

Section 7.02.

  Security Interest Absolute      26  

Section 7.03.

  Limitation By Law      27  

Section 7.04.

  Binding Effect; Several Agreement      27  

Section 7.05.

  Successors and Assigns      27  

Section 7.06.

  Administrative Agent’s Fees and Expenses; Indemnification      27  

Section 7.07.

  Administrative Agent Appointed Attorney-in-Fact      27  

 

i


Section 7.08.

  APPLICABLE LAW      28  

Section 7.09.

  Waivers; Amendment      28  

Section 7.10.

  WAIVER OF JURY TRIAL      28  

Section 7.11.

  Severability      28  

Section 7.12.

  Counterparts      29  

Section 7.13.

  Headings      29  

Section 7.14.

  Jurisdiction; Consent to Service of Process      29  

Section 7.15.

  Termination or Release      29  

Section 7.16.

  Additional Subsidiaries      30  

 

 

ii


Schedules

 

Schedule I

  

Subsidiary Loan Parties

Schedule II

  

Pledged Stock; Debt Securities

Schedule III

  

Intellectual Property

Schedule IV

  

Filing Jurisdictions

Schedule V

  

Commercial Tort Claims

Schedule VI

  

Matters Relating to Accounts and Inventory

Schedule VII

  

Jurisdictions of Organization, Locations of Chief Executive Offices

Exhibits

  

Exhibit I

  

Form of Supplement to the Guarantee and Collateral Agreement

 

 

iii


TERM LOAN GUARANTEE AND COLLATERAL AGREEMENT dated as of September 30, 2013 (this “Agreement”), among CPG MERGER SUB LLC, a Delaware limited liability company (prior to the consummation of the Acquisition, the “Borrower”), each other party that becomes a party to this Agreement after the Closing Date and BARCLAYS BANK PLC (“Barclays”), as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined below).

Reference is made to the Term Loan Credit Agreement dated as of September 30, 2013 (as amended, restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto from time to time, Barclays, as Administrative Agent and Collateral Agent, and the other parties thereto.

Promptly following consummation of the Acquisition, each of CPG Newco LLC (“Holdings”) and the Subsidiary Loan Parties shall accede to this Agreement and each other Loan Document (as appropriate) by execution of a joinder, supplement or other form of applicable agreement.

The Lenders have agreed to extend credit to the Borrower subject to the terms and conditions set forth in the Credit Agreement. The obligations of the Lenders to extend such credit are conditioned upon, among other things, the execution and delivery of this Agreement. Holdings, directly or indirectly, owns 100% of the equity interests of the Borrower and, following the consummation of the Acquisition, the Subsidiary Loan Parties (which at that time shall also be Subsidiaries of the Borrower). The Loan Parties will derive substantial benefits from the extension of credit to the Borrower pursuant to the Credit Agreement and are willing to execute and deliver this Agreement in order to induce the Lenders to extend such credit. Accordingly, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Credit Agreement. (a) Capitalized terms used in this Agreement and not otherwise defined herein have the respective meanings assigned thereto in the Credit Agreement. All capitalized terms defined in the New York UCC (as defined herein) and not defined in this Agreement have the meanings specified therein.

(b) The rules of construction specified in Section 1.02 of the Credit Agreement also apply to this Agreement.

Section 1.02. Other Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

ABL Administrative Agent” shall mean Deutsche Bank AG New York Branch, as administrative agent under the ABL Credit Agreement, and any successor thereto.

ABL Priority Collateral” shall have the meaning assigned to such term in the ABL/Term Loan Intercreditor Agreement as in effect on the date hereof.

ABL/Term Loan Intercreditor Agreement” shall mean the Intercreditor Agreement, dated as of the date hereof among the Administrative Agent, the ABL Administrative Agent and the Pledgors.

Article 9 Collateral” shall have the meaning assigned to such term in Section 4.01.

 

1


Collateral” shall mean the collective reference to Article 9 Collateral and Pledged Collateral.

Control Agreement” shall mean a deposit account control agreement, a securities account control agreement or a commodity account control agreement, as applicable, which provides the Administrative Agent with “control” (within the meaning of the New York UCC) of any such accounts, in form and substance reasonably satisfactory to the Administrative Agent.

Copyright License” shall mean any written agreement, now or hereafter in effect, granting any right to any Pledgor under any Copyright now or hereafter owned by any third party (including, without limitation, any such rights that such Pledgor has the right to license).

Copyrights” shall mean all of the following which any Pledgor now or hereafter owns or in which any Pledgor now or hereafter has an interest (pursuant to a Copyright License or otherwise): (a) all copyright rights in any work subject to the copyright laws of the United States, whether as author, assignee, transferee or otherwise, (b) all registrations and applications for registration of any such Copyright in the United States, including registrations, supplemental registrations and pending applications for registration in the United States Copyright Office and the right to obtain all renewals thereof, including those listed on Schedule III, (c) all claims for, and rights to sue for, past or future infringements of any of the foregoing and (d) all income, royalties, damages and payments now or hereafter due and payable with respect to any of the foregoing, including damages and payments for past or future infringement thereof.

Credit Agreement” shall have the meaning assigned to such term in the preliminary statement of this Agreement.

Discharge of ABL Priority Claims” shall have the meaning assigned to such term in the ABL/Term Loan Intercreditor Agreement.

Excluded Assets” shall have the meaning assigned to such term in Section 4.01.

Excluded Equity Interests” shall have the meaning assigned to such term in Section 3.01.

Federal Securities Laws” shall have the meaning assigned to such term in Section 5.03.

Guarantors” shall mean Holdings and the Subsidiary Loan Parties.

Intellectual Property” shall mean all intellectual property of every kind and nature which any Pledgor now or hereafter owns or in which any Pledgor now or hereafter has an interest, including inventions, designs, Patents, Copyrights, Trademarks, trade secrets, domain names, confidential or proprietary technical and business information or know-how.

Intellectual Property Security Agreement” shall mean a security agreement in a form reasonably acceptable to the Administrative Agent and the Borrower.

IP Agreements” shall mean all material Copyright Licenses, Patent Licenses, Trademark Licenses, and all other agreements, relating to the license of any material Intellectual Property to which a Pledgor, now or hereafter, is a party, excluding, in each case, licenses of commercial business software and non-exclusive licenses of Intellectual Property incidental to the sale or purchase of products or services in the ordinary course of business, and including, without limitation, the agreements set forth on Schedule III hereto.

 

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New York UCC” shall mean the Uniform Commercial Code as from time to time in effect in the State of New York.

Patent License” shall mean any written agreement, now or hereafter in effect, granting to any Pledgor any right to make, use or sell any invention covered by a Patent, now or hereafter owned by any third party (including, without limitation, any such rights that such Pledgor has the right to license).

Patents” shall mean all of the following which any Pledgor now or hereafter owns or in which any Pledgor now or hereafter has an interest (pursuant to a Patent License or otherwise): (a) all letters patent of the United States, including those listed on Schedule III, and all applications for letters patent of the United States, including those listed on Schedule III, (b) all provisionals, reissues, extensions, continuations, divisions, continuations-in-part, reexaminations or revisions thereof, and the inventions disclosed or claimed therein, including the right to make, use, import and/or sell the inventions disclosed or claimed therein, (c) all claims for, and rights to sue for, past or future infringements of any of the foregoing and (d) all income, royalties, damages and payments now or hereafter due and payable with respect to any of the foregoing, including damages and payments for past or future infringement thereof.

Pledged Collateral” shall have the meaning assigned to such term in Section 3.01.

Pledged Debt Securities” shall have the meaning assigned to such term in Section 3.01.

Pledged Securities” shall mean any promissory notes, stock certificates or other certificated securities now or hereafter included in the Pledged Collateral, including all certificates, instruments or other documents representing or evidencing any Pledged Collateral.

Pledged Stock” shall have the meaning assigned to such term in Section 3.01.

Pledgor” shall mean Holdings, the Borrower and each Subsidiary Loan Party.

Secured Parties” shall mean (a) the Lenders, (b) the Agents, (c) the beneficiaries of each indemnification obligation undertaken by any Loan Party under any Loan Document and (d) the successors and permitted assigns of each of the foregoing.

Security Interest” shall have the meaning assigned to such term in Section 4.01.

Subsidiary Loan Party” shall mean each Subsidiary identified on Schedule I, each Co- Borrower and each other Person that becomes a party hereto in accordance with Section 7.16.

Trademark License” shall mean any written agreement, now or hereafter in effect, granting to any Pledgor any right to use any Trademark now or hereafter owned by any third party (including, without limitation, any such rights that such Pledgor has the right to license).

Trademarks” shall mean all of the following which any Pledgor now or hereafter owns or in which any Pledgor now or hereafter has an interest (pursuant to a Trademark License or otherwise): (a) all trademarks, service marks, corporate names, company names, business names, fictitious business names, trade styles, trade dress, logos, other source or business identifiers, designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all registrations thereof (if any), and all

 

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registration and recording applications filed in connection therewith, including registrations and registration applications in the United States Patent and Trademark Office or any similar offices in any State of the United States (except for “intent-to-use” applications for trademark or service mark registrations filed pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. § 1051, unless and until an Amendment to Allege Use or a Statement of Use under Sections 1(c) and 1(d) of the Lanham Act has been filed, to the extent that, and solely during the period for which, any assignment of an “intent-to-use” application prior to such filing would violate the Lanham Act), and all renewals thereof, including those listed on Schedule III, (b) all goodwill associated therewith or symbolized thereby, (c) all claims for, and rights to sue for, past or future infringements of any of the foregoing and (d) all income, royalties, damages and payments now or hereafter due and payable with respect to any of the foregoing, including damages and payments for past or future infringement thereof.

ARTICLE II

GUARANTEE

Section 2.01. Guarantee. Each Guarantor unconditionally guarantees, jointly with the other Guarantors and severally, to the Administrative Agent for the ratable benefit of the Secured Parties as a primary obligor and not merely as a surety, the due and punctual payment and performance of the Obligations. Each Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice to or further assent from such Guarantor, and that such Guarantor will remain bound upon its guarantee hereunder notwithstanding any extension or renewal of any Obligation. Each Guarantor waives presentment to, demand of payment from and protest to the Borrower or any other Loan Party of any of the Obligations, and also waives notice of acceptance of its guarantee and notice of protest for nonpayment.

Section 2.02. Guarantee of Payment. Each Guarantor further agrees that its guarantee hereunder constitutes a guarantee of payment when due (whether at the stated maturity, by acceleration or otherwise) and not of collection, and waives any right to require that any resort be had by the Administrative Agent or any other Secured Party to any security held for the payment of the Obligations or to any balance of any Deposit Account or credit on the books of the Administrative Agent or any other Secured Party in favor of any Loan Party or any other person.

Section 2.03. No Limitations, Etc. (a) Except for termination of a Guarantor’s obligations hereunder as expressly provided for in Section 7.15 and except as provided in Section 2.07, the obligations of each Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise (other than defense of payment or performance). Without limiting the generality of the foregoing, except for termination or release of a Guarantor’s obligations hereunder in accordance with the terms of Section 7.15 hereof the obligations of each Guarantor hereunder, to the fullest extent permitted by applicable law, shall not be discharged or impaired or otherwise affected by, and each Guarantor hereby waives any defense to the enforcement hereof by reason of:

(i) the failure of the Administrative Agent or any other Secured Party to assert any claim or demand or to exercise or enforce any right or remedy under the provisions of any Loan Document or otherwise;

 

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(ii) any rescission, waiver, amendment or modification of, or any release from any of the terms or provisions of, any Loan Document or any other agreement, including with respect to any other Guarantor under this Agreement;

(iii) the failure to perfect any security interest in, or the release of, any of the Collateral held by or on behalf of the Administrative Agent or any other Secured Party for the Obligations;

(iv) any default, failure or delay, willful or otherwise, in the performance of the Obligations;

(v) any illegality, lack of validity or enforceability of any Obligation;

(vi) any change in the corporate existence, structure or ownership of any Loan Party, or any insolvency, bankruptcy or reorganization of any Loan Party;

(vii) the existence of any claim, set-off or other rights that the Guarantors may have at any time against the Borrower, the Administrative Agent, any other Secured Party or any other person, whether in connection herewith, the other Loan Documents or any unrelated transactions; provided that nothing herein will prevent the assertion of any such claim by separate suit or compulsory counterclaim;

(viii) any action permitted or authorized hereunder; or

(ix) any other circumstance (including any statute of limitations) or any act or omission that may in any manner or to any extent vary the risk of any Guarantor or otherwise operate as a defense to, or a legal or equitable discharge of, the Borrower or any Guarantor or any other guarantor or surety (other than the payment in full in cash or immediately available funds of the Obligations).

Each Guarantor expressly authorizes the Secured Parties to take and hold security for the payment and performance of the Obligations, to exchange, waive or release any or all such security (with or without consideration), to enforce or apply such security and direct the order and manner of any sale thereof in their sole discretion or to release, substitute or add any one or more other guarantors or obligors upon or in respect of the Obligations, all without affecting the obligations of any Guarantor hereunder.

(b) To the fullest extent permitted by applicable law and except for termination or release of a Guarantor’s obligations hereunder in accordance with the terms of Section 7.15 hereof, each Guarantor waives any defense based on or arising out of any defense of any other Loan Party or the unenforceability of the Obligations or any part thereof from any cause, or the cessation from any cause of the liability of any other Loan Party, other than, after the payment in full in cash or immediately available funds of all the Obligations (other than contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted). The Administrative Agent and the other Secured Parties may exercise any right or remedy available to them against any other Loan Party pursuant to this Agreement or the other Loan Documents, without affecting or impairing in any way the liability of any Guarantor hereunder except to the extent that after giving effect thereto all Obligations have been terminated and paid in full (other than contingent indemnity or expense reimbursement obligations that are not yet due and payable and for which no claim has been made). To the fullest extent permitted by applicable law, each Guarantor waives any defense arising out of any such election even though such election operates, pursuant to applicable law, to impair or to extinguish any right of reimbursement or subrogation or other right or remedy of such Guarantor against any other Loan Party, as the case may be, or any security.

 

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Section 2.04. Reinstatement. Each Guarantor agrees that its guarantee hereunder shall continue to be effective or be reinstated, if, at any time payment, or any part thereof, of any Obligation is rescinded or must otherwise be restored by the Administrative Agent or any other Secured Party upon the bankruptcy or reorganization of the Borrower or any other Loan Party or otherwise.

Section 2.05. Agreement To Pay; Contribution; Subrogation. In furtherance of the foregoing and not in limitation of any other right that the Administrative Agent or any other Secured Party has at law or in equity against any Guarantor by virtue hereof, upon the failure of any Loan Party to pay any Obligation when and as the same shall become due, whether at maturity, by acceleration, after notice of prepayment or otherwise, subject to Section 2.07, each Guarantor hereby promises to and will forthwith pay, or cause to be paid, to the Administrative Agent for distribution to the applicable Secured Parties in cash the amount of such unpaid Obligation. Subject to the foregoing, to the extent that any Guarantor shall, under this Agreement or the Credit Agreement as a joint and several obligor, repay any of the Obligations constituting Loans or other advances made to or reimbursement obligations owed by another Loan Party under the Credit Agreement (an “Accommodation Payment”), then the Guarantor making such Accommodation Payment shall be entitled to contribution and indemnification from, and be reimbursed by, each of the other Guarantors in an amount equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Guarantor’s Allocable Amount and the denominator of which is the sum of the Allocable Amounts of all of the Guarantors; provided that such rights of contribution and indemnification shall be subordinated to the discharge of Obligations. As of any date of determination, the “Allocable Amount” of each Guarantor shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Guarantor hereunder and under the Credit Agreement without (a) rendering such Guarantor “insolvent” within the meaning of Section 101 (31) of the Bankruptcy Code of the United States, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (b) leaving such Guarantor with unreasonably small capital or assets, within the meaning of Section 548 of the Bankruptcy Code of the United States, Section 4 of the UFTA, or Section 5 of the UFCA, or (c) leaving such Guarantor unable to pay its debts as they become due within the meaning of Section 548 of the Bankruptcy Code of the United States or Section 4 of the UFTA, or Section 5 of the UFCA. Upon payment by any Guarantor of any sums to the Administrative Agent as provided above, all rights of such Guarantor against the Borrower, any other Loan Party or any other Guarantor arising as a result thereof by way of right of subrogation, contribution, reimbursement, indemnity or otherwise shall in all respects be subject to Article VI.

Section 2.06. Information. Each Guarantor assumes all responsibility for being and keeping itself informed of the financial condition and assets of the Borrower and each other Loan Party, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that such Guarantor assumes and incurs hereunder, and agrees that no Agent nor any other Secured Party will have any duty to advise such Guarantor of information known to it or any of them regarding such circumstances or risks.

Section 2.07. Maximum Liability. Each Guarantor, and by its acceptance of this guarantee, each Agent and each other Secured Party hereby confirms that it is the intention of all such persons that this guarantee and the Obligations of each Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of the U.S. Bankruptcy Code or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to this guarantee and the Obligations of each Guarantor hereunder. To effectuate the foregoing intention, the Agents, the other Secured Parties and the Guarantors hereby irrevocably agree that the Obligations of Guarantor under this guarantee at any time shall be limited to the maximum amount as will result in the Obligations of such Guarantor under this guarantee not constituting a fraudulent transfer or conveyance.

 

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Section 2.08. Taxes. Any and all payments by or on account of any obligation of any Guarantor hereunder shall be made free and clear of and without deduction for, any Indemnified Taxes or Other Taxes provided that if a Guarantor shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 2.08) the Administrative Agent or any Secured Party, as applicable, receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Guarantor shall make such deductions and (iii) such Guarantor shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. The provisions of Section 2.15 of the Credit Agreement shall apply to each Guarantor mutatis mutandis.

ARTICLE III

PLEDGE OF SECURITIES

Section 3.01. Pledge. As security for the payment or performance, as the case may be, in full of its Obligations, each Pledgor hereby pledges to the Administrative Agent, its successors and permitted assigns, for the ratable benefit of the Secured Parties, and hereby grants to the Administrative Agent, its successors and permitted assigns, for the ratable benefit of the Secured Parties, a security interest in all of such Pledgor’s right, title and interest in, to and under (a)(i) the Equity Interests directly owned by it (including those Equity Interests listed on Schedule II) and (ii) any other Equity Interests obtained in the future by such Pledgor and, in each case, the certificates representing all such Equity Interests (the foregoing clauses (i) and (ii), collectively, the “Pledged Stock”); provided that the Pledged Stock shall not include:

(A) (1) more than 65% of the issued and outstanding voting Equity Interests of any Foreign Subsidiary that is (x) a CFC directly owned by any Pledgor or (y) any Qualified CFC Holding Company directly owned by a Pledgor or (2) any of the issued and outstanding Equity Interests of (x) any Domestic Subsidiary that is a direct or indirect Subsidiary of a Foreign Subsidiary that is a CFC or (y) any Qualified CFC Holding Company that is not a “first tier” Subsidiary of a Loan Party,

(B) to the extent applicable law requires that a Subsidiary of such Pledgor issue directors’ qualifying shares, nominee shares or similar shares, which are required by Law to be held by persons other than the Pledgors, such qualifying shares, nominee shares or similar shares held by persons other than Pledgors,

(C) any Equity Interests of any person (other than a Wholly Owned Domestic Subsidiary that is directly owned by a Pledgor), to the extent restricted or not permitted by the terms of such person’s organizational documents or other agreements with holders of such Equity Interests (so long as such prohibition did not arise as part of the acquisition or formation of such person or in anticipation of the Credit Agreement and other than to the extent that any such prohibition would be rendered ineffective pursuant to the UCC or any other applicable Law); provided that such Equity Interests shall cease to be Excluded Equity Interests at such time as such prohibition ceases to be in effect,

(D) any Equity Interests if, to the extent and for so long as the pledge of such Equity Interests hereunder is prohibited or restricted by any applicable Law, including any requirement to obtain consent of any Governmental Authority (other than to the extent such prohibition would be rendered ineffective under the UCC or any other applicable Law); provided that such Equity Interests shall cease to be Excluded Equity Interests at such time as such prohibition ceases to be in effect,

 

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(E) any Equity Interests if, to the extent and for so long as the pledge of such Equity Interests hereunder would result in (1) material adverse tax consequences (including, without limitation, as a result of the operation of Section 956 of the Code or any similar Law or regulation in any applicable jurisdiction) or (2) material adverse regulatory consequences, in each case as reasonably determined by the Borrower and with the consent of the Administrative Agent (such consent not to be unreasonably withheld, delayed or conditioned),

(F) any margin stock,

(G) any Equity Interests that the Borrower and the Administrative Agent shall have agreed in writing to treat as Excluded Equity Interests for purposes hereof on account of the cost, difficulty, burden or consequences of pledging such Equity Interests hereunder being excessive in relation to the benefit to the Secured Parties of the security to be afforded thereby,

(H) any Equity Interests in captive insurance subsidiaries, special purpose entities identified in writing at any time by the Borrower to the Administrative Agent and not-for-profit subsidiaries and

(I) (a) any Equity Interests in Unrestricted Subsidiaries (any Equity Interests excluded pursuant to clauses (A) through (H) above, along with this clause (I), the “Excluded Equity Interests”), (b)(i) the promissory notes and any instruments evidencing Indebtedness owned by it as of the Closing Date (including those listed opposite the name of such Pledgor on Schedule II) and (ii) any promissory notes and instruments and any Indebtedness in the future issued to such Pledgor having, an aggregate principal amount in excess of $5.0 million (the foregoing clauses (i) and (ii) collectively, the “Pledged Debt Securities”), in each case including all interest, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all Pledged Debt Securities (except to the extent otherwise excluded from the Collateral pursuant to this Agreement), but excluding (1) intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings and its Subsidiaries or (2) to the extent the pledge of such promissory note or instrument would violate applicable law (after giving effect to the relevant anti- assignment provisions of the Uniform Commercial Code), (c) subject to Section 3.05 hereof, all payments of principal or interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise distributed in respect of, in exchange for or upon the conversion of, and all other proceeds received in respect of, the securities referred to in clauses (a) and (b) above, (d) subject to Section 3.05 hereof, all rights and privileges of such Pledgor with respect to the securities and other property referred to in clauses (a), (b) and (c) above and (e) all proceeds of any of the foregoing (the items referred to in clauses (a) through (d) above being collectively referred to as the “Pledged Collateral”).

TO HAVE AND TO HOLD the Pledged Collateral, together with all right, title, interest, powers, privileges and preferences pertaining or incidental thereto, unto the Administrative Agent, its successors and permitted assigns, for the benefit of the Secured Parties, forever, subject, however, to the terms, covenants and conditions hereinafter set forth and in each case subject to the last paragraph of Article IV of the Credit Agreement and the Collateral and Guarantee Requirement.

Section 3.02. Delivery of the Pledged Collateral. (a) Each Pledgor agrees promptly to deliver or cause to be delivered to the Administrative Agent, for the benefit of the Secured Parties, any and all Pledged Securities to the extent such Pledged Securities, in the case of promissory notes or other instruments evidencing Indebtedness, are required to be delivered pursuant to paragraph (b) of this Section 3.02.

 

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(b) Each Pledgor will cause any Indebtedness for borrowed money having an aggregate principal amount in excess of $5.0 million (other than (i) intercompany current liabilities incurred in the ordinary course of business in connection with the cash management operations of Holdings, the Borrower and the other Subsidiaries or (ii) to the extent that a pledge of such promissory note or instrument would violate applicable law) owed to such Pledgor by any person to be evidenced by a duly executed promissory note that is pledged and delivered to the Administrative Agent, for the benefit of the Secured Parties, pursuant to the terms hereof. To the extent any such promissory note is a demand note, each Pledgor party thereto agrees, if requested by the Administrative Agent, to immediately demand payment thereunder upon a Specified Event of Default unless such demand would not be commercially reasonable or would otherwise expose such Pledgor to liability to the maker.

(c) Upon delivery to the Administrative Agent, (i) any Pledged Securities required to be delivered pursuant to the foregoing paragraphs (a) and (b) of this Section 3.02 shall be accompanied by stock powers or note powers, as applicable, duly executed in blank or other instruments of transfer reasonably satisfactory to the Administrative Agent and by such other instruments and documents as the Administrative Agent may reasonably request and (ii) all other property composing part of the Pledged Collateral delivered pursuant to the terms of this Agreement shall be accompanied to the extent necessary to perfect the security interest in or allow realization on the Pledged Collateral by proper instruments of assignment duly executed by the applicable Pledgor and such other instruments or documents as the Administrative Agent may reasonably request. Each delivery of Pledged Securities shall be accompanied by a schedule describing the securities, which schedule shall be attached hereto as Schedule II (or a supplement to Schedule II, as applicable) and made a part hereof; provided that failure to attach any such schedule hereto shall not affect the validity of such pledge of such Pledged Securities. Each schedule so delivered shall supplement any prior schedules so delivered.

Section 3.03. Representations, Warranties and Covenants. Each Pledgor represents, warrants and covenants to and with the Administrative Agent, for the benefit of the Secured Parties, that:

(a) Schedule II correctly sets forth the percentage of the issued and outstanding shares of each class of the Equity Interests of the issuer thereof represented by such Pledged Stock, in each case as of the Closing Date and includes all Equity Interests, debt securities and promissory notes or instruments evidencing Indebtedness required to be pledged in order to satisfy the Collateral and Guarantee Requirement on the Closing Date. Any Pledgor may certificate any interest in a limited liability company or a limited partnership that was previously uncertificated; provided that the certificate is promptly delivered to the Administrative Agent in accordance with the Intercreditor Agreements. Any Pledgor may amend the organizational documents of any limited liability company or limited partnership so that such limited liability company’s or limited partnership’s interests are no longer represented by a certificate; provided that upon such action, the Administrative Agent will not cease to have a perfected security interest in such interests;

(b) the Pledged Stock and Pledged Debt Securities (solely with respect to Pledged Debt Securities issued by a person that is not a Subsidiary of Holdings or an Affiliate of any such Subsidiary, to the best of each Pledgor’s knowledge) have been duly and validly authorized and issued by the issuers thereof and (i) in the case of Pledged Stock, are fully paid and nonassessable (other than with respect to Pledged Stock consisting of membership interests of limited liability companies to the extent provided in Sections 18-502 and 18-607 of the Delaware Limited Liability Company Act) and (ii) in the case of Pledged Debt Securities (solely with respect to Pledged Debt Securities issued by a person that is not a Subsidiary of Holdings or an Affiliate of any such Subsidiary, to the best of each Pledgor’s knowledge) are legal, valid and binding obligations of the issuers thereof, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, general equitable principles (whether considered in a proceeding at law or in equity) and an implied covenant of good faith and fair dealing;

 

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(c) except for the security interests granted hereunder, each Pledgor (i) is and, subject to any transfers made in compliance with the Credit Agreement, will continue to be the direct owner, beneficially and of record, of the Pledged Securities indicated on Schedule II as owned by such Pledgor, (ii) holds the same free and clear of all Liens, other than Permitted Liens, (iii) will make no assignment, pledge, hypothecation or transfer of, or create or permit to exist any security interest in or other Lien on, the Pledged Collateral, other than pursuant to a transaction permitted by the Credit Agreement and other than Permitted Liens and (iv) subject to the rights of such Pledgor under the Loan Documents to dispose of Pledged Collateral, will use commercially reasonable efforts to defend its title or interest hereto or therein against any and all Liens (other than Permitted Liens), however arising, of all persons;

(d) other than as set forth in the Credit Agreement or the schedules thereto, and except for restrictions and limitations imposed by the Loan Documents or securities laws generally or otherwise permitted to exist pursuant to the terms of the Credit Agreement, the Pledged Stock (other than partnership interests) is and will continue to be freely transferable and assignable, and none of the Pledged Stock is or will be subject to any option, right of first refusal, shareholders agreement, charter or by-law provisions or contractual restriction of any nature that might prohibit, impair, delay or otherwise affect the pledge of such Pledged Stock hereunder, the sale or disposition thereof pursuant hereto or the exercise by the Administrative Agent of rights and remedies hereunder;

(e) each Pledgor has the power and authority to pledge the Pledged Collateral pledged by it hereunder in the manner hereby done or contemplated;

(f) other than as set forth in the Credit Agreement or the schedules thereto, no consent or approval of any Governmental Authority, any securities exchange or any other person was or is necessary to the validity of the pledge effected hereby (other than such as have been obtained and are in full force and effect);

(g) by virtue of the execution and delivery by the Pledgors of this Agreement, when any Pledged Securities (including Pledged Stock of any Domestic Subsidiary, any Qualified CFC Holding Company or any Foreign Subsidiary) are delivered to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), for the ratable benefit of the Secured Parties, in accordance with this Agreement and a financing statement covering such Pledged Securities is filed in the appropriate UCC filing office, the Administrative Agent will obtain, for the ratable benefit of the Secured Parties, a legal, valid and perfected lien upon and security interest in such Pledged Securities under the New York UCC or the corresponding code or statute of any other applicable jurisdiction, subject only to Permitted Liens, as security for the payment and performance of the Obligations;

(h) as of the Closing Date, none of the Equity Interests in limited liability companies or partnerships that are pledged by the Pledgors hereunder constitute a security under Section 8-103 of the New York UCC or the corresponding code or statute of any other applicable jurisdiction; and

(i) the Pledgors shall not amend, or permit to be amended, the limited liability company agreement (or operating agreement or similar agreement) or partnership agreement of any subsidiary of any Loan Party whose Equity Interests are, or are required to be, Collateral in a manner to cause such Equity Interests to constitute a security under Section 8-103 of the New York UCC or the corresponding code or statute of any other applicable jurisdiction unless such Loan Party shall have first delivered reasonable prior written notice to the Administrative Agent and shall have taken all actions contemplated hereby and as otherwise reasonably required by the Administrative Agent to maintain the security interest of the Administrative Agent therein as a valid, perfected, first priority security interest, subject to the relative priorities set forth in the ABL/Term Loan Intercreditor Agreement.

 

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Section 3.04. Registration in Nominee Name; Denominations. The Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), on behalf of the Secured Parties, shall have the right (in its sole and absolute discretion) to hold the Pledged Securities in the name of the applicable Pledgor, endorsed or assigned in blank or in favor of the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) or, if an Event of Default shall have occurred and be continuing, in its own name as pledgee or the name of its nominee (as pledgee or as sub-agent). Each Pledgor will promptly give to the Administrative Agent copies of any notices or other communications received by it with respect to Pledged Securities registered in the name of such Pledgor. If an Event of Default shall have occurred and be continuing, the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) shall have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement. Each Pledgor shall use its commercially reasonable efforts to cause any Loan Party that is not a party to this Agreement to comply with a request by the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), pursuant to this Section 3.04, to exchange certificates representing Pledged Securities of such Loan Party for certificates of smaller or larger denominations.

Section 3.05. Voting Rights; Dividends and Interest, Etc. (a) Unless and until an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given written notice to the relevant Pledgors of the Administrative Agent’s intention to exercise its rights hereunder:

(i) Each Pledgor shall be entitled to exercise any and all voting and/or other consensual rights and powers inuring to an owner of Pledged Collateral or any part thereof for any purpose consistent with the terms of this Agreement, the Credit Agreement and the other Loan Documents provided that, except as permitted under the Credit Agreement, such rights and powers shall not be exercised in any manner that could materially and adversely affect the rights inuring to a holder of any Pledged Collateral, the rights and remedies of any of the Administrative Agent or the other Secured Parties under this Agreement, the Credit Agreement or any other Loan Document or the ability of the Secured Parties to exercise the same.

(ii) The Administrative Agent shall promptly execute and deliver to each Pledgor, or cause to be executed and delivered to such Pledgor, all such proxies, powers of attorney and other instruments as such Pledgor may reasonably request for the purpose of enabling such Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to subparagraph (i) above.

(iii) Each Pledgor shall be entitled to receive and retain any and all dividends, interest, principal and other distributions paid on or distributed in respect of the Pledged Collateral to the extent and only to the extent that such dividends, interest, principal and other distributions are permitted by, and otherwise paid or distributed in accordance with, the terms and conditions of the Credit Agreement, the other Loan Documents and applicable laws; provided that (A) any noncash dividends, interest, principal or other distributions, payments or other consideration in respect thereof, including any rights to receive the same to the extent not so distributed or paid, that would constitute Pledged Securities, whether resulting from a subdivision, combination or reclassification of the outstanding Equity Interests of the issuer of any Pledged Securities, received in exchange

 

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for Pledged Securities or any part thereof, or in redemption thereof, as a result of any merger, consolidation, acquisition or other exchange of assets to which such issuer may be a party or otherwise and (B) any noncash dividends and other distributions paid or payable in respect of any Pledged Securities that would constitute Pledged Securities in connection with a partial or total liquidation or dissolution or in connection with a reduction of capital, capital surplus or paid in surplus, shall be and become part of the Pledged Collateral, and, if received by any Pledgor, shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Administrative Agent, for the ratable benefit of the Secured Parties, and shall be forthwith delivered to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), for the ratable benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Administrative Agent).

(b) Upon the occurrence and during the continuance of an Event of Default and after written notice by the Administrative Agent to the relevant Pledgors of the Administrative Agent’s intention to exercise its rights hereunder, all rights of any Pledgor to dividends, interest, principal or other distributions that such Pledgor is authorized to receive pursuant to paragraph (a)(iii) of this Section 3.05 shall cease, and all such rights shall thereupon become vested, for the benefit of the Secured Parties, in the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) which shall have the sole and exclusive right and authority to receive and retain such dividends, interest, principal or other distributions; provided, however, that even after the occurrence of an Event of Default, any Pledgor may continue to exercise dividend and distribution rights solely to the extent permitted under subclause (i), subclause (iii) and subclause (v) of Section 6.06(b) of the Credit Agreement. All dividends, interest, principal or other distributions received by any Pledgor contrary to the provisions of this Section 3.05 shall not be commingled by such Pledgor with any of its other funds or property but shall be held separate and apart therefrom, shall be held in trust for the benefit of the Administrative Agent, for the ratable benefit of the Secured Parties, and shall be forthwith delivered to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), for the ratable benefit of the Secured Parties, in the same form as so received (endorsed in a manner reasonably satisfactory to the Administrative Agent). Any and all money and other property paid over to or received by the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) pursuant to the provisions of this paragraph (b), subject to the ABL/Term Loan Intercreditor Agreement shall be retained by the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) in an account to be established by the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) upon receipt of such money or other property and shall be applied in accordance with the provisions of Section 5.02 hereof. After all Events of Default have been cured or waived, the Administrative Agent shall, if not previously applied to the Obligations, promptly repay to each Pledgor (without interest) all dividends, interest, principal or other distributions that such Pledgor would otherwise be permitted to retain pursuant to the terms of paragraph (a)(iii) of this Section 3.05 and that remain in such account.

(c) Upon the occurrence and during the continuance of an Event of Default and after the Administrative Agent shall have given written notice to the Borrower of the Administrative Agent’s intention to exercise its rights hereunder, all rights of any Pledgor to exercise the voting and/or consensual rights and powers it is entitled to exercise pursuant to paragraph (a)(i) of this Section 3.05, and the obligations of the Administrative Agent under paragraph (a)(ii) of this Section 3.05, shall cease, and all such rights shall thereupon become vested in the Administrative Agent, for the ratable benefit of the Secured Parties, which shall have the sole and exclusive right and authority to exercise such voting and

 

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consensual rights and powers (subject to the ABL/Term Loan Intercreditor Agreement); provided that, unless otherwise directed by the Required Lenders, the Administrative Agent shall have the right from time to time following and during the continuance of an Event of Default to permit the Pledgors to exercise such rights. After all Events of Default have been cured or waived, each Pledgor shall have the right to exercise the voting and/or consensual rights and powers that such Pledgor would otherwise be entitled to exercise pursuant to the terms of paragraph (a)(i) above.

ARTICLE IV

SECURITY INTERESTS IN OTHER PERSONAL PROPERTY

Section 4.01. Security Interest. (a) As security for the payment or performance when due (whether at the stated maturity, by acceleration or otherwise), as the case may be, in full of the Obligations, each Pledgor hereby pledges to the Administrative Agent, its successors and permitted assigns, for the benefit of the Secured Parties, and hereby grants to the Administrative Agent, its successors and permitted assigns, for the ratable benefit of the Secured Parties, a security interest (the “Security Interest”) in all right, title and interest in or to any and all of the following assets and properties now owned or at any time hereafter acquired by such Pledgor or in which such Pledgor now has or at any time in the future may acquire any right, title or interest (collectively, the “Article 9 Collateral”):

(i) all Accounts;

(ii) all Chattel Paper;

(iii) all cash and Money, whether held in a Deposit Account or in the possession of the Administrative Agent;

(iv) all Documents;

(v) all Equipment;

(vi) all General Intangibles;

(vii) all Instruments;

(viii) all Inventory;

(ix) all Investment Property;

(x) all Letter of Credit Rights;

(xi) all Intellectual Property;

(xii) all Commercial Tort Claims described on Schedule V hereto, as updated from time to time;

(xiii) all cash held in any Securities Account;

(xiv) all books and Records pertaining to the Article 9 Collateral; and

 

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(xv) all Proceeds, Supporting Obligations and products of any and all of the foregoing and all collateral security and guarantees given by any person with respect to any of the foregoing.

Notwithstanding anything to the contrary in this Agreement, this Agreement shall not constitute a grant of a security interest in (a) any vehicle or any other property covered by a certificate of title or ownership, whether now owned or hereafter acquired, (b) any Excluded Equity Interests, (c) any Letter of Credit Rights, except to the extent a security interest therein can be perfected by the filing of Uniform Commercial Code financing statements, and to the extent such Pledgor is not required by applicable law to apply the proceeds of a drawing of such Letter of Credit for a specified purpose, (d) any Pledgor’s right, title or interest in any lease, license, contract or agreement to which such Pledgor is a party or any of its right, title or interest thereunder to the extent, but only to the extent, that such a grant would, under the terms of such lease, license, contract or agreement, result in a breach of the terms of, or constitute a default under, or result in the abandonment, invalidation or unenforceability of or create a right of termination in favor of or require the consent of any other party thereto (other than such Pledgor), such lease, license, contract or agreement (other than to the extent that any such term would be rendered ineffective pursuant to Section 9-406, 9-407, 9-408 or 9-409 of the New York UCC or any other applicable law (including, without limitation, Title 11 of the United States Code) or principles of equity), (e) assets to the extent the granting of a security interest therein would be prohibited or restricted by applicable law, rule or regulation (including any requirement to obtain the consent of any Governmental Authority), (f)(i) payroll and other employee wage and benefit accounts, (ii) tax accounts, including, without limitation, sales tax accounts, (iii) escrow accounts and (iv) fiduciary or other trust accounts, and, in the case of clauses (i) through (iv), the funds or other property held in or maintained in such account, (g) any Commercial Tort Claim with a value not in excess of $5.0 million, as determined in good faith by the Borrower, (h) any governmental licenses or State or local franchises, charters or authorizations, to the extent security interests in such licenses, franchises, charters or authorizations are prohibited or restricted thereby, after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code of any applicable jurisdiction notwithstanding such prohibition or restriction, (i) assets if the granting of a security interest therein would result in (i) material adverse tax consequences (including, without limitation, as a result of the operation of Section 956 of the Code or any similar law or regulation in any applicable jurisdiction) or (ii) material adverse regulatory consequences, in each case as reasonably determined by the Borrower and with the consent of the Administrative Agent (which consent will not to be unreasonably withheld, delayed or conditioned), (j) those assets as to which the Administrative Agent and the Borrower reasonably agree in writing that any of the cost, difficulty, burden or consequences of obtaining such a security interest are excessive in relation to the benefit to the Lenders of the security to be afforded thereby, (k) any United States “intent to use” trademark application or intent-to-use service mark application filed pursuant to Section 1(b) of the Lanham Act to the extent that the grant of a security interest therein would impair the validity or enforceability of, or render void or voidable or result in the cancellation of the applicable Pledgor’s right, title or interest therein or any trademark or service mark issues as a result of such application under applicable federal law, after which period such application shall be automatically subject to the security interest granted herein and deemed to be included in the Collateral, (l) any assets and proceeds thereof subject to a Capital Lease Obligations or a purchase money Lien permitted by Section 6.02(i) of the Credit Agreement to the extent the documents providing for such Capital Lease Obligation or purchase money Lien do not permit such assets and proceeds thereof to the pledged to the Administrative Agent and (m) any assets acquired after the date hereof subject to a Lien permitted by Section 6.02(c) of the Credit Agreement that existed on such assets at the time of the acquisition thereof and was not incurred in contemplation of such acquisition so long as the documents providing for such Lien do not permit such assets to be pledged to the Administrative Agent (the assets described in clauses (a) through (l) above, collectively, the “Excluded Assets”); provided that such exclusions shall not apply to the proceeds of any of the foregoing property.

 

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(b) Each Pledgor hereby irrevocably authorizes the Administrative Agent at any time and from time to time to file in any relevant jurisdiction any financing statements (including fixture filings) with respect to the Article 9 Collateral (including all Article 9 Collateral consisting of Pledged Collateral) or any part thereof and amendments thereto that contain the information required by Article 9 of the Uniform Commercial Code of each applicable jurisdiction for the filing of any financing statement or amendment, including (i) whether such Pledgor is an organization, the type of organization and any organizational identification number issued to such Pledgor, (ii) in the case of a financing statement filed as a fixture filing, a sufficient description of the property to which such Article 9 Collateral relates and (iii) a description of collateral that describes such property in any other manner as the Administrative Agent may reasonably determine is necessary to ensure the perfection of the security interest in the Article 9 Collateral granted under this Agreement, including describing such property as “all assets”, whether now owned or hereafter acquired, or words of similar effect. Each Pledgor agrees to provide such information to the Administrative Agent promptly upon request. As of the Closing Date, the filing jurisdictions for filing of each applicable Uniform Commercial Code financing statement is as set forth on Schedule IV.

The Administrative Agent is further authorized to file with the United States Patent and Trademark Office or United States Copyright Office (or any successor office) such documents as may be reasonably necessary for the purpose of perfecting, continuing, enforcing or protecting the Security Interest granted by each Pledgor, and naming any Pledgor or the Pledgors as debtors and the Administrative Agent as secured party. Notwithstanding anything to the contrary herein, no Pledgor shall be required to take any action under the laws of any jurisdiction other than the United States (or any political subdivision thereof) and its territories and possessions for the purpose of perfecting the Security Interest in any Article 9 Collateral of such Pledgor constituting Patents, Trademarks or Copyrights.

(c) The Security Interest is granted as security only and shall not subject the Administrative Agent or any other Secured Party to, or in any way alter or modify, any obligation or liability of any Pledgor with respect to or arising out of the Article 9 Collateral.

(d) Notwithstanding anything to the contrary in this Agreement or the Credit Agreement, (i) no perfection steps shall be required by any means other than (A) filings pursuant to the Uniform Commercial Code in the office of the Secretary of State (or equivalent filing office) of the relevant State(s) of the respective jurisdictions of organization of each Pledgor, (B) filings in the United States Patent and Trademark Office and the United States Copyright Office of the short forms of Intellectual Property Security Agreement, (C) delivery of Collateral consisting of instruments, notes and debt securities in a principal amount in excess of $5.0 million; provided that such delivery shall not be required with respect to (1) instruments, notes and debt securities that are promptly deposited into an investment or securities account, (2) checks received in the ordinary course of business and (3) notes and debt securities issued in connection with the extension of trade credit by a grantor of a security interest, (D) delivery of Collateral consisting of certificated Equity Interests included in the Collateral and (E) (i) other actions expressly required by this Agreement or the Credit Agreement; (ii) Control Agreements or similar arrangements shall not be required with respect to any Deposit Accounts (except with respect to the Blocked Accounts as defined under the ABL Credit Agreement and the Asset Sale Proceeds Account), Securities Accounts, Commodities Accounts or other Collateral that requires perfection by “control”; and (iii) the Pledgors shall not be required to take any actions outside the United States to create or perfect any security interests in any Collateral (it being understood that there shall be no security agreements or pledge agreements governed under the laws of any foreign jurisdiction).

 

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Section 4.02. Representations and Warranties. Each Pledgor represents and warrants to the Administrative Agent and the Secured Parties that:

(a) Each Pledgor has good and valid rights in and title to the Article 9 Collateral with respect to which it has purported to grant a Security Interest hereunder and has full power and authority to grant to the Administrative Agent the Security Interest in such Article 9 Collateral pursuant hereto and to execute, deliver and perform its obligations in accordance with the terms of this Agreement, without the consent or approval of any other person other than any consent or approval that has been obtained and is in full force and effect or has otherwise been disclosed herein or in the Credit Agreement.

(b) The information set forth in the schedules attached hereto is correct and complete, in all material respects, as of the Closing Date. The Uniform Commercial Code financing statements containing a description of the Article 9 Collateral that have been prepared by the Administrative Agent for filing in the office specified in Schedule IV constitute all the filings, recordings and registrations (except as set forth in the following clause (c)) that are, as of the Closing Date, necessary to publish notice of and protect the validity of and to establish a legal, valid and perfected security interest in favor of the Administrative Agent (for the benefit of the Secured Parties) in respect of all Article 9 Collateral in which the Security Interest may be perfected by filing. Each Pledgor agrees to update the schedules attached hereto in accordance with Section 5.04(f) of the Credit Agreement.

(c) Each Pledgor represents and warrants that a fully executed Intellectual Property Security Agreement containing a description of all Article 9 Collateral consisting of Intellectual Property with respect to United States Patents (and Patents for which United States applications are pending), United States registered Trademarks (and Trademarks for which United States registration applications are pending) and United States registered Copyrights (and Copyrights for which United States registration applications are pending) has been delivered to the Administrative Agent for recording with the United States Patent and Trademark Office and the United States Copyright Office pursuant to 35 U.S.C. § 261, 15 U.S.C. § 1060 or 17 U.S.C. § 205 and the regulations thereunder, as applicable, and reasonably requested by the Administrative Agent, to protect the validity of and to establish a legal, valid and perfected security interest in favor of the Administrative Agent, for the benefit of the Secured Parties, in respect of all Article 9 Collateral consisting of such Intellectual Property in which a security interest may be perfected by recording with the United States Patent and Trademark Office and the United States Copyright Office.

(d) The Security Interest constitutes (i) a legal and valid security interest in all the Article 9 Collateral securing the payment and performance of the Obligations, (ii) subject to the filings described in Section 4.01(b), a perfected security interest in all Article 9 Collateral if and to the extent which a security interest may be perfected by filing, recording or registering a financing statement or analogous document in the United States (or any political subdivision thereof) and its territories and possessions pursuant to the Uniform Commercial Code or other applicable law in such jurisdictions and (iii) a security interest in all Intellectual Property Collateral upon the receipt and recording of the Intellectual Property Security Agreement with the United States Patent and Trademark Office and the United States Copyright Office, as applicable, if and to the extent which a security interest may be perfected by such recording. The Security Interest is and shall be prior to any other Lien on any of the Article 9 Collateral other than (i) Permitted Liens having priority either by operation of applicable law or pursuant to the terms of the ABL/Term Loan Intercreditor Agreement or (ii) Permitted Liens which are permitted to have priority pursuant to the terms of the Credit Agreement.

(e) The Article 9 Collateral is owned by the Pledgors free and clear of any Lien, other than Permitted Liens. None of the Pledgors has filed or consented to the filing of (i) any financing statement or analogous document under the Uniform Commercial Code or any other applicable laws covering any Article 9 Collateral, (ii) any assignment in which any Pledgor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with the United States Patent and Trademark Office or the United States Copyright Office or (iii) any assignment

 

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in which any Pledgor assigns any Article 9 Collateral or any security agreement or similar instrument covering any Article 9 Collateral with any foreign governmental, municipal or other office, which financing statement or analogous document, assignment, security agreement or similar instrument is still in effect, except, in each case, for Permitted Liens.

(f) None of the Pledgors holds any Commercial Tort Claim individually in excess of $5.0 million as of the Closing Date except as indicated on Schedule V.

(g) Except as set forth in Schedule VI, as of the Closing Date, all Accounts have been originated by the Pledgors and all Inventory has been produced or acquired by the Pledgors in the ordinary course of business.

(h) As to itself and its Article 9 Collateral consisting of Intellectual Property, excluding the Excluded Assets (the “Intellectual Property Collateral”):

(i) The Intellectual Property Collateral set forth on Schedule III includes all of the Patents, Trademarks and Copyrights owned by such Pledgor as of the date hereof that are material to the operation of such Pledgor’s business. To the knowledge of such Pledgor, Pledgor owns all of the Patents, Trademarks, and Copyrights on Schedule III, free and clear of all Liens except Permitted Liens.

(ii) The issued Patents, registered Copyrights and registered Trademarks included in the Intellectual Property Collateral are subsisting and unexpired and have not been adjudged invalid or unenforceable in whole or part, and are valid and enforceable, except as would not reasonably be expected to have a Material Adverse Effect. Such Pledgor is not aware of any uses of any item of Intellectual Property Collateral that would be expected to lead to such item becoming invalid or unenforceable.

(iii) The operation of such Pledgor’s business as currently conducted and the use of the Intellectual Property Collateral in connection therewith do not conflict with, infringe, misappropriate, dilute, misuse or otherwise violate any third party rights in any Intellectual Property.

(iv) To the knowledge of such Pledgor, no third party is infringing, misappropriating, diluting, misusing or otherwise violating such Pledgor’s rights in any Intellectual Property.

(v) Such Pledgor has (A) made or performed in the ordinary course of Pledgor’s business, acts, including without limitation filings, recordings and payment of all required fees and taxes, required to maintain and protect its interest in each and every item of Intellectual Property Collateral in full force and effect in the United States and (B) used proper statutory notice in connection with its use of each Patent, Trademark and Copyright in the Intellectual Property Collateral, except, in the case of each of (A) and (B), to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect.

(vi) With respect to each IP Agreement, the absence, termination or violation of which would reasonably be expected to have a Material Adverse Effect: (A) such Pledgor has not received any written notice of termination or cancellation under such IP Agreement; (B) such Pledgor has not received any written notice of a breach or default under such IP Agreement, which breach or default has not been cured or waived; and (C)

 

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neither such Pledgor nor, to the knowledge of such Pledgor, any other party to such IP Agreement is in breach or default thereof in any material respect, and to the knowledge of such Pledgor, no event has occurred that, with notice or lapse of time or both, would constitute such a breach or default or permit termination, modification or acceleration under such IP Agreement.

(i) On the date hereof, such Pledgor’s jurisdiction of organization, identification number from the jurisdiction of organization (if any), and the location of such Pledgor’s chief executive office or sole place of business or principal residence, as the case may be, are specified on Schedule VII. Such Pledgor has furnished to the Administrative Agent a certified charter, certificate of incorporation or other organization document and long-form good standing certificate as of a date which is recent to the date hereof.

(j) No amount payable to such Pledgor under or in connection with any Receivable is evidenced by any Instrument or Chattel Paper which has not been delivered to the Administrative Agent. None of the obligors on any Receivables is a Governmental Authority. The amounts represented by such Pledgor to the Lenders from time to time as owing to such Pledgor in respect of the Receivables will at such times be accurate.

Section 4.03. Covenants.

(a) Each Pledgor agrees to provide at least 10 days’ prior written notice to the Administrative Agent of any change (i) in its corporate or organization name, (ii) in its identity or type of organization or corporate structure, (iii) in organizational identification number, where applicable, or (iv) in its “location” (determined as provided in UCC Section 9-307). Each Pledgor agrees promptly to provide the Administrative Agent with certified organizational documents reflecting any of the changes described in the immediately preceding sentence. Each Pledgor agrees not to effect or permit any change referred to in the first sentence of this paragraph (a) unless all filings have been made, or will have been made within any applicable statutory period, under the Uniform Commercial Code or otherwise that are required in order for the Administrative Agent to continue at all times following such change to have a valid, legal and perfected first priority security interest in all the Article 9 Collateral, for the ratable benefit of the Secured Parties. Each Pledgor agrees promptly to notify the Administrative Agent if any material portion of the Article 9 Collateral owned or held by such Pledgor is damaged or destroyed. Subject to the rights of such Pledgor under the Loan Documents to dispose of Collateral and subject to Section 4.05 with respect to the Intellectual Property Collateral, each Pledgor shall, at its own expense, use commercially reasonable efforts to defend title to the Article 9 Collateral against all persons and to defend the Security Interest of the Administrative Agent, for the ratable benefit of the Secured Parties, in the Article 9 Collateral and the priority thereof against any Lien that is not a Permitted Lien.

(b) Each Pledgor agrees, at its own expense, to execute, acknowledge, deliver and cause to be duly filed all such further instruments and documents and take all such actions as the Administrative Agent may from time to time reasonably request to preserve, protect and perfect the Security Interest and the rights and remedies created hereby, including the payment of any fees and taxes required in connection with the execution and delivery of this Agreement and the granting of the Security Interest and the filing of any financing statements (including fixture filings) or other documents in connection herewith or therewith. If any amount payable under or in connection with any of the Article 9 Collateral that is in excess of $5.0 million shall be or become evidenced by any promissory note or other instrument, such note or instrument subject to the ABL/Term Intercreditor Agreement shall be promptly pledged and delivered to the Administrative Agent, for the ratable benefit of the Secured Parties, duly endorsed in a manner reasonably satisfactory to the Administrative Agent.

 

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(c) After the occurrence of an Event of Default and during the continuance thereof, the Administrative Agent shall have the right to verify under reasonable procedures the validity, amount, quality, quantity, value, condition and status of, or any other matter relating to, the Article 9 Collateral, including, in the case of Accounts or Article 9 Collateral in the possession of any third person, by contacting Account Debtors or the third person possessing such Article 9 Collateral for the purpose of making such a verification. The Administrative Agent shall have the right to share any information it gains from such inspection or verification with any Secured Party.

(d) None of the Pledgors will, without the Administrative Agent’s prior written consent (which consent shall not be unreasonably withheld), grant any extension of the time of payment of any Accounts included in the Article 9 Collateral, compromise, compound or settle the same for less than the full amount thereof, release, wholly or partly, any person liable for the payment thereof or allow any credit or discount whatsoever thereon, other than extensions, credits, discounts, compromises or settlements granted or made in the ordinary course of business and consistent with prudent business practices or as otherwise permitted under the Credit Agreement.

(e) At its option after the occurrence of an Event of Default and during the continuance thereof, the Administrative Agent may discharge past due taxes, assessments, charges, fees, Liens, security interests or other encumbrances at any time levied or placed on the Article 9 Collateral and not a Permitted Lien, and may pay for the maintenance and preservation of the Article 9 Collateral to the extent any Pledgor fails to do so as required by the Credit Agreement or this Agreement, and each Pledgor jointly and severally agrees to reimburse the Administrative Agent on demand for any reasonable payment made or any reasonable expense incurred by the Administrative Agent pursuant to the foregoing authorization; provided, however, that nothing in this Section 4.03(e) shall be interpreted as excusing any Pledgor from the performance of, or imposing any obligation on the Administrative Agent or any Secured Party to cure or perform, any covenants or other promises of any Pledgor with respect to taxes, assessments, charges, fees, Liens, security interests or other encumbrances and maintenance as set forth herein or in the other Loan Documents.

(f) Each Pledgor (rather than the Administrative Agent or any Secured Party) shall remain liable for the observance and performance of all the conditions and obligations to be observed and performed by it under each contract, agreement or instrument relating to the Article 9 Collateral.

(g) Each Pledgor irrevocably makes, constitutes and appoints the Administrative Agent (and all officers, employees or agents designated by the Administrative Agent) as such Pledgor’s true and lawful agent (and attorney-in-fact) for the purpose, during the continuance of an Event of Default, of making, settling and adjusting claims in respect of Article 9 Collateral under policies of insurance, endorsing the name of such Pledgor on any check, draft, instrument or other item of payment for the proceeds of such policies of insurance and for making all determinations and decisions with respect thereto. In the event that any Pledgor at any time or times shall fail to obtain or maintain any of the policies of insurance required hereby or under the Credit Agreement or to pay any premium in whole or part relating thereto, the Administrative Agent may, after the occurrence and during the continuation of an Event of Default, without waiving or releasing any obligation or liability of the Pledgors hereunder or any Event of Default, in its sole discretion, obtain and maintain such policies of insurance and pay such premium and take any other actions with respect thereto as the Administrative Agent reasonably deems advisable. All sums disbursed by the Administrative Agent in connection with this Section 4.03(g), including reasonable attorneys’ fees, court costs, expenses and other charges relating thereto, shall be payable, upon demand, by the Pledgors to the Administrative Agent and shall be additional Obligations secured hereby.

 

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Section 4.04. Other Actions. In order to further ensure the attachment, perfection and priority of, and the ability of the Administrative Agent to enforce, for the ratable benefit of the Secured Parties, the Administrative Agent’s security interest in the Article 9 Collateral, each Pledgor agrees, in each case at such Pledgor’s own expense, to take the following actions with respect to the following Article 9 Collateral:

(a) Instruments and Tangible Chattel Paper. If any Pledgor shall at any time hold or acquire any Instruments (other than checks received and processed in the ordinary course of business) or Tangible Chattel Paper evidencing an amount in excess of $5.0 million, such Pledgor shall forthwith endorse, assign and deliver the same to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), accompanied by such instruments of transfer or assignment duly executed in blank as the Administrative Agent may from time to time reasonably request.

(b) Investment Property. Except to the extent otherwise provided in Article III, if any Pledgor shall at any time hold or acquire any Certificated Security constituting Pledged Collateral or Article 9 Collateral, such Pledgor shall forthwith endorse, assign and deliver the same to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement), accompanied by such instruments of transfer or assignment duly executed in blank as the Administrative Agent may from time to time reasonably specify. If any security of a domestic issuer now owned or hereafter acquired by any Pledgor is uncertificated and is issued to such Pledgor or its nominee directly by the issuer thereof, such Pledgor shall promptly notify the Administrative Agent of such uncertificated securities and upon the occurrence and during the continuance of an Event of Default, such Pledgor shall pursuant to an agreement in form and substance reasonably satisfactory to the Administrative Agent, either (i) cause the issuer to agree to comply with instructions from the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) as to such security, without further consent of any Pledgor or such nominee or (ii) cause the issuer to register the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) as the registered owner of such security.

(c) Commercial Tort Claims. If any Pledgor shall at any time hold or acquire a Commercial Tort Claim in an amount reasonably estimated to exceed $5.0 million at any time after the date hereof, such Pledgor shall promptly notify the Administrative Agent thereof by updating Schedule V hereof, and grant to the Administrative Agent in writing a security interest therein and in the proceeds thereof, all under the terms and provisions of this Agreement, with such writing to be in form and substance reasonably satisfactory to the Administrative Agent.

Section 4.05. Covenants Regarding Patent, Trademark and Copyright Collateral. Except as permitted by the Credit Agreement: (a) Each Pledgor agrees that it will not knowingly do any act or omit to do any act (and will exercise commercially reasonable efforts to contractually prohibit its licensees from doing any act or omitting to do any act) whereby any Patent that is material to the normal conduct of such Pledgor’s business may become prematurely invalidated, abandoned, lapsed or dedicated to the public, and agrees that it shall take commercially reasonable steps with respect to any material products covered by any such Patent as necessary to establish and preserve its rights under applicable patent laws.

(b) Each Pledgor will, and will use its commercially reasonable efforts to contractually require its licensees and its sublicensees to, for each material Trademark necessary to the normal conduct of such Pledgor’s business, (i) maintain such Trademark in full force free from any adjudication of abandonment or invalidity for non-use, (ii) maintain the quality of products and services offered under such Trademark, (iii) display such Trademark with notice of federal registration or claim of trademark or service mark as required under applicable law and (iv) not knowingly use, or knowingly permit its licensees’ use of, such Trademark in violation of any third-party rights.

 

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(c) Each Pledgor will, and will use its commercially reasonable efforts to cause its licensees and its sublicensees to, for each work covered by a material Copyright necessary to the normal conduct of such Pledgor’s business that it publishes, displays and distributes, use a copyright notice as necessary and sufficient to establish and preserve its rights under applicable copyright laws.

(d) Each Pledgor shall notify the Administrative Agent promptly if it knows that any Patent, Trademark or Copyright material to the normal conduct of such Pledgor’s business may imminently become abandoned, lapsed or dedicated to the public, or of any materially adverse determination or development, excluding office actions and similar determinations or developments in the United States Patent and Trademark Office, United States Copyright Office, any court or any similar office of any country, regarding such Pledgor’s ownership of any such material Patent, Trademark or Copyright or its right to register or to maintain the same.

(e) Each Pledgor, either itself or through any agent, employee, licensee or designee, shall (i) inform the Administrative Agent on an annual basis of each application by itself, or through any agent, employee, licensee or designee, for any Patent with the United States Patent and Trademark Office and each registration of any Trademark or Copyright with the United States Patent and Trademark Office, the United States Copyright Office or any comparable office or agency in any other country filed during the preceding twelve month period and (ii) upon the reasonable request of the Administrative Agent, execute and deliver any and all agreements, instruments, documents and papers as the Administrative Agent may reasonably request to evidence the Administrative Agent’s security interest in such Patent, Trademark or Copyright.

(f) Each Pledgor shall exercise its reasonable business judgment consistent with the practice in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office with respect to maintaining and pursuing each application relating to any Patent, Trademark and/or Copyright (and obtaining the relevant grant or registration) material to the normal conduct of such Pledgor’s business and to maintain (i) each issued Patent and (ii) the registrations of each Trademark and each Copyright that is in each case material to the normal conduct of such Pledgor’s business, including, when applicable and necessary in such Pledgor’s reasonable business judgment, timely filings of applications for renewal, affidavits of use, affidavits of incontestability and payment of maintenance fees, and, if any Pledgor believes necessary in its reasonable business judgment, to initiate opposition, interference and cancellation proceedings against third parties.

(g) In the event that any Pledgor knows or has reason to know that any Article 9 Collateral consisting of a Patent, Trademark or Copyright material to the normal conduct of its business has been materially infringed, misappropriated or diluted by a third party, such Pledgor shall promptly notify the Administrative Agent and shall, if such Pledgor deems it necessary in its reasonable business judgment, promptly take actions as are reasonably appropriate under the circumstances.

Section 4.06. ABL/Term Intercreditor Relations. Notwithstanding anything herein to the contrary, (a) the Pledgors and the Administrative Agent acknowledge that the exercise of certain of the Administrative Agent’s rights and remedies hereunder are subject to the provisions of the ABL/Term Loan Intercreditor Agreement and (b) prior to the Discharge of ABL Priority Claims, any obligation hereunder to physically deliver any ABL Priority Collateral to the Administrative Agent shall be deemed satisfied by the delivery to the ABL Administrative Agent, acting as gratuitous bailee for the Administrative Agent in accordance with the ABL/Term Loan Intercreditor Agreement. The failure of the Administrative Agent or any other Secured Party to immediately enforce any of its rights and remedies hereunder (as a result of the terms of the ABL/Term Loan Intercreditor Agreement or otherwise) shall not constitute a waiver of any such rights and remedies.. In the event of any conflict or inconsistency between the ABL/Term Loan Intercreditor Agreement and this Agreement regarding the relative priorities of the liens granted to ABL Administrative Agent and the Administrative Agent in the Collateral, the terms of the ABL/Term Loan Intercreditor Agreement shall govern and control.

 

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ARTICLE V

REMEDIES

Section 5.01. Remedies Upon Default. Upon the occurrence and during the continuance of an Event of Default, each Pledgor agrees to deliver each item of Collateral to the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) on demand, and it is agreed that the Administrative Agent shall have the right, subject to applicable law, to take any of or all the following actions at the same or different times: (a) with respect to any Article 9 Collateral consisting of Intellectual Property, on demand, to cause the Security Interest to become an assignment, transfer and conveyance of any of or all such Article 9 Collateral by the applicable Pledgors to the Administrative Agent or to license or sublicense, whether general, special or otherwise, and whether on an exclusive or a non-exclusive basis, any such Article 9 Collateral throughout the world on such terms and conditions and in such manner as the Administrative Agent shall determine (other than in violation of any then-existing licensing arrangements to the extent that waivers thereunder cannot be obtained with the use of commercially reasonable efforts, which each Pledgor hereby agrees to use) and (b) to take possession of the Article 9 Collateral and without liability for trespass to the applicable Pledgor to enter any premises where the Article 9 Collateral may be located for the purpose of taking possession of, removing or selling the Article 9 Collateral and, generally, to exercise any and all rights afforded to a secured party under the applicable Uniform Commercial Code or other applicable law. Without limiting the generality of the foregoing rights and remedies, each Pledgor agrees that the Administrative Agent shall have the right, subject to the mandatory requirements of applicable law (including the Uniform Commercial Code), to sell or otherwise dispose of all or any part of the Collateral at a public or private sale or at any broker’s board or on any securities exchange, for cash, upon credit or for future delivery as the Administrative Agent shall deem appropriate. The Administrative Agent shall be authorized in connection with any sale of a security (if it deems it advisable to do so) pursuant to the foregoing to restrict the prospective bidders or purchasers to persons who represent and agree that they are purchasing such security for their own account, for investment, and not with a view to the distribution or sale thereof. Upon consummation of any such sale of Collateral pursuant to this Section 5.01, the Administrative Agent shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Collateral so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of any Pledgor, and each Pledgor hereby waives and releases (to the extent permitted by law) all rights of redemption, stay, valuation and appraisal that such Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

The Administrative Agent shall give the applicable Pledgors ten Business Days’ written notice (which each Pledgor agrees is reasonable notice within the meaning of Section 9-611 of the New York UCC or its equivalent in other jurisdictions) of the Administrative Agent’s intention to make any sale of Collateral. Such notice, in the case of a public sale, shall state the time and place for such sale and, in the case of a sale at a broker’s board or on a securities exchange, shall state the board or exchange at which such sale is to be made and the day on which the Collateral, or portion thereof, will first be offered for sale at such board or exchange. Any such public sale shall be held at such time or times within ordinary business hours and at such place or places as the Administrative Agent may fix and state in the notice (if any) of such sale. The Collateral, or the portion thereof, to be sold at any such sale may be sold in one lot as an entirety or in separate parcels, in the Administrative Agent’s own right or by one or more agents and contractors, upon any premises owned, leased, or occupied by any Pledgor and the Administrative Agent and any such agent or contractor, in conjunction with any such sale, may augment the Inventory to be sold with other goods (all of which other goods shall remain the sole property of the

 

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Administrative Agent or such agent or contractor), all as the Administrative Agent may (in its sole and absolute discretion) determine. The Administrative Agent shall not be obligated to make any sale of any Collateral if it shall determine not to do so, regardless of the fact that notice of sale of such Collateral shall have been given. The Administrative Agent may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for sale, and such sale may, without further notice, be made at the time and place to which the same was so adjourned. In the case of any sale of all or any part of the Collateral made on credit or for future delivery, the Collateral so sold may be retained by the Administrative Agent until the sale price is paid by the purchaser or purchasers thereof, but the Administrative Agent shall not incur any liability in the event that any such purchaser or purchasers shall fail to take up and pay for the Collateral so sold and, in the case of any such failure, such Collateral may be sold again upon notice given in accordance with provisions above. At any public (or, to the extent permitted by law, private) sale made pursuant to this Section 5.01, any Secured Party may bid for or purchase, free (to the extent permitted by law) from any right of redemption, stay, valuation or appraisal on the part of any Pledgor (all such rights being also hereby waived and released to the extent permitted by law), the Collateral or any part thereof offered for sale and may make payment on account thereof by using any claim then due and payable to such Secured Party from any Pledgor as a credit against the purchase price, and such Secured Party may, upon compliance with the terms of sale, hold, retain and dispose of such property in accordance with Section 5.02 hereof without further accountability to any Pledgor therefor. For purposes hereof, a written agreement to purchase the Collateral or any portion thereof shall be treated as a sale thereof; the Administrative Agent shall be free to carry out such sale pursuant to such agreement and no Pledgor shall be entitled to the return of the Collateral or any portion thereof subject thereto, notwithstanding the fact that after the Administrative Agent shall have entered into such an agreement all Events of Default shall have been remedied and the Obligations paid in full. As an alternative to exercising the power of sale herein conferred upon it, the Administrative Agent may proceed by a suit or suits at law or in equity to foreclose this Agreement and to sell the Collateral or any portion thereof pursuant to a judgment or decree of a court or courts having competent jurisdiction or pursuant to a proceeding by a court-appointed receiver. Any sale pursuant to the provisions of this Section 5.01 shall be deemed to conform to the commercially reasonable standards as provided in Section 9-610(b) of the New York UCC or its equivalent in other jurisdictions.

For the purpose of enabling the Administrative Agent to exercise rights and remedies under this Agreement at such time as the Administrative Agent shall be lawfully entitled to exercise such rights and remedies, each Pledgor hereby grants to the Administrative Agent an irrevocable (subject to the last sentence of this paragraph), nonexclusive license (exercisable without payment of royalty or other compensation to the Pledgors), subject, in the case of Trademarks, to sufficient rights to quality control and inspection in favor of such Pledgor to avoid the risk of invalidation of such Trademarks, to use, license or sublicense any of the Intellectual Property Collateral now owned or hereafter acquired by such Pledgor, and wherever the same may be located, and including in such license access to all media in which any of the licensed items may be recorded or stored and to all computer software and programs used for the compilation or printout thereof. The use of such license by the Administrative Agent may be exercised, at the option of the Administrative Agent, only upon the occurrence and during the continuation of an Event of Default; provided, however, that any license or sublicense to any Intellectual Property granted by the Administrative Agent in accordance herewith shall be binding upon each Pledgor notwithstanding any subsequent cure of an Event of Default.

With respect to the foregoing, the Administrative Agent shall provide the Borrower with seven (7) days’ written notice prior to taking the actions contemplated by this Section 5.01.

 

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Section 5.02. Application of Proceeds.

(a) To the extent required pursuant to the ABL/Term Loan Intercreditor to be applied to Term Loan Claims (as defined in the ABL/Term Loan Intercreditor), the Administrative Agent shall promptly apply the proceeds, moneys or balances of any collection or sale of Collateral, as well as any Collateral consisting of cash, in the following order of priority:

(i) first, to all amounts owing to the Administrative Agent or the Administrative Agent pursuant to any of the Loan Documents in its capacity as such in respect of (x) the preservation of Collateral or its security interest in the Collateral or (y) with respect to enforcing the rights of the Secured Parties under the Loan Documents;

(ii) second, to the extent proceeds remain after the application pursuant to preceding clause (i), to all other amounts owing to the Administrative Agent or Administrative Agent pursuant to any of the Loan Documents in its capacity as such;

(iii) third, to the extent proceeds remain after the application pursuant to preceding clauses (i) through (ii), to an amount equal to the outstanding Obligations shall be paid to the Secured Parties, with each Secured Party receiving an amount equal to its outstanding Obligations or, if the proceeds are insufficient to pay in full all such Obligations, its pro rata share of the amount remaining to be distributed; and

(iv) fourth, to the extent proceeds remain after the application pursuant to preceding clauses (i) through (iii), inclusive, and following the payment in full of the Obligations, to the relevant Loan Party, their successors or assigns, or as a court of competent jurisdiction may otherwise direct or as otherwise required by the Intercreditor Agreement.

(b) If any payment to any Secured Party pursuant to this Section 5.02 of its pro rata share of any distribution would result in overpayment to such Secured Party, such excess amount shall instead be distributed in respect of the unpaid Obligations of the other Secured Parties, with each Secured Party whose Obligations have not been paid in full to receive an amount equal to such excess amount multiplied by a fraction the numerator of which is the unpaid Obligations of such Secured Party and the denominator of which is the unpaid Obligations of all Secured Parties entitled to such distribution.

(c) Subject to the terms of the applicable Intercreditor Agreement, all payments required to be made hereunder shall be made to the Administrative Agent for the account of such Secured Parties or as the Administrative Agent may otherwise direct in accordance with the Loan Documents.

(d) [Reserved.]

(e) Subject to the other limitations (if any) set forth herein and in the other Loan Documents, it is understood that the Loan Parties shall remain liable (as and to the extent set forth in herein except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the Administrative Agent’s gross negligence or willful misconduct) to the extent of any deficiency between the amount of the proceeds of the Collateral and the aggregate amount of the Obligations of the Loan Parties.

(f) It is understood and agreed by each Loan Party that the Administrative Agent shall have no liability for any determinations made by it in this Section 5.02 except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its gross negligence or willful misconduct. Each Loan Party also agrees that the Administrative Agent may (but shall not be required to), at any time and in its sole discretion, and with no liability resulting therefrom, petition a court of competent jurisdiction regarding any application of Collateral in accordance with the requirements hereof and of the ABL/Term Loan Intercreditor Agreement, and the Administrative Agent shall be entitled to wait for, and may conclusively rely on, any such determination.

 

 

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Section 5.03. Securities Act, Etc. In view of the position of the Pledgors in relation to the Pledged Collateral, or because of other current or future circumstances, a question may arise under the Securities Act of 1933, as now or hereafter in effect, or any similar federal statute hereafter enacted analogous in purpose or effect (such Act and any such similar statute as from time to time in effect being called the “Federal Securities Laws”) with respect to any disposition of the Pledged Collateral permitted hereunder. Each Pledgor understands that compliance with the Federal Securities Laws might very strictly limit the course of conduct of the Administrative Agent if the Administrative Agent were to attempt to dispose of all or any part of the Pledged Collateral, and might also limit the extent to which or the manner in which any subsequent transferee of any Pledged Collateral could dispose of the same. Similarly, there may be other legal restrictions or limitations affecting the Administrative Agent in any attempt to dispose of all or part of the Pledged Collateral under applicable Blue Sky or other state securities laws or similar laws analogous in purpose or effect. Each Pledgor acknowledges and agrees that in light of such restrictions and limitations, the Administrative Agent, in its sole and absolute discretion, (a) may proceed to make such a sale whether or not a registration statement for the purpose of registering such Pledged Collateral or part thereof shall have been filed under the Federal Securities Laws or, to the extent applicable, Blue Sky or other state securities laws and (b) may approach and negotiate with a single potential purchaser to effect such sale. Each Pledgor acknowledges and agrees that any such sale might result in prices and other terms less favorable to the seller than if such sale were a public sale without such restrictions. In the event of any such sale, the Administrative Agent shall incur no responsibility or liability for selling all or any part of the Pledged Collateral at a price that the Administrative Agent, in its sole and absolute discretion, may in good faith deem reasonable under the circumstances, notwithstanding the possibility that a substantially higher price might have been realized if the sale were deferred until after registration as aforesaid or if more than a single purchaser were approached. The provisions of this Section 5.03 will apply notwithstanding the existence of a public or private market upon which the quotations or sales prices may exceed substantially the price at which the Administrative Agent sells.

ARTICLE VI

INDEMNITY, SUBROGATION AND SUBORDINATION

Section 6.01. Indemnity. In addition to all such rights of indemnity and subrogation as the Guarantors may have under applicable law (but subject to Section 6.03 hereof), the Borrower agrees that (a) in the event a payment shall be made by any Guarantor under this Agreement in respect of any Obligation of the Borrower, the Borrower shall indemnify such Guarantor for the full amount of such payment and such Guarantor shall be subrogated to the rights of the person to whom such payment shall have been made to the extent of such payment and (b) in the event any assets of any Guarantor shall be sold pursuant to this Agreement or any other Security Document to satisfy in whole or in part an Obligation of the Borrower, the Borrower shall indemnify such Guarantor in an amount equal to the greater of the book value or the fair market value of the assets so sold.

Section 6.02. Contribution and Subrogation. Subject to Section 2.07, each Guarantor (other than Holdings) (a “Contributing Guarantor”) agrees (subject to Section 6.03 hereof) that, in the event a payment shall be made by any other Guarantor (other than Holdings) hereunder in respect of any Obligation or assets of any other Guarantor (other than Holdings) shall be sold pursuant to any Security Document to satisfy any Obligation owed to any Secured Party and such other Guarantor other than

 

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Holdings (the “Claiming Guarantor”) shall not have been fully indemnified by the Borrower as provided in Section 6.01 hereof, the Contributing Guarantor shall indemnify the Claiming Guarantor in an amount equal to the amount of such payment or the greater of the book value or the fair market value of such assets, as applicable, in each case multiplied by a fraction of which the numerator shall be the net worth of such Contributing Guarantor on the date hereof and the denominator shall be the aggregate net worth of all the Guarantors on the date hereof (or, in the case of any Guarantor becoming a party hereto pursuant to Section 7.16 hereof, the date of the supplement hereto executed and delivered by such Guarantor). Any Contributing Guarantor making any payment to a Claiming Guarantor pursuant to this Section 6.02 shall be subrogated to the rights of such Claiming Guarantor under Section 6.01 hereof to the extent of such payment.

Section 6.03. Subordination. (a) Notwithstanding any provision of this Agreement to the contrary, all rights of the Guarantors under Sections 6.01 and 6.02 hereof and all other rights of indemnity, contribution or subrogation of the Guarantors under applicable law or otherwise shall be fully subordinated to the payment in full in cash or immediately available funds of the Obligations (other than contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) until such time as this Agreement has been terminated in accordance with Section 7.15(a). No failure on the part of the Borrower or any Guarantor to make the payments required by Sections 6.01 and 6.02 hereof (or any other payments required under applicable law or otherwise) shall in any respect limit the obligations and liabilities of the Borrower with respect to the Obligations or any Guarantor with respect to its obligations hereunder, and the Borrower shall remain liable for the full amount of the Obligations and each Guarantor shall remain liable for the full amount of its obligations hereunder.

(b) The Borrower and each Guarantor hereby agree that all Indebtedness and other monetary obligations owed by it to the Borrower, any other Guarantor or any Subsidiary shall be fully subordinated to the payment in full in cash or immediately available funds of the Obligations (other than contingent indemnification and reimbursement obligations that are not yet due and payable and for which no claim has been asserted) to the extent subordination is required pursuant to the provisions of Section 6.01(f) of the Credit Agreement, until such time as this Agreement has been terminated in accordance with Section 7.15(a).

ARTICLE VII

MISCELLANEOUS

Section 7.01. Notices. All communications and notices hereunder shall (except as otherwise permitted herein) be in writing and given as provided in Section 9.01 of the Credit Agreement. All communications and notices hereunder to any Subsidiary Loan Party shall be given to it in care of the Borrower, with such notice to be given as provided in Section 9.01 of the Credit Agreement.

Section 7.02. Security Interest Absolute. All rights of the Administrative Agent hereunder, the Security Interest in the Article 9 Collateral, the security interest in the Pledged Collateral and all obligations of each Pledgor hereunder shall be absolute and unconditional irrespective of (a) any lack of validity or enforceability of the Credit Agreement, any other Loan Document, any agreement with respect to any of the Obligations or any other agreement or instrument relating to any of the foregoing, (b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to any departure from the Credit Agreement, any other Loan Document or any other agreement or instrument, (c) any exchange, release or non-perfection of any Lien on other collateral, or any release or amendment or waiver of or consent under or departure from any guarantee, securing or guaranteeing all or any of the Obligations or (d) subject only to termination or release of a Guarantor’s obligations hereunder in accordance with the terms of Section 7.15 hereof any other circumstance that might otherwise constitute a defense available to, or a discharge of, any Pledgor in respect of the Obligations or this Agreement (other than a defense of payment or performance).

 

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Section 7.03. Limitation By Law. All rights, remedies and powers provided in this Agreement may be exercised only to the extent that the exercise thereof does not violate any applicable provision of law, and all the provisions of this Agreement are intended to be subject to all applicable mandatory provisions of law that may be controlling and to be limited to the extent necessary so that they shall not render this Agreement invalid, unenforceable, in whole or in part, or not entitled to be recorded, registered or filed under the provisions of any applicable law.

Section 7.04. Binding Effect; Several Agreement. This Agreement shall become effective as to any party to this Agreement when a counterpart hereof executed on behalf of such party shall have been delivered to the Administrative Agent and a counterpart hereof shall have been executed on behalf of the Administrative Agent, and thereafter shall be binding upon such party and the Administrative Agent and their respective permitted successors and assigns, and shall inure to the benefit of such party, the Administrative Agent and the other Secured Parties and their respective permitted successors and assigns, except that no party shall have the right to assign or transfer its rights or obligations hereunder or any interest herein or in the Collateral (and any such assignment or transfer shall be void) except as expressly contemplated by this Agreement, the Credit Agreement. This Agreement shall be construed as a separate agreement with respect to each Loan Party and may be amended, modified, supplemented, waived or released with respect to any Loan Party without the approval of any other Loan Party and without affecting the obligations of any other Loan Party hereunder.

Section 7.05. Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the permitted successors and assigns of such party, and all covenants, promises and agreements by or on behalf of any Pledgor or the Administrative Agent that are contained in this Agreement shall bind and inure to the benefit of their respective permitted successors and assigns; provided that no Pledgor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent.

Section 7.06. Administrative Agents Fees and Expenses; Indemnification. The parties hereto agree that the Administrative Agent shall be entitled to reimbursement of its expenses incurred hereunder as provided in Section 9.05 of the Credit Agreement and the provisions of Section 9.05 shall be incorporated by reference herein and apply to each Pledgor mutatis mutandis.

Section 7.07. Administrative Agent Appointed Attorney-in-Fact. Each Pledgor hereby appoints the Administrative Agent the attorney-in-fact of such Pledgor for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instrument that the Administrative Agent may deem necessary to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest. The Administrative Agent shall have the right, upon the occurrence and during the continuance of an Event of Default, with full power of substitution either in the Administrative Agent’s name or in the name of such Pledgor, (a) to receive, endorse, assign or deliver any and all notes, acceptances, checks, drafts, money orders or other evidences of payment relating to the Collateral or any part thereof, (b) to demand, collect, receive payment of, give receipt for and give discharges and releases of all or any of the Collateral, (c) to ask for, demand, sue for, collect, receive and give acquittance for any and all moneys due or to become due under and by virtue of any Collateral, (d) to sign the name of any Pledgor on any invoice or bill of lading relating to any of the Collateral, (e) to send verifications of Accounts to any Account Debtor, (f) to commence and prosecute any and all suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect or otherwise realize on all or any of the

 

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Collateral or to enforce any rights in respect of any Collateral, (g) to settle, compromise, compound, adjust or defend any actions, suits or proceedings relating to all or any of the Collateral, (h) to notify, or to require any Pledgor to notify, Account Debtors to make payment directly to the Administrative Agent, and (i) to use, sell, assign, transfer, pledge, make any agreement with respect to or otherwise deal with all or any of the Collateral, and to do all other acts and things necessary to carry out the purposes of this Agreement, as fully and completely as though the Administrative Agent were the absolute owner of the Collateral for all purposes; provided that nothing herein contained shall be construed as requiring or obligating the Administrative Agent to make any commitment or to make any inquiry as to the nature or sufficiency of any payment received by the Administrative Agent, or to present or file any claim or notice, or to take any action with respect to the Collateral or any part thereof or the moneys due or to become due in respect thereof or any property covered thereby. The Administrative Agent and the other Secured Parties shall be accountable only for amounts actually received as a result of the exercise of the powers granted to them herein, and neither they nor their officers, directors, employees or agents shall be responsible to any Pledgor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

Section 7.08. APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

Section 7.09. Waivers; Amendment. (a) No failure or delay by the Administrative Agent or any Lender in exercising any right, power or remedy hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy, or any abandonment or discontinuance of steps to enforce such a right, power or remedy, preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The rights, powers and remedies of the Administrative Agent and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights, powers or remedies that they would otherwise have. No waiver of any provision of this Agreement or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section 7.09, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.

(b) 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 Administrative Agent and the Loan Party or Loan Parties with respect to which such waiver, amendment or modification is to apply, subject to any consent required in accordance with Section 9.08 of the Credit Agreement.

Section 7.10. 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 RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT. 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 7.10.

Section 7.11. Severability. In the event any one or more of the provisions contained in this Agreement or the other Loan Documents should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby.

 

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Section 7.12. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract, and shall become effective as provided in Section 7.04 hereof. Delivery of an executed counterpart to this Agreement by facsimile or other electronic transmission shall be as effective as delivery of a manually signed original.

Section 7.13. 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 are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

Section 7.14. Jurisdiction; Consent to Service of Process. (a) Each party to this Agreement hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York County, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, 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 shall be heard and determined in such New York State or, to the extent permitted by law, in such federal 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 shall affect any right that the Administrative Agent or any Lender may otherwise have to bring any action or proceeding relating to this Agreement against any Pledgor, or its properties, in the courts of any jurisdiction.

(b) Each party to this Agreement 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 in any New York State or federal court. 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.

Section 7.15. Termination or Release. (a) This Agreement, the guarantees made herein, the pledges made herein, the Security Interest and all other security interests granted hereby shall terminate when all the Obligations (other than contingent indemnification and reimbursement obligations, in each case, that are not yet due and payable and for which no claim has been asserted) have been paid in full in cash or immediately available funds and the Lenders have no further commitment to lend under the Credit Agreement.

(b) A Subsidiary Loan Party shall automatically be released from its obligations hereunder and the security interests in the Collateral of such Subsidiary Loan Party shall be automatically released upon the consummation of any transaction permitted by the Credit Agreement as a result of which such Subsidiary Loan Party ceases to be a Subsidiary Loan Party, is designated as an Unrestricted Subsidiary or otherwise ceases to be a Guarantor; provided that such portion of the Lenders as shall be required by the terms of the Credit Agreement to have consented to such transaction (to the extent such consent is required by the Credit Agreement) shall have consented thereto and the terms of such consent did not provide otherwise; provided further to the extent the ABL Security Documents are in effect on such date, such Subsidiary Loan Party (and the security interests in the Collateral in respect thereof) shall be released under the ABL Security Documents concurrently with the release referred to in this clause (b).

 

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(c) Upon any sale or other transfer by any Pledgor of any Collateral that is permitted under the Credit Agreement to any person that is not a Pledgor, upon the effectiveness of any written consent to the release of the security interest granted hereby in any Collateral pursuant to Section 9.08 of the Credit Agreement or pursuant to Section 5.1 of the ABL/Term Loan Intercreditor Agreement, the security interest in such Collateral shall be automatically released; provided to the extent the ABL Security Documents are in effect on such date, the security interests in such Collateral shall be released under the ABL Security Documents concurrently with the release referred to in this clause (c).

(d) In connection with any termination or release pursuant to paragraph (a), (b) or (c) of this Section 7.15, the Administrative Agent shall execute and deliver to any Pledgor, at such Pledgor’s expense, all documents that such Pledgor shall reasonably request to evidence such termination or release (including, without limitation, UCC termination statements) and will duly assign and transfer to such Pledgor such of the Pledged Collateral that may be in the possession of the Administrative Agent (or a designated bailee, in accordance with the ABL/Term Loan Intercreditor Agreement) and has not theretofore been sold or otherwise applied or released pursuant to this Agreement; provided that the Administrative Agent shall not be required to take any action under this Section 7.15(d) unless such Pledgor shall have delivered to the Administrative Agent together with such request, which may be incorporated into such request, (i) a reasonably detailed description of the Collateral, which in any event shall be sufficient to effect the appropriate termination or release without affecting any other Collateral and (ii) a certificate of a Responsible Officer of the Borrower or such Pledgor certifying that the transaction giving rise to such termination or release is permitted by the Credit Agreement and was consummated in compliance with the Loan Documents. Any execution and delivery of documents pursuant to this Section 7.15 shall be without recourse to or warranty by the Administrative Agent.

Section 7.16. Additional Guarantors. Upon execution and delivery by the Administrative Agent and any Subsidiary that is required to become a party hereto by Section 5.10 of the Credit Agreement of an instrument in the form of Exhibit I hereto, such Subsidiary shall become a Subsidiary Loan Party hereunder with the same force and effect as if originally named as a Subsidiary Loan Party herein. The execution and delivery of any such instrument shall not require the consent of any other party to this Agreement. Upon execution and delivery by the Administrative Agent and Holdings of an instrument in the form of Exhibit I hereto, Holdings shall become a Guarantor hereunder with the same force and effect as if originally named as a Guarantor herein. The execution and delivery of any such instrument shall not require the consent of any other party to this Agreement. The rights and obligations of each party to this Agreement shall remain in full force and effect notwithstanding the addition of any new party to this Agreement.

[Signature Page Follows]

 

30


IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 

CPG MERGER SUB LLC,

as Borrower

By:  

/s/ Dan Lukas

  Name:   Dan Lukas
  Title:     Authorized Person

[Signature Page to Term Loan Guarantee and Collateral Agreement]


BARCLAYS BANK PLC, as Administrative Agent and Collateral Agent
  By:  

/s/ Irina Dimova

    Name: Irina Dimova
    Tit le: Vice President

[Signature Page to Term loan Guarantee and Collateral Agreement]


Schedule I

Subsidiary Loan Parties

 

1.

CPG International I Inc.

 

2.

Vycom Corp.

 

3.

Scranton Products Inc.

 

4.

Sanatec Sub I Corporation

 

5.

Santana Products Inc.

 

6.

AZEK Building Products, Inc.

 

7.

TimberTech Limited

 

8.

Procell Decking Inc.

 

9.

VAST Enterprises, LLC

 

10.

CPG Sub I Corporation

 

-1-


Schedule II

A. Pledged Stock

 

Entity

  

Form of Entity

  

Jurisdiction of
Organization

  

Holder(s) of

Equity

Interests/Pledgor

   Percent
Held/Pledged
  

Certificated

CPG International Inc.

   Corporation    Delaware    CPG Newco LLC    100%    No

CPG International I Inc.

   Corporation    Delaware    CPG International Inc.    100%    Yes

Vycom Corp.

   Corporation    Delaware    CPG International I Inc.    100%    Yes

Scranton Products Inc.

   Corporation    Delaware    CPG International I Inc.    100%    Yes

Sanatec Sub I Corporation

   Corporation    Delaware    Scranton Products Inc.    100%    Yes

Santana Products Inc.

   Corporation    Delaware    Scranton Products Inc.    100%    Yes

AZEK Building Products, Inc.

   Corporation    Delaware    CPG International I Inc.    100%    Yes

TimberTech Limited

   Limited liability company    Ohio    CPG International I Inc.    100%    No

Procell Decking Inc.

   Corporation    Delaware    AZEK Building Products, Inc.    100%    Yes

VAST Enterprises, LLC

   Limited liability company    Minnesota    AZEK Building Products, Inc.    100%    No

CPG Sub I

Corporation

   Corporation    Delaware    CPG International I Inc.    100%    Yes

AZEK Canada Inc.

   Corporation    Ontario    AZEK Building Products, Inc.    100%/65%    No

 

-2-


B. Debt Securities

 

Pledgor    Debt Security
Holdings, the Borrower and each Subsidiary Loan Party    Global Intercompany Note among Holdings, the Borrower and each Subsidiary Loan Party, in each case as payor and payee, replacing, superseding and canceling the loans and advances made pursuant to (i) the Subordinated Intercompany Notes among CPG International I Inc., as payee, and (A) Procell Decking Inc., as payor, in the original principal amount of $33.0 million, (B) Scranton Products Inc., as payor, in the original principal amount of $33.5 million, (C) AZEK Building Products, Inc., as payor, in the original principal amount of $132.0 million and (D) Scranton Products Inc., as payor, in the original principal amount of $88.0 million and (ii) the intercompany loans by CPG International Inc., CPG International I Inc., Scranton Products Inc., AZEK Building Products, Inc., Santana Products Inc., Sanatec Sub I Corporation, CPG Sub I Corporation, Vycom Corp. and Procell Decking Inc., as payors, to CPG International Inc., CPG International I Inc., Scranton Products Inc., AZEK Building Products, Inc., Santana Products Inc., Sanatec Sub I Corporation, CPG Sub I Corporation, Vycom Corp. and Procell Decking Inc., as payees.

 

-3-


Schedule III

Intellectual Property

1. Patents, Trademarks, Copyrights (Owned)

Please see attached schedules III(1), III(2), III(3) for list of material owned patents, trademarks and copyrights.

2. Third Party IP Agreements

None.

 

-4-


Schedule III(1)

Patents

U.S. PATENTS AND PATENT APPLICATIONS

 

Country    Owner    Title    Application No.      File Date      Patent No.    Issue Date      Status

US

   AZEK Building Products, Inc.    An Apparatus and Method for Edge Sealing of Foam Boards      12/390,037        2/20/2009      8,333,582      12/18/2012      Issued

US

   AZEK Building Products, Inc.    Apparatus and Method for Edge Sealing of Foam Boards      13/716,795        12/17/2012            Pending

US

   AZEK Canada, Inc.    Guard Rail System      09/994,736        11/28/2001      6,702,259      3/9/2004      Issued

US

   AZEK Canada, Inc.    Method of Assembling a Guard Rail      11/409,005        4/24/2006      7,472,482      1/6/2009      Issued

US

   AZEK Building Products, Inc.    Rail Assembly Having a Baluster Swing Bracket      12/836,685        7/15/2010      8,376,321      2/19/2013      Issued

US

   AZEK Building Products, Inc.    Screw Type Fastener      29/356,196        2/22/2010      D651,507      1/3/2012      Issued

US

   AZEK Building Products, Inc.    Universal Skirt Board      12/985,650        1/6/2011            Pending

US

   AZEK Building Products, Inc.    Water Barrier Trim      12/986,413        1/7/2011      8,347,567      1/8/2013      Issued

US

   AZEK Building Products, Inc.    Integrated Drip Edge      29/410,691        1/11/2012      D679,418      4/2/2013      Issued

US

   AZEK Building Products, Inc.    Water Barrier Trim      29/440,517        12/21/2012      D684,706      6/18/2013      Issued

US

   AZEK Building Products, Inc.    Interlocking Decorative Trim System      12/986,483        1/7/2011      8,375,660      2/19/2013      Issued

 

-5-


Country    Owner    Title    Application No.      File Date      Patent No.    Issue Date      Status

US

   AZEK Building Products, Inc.    Finish Grade Trim Base      29/410,009        1/3/2012      D679,420      4/2/2013      Issued

US

   AZEK Building Products, Inc.    Finish Grade Trim      29/410,010        1/3/2012      D679,421      4/2/2013      Issued

US

   AZEK Building Products, Inc.    Universal Bracket      12/819,430        6/21/2010      8,398,058      3/19/2013      Issued

US

   AZEK Building Products, Inc.    Screw Type Fastener Having an Unthreaded Shank      29/369,633        9/10/2010      D637,896      5/17/2011      Issued

US

   AZEK Building Products, Inc.    Bench and Planter Combination      13/347,024        1/10/2012            Pending

US

   AZEK Building Products, Inc.    Adjustable Gate      13/347,013        1/10/2012            Pending

US

   AZEK Building Products, Inc.    Deck Storage Bin System      13/347,002        1/10/2012            Pending

US

   AZEK Building Products, Inc.    Bracket      29/383,111        1/12/2011      D655,149      3/6/2012      Issued

US

   AZEK Building Products, Inc.    Spring Clip Method of use for Installing Railings      13/345,950        1/9/2012            Pending

US

   AZEK Building Products, Inc.    Bottom Rail Bracket Assembly      29/383,114        1/12/2011      D656,813      4/3/2012      Issued

US

   AZEK Building Products, Inc.    Retainer for Railings      29/386,040        2/24/2011      D669,340      10/23/2012      Issued

US

   AZEK Building Products, Inc.    Angle Shim      29/386,039        2/24/2011      D,679,574      4/9/2013      Issued

US

   AZEK Building Products, Inc.    Storage Tub      29/386,765        3/4/2011      D663,525      7/17/2012      Issued

US

   AZEK Building Products, Inc.    Siding Board      29/387,081        3/9/2011      D661,818      6/12/2012      Issued

 

-6-


Country    Owner    Title    Application No.      File Date      Patent No.    Issue Date      Status

US

   AZEK Building Products, Inc.    Lighted Railing and Similar Structures      13/345,970        1/9/2012      8,388,214      3/5/2013      Issued

US

   AZEK Building Products, Inc.    Light Strip for Railings      29/408,376        12/12/2011      D661,010      5/29/2012      Issued

US

   AZEK Building Products, Inc.    Crosshead Pediment      29/401,766        9/15/2011      D674,122      1/8/2013      Issued

US

   AZEK Building Products, Inc.    Crown Moulding      29/407,992        12/6/2011      D666,326      8/28/2012      Issued

US

   AZEK Building Products, Inc.    Universal Skirt Board      29/410,689        1/11/2012      D679,417      4/2/2013      Issued

US

   AZEK Building Products, Inc.    Interlocking Finish Trim      29/422,948        5/25/2012      D679,419      4/2/2013      Issued

US

   AZEK Building Products, Inc.    Interlocking Finish Trim Base      29/422,951        5/25/2012      D679,380      4/2/2013      Issued

US

   AZEK Building Products, Inc.    Column Panel      29/454,249        5/8/2013            Pending

US

   AZEK Building Products, Inc.    Column Panel      29/454,245        5/8/2013            Pending

US

   AZEK Building Products, Inc.    Column Panel      29/454,243        5/8/2013            Pending

US

   AZEK Building Products, Inc.    Corner Reinforcement for Building Trim      29/410,687        1/11/2012      D684,279      6/11/2013      Issued

US

   Scranton Products Inc.    Locker      12/505,017        7/17/2009      8,333,412      12/18/2012      Issued

US

   Scranton Products Inc.    Locker      08/196,660        2/10/1994      5,564,806      10/15/1996      Issued

US

   Scranton Products Inc.    Locker Door Retrofit Assembly      08/356,490        12/15/1994      5,595,426      1/21/1997      Issued

US

   Scranton Products Inc.    Locker Door Retrofit Assembly      08/754,496        11/20/1996      5,810,458      9/22/1998      Issued

 

-7-


Country    Owner    Title    Application No.      File Date      Patent No.    Issue Date      Status

US

   Scranton Products Inc.    Locker Door Retrofit Assembly      09/118,636        7/17/1998      5,951,126      9/14/1999      Issued

US

   Scranton Products Inc.    Fire Retarding Polypropylene Composition      09/004,374        1/8/1998      6,348,122      2/19/2002      Issued

US

   Scranton Products Inc.    Locker Retrofit Assembly      10/821,364        4/9/2004      7,409,805      8/12/2008      Issued

US

   Scranton Products Inc.    Locker Handle      29/358,631        3/30/2010      D653,932      2/14/2012      Issued

US

   Scranton Products    Hinge      29/410,443        1/9/2012            Pending

US

   Scranton Products Inc.    Thermoformed or Molded Partition      12/845,0741        07/28/2010            Pending

US

   Scranton Products Inc.    Clam Hinge      29/425,900        6/28/2012      D,679,570      4/9/2013      Issued

US

   TimberTech Limited    Synthetic Wood Post Cap      09/824,463        04/02/2001      6,662,515      12/16/2003      Issued

US

   TimberTech Limited    Deck Plank      08/752,813        11/21/1996      5,836,128      11/17/1998      Issued

US

   TimberTech Limited    Deck Plank      09/009,283        01/20/1998      6,131,355      10/17/2000      Issued

US

   TimberTech Limited    Deck Plank      09/162,626        09/29/1998      6,035,588      03/14/2000      Issued

US

   TimberTech Limited    Deck Plank      09/643,806        08/22/2000      6,272,808      08/14/2001      Issued

US

   TimberTech Limited    Method Of Manufacturing A Sacrificial Limb For A Deck Plank      09/413,385        10/06/1999      6,423,257      07/23/2002      Issued

US

   TimberTech Limited    Rail System And Method For Assembly      12/831,064        07/06/2010      8,167,275      05/01/2012      Issued

US

   TimberTech Limited    Rail System And Method For Assembly      13/461,496        05/01/2012            Pending

US

   TimberTech Limited    Fiberglass/Cellulosic Composite And Method For Molding      11/625,196        01/19/2007      7,743,567      6/29/2010      Issued

US

   TimberTech Limited    Methods Of Manufacturing A Lattice Having A Distressed Appearance      11/968,086        12/31/2007      8,074,339      12/13/2011      Issued

 

1 

CPG International Holdings LP intends to abandon this patent application. If and when the patent application is abandoned, the patent application will effectively be removed from the schedules.

 

-8-


Country    Owner    Title    Application No.      File Date      Patent No.      Issue Date      Status

US

   TimberTech Limited    Outdoor Deck Lighting System      12/049,938        03/17/2008        7,686,485        3/30/2010      Issued

US

   TimberTech Limited    Baluster Light System      12/049,967        03/17/2008        7,862,196        01/04/2011      Issued

US

   TimberTech Limited    Deck Lighting System      12/049,929        03/17/2008        7,661,837        2/16/2010      Issued

US

   TimberTech Limited    Stair Riser Light And Method For Installing Same      12/049,979        03/17/2008        7,934,848        5/3/2011      Issued

US

   TimberTech Limited    Bracketing System      11/843,646        08/22/2007        7,913,960        3/29/2011      Issued

US

   TimberTech Limited    Capped Component And Method For Forming      12/635,532        12/10/2009        8,460,797        6/11/2013      Issued

US

   TimberTech Limited    Compression Molding Of Synthetic Wood Material      08/739,416        10/29/1996        6,180,257        1/30/2001      Issued

US

   TimberTech Limited    Compression Molding Of Synthetic Wood Material      09/712,118        11/14/2000        6,511,757        1/28/2003      Issued

US

   TimberTech Limited    Foam Composite Wood Replacement Material      10/038,851        12/31/2001        6,590,004        07/08/2003      Issued

US

   TimberTech Limited    Cellulosic/Polymer Composite Material      10/802,467        03/17/2004        6,971,211        12/06/2005      Issued

US

   TimberTech Limited    Cellulose/Polyolefin Composite Pellet      10/001,530        10/25/2001        6,632,863        10/14/2003      Issued

US

   TimberTech Limited    Water Drainage System For A Deck      09/564,511        05/04/2000        6,393,785        05/28/2002      Issued

US

   TimberTech Limited    Renewable Surface For Extruded Synthetic Wood Material      08/735,334        10/22/1996        5,866,264        02/02/1999      Issued

US

   TimberTech Limited    Multilayer Synthetic Wood Component      09/854,894        05/14/2001        6,579,605        06/17/2003      Issued

US

   TimberTech Limited    Multilayer Synthetic Wood Component      10/421,156        04/23/2003        6,958,185        10/25/2005      Issued

US

   TimberTech Limited    Flexible Wood Composition      09/822,953        03/30/2001        6,617,376        09/09/2003      Issued

US

   TimberTech Limited    Thermally Cooled And Heated Decking      13/471,101        5/14/2012            Pending

US

   TimberTech Limited    Composite Component Having A Multilayer Cap      13/590,143        8/20/2012            Pending

US

   TimberTech Limited    Vinyl Based Cellulose Reinforced Composite      08/791,178        01/31/1997        6,011,091        01/04/2000      Issued

US

   TimberTech Limited    Vinyl Based Cellulose Reinforced Composite      09/439,677        11/15/1999        6,103,791        08/15/2000      Issued

 

-9-


Country    Owner    Title    Application No.      File Date      Patent No.      Issue Date      Status

US

   TimberTech Limited    Vinyl Based Cellulose Reinforced Composite      09/595,690        06/16/2000        6,248,813        06/19/2001      Issued

US

   TimberTech Limited    Variegated Asa Capstock      12/324,768        11/26/2008            Pending

US

   TimberTech Limited    Variegated Asa Capstock      61/696,476        09/04/2012            Pending

US

   TimberTech Limited    Extrusion Of Synthetic Wood Material      08/735,329        10/22/1996        6,117,924        09/12/2000      Issued

US

   TimberTech Limited    Extrusion Of Synthetic Wood Material      10/247,918        09/20/2002        6,984,676        01/10/2006      Issued

US

   TimberTech Limited    Balanced Cooling Of Extruded Synthetic Wood Material      08/735,323        10/22/1996        5,827,462        10/27/1998      Issued

US

   TimberTech Limited    Extrusion Of Synthetic Wood Material      08/741,846        10/31/1996        6,344,504 2       02/05/2002      Issued

US

   TimberTech Limited    Extrusion Of Synthetic Wood Material Using Thermoplastic Material In Powder Form      10/036,053        12/27/2001        6,498,205        12/24/2002      Issued

US

   TimberTech Limited    Cellulosic, Inorganic-Filled Plastic Composite      09/473,377        12/28/1999        6,337,138        01/08/2002      Issued

US

   TimberTech Limited    System For Drying And Processing Cellulosic Compounds      09/443,694        11/19/1999        6,409,952        06/25/2002      Issued

US

   Vast Enterprises, LLC    Method for installing a bounded paving system.      13/254,367        10/17/2011            Pending

US

   Vast Enterprises, LLC    Methods and devices for constructing a wall with brick facade      12/397,988        3/4/2009        8,316,616        11/27/2012      Issued

US

   Vast Enterprises, LLC    Structural paver decking assembly and method for same      12/717,856        03/4/2010        8,336,278        12/25/2012      Issued

US

   Vast Enterprises, LLC    Brick cutting apparatuses and methods      12/395,825        03/2/2009        8,251,052        08/28/2012      Issued

US

   Vast Enterprises, LLC    Method of installing a paving system      12/990,419        11/19/2010            Pending

US

   Vast Enterprises, LLC    Paver System      29281259        06/19/2007        D581549        11/25/2008      Issued

US

   Vast Enterprises, LLC    Paver system      11/435,319        05/16/2006        7,344,334        3/18/2008      Issued

 

2 

One of the named inventors for this patent, Terry Laver, worked for another company, Strandex Corporation. The United States Patent and Trademark Office record shows that no assignment has been recorded from Mr. Laver for this patent and CPG International Inc. does not have an assignment from Mr. Laver.

 

-10-


NON-U.S. PATENTS AND PATENT APPLICATIONS

 

Country    Owner    Title    Application No.      File Date      Patent No.      Issue Date      Status

CA

   AZEK Building Products, Inc.    An Apparatus and Method for Edge Sealing of Foam Boards      2,693,650        2/18/2010            Pending

CA

   AZEK Canada, Inc.    Guard Rail System      2,491,550        1/5/2005            Pending

CA

   AZEK Canada, Inc.    Guard Rail System      2,363,976        11/26/2001        2,363,976        4/26/2005      Issued

CA

   AZEK Building Products, Inc.    Rail Assembly Having a Baluster Swing Bracket      2,746,198        7/13/2011            Pending

CA

   AZEK Building Products, Inc.    Screw Type Fastener      136652        8/10/2010        136652        3/9/2011      Issued

CA

   AZEK Building Products, Inc.    Universal Bracket      2,743,379        6/16/2011            Pending

CN

   AZEK Building Products, Inc.    Universal Bracket      201110214555.2        6/21/2011            Pending

CA

   AZEK Building Products, Inc.    Screw Type Fastener Having Unthreaded Shank      137596        10/21/2010        137596        5/12/2011      Issued

CN

   AZEK Building Products, Inc.    Screw Type Fastener Having an Unthreaded Shank      201030589730.2        11/3/2010       
ZL20103058973
0.2
 
 
     4/13/2011      Issued

TW

   AZEK Building Products, Inc.    Screw Type Fastener Having Unthreaded Shank      099305915        11/18/2010        D146576        4/21/2012      Issued

CA

   AZEK Building Products, Inc.    Bracket      141284        7/12/2011        141284        2/24/2012      Issued

CA

   AZEK Building Products, Inc.    Bottom Rail Bracket      141283        7/12/2011        141283        2/24/2012      Issued

 

-11-


Country    Owner    Title    Application No.      File Date      Patent No.      Issue Date      Status

CA

   AZEK Building Products, Inc.    Retainer for Railings      141929        8/23/2011        141929        3/22/2012      Issued

CA

   AZEK Building Products, Inc.    Angle Shim      141928        8/23/2011        141928        3/19/2012      Issued

CA

   Scranton ProductsInc.    Locker      2,697,278        3/18/2010            Pending

DE

   Compression Polymers Corp.3    Fire Retarding Polypropylene Composition      199 82 451.7        1/8/1999       
199 82
451.7
 
 
     7/17/2008      Issued

CA

   Scranton Products Inc.    Locker Handle      136458        7/23/2010        136458        2/28/2011      Issued

CA

   Scranton Products Inc.    Thermoformed or Molded Partition      2,747,271        7/26/2011            Pending

MX

   Scranton Products Inc.    Thermoformed or Molded Partition      MX/a/2011/007953        7/27/2011            Pending

CA

   Scranton Products    Hinge      146232        6/28/2012            Pending

MX

   Scranton Products    Hinge      MX/f/2012/002091        10/8/2012            Pending

CA

   Scranton Products Inc.    Clam Hinge      148944        12/13/2012            Pending

MX

   Scranton Products Inc.    Clam Hinge      MX/f/2012/004085        12/19/2012            Pending

 

3 

To be transferred.

 

-12-


Schedule III(2)

Trademarks

U.S. TRADEMARK REGISTRATIONS AND APPLICATIONS

 

Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

US

   AZEK Building Products, Inc.    AZEK      78/594,481        3/24/2005        3,068,158        3/14/2006      Registered

US

   AZEK Building Products, Inc.    AZEK      78/071,690        6/29/2001        2,696,724        3/11/2003      Registered

US

   AZEK Building Products, Inc.    PROCELL      77/225,010        7/9/2007        3,397,777        3/18/2008      Registered

US

   AZEK Building Products, Inc.    AZEK TRIM and Design      77/319,019        11/1/2007        3,495,156        9/2/2008      Registered

US

   AZEK Building Products, Inc.    AZEK Moulding and Design      77/319,029        11/1/2007        3,461,329        7/8/2008      Registered

US

   AZEK Building Products, Inc.    AZEK Deck and Design      77/319,059        11/1/2007        3,466,497        7/15/2008      Registered

US

   AZEK Building Products    Vintec      74/396,882        6/1/1993        1,821,342        2/15/1994      Registered

US

   AZEK Building Products    Celtec      73/646,733        2/17/1987        1,458,348        9/22/1987      Registered

US

   AZEK Building Products    Once You Look, It’s All You’ll See      78/487,138        9/21/2004        3,121,847        7/25/2006      Registered

US

   AZEK Building Products, Inc.    AZEK PORCH and Design      77/493,961        6/9/2008        3,569,527        2/3/2009      Registered

US

   AZEK Canada, Inc.    Fensations      76/644,936        8/15/2005        3,383,684        2/19/2008      Registered

US

   AZEK Building Products, Inc.    HARVEST COLLECTION      77/861,605        10/30/2009        3,868,585        10/26/2010      Registered

US

   AZEK Building Products, Inc.    KONA      77/861,614        10/30/2009        3,806,726        6/22/2010      Registered

US

   AZEK Building Products, Inc.    FAWN      77/861,622        10/30/2009        3,855,187        9/28/2010      Registered

US

   AZEK Building Products, Inc.    SEDONA      77/861,631        10/30/2009        3,892,034        12/21/2010      Registered

 

-13-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

US

   AZEK Building Products, Inc.    TAHOE      77/861,643        10/30/2009        3,806,730        6/22/2010      Registered

US

   AZEK Building Products, Inc.    ARBOR COLLECTION      77/861,638        10/30/2009        3,806,729        6/22/2010      Registered

US

   AZEK Building Products, Inc.    ACACIA      77/861,650        10/30/2009        3,855,188        9/28/2010      Registered

US

   AZEK Building Products, Inc.    REDLAND ROSE      77/861,658        10/30/2009        3,892,035        12/21/2010      Registered

US

   AZEK Building Products, Inc.    MARIPOSA      85/958,134        6/12/2013            Pending

US

   AZEK Building Products, Inc.    MORADO      77/861,675        10/30/2009        3,855,189        9/28/2010      Registered

US

   AZEK Building Products, Inc.    COBRE      77/861,680        10/30/2009        3,877,979        11/16/2010      Registered

US

   AZEK Building Products, Inc.    SILVER OAK      77/861,684        10/30/2009        3,952,777        4/26/2011      Registered

US

   AZEK Building Products, Inc.    AZEK RAIL AND DESIGN      77/927,147        2/3/2010        3,844,774        9/7/2010      Registered

US

   AZEK Building Products, Inc.    MODENA      85/195,469        12/10/2010        3,997,331        7/19/2011      Registered

US

   AZEK Building Products, Inc.    VILLA      85/348,055        6/16/2011        4,090,685        1/24/2012      Registered

US

   AZEK Building Products, Inc.    OYSTER      85/551,141        2/23/2012        4,213,907        9/25/2012      Registered

US

   AZEK Building Products, Inc.    PREMIER RAILING      85/551,098        2/23/2012            Pending

US

   AZEK Building Products, Inc.    AZEK and Design      85/697,369        8/7/2012        4,323,511        4/23/2013      Registered

US

   CCP Holdings Inc.4    Premier Composite Railing & Deck and Design      76/488,955        2/5/2003        3,382,299        2/12/2008      Registered

US

   Scranton Products Inc.    Poly-Mar HD      74/309,678        9/1/1992        1,785,556        8/3/1993      Registered

US

   Scranton Products Inc.    Poly-Marble HD      74/310,043        9/2/1992        1,781,445        7/13/1993      Registered

 

4 

To be transferred.

 

-14-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

US

   Scranton Products Inc.    Hiny Hiders      74/309,661        9/1/1992        1,772,990        5/25/1993      Registered

US

   Scranton Products Inc.    Hiny Hiders and Design      78/864,403        4/19/2006        3,293,859        9/18/2007      Registered

US

   Scranton Products Inc.    Sanatec      74/640,108        2/24/1995        1,951,251        1/23/1996      Registered

US

   Scranton Products Inc.    Protec      74/396,884        6/1/1993        1,821,344        2/15/1994      Registered

US

   Scranton Products Inc.    Flametec      75/905,554        1/25/2000        2,452,876        5/22/2001      Registered

US

   Scranton Products Inc.    Hitec      74/396,883        6/1/1993        1,833,834        5/3/1994      Registered

US

   Scranton Products Inc.    Tufftec Lockers      78/405,595        4/21/2004        2,947,960        5/10/2005      Registered

US

   Scranton Products Inc.    Playboard      78/283,720        8/6/2003        2,945,195        4/26/2005      Registered

US

   Scranton Products Inc.    Grip X      78/283,715        8/6/2003        2,945,194        4/26/2005      Registered

US

   Scranton Products Inc.    Seaboard      78/308,394        10/2/2003        2,930,670        3/8/2005      Registered

US

   Scranton Products Inc.    Kytec      75/910,088        1/26/2000        2,511,775        11/27/2001      Registered

US

   Scranton Products, Inc.    Ultra White      78/757,958        11/21/2005        3,186,396        12/19/2006      Registered

US

   Scranton Products, Inc.    COMTEC INDUSTRIES      85/058,293        6/9/2010        3,907,932        1/18/2011      Registered

US

   Scranton Products, Inc.    SCRANTON PRODUCTS AND DESIGN      85/062,238        6/14/2010        3,908,051        1/18/2011      Registered

US

   Scranton Products, Inc.    SCRANTON PRODUCTS      85/058,348        6/9/2010        3,871,769        11/2/2010      Registered

US

   Scranton Products, Inc.    VYCOM      85/058,299        6/9/2010        3,907,933        1/18/2011      Registered

US

   Scranton Products, Inc.    WHERE QUALITY MEETS PERFORMANCE      85/070,837        6/24/2010        3,908,104        1/18/2011      Registered

US

   Scranton Products, Inc.    VYCOM OLEFIN & PVC SOLUTIONS AND DESIGN      85/062,961        6/15/2010        3,908,054        1/18/2011      Registered

 

-15-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

US

   Scranton Products, Inc.    POLYCARVE      85/070,828        6/24/2010        3,911,214        1/25/2011      Registered

US

   Scranton Products, Inc.    RESISTALL      85/116,708        8/26/2010        3,946,346        4/12/2011      Registered

US

   Scranton Products, Inc.    DesignBoard      85/428,383        9/21/2011        4,319,071        4/9/2013      Registered

US

   Scranton Products, Inc.    DURALIFE LOCKERS      85/650,695        6/13/2012        4397391        9/3/2013      Registered

US

   Scranton Products, Inc.    TUFFTEC      85939682        5/22/2013            Pending

US

   Scranton Products, Inc.    EX      85939710        5/22/2013            Pending

US

   Scranton Products, Inc.    ENDURABOND      85944758        5/29/2013            Pending

US

   Scranton Products, Inc.    ENDURALITE      85/796,381        12/6/2012            Pending

US

   TimberTech Limited    BUILDERBOARD      78/693,198        08/16/2005        3,178,753        11/28/2006      Registered

US

   TimberTech Limited    BUILDERRAIL      77/142,784        03/28/2007        3,412,440        04/15/2008      Registered

US

   TimberTech Limited    LOGO      77/161,506        4/20/2007        3,415,387        04/22/2008      Registered

US

   TimberTech Limited    CONCEALOC      78/951,964        08/15/2006        3,433,341        05/20/2008      Registered

US

   TimberTech Limited    EARTHWOOD      78/646,899        06/09/2005        3,184,871        12/12/2006      Registered

US

   TimberTech Limited    EARTHWOOD EVOLUTIONS      85/012,497        04/13/2010        3,986,813        06/28/2011      Registered

US

   TimberTech Limited    FENCESCAPE      77/042,329        11/13/2006        3,382,509        02/12/2008      Registered

US

   TimberTech Limited    FLOORIZON      78/465,462        08/11/2004        3,163,622        10/24/2006      Registered

US

   TimberTech Limited    LESS WORK. MORE LIFE.      78/047,349        02/08/2001        2,652,749        11/19/2002      Registered

US

   TimberTech Limited    LOOKS BETTER. LASTS LONGER.      77/075,658        01/04/2007        3,450,242        06/17/2008      Registered

 

-16-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

US

   TimberTech Limited    LOGO      75/100,026        05/07/1996        2,112,994        11/11/1997      Registered

US

   TimberTech Limited    RADIANCERAIL      78/646,901        06/09/2005        3,216,481        03/06/2007      Registered

US

   TimberTech Limited    RADIANCERAIL EXPRESS      85/351,440        06/21/2011        4,108,138        03/06/2012      Registered

US

   TimberTech Limited    RELIABOARD      77/768,867        06/26/2009        3,874,378        11/09/2010      Registered

US

   TimberTech Limited    SECURE-MOUNT POST      77/840,457        10/02/2009        3,851,829        09/21/2010      Registered

US

   TimberTech Limited    TIMBERTECH      75/100,025        05/07/1996        2,112,993        11/11/1997      Registered

US

   TimberTech Limited    LOGO      75/100,027        05/07/1996        2,112,995        11/11/1997      Registered

US

   TimberTech Limited    TOPLOC      85/063,944        06/16/2010        4,003,707        07/26/2011      Registered

US

   TimberTech Limited    TOPLOC      86/050308        08/28/2013            Pending

US

   TimberTech Limited    TWINFASCIA      78/465,460        08/11/2004        3,133,999        08/22/2006      Registered

US

   TimberTech Limited    TWINFINISH      78/205,132        01/20/2003        2,925,850        02/08/2005      Registered

US

   TimberTech Limited    TWINRISER      78/887,449        05/19/2006        3,321,644        10/23/2007      Registered

US

   TimberTech Limited    VALUPLANK      77/242,754        07/31/2007        3,728,937        12/22/2009      Registered

US

   TimberTech Limited    XLM      77/161,687        04/20/2007        3,412,485        04/15/2008      Registered

US

   TimberTech Limited    YOU’LL NEVER FIND WOOD THIS GOOD      85/168,827        11/04/2010            Pending

US

   Vast Enterprises, LLC    LOGO      77/205,254        6/13/2007        3,391,274        3/4/2008      Registered

 

-17-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

US

   Vast Enterprises, LLC    Vast      77/205,159        6/13/2007        3,391,272        3/4/2008      Registered

STATE - OH

   TimberTech Limited    TIMBERTECH            1075726        5/4/1999      Registered

STATE - PA

   Santana Products Inc.    POLY - MARBLE HD      03-010685           2094359        6/12/1992      Registered

STATE - PA

   Santana Products Inc.    HINY HIDERS      03-010684           2094360        6/12/1992      Registered

STATE - PA

   Santana Products Inc.    POLY - MAR HD      03-010686           2094357        6/12/1992      Registered

STATE - PA

   Santana Products Inc.    SANTANA      01-103479           1614684        10/19/1990      Registered

 

-18-


NON-U.S. TRADEMARK REGISTRATIONS AND APPLICATIONS

 

Country    Owner    Mark   

Application

No.

     File Date      Registration
No.
     Registration
Date
     Status

ARGENTINA

   AZEK Building Products, Inc.    AZEK      2.835.124        6/30/2008        2.311.264        9/4/2009      Registered

AUSTRALIA

   AZEK Building Products, Inc.    AZEK      1247932        6/24/2008        1247932        6/24/2008      Registered

BERMUDA

   AZEK Building Products, Inc.    AZEK      48239        7/4/2008        48239        7/4/2008      Registered

BRAZIL

   AZEK Building Products, Inc.    AZEK      901047600        7/15/2008        901047600        11/9/2010      Registered

CANADA

   AZEK Building Products, Inc.    AZEK      1,331,590        1/17/2007        TMA711,762        4/14/2008      Registered

COSTA RICA

   AZEK Building Products, Inc.    AZEK      2008-6495        7/4/2008        183418        12/18/2008      Registered

DOMINICAN REPUBLIC

   AZEK Building Products, Inc.    AZEK      2008-28199        7/2/2008        169612        9/15/2008      Registered

EUROPEAN UNION (CTM)

   AZEK Building Products, Inc.    AZEK      005621149        1/17/2007        005621149        4/11/2008      Registered

INDIA

   AZEK Building Products, Inc.    AZEK      1702935        6/24/2008        1702935        11/22/2010      Registered

SOUTH KOREA

   AZEK Building Products, Inc.    AZEK      40-2008-0033534        7/8/2008        0791608        6/9/2009      Registered

MEXICO

   AZEK Building Products, Inc.    AZEK      830574        1/17/2007        1007487        10/22/2007      Registered

MEXICO

   AZEK Building Products, Inc.    AZEK      830575        1/17/2007        1007488        10/22/2007      Registered

NEW ZEALAND

   AZEK Building Products, Inc.    AZEK      791673        6/24/2008        791673        6/24/2008      Registered

RUSSIAN FEDERATION

   AZEK Building Products, Inc.    AZEK      2008720470        6/27/2008        383728        7/15/2009      Registered

SAUDI ARABIA

   AZEK Building Products, Inc.    AZEK      132336        6/28/2008        1108/24        11/15/2009      Registered

TURKEY

   AZEK Building Products, Inc.    AZEK      2008/37905        6/26/2008        2008/37905        7/28/2009      Registered

 

-19-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

AUSTRALIA

   AZEK Building Products, Inc.    Procell      1216438        12/18/2007        1216438        12/18/2007      Registered

CANADA

   AZEK Building Products, Inc.    PROCELL      1,371,929        11/14/2007        TMA741,441        6/4/2009      Registered

CHILE

   AZEK Building Products, Inc.    PROCELL      802-327        1/9/2008        820.591        6/26/2008      Registered

CHINA

   AZEK Building Products, Inc.    PROCELL      6496593        1/7/2008        6496593        4/14/2010      Registered

EUROPEAN UNION (CTM)

   AZEK Building Products, Inc.    PROCELL      006552269        1/3/2008        006552269        10/8/2008      Registered

MEXICO

   AZEK Building Products, Inc.    PROCELL      905544        1/7/2008        1036971        4/28/2008      Registered

RUSSIAN FEDERATION

   AZEK Building Products, Inc.    PROCELL      2007740842        12/25/2007        374390        3/12/2009      Registered

TURKEY

   AZEK Building Products, Inc.    PROCELL      2007/68973        12/26/2007        200768973        12/26/2008      Registered

UKRAINE

   AZEK Building Products, Inc.    PROCELL      m200800121        1/8/2008        109320        7/10/2009      Registered

NEW ZEALAND

   Vycom Corp.    Vintec      230947        10/11/1993        230947        10/11/1993      Registered

NEW ZEALAND

   Vycom Corp.    Celtec      230946        10/11/1993        230946        10/11/1993      Registered

MEXICO

   Compression Polymers Corp.    Once You Look, It’s All You See      701,219        2/9/2005        905705        10/27/2005      Registered

MEXICO

   Compression Polymers Corp.    Once You Look, It’s All You’ll See      701,220        2/9/2005        905706        10/27/2005      Registered

WIPO

   Compression Polymers Corp.    Once You Look, It’s All You’ll See            854775        2/2/2005      Registered

CANADA

   AZEK Building Products, Inc.    HARVEST COLLECTION      1,478,846        4/28/2010        TMA793,919        3/25/2011      Registered

CANADA

   AZEK Building Products, Inc.    KONA      1,478,845        4/28/2010            Pending

CANADA

   AZEK Building Products, Inc.    TAHOE      1,478,847        4/28/2010        TMA793,914        3/25/2011      Registered

CANADA

   AZEK Building Products, Inc.    ARBOR COLLECTION      1,478,844        4/28/2010        TMA793,921        3/25/2011      Registered

 

-20-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

CANADA

   AZEK Building Products, Inc.    COBRE      1,478,852        4/28/2010        TMA824,666        5/23/2012      Pending

CANADA

   AZEK Building Products, Inc.    AZEK RAIL & DESIGN      1,490,880        8/3/2010        TMA804,039        8/10/2011      Registered

CANADA

   AZEK Building Products, Inc.    TERRA COLLECTION      1,479,039        4/29/2010        TMA825,144        5/30/2012      Registered

CANADA

   AZEK Building Products, Inc.    MODENA      1,530,879        6/8/2011        TMA845,425        3/7/2013      Registered

MEXICO

   AZEK Building Products, Inc.    MODENA      1184783        6/8/2011        1251134        11/11/2011      Registered

CANADA

   AZEK Building Products, Inc.    OYSTER      1,587,038        7/20/2012            Pending

AUSTRALIA

   AZEK Building Products, Inc.    AZEK and Design      1537851        1/29/2013        1537851        5/29/2013      Registered

BRAZIL

   AZEK Building Products, Inc.    AZEK and Design      840410468        2/1/2013            Pending

CANADA

   AZEK Building Products, Inc.    AZEK and Design      1,613,153        2/7/2013            Pending

CHILE

   AZEK Building Products, Inc.    AZEK and Design      1.044.527        2/4/2013            Pending

COLOMBIA

   AZEK Building Products, Inc.    AZEK and Design      13-020244        2/4/2013            Pending

EUROPEAN UNION (CTM)

   AZEK Building Products, Inc.    AZEK and Design      011586691        2/6/2013        011586691        6/28/2013      Pending

CANADA

   AZEK Canada, Inc.    Fensations      1,267,897        8/10/2005        TMA678,451        12/12/2006      Registered

CANADA

   AZEK Canada, Inc.    TRADEMARK      1,281,331        11/30/2005        TMA731,442        12/23/2008      Registered

GERMANY

   Compression Polymers Corp.5    FLAME TEC      30055516        7/25/2000        30055516        4/2/2001      Registered

JAPAN

   Compression Polymers Group    FLAMETEC     
2000-
081494

 
     7/24/2000        4445565        1/12/2001      Registered

AUSTRALIA

   Compression Polymers Corp.    Seaboard      996221        4/1/2004        996221        7/25/2005      Registered

 

5 

To be transferred.

 

-21-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

CANADA

   Compression Polymers Corp.    Seaboard      1,212,045        4/2/2004        657,224        1/24/2006      Registered

INDIA

   Compression Polymers Corp.    ONCE YOU LOOK, IT’S ALL YOU SEE      1342920        3/7/2005            Pending

INDIA

   Compression Polymers Corp.    ONCE YOU LOOK, IT’S ALL YOU SEE      1344691        3/15/2005        755388        09/24/2008      Registered

MEXICO

   Santana Products, Inc.    SANTANA      489723        6/8/2001        831700        4/21/2004      Registered

MEXICO

   Santana Products, Inc.    SANTANA      489724        6/8/2001        709333        7/30/2001      Registered

MEXICO

   Santana Products, Inc.    SANTANA      489725        6/8/2001        709334        7/30/2001      Registered

CANADA

   Scranton Products, Inc.    COMTEC INDUSTRIES      1,506,789        12/7/2010        TMA813,246        12/2/2011      Registered

MEXICO

   Scranton Products, Inc.    COMTEC INDUSTRIES      1141007        12/9/2010        1245484        10/19/2011      Registered

CANADA

   Scranton Products, Inc.    SCRANTON PRODUCTS & DESIGN      1,506,791        12/7/2010        TMA813,243        12/2/2011      Registered

MEXICO

   Scranton Products, Inc.    SCRANTON PRODUCTS AND DESIGN      1140105        12/7/2010        1245483        10/19/2011      Registered

MEXICO

   Scranton Products, Inc.    SCRANTON PRODUCTS AND DESIGN      1140106        12/7/2010        1274898        3/23/2012      Registered

CANADA

   Scranton Products, Inc.    SCRANTON PRODUCTS      1,506,799        12/7/2010        TMA826,472        6/18/2012      Registered

MEXICO

   Scranton Products, Inc.    SCRANTON PRODUCTS      1140102        12/7/2010        1257584        12/12/2011      Registered

MEXICO

   Scranton Products, Inc.    SCRANTON PRODUCTS      1140103        12/7/2010        1257585        12/12/2011      Registered

CANADA

   Scranton Products, Inc.    VYCOM      1,506,786        12/7/2010        TMA813,244        12/2/2011      Registered

CANADA

   Scranton Products, Inc.    WHERE QUALITY MEETS PERFORMANCE      1,506,792        12/7/2010        TMA813,245        12/2/2011      Registered

 

-22-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

MEXICO

   Scranton Products, Inc.    WHERE QUALITY MEETS PERFORMANCE      0065362        12/9/2010        67177        1/26/2012      Registered

CANADA

   Scranton Products, Inc.    V COM OLEFIN AND PVC OLUTIONS & DESIGN      1,506,790        12/7/2010        TMA813,256        12/2/2011      Registered

CANADA

   Scranton Products, Inc.    CORRTEC      1,506,788        12/7/2010        TMA850172        5/3/2013      Registered

MEXICO

   Scranton Products, Inc.    CORRTEC      1140101        12/7/2010        1246307        10/21/2011      Registered

CANADA

   Scranton Products, Inc.    POLYCARVE      1,508,691        12/21/2010        TMA834,523        10/17/2012      Registered

MEXICO

   Scranton Products, Inc.    POLYCARVE      1168339        4/4/2011        1263484        1/27/2012      Registered

MEXICO

   Scranton Products, Inc.    CELTEC      1114618        8/25/2010        1198969        1/27/2011      Registered

CANADA

   Scranton Products, Inc.    RESISTALL      1,512,133        1/21/2011            Pending

CANADA

   Scranton Products, Inc.    DURALIFE LOCKER      1,606,485        12/13/2012            Pending

MEXICO

   Scranton Products, Inc.    DURALIFE LOCKER      1332658        12/10/2012            Pending

CANADA

   TimberTech Limited    BUILDERRAIL      1,342,127        04/04/2007        TMA745,614        08/18/2009      Registered

CANADA

   TimberTech Limited    LOGO      1,357,918        07/31/2007        TMA803,183        07/29/2011      Registered

CTM

   TimberTech Limited    LOGO      006154785        07/31/2007        006154785        08/18/2008      Registered

CANADA

   TimberTech Limited    CONCEALOC      1,331,854        01/18/2007        TMA705,772        01/25/2008      Registered

CTM

   TimberTech Limited    CONCEALOC      005937511        05/25/2007        005937511        04/25/2008      Registered

CANADA

   TimberTech Limited    DOCKSIDER      1,309,033        07/13/2006        TMA721,545        08/21/2008      Registered

CTM

   TimberTech Limited    DOCKSIDER      005204128        07/18/2006        005204128        07/05/2007      Registered

CANADA

   TimberTech Limited    EARTHWOOD      1,282,525        12/09/2005        TMA680,750        01/31/2007      Registered

 

-23-


Country    Owner    Mark   

Application

No.

     File Date     

Registration

No.

     Registration
Date
     Status

FRANCE

   TimberTech Limited    EARTHWOOD      10/3728292        03/30/2010        103728292        12/08/2005      Registered

GERMANY

   TimberTech Limited    EARTHWOOD      302010000635.8/19        12/08/2005        302010000635        07/19/2010      Registered

SPAIN

   TimberTech Limited    EARTHWOOD      2907927/6        12/30/2009        2907927        06/02/2010      Registered

UK

   TimberTech Limited    EARTHWOOD      2535980        12/08/2005        2535980        05/21/2010      Registered

BENELUX

   TimberTech Limited    EARTHWOOD      0200970        12/08/2005        0200970        05/20/2010      Registered

SPAIN

   TimberTech Limited    TI BERTECH CATALUNYA      2853148/5        11/19/2008        2853148/5        03/16/2009      Registered

SPAIN

   TimberTech Limited    LOGO      2856393/X        12/12/2008        2856393/X        06/12/2009      Registered

SPAIN

   TimberTech Limited    TIMBERTECH ESPAÑA. LESS      2859139/9        01/13/2009        2859139/9        05/20/2009      Registered
      WORK MORE LIFE               

SPAIN

   TimberTech Limited    IMBERTECH ESPAÑA      2878862/1        06/04/2009        2878862/1        10/16/2009      Registered

CANADA

   TimberTech Limited    FENCESCAPE      1,337,089        02/27/2007        TMA713,281        05/01/2008      Registered

CANADA

   TimberTech Limited    FLOORIZON      1,350,127        06/04/2007        TMA721,739        08/22/2008      Registered

CANADA

   TimberTech Limited    RADIANCERAIL      1,282,522        12/09/2005        TMA680,751        01/31/2007      Registered

CTM

   TimberTech Limited    RADIANCERAIL      004772381        12/08/2005        004772381        12/14/2006      Registered

NEW ZEALAND

   TimberTech Limited    TIMBERTECH      679568        05/23/2003        679568        05/23/2003      Registered

BRAZIL

   TimberTech Limited    TIMBERTECH      820405132        11/24/1997        820405132        03/27/2001      Registered

BRAZIL

   TimberTech Limited    LOGO      820405124        11/24/1997        820405124        03/27/2001      Registered

CANADA

   TimberTech Limited    TIMBERTECH      1,017,584        06/02/1999        638,171        04/22/2005      Registered

 

-24-


Country    Owner    Mark    Application
No.
     File Date      Registration
No.
     Registration
Date
     Status

CANADA

   TimberTech Limited    LOGO      1,017,585        06/02/1999        TMA647,133        09/01/2005      Registered

CTM

   TimberTech Limited    TIMBERTECH      000671347        11/05/1997        000671347        04/23/1999      Registered

CTM

   TimberTech Limited    LOGO      000671453        11/05/1997        000671453        03/22/1999      Registered

JAPAN

   TimberTech Limited    LOGO      53136/99        06/15/1999        04450396        02/02/2001      Registered

CANADA

   TimberTech Limited    TWINFINISH      1,282,526        12/09/2005        TMA683,521        03/13/2007      Registered

CTM

   TimberTech Limited    TWINFINISH      004772951        12/08/2005        004772951        12/14/2006      Registered

CANADA

   TimberTech Limited    VALUPLANK      1,379,650        01/17/2008        TMA744,955        08/10/2009      Registered

CTM

   TimberTech Limited    VALUPLANK      006545479        12/28/2007        006545479        11/27/2009      Registered

CANADA

   TimberTech Limited    XLM      1,357,920        07/31/2007        TMA775,140        08/20/2010      Registered

CTM

   TimberTech Limited    XLM      006154082        07/31/2007        006154082        08/18/2008      Registered

CANADA

   TimberTech Limited    EVOLUTIONS RAIL      1,588,040        07/30/2012            Pending

CTM

   TimberTech Limited    EVOLUTIONS RAIL      011092186        08/06/2012        011092186        12/28/2012      Registered

UAE

   TimberTech Limited    TIMBERTECH & DEVICE (in black & white)      179982        09/30/2012            Pending

UNITED KINGDOM

   Vycom Corp.    CELTEC      1,547,946        9/16/1993        1,547,946        12/04/1998      Registered

AUSTRALIA

   Vycom Corp.    CELTEC      613822        10/14/1993        A613822        12/20/1994      Registered

AUSTRALIA

   Vycom Corp.    VINTEC      613823        10/14/1993        A613823        12/20/1994      Registered

 

-25-


Schedule III(3)

U.S. COPYRIGHT REGISTRATIONS AND APPLICATIONS

 

Country    Record Owner    Copyright Title    Registration Number    Registration Date
United States    AZEK Building Products, Inc.    Azek Trimboards installation guidelines.    TX0006265403    01/18/2006
United States    AZEK Building Products, Inc.    Azek Trimboards limited warranty.    TX0006265404    01/18/2006

 

NON-U.S. COPYRIGHT REGISTRATIONS AND APPLICATIONS

None.

REGISTERED DOMAIN NAMES

 

azek.biz

  

azektrimboardsucks.org

  

cpg-vycom.org

azek.com

  

azektrimboardsucks.us

  

cpg-vycom.us

azek.info

  

azekworldwide.com

  

cpggreeninitiative.com

azek.net

  

celtecmarine.com

  

cpggreeninitiative.net

azek.us

  

celtecmarine.us

  

cpgint.com

azekbuildingproducts.com

  

composatron.com

  

cpgintsustainability.com

azekdeck.com

  

compressionpolymers.biz

  

cpgintsustainability.net

azekdecking.com

  

compressionpolymers.com

  

cpgsustainabilitymission.com

azekindustries.com

  

compressionpolymers.net

  

cpgsustainabilitymission.net

azeksucks.biz

  

compressionpolymers.org

  

dieblock.com

azeksucks.com

  

compressionpolymers.us

  

dieblok.com

azeksucks.info

  

compressionpolymerscorp.biz

  

hinyhider.com

azeksucks.net

  

compressionpolymerscorp.com

  

hinyhiders.com

azeksucks.org

  

compressionpolymerscorp.info

  

hyzek.com

azeksucks.us

  

compressionpolymerscorp.net

  

hyzek.net

azektrimboardssuck.biz

  

compressionpolymerscorp.org

  

procelldeck.com

azektrimboardssuck.com

  

compressionpolymerscorp.us

  

procelldecking.com

azektrimboardssuck.info

  

comtecindustries.biz

  

procelldecks.com

azektrimboardssuck.net

  

comtecindustries.com

  

santanaproducts.com

azektrimboardssuck.org

  

comtecindustries.info

  

scranton-products.com

azektrimboardssuck.us

  

comtecindustries.net

  

scrantonprod.com

azektrimboardssucks.biz

  

comtecindustries.org

  

scrantonproducts.com

azektrimboardssucks.com

  

comtecindustries.us

  

seaboard-marine.com

azektrimboardssucks.info

  

cpcorp.biz

  

timbertech.com

azektrimboardssucks.net

  

cpcorp.info

  

vycom.biz

azektrimboardssucks.org

  

cpcorp.us

  

vycom.info

azektrimboardssucks.us

  

cpg-int.com

  

vycom.org

azektrimboardsucks.biz

  

cpg-vycom.biz

  

vycom.us

azektrimboardsucks.com

  

cpg-vycom.com

  

vycomcorp.com

azektrimboardsucks.info

  

cpg-vycom.net

  

vycomcorp.info

 

-26-


vycomcorp.net

  

timbertechglobaldirect.com

  

styleselectionsrailing.com

vycomcorp.org

  

timbertechpress.com

  

timbertechdirect.com

vycomcorp.us

  

timbertechpro.com

  

timbertechfencescape.com

cpgdirect.com

  

timbertechstore.com

  

timbertechfencing.com

azekdirect.com

  

twinfinish.com

  

timbertech.ie

builderrail.com

  

deckedoutforlife.com

  

timbertech.cl

concealoc.com

  

evolutionsrail.com

  

timbertech.co.cr

concealock.com

  

fencescapedirect.com

  

timbertech.com.co

discoverrail.com

  

fencescaping.com

  

timbertech.com.pa

dogsondecks.com

  

fencingscape.com

  

timbertech.co.za

earthwoodevolutions.com

  

radiancerailexpress.com

  

timbertechdeutschland.de

extremelowmaintenance.com

  

styleselectiondeck.com

  

timbertechoesterreich.at

fencescape.com

  

styleselectiondecking.com

  

timbertechschweiz.ch

floorizon.com

  

styleselectionrail.com

  

timberech.com.br

lessworkmorelife.com

  

styleselectionrailing.com

  

timbertech.pt

radiancerail.com

  

styleselectionsdeck.com

  

timbertechespana.es

securemountpost.com

  

styleselectionsdecking.com

  

timbertechespana.es

timbertech.com

  

styleselectionsdecking.net

  

timbertech.fr

timbertechcontractor.com

  

styleselectionsrail.com

  

 

-27-


Schedule IV

Filing Jurisdictions

 

Entity

  

Filing Jurisdiction

CPG International Inc.

   Delaware

CPG International I Inc.

   Delaware

Vycom Corp.

   Delaware

Scranton Products Inc.

   Delaware

Sanatec Sub I Corporation

   Delaware

Santana Products Inc.

   Delaware

AZEK Building Products, Inc.

   Delaware

TimberTech Limited

   Ohio

Procell Decking Inc.

   Delaware

VAST Enterprises, LLC

   Minnesota

CPG Sub I Corporation

   Delaware

CPG Newco LLC

   Delaware

 

-28-


Schedule V

Commercial Tort Claims

None.

 

-29-


Schedule VI

Matters Relating to Accounts and Inventory

None.

 

-30-


Schedule VII

Jurisdictions of Organization, Locations of Chief Executive Offices

 

Entity

  

Jurisdiction of
Organization

   Identification
Number
  

Location of Chief Executive Office

CPG International Inc.    Delaware    3937658   

888 N. Keyser Avenue

Scranton, PA 18504

CPG International I Inc.    Delaware    3953009   

888 N. Keyser Avenue

Scranton, PA 18504

Vycom Corp.    Delaware    4068646   

888 N. Keyser Avenue

Scranton, PA 18504

Scranton Products Inc.    Delaware    3359187   

888 N. Keyser Avenue

Scranton, PA 18504

Sanatec Sub I Corporation    Delaware    4068653   

888 N. Keyser Avenue

Scranton, PA 18504

Santana Products Inc.    Delaware    3564527   

888 N. Keyser Avenue

Scranton, PA 18504

AZEK Building Products, Inc.    Delaware    3359183   

888 N. Keyser Avenue

Scranton, PA 18504

TimberTech Limited    Ohio    1047360   

894 Prairie Avenue

Wilmington, OH 45177

Procell Decking Inc.    Delaware    4068656   

888 N. Keyser Avenue

Scranton, PA 18504

VAST Enterprises, LLC    Minnesota    20-4245524   

1828 Marshall Street N.E., Suite 15A,

Minneapolis, MN 55418

CPG Sub I Corporation    Delaware    4068643   

888 N. Keyser Avenue

Scranton, PA 18504

CPG Newco LLC    Delaware    5384228   

888 N. Keyser Avenue

Scranton, PA 18504

 

-31-


Exhibit I

to Guarantee and

Collateral Agreement1

SUPPLEMENT NO.         dated as of                             (this “Supplement”), to the Term Loan Guarantee and Collateral Agreement dated as of September 30, 2013 (the “Guarantee and Collateral Agreement”), among CPG MERGER SUB LLC, a Delaware limited liability company (prior to the consummation of the Acquisition, the “Borrower”), CPG NEWCO LLC (“Holdings”) and each other Subsidiary of Holdings that, in each case, becomes a party to the Guarantee and Collateral Agreement after the Closing Date (each, a “Subsidiary Loan Party”) and BARCLAYS BANK PLC, as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”) for the Secured Parties (as defined therein).

A. Reference is made to the Term Loan Credit Agreement dated as of September 30, 2013 (as amended, restated, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the lenders party thereto from time to time (the “Lenders”), the Administrative Agent and the Collateral Agent for the Lenders, and the other parties from time to time thereto.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement and the Guarantee and Collateral Agreement referred to therein.

C. The Pledgors have entered into the Guarantee and Collateral Agreement in order to induce the Lenders to make Loans under the Credit Agreement. Section 7.16 of the Guarantee and Collateral Agreement provides that [Holdings and]2 additional Subsidiaries of Holdings may become Subsidiary Loan Parties under the Guarantee and Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. [Holdings and] The undersigned Subsidiary (the “New Guarantor”) is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Subsidiary Loan Party under the Guarantee and Collateral Agreement in order to induce the Lenders to make additional Loans (if available under the Credit Agreement) and as consideration for any financial considerations previously made or issed under the Credit Agreement.

Accordingly, the Administrative Agent and the New Guarantor agree as follows:

SECTION 1. In accordance with Section 7.16 of the Guarantee and     Collateral Agreement, the New Guarantor by its signature below becomes a Subsidiary Loan Party, a Guarantor and a Pledgor under the Guarantee and Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Loan Party, a Guarantor and a Pledgor, and the New Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee and Collateral Agreement applicable to it as a Subsidiary Loan Party, a Guarantor and a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor and a Pledgor thereunder are true and correct, in all material respects, on and as of the date hereof. In furtherance of the foregoing, the New Guarantor, as security for the payment and performance in full of the Obligations (as defined in the Guarantee and Collateral Agreement), does hereby create and grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in and Lien on all the New Guarantor’s right, title and interest in and to

 

1 

At any time the ABL/Term Loan Intercreditor Agreement is outstanding, language to be added to Supplement regarding joinder to such agreement.

2 

Modify accordingly if executed by Holdings.

 

 

 

Exhibit I-1


the Collateral (as defined in the Guarantee and Collateral Agreement) of the New Guarantor. Each reference to a “Subsidiary Loan Party,” a “Guarantor,” or a “Pledgor” in the Guarantee and Collateral Agreement shall be deemed to include the New Guarantor. The Guarantee and Collateral Agreement is hereby incorporated herein by reference.

SECTION 2. The New Guarantor represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing.

SECTION 3. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. This Supplement shall become effective when (a) the Administrative Agent shall have received a counterpart of this Supplement that bears the signature of the New Guarantor and (b) the Agents have executed a counterpart hereof.

SECTION 4. The New Guarantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of all the Pledged Securities of the New Guarantor as of the date hereof, (b) set forth on Schedule II attached hereto is a true and correct schedule of all of the material Patents, Trademarks and Copyrights of the New Guarantor as of the date hereof, (c) set forth on Schedule III attached hereto is a true and correct schedule of all Commercial Tort Claims of the New Guarantor individually in excess of $5.0 million as of the date hereof and (d) set forth under its signature hereto, is the true and correct legal name of the New Guarantor, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Guarantee and Collateral Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Guarantee and Collateral Agreement.

SECTION 9. The New Guarantor agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, including the reasonable fees, disbursements and other charges of counsel for the Administrative Agent.

IN WITNESS WHEREOF, the New Guarantor and the Agents have duly executed this Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.

 

Exhibit I-2


[Name of New Guarantor]
By:    
  Name:
  Title:
Legal Name:
Jurisdiction of Formation:
Location of Chief Executive Office:

BARCLAYS BANK PLC, as

Administrative Agent and Collateral Agent

By:    
  Name:
  Title:

 

Exhibit I-3


Schedule I

to Supplement No.         to the

Guarantee and

Collateral Agreement

Pledged Securities of the New Guarantor

EQUITY INTERESTS

 

Number of Issuer

Certificate

   Registered Owner    Number and Class of
Equity Interest
   Percentage of Equity
Interests

DEBT SECURITIES

 

Issuer

   Principal Amount    Date of Note    Maturity Date

 

 

 

 

 

Schedule I-1


Schedule II

to Supplement No.         to the

Guarantee and

Collateral Agreement

PATENTS, TRADEMARKS AND COPYRIGHTS

 

 

 

 

 

 

Schedule II-1


Schedule III

to Supplement No.         to the

Guarantee and

Collateral Agreement

COMMERCIAL TORT CLAIMS

 

 

 

 

 

 

Schedule III-1

Exhibit 10.14

TERM LOAN GUARANTEE AND COLLATERAL AGREEMENT SUPPLEMENT

This Supplement is entered into as of January 29, 2018 (this “Supplement”), by WES, LLC, a Minnesota limited liability company, and UltraLox Technology, LLC, a Minnesota limited liability company (each, a “New Guarantor”), and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”). Reference is hereby made to that certain Term Loan Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Guarantee and Collateral Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), CPG Newco LLC, a Delaware limited liability company (“Holdings”), and certain Subsidiaries of Holdings (each, a “Subsidiary Loan Party”) and Jefferies Finance LLC, as the successor Administrative Agent and Collateral Agent for the Secured Parties (as defined therein).

A. Reference is made to that certain Term Loan Credit Agreement, dated as of September 30, 2013, as amended by First Amendment to the Term Loan Credit Agreement, dated as of February 6, 2014, as further amended by Second Amendment to the Term Loan Credit Agreement, dated as of May 5, 2017 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the Lenders party thereto, the Administrative Agent, the Collateral Agent, and other agents party thereto.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement and the Guarantee and Collateral Agreement referred to therein, as applicable.

C. The Pledgors have entered into the Guarantee and Collateral Agreement in order to induce the Lenders to make Loans under the Credit Agreement. Section 7.16 of the Guarantee and Collateral Agreement provides that additional Subsidiaries may become Subsidiary Loan Parties under the Guarantee and Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. Each New Guarantor is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guarantee and Collateral Agreement in order to induce the Lenders to make additional Loans (if available under the Credit Agreement), and as consideration for any financial considerations previously made or issued under the Credit Agreement.

Accordingly, the Administrative Agent and each New Guarantor agree as follows:

SECTION 1. In accordance with Section 7.16 of the Guarantee and Collateral Agreement, each New Guarantor by its signature below becomes a Subsidiary Loan Party, a Guarantor and a Pledgor under the Guarantee and Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Loan Party, a Guarantor and a Pledgor, and each New Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee and Collateral Agreement applicable to it as a Subsidiary Loan Party, a Guarantor and a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor and a Pledgor thereunder are true and correct, in all material respects, on and as of the date hereof. In furtherance of the foregoing, each New Guarantor, as security for the payment


and performance in full of the Obligations (as defined in the Guarantee and Collateral Agreement), does hereby create and grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in and Lien on all of such New Guarantor’s right, title and interest in and to the Collateral (as defined in the Guarantee and Collateral Agreement) of such New Guarantor. Each reference to a “Subsidiary Loan Party,” a “Guarantor,” or a “Pledgor” in the Guarantee and Collateral Agreement shall be deemed to include each New Guarantor. The Guarantee and Collateral Agreement is hereby incorporated herein by reference.

SECTION 2. Each New Guarantor represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing.

SECTION 3. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. This Supplement shall become effective when (a) the Administrative Agent shall have received a counterpart of this Supplement that bears the signature of each New Guarantor and (b) the Agents have executed a counterpart hereof.

SECTION 4. Each New Guarantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of all the Pledged Securities of such New Guarantor as of the date hereof, (b) set forth on Schedule II attached hereto is a true and correct schedule of all of the material Patents, Trademarks and Copyrights of such New Guarantor as of the date hereof, (c) set forth on Schedule III attached hereto is a true and correct schedule of all Commercial Tort Claims of such New Guarantor individually in excess of $5.0 million as of the date hereof and (d) set forth on Schedule IV is the true and correct legal name of such New Guarantor, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Guarantee and Collateral Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.


SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Guarantee and Collateral Agreement.

SECTION 9. Each New Guarantor agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, in each case in accordance with and pursuant to the terms of Section 7.06 of the Guarantee and Collateral Agreement, including the reasonable fees, disbursements and other charges of counsel for the Administrative Agent.


IN WITNESS WHEREOF, each New Guarantor and the Agents have duly executed this Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.

 

WES, LLC

By:

 

/s/ Christopher Eppel

 

Name: Christopher Eppel

  Title: CFO

UltraLox Technology, LLC

By:

 

/s/ Christopher Eppel

 

Name: Christopher Eppel

  Title: CFO


ACKNOWLEDGED AND ACCEPTED:

JEFFERIES FINANCE LLC, as Administrative

Agent

By:

 

/s/ Paul Chisholm

 

Name: Paul Chisholm

 

Title: Managing Director


SCHEDULE I

Pledged Securities

A. Pledged Stock

 

Entity

  

Form of

Entity

  

Jurisdiction of

Organization

  

Holder(s) of

Equity

Interests /

Pledgor

   Percent
Held /
Pledged
   

Certificated

WES, LLC

   Limited liability company    Minnesota    CPG International LLC      100   No

UltraLox Technology, LLC

   Limited liability company    Minnesota    WES, LLC      100   No

B. Pledged notes

None.


SCHEDULE II

Intellectual Property

A. Patents

 

Country

  

Owner

  

Title

   Application
Number
     File Date     

Patent No.

   Issue
Date
    

Status

US

   WES, LLC    PRESS FOR ASSEMBLING RAILING SYSTEMS      11/678,360        02/23/07      7,975,374      07/12/11      GRANTED

US

   WES, LLC    RAILING SYSTEM      11/678,354        02/23/07      8,286,948      10/16/12      GRANTED

Canada

   WES, LLC    PRESS FOR ASSEMBLING RAILING SYSTEMS      2,537,683        02/23/07      CA2579495 C                       06/03/14      GRANTED

Canada

   WES, LLC    RAILING SYSTEM      2,537,683        02/23/07      CA2579497      10/13/15      GRANTED

B. Trademarks

 

Country

  

Owner

  

Title

  

Application Number

US

   WES, LLC    UltraLox    87416602

US

   WES, LLC    UltraLox Interlocking    87588010

US

   WES, LLC    Williams Architectural Products    87416595

US

   WES, LLC    Harmony Railing    87416599

US

   WES, LLC    Aria Railing    87434953

C. Copyrights

None.

D. Domain Names

ultralox.com

williamsrailing.com

harmonyrailing.com

ariarailing.com

deckrailingandfence.com

ultraloxcloud.com

ultraloxmarketing.com

advancedmarketingdevelopment.com

directrailing.com

harmonyordering.com


orderingharmony.com

bestaluminumrailing.com

bestdeckrailing.com

ultraloxinterlocking.com

ultraloxrailing.com

ultraloxrail.com

ultraloxtechnologies.com

ultraloxproducts.com

harmonyrail.com

ariarail.com

railingaccent.com

railingaccents.com

ultraloxfencing.com

ultraloxfence.com

harmonyrailings.com

deckbuildersdirect.com

harmonyorders.com

ultraloxsystems.com

deckandlandscaping.com

ultraloxmap.com

loxiteonline.com

williamsrail-fence.com


SCHEDULE III

Commercial Tort Claims

None.


SCHEDULE IV

Jurisdictions of Organization, Locations of Chief Executive Offices

 

Entity

  

Jurisdiction of

Organization

  

Identification

Number

  

Location of Chief Executive Office

WES, LLC

   Minnesota    47-2506778   

2955 Lone Oak Drive, #180

Eagan, Minnesota 55121

UltraLox Technology, LLC

   Minnesota    47-3248718   

2955 Lone Oak Drive, #180

Eagan, Minnesota 55121

Exhibit 10.15

TERM LOAN GUARANTEE AND COLLATERAL AGREEMENT SUPPLEMENT

This Supplement is entered into as of June 18, 2018 (this “Supplement”), by Versatex Holdings, LLC, a Delaware limited liability company, and Versatex Building Products, LLC, a Pennsylvania limited liability company (each, a “New Guarantor”), and Jefferies Finance LLC, as administrative agent (in such capacity, the “Administrative Agent”) and as collateral agent (in such capacity, the “Collateral Agent”). Reference is hereby made to that certain Term Loan Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended by the First Amendment to Term Loan Guarantee and Collateral Agreement, dated as of May 5, 2017, and as may be further amended, restated, supplemented or otherwise modified from time to time, the “Guarantee and Collateral Agreement”), among CPG International LLC, a Delaware limited liability company (the “Borrower”), CPG Newco LLC, a Delaware limited liability company (“Holdings”), and certain Subsidiaries of Holdings (each, a “Subsidiary Loan Party”) and Jefferies Finance LLC, as the successor Administrative Agent and Collateral Agent for the Secured Parties (as defined therein).

A. Reference is made to that certain Amended and Restated Term Loan Credit Agreement, dated as of June 18, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrower, the Lenders party thereto, the Administrative Agent, the Collateral Agent, and other agents party thereto.

B. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement and the Guarantee and Collateral Agreement referred to therein, as applicable.

C. The Pledgors have entered into the Guarantee and Collateral Agreement in order to induce the Lenders to make Loans under the Credit Agreement. Section 7.16 of the Guarantee and Collateral Agreement provides that additional Subsidiaries may become Subsidiary Loan Parties under the Guarantee and Collateral Agreement by execution and delivery of an instrument in the form of this Supplement. Each New Guarantor is executing this Supplement in accordance with the requirements of the Credit Agreement to become a Guarantor under the Guarantee and Collateral Agreement in order to induce the Lenders to make additional Loans (if available under the Credit Agreement), and as consideration for any financial considerations previously made or issued under the Credit Agreement.

Accordingly, the Administrative Agent and each New Guarantor agree as follows:

SECTION 1. In accordance with Section 7.16 of the Guarantee and Collateral Agreement, each New Guarantor by its signature below becomes a Subsidiary Loan Party, a Guarantor and a Pledgor under the Guarantee and Collateral Agreement with the same force and effect as if originally named therein as a Subsidiary Loan Party, a Guarantor and a Pledgor, and each New Guarantor hereby (a) agrees to all the terms and provisions of the Guarantee and Collateral Agreement applicable to it as a Subsidiary Loan Party, a Guarantor and a Pledgor thereunder and (b) represents and warrants that the representations and warranties made by it as a Guarantor and a Pledgor thereunder are true and correct, in all material respects, on and as of the date hereof. In furtherance of the foregoing, each New Guarantor, as security for the payment and performance in full of the Obligations (as defined in the Guarantee and Collateral


Agreement), does hereby create and grant to the Administrative Agent, for the benefit of the Secured Parties, a security interest in and Lien on all of such New Guarantor’s right, title and interest in and to the Collateral (as defined in the Guarantee and Collateral Agreement) of such New Guarantor. Each reference to a “Subsidiary Loan Party,” a “Guarantor,” or a “Pledgor” in the Guarantee and Collateral Agreement shall be deemed to include each New Guarantor. The Guarantee and Collateral Agreement is hereby incorporated herein by reference.

SECTION 2. Each New Guarantor represents and warrants to the Administrative Agent and the other Secured Parties that this Supplement has been duly authorized, executed and delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to (i) the effects of bankruptcy, insolvency, moratorium, reorganization, fraudulent conveyance or other similar laws affecting creditors’ rights generally, (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law) and (iii) implied covenants of good faith and fair dealing.

SECTION 3. This Agreement may be executed in two or more counterparts, each of which shall constitute an original but all of which when taken together shall constitute but one contract. This Supplement shall become effective when (a) the Administrative Agent shall have received a counterpart of this Supplement that bears the signature of each New Guarantor and (b) the Agents have executed a counterpart hereof.

SECTION 4. Each New Guarantor hereby represents and warrants that (a) set forth on Schedule I attached hereto is a true and correct schedule of all the Pledged Securities of such New Guarantor as of the date hereof, (b) set forth on Schedule II attached hereto is a true and correct schedule of all of the material Patents, Trademarks and Copyrights of such New Guarantor as of the date hereof, (c) set forth on Schedule III attached hereto is a true and correct schedule of all Commercial Tort Claims of such New Guarantor individually in excess of $5.0 million as of the date hereof and (d) set forth on Schedule IV is the true and correct legal name of such New Guarantor, its jurisdiction of formation and the location of its chief executive office.

SECTION 5. Except as expressly supplemented hereby, the Guarantee and Collateral Agreement shall remain in full force and effect.

SECTION 6. THIS SUPPLEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS SUPPLEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

SECTION 7. In the event any one or more of the provisions contained in this Supplement should be held invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and in the Guarantee and Collateral Agreement shall not in any way be affected or impaired thereby. The parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.


SECTION 8. All communications and notices hereunder shall be in writing and given as provided in Section 7.01 of the Guarantee and Collateral Agreement.

SECTION 9. Each New Guarantor agrees to reimburse the Administrative Agent for its reasonable out-of-pocket expenses in connection with this Supplement, in each case in accordance with and pursuant to the terms of Section 7.06 of the Guarantee and Collateral Agreement, including the reasonable fees, disbursements and other charges of counsel for the Administrative Agent.


IN WITNESS WHEREOF, each New Guarantor and the Agents have duly executed this Supplement to the Guarantee and Collateral Agreement as of the day and year first above written.

 

VERSATEX HOLDINGS, LLC
By:  

/s/ Jesse Singh

  Name: Jesse Singh
  Title: President
VERSATEX BUILDING PRODUCTS, LLC
By:  

/s/ Jesse Singh

  Name: Jesse Singh
  Title: President

[Signature Page to Guarantee and Collateral Supplement (Term Loan)]


ACKNOWLEDGED AND ACCEPTED:
JEFFERIES FINANCE LLC, as Administrative Agent
By:  

/s/ Jason Kennedy

  Name: Jason Kennedy
  Title: Managing Director

[Signature Page to Guarantee and Collateral Supplement (Term Loan)]


SCHEDULE I

Pledged Securities

A. Pledged Stock

 

Entity

  

Form of

Entity

  

Jurisdiction

of

Organization

  

Holder(s) of

Equity

Interests /

Pledgor

   Percent
Held /
Pledged
    

Certificated

Versatex Holdings, LLC

   Limited liability company    Delaware    CPG International LLC      100%      Yes

Versatex Building Products, LLC

   Limited liability company    Pennsylvania    Versatex Holdings, LLC      100%      Yes

B. Pledged notes

None.


SCHEDULE II

Intellectual Property

A. Patents

Owned Patents

None.

Licensed Patents

 

Patent

  

Name and Address of Licensor

   Marhaygue, LLC

7,997,044 B2

  

(Reeam 7,997,044 C1)

  

8 Lachicotte Drive

Pawleys Island, South Carolina 29585

B. Trademarks

 

Country

  

Owner

  

Title

  

Application Number

US

   Versatex Buildings Products, LLC    VERSATEX    3,077,495

US

   Versatex Buildings Products, LLC    STEALTH    4,124,302

US

   Versatex Buildings Products, LLC    VERSAWRAP    4,119,315

C. Copyrights

None.

D. Domain Names

None.


SCHEDULE III

Commercial Tort Claims

None.


SCHEDULE IV

Jurisdictions of Organization, Locations of Chief Executive Offices

 

Entity

  

Jurisdiction of

Organization

   Identification
Number
    

Location of Chief Executive Office

Versatex Holdings, LLC

   Delaware      6144649     

400 Steel Street

Aliquippa

Beaver County, Pennsylvania 15001

Versatex Building Products, LLC

   Pennsylvania      4290561     

400 Steel Street

Aliquippa

Beaver County, Pennsylvania 15001

Exhibit 10.16

Trademark Security Agreement

Trademark Security Agreement, dated as of September 30, 2013, by Azek Building Products, Inc., Scranton Products, Inc., TimberTech Limited, and Vast Enterprises, LLC (the “Pledgors”), in favor of BARCLAYS BANK PLC, in its capacity as administrative agent and collateral agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent and Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgors are party to a Term Loan Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Term Loan Security Agreement”) in favor of the Administrative Agent and Collateral Agent pursuant to which the Pledgors are required to execute and deliver this Trademark Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgors hereby agree with the Administrative Agent and Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the Security Agreement and used herein have the meaning given to them in the Security Agreement.

SECTION 2. Grant of Security Interest in Trademark Collateral. Each Pledgor hereby pledges and grants to the Administrative Agent and Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of such Pledgor:

(a) Trademarks of such Pledgor listed on Schedule I attached hereto;

(b) all goodwill associated with such Trademarks; and

(c) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent and Collateral Agent pursuant to the Term Loan Security Agreement and Pledgors hereby acknowledge and affirm that the rights and remedies of the Administrative Agent and Collateral Agent with respect to the security interest in the Trademarks made and granted hereby are more fully set forth in the Term Loan Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Trademark Security Agreement is deemed to conflict with the Tern Loan Security Agreement, the provisions of the Term Loan Security Agreement shall control unless the Administrative Agent and Collateral Agent shall otherwise determine.


SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the Term Loan Security Agreement, the Administrative Agent and Collateral Agent shall execute, acknowledge, and deliver to the Pledgors an instrument in writing in recordable form releasing the collateral grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Trademarks under this Trademark Security Agreement.

SECTION 5. Counterparts. This Trademark Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Trademark Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Trademark Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]

 

2


IN WITNESS WHEREOF, each Pledgor has caused this Trademark Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

PLEDGORS:
AZEK BUILDING PRODUCTS, INC.
By:  

/s/ Eric K. Jungbluth

  Name: Eric K. Jungbluth
 

Title: Chief Executive Officer

SCRANTON PRODUCTS INC.
By:  

/s/ Eric K. Jungbluth

  Name: Eric K. Jungbluth
 

Title: Chief Executive Officer

TIMBERTECH LIMITED
By:  

/s/ Eric K. Jungbluth

  Name: Eric K. Jungbluth
  Title: Chief Executive Officer

 

[Signature Page to Trademark Security Agreement (Term Loan)]


VAST ENTERPRISES, LLC
By:  

/s/ Dan Lukas

 

Name:  Dan Lukas

 

Title:    Authorized Person

 

[Signature Page to Trademark Security Agreement (Term Loan)]


Accepted and Agreed:

BARCLAYS BANK PLC,

as Administrative Agent and Collateral Agent

By:

 

/s/ Irina Dimova

 

Name: Irina Dimova

 

Title: Vice President

 

[Signature Page to Trademark Security Agreement (Term Loan)]

Exhibit 10.17

Trademark Security Agreement

Trademark Security Agreement, dated as of January 29, 2018, by WES, LLC (the “Pledgor”), in favor of JEFFERIES FINANCE LLC, in its capacity as successor administrative agent and collateral agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent and Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgor is party to a Term Loan Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Term Loan Security Agreement”) in favor of the Administrative Agent and Collateral Agent pursuant to which the Pledgor is required to execute and deliver this Trademark Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgor hereby agrees with the Administrative Agent and Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the Term Loan Security Agreement and used herein have the meaning given to them in the Term Loan Security Agreement.

SECTION 2. Grant of Security Interest in Trademark Collateral. The Pledgor hereby pledges and grants to the Administrative Agent and Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of the Pledgor:

(a) Trademarks of the Pledgor listed on Schedule I attached hereto;

(b) all goodwill associated with such Trademarks; and

(c) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent and Collateral Agent pursuant to the Term Loan Security Agreement and the Pledgor hereby acknowledges and affirms that the rights and remedies of the Administrative Agent and Collateral Agent with respect to the security interest in the Trademarks made and granted hereby are more fully set forth in the Term Loan Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Trademark Security Agreement is deemed to conflict with the Term Loan Security Agreement, the provisions of the Term Loan Security Agreement shall control unless the Administrative Agent and Collateral Agent shall otherwise determine.


SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the Term Loan Security Agreement, the Administrative Agent and Collateral Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in writing in recordable form releasing the collateral, grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Trademarks under this Trademark Security Agreement.

SECTION 5. Counterparts. This Trademark Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Trademark Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Trademark Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]


IN WITNESS WHEREOF, the Pledgor has caused this Trademark Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

PLEDGOR:
WES, LLC
        By:  

/s/ Christopher Eppel

        Name:  

Christopher Eppel

        Title:  

CFO

[Signature Page to Trademark Security Agreement (Term Loan)]


Accepted and Agreed:

JEFFERIES FINANCE LLC

as Administrative Agent and Collateral Agent

      By:  

/s/ Paul Chisholm

      Name:  

Paul Chisholm

      Title:  

Managing Director

[Signature Page to Trademark Security Agreement (Term Loan)]

Exhibit 10.18

Trademark Security Agreement

Trademark Security Agreement, dated as of June 18, 2018, by Versatex Building Products, LLC (the “Pledgor”), in favor of JEFFERIES FINANCE LLC, in its capacity as successor administrative agent and collateral agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent and Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgor is party to a Term Loan Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Term Loan Security Agreement”) in favor of the Administrative Agent and Collateral Agent pursuant to which the Pledgor is required to execute and deliver this Trademark Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgor hereby agrees with the Administrative Agent and Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the Term Loan Security Agreement and used herein have the meaning given to them in the Term Loan Security Agreement.

SECTION 2. Grant of Security Interest in Trademark Collateral. The Pledgor hereby pledges and grants to the Administrative Agent and Collateral Agent, for the benefit of the Secured Parties, a lien on and security interest in and to all of the Pledgor’s right, title and interest in, to and under all the following Pledged Collateral of the Pledgor:

(a) Trademarks of the Pledgor listed on Schedule I attached hereto;

(b) all goodwill associated with such Trademarks; and

(c) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Trademark Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent and Collateral Agent pursuant to the Term Loan Security Agreement, and the Pledgor hereby acknowledges and affirms that the rights and remedies of the Administrative Agent and Collateral Agent with respect to the security interest in the Trademarks made and granted hereby are more fully set forth in the Term Loan Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Trademark Security Agreement is deemed to conflict with the Term Loan Security Agreement, the provisions of the Term Loan Security Agreement shall control unless the Administrative Agent and Collateral Agent shall otherwise determine.


SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the Term Loan Security Agreement, the Administrative Agent and Collateral Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in writing in recordable form releasing the collateral, grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Trademarks under this Trademark Security Agreement.

SECTION 5. Counterparts. This Trademark Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Trademark Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Trademark Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]


IN WITNESS WHEREOF, the Pledgor has caused this Trademark Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

PLEDGOR:
Versatex Building Products, LLC
By:  

/s/ Jesse Singh

  Name: Jesse Singh
  Title: President

[Signature Page to Trademark Security Agreement (Term Loan)]


Accepted and Agreed:

JEFFERIES FINANCE LLC

as Administrative Agent and Collateral Agent

 

           By:  

/s/ Jason Kennedy

  Name:   Jason Kennedy
  Title:   Managing Director

[Signature Page to Trademark Security Agreement (Term Loan)]

Exhibit 10.19

Patent Security Agreement

Patent Security Agreement, dated as of September 30, 2013, by AZEK Building Products, Inc., TimberTech Limited, Scranton Products Inc., and Vast Enterprises, LLC (the “Pledgors”), in favor of BARCLAYS BANK PLC, in its capacity as administrative agent and collateral agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent and Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgors are party to a Term Loan Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Term Loan Security Agreement”) in favor of the Administrative Agent and Collateral Agent pursuant to which the Pledgors are required to execute and deliver this Patent Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgors hereby agree with the Administrative Agent and Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the Term Loan Security Agreement and used herein have the meaning given to them in the Term Loan Security Agreement.

SECTION 2. Grant of Security Interest in Patent Collateral. Each Pledgor hereby pledges and grants to the Administrative Agent and Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of such Pledgor:

(a) Patents of such Pledgor listed on Schedule I attached hereto; and

(b) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Patent Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent and Collateral Agent pursuant to the Term Loan Security Agreement and Pledgors hereby acknowledge and affirm that the rights and remedies of the Administrative Agent and Collateral Agent with respect to the security interest in the Patents made and granted hereby are more fully set forth in the Term Loan Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Patent Security Agreement is deemed to conflict with the Term Loan Security Agreement, the provisions of the Term Loan Security Agreement shall control unless the Administrative Agent and Collateral Agent shall otherwise determine.


SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the Term Loan Security Agreement, the Administrative Agent and Collateral Agent shall execute, acknowledge, and deliver to the Pledgors an instrument in writing in recordable form releasing the collateral grant, assignment, lien and security interest pledged and granted in and to all of its right, title, and interest in, to and under the Patents under this Patent Security Agreement.

SECTION 5. Counterparts. This Patent Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Patent Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Patent Security Agreement shall be governed by the laws of the State of New York.

[signature page follows]

 

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IN WITNESS WHEREOF, each Pledgor has caused this Patent Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

PLEDGORS:
AZEK BUILDING PRODUCTS, INC.
By:  

/s/ Eric K. Jungbluth

  Name: Eric K. Jungbluth
  Title: Chief Executive Officer
SCRANTON PRODUCTS INC.
By:  

/s/ Eric K. Jungbluth

  Name: Eric K. Jungbluth
  Title: Chief Executive Officer
TIMBERTECH LIMITED
By:  

/s/ Eric K. Jungbluth

  Name: Eric K. Jungbluth
  Title: Chief Executive Officer

[Signature Page to Patent Security Agreement (Term Loan)]


VAST ENTERPRISES, LLC
By:  

/s/ Dan Lukas

  Name: Dan Lukas
  Title: Authorized Person

[Signature Page to Patent Security Agreement (Term Loan)]


BARCLAYS BANK PLC,

as Administrative Agent and Collateral Agent

By:  

/s/ Irina Dimova

  Name: Irina Dimova
  Title: Vice President

[Signature Page to Patent Security Agreement (Term Loan)]

Exhibit 10.20

Patent Security Agreement

Patent Security Agreement, dated as of January 29, 2018, by WES, LLC (the “Pledgor”), in favor of JEFFERIES FINANCE LLC, in its capacity as successor administrative agent and collateral agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent and Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgor is party to an Term Loan Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Term Loan Security Agreement”) in favor of the Administrative Agent and Collateral Agent pursuant to which the Pledgor is required to execute and deliver this Patent Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgor hereby agrees with the Administrative Agent and Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the TERM LOAN Security Agreement and used herein have the meaning given to them in the TERM LOAN Security Agreement.

SECTION 2. Grant of Security Interest in Patent Collateral. The Pledgor hereby pledges and grants to the Administrative Agent and Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of the Pledgor:

(a) Patents of the Pledgor listed on Schedule I attached hereto; and

(b) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Patent Security Agreement is granted in conjunction with the security interest granted to the Administrative Agent and Collateral Agent pursuant to the Term Loan Security Agreement and the Pledgor hereby acknowledges and affirms that the rights and remedies of the Administrative Agent and Collateral Agent with respect to the security interest in the Patents made and granted hereby are more fully set forth in the Term Loan Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Patent Security Agreement is deemed to conflict with the Term Loan Security Agreement, the provisions of the Term Loan Security Agreement shall control unless the Administrative Agent and Collateral Agent shall otherwise determine.

SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the Term Loan Security


Agreement, the Administrative Agent and Collateral Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in writing in recordable form releasing the collateral, grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Patents under this Patent Security Agreement.

SECTION 5. Counterparts. This Patent Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Patent Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Patent Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]

 

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IN WITNESS WHEREOF, the Pledgor has caused this Patent Security Agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

PLEDGOR:
WES, LLC
        By:  

/s/ Christopher Eppel

        Name:  

Christopher Eppel

        Title:  

CFO

[Signature Page to Patent Security Agreement (Term Loan)]


Accepted and Agreed:

JEFFERIES FINANCE LLC

as Administrative Agent and Collateral Agent

        By:  

/s/ Paul Chisholm

        Name:  

Paul Chisholm

        Title:  

Managing Director

[Signature Page to Patent Security Agreement (Term Loan)]

Exhibit 10.21

Copyright Security Agreement

Copyright Security Agreement, dated as of September 30, 2013, by AZEK Building Products, Inc. (the “Pledgor”), in favor of BARCLAYS BANK PLC, in its capacity as administrative agent and collateral agent pursuant to the Credit Agreement (in such capacity, the “Administrative Agent and Collateral Agent”).

W I T N E S S E T H:

WHEREAS, the Pledgor is party to a Term Loan Guarantee and Collateral Agreement dated as of September 30, 2013 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Term Loan Security Agreement”) in favor of the Administrative Agent and Collateral Agent pursuant to which the Pledgor is required to execute and deliver this Copyright Security Agreement;

NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and Collateral Agent, for the benefit of the Secured Parties, to enter into the Credit Agreement, the Pledgor hereby agrees with the Administrative Agent and Collateral Agent as follows:

SECTION 1. Defined Terms. Unless otherwise defined herein, terms defined in the Term Loan Security Agreement and used herein have the meaning given to them in the Term Loan Security Agreement.

SECTION 2. Grant of Security Interest in Copyright Collateral. The Pledgor hereby pledges and grants to the Administrative Agent and Collateral Agent for the benefit of the Secured Parties a lien on and security interest in and to all of its right, title and interest in, to and under all the following Pledged Collateral of the Pledgor:

(a) Copyrights of the Pledgor listed on Schedule I attached hereto; and

(b) all proceeds of any and all of the foregoing (other than Excluded Assets).

SECTION 3. Security Agreement. The security interest granted pursuant to this Copyright security agreement is granted in conjunction with the security interest granted to the Administrative Agent and Collateral Agent pursuant to the Term Loan Security Agreement and the Pledgor hereby acknowledges and affirms that the rights and remedies of the Administrative Agent and Collateral Agent with respect to the security interest in the Copyrights made and granted hereby are more fully set forth in the Term Loan Security Agreement, the terms and provisions of which are incorporated by reference herein as if fully set forth herein. In the event that any provision of this Copyright security agreement is deemed to conflict with the Term Loan Security Agreement, the provisions of the Term Loan Security Agreement shall control unless the Administrative Agent and Collateral Agent shall otherwise determine.

 


SECTION 4. Termination. Upon the Termination Date or such other date as Pledged Collateral may be released pursuant to Section 7.15 of the Term Loan Security Agreement, the Administrative Agent and Collateral Agent shall execute, acknowledge, and deliver to the Pledgor an instrument in writing in recordable form releasing the collateral grant, assignment, lien and security interest pledged and granted in and to all of its right, title and interest in, to and under the Copyrights under this Copyright Security Agreement.

SECTION 5. Counterparts. This Copyright Security Agreement may be executed in any number of counterparts, all of which shall constitute one and the same instrument, and any party hereto may execute this Copyright Security Agreement by signing and delivering one or more counterparts.

SECTION 6. Governing Law. This Copyright Security Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

[signature page follows]

 

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IN WITNESS WHEREOF, the Pledgor has caused this Copyright security agreement to be executed and delivered by its duly authorized officer as of the date first set forth above.

 

AZEK Building Products, Inc.,
as Pledgor
By:  

/s/ Eric K. Jungbluth

Name: Eric K. Jungbluth
Title: Chief Executive Officer

 

 

[Signature Page to Copyright Security Agreement (Term Loan)]


BARCLAYS BANK PLC,

as Administrative Agent and Collateral Agent

By:  

/s/ Irina Dimova

  Name: Irina Dimova
  Title:   Vice President

 

 

[Signature Page to Copyright Security Agreement (ABL)]

Exhibit 10.22

INTERCREDITOR AGREEMENT

INTERCREDITOR AGREEMENT dated as of September 30, 2013 among DEUTSCHE BANK AG NEW YORK BRANCH (“Deutsche Bank”), as ABL Agent, BARCLAYS BANK PLC (“Barclays”), as a Term Loan Agent, CPG MERGER SUB LLC, a Delaware limited liability company (“Merger Sub”, and prior to the consummation of the Acquisition, the “Company”), as the initial borrower under the ABL Credit Agreement and the Term Loan Credit Agreement, Holdings (as defined below) and each Subsidiary of Holdings that, in each case, becomes a party hereto pursuant to Section 9.19 below.

A. Ares Corporate Opportunities Fund IV, L.P. and Ontario Teachers’ Pension Plan Board have formed CPG Newco LLC, the parent of the Company (“Holdings”) and Merger Sub, and pursuant to the Agreement and Plan of Merger, dated as of August 16, 2013, by and among Holdings, Merger Sub, CPG International Inc., a Delaware corporation, (“Target”, together with its Subsidiaries, the “Acquired Business” and from and after the consummation of the Acquisition, the “Company”) and CPG International Holdings LP, a Delaware limited partnership, Holdings on the Closing Date will acquire 100% of the issued and outstanding shares of common stock of Target, par value $0.01 per share pursuant to a reverse triangular merger (the “Acquisition”) whereby Merger Sub will be merged with and into Target, with Target as the surviving entity and a wholly owned subsidiary of Holdings.

B. Upon consummation of the Acquisition, Target will accede as successor in interest by operation of law to this Agreement and become the Company. Immediately after the Closing, Target will convert from a corporation to a limited liability company.

C. Promptly following consummation of the Acquisition, each of Holdings and the Subsidiary Loan Parties shall accede to this Agreement by execution of a joinder, supplement or other form of applicable agreement.

D. The Company is party to the Revolving Credit Agreement dated as of the date hereof (as amended, supplemented, restated, extended, refinanced, renewed, replaced, defeased, refunded or otherwise modified from time to time, the “ABL Credit Agreement”) among the Company, the Co-Borrowers party thereto, the lenders party thereto from time to time, Deutsche Bank, as administrative agent, and the other parties thereto.

E. The Company is party to the Term Loan Credit Agreement dated as of the date hereof (as amended, supplemented, restated, extended, refinanced, renewed, replaced, defeased, refunded or otherwise modified from time to time, the “Term Loan Credit Agreement”) among the Company, the lenders party thereto from time to time, Barclays, as administrative agent, and the other parties thereto.

Accordingly, in consideration of the foregoing, the mutual covenants and obligations herein set forth and for other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

 

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Section 1. Definitions.

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

ABL Agent” shall mean, Deutsche Bank, in its capacity as administrative agent and collateral agent for the ABL Lenders under the ABL Credit Agreement and the other ABL Loan Documents entered into pursuant to the ABL Credit Agreement, together with its successors and permitted assigns under the ABL Credit Agreement exercising substantially the same rights and powers.

ABL Claims” shall mean the ABL Priority Claims.

ABL Collateral” shall mean all of the assets of any Grantor, whether real, personal or mixed, upon which a Lien is granted or purported to be granted to the ABL Agent under any of the ABL Collateral Documents.

ABL Collateral Agreement” shall mean the ABL Guarantee and Collateral Agreement dated as of the date hereof, among Holdings, the Company, the other Grantors and Deutsche Bank, as administrative agent and collateral agent for the secured parties referred to therein.

ABL Collateral Documents” shall mean the ABL Collateral Agreement and any security agreement, mortgage or other agreement, document or instrument pursuant to which a Lien is now or hereafter granted securing any ABL Claims or under which rights or remedies with respect to such Liens are at any time governed.

ABL Credit Agreement” shall have the meaning set forth in the recitals.

ABL Lender Cash Management Obligations” shall mean “Cash Management Obligations” as defined in the ABL Collateral Agreement.

ABL Lender Hedging Obligations” shall mean all amounts owing under any Specified Hedge Agreement (as defined in the ABL Collateral Agreement).

ABL Lenders” shall mean the Persons holding ABL Claims, including the ABL Agent.

ABL Loan Documents” shall mean (i) the ABL Credit Agreement, the ABL Collateral Documents and each of the other agreements, documents and instruments providing for, evidencing or securing any Obligation under the ABL Credit Agreement, (ii) each agreement, document or instrument providing for or evidencing an ABL Lender Hedging Obligation or ABL Lender Cash Management Obligation and (iii) any other related document or instrument executed or delivered pursuant to any document in subclause (i) or (ii) at any time or otherwise evidencing or securing any Obligation arising under any such ABL Loan Document.

 

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ABL Loan Parties” shall mean the “Loan Parties” as defined in the ABL Credit Agreement.

“ABL Obligations” shall have the meaning set forth in Section 8.1(a).

ABL Priority Claims” shall mean the aggregate of (i) the principal amount of all Indebtedness (other than ABL Lender Cash Management Obligations and ABL Lender Hedging Obligations) and the face amount of all letters of credit incurred under the ABL Credit Agreement to the extent such principal amount is permitted to be incurred pursuant to Section 6.01(l) of the Term Loan Credit Agreement as in effect on the date hereof (or, as amended after the date hereof to the extent such amendment increases such maximum permitted principal amount), together with any interest, fees, attorneys fees, costs, expenses and indemnities payable on account of such principal amount or otherwise in respect of, or arising under, the ABL Credit Agreement or the ABL Loan Documents related thereto or any of them, including all fees and expenses of the ABL Agent thereunder and (ii) the maximum amount of all ABL Lender Cash Management Obligations and ABL Lender Hedging Obligations (calculated, in the case of ABL Lender Hedging Obligations at any given date, as the maximum aggregate amount, giving effect to any netting agreements, that would be required to be paid if all Swap Obligations underlying such ABL Lender Hedging Obligations were terminated as of such date), plus, in the case of each of (i) and (ii) above, all interest and expenses accrued or accruing (or that would, absent the commencement of an Insolvency or Liquidation Proceeding, accrue) after the commencement of an Insolvency or Liquidation Proceeding in accordance with and at the rate specified in the relevant ABL Loan Document to the extent that the claim for such interest or expense is allowed or allowable as a claim in such Insolvency or Liquidation Proceeding.

ABL Priority Collateral” shall mean all Common Collateral consisting of the following:

(1) all Accounts;

(2) all Chattel Paper (including Tangible Chattel Paper and Electronic Chattel Paper);

(3) (x) all Deposit Accounts and Money and all cash, checks, other negotiable instruments, funds and other evidences of payments held therein and (y) all Securities, Security Entitlements and Securities Accounts, in each case, to the extent constituting cash or cash equivalents or representing a claim to cash equivalents; provided that the foregoing shall not include the Asset Sale Proceeds Account and all cash, checks and other property held therein or credited thereto;

(4) all Inventory;

(5) to the extent involving or governing any of the items referred to in the preceding clauses (1) through (4), all Documents, General Intangibles (including all Payment Intangibles), Instruments (including, without limitation, promissory notes), Commercial Tort Claims (it being understood that a Commercial Tort Claim does not

 

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“involve” or “govern” any of clauses (1) through (4) solely because a claim for money damages is made) and Letter-of-Credit Rights; provided that to the extent any of the foregoing also relates to Term Loan Priority Collateral, only that portion related to the items referred to in the preceding clauses (1) through (4) shall be included in the ABL Priority Collateral;

(6) to the extent evidencing or governing any of the items referred to in the preceding clauses (1) through (5), all Supporting Obligations; provided that to the extent any of the foregoing also relates to Term Loan Priority Collateral, only that portion related to the items referred to in the preceding clauses (1) through (5) shall be included in the ABL Priority Collateral;

(7) all books and Records relating to the foregoing (including, without limitation, all books, databases, customer lists, engineer drawings, and Records, whether tangible or electronic, which contain any information relating to any of the foregoing);

(8) all collateral security and guarantees with respect to any of the foregoing and all cash, Money, Instruments, Securities, Financial Assets and Deposit Accounts directly received as proceeds of any ABL Priority Collateral (“ABL Priority Proceeds”); provided, however, that no proceeds of ABL Priority Proceeds will constitute ABL Priority Collateral unless such proceeds of ABL Priority Proceeds would otherwise constitute ABL Priority Collateral.

For the avoidance of doubt, except as provided in Section 2.3, under no circumstances shall any assets excluded from the ABL Collateral pursuant to any ABL Collateral Document constitute ABL Priority Collateral.

ABL Recovery” shall have the meaning set forth in Section 6.4.

ABL Secured Parties” shall mean the “Secured Parties” as defined in the ABL Credit Agreement.

ABL Standstill Period” shall have the meaning set forth in Section 3.1(b).

Accounts” shall have the meaning set forth in the ABL Credit Agreement in effect on Closing Date.

Affiliate” shall have the meaning set forth in the applicable Credit Agreement.

Agreement” shall mean this Agreement.

Asset Sale Proceeds Account” shall mean one or more Deposit Accounts or Securities Accounts holding only the proceeds of any sale or disposition of any Term Loan Priority Collateral and the proceeds or investment thereof.

Bankruptcy Law” shall mean Title 11 of the United States Code and any similar Federal, state or foreign law for the relief of debtors.

 

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Barclays” shall have the meaning set forth in the preamble.

“Business Day” shall have the meaning set forth in the applicable Credit Agreement.

Cash Collateral” shall mean any Common Collateral consisting of Money or cash equivalents, any Security Entitlement and any Financial Assets.

Closing Date” shall have the meaning set forth in the applicable Credit Agreement.

Closing” shall have the meaning set forth in the applicable Credit Agreement.

Collateral” shall mean any collateral granted under the Collateral Documents.

“Collateral Agreements” shall mean, collectively, the ABL Collateral Agreement and the Term Loan Collateral Agreement.

Collateral Documents” shall mean, collectively, the ABL Collateral Documents and the Term Loan Collateral Documents.

Common Collateral” shall mean, collectively, the ABL Priority Collateral and the Term Loan Priority Collateral.

Company” shall have the meaning set forth in the preamble.

Credit Agreements” shall mean, collectively, the ABL Credit Agreement, the Term Loan Credit Agreement and any other credit agreement that is entered into by the Company in connection with its incurrence of Future Secured Indebtedness.

Deposit Account Collateral” shall mean that part of the Common Collateral comprised of or contained in Deposit Accounts.

Deutsche Bank” shall have the meaning set forth in the preamble.

DIP Financing” shall have the meaning set forth in Section 6.1.

“DIP Financing Liens” shall have the meaning set forth in Section 6.1.

Discharge of ABL Priority Claims” shall mean, except to the extent otherwise provided in Section 5.7 below, payment in full in cash (except for contingent indemnities and cost and reimbursement obligations to the extent no claim therefor has been made) of all Obligations in respect of all outstanding ABL Priority Claims and, with respect to letters of credit outstanding thereunder, delivery of cash collateral or backstop letters of credit in respect thereof in compliance with the ABL Credit Agreement (or such other arrangements as are reasonably acceptable to the letter of credit issuer), in each case after or concurrently with the termination of all commitments to extend credit thereunder; provided that the Discharge of ABL Priority Claims shall not be deemed to have occurred

 

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if such payments are made with the proceeds of other ABL Priority Claims that constitute an exchange or replacement for or a refinancing of such Obligations or ABL Priority Claims. In the event the ABL Priority Claims are modified and the Obligations are paid over time or otherwise modified pursuant to Section 1129 of the Bankruptcy Code, the ABL Priority Claims shall be deemed to be discharged when the final payment is made, in cash, in respect of such Obligations and any obligations pursuant to such new indebtedness shall have been satisfied.

Discharge of Term Loan Claims” shall mean, except to the extent otherwise provided in Section 5.7 below, payment in full in cash (except for contingent indemnities and cost and reimbursement obligations to the extent no claim therefor has been made) of all Obligations in respect of all outstanding Term Loan Claims; provided that the Discharge of Term Loan Claims shall not be deemed to have occurred if such payments are made with the proceeds of other Term Loan Claims that constitute an exchange or replacement for or a refinancing of such Obligations or Term Loan Claims. In the event the Term Loan Claims are modified and the Obligations are paid over time or otherwise modified pursuant to Section 1129 of the Bankruptcy Code, the Term Loan Claims shall be deemed to be discharged when the final payment is made, in cash, in respect of such Obligations and any obligations pursuant to such new indebtedness shall have been satisfied.

Domestic Subsidiary” shall have the meaning set forth in the applicable Credit Agreement.

“Equity Interest” shall have the meaning set forth in the applicable Credit Agreement.

Exercise Any Secured Creditor Remedies” or “Exercise of Any Secured Creditor Remedies” shall mean, except as otherwise provided in the final sentence of this definition:

(a) the taking by any Lender of any action to enforce or realize upon any Lien, including the institution of any foreclosure proceedings or the noticing of any public or private sale pursuant to Article 9 of the Uniform Commercial Code or other applicable law;

(b) the exercise by any Lender of any remedy provided to a secured creditor on account of a Lien under any of the ABL Loan Documents or Term Loan Documents, as applicable, under applicable law, in an Insolvency or Liquidation Proceeding or otherwise, including the election to retain any of the Common Collateral in satisfaction of a Lien;

(c) the taking of any action by any Lender or the exercise of any right or remedy by any Lender in respect of the collection on, set off against, marshaling of, injunction respecting or foreclosure on the Common Collateral or the proceeds thereof;

(d) the appointment, on the application of a Lender, of a receiver, receiver and manager or interim receiver of all or part of the Common Collateral;

 

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(e) the sale, lease, license or other disposition of all or any portion of the Common Collateral by private or public sale conducted by a Lender or by any other means at the direction of a Lender permissible under applicable law;

(f) the exercise of any other right of a secured creditor under Part 6 of Article 9 of the Uniform Commercial Code or under provisions of similar effect other applicable law; and

(g) the exercise by a Lender of any voting rights relating to any Equity Interests included in the Common Collateral.

For the avoidance of doubt, none of the following shall be deemed to constitute an Exercise of Any Secured Creditor Remedies: (i) the filing of a proof of claim in any Insolvency or Liquidation Proceeding or seeking adequate protection, (ii) the exercise of rights pursuant to Section 5.11 of the ABL Credit Agreement by the ABL Lenders during the continuance of a Cash Dominion Event (as defined in the ABL Credit Agreement), including the notification of account debtors, depository institutions or any other Person to deliver proceeds of ABL Priority Collateral to the ABL Agent in accordance with Section 5.11 of the ABL Credit Agreement, (iii) the consent by the ABL Lenders to a store closing sale, going out of business sale or other disposition by any Grantor of any of the ABL Priority Collateral, (iv) the reduction of advance rates or sub-limits by the ABL Agent and the ABL Lenders, or (v) the imposition of Reserves (as defined in the ABL Credit Agreement) by the ABL Agent.

First Priority Agent” shall mean, with respect to (a) any ABL Priority Collateral, the ABL Agent and (b) any Term Loan Priority Collateral, the Term Loan Agents.

First Priority Claims” shall mean, with respect to (a) any ABL Priority Collateral, the ABL Priority Claims and (b) any Term Loan Priority Collateral, the Term Loan Claims.

First Priority Collateral” shall mean, with respect to (a) the Term Loan Agents and the Term Loan Lenders, the ABL Priority Collateral and (b) the ABL Agent and the ABL Lenders, the Term Loan Priority Collateral.

First Priority Documents” shall mean, with respect to (a) any ABL Priority Collateral, the ABL Loan Documents and (b) any Term Loan Priority Collateral, the Term Loan Documents, as applicable.

First Priority Lenders” shall mean, with respect to (a) any ABL Priority Collateral, the ABL Lenders and (b) any Term Loan Priority Collateral, the Term Loan Lenders, as applicable.

Future Secured Indebtedness” shall mean secured Indebtedness or Obligations (other than Term Loan Claims contemplated by clause (i) of the definition of “Term Loan Claims” or ABL Priority Claims contemplated by clause (i) or (ii) of the definition of “ABL Priority Claims”) of the Company and its Subsidiaries.

 

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Future Senior Term Indebtedness” shall mean Future Secured Indebtedness that is either (a) to be equally and ratably secured with the Term Loan Claims contemplated by clause (i) of the definition of “Term Loan Claims” or (b) is to be secured by the Collateral on a junior basis to the Term Loan Claims contemplated by clause (i) of the definition of “Term Loan Claims” (but, with respect to Term Loan Priority Collateral, on a senior basis to the ABL Priority Claims with respect to such Collateral), and in each case, is so designated by the Company at the time of incurrence thereof as Future Senior Term Indebtedness hereunder; provided that such Indebtedness is incurred in compliance with Section 6.01 of the ABL Credit Agreement and the Liens securing such Future Senior Term Indebtedness are granted in compliance with Sections 6.02(u) or (cc) of the ABL Credit Agreement as in effect on the date hereof (or, as amended after the date hereof to the extent such amendment increases such maximum permitted principal amount).

Grantors” shall mean Holdings, the Company and each of Holdings’ other Domestic Subsidiaries that has executed and delivered an ABL Collateral Document and a Term Loan Collateral Document.

Holdings” shall have the meaning set forth in the preamble.

Indebtedness” shall mean and include all obligations that constitute “Indebtedness” within the meaning of the ABL Credit Agreement or the Term Loan Credit Agreements.

Insolvency or Liquidation Proceeding” shall mean (a) any voluntary or involuntary case or proceeding under any Bankruptcy Law with respect to any Grantor, (b) any other voluntary or involuntary insolvency, reorganization or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding with respect to any Grantor or with respect to any of its assets, (c) any liquidation, dissolution, reorganization or winding up of any Grantor whether voluntary or involuntary and whether or not involving insolvency or bankruptcy or (d) any assignment for the benefit of creditors or any other marshalling of assets and liabilities of any Grantor.

“Intellectual Property” shall have the meaning set forth in the applicable Collateral Agreement.

Lenders” shall mean the collective reference to the ABL Lenders and the Term Loan Lenders.

Lien” shall mean, with respect to any asset, (a) any mortgage, deed of trust, lien, hypothecation, pledge, charge, security interest or similar encumbrance in or on such asset and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset.

“Loan Parties” shall mean, collectively, the ABL Loan Parties and the Term Loan Parties.

 

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New York Courts” shall have the meaning set forth in Section 9.7.

Obligations” shall mean, with respect to any Person, any payment, performance or other obligations of such Person of any kind, including any liability of such Person on any claim, whether or not the right of any creditor to payment in respect of such claim is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, disputed, undisputed, legal, equitable, secured or unsecured, and whether or not such claim is discharged, stayed or otherwise affected by any Insolvency or Liquidation Proceeding. Without limiting the generality of the foregoing, the Obligations of any Grantor under any ABL Loan Document or Term Loan Document include the obligations to pay principal, reimbursement obligations under letters of credit, interest (including interest accrued on or accruing after the commencement of any Insolvency or Liquidation Proceeding to the extent that a claim for post-filing interest is allowed in such proceeding) or premium on any Indebtedness, letter of credit commissions (if applicable), charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by such Grantor to reimburse any amount in respect of any of the foregoing that any ABL Lender or Term Loan Lender, in its sole discretion, many elect to pay or advance on behalf of such Grantor.

Payment Collateral” shall mean all Accounts, Instruments, Chattel Paper, Letter-Of-Credit Rights, Deposit Accounts (other than the Asset Sales Proceeds Account), Securities Accounts, and Payment Intangibles, together with all Supporting Obligations, in each case composing a portion of the Common Collateral.

Person” shall mean an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.

Pledged Collateral” shall mean the Common Collateral in the possession of the ABL Agent (or its agents or bailees) or the Term Loan Agents (or their respective agents or bailees), to the extent that possession thereof perfects a Lien thereon under the Uniform Commercial Code.

“Real Property” shall have the meaning set forth in the applicable Credit Agreement.

Required Lenders” shall mean, with respect to any Credit Agreement, those Lenders the approval of which is required to approve an amendment or modification of, termination or waiver of any provision of or consent to any departure from such Credit Agreement (or would be required to effect such consent under this Agreement if such consent were treated as an amendment of the Credit Agreement).

Second Priority Agent” shall mean, with respect to (a) any ABL Priority Collateral, the Term Loan Agents and (b) any Term Loan Priority Collateral, the ABL Agent.

 

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Second Priority Claims” shall mean, with respect to (a) any ABL Priority Collateral, the Term Loan Claims and (b) any Term Loan Priority Collateral, the ABL Claims.

Second Priority Documents” shall mean, with respect to (a) any ABL Priority Collateral, the Term Loan Documents and (b) any Term Loan Priority Collateral, the ABL Loan Documents.

Second Priority Lenders” shall mean, with respect to (a) any ABL Priority Collateral, the Term Loan Lenders and (b) any Term Loan Priority Collateral, the ABL Lenders.

Subsidiary” shall mean any “Subsidiary” of Holdings under each of the Credit Agreements.

Swap Obligation” shall have the meaning set forth in the ABL Credit Agreement.

Term Loan Agents” shall mean, collectively, (a) Barclays, in its capacity as administrative agent and collateral agent for the Term Loan Lenders under the Term Loan Credit Agreement and the other Term Loan Documents entered into pursuant to the Term Loan Credit Agreement, together with its successors and permitted assigns under the Term Loan Credit Agreement exercising substantially the same rights and powers and (b) the collateral agent for any Future Senior Term Indebtedness.

Term Loan Claims” shall mean (i) the principal amount of all Indebtedness incurred under the Term Loan Credit Agreement to the extent such principal amount is permitted to be incurred pursuant to Section 6.01(m) of the ABL Credit Agreement, as in effect on the date hereof (or, as amended after the date hereof to the extent such amendment increases such maximum permitted principal amount), together with any interest, fees, attorneys’ fees, costs, expenses and indemnities payable on account of such principal amount or otherwise in respect of, or arising under, the Term Loan Credit Agreement or the Term Loan Documents related thereto or any of them, including all fees and expenses of the applicable Term Loan Agent thereunder and (ii) the principal amount of all Future Senior Term Indebtedness plus any interest, fees, attorneys’ fees, costs, expenses and indemnities payable on account of such principal amount or otherwise in respect of, or arising under, the Term Loan Documents related to such Future Senior Term Indebtedness, including all fees and expenses of the collateral agent for any Future Senior Term Indebtedness, plus, in each case, all interest and expenses accrued or accruing (or that would, absent the commencement of an Insolvency or Liquidation Proceeding, accrue) after the commencement of an Insolvency or Liquidation Proceeding in accordance with and at the rate specified in the relevant Term Loan Documents to the extent that the claim for such interest or expense is allowed or allowable as a claim in such Insolvency or Liquidation Proceeding.

Term Loan Collateral Agreement” shall mean the Term Loan Guarantee and Collateral Agreement dated as of the date hereof, among CPG Merger Sub LLC, CPG Newco LLC, the Company, the other Grantors, and Barclays, as administrative agent and collateral agent for the secured parties referred to therein.

 

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Term Loan Collateral Documents” shall mean the Term Loan Collateral Agreement and any security agreement, mortgage or other agreement, document or instrument pursuant to which a Lien is now or hereafter granted securing any Term Loan Claims or under which rights or remedies with respect to such Liens are at any time governed.

Term Loan Credit Agreement” shall have the meaning set forth in the recitals.

Term Loan Documents” shall mean (i) the Term Loan Credit Agreement, the Term Loan Collateral Documents and each of the other agreements, documents and instruments providing for, evidencing or securing any Obligation under the Term Loan Credit Agreement, (ii) any other document or instrument evidencing or governing any Future Senior Term Indebtedness and (iii) any other related document or instrument executed or delivered pursuant to any document in subclause (i) or (ii) at any time or otherwise evidencing or securing any Obligation arising under any such Term Loan Document.

Term Loan Lenders” shall mean the Persons holding Term Loan Claims, including the Term Loan Agents.

“Term Loan Obligations” shall have the meaning set forth in Section 8.1(b).

Term Loan Parties” shall mean the “Loan Parties” as defined in the Term Loan Credit Agreement.

Term Loan Priority Collateral” shall mean all Common Collateral consisting of the following:

(1) the Asset Sale Proceeds Accounts;

(2) all Equipment;

(3) all Fixtures;

(4) all Goods (other than Inventory)

(5) all Real Property;

(6) all Intellectual Property;

(7) all Equity Interests;

 

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(8) to the extent involving or governing any of the items referred to in the preceding clauses (1) through (7), all Documents, General Intangibles (including all Payment Intangibles), Instruments (including, without limitation, promissory notes), Commercial Tort Claims (it being understood that a Commercial Tort Claim does not “involve” or “govern” any of clauses (1) through (7) solely because a claim for money damages is made) and Letter-of-Credit Rights; provided that to the extent any of the foregoing also relates to ABL Priority Collateral, only that portion related to the items referred to in the preceding clauses (1) through (7) shall be included in the Term Loan Priority Collateral;

(9) to the extent evidencing or governing any of the items referred to in the preceding clauses (1) through (8), all Supporting Obligations; provided that to the extent any of the foregoing also relates to ABL Priority Collateral, only that portion related to the items referred to in the preceding clauses (1) through (8) shall be included in the Term Loan Priority Collateral;

(10) all books and Records relating to the foregoing (including, without limitation, all books, databases, customer lists, engineer drawings, and Records, whether tangible or electronic, which contain any information relating to any of the foregoing); and

(11) all collateral security and guarantees with respect to any of the foregoing and all cash, Money, Instruments, Securities, Financial Assets and Deposit Accounts directly received as proceeds of any Term Loan Priority Collateral (“Term Priority Proceeds”); provided, however, that no proceeds of Term Priority Proceeds will constitute Term Loan Priority Collateral unless such proceeds of Term Priority Proceeds would otherwise constitute Term Loan Priority Collateral.

For the avoidance of doubt, except as provided in Section 2.3, under no circumstances shall any assets excluded from the Term Loan Priority Collateral pursuant to any Term Loan Document constitute Term Loan Priority Collateral.

Term Loan Recovery” shall have the meaning set forth in Section 6.4(b).

Term Loan Secured Parties” shall mean the “Secured Parties” as defined in the Term Loan Credit Agreement or the credit agreement governing any Future Senior Term Indebtedness.

Term Loan Standstill Period” shall have the meaning set forth in Section 3.1(a).

Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as from time to time in effect in the State of New York.

1.2. 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”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such

 

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agreement, instrument or other document as from time to time amended, renewed, restated, extended, supplemented, replaced or otherwise modified in accordance with this Agreement, (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) 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, (d) all references herein to Sections shall be construed to refer to Sections of this Agreement, (e) the words “asset” and “property” 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 and (f) the term “or” is not exclusive. All capitalized terms not defined herein or by reference to another agreement shall have the meaning assigned to such term in the UCC. The term “Instrument” shall have the meaning specified in Article 9 of the UCC.

Section 2. Lien Priorities.

2.1. Subordination of Liens. Notwithstanding (i) the date, time, method, manner or order of filing or recordation of any document or instrument or grant, attachment or perfection (including any defect or deficiency or alleged defect or deficiency in any of the foregoing) of any Liens granted to the ABL Agent or the ABL Lenders on the Common Collateral or of any Liens granted to the Term Loan Agents or the Term Loan Lenders on the Common Collateral, (ii) any provision of the UCC, the Bankruptcy Code, or any applicable law or the ABL Loan Documents or the Term Loan Documents, (iii) whether the ABL Agent or a Term Loan Agent, either directly or through agents, holds possession of, or has control over, all or any part of the Common Collateral, (iv) the fact that any such Liens may be subordinated, voided, avoided, invalidated or lapsed or (v) any other circumstance of any kind or nature whatsoever, the ABL Agent, on behalf of itself and each ABL Lender, and each Term Loan Agent, on behalf of itself and each applicable Term Loan Lender, hereby agrees that:

(a) any Lien on the ABL Priority Collateral securing any ABL Priority Claims now or hereafter held by or on behalf of the ABL Agent or any ABL Lenders or any agent or trustee therefor regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall have priority over and be senior in all respects and prior to any Lien on the ABL Priority Collateral securing any Term Loan Claims,

(b) any Lien on the ABL Priority Collateral securing any Term Loan Claims now or hereafter held by or on behalf of a Term Loan Agent or any Term Loan Lenders or any agent or trustee therefor regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate in all respects to all Liens on the ABL Priority Collateral securing any ABL Priority Claims,

(c) any Lien on the Term Loan Priority Collateral securing any Term Loan Claims now or hereafter held by or on behalf of a Term Loan Agent or any Term Loan Lenders or any agent or trustee therefor regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall have priority over and be senior in all respects and prior to any Lien on the Term Loan Priority Collateral securing any ABL Claims, and

 

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(d) any Lien on the Term Loan Priority Collateral securing any ABL Claims now or hereafter held by or on behalf of the ABL Agent or any ABL Lenders or any agent or trustee therefor regardless of how acquired, whether by grant, statute, operation of law, subrogation or otherwise, shall be junior and subordinate in all respects to all Liens on the Term Loan Priority Collateral securing any Term Loan Claims.

All Liens on the ABL Priority Collateral securing any ABL Priority Claims shall be and remain senior in all respects and prior to all Liens on the ABL Priority Collateral securing any Term Loan Claims for all purposes, whether or not such Liens securing any ABL Priority Claims are subordinated to any Lien securing any other obligation of the Company, any other Grantor or any other Person, and all Liens on the Term Loan Priority Collateral securing any Term Loan Claims shall be and remain senior in all respects and prior to all Liens on the Term Loan Priority Collateral securing any ABL Claims for all purposes, whether or not such Liens securing any Term Loan Claims are subordinated to any Lien securing any other obligation of the Company, any other Grantor or any other Person.

2.2. Prohibition on Contesting Liens. The ABL Agent, for itself and on behalf of each ABL Lender, and each Term Loan Agent, for itself and on behalf of each applicable Term Loan Lender, agrees that it shall not (and hereby waives any right to) take any action to challenge, contest or support any other Person in contesting or challenging, directly or indirectly, in any proceeding (including any Insolvency or Liquidation Proceeding), the validity, perfection, priority or enforceability of (a) a Lien securing any ABL Claims held (or purported to be held) by or on behalf of the ABL Agent or any of the ABL Lenders or any agent or trustee therefor in any Common Collateral or (b) a Lien securing any Term Loan Claims held (or purported to be held) by or on behalf of any Term Loan Lender in any Common Collateral, as the case may be; provided, however, that nothing in this Agreement shall be construed (x) to prevent or impair the rights of the ABL Agent or any ABL Lender to enforce this Agreement (including the priority of the Liens securing the ABL Claims as provided in Section 2.1 with respect to any ABL Priority Collateral) or any of the ABL Loan Documents or (y) to prevent or impair the rights of a Term Loan Agent or any Term Loan Lender to enforce this Agreement (including the priority of the Liens securing the Term Loan Claims as provided in Section 2.1 with respect to any Term Loan Priority Collateral) or any of the Term Loan Documents.

2.3. No New Liens.

(a) So long as the Discharge of ABL Priority Claims has not occurred, each Term Loan Agent agrees, for itself and on behalf of each applicable Term Loan Lender, whether or not any Insolvency or Liquidation Proceeding has been commenced by or against the Company or any other Grantor, that it shall not acquire or hold any Lien on any assets of the Company or any other Grantor securing any Term Loan Claims that, to the extent permissible under applicable law, are not also subject to the Lien in respect of the ABL Claims under the ABL Loan Documents. If a Term Loan Agent or any Term Loan Lender shall (nonetheless and in breach hereof) acquire or hold any Lien on any collateral of a Grantor (and such Lien is validly granted under the Term Loan Documents) that is not also subject to the Lien in respect of the ABL Claims under the ABL Loan Documents, then the applicable Term Loan Agent shall, to the extent permissible under applicable law, without the need for any further consent of any party and notwithstanding anything to the contrary in any other document, be deemed to also hold and have held such Lien for the benefit of the ABL Agent as security for the ABL Claims (subject to the Lien priority and other terms hereof) and shall promptly notify the ABL Agent in writing of the existence of such Lien and in any event take such actions as may be requested by the ABL Agent to assign or release such Liens to the ABL Agent (and/or its designee) as security for the ABL Claims.

 

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(b) So long as the Discharge of Term Loan Claims has not occurred, the ABL Agent agrees, for itself and on behalf of each applicable ABL Lender, whether or not any Insolvency or Liquidation Proceeding has been commenced by or against the Company or any other Grantor, that it shall not acquire or hold any Lien on any assets of the Company or any other Grantor securing any ABL Claims that, to the extent permissible under applicable law, are not also subject to the Liens in respect of the Term Loan Claims under the Term Loan Documents. If the ABL Agent or any ABL Lender shall (nonetheless and in breach hereof) acquire or hold any Lien on any collateral of a Grantor (and such Lien is validly granted under the ABL Loan Documents) that is not also subject to the Liens in respect of the Term Loan Claims under the Term Loan Documents, then the ABL Agent shall, to the extent permissible under applicable law, without the need for any further consent of any party and notwithstanding anything to the contrary in any other document, be deemed to also hold and have held such Lien for the benefit of the Term Loan Agent as security for the Term Loan Claims (subject to the Lien priority and other terms hereof) and shall promptly notify each Term Loan Agent in writing of the existence of such Lien and in any event take such actions as may be requested by the Term Loan Agents to assign or release such Liens to the applicable Term Loan Agent (and/or its designees) as security for the applicable Term Loan Claims.

2.4. Perfection of Liens. With respect to any portion of the Common Collateral, neither the First Priority Agent nor the First Priority Lenders shall be responsible for perfecting and maintaining the perfection of Liens with respect to the Common Collateral for the benefit of the Second Priority Agent and the Second Priority Lenders. The provisions of this Agreement are intended solely to govern the respective Lien priorities as between the ABL Lenders and the Term Loan Lenders and shall not impose on the ABL Agent, the Term Loan Agents, the ABL Lenders or the Term Loan Lenders or any agent or trustee therefor any obligations in respect of the disposition of proceeds of any Common Collateral which would conflict with prior perfected claims therein in favor of any other Person or any order or decree of any court or governmental authority or any applicable law.

2.5. Waiver of Marshalling.

(a) Until the Discharge of ABL Priority Claims, each Term Loan Agent, on behalf of itself and the applicable Term Loan Lenders, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law with respect to the ABL Priority Collateral or any other similar rights a junior secured creditor may have under applicable law with respect to the ABL Priority Collateral.

(b) Until the Discharge of Term Loan Claims, the ABL Agent, on behalf of itself and the ABL Lenders, agrees not to assert and hereby waives, to the fullest extent permitted by law, any right to demand, request, plead or otherwise assert or otherwise claim the benefit of, any marshalling, appraisal, valuation or other similar right that may otherwise be available under applicable law with respect to the Term Loan Priority Collateral or any other similar rights a junior secured creditor may have under applicable law with respect to the Term Loan Priority Collateral.

 

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Section 3. Enforcement.

3.1. Exercise of Remedies.

(a) So long as the Discharge of ABL Priority Claims has not occurred, whether or not any Insolvency or Liquidation Proceeding has been commenced by or against the Company or any other Grantor, subject to Section 5.6, (i) no Term Loan Agent or Term Loan Lender will (x) Exercise Any Secured Creditor Remedies or seek to Exercise Any Secured Creditor Remedies (including setoff or recoupment) with respect to any ABL Priority Collateral, or exercise any right under any lockbox agreement, control agreement, landlord waiver or bailee’s letter or similar agreement or arrangement, or institute any action or proceeding with respect to such rights or remedies (including any action of foreclosure), (y) contest, protest or object to any foreclosure proceeding or action brought with respect to the ABL Priority Collateral by the ABL Agent or any ABL Lender in respect of the ABL Priority Claims, the exercise of any right by the ABL Agent or any ABL Lender (or any agent or sub-agent on their behalf) in respect of the ABL Priority Claims under any lockbox agreement, control agreement, landlord waiver or bailee’s letter or similar agreement or arrangement to which a Term Loan Agent or any Term Loan Lender either is a party or may have rights as a third party beneficiary, or any other exercise by any such party, of any rights and remedies relating to the ABL Priority Collateral under the ABL Loan Documents or otherwise in respect of ABL Priority Claims, or (z) object to the forbearance by the ABL Lenders from bringing or pursuing any foreclosure proceeding or action or any other Exercise of Any Secured Creditor Remedies relating to the ABL Priority Collateral in respect of ABL Priority Claims and (ii) except as otherwise provided herein, the ABL Agent and the ABL Lenders shall have the exclusive right to enforce rights, exercise remedies (including setoff and the right to credit bid their debt) and make determinations regarding the release, disposition or restrictions with respect to the ABL Priority Collateral without any consultation with or the consent of any Term Loan Agent or any Term Loan Lender; provided, however, that (A) in any Insolvency or Liquidation Proceeding commenced by or against the Company or any other Grantor, a Term Loan Agent may file a proof of claim or statement of interest with respect to the applicable Term Loan Claims and (B) a Term Loan Agent may take any action (not adverse to the prior Liens on the ABL Priority Collateral securing the ABL Priority Claims, or the rights of the ABL Agent or the ABL Lenders to exercise remedies in respect thereof) in order to create, prove, perfect, preserve or protect (but not enforce) its rights in, and perfection and priority of its Lien on, the ABL Priority Collateral; provided, further, that a Term Loan Agent or any Term Loan Lender may exercise any or all of such rights, powers, or remedies after a period of at least 180 days has elapsed since the later of: (i) the date on which a Term Loan Agent declared the existence of an “Event of Default” under the applicable Term Loan Documents, accelerated (to the extent such amount was not already due and owing) the payment of the principal amount of all Obligations under the applicable Term Loan Documents, and demanded payment thereof and (ii) the date on which the ABL Agent has received notice thereof from such Term Loan Agent; provided, further, however, that neither any Term Loan Agent nor any other Term Loan Lender shall exercise any rights or remedies with respect to the ABL Priority Collateral if, notwithstanding the expiration of such

 

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180-day period, the ABL Agent or the other ABL Lenders (A) shall have commenced, whether before or after the expiration of such 180-day period, and be diligently pursuing the exercise of their rights, powers, or remedies with respect to all or any material portion of the ABL Priority Collateral (prompt written notice of such exercise to be given to the Term Loan Agents), or (B) shall have been stayed by operation of law or any court order from pursuing any such exercise of remedies (the period during which the Term Loan Agents and the Term Loan Lenders may not pursuant to this Section 3.1(a)(ii) exercise any rights, powers, or remedies with respect to the ABL Priority Collateral, the “Term Loan Standstill Period”). In exercising rights and remedies with respect to the ABL Priority Collateral, the ABL Agent and the ABL Lenders may enforce the provisions of the ABL Loan Documents and exercise remedies thereunder, all in such order and in such manner as they may determine in the exercise of their sole discretion. Such exercise and enforcement shall include the rights of an agent appointed by them to sell or otherwise dispose of ABL Priority Collateral or other collateral upon foreclosure, to incur expenses in connection with such sale or disposition, and to exercise all the rights and remedies of a secured lender under the uniform commercial code of any applicable jurisdiction and of a secured creditor under Bankruptcy Laws of any applicable jurisdiction.

(b) So long as the Discharge of Term Loan Claims has not occurred, whether or not any Insolvency or Liquidation Proceeding has been commenced by or against the Company or any other Grantor, subject to Section 5.6, (i) neither the ABL Agent nor ABL Lender will (x) Exercise Any Secured Creditor Remedies or seek to Exercise Any Secured Creditor Remedies (including setoff or recoupment) with respect to any Term Loan Priority Collateral, or exercise any right under any lockbox agreement, control agreement, landlord waiver or bailee’s letter or similar agreement or arrangement, or institute any action or proceeding with respect to such rights or remedies (including any action of foreclosure), (y) contest, protest or object to any foreclosure proceeding or action brought with respect to the Term Loan Priority Collateral by a Term Loan Agent or any Term Loan Lender in respect of the Term Loan Claims, the exercise of any right by a Term Loan Agent or any Term Loan Lender (or any agent or sub-agent on their behalf) in respect of the Term Loan Claims under any lockbox agreement, control agreement, landlord waiver or bailee’s letter or similar agreement or arrangement to which the ABL Agent or any ABL Lender either is a party or may have rights as a third party beneficiary, or any other exercise by any such party, of any rights and remedies relating to the Term Loan Priority Collateral under the Term Loan Documents or otherwise in respect of Term Loan Claims, or (z) object to the forbearance by the Term Loan Lenders from bringing or pursuing any foreclosure proceeding or action or any other Exercise of Any Secured Creditor Remedies relating to the Term Loan Priority Collateral in respect of Term Loan Claims and (ii) except as otherwise provided herein, the Term Loan Agents and the Term Loan Lenders shall have the exclusive right to enforce rights, exercise remedies (including setoff and the right to credit bid their debt) and make determinations regarding the release, disposition or restrictions with respect to the Term Loan Priority Collateral without any consultation with or the consent of the ABL Agent or any ABL Lender; provided, however, that (A) in any Insolvency or Liquidation Proceeding commenced by or against the Company or any other Grantor, the ABL Agent may file a proof of claim or statement of interest with respect to the applicable ABL Priority Claims and (B) the ABL Agent may take any action (not adverse to the prior Liens on the Term Loan Priority Collateral securing the Term Loan Claims, or the rights of the Term Loan Agents or the Term Loan Lenders to exercise remedies in respect thereof) in order to create, prove, perfect, preserve or protect (but not enforce) its rights in, and perfection and priority of its

 

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Lien on, the Term Loan Priority Collateral; provided, further, that the ABL Agent or any ABL Lender may exercise any or all of such rights, powers, or remedies after a period of at least 180 days has elapsed since the later of: (i) the date on which the ABL Agent declared the existence of an “Event of Default” under the applicable ABL Loan Documents, accelerated (to the extent such amount was not already due and owing) the payment of the principal amount of all ABL Claims under the ABL Credit Agreement, and demanded payment thereof and (ii) the date on which the Term Loan Agents have received notice thereof from the ABL Agent; provided, further, however, that neither the ABL Agent nor any other ABL Lender shall exercise any rights or remedies with respect to the Term Loan Priority Collateral if, notwithstanding the expiration of such 180-day period, the Term Loan Agents or the other Term Loan Lenders (A) shall have commenced, whether before or after the expiration of such 180-day period, and be diligently pursuing the exercise of their rights, powers, or remedies with respect to all or any material portion of the Term Loan Priority Collateral (prompt written notice of such exercise to be given to the ABL Agent), or (B) shall have been stayed by operation of law or any court order from pursuing any such exercise of remedies (the period during which the ABL Agent and the ABL Lenders may not pursuant to this Section 3.1(b)(ii) exercise any rights, powers, or remedies with respect to the ABL Priority Collateral, the “ABL Standstill Period”). In exercising rights and remedies with respect to the Term Loan Priority Collateral, the Term Loan Agents and the Term Loan Lenders may enforce the provisions of the Term Loan Documents and exercise remedies thereunder, all in such order and in such manner as they may determine in the exercise of their sole discretion consistent with the terms of the Term Loan Documents. Such exercise and enforcement shall include the rights of an agent appointed by them to sell or otherwise dispose of Term Loan Priority Collateral or other collateral upon foreclosure, to incur expenses in connection with such sale or disposition, and to exercise all the rights and remedies of a secured lender under the uniform commercial code of any applicable jurisdiction and of a secured creditor under Bankruptcy Laws of any applicable jurisdiction.

(c) So long as the Discharge of ABL Priority Claims has not occurred, each Term Loan Agent, on behalf of itself and each applicable Term Loan Lender, agrees that it will not take or receive any ABL Priority Collateral or any proceeds of ABL Priority Collateral in connection with the exercise of any right or remedy (including setoff or recoupment) with respect to any ABL Priority Collateral. Without limiting the generality of the foregoing, unless and until the Discharge of ABL Priority Claims has occurred, except as expressly provided in the provisos in clause (ii) of Section 3.1(a), the sole right of each Term Loan Agent and the Term Loan Lenders with respect to the ABL Priority Collateral is to hold a Lien on the ABL Priority Collateral pursuant to the Term Loan Documents for the period and to the extent granted therein and to receive a share of the proceeds thereof, if any, after the Discharge of ABL Priority Claims has occurred. So long as the Discharge of Term Loan Claims has not occurred, the ABL Agent, on behalf of itself and each applicable ABL Lender, agrees that it will not take or receive any Term Loan Priority Collateral or any proceeds of Term Loan Priority Collateral in connection with the exercise of any right or remedy (including setoff or recoupment) with respect to any Term Loan Priority Collateral. Without limiting the generality of the foregoing, unless and until the Discharge of Term Loan Claims has occurred, except as expressly provided in the provisos in clause (ii) of Section 3.1(b), the sole right of the ABL Agent and the ABL Lenders with respect to the Term Loan Priority Collateral is to hold a Lien on the Term Loan Priority Collateral pursuant to the ABL Loan Documents for the period and to the extent granted therein and to receive a share of the proceeds thereof, if any, after the Discharge of Term Loan Claims has occurred.

 

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(d) Subject to the provisos in clause (ii) of Section 3.1(a) above and Section 5.6, (i) each Term Loan Agent, for itself and on behalf of each applicable Term Loan Lender, agrees that the Term Loan Agents and the Term Loan Lenders will not take any action that would hinder any Exercise of Any Secured Creditor Remedies undertaken by the ABL Agent or the ABL Lenders with respect to the ABL Priority Collateral under the ABL Loan Documents, including any sale, lease, exchange, transfer or other disposition of the ABL Priority Collateral, whether by foreclosure or otherwise, and (ii) each Term Loan Agent, for itself and on behalf of each applicable Term Loan Lender, hereby waives any and all rights it or any such Term Loan Lender may have as a junior lien creditor or otherwise to object to the manner in which the ABL Agent or the ABL Lenders seek to enforce or collect the ABL Priority Claims with respect to the ABL Priority Collateral or the Liens granted in any of the ABL Priority Collateral, regardless of whether any action or failure to act by or on behalf of the ABL Agent or ABL Lenders is adverse to the interests of the Term Loan Lenders. Subject to the provisos in clause (ii) of Section 3.1(b) above and Section 5.6, (i) the ABL Agent, for itself and on behalf of each applicable ABL Lender, agrees that the ABL Agent and the ABL Lenders will not take any action that would hinder any Exercise of Any Secured Creditor Remedies undertaken by any Term Loan Agent or the Term Loan Lenders with respect to the Term Loan Priority Collateral under the Term Loan Documents, including any sale, lease, exchange, transfer or other disposition of the Term Loan Priority Collateral, whether by foreclosure or otherwise, and (ii) the ABL Agent, for itself and on behalf of each applicable ABL Lender, hereby waives any and all rights it or any ABL Lender may have as a junior lien creditor or otherwise to object to the manner in which the Term Loan Agents or the Term Loan Lenders seek to enforce or collect the Term Loan Claims with respect to the Term Loan Priority Collateral or the Liens granted in any of the Term Loan Priority Collateral, regardless of whether any action or failure to act by or on behalf of the Term Loan Agents or Term Loan Lenders is adverse to the interests of the Term Loan Lenders.

(e) Each Term Loan Agent hereby acknowledges and agrees that no covenant, agreement or restriction contained in any applicable Term Loan Document shall be deemed to restrict in any way the rights and remedies of the ABL Agent or the ABL Lenders with respect to the ABL Priority Collateral as set forth in this Agreement and the ABL Loan Documents. The ABL Agent hereby acknowledges and agrees that no covenant, agreement or restriction contained in any applicable ABL Loan Document shall be deemed to restrict in any way the rights and remedies of the Term Loan Agents or the Term Loan Lenders with respect to the Term Loan Priority Collateral as set forth in this Agreement and the Term Loan Documents.

3.2. Cooperation.

(a) Subject to the provisos in clause (ii) of Section 3.1(a), each Term Loan Agent, on behalf of itself and each applicable Term Loan Lender, agrees that, unless and until the Discharge of ABL Priority Claims has occurred, it will not commence, or join with any Person (other than the ABL Lenders and the ABL Agent upon the request thereof) in commencing, any enforcement, collection, execution, levy or foreclosure action or proceeding with respect to any Lien held by it in the ABL Priority Collateral under any of the applicable Term Loan Documents or otherwise in respect of the applicable Term Loan Claims relating to the ABL Priority Collateral.

 

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(b) Subject to the provisos in clause (ii) of Section 3.1(b), the ABL Agent, on behalf of itself and each ABL Lender, agrees that, unless and until the Discharge of Term Loan Claims has occurred, it will not commence, or join with any Person (other than the Term Loan Lenders and the Term Loan Agents upon the request thereof) in commencing, any enforcement, collection, execution, levy or foreclosure action or proceeding with respect to any Lien held by it in the Term Loan Priority Collateral under any of the applicable ABL Loan Documents or otherwise in respect of the applicable ABL Claims relating to the Term Loan Priority Collateral.

3.3. Actions Upon Breach.

(a) If any Term Loan Lender, in contravention of the terms of this Agreement, in any way takes or attempts or threatens to take any action with respect to the ABL Priority Collateral (including any attempt to realize upon or enforce any remedy with respect to this Agreement except as provided in the provisos to Section 3.1(a)(ii)), this Agreement shall create an irrebuttable presumption and admission by such Term Loan Lender that relief against such Term Loan Lender by injunction, specific performance and/or other appropriate equitable relief is necessary to prevent irreparable harm to the ABL Lenders, it being understood and agreed by each Term Loan Agent on behalf of each applicable Term Loan Lender that (i) the ABL Lenders’ damages from its actions may at that time be difficult to ascertain and may be irreparable, and (ii) each Term Loan Lender waives any defense that the Grantors and/or the ABL Lenders cannot demonstrate damage and/or be made whole by the awarding of damages.

(b) If any ABL Lender, in contravention of the terms of this Agreement, in any way takes or attempts or threatens to take any action with respect to the Term Loan Priority Collateral (including any attempt to realize upon or enforce any remedy with respect to this Agreement except as provided in the provisos to Section 3.1(b)(ii)), this Agreement shall create an irrebuttable presumption and admission by such ABL Lender that relief against such ABL Lender by injunction, specific performance and/or other appropriate equitable relief is necessary to prevent irreparable harm to the Term Loan Lenders, it being understood and agreed by the ABL Agent on behalf of each applicable ABL Lender that (i) the Term Loan Lenders’ damages from its actions may at that time be difficult to ascertain and may be irreparable, and (ii) each ABL Lender waives any defense that the Grantors and/or the Term Loan Lenders cannot demonstrate damage and/or be made whole by the awarding of damages.

Section 4. Payments.

4.1. Revolving Nature of ABL Priority Claims. Each Term Loan Agent, for and on behalf of itself and each applicable Term Loan Lender, expressly acknowledges and agrees that (i) the ABL Credit Agreement includes a revolving commitment, that in the ordinary course of business the ABL Agent under the ABL Credit Agreement and the ABL Lenders will apply payments and make advances thereunder, and that no application of any Payment Collateral or Cash Collateral or the release of any Lien by the ABL Agent upon any portion of the Common Collateral in connection with a permitted disposition under the ABL Credit Agreement shall constitute the exercise of remedies prohibited under this Agreement; (ii) subject

 

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to the limitations set forth herein, the amount of the ABL Priority Claims that may be outstanding at any time or from time to time may be increased or reduced and subsequently reborrowed, and that the terms of the ABL Priority Claims may be modified, extended or amended from time to time, and that the aggregate amount of the ABL Priority Claims may be increased, replaced or refinanced, in each event, without notice to or consent by the Term Loan Lenders and without affecting the provisions hereof; and (iii) all Payment Collateral or Cash Collateral received by the ABL Agent may be applied, reversed, reapplied, credited, or reborrowed, in whole or in part, to the ABL Priority Claims at any time; provided, however, that from and after the date on which the ABL Agent (or any ABL Lender) commences the Exercise of Any Secured Creditor Remedies with respect to any of the Common Collateral, all amounts received by the ABL Agent or any ABL Lender in respect of any ABL Claims shall be applied as specified in this Section 4. The Lien priority set forth in this Agreement shall not be altered or otherwise affected by any such amendment, modification, supplement, extension, repayment, reborrowing, increase, replacement, renewal, restatement or refinancing of the ABL Priority Claims the Term Loan Claims, or any portion thereof.

4.2. Application of Proceeds of ABL Priority Collateral. The ABL Agent, on behalf of itself and each ABL Lender, and each Term Loan Agent, on behalf of itself and each applicable Term Loan Lender, hereby agrees that the ABL Priority Collateral or proceeds thereof received in connection with the sale or other disposition of, or collection on, such ABL Priority Collateral upon the Exercise of Any Secured Creditor Remedies, shall be applied:

first, to the payment of the ABL Priority Claims in accordance with the ABL Credit Agreement,

second, to the payment of the Term Loan Claims in accordance with the Term Loan Documents, and

third, the balance, if any, to the Grantors or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

4.3. Application of Proceeds of Term Loan Priority Collateral. The ABL Agent, on behalf of itself and each applicable ABL Lender, and each Term Loan Agent, on behalf of itself and each applicable Term Loan Lender, hereby agrees that the Term Loan Priority Collateral or proceeds thereof received in connection with the sale or other disposition of, or collection on, such Term Loan Priority Collateral upon the Exercise of Any Secured Creditor Remedies, shall be applied:

first, to the payment of the Term Loan Claims in accordance with the Term Loan Documents,

second, to the payment of the ABL Priority Claims, and

third, the balance, if any, to the Grantors or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct.

 

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4.4. Payments Over.

(a) Any ABL Priority Collateral or proceeds thereof received by a Term Loan Agent or any Term Loan Lender in connection with the exercise of any right or remedy (including setoff or recoupment) relating to the ABL Priority Collateral in contravention of this Agreement shall be segregated and held in trust for the benefit of and forthwith paid over to the ABL Agent (and/or their designees) for the benefit of the ABL Lenders in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. The ABL Agent is hereby authorized to make any such endorsements as agent for each Term Loan Agent or any such Term Loan Lender. This authorization is coupled with an interest and is irrevocable.

(b) Any Term Loan Priority Collateral or proceeds thereof received by the ABL Agent or any ABL Lender in connection with the exercise of any right or remedy (including setoff or recoupment) relating to the Term Loan Priority Collateral in contravention of this Agreement shall be segregated and held in trust for the benefit of and forthwith paid over to the Term Loan Agents (and/or their designees) for the benefit of the Term Loan Lenders in the same form as received, with any necessary endorsements or as a court of competent jurisdiction may otherwise direct. Each Term Loan Agent is hereby authorized to make any such endorsements as agent for the ABL Agent or any such ABL Lender. This authorization is coupled with an interest and is irrevocable.

(c) Promptly upon the Discharge of ABL Priority Claims, the ABL Agent shall deliver written notice confirming the same to the Term Loan Agents; provided that the failure to give any such notice shall not result in any liability of the ABL Agent or the other ABL Lenders hereunder or in the modification, alteration, impairment, or waiver of the rights of any party hereunder. Promptly upon the Discharge of Term Loan Claims, the Term Loan Agents shall deliver written notice confirming the same to the ABL Agent; provided that the failure to give any such notice shall not result in any liability of the Term Loan Agents or the other Term Loan Lenders hereunder or in the modification, alteration, impairment, or waiver of the rights of any party hereunder.

Section 5. Other Agreements.

5.1. Releases.

(a) If, at any time any Grantor or the holder of any ABL Priority Claim delivers notice to the Term Loan Agents that any specified ABL Priority Collateral is sold, transferred or otherwise disposed of (including for such purpose, in the case of the sale of equity interests in any Subsidiary, any ABL Priority Collateral held by such Subsidiary or any direct or indirect Subsidiary thereof):

(i) by the owner of such ABL Priority Collateral in a transaction permitted under the ABL Credit Agreement, the Term Loan Credit Agreement and each other ABL Loan Document (if any) and Term Loan Document (if any); or

(ii) during the existence of any Event of Default under (and as defined in) the ABL Credit Agreement by the owner of such ABL Priority Collateral (to the extent the ABL Agent has consented to such sale, transfer or disposition) or by the ABL Agent in connection with the Exercise of Any Secured Creditor Remedies;

 

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then (whether or not any Insolvency or Liquidation Proceeding is pending at the time) the Liens in favor of the Term Loan Lenders upon such ABL Priority Collateral will automatically be released and discharged as and when, but only to the extent, such Liens on such ABL Priority Collateral securing ABL Claims are released and discharged. Upon delivery to each Term Loan Agent of a notice from the ABL Agent stating that any release of Liens by the ABL Agent securing or supporting the ABL Claims on any ABL Priority Collateral has become effective (or shall become effective upon each Term Loan Agent’s release), each Term Loan Agent will promptly execute, file and deliver such instruments, releases, termination statements or other documents (including UCC-3 termination statements, mortgage releases and termination of USPTO and copyright filings) confirming such release on customary terms at the expense of the Company.

Each Term Loan Agent, for itself and on behalf of each applicable Term Loan Lender, hereby irrevocably constitutes and appoints the ABL Agent and any officer or agent of the ABL Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Term Loan Agent or such Term Loan Lender or in the ABL Agent’s own name, from time to time in the ABL Agent’s discretion, for the purpose of carrying out the terms of this Section 5.1(a), to take any and all appropriate action and to execute any and all documents and instruments and make any filings that may be necessary or desirable to accomplish the purposes of this Section 5.1(a), including filing any termination statements, endorsements or other instruments of transfer or release; provided that the ABL Agent shall not exercise such power of attorney unless the Term Loan Agents have failed to comply with their obligations under this Section 5.1 within two Business Days after demand by the ABL Agent. In the case of the sale of all or substantially all of the capital stock of a Grantor or any of its Subsidiaries, the guarantee in favor of the Term Loan Lenders, if any, made by such Grantor or Subsidiary will automatically be released and discharged as and when, but only to the extent, the guarantee by such Grantor or Subsidiary of ABL Priority Claims is released and discharged.

(b) Subject to Section 5.6, if, at any time any Grantor or the holder of any Term Loan Claim delivers notice to the ABL Agent that any specified Term Loan Priority Collateral (including all or substantially all of the equity interests of a Grantor or any of its Subsidiaries) (including for such purpose, in the case of the sale of equity interests in any Subsidiary, any Term Loan Priority Collateral held by such Subsidiary or any direct or indirect Subsidiary thereof) is sold, transferred or otherwise disposed of:

(i) by the owner of such Term Loan Priority Collateral in a transaction permitted under the Term Loan Credit Agreement, the ABL Credit Agreement and each other Term Loan Document (if any) and ABL Loan Document (if any); or

(ii) during the existence of any Event of Default under (and as defined in) the Term Loan Credit Agreement (or any other Credit Agreement governing Future Senior Term Indebtedness) by the owner of such Term Loan Priority Collateral (to the extent the applicable Term Loan Agents have consented to such sale, transfer or disposition or by a Term Loan Agent in connection with the Exercise of Any Secured Creditor Remedies;

 

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then (whether or not any Insolvency or Liquidation Proceeding is pending at the time) the Liens in favor of the ABL Lenders upon such Term Loan Priority Collateral will automatically be released and discharged as and when, but only to the extent, such Liens on such Term Loan Priority Collateral securing Term Loan Claims are released and discharged. Upon delivery to the ABL Agent of a notice from the applicable Term Loan Agent stating that any release of Liens by the Term Loan Agents securing or supporting the Term Loan Claims on any Term Loan Priority Collateral has become effective (or shall become effective upon the ABL Agent’s release), the ABL Agent will promptly execute, file and deliver such instruments, releases, termination statements or other documents (including UCC-3 termination statements, mortgage releases and termination of USPTO and copyright filings) confirming such release on customary terms at the expense of the Company. In the case of the sale of all or substantially all of the capital stock of a Grantor or any of its Subsidiaries, the guarantee in favor of the ABL Lenders, if any, made by such Grantor or Subsidiary will automatically be released and discharged as and when, but only to the extent, the guarantee by such Grantor or Subsidiary of Term Loan Claims is released and discharged.

The ABL Agent, for itself and on behalf of each applicable ABL Lender, hereby irrevocably constitutes and appoints each Term Loan Agent and any officer or agent of such Term Loan Agent, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of the ABL Agent or such ABL Lender or in the Term Loan Agent’s own name, from time to time in the Term Loan Agent’s discretion, for the purpose of carrying out the terms of this Section 5.1(b), to take any and all appropriate action and to execute any and all documents and instruments and make any filings that may be necessary or desirable to accomplish the purposes of this Section 5.1(b), including filing any termination statements, endorsements or other instruments of transfer or release; provided that the applicable Term Loan Agent shall not exercise such power of attorney unless the ABL Agent has failed to comply with their obligations under this Section 5.1 within two Business Days after demand by the applicable Term Loan Agent.

(c) Unless and until the Discharge of ABL Priority Claims has occurred, each Term Loan Agent, for itself and on behalf of each applicable Term Loan Lender, hereby consents to the application, whether prior to or after a default, of proceeds of ABL Priority Collateral to the repayment of ABL Priority Claims pursuant to the ABL Credit Agreement; provided that nothing in this Section 5.1(c) shall be construed to prevent or impair the rights of the Term Loan Agents or the Term Loan Lenders to receive proceeds in connection with the Term Loan Claims not otherwise in contravention of this Agreement.

(d) Unless and until the Discharge of Term Loan Claims has occurred, the ABL Agent, for itself and on behalf of each applicable ABL Lender, hereby consents to the application, whether prior to or after a default, of proceeds of Term Loan Priority Collateral to the repayment of Term Loan Claims pursuant to the Term Loan Credit Agreements; provided that nothing in this Section 5.1(d) shall be construed to prevent or impair the rights of the ABL Agent or the ABL Lenders to receive proceeds in connection with the ABL Claims not otherwise in contravention of this Agreement.

 

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5.2. Insurance.

(a) Proceeds of Common Collateral include insurance proceeds and, therefore, the Lien priority set forth in this Agreement shall govern the ultimate disposition of casualty insurance proceeds.

(b) Unless and until the Discharge of ABL Priority Claims has occurred, the ABL Agent and the ABL Lenders shall have the sole and exclusive right, subject to the rights of the Grantors under the ABL Loan Documents, to adjust settlement for any insurance policy covering the ABL Priority Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding affecting the ABL Priority Collateral. Unless and until the Discharge of ABL Priority Claims has occurred, subject to the rights of the ABL Loan Parties, all proceeds of any such policy and any such award if in respect of the ABL Priority Collateral shall be paid in accordance with the terms of Section 4.2. If a Term Loan Agent or any Term Loan Lender shall, at any time, receive any proceeds of any such insurance policy or any such award in contravention of this Agreement, subject to the rights of the ABL Loan Parties, it shall pay such proceeds over to the ABL Agent in accordance with the terms of Section 4.4.

(c) Unless and until the Discharge of Term Loan Claims has occurred, the Term Loan Agents and the Term Loan Lenders shall have the sole and exclusive right, subject to the rights of the Grantors under the Term Loan Documents, to adjust settlement for any insurance policy covering the Term Loan Priority Collateral in the event of any loss thereunder and to approve any award granted in any condemnation or similar proceeding affecting the Term Loan Priority Collateral. Unless and until the Discharge of Term Loan Claims has occurred, subject to the rights of the Term Loan Parties, all proceeds of any such policy and any such award if in respect of the Term Loan Priority Collateral shall be paid in accordance with the terms of Section 4.3. If the ABL Agent or any ABL Lender shall, at any time, receive any proceeds of any such insurance policy or any such award in contravention of this Agreement, subject to the rights of the Term Loan Parties, it shall pay such proceeds over to the applicable Term Loan Agent in accordance with the terms of Section 4.4.

5.3. Amendments to ABL Loan Documents and Term Loan Documents.

(a) Each Term Loan Agent, on behalf of itself and the applicable Term Loan Lenders, hereby agrees that, without affecting the obligations of the Term Loan Agents and the Term Loan Lenders hereunder, the ABL Agent and the ABL Lenders may, at any time and from time to time, in their sole discretion without the consent of or notice to a Term Loan Agent or any Term Loan Lender (except to the extent such notice or consent is required pursuant to the express provisions of this Agreement), and without incurring any liability to a Term Loan Agent or any Term Loan Lender or impairing or releasing the subordination provided for herein, amend, restate, supplement, replace, refinance, extend, consolidate, restructure, or otherwise modify any of the ABL Loan Documents in any manner whatsoever, including, to:

 

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(i) change the manner, place, time, or terms of payment or renew or alter or increase, all or any of the Obligations under the ABL Loan Documents or otherwise amend, restate, supplement, or otherwise modify in any manner, or grant any waiver or release with respect to, all or any part of the Obligations under the ABL Loan Documents or any of the ABL Loan Documents; provided, that no such change, amendment, restatement, supplement or other modification shall increase the “Applicable Margin” or similar component of the interest rate under the ABL Loan Documents by more than 300 basis points (excluding increases resulting from the accrual of interest at the default rate or from the application of the Pricing Grid (as such term is defined in the ABL Credit Agreement));

(ii) retain or, subject to Section 2.3, obtain a Lien on any property of any Person to secure any of the ABL Claims, and in connection therewith to enter into any additional ABL Loan Documents;

(iii) amend, or grant any waiver, compromise, or release with respect to, or consent to any departure from, any guaranty or other obligations of any Person obligated in any manner under or in respect of the ABL Claims;

(iv) subject to Section 5.1, release its Lien on any Common Collateral or other property;

(v) exercise or refrain from exercising any rights against the Company, any Grantor, or any other Person;

(vi) retain or obtain the primary or secondary obligation of any other Person with respect to any of the ABL Claims; and

(vii) otherwise manage and supervise the ABL Claims as the ABL Agent shall deem appropriate.

(b) The ABL Agent, on behalf of itself and the ABL Lenders, hereby agrees that, without affecting the obligations of the ABL Agent and the ABL Lenders hereunder, each Term Loan Agent and the Term Loan Lenders may, at any time and from time to time, in their sole discretion without the consent of or notice to the ABL Agent or any ABL Lender (except to the extent such notice or consent is required pursuant to the express provisions of this Agreement), and without incurring any liability to the ABL Agent or any ABL Lender or impairing or releasing the subordination provided for herein, amend, restate, supplement, replace, refinance, extend, consolidate, restructure, or otherwise modify any of the Term Loan Documents in any manner whatsoever, including, to:

(i) change the manner, place, time, or terms of payment or renew, alter or increase, all or any of the Obligations under the Term Loan Documents or otherwise amend, restate, supplement, or otherwise modify in any manner, or grant any waiver or release with respect to, all or any part of the Obligations under the Term Loan Documents; provided, that no such change, amendment, restatement, supplement or other modification shall increase the “Applicable Margin” or similar component of the interest rate under the Term Loan Documents specified in clause (i) of the definition thereof by more than 300 basis points (excluding increases resulting from the accrual of interest at the default rate);

 

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(ii) retain or, subject to Section 2.3, obtain a Lien on any property of any Person to secure any of the Term Loan Claims, and in connection therewith to enter into any additional Term Loan Documents;

(iii) amend, or grant any waiver, compromise, or release with respect to, or consent to any departure from, any guaranty or other obligations of any Person obligated in any manner under or in respect of the Term Loan Claims;

(iv) subject to Section 5.1, release its respective Lien on any Common Collateral or other property;

(v) exercise or refrain from exercising any rights against the Company, any Grantor, or any other Person;

(vi) retain or obtain the primary or secondary obligation of any other Person with respect to any of the Term Loan Claims; and

(vii) otherwise manage and supervise the Term Loan Claims as the applicable Term Loan Agent shall deem appropriate.

(c) The ABL Claims and the Term Loan Claims may be refinanced, in whole or in part, in each case, without notice to, or the consent (except to the extent a consent is required to permit the refinancing transaction under any ABL Loan Document or any Term Loan Document) of the ABL Agent, the ABL Lenders, the Term Loan Agents or the Term Loan Lenders, as the case may be, all without affecting the Lien priorities provided for herein or the other provisions hereof; provided, however, that the holders of such refinancing indebtedness (or an authorized agent or trustee on their behalf) bind themselves in writing to the terms of this Agreement pursuant to such documents or agreements (including amendments, replacements or supplements to this Agreement) as the ABL Agent or the Term Loan Agents, as the case may be, shall reasonably request and in form and substance reasonably acceptable to the ABL Agent or the Term Loan Agents, as the case may be, and any such refinancing transaction shall be in accordance with any applicable provisions of both the ABL Loan Documents and the Term Loan Documents.

(d) In the event that the ABL Agent or the ABL Lenders enter into any amendment, waiver or consent in respect of or replace any of the ABL Collateral Documents for the purpose of adding to, or deleting from, or waiving or consenting to any departures from any provisions of, any ABL Collateral Document or changing in any manner the rights of the ABL Agent, the ABL Lenders, the Company or any other Grantor thereunder in respect of the ABL Priority Collateral, then such amendment, waiver or consent shall apply automatically to any comparable provision of each comparable Term Loan Collateral Document (but solely as to ABL Priority Collateral) without the consent of any Term Loan Agent or any Term Loan Lender and without any action by the Term Loan Lenders, the Company or any other Grantor; provided that such amendment, waiver or consent may not materially adversely affect the rights of the applicable Term Loan Lenders or the interests of the applicable Term Loan Lenders in the ABL Priority Collateral unless the rights and interests of all other creditors of the Company or such Grantor, as the case may be, that have a security interest in the affected collateral are affected in

 

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a like or similar manner (without regard to the fact that the Lien of such ABL Collateral Document is senior to the Lien of the comparable Term Loan Collateral Document). The ABL Agent shall give written notice of such amendment, waiver or consent to the Term Loan Agents; provided that the failure to give such notice shall not affect the effectiveness of such amendment, waiver or consent with respect to the provisions of any Term Loan Collateral Document as set forth in this Section 5.3(d).

(e) In the event that a Term Loan Agent or the Term Loan Lenders enter into any amendment, waiver or consent in respect of or replace any of the Term Loan Collateral Documents for the purpose of adding to, or deleting from, or waiving or consenting to any departures from any provisions of, any Term Loan Collateral Document or changing in any manner the rights of the Term Loan Agents, the Term Loan Lenders, the Company or any other Grantor thereunder in respect of the Term Loan Priority Collateral, then such amendment, waiver or consent shall apply automatically to any comparable provision of each comparable ABL Collateral Document (but solely as to Term Loan Priority Collateral) without the consent of the ABL Agent or any ABL Lender and without any action by the ABL Lenders, the Company or any other Grantor; provided that such amendment, waiver or consent may not materially adversely affect the rights of the ABL Lenders or the interests of the ABL Lenders in the Term Loan Priority Collateral unless the rights and interests of all other creditors of the Company or such Grantor, as the case may be, that have a security interest in the affected collateral are affected in a like or similar manner (without regard to the fact that the Lien of such Term Loan Collateral Document is senior to the Lien of the comparable ABL Collateral Document). The applicable Term Loan Agent shall give written notice of such amendment, waiver or consent to the ABL Agent; provided that the failure to give such notice shall not affect the effectiveness of such amendment, waiver or consent with respect to the provisions of any ABL Collateral Document as set forth in this Section 5.3(e).

5.4. Rights As Unsecured Creditors. Notwithstanding anything to the contrary in this Agreement, the Second Priority Agents and the Second Priority Lenders may exercise rights and remedies as an unsecured creditor against Holdings, the Company or any Subsidiary that has guaranteed the Second Priority Claims in accordance with the terms of the applicable Second Priority Documents and applicable law, in each case to the extent not inconsistent with the provisions of this Agreement. Nothing in this Agreement shall prohibit the receipt by any Second Priority Agent or any Second Priority Lender of the required payments of interest and principal so long as such receipt is not the direct or indirect result of (a) the exercise by any Second Priority Agent or any Second Priority Lender of rights or remedies as a secured creditor in respect of the applicable portion of the Common Collateral or (b) enforcement in contravention of this Agreement of any Lien in respect of Second Priority Claims held by any of them. In the event any Second Priority Agent or any Second Priority Lender becomes a judgment lien creditor or other secured creditor in respect of Common Collateral as a result of its enforcement of its rights as an unsecured creditor in respect of Second Priority Claims or otherwise, such judgment or other lien shall be subordinated to the Liens securing First Priority Claims on the same basis as the other Liens securing the Second Priority Claims are so subordinated to such Liens securing First Priority Claims under this Agreement. Nothing in this Agreement impairs or otherwise adversely affects any rights or remedies the ABL Agent or the ABL Lenders may have with respect to the ABL Priority Collateral, or any rights or remedies the Term Loan Agents or the Term Loan Lenders may have with respect to the Term Loan Priority Collateral.

 

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5.5. First Priority Agent as Gratuitous Bailee for Perfection.

(a) The ABL Agent agrees to hold the Pledged Collateral that is part of the ABL Priority Collateral in its possession or control (or in the possession or control of its agents or bailees) as gratuitous bailee for each Term Loan Agent and any assignee solely for the purpose of perfecting the security interest granted in such Pledged Collateral pursuant to the Term Loan Collateral Documents, subject to the terms and conditions of this Section 5.5 (such bailment being intended, among other things, to satisfy the requirements of Sections 8-106(d)(3), 8-301(a)(2) and 9-313(c) of the UCC). Each Term Loan Agent agrees to hold the Pledged Collateral that is part of the Term Loan Priority Collateral in its possession or control (or in the possession or control of its agents or bailees) as gratuitous bailee for the ABL Agent and any assignee solely for the purpose of perfecting the security interest granted in such Pledged Collateral pursuant to the ABL Collateral Documents, subject to the terms and conditions of this Section 5.5 (such bailment being intended, among other things, to satisfy the requirements of Sections 8-106(d)(3), 8-301(a)(2) and 9-313(c) of the UCC).

(b) The ABL Agent agrees to hold the Deposit Account Collateral that is part of the Collateral and controlled by the ABL Agent as gratuitous bailee for each Term Loan Agent and any assignee solely for the purpose of perfecting the security interest granted in such Deposit Account Collateral pursuant to the Term Loan Collateral Documents, subject to the terms and conditions of this Section 5.5.

(c) Except as otherwise specifically provided herein (including Sections 3.1, 4 and 7.2), until the Discharge of ABL Priority Claims has occurred, the ABL Agent shall be entitled to deal with the Pledged Collateral constituting ABL Priority Collateral in accordance with the terms of the ABL Loan Documents as if the Liens under the Term Loan Collateral Documents did not exist. The rights of each Term Loan Agent and the Term Loan Lenders with respect to such Pledged Collateral shall at all times be subject to the terms of this Agreement. Except as otherwise specifically provided herein (including Sections 3.1, 4 and 7.2), until the Discharge of Term Loan Claims has occurred, each Term Loan Agent shall be entitled to deal with the Pledged Collateral constituting Term Loan Priority Collateral in accordance with the terms of the Term Loan Documents as if the Liens under the ABL Collateral Documents did not exist. The rights of the ABL Agent and the ABL Lenders with respect to such Pledged Collateral shall at all times be subject to the terms of this Agreement.

(d) The First Priority Agent shall have no obligation whatsoever to any Second Priority Agent or any Second Priority Lender to assure that the Pledged Collateral is genuine or owned by the Grantors or to protect or preserve rights or benefits of any Person or any rights pertaining to the applicable portion of the Common Collateral except as expressly set forth in this Section 5.5. The duties or responsibilities of the First Priority Agent under this Section 5.5 shall be limited solely to holding the Pledged Collateral as gratuitous bailee for each Second Priority Agent for purposes of perfecting the Lien held by the Second Priority Lenders.

 

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(e) The First Priority Agent shall not have by reason of the Second Priority Documents or this Agreement or any other document a fiduciary relationship in respect of any Second Priority Agent or any Second Priority Lender and the Second Priority Agent and the Second Priority Lenders hereby waive and release the First Priority Agent from all claims and liabilities arising pursuant to the First Priority Agent’s role under this Section 5.5, as agent and gratuitous bailee with respect to the applicable portion of the Common Collateral.

(f) Upon the Discharge of ABL Priority Claims, the ABL Agent shall deliver to the Term Loan Agents, to the extent that it is legally permitted to do so, the remaining Pledged Collateral (if any) and Deposit Account Collateral (if any) constituting ABL Priority Collateral in its possession or under its control, together with any necessary endorsements (or otherwise allow the Term Loan Agents to obtain control of such Pledged Collateral and Deposit Account Collateral) or as a court of competent jurisdiction may otherwise direct. The Company shall take such further action as is required to effectuate the transfer contemplated hereby and shall indemnify the ABL Agent for loss or damage suffered by the ABL Agent as a result of such transfer except for loss or damage suffered by the ABL Agent as a result of its own willful misconduct, gross negligence or bad faith. The ABL Agent has no obligation to follow instructions from a Term Loan Agent in contravention of this Agreement.

(g) Upon the Discharge of Term Loan Claims, each Term Loan Agent shall deliver to the ABL Agent, to the extent that it is legally permitted to do so, the remaining Pledged Collateral (if any) constituting Term Loan Priority Collateral in its possession or under its control, together with any necessary endorsements (or otherwise allow the ABL Agent to obtain control of such Pledged Collateral) or as a court of competent jurisdiction may otherwise direct. The Company shall take such further action as is required to effectuate the transfer contemplated hereby and shall indemnify each Term Loan Agent for loss or damage suffered by such Term Loan Agent as a result of such transfer except for loss or damage suffered by such Term Loan Agent as a result of its own willful misconduct, gross negligence or bad faith. No Term Loan Agent has any obligation to follow instructions from the ABL Agent in contravention of this Agreement.

5.6. Access to Premises and Cooperation.

(a) If the ABL Agent takes any enforcement action with respect to the ABL Priority Collateral, each Term Loan Agent and the Term Loan Lenders (i) shall cooperate with the ABL Agent (at the sole cost and expense of the ABL Agent and the ABL Lenders and subject to the condition that the Term Loan Agents and the Term Loan Lenders shall have no obligation or duty to take any action or refrain from taking any action that could reasonably be expected to result in the incurrence of any liability or damage to a Term Loan Agent or the Term Loan Lenders) in its efforts to enforce its security interest in the ABL Priority Collateral and to allow the ABL Agent to finish any work-in-process and assemble the ABL Priority Collateral, (ii) shall not take any action designed or intended to hinder or restrict in any respect the ABL Agent from enforcing its security interest in the ABL Priority Collateral or from finishing any work-in- process or assembling the ABL Priority Collateral and (iii) shall permit the ABL Agent, its employees, agents, advisers and representatives, at the sole cost and expense of the ABL Lenders and upon reasonable advance notice, to use the Term Loan Priority Collateral (including (x) equipment, processors, computers and other machinery related to the storage or processing of

 

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records, documents or files and (y) intellectual property in each case only to the extent and for so long as required to effect an enforcement action with respect to the ABL Priority Collateral), for a period not to exceed 180 days after the taking of such enforcement action, for purposes of (A) assembling and storing the ABL Priority Collateral and completing the processing of and turning into finished goods of any ABL Priority Collateral consisting of work-in-process, (B) selling any or all of the ABL Priority Collateral, whether in bulk, in lots or to customers in the ordinary course of business or otherwise, (C) removing any or all of the ABL Priority Collateral located in or on such Term Loan Priority Collateral, if any, or (D) taking reasonable actions to protect, secure, and otherwise enforce the rights of the ABL Agent and the ABL Lenders in and to the ABL Priority Collateral; provided, however, that nothing contained in this Agreement shall restrict the rights of the Term Loan Agents or the Term Loan Lenders from selling, assigning or otherwise transferring any Term Loan Priority Collateral prior to the expiration of such 180 day period if the purchaser, assignee or transferee thereof agrees to be bound by the provisions of this Section 5.6. If any stay or other order prohibiting the exercise of remedies with respect to the ABL Priority Collateral has been entered by a court of competent jurisdiction, such 180 day period shall be tolled during the pendency of any such stay or other order.

(b) During the period of actual use or control by the ABL Agent or its agents or representatives of any Term Loan Priority Collateral, the ABL Agent and the ABL Lenders shall (i) be responsible for the ordinary course third party expenses related thereto, and (ii) be obligated to repair at their expense any physical damage to such Term Loan Priority Collateral resulting from such use or control, and to leave such Term Loan Priority Collateral in substantially the same condition as it was at the commencement of such use or control, ordinary wear and tear excepted. The ABL Agent and the ABL Lenders jointly and severally agree to pay, indemnify and hold each Term Loan Agent and their respective officers, directors, employees and agents harmless from and against any liability, cost, expense, loss or damages, including legal fees and expenses, resulting from the gross negligence or willful misconduct of the ABL Agent or any of its agents, representatives or invitees in its or their operation of such Term Loan Priority Collateral. Notwithstanding the foregoing, in no event shall the ABL Agent or the ABL Lenders have any liability to the Term Loan Agents or the Term Loan Lenders pursuant to this Section 5.6 as a result of the condition of any Term Loan Priority Collateral existing prior to the date of the exercise by the ABL Agent and the ABL Lenders of their rights under this Section 5.6, and the ABL Agent and the ABL Lenders shall have no duty or liability to maintain the Term Loan Priority Collateral in a condition or manner better than that in which it was maintained prior to the use thereof by the ABL Agent, or for any diminution in the value of the Term Loan Priority Collateral that results solely from ordinary wear and tear resulting from the use of the Term Loan Priority Collateral by the ABL Agent in the manner and for the time periods specified under this Section 5.6. Without limiting the rights granted in this paragraph, the ABL Agent and the ABL Lenders shall cooperate with the Term Loan Agents and the Term Loan Lenders in connection with any efforts made by the Term Loan Agents and the Term Loan Secured Parties to sell the Term Loan Priority Collateral.

(c) If a Term Loan Agent takes any enforcement action with respect to the Term Loan Priority Collateral, the ABL Agent and the ABL Lenders (i) shall cooperate with such Term Loan Agent (at the sole cost and expense of such Term Loan Agent and the applicable Term Loan Lenders and subject to the condition that the ABL Agent and the ABL Lenders shall have no obligation or duty to take any action or refrain from taking any action that

 

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could reasonably be expected to result in the incurrence of any liability or damage to the ABL Agent or the ABL Lenders) in its efforts to enforce its security interest in the Term Loan Priority Collateral and assemble the Term Loan Priority Collateral and (ii) shall not take any action designed or intended to hinder or restrict in any respect such Term Loan Agent from enforcing its security interest in the Term Loan Priority Collateral or from assembling the Term Loan Priority Collateral.

(d) Each Term Loan Agent agrees that if the ABL Agent shall require rights available under any permit or license controlled by such Term Loan Agent in order to realize on any ABL Priority Collateral, such Term Loan Agent shall take all such actions as shall be available to it (at the sole expense of the Grantors), consistent with applicable law and reasonably requested by the ABL Agent to make such rights available to the ABL Agent, subject to the Liens of the Term Loan Agents and the Term Loan Lenders. The ABL Agent agrees that if a Term Loan Agent shall require rights available under any permit or license controlled by the ABL Agent in order to realize on any Term Loan Priority Collateral, the ABL Agent shall take all such actions as shall be available to it (at the sole expense of the Grantors), consistent with applicable law and reasonably requested by the applicable Term Loan Agent to make such rights available to such Term Loan Agent, subject to the Liens of the ABL Agent and the ABL Lenders.

5.7. No Release If Event of Default; Reinstatement.

(a) If, at any time after the Discharge of ABL Priority Claims has occurred, the Company incurs any ABL Priority Claims, then such Discharge of ABL Priority Claims shall automatically be deemed not to have occurred for all purposes of this Agreement (other than with respect to any actions taken by a Term Loan Agent or otherwise prior to the date of such designation as a result of the occurrence of such prior Discharge of ABL Priority Claims), and the applicable agreement governing such ABL Priority Claims shall automatically be treated as the ABL Credit Agreement for all purposes of this Agreement, including for purposes of the Lien priorities and rights in respect of Common Collateral set forth herein and the granting by the ABL Agent of amendments, waivers and consents hereunder. Upon receipt of notice of such incurrence (including the identity of the new ABL Agent), each Term Loan Agent shall promptly (i) enter into such documents and agreements (at the expense of the Company), including amendments or supplements to this Agreement, as the Company or such new ABL Agent shall reasonably request in writing in order to provide the new ABL Agent the rights of the ABL Agent contemplated hereby and (ii) to the extent then held by a Term Loan Agent, deliver to the ABL Agent the Pledged Collateral that is ABL Priority Collateral together with any necessary endorsements (or otherwise allow the ABL Agent to obtain possession or control of such Pledged Collateral); provided that any costs or other expenses incurred in connection therewith shall be the exclusive responsibility of the Grantors.

(b) If, at any time after the Discharge of Term Loan Claims has occurred, the Company incurs any Term Loan Claims, then such Discharge of Term Loan Claims shall automatically be deemed not to have occurred for all purposes of this Agreement (other than with respect to any actions taken by the ABL Agent or otherwise prior to the date of such designation as a result of the occurrence of such prior Discharge of Term Loan Claims), and the applicable agreement governing such Term Loan Claims shall automatically be treated as a Term

 

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Loan Credit Agreement for all purposes of this Agreement, including for purposes of the Lien priorities and rights in respect of Common Collateral set forth herein and the granting by the applicable Term Loan Agent of amendments, waivers and consents hereunder. Upon receipt of notice of such incurrence (including the identity of the new Term Loan Agent), the ABL Agent shall promptly (i) enter into such documents and agreements (at the expense of the Company), including amendments or supplements to this Agreement, as the Company or such new Term Loan Agent shall reasonably request in writing in order to provide the new Term Loan Agent the rights of the Term Loan Agents contemplated hereby and (ii) to the extent then held by the ABL Agent, deliver to the Term Loan Agents the Pledged Collateral that is Term Loan Priority Collateral together with any necessary endorsements (or otherwise allow the appropriate Term Loan Agent to obtain possession or control of such Pledged Collateral); provided that any costs or other expenses incurred in connection therewith shall be the exclusive responsibility of the Grantors.

5.8. Legends. Each party hereto agrees that each Credit Agreement, the Term Loan Collateral Agreement and the ABL Collateral Agreement shall contain the applicable provisions set forth on Schedule II hereto, or similar provisions approved by the ABL Agent and the Term Loan Agents, which approval shall not be unreasonably withheld or delayed.

Section 6. Insolvency or Liquidation Proceedings.

6.1. Financing Issues. If the Company or any other Grantor shall be subject to any Insolvency or Liquidation Proceeding and shall move for the approval of the use of cash collateral or of financing (“DIP Financing”) under Section 363 or Section 364 of Title 11 of the United States Code or any similar provision in any Bankruptcy Law, then each Second Priority Agent, on behalf of itself and each Second Priority Lender, agrees that it will raise no objection to, and will not support any objection to, and will not otherwise contest (a) such DIP Financing, the Liens on First Priority Collateral securing such DIP Financing (the “DIP Financing Liens”) or the use of cash collateral that constitutes First Priority Collateral, in each case unless the First Priority Agent or the First Priority Lenders shall then object or support an objection to such DIP Financing, DIP Financing Liens or use of cash collateral, and will not object on the basis of lack of adequate protection or any other relief in connection therewith and, to the extent the Liens securing the First Priority Claims under the applicable Credit Agreement or, if no such Credit Agreement exists, under the other First Priority Documents are subordinated or pari passu with such DIP Financing Liens, will subordinate its Liens in the First Priority Collateral to such DIP Financing Liens on the same basis as the other Liens on First Priority Collateral securing the Second Priority Claims are so subordinated to Liens securing First Priority Claims under this Agreement, (b) any motion for relief from the automatic stay or from any injunction against foreclosure or enforcement in respect of First Priority Claims made by the First Priority Agent or any holder of First Priority Claims, (c) any lawful exercise by any holder of First Priority Claims of the right to credit bid First Priority Claims at any sale in foreclosure of First Priority Collateral, (d) any other request for judicial relief made in any court by any holder of First Priority Claims relating to the lawful enforcement of any Lien on First Priority Collateral or (e) any order relating to a sale of First Priority Collateral for which the First Priority Agent has consented that provides, to the extent the sale is to be free and clear of Liens, that the Liens securing the First Priority Claims and the Second Priority Claims will attach to the proceeds of the sale on the same basis of priority as set forth in this Agreement; provided that all Liens granted to the ABL Agent or the Term Loan Agents in any Insolvency or Liquidation Proceeding are intended by the parties hereto to be and shall be deemed to be subject to the Lien priority and the other terms and conditions of this Agreement.

 

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6.2. Relief from the Automatic Stay. Until the Discharge of ABL Priority Claims has occurred, each Term Loan Agent, on behalf of itself and each applicable Term Loan Lender, agrees that none of them shall seek relief from the automatic stay or any other stay in any Insolvency or Liquidation Proceeding in respect of the ABL Priority Collateral, without the prior written consent of the ABL Agent and the Required Lenders under the ABL Credit Agreement. Until the Discharge of Term Loan Claims has occurred, the ABL Agent, on behalf of itself and each ABL Lender, agrees that none of them shall seek relief from the automatic stay or any other stay in any Insolvency or Liquidation Proceeding in respect of the Term Loan Priority Collateral, without the prior written consent of the Term Loan Agents and the Required Lenders under the applicable Term Loan Credit Agreement (and any other Credit Agreements governing Future Senior Term Indebtedness, if applicable).

6.3. Adequate Protection.

(a) Each Term Loan Agent, on behalf of itself and the applicable Term Loan Lenders, agrees that none of them shall be entitled to contest and none of them shall contest (or support any other Person contesting) (but instead shall be deemed to have hereby irrevocably, absolutely, and unconditionally waived any right):

(i) any request by the ABL Agent or the ABL Lenders for adequate protection with respect to the ABL Priority Collateral (except to the extent any such adequate protection is a payment from Term Loan Priority Collateral); or

(ii) any objection by the ABL Agent or ABL Lender to any motion, relief, action or proceeding based on the ABL Agent or the other ABL Lender claiming a lack of adequate protection with respect to the ABL Priority Collateral.

(b) The ABL Agent, on behalf of itself and the ABL Lenders, agrees that none of them shall be entitled to contest and none of them shall contest (or support any other Person contesting) (but instead shall be deemed to have hereby irrevocably, absolutely, and unconditionally waived any right):

(i) any request by any Term Loan Agent or the other Term Loan Lenders for adequate protection with respect to the Term Loan Priority Collateral (except to the extent any such adequate protection is a payment from ABL Priority Collateral); or

(ii) any objection by any Term Loan Agent or the Term Loan Lenders to any motion, relief, action or proceeding based on such Term Loan Agent or the applicable Term Loan Lenders claiming a lack of adequate protection with respect to the Term Loan Priority Collateral.

(c) Consistent with the foregoing provisions in this Section 6.3, and except as provided in Sections 6.1 and 6.7, in any Insolvency or Liquidation Proceeding:

 

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(i) no Term Loan Agent or Term Loan Lender shall be entitled (and each Term Loan Agent and Term Loan Lender shall be deemed to have hereby irrevocably, absolutely, and unconditionally waived any right):

(1) to seek or otherwise be granted any type of adequate protection with respect to its interests in the ABL Priority Collateral; provided, however, subject to Section 6.1, the Term Loan Agents and the Term Loan Lenders may seek and obtain adequate protection in the form of an additional or replacement Lien on Collateral so long as (i) the ABL Agent and the ABL Lenders have been granted adequate protection in the form of a replacement Lien on such Collateral, and (ii) any such Lien on ABL Priority Collateral (and on any Collateral granted as adequate protection for the ABL Agent and the ABL Lenders in respect of their interest in such ABL Priority Collateral) is subordinated to the Liens of the ABL Agent in such Collateral on the same basis as the other Liens of the Term Loan Agent on ABL Priority Collateral; and

(2) to seek or otherwise be granted any adequate protection payments with respect to its interests in the Collateral from Proceeds of ABL Priority Collateral;

(ii) no ABL Agent or ABL Lender shall be entitled (and the ABL Agent and each ABL Lender shall be deemed to have hereby irrevocably, absolutely, and unconditionally waived any right):

(1) to seek or otherwise be granted any type of adequate protection in respect of Term Loan Priority Collateral except as may be consented to in writing by each Term Loan Agent in its sole and absolute discretion; provided, however, ABL Agent and ABL Lenders may seek and obtain adequate protection in the form of an additional or replacement Lien on Collateral so long as (i) the Term Loan Agents and Term Loan Lenders have been granted adequate protection in the form of a replacement Lien on such Collateral, and (ii) any such Lien on Term Loan Priority Collateral (and on any Collateral granted as adequate protection for the Term Loan Agents and Term Loan Lenders in respect of their interest in such Term Loan Priority Collateral) is subordinated to the Liens of the Term Loan Agent in such Collateral on the same basis as the other Liens of the ABL Agent on Term Loan Priority Collateral; and

(2) to seek or otherwise be granted any adequate protection payments with respect to its interests in the Collateral from Proceeds of Term Loan Priority Collateral (except as may be consented to in writing by each Term Loan Agent in its sole and absolute discretion).

(d) With respect to (i) the ABL Priority Collateral, nothing herein shall limit the rights of the Term Loan Agents or the Term Loan Lenders from seeking adequate protection with respect to their rights in the Term Loan Priority Collateral in any Insolvency or Liquidation Proceeding (including adequate protection in the form of a cash payment, periodic cash payments or otherwise, other than from proceeds of ABL Priority Collateral) so long as such

 

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request is not otherwise inconsistent with this Agreement and (ii) the Term Loan Priority Collateral, nothing herein shall limit the rights of the ABL Agent or the ABL Lenders from seeking adequate protection with respect to their rights in the ABL Priority Collateral in any Insolvency or Liquidation Proceeding (including adequate protection in the form of a cash payment, periodic cash payments or otherwise, other than from proceeds of Term Loan Priority Collateral) so long as such request is not otherwise inconsistent with this Agreement.

6.4. Avoidance Issues.

(a) If any ABL Lender is required in any Insolvency or Liquidation Proceeding or otherwise to turn over or otherwise pay to the estate of the Company or any other Grantor (or any trustee, receiver or similar person therefor), because the payment of such amount was declared to be fraudulent or preferential in any respect or for any other reason, any amount (an “ABL Recovery”), whether received as proceeds of security, enforcement of any right of setoff or otherwise, then as among the parties hereto the ABL Claims shall be deemed to be reinstated to the extent of such ABL Recovery and to be outstanding as if such payment had not occurred and the ABL Lenders shall be entitled, to the extent they are entitled hereunder, to a Discharge of ABL Priority Claims with respect to all such recovered amounts and shall have all rights hereunder until such time. If this Agreement shall have been terminated prior to such ABL Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto.

(b) If any Term Loan Lender is required in any Insolvency or Liquidation Proceeding or otherwise to turn over or otherwise pay to the estate of the Company or any other Grantor (or any trustee, receiver or similar person therefor), because the payment of such amount was declared to be fraudulent or preferential in any respect or for any other reason, any amount (an “Term Loan Recovery”), whether received as proceeds of security, enforcement of any right of setoff or otherwise, then as among the parties hereto the Term Loan Claims shall be deemed to be reinstated to the extent of such Term Loan Recovery and to be outstanding as if such payment had not occurred and the Term Loan Lenders shall be entitled to a Discharge of Term Loan Claims with respect to all such recovered amounts and shall have all rights hereunder until such time. If this Agreement shall have been terminated prior to such Term Loan Recovery, this Agreement shall be reinstated in full force and effect, and such prior termination shall not diminish, release, discharge, impair or otherwise affect the obligations of the parties hereto.

6.5. Application. This Agreement, which the parties hereto expressly acknowledge is a “subordination agreement” under Section 510(a) of the Bankruptcy Code, shall be applicable prior to and after the commencement of any Insolvency or Liquidation Proceeding. All references herein to any Grantor shall apply to any trustee for such Person and such Person as debtor in possession. The relative rights as to the Common Collateral and proceeds thereof shall continue after the filing thereof on the same basis as prior to the date of the petition, subject to any court order approving the financing of, or use of cash collateral by, any Grantor.

 

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6.6. Waivers. Until the Discharge of ABL Priority Claims has occurred, each Term Loan Agent, on behalf of itself and each applicable Term Loan Lender, (a) will not assert or enforce any claim under Section 506(c) of the United States Bankruptcy Code senior to or on a parity with the Liens on ABL Priority Collateral securing the ABL Priority Claims for costs or expenses of preserving or disposing of any ABL Collateral, and (b) waives any claim it may now or hereafter have arising out of the election by any ABL Lender of the application of Section 1111(b)(2) of the Bankruptcy Code with respect to any ABL Priority Collateral. Until the Discharge of Term Loan Claims has occurred, the ABL Agent, on behalf of itself and each applicable ABL Lender, (a) will not assert or enforce any claim under Section 506(c) of the United States Bankruptcy Code senior to or on a parity with the Liens on Term Loan Priority Collateral securing the Term Loan Claims for costs or expenses of preserving or disposing of any Term Loan Priority Collateral, and (b) waives any claim it may now or hereafter have arising out of the election by any Term Loan Lender of the application of Section 1111(b)(2) of the Bankruptcy Code with respect to any Term Loan Priority Collateral.

6.7. Separate Grants of Liens. Each Term Loan Lender and each ABL Lender acknowledges and agrees that (i) the grants of Liens pursuant to the ABL Collateral Documents and the Term Loan Collateral Documents constitute two separate and distinct grants of Liens and (ii) because of, among other things, their differing rights in the Common Collateral, the Term Loan Claims are fundamentally different from the ABL Claims and must be separately classified in any plan of reorganization (or other plan of similar effect under any Bankruptcy Laws) proposed or adopted in an Insolvency Proceeding. To further effectuate the intent of the parties as provided in the immediately preceding sentence, if it is held that the claims of the ABL Lenders and the Term Loan Lenders in respect of the Common Collateral constitute only one secured claim (rather than separate classes of senior and junior secured claims), then the ABL Lenders and the Term Loan Lenders hereby acknowledge and agree that all distributions shall be made as if there were separate classes of ABL Claims and Term Loan Claims against the Grantors, with the effect being that, to the extent that the aggregate value of the ABL Priority Collateral or Term Loan Priority Collateral is sufficient, the ABL Lenders or the Term Loan Lenders, respectively, shall be entitled to receive, in addition to amounts distributed to them in respect of principal, pre-petition interest and other claims, all amounts owing in respect of post- petition interest that is available from each pool of ABL Priority Collateral and Term Loan Priority Collateral for each of the ABL Lenders and the Term Loan Lenders, respectively, before any distribution is made in respect of the claims held by the other Lenders from such ABL Priority Collateral or Term Loan Priority Collateral, with the other Lenders hereby acknowledging and agreeing to turn over to the respective other Lenders amounts otherwise received or receivable by them to the extent necessary to effectuate the intent of this sentence, even if such turnover has the effect of reducing the aggregate recoveries.

Section 7. Reliance; Waivers; etc.

7.1. Reliance. The consent by the First Priority Lenders to the execution and delivery of the Second Priority Documents to which the First Priority Lenders have consented and all loans and other extensions of credit made or deemed made on and after the date hereof by the First Priority Lenders to the Company or any Subsidiary shall be deemed to have been given and made in reliance upon this Agreement. The Second Priority Agent, on behalf of itself and each applicable Second Priority Lender, acknowledges that it and the applicable Second Priority Lenders are not entitled to rely on any credit decision or other decisions made by the First Priority Agent or any First Priority Lender in taking or not taking any action under the applicable Second Priority Document or this Agreement.

 

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7.2. No Warranties or Liability. Except as set forth in Section 9.14, neither the First Priority Agent nor any First Priority Lender shall have been deemed to have made any express or implied representation or warranty, including with respect to the execution, validity, legality, completeness, collectibility or enforceability of any of the First Priority Documents, the ownership of any Common Collateral or the perfection or priority of any Liens thereon. The First Priority Lenders will be entitled to manage and supervise their respective loans and extensions of credit under the First Priority Documents in accordance with law and as they may otherwise, in their sole discretion, deem appropriate, and the First Priority Lenders may manage their loans and extensions of credit without regard to any rights or interests that any Second Priority Agent or any of the Second Priority Lenders have in the Common Collateral or otherwise, except as otherwise provided in this Agreement. Neither the First Priority Agent nor any First Priority Lender shall have any duty to any Second Priority Agent or any Second Priority Lender to act or refrain from acting in a manner that allows, or results in, the occurrence or continuance of an event of default or default under any agreements with the Company or any Subsidiary thereof (including the Second Priority Documents), regardless of any knowledge thereof that they may have or be charged with. Notwithstanding anything to the contrary herein contained, none of the parties hereto waives any claim that it may have against a Term Loan Agent or the ABL Agent, as applicable, on the grounds that any sale, transfer or other disposition by such Term Loan Agent or ABL Agent, as applicable, was not commercially reasonable to the extent required by the Uniform Commercial Code. Except as expressly set forth in this Agreement, the First Priority Agent, the First Priority Lenders, the Second Priority Agent and the Second Priority Lenders have not otherwise made to each other, nor do they hereby make to each other, any warranties, express or implied, nor do they assume any liability to each other with respect to (a) the enforceability, validity, value or collectibility of any of the First Priority Claims, the Second Priority Claims or any guarantee or security which may have been granted to any of them in connection therewith, (b) the Company’s title to or right to transfer any of the Common Collateral or (c) any other matter except as expressly set forth in this Agreement.

7.3. Obligations Unconditional. All rights, interests, agreements and obligations of the First Priority Agent and the First Priority Lenders, and the Second Priority Agent and the Second Priority Lenders, respectively, hereunder shall remain in full force and effect irrespective of:

(a) any lack of validity or enforceability of any First Priority Documents or any Second Priority Documents;

(b) any change in the time, manner or place of payment of, or in any other terms of, all or any of the First Priority Claims or Second Priority Claims, or any amendment or waiver or other modification, including any increase in the amount thereof, whether by course of conduct or otherwise, of the terms of the ABL Credit Agreement or any other ABL Loan Document or of the terms of the Term Loan Credit Agreements or any other Term Loan Document;

 

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(c) any exchange of any security interest in any Common Collateral or any other collateral, or any amendment, waiver or other modification, whether in writing or by course of conduct or otherwise, of all or any of the First Priority Claims or Second Priority Claims or any guarantee thereof;

(d) the commencement of any Insolvency or Liquidation Proceeding in respect of the Company or any other Grantor; or

(e) any other circumstances that otherwise might constitute a defense available to, or a discharge of, the Company or any other Grantor in respect of the First Priority Claims, or of any Second Priority Agent or any Second Priority Lenders in respect of this Agreement.

Section 8. Purchase Options

8.1. Notice of Exercise. (a) Upon the occurrence and during the continuance of an “Event of Default” under clauses (b), (c), (h) or (i) of Article VII of the ABL Credit Agreement, if such Event of Default remains uncured or unwaived for at least thirty (30) consecutive days and the requisite ABL Lenders have not agreed to forbear from the exercise of remedies, all or a portion of the Term Loan Lenders, acting as a single group, shall have the option at any time upon five (5) Business Days’ prior written notice to the ABL Agent to purchase all of the Obligations (as defined in the ABL Credit Agreement) (the “ABL Obligations”) from the ABL Lenders. Such notice from such Term Loan Lenders to the ABL Agent shall be irrevocable.

(b) Upon the occurrence and during the continuance of an “Event of Default” under clauses (b), (c), (h) or (i) of Article VII of the Term Loan Credit Agreement, if such Event of Default remains uncured or unwaived for at least thirty (30) consecutive days and the requisite Term Loan Lenders have not agreed to forbear from the exercise of remedies, all or a portion of the ABL Lenders, acting as a single group, shall have the option at any time upon five (5) Business Days’ prior written notice to the Term Loan Agent (with a copy to the Term Loan Agent) to purchase all of the Obligations (as defined in the Term Loan Credit Agreement) (the “Term Loan Obligations”) from the Term Loan Lenders. Such notice from such ABL Lenders to the Term Loan Agent shall be irrevocable.

8.2. Purchase and Sale. (a) On the date specified by the relevant Term Loan Lenders in the notice contemplated by Section 8.1(a) above (which shall not be less than five (5) Business Days, nor more than twenty (20) calendar days, after the receipt by the ABL Agent of the notice of the relevant Term Loan Lenders’ election to exercise such option), the ABL Lenders shall sell to the relevant Term Loan Lenders, and the relevant Term Loan Lenders shall purchase from the ABL Lenders, the ABL Obligations, provided that, the ABL Agent and the ABL Secured Parties shall retain all rights to be indemnified or held harmless by the ABL Loan Parties in accordance with the terms of the ABL Loan Documents but shall not retain any rights to the security therefor.

 

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(b) On the date specified by the relevant ABL Lenders in the notice contemplated by Section 8.1(b) above (which shall not be less than five (5) Business Days, nor more than twenty (20) calendar days, after the receipt by the Term Loan Agent of the notice of the relevant ABL Lenders’ election to exercise such option), the Term Loan Lenders shall sell to the relevant ABL Lenders, and the relevant ABL Lenders shall purchase from the Term Loan Lenders, the Term Loan Obligations, provided that, the Term Loan Agent and the Term Loan Secured Parties shall retain all rights to be indemnified or held harmless by the Term Loan Parties, in accordance with the terms of the Term Loan Documents but shall not retain any rights to the security therefor.

8.3. Payment of Purchase Price. Upon the date of such purchase and sale, the relevant Term Loan Lenders or the relevant ABL Lenders, as applicable, shall (a) pay to the ABL Agent for the benefit of the ABL Lenders (with respect to a purchase of the ABL Obligations) or to the Term Loan Agent for the benefit of the Term Loan Lenders (with respect to a purchase of the Term Loan Obligations) as the purchase price therefor the full amount of all the ABL Obligations or Term Loan Obligations, as applicable, then outstanding and unpaid (including principal, interest, fees and expenses, including reasonable attorneys’ fees and legal expenses but specifically excluding any prepayment premium, termination or similar fees), (b) with respect to a purchase of the ABL Obligations, furnish cash collateral to the ABL Agent in a manner and in such amounts as the ABL Agent determines is reasonably necessary to secure the ABL Agent, the ABL Secured Parties, letter of credit issuing banks and applicable Affiliates in connection with any issued and outstanding letters of credit, hedging obligations and cash management obligations secured by the ABL Loan Documents, (c) with respect to a purchase of the ABL Obligations, agree to reimburse the ABL Agent, the ABL Secured Parties and letter of credit issuing banks for any loss, cost, damage or expense (including reasonable attorneys’ fees and legal expenses) in connection with any commissions, fees, costs or expenses related to any issued and outstanding letters of credit as described above and any checks or other payments provisionally credited to the ABL Obligations, and/or as to which the ABL Agent has not yet received final payment, (d) with respect to a purchase of the Term Loan Obligations, furnish cash collateral to the Term Loan Agent in a manner and in such amounts as the Term Loan Agent determines is reasonably necessary to secure the Term Loan Agent, the Term Loan Secured Parties and applicable Affiliates in connection with any hedging obligations and cash management obligations secured by the Term Loan Documents, (e) agree to reimburse the ABL Secured Parties or the Term Loan Secured Parties, as applicable, and with respect to a purchase of the ABL Obligations letter of credit issuing banks, in respect of indemnification obligations of the Loan Parties under the ABL Documents or the Term Loan Documents, as applicable, as to matters or circumstances known to the ABL Agent, or the Term Loan Agent, as applicable, at the time of the purchase and sale which would reasonably be expected to result in any loss, cost, damage or expense (including reasonable attorneys’ fees and legal expenses) to the ABL Secured Parties, the Term Loan Secured Parties or letter of credit issuing banks, as applicable, and (f) agree to indemnify and hold harmless the ABL Secured Parties or the Term Loan Secured Parties, as applicable, and with respect to a purchase of the ABL Obligations letter of credit issuing banks, from and against any loss, liability, claim, damage or expense (including reasonable fees and expenses of legal counsel) arising out of any claim asserted by a third party in respect of the ABL Obligations or the Term Loan Obligations, as applicable, as a direct result of any acts by any ABL Secured Party or Term Loan Secured Party, as applicable, occurring after the date of such purchase. Such purchase price and cash collateral shall be remitted by wire transfer in federal funds to such bank account in New York, New York as the ABL Agent or the Term Loan Agent, as applicable, may designate in writing for such purpose.

 

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8.4. Limitation on Representations and Warranties. Such purchase shall be expressly made without representation or warranty of any kind by any selling party (or the applicable ABL Agent or the Term Loan Agent) and without recourse of any kind, except that the selling party shall represent and warrant: (a) the amount of the ABL Obligations or Obligations (as defined in the Term Loan Credit Agreement), as applicable, being purchased from it, (b) that such ABL Secured Party or Term Loan Secured Party, as applicable, owns the ABL Obligations or Obligations, as applicable, free and clear of any Liens or encumbrances and (c) that such ABL Secured Party or Term Loan Secured Party, as applicable, has the right to assign such ABL Obligations or Obligations, as applicable, and the assignment is duly authorized.

Section 9. Miscellaneous.

9.1. Conflicts. Subject to Section 9.18, in the event of any conflict between the provisions of this Agreement and the provisions of any ABL Loan Document or any Term Loan Document, the provisions of this Agreement shall govern.

9.2. Term of this Agreement; Severability. Subject to Section 6.4, (i) if no Event of Default has occurred and is continuing under any Credit Agreement (as such term is defined in the applicable Credit Agreement), this Agreement shall terminate upon the Discharge of ABL Priority Claims and the Discharge of Term Loan Claims and (ii) if an Event of Default has occurred and is continuing under any Credit Agreement (as such term is defined in the applicable Credit Agreement), this Agreement shall terminate upon the Discharge of ABL Priority Claims and the Discharge of Term Loan Claims. This is a continuing agreement of lien subordination and the First Priority Lenders may continue, at any time and without notice to the Second Priority Agent or any Second Priority Lender, to extend credit and other financial accommodations and lend monies to or for the benefit of the Company or any other Grantor constituting First Priority Claims in reliance hereon. The terms of this Agreement shall survive, and shall continue in full force and effect, in any Insolvency or Liquidation Proceeding. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall not invalidate the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

9.3. Amendments; Waivers. (a) No amendment, modification or waiver of any of the provisions of this Agreement by the ABL Agent or the Term Loan Agents shall be deemed to be made unless the same shall be in writing signed on behalf of the party making the same or its authorized agent and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of the parties making such waiver or the obligations of the other parties to such party in any other respect or at any other time. The Company and the other Grantors shall not have any right to consent to or approve any amendment, modification or waiver of any provision of this Agreement except to the extent their rights are affected.

(b) Notwithstanding anything in this Section 9.3 to the contrary, this Agreement may be amended from time to time at the request of the Company, at the Company’s expense, and without the consent of the ABL Agent or Term Loan Agent to (i) add other parties holding Future Senior Term Indebtedness to the extent such Indebtedness (and the Liens thereon)

 

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are not prohibited by the Term Loan Credit Agreement or the ABL Credit Agreement, (ii) in the case of Future Senior Term Indebtedness, (1) establish that the Lien on the ABL Priority Collateral securing such Future Senior Term Indebtedness shall be junior and subordinate in all respects to all Liens on the ABL Priority Collateral securing any ABL Priority Claims and shall share in the benefits of the ABL Priority Collateral equally and ratably with all Liens on the ABL Priority Collateral securing any Term Loan Claims (provided that such Future Senior Term Indebtedness may be secured by the ABL Priority Collateral on a junior basis to the Term Loan Claims contemplated by clause (i) of the definition of “Term Loan Claims”), and (2) provide to the holders of such Future Senior Term Indebtedness (or any agent or trustee thereof) the comparable rights and benefits (including any improved rights and benefits that have been consented to by the ABL Agent) as are provided to the holders of Term Loan Claims under this Agreement (provided that such Future Senior Term Indebtedness may be secured by the Term Loan Priority Collateral on a junior basis to the Term Loan Claims contemplated by clause (i) of the definition of “Term Loan Claims”).

(c) Notwithstanding the provisions herein related to Future Senior Term Indebtedness, this Agreement does not constitute (i) the intercreditor agreement required by Section 6.02(u) of the Term Loan Credit Agreement with respect to any Future Senior Term Indebtedness that is to be equally and ratably secured with the Term Loan Claims or (ii) the intercreditor agreement required by Section 6.02(u) of the Term Loan Credit Agreement with respect to any Future Senior Term Indebtedness that is to be secured on a junior basis to the Term Loan Claims contemplated by clause (i) of the definition of “Term Loan Claims”.

9.4. Information Concerning Financial Condition of the Company and the Subsidiaries. Neither the ABL Agent nor any ABL Lender shall have any obligation to the any Term Loan Agent or any Term Loan Lender to keep any Term Loan Agent or any Term Loan Lender informed of, and each Term Loan Agent and the Term Loan Lenders shall not be entitled to rely on the ABL Agent or the ABL Lenders with respect to, (a) the financial condition of the Company and the Subsidiaries and all endorsers and/or guarantors of the ABL Claims or the Term Loan Claims and (b) all other circumstances bearing upon the risk of nonpayment of the ABL Claims or the Term Loan Claims. The ABL Agent, the ABL Lenders, the Term Loan Agents and the Term Loan Lenders shall have no duty to advise any other party hereunder of information known to it or them regarding such condition or any such circumstances or otherwise. In the event that the ABL Agent, any ABL Lender, any Term Loan Agent or any Term Loan Lender, in its or their sole discretion, undertakes at any time or from time to time to provide any such information to any other party (and the Company acknowledges that any such party may do so), it or they shall be under no obligation (w) to make, and the ABL Agent, the ABL Lenders, the Term Loan Agents and the Term Loan Lenders shall not make, any express or implied representation or warranty, including with respect to the accuracy, completeness, truthfulness or validity of any such information so provided, (x) to provide any additional information or to provide any such information on any subsequent occasion, (y) to undertake any investigation or (z) to disclose any information that, pursuant to accepted or reasonable commercial finance practices, such party wishes to maintain confidential or is otherwise required to maintain confidential. The Grantors agree that any information provided to the ABL Agent, the Term Loan Agents, any other ABL Lender or any other Term Loan Lender may be shared by such person with any of the other Lenders notwithstanding a request or demand by such Grantor that such information be kept confidential; provided that such information shall otherwise be subject to the respective confidentiality provisions in the ABL Credit Agreement and the Term Loan Credit Agreements, as applicable.

 

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9.5. Subrogation. Each Term Loan Agent, for and on behalf of itself and the applicable Term Loan Lenders, agrees that no payment to the ABL Agent or any ABL Lender pursuant to the provisions of this Agreement shall entitle such Term Loan Agent or any Term Loan Lender to exercise any rights of subrogation in respect thereof until the Discharge of ABL Priority Claims shall have occurred. Following the Discharge of ABL Priority Claims, the ABL Agent agrees to execute such documents, agreements, and instruments as any Term Loan Agent or any Term Loan Lender may reasonably request to evidence the transfer by subrogation to any such Person of an interest in the ABL Priority Claims resulting from payments to the ABL Agent by such Person, so long as all costs and expenses (including all reasonable legal fees and disbursements) incurred in connection therewith by the ABL Agent are paid by such Person upon request for payment thereof. The ABL Agent, for and on behalf of itself and the applicable ABL Lenders, agrees that no payment to any Term Loan Agent or any Term Loan Lender pursuant to the provisions of this Agreement shall entitle the ABL Agent or any ABL Lender to exercise any rights of subrogation in respect thereof until the Discharge of Term Loan Claims shall have occurred. Following the Discharge of Term Loan Claims, each Term Loan Agent agrees to execute such documents, agreements, and instruments as the ABL Agent or any ABL Lender may reasonably request to evidence the transfer by subrogation to any such Person of an interest in the Term Loan Claims resulting from payments to the applicable Term Loan Agent by such Person, so long as all costs and expenses (including all reasonable legal fees and disbursements) incurred in connection therewith by such Term Loan Agent are paid by such Person upon request for payment thereof.

9.6. Application of Payments.

(a) Except as otherwise provided herein, all payments received by the ABL Lenders may be applied, reversed and reapplied, in whole or in part, to such part of the ABL Priority Claims as the ABL Lenders, in their sole discretion, deem appropriate, consistent with the terms of the ABL Loan Documents. Except as otherwise provided herein, each Term Loan Agent, on behalf of itself and each applicable Term Loan Lender, assents to any such extension or postponement of the time of payment of the ABL Priority Claims or any part thereof and to any other indulgence with respect thereto, to any substitution, exchange or release of any security that may at any time secure any part of the ABL Priority Claims and to the addition or release of any other Person primarily or secondarily liable therefor.

(b) Except as otherwise provided herein, all payments received by the Term Loan Lenders may be applied, reversed and reapplied, in whole or in part, to such part of the Term Loan Claims as the Term Loan Lenders, in their sole discretion, deem appropriate, consistent with the terms of the Term Loan Documents. Except as otherwise provided herein, the ABL Agent, on behalf of itself and each applicable ABL Lender, assents to any such extension or postponement of the time of payment of the Term Loan Claims or any part thereof and to any other indulgence with respect thereto, to any substitution, exchange or release of any security that may at any time secure any part of the Term Loan Claims and to the addition or release of any other Person primarily or secondarily liable therefor.

 

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9.7. Consent to Jurisdiction; Waivers. The parties hereto consent to the exclusive jurisdiction of any state or federal court located in New York, New York (the “New York Courts”), and consent that all service of process may be made by registered mail directed to such party as provided in Section 9.8 for such party. Service so made shall be deemed to be completed three days after the same shall be posted as aforesaid. The parties hereto waive any objection to any action instituted hereunder in any such court based on forum non conveniens, and any objection to the venue of any action instituted hereunder in any such court. Each of the parties hereto waives any right it may have to trial by jury in respect of any litigation based on, or arising out of, under or in connection with this Agreement, or any course of conduct, course of dealing, verbal or written statement or action of any party hereto in connection with the subject matter hereof.

9.8. Notices. All notices to the ABL Lenders and the Term Loan Lenders permitted or required under this Agreement may be sent to the ABL Agent or the applicable Term Loan Agent as provided in the ABL Credit Agreement or the applicable Term Loan Credit Agreement. Unless otherwise specifically provided herein, any notice or other communication herein required or permitted to be given shall be in writing and may be personally served, telecopied, electronically mailed or sent by courier service or U.S. mail and shall be deemed to have been given when delivered in person or by courier service, upon receipt of a telecopy or electronic mail or upon receipt via U.S. mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, the addresses of the parties hereto shall be as set forth below each party’s name on the signature pages hereto, or, as to each party, at such other address as may be designated by such party in a written notice to all of the other parties. Each First Priority Agent hereby agrees to promptly notify each Second Priority Agent upon payment in full in cash of all Indebtedness under the applicable First Priority Documents (except for contingent indemnities and cost and reimbursement obligations to the extent no claim therefor has been made).

9.9. Further Assurances. The ABL Agent, on behalf of itself and each applicable ABL Lender, and each Term Loan Agent, on behalf of itself and each applicable Term Loan Lender, agrees that each of them shall take such further action and shall execute and deliver to the ABL Agent, the ABL Lenders, each Term Loan Agent and the Term Loan Lenders such additional documents and instruments (in recordable form, if requested) as the ABL Agent, the ABL Lenders, each Term Loan Agent or the Term Loan Lenders may reasonably request, at the expense of the Company, to effectuate the terms of and the Lien priorities contemplated by this Agreement.

9.10. Governing Law. This Agreement has been delivered and accepted in and shall be deemed to have been made in New York, New York and shall be interpreted, and the rights and liabilities of the parties bound hereby determined, in accordance with the laws of the State of New York.

9.11. Specific Performance. Each First Priority Agent may demand specific performance of this Agreement. Each Second Priority Agent, on behalf of itself and each applicable Second Priority Lender, hereby irrevocably waives any defense based on the adequacy of a remedy at law and any other defense that might be asserted to bar the remedy of specific performance in any action that may be brought by the First Priority Agent.

 

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9.12. Section Titles. The section titles contained in this Agreement are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement.

9.13. Counterparts. This Agreement may be executed in one or more counterparts, including by means of facsimile or other electronic transmission, each of which shall be an original and all of which shall together constitute one and the same document.

9.14. Authorization. By its signature, each Person executing this Agreement on behalf of a party hereto represents and warrants to the other parties hereto that it is duly authorized to execute this Agreement. The ABL Agent represents and warrants that this Agreement is binding upon the applicable ABL Lenders. Each Term Loan Agent represents and warrants that this Agreement is binding upon the applicable Term Loan Lenders.

9.15. No Third Party Beneficiaries; Successors and Assigns. This Agreement and the rights and benefits hereof shall inure to the benefit of, and be binding upon, each of the parties hereto and their respective successors and assigns and shall inure to the benefit of each of, and be binding upon, the holders of ABL Claims and Term Loan Claims. No other Person shall have or be entitled to assert rights or benefits hereunder. Without limiting the generality of the foregoing, any person to whom a Lender assigns or otherwise transfers all or any portion of the ABL Claims or the Term Loan Claims, as applicable, in accordance with the applicable ABL Loan Documents or Term Loan Documents, as the case may be, shall become vested with all the rights and obligations in respect thereof granted to such Lenders, without any further consent or action of the other Lenders.

9.16. Effectiveness. This Agreement shall become effective when executed and delivered by the parties hereto. This Agreement shall be effective both before and after the commencement of any Insolvency or Liquidation Proceeding. All references to the Company or any other Grantor shall include the Company or any other Grantor as debtor and debtor-in- possession and any receiver or trustee for the Company or any other Grantor (as the case may be) in any Insolvency or Liquidation Proceeding.

9.17. ABL Agent and Term Loan Agents. (a) It is understood and agreed that (i) Deutsche Bank is entering into this Agreement in its capacity as administrative agent under the ABL Credit Agreement and the provisions of Article VIII of the ABL Credit Agreement applicable to Deutsche Bank as administrative agent thereunder shall also apply to Deutsche Bank as the ABL Agent hereunder and (ii) Barclays is entering in this Agreement in its capacity as administrative agent under the Term Loan Credit Agreement and the provisions of Article VIII of the Term Loan Credit Agreement applicable to Barclays as administrative agent thereunder shall also apply to Barclays as a Term Loan Agent hereunder.

9.18. Relative Rights. Notwithstanding anything in this Agreement to the contrary (except to the extent contemplated by Section 5.3(d) or (e)), nothing in this Agreement is intended to or will (a) amend, waive or otherwise modify the provisions of the ABL Credit Agreement, the Term Loan Credit Agreements or any other ABL Loan Document or Term Loan Document entered into in connection with the ABL Credit Agreement, the Term Loan Credit Agreements or any other ABL Loan Document or Term Loan Document or permit Holdings, the

 

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Company or any other Subsidiary to take any action, or fail to take any action, to the extent such action or failure would otherwise constitute a breach of, or default under, the ABL Credit Agreement or any other ABL Loan Documents entered into in connection with the ABL Credit Agreement, any Term Loan Credit Agreement or any other Term Loan Document entered into in connection with the Term Loan Documents, (b) change the relative priorities of the ABL Priority Claims or the Liens granted under the ABL Loan Documents on the Common Collateral (or any other assets) as among the ABL Lenders, or change the relative priorities of the Term Loan Claims or the Liens granted under the Term Loan Documents on the Common Collateral (or any other assets) as among the Term Loan Lenders, (c) otherwise change the relative rights of the ABL Lenders in respect of the Common Collateral as among such ABL Lenders, or the relative rights of the Term Loan Lenders in respect of the Common Collateral as among such Term Loan Lenders or (d) obligate Holdings, the Company or any Subsidiary to take any action, or fail to take any action, that would otherwise constitute a breach of, or default under, the ABL Credit Agreement or any other ABL Loan Document entered into in connection with the ABL Credit Agreement, the Term Loan Credit Agreements or any other Term Loan Document into in connection with the Term Loan Credit Agreements. None of Holdings, the Company or any Subsidiary shall have any rights hereunder except as expressly set forth herein (including as set forth in Section 9.3).

9.19. Supplements. Upon the execution by Holdings or any Subsidiary of the Company of a supplement hereto in form and substance satisfactory to the ABL Agent and the Term Loan Agents, Holdings and such Subsidiary shall be a party to this Agreement and shall be bound by the provisions hereof to the same extent as the Company and each other Grantor are so bound.

[remainder of page intentionally left blank]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

CPG MERGER SUB LLC,
as Borrower
By:  

/s/ Dan Lukas

      Name: Dan Lukas
      Title: Authorized Person

 

[Signature Page to ABL/Term Loan Intercreditor]


BARCLAYS BANK PLC, as Term Loan Agent
By:  

/s/ Irina Dimova

      Name: Irina Dimova
      Title: Vice President
Address:  745 Seventh Avenue
      New York, NY 10019
Telecopy: (212) 526-5115

 

[Signature Page to ABl/Term Loan lntercreditor]


DEUTSCHE BANK AG NEW YORK BRANCH, as
ABL Agent
By:  

/s/ Peter Cucchiara

  Name: Peter Cucchiara
  Title: Vice President
By:  

/s/ Kirk L. Tashjian

  Name: Kirk L. Tashjian
  Title: Vice President
Address:
Telecopy:

 

[Signature Page to ABL/Term Loan lntercreditor]


SCHEDULE II

Provision for Credit Agreements

“Reference is made to the Intercreditor Agreement dated as of September 30, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), among Parent, the Company, the Subsidiaries of the Company party thereto, Deutsche Bank, as ABL Agent (as defined therein), and Barclays, as Term Loan Agent (as defined therein). Each Lender hereunder (a) consents to the subordination of Liens provided for in the Intercreditor Agreement, (b) agrees that it will be bound by and will take no actions contrary to the provisions of the Intercreditor Agreement and (c) authorizes and instructs the [ABL Agent] [Term Loan Agent] to enter into the Intercreditor Agreement as [ABL Agent] [Term Loan Agent] and on behalf of such Lender. The foregoing provisions are intended as an inducement to the Lenders under the Credit Agreement to extend credit and such Lenders are intended third party beneficiaries of such provisions and the provisions of the Intercreditor Agreement.”

Provision for Security Documents

“Reference is made to the Intercreditor Agreement dated as of September 30, 2013 (as amended, restated, supplemented or otherwise modified from time to time, the “Intercreditor Agreement”), among Parent, the Company, the Subsidiaries of the Company party thereto, Deutsche Bank, as ABL Agent (as defined therein), and Barclays, as Term Loan Agent (as defined therein). Notwithstanding anything herein to the contrary, the lien and security interest granted to the [Collateral Agent], for the benefit of the secured parties hereunder, pursuant to this Agreement and the exercise of any right or remedy by the [Collateral Agent] and the other secured parties hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of the Intercreditor Agreement and this Agreement, the provisions of the Intercreditor Agreement shall control.”

 

Schedule II-1

Exhibit 10.23

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) dated as of [•], 2020, is made by and between THE AZEK COMPANY, INC., a Delaware corporation (the “Company”), and [] (“Indemnitee”).

RECITALS

A. The Company desires to attract and retain the services of highly qualified individuals as directors, officers, employees and agents.

B. The Company’s bylaws (the “Bylaws”) require that the Company indemnify its directors and officers, and empowers the Company to indemnify its employees and agents, as authorized by the Delaware General Corporation Law, as amended (the “DGCL”), under which the Company is organized. The Bylaws expressly provide that the indemnification provided in the Bylaws is not exclusive and contemplates that the Company may enter into separate agreements with its directors, officers and other persons to set forth specific indemnification provisions.

C. Indemnitee does not regard the protection currently provided by applicable law, the Bylaws, the Company’s other governing documents and available insurance as adequate under the present circumstances. Consequently, the Company has determined that Indemnitee and other directors, officers, employees and agents of the Company may not be willing to serve or continue to serve in such capacities without additional protection.

D. The Company desires and has requested Indemnitee to serve or continue to serve as a director, officer, employee or agent of the Company, as the case may be, and has proposed this Agreement as an additional inducement to serve in such capacity.

E. Indemnitee is willing to serve, or to continue to serve, as a director, officer, employee or agent of the Company if Indemnitee is furnished the indemnity provided for in this Agreement by the Company.

AGREEMENT

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth in this Agreement, the parties to this Agreement, intending to be legally bound, agree as follows:

1. Agreement to Serve. Indemnitee will serve, or continue to serve, as the case may be, as an Agent at the will of such entity designated by the Company and at the request of the Company (or under separate agreement, if a separate agreement exists), in the capacity Indemnitee currently serves such entity, so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable provisions of the governance documents of that entity, or until such time as Indemnitee tenders his or her resignation in writing. Nothing contained in this Agreement is intended as an employment agreement between Indemnitee and the Company or any of its subsidiaries or to create any right to continued employment of Indemnitee with the Company or any of its subsidiaries in any capacity. The Company acknowledges that it has entered into this Agreement and assumes the obligations imposed on it under this Agreement, in addition to and separate from its obligations to Indemnitee under the Bylaws, to induce Indemnitee to serve, or continue to serve, as an Agent, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as an Agent.

2. Indemnification.

(a) Indemnification in Third Party Proceedings. Subject to Section 11 below, the Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by the DGCL, as it may be amended from time to time. The Company’s obligation to indemnify to the “fullest extent permitted by applicable law” shall parallel future amendments to the DGCL, but only to the extent that any future amendment entitles Indemnitee to broader indemnification rights than the DGCL permitted prior to adoption of that amendment. The Company’s obligation to indemnify shall fully apply whether the Indemnitee is a party to any proceeding or threatened to be made a party to or otherwise involved in any such proceeding. Without limitation, the Company’s obligation to indemnify an Indemnitee in any proceeding shall apply to all Expenses and Liabilities, including any interest, assessments and other charges paid or payable in connection with or in respect of such Expenses and Liabilities, incurred by Indemnitee in connection with the investigation, defense, settlement or appeal of such proceeding, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal proceeding had no reasonable cause to believe that Indemnitee’s conduct was unlawful. The parties intend that this Agreement shall provide to the fullest extent permitted by law for indemnification in excess of that expressly permitted by statute, including, but not limited to, any indemnification provided by the Certificate of Incorporation of the Company, the Bylaws, vote of its stockholders or Disinterested Directors, or applicable law. This Section 2(a) shall not apply to derivative actions or proceedings or actions or proceedings brought by the Company as those actions or proceedings shall be governed by Section 2(b).


(b) Indemnification in Derivative Actions and Direct Actions by the Company. Subject to Section 11 below, the Company shall indemnify and hold harmless Indemnitee to the fullest extent permitted by the DGCL, as it may be amended from time to time. The Company’s obligation to indemnify to the “fullest extent permitted by applicable law” shall parallel future amendments to the DGCL, but only to the extent that any future amendment entitles Indemnitee to broader indemnification rights than the DGCL permitted prior to adoption of that amendment. The Company’s obligation to indemnify shall fully apply, whether the Indemnitee is a party to any proceeding or is otherwise involved in any proceeding by or in the right of the Company to procure a judgment in its favor, to any and all Expenses actually and reasonably incurred by Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceedings, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. No indemnification for Expenses shall be made under this Section 2(b) in respect of any claim, issue or matter as to which Indemnitee shall have been finally adjudged by a court of competent jurisdiction to be liable to the Company, unless and only to the extent that the Chancery Court of the State of Delaware or any court in which the proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

3. Indemnification of Expenses of Successful Party. Notwithstanding any other provision of this Agreement and to the fullest extent permitted by law, in any circumstance where indemnification is not available under Section 2(a) or 2(b), to the extent that Indemnitee is a party to (or a participant in) any proceeding and has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue or matter in that proceeding, in whole or part, including the dismissal of any action without prejudice, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred and Liabilities in connection with the investigation, defense or appeal of that proceeding. If Indemnitee is not wholly successful in that proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in that proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred and Liabilities incurred by Indemnitee or on Indemnitee’s behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law. For these purposes, Indemnitee will be deemed to have been “successful on the merits” in circumstances including but not limited to the termination of any proceeding or of any claim, issue or matter in that proceeding, by the winning of a motion to dismiss (with or without prejudice), motion for summary judgment, settlement (with or without court approval, but only if the Indemnitee complies with Section 11(c)), or upon a plea of no contest or its equivalent.

4. Partial Indemnification; Witness Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any Expenses and Liabilities incurred by Indemnitee in the investigation, defense, settlement or appeal of a proceeding, but is precluded by applicable law or the specific terms of this Agreement to indemnification for the total amount of those Expenses and/or Liabilities, the Company shall nevertheless indemnify Indemnitee for the portion of those Expenses and/or Liabilities to which Indemnitee is entitled. In the event that Indemnitee is, by reason of Indemnitee’s acting as an Agent, called as a witness or otherwise asked to participate in any proceeding to which Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with participation in that proceeding to the fullest extent permitted by applicable law.

5. Primacy of Indemnification. The Company acknowledges that the Indemnitee may have certain rights to indemnification, advancement of expenses and/or insurance provided by one or more third parties, including the Sponsors (collectively, the “Secondary Indemnitors”). Notwithstanding any such rights, the Company agrees that: (i) it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary, and any obligation of the Secondary Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by Indemnitee are secondary); (ii) it shall be required to advance the full amount of expenses incurred by Indemnitee and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the Certificate of Incorporation or Bylaws of the Company (or any agreement between the Company and Indemnitee), without regard to any rights Indemnitee may have against the Secondary Indemnitors; and (iii) it irrevocably waives, relinquishes and releases the Secondary Indemnitors from any and all claims against the Secondary Indemnitors for contribution, subrogation or any other recovery of any kind in respect of the amounts as provided for in subsection (ii) of this sentence. The Company further agrees that no advancement or payment by the Secondary Indemnitors (or any insurer under a policy provided by the Secondary Indemnitors) to or on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification from the Company shall affect the foregoing. Any Secondary Indemnitors shall have a right of contribution and/or be subrogated to the extent they make an advancement or payment on behalf of Indemnitee to all of the rights of recovery of the Indemnitee against the Company. The Company and the Indemnitee agree that the Secondary Indemnitors are express third party beneficiaries of the terms of this Section 5.


6. No Presumptions/Burden of Proof. Provided Indemnitee complies with Section 11(c) of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval), or conviction, or upon a plea of no contest, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or did not have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met that standard of conduct or did not have that belief, shall be a defense to Indemnitee’s claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified under this Agreement, the Company shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 8. In all cases, the burden of proof shall be on the Company to establish by clear and convincing evidence that Indemnitee is not entitled to indemnification.

7. Advancement of Expenses. To the extent not prohibited by law, the Company shall advance the Expenses actually and reasonably incurred by Indemnitee in connection with any proceeding. Such advancement shall be made within twenty (20) after the receipt by the Company of a statement or statements requesting such advances, which shall include invoices received by Indemnitee in connection with such Expenses. In the case of invoices in connection with legal services, any references to legal work performed or to expenditures made that would cause Indemnitee to waive any privilege accorded by applicable law shall not be included with the invoice. Advances shall be unsecured, interest free and without regard to Indemnitee’s ability to repay the advances. Indemnitee’s right to such advancement is not subject to the satisfaction of any standard of conduct. Advances shall include any and all Expenses actually and reasonably incurred by Indemnitee pursuing an action to enforce Indemnitee’s right to indemnification under this Agreement or otherwise, including expenses incurred preparing and forwarding statements to the Company to support the advances claimed. Indemnitee acknowledges that the execution and delivery of this Agreement shall constitute an undertaking providing that, to the fullest extent required by law, Indemnitee shall repay the advance (without interest) if and to the extent that it is ultimately determined by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. No other undertaking shall be required. The right to advances under this Section 7 shall continue until final disposition of any proceeding, including any appeal. Without limiting the generality or effect of the provisions of this paragraph, within thirty (30) days after any request by Indemnitee, the Company shall: (a) pay such Expenses on behalf of Indemnitee; (b) advance to Indemnitee funds in an amount sufficient to pay such Expenses; or (c) reimburse Indemnitee for such Expenses. The Company shall not seek from a court, or agree to, a “bar order” which would have the effect of prohibiting or limiting the Indemnitee’s rights to receive advancement of expenses under this Agreement.

8. Notice and Other Indemnification Procedures.

(a) Notification of Proceeding. Indemnitee shall notify the Company in writing promptly upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any proceeding or matter which may be subject to indemnification or advancement of Expenses covered under this Agreement. The written notification to the Company shall include a description of the nature of the proceeding and the facts underlying the proceeding. The failure of Indemnitee to notify the Company as required by this paragraph shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise. Any delay in so notifying the Company shall not constitute a waiver by Indemnitee of any rights under this Agreement.

(b) Request for Indemnification Payments. To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request. Any such written request shall include such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification under the terms of this Agreement.

(c) Determination of Right to Indemnification Payments. Upon written request by Indemnitee for indemnification pursuant to Section 8(b), a determination with respect to Indemnitee’s entitlement to indemnification shall be made in the specific case by one of the following four methods, which shall be at the election of the Board of Directors: (1) by a majority vote of the Disinterested Directors, even though less than a quorum; (2) by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum; (3) if there are no Disinterested Directors or if the Disinterested Directors so direct, by Independent Counsel selected by the Company and approved by Indemnitee in a


written opinion to the Board of Directors, a copy of which shall be delivered to the Indemnitee; or (4) if so directed by the Board of Directors, by the stockholders of the Company (each of (1)-(4) and as applicable, a “Reviewing Party”). Notwithstanding the previous sentence, if there has been a Change in Control, then such determination shall be made by Independent Counsel selected by Indemnitee and approved by the Company, which approval shall not be unreasonably withheld. Indemnification payments requested by Indemnitee under Section 2 shall be made by the Company no later than sixty (60) days after receipt of the written request of Indemnitee. Claims for advancement of Expenses shall be made under the provisions of Section 7.

(d) Application for Enforcement. In the event the Company fails to make timely payments as set forth in Sections 7 or 8(b) above, Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing Indemnitee’s right to indemnification or advancement of Expenses pursuant to this Agreement. In such an enforcement hearing or proceeding, the burden of proof shall be on the Company to prove that indemnification or advancement of Expenses to Indemnitee is not required under this Agreement or permitted by applicable law. In any proceeding to enforce any rights pursuant to this Agreement, the Company shall be precluded from asserting that the procedures and presumptions of this Agreement are not valid, binding and enforceable. If requested by Indemnitee, the Company shall stipulate in any such court that the Company is bound by all the provisions of this Agreement and is precluded from making any assertion to the contrary. Any determination by the Reviewing Party that Indemnitee is not entitled to indemnification under this Agreement shall not be a defense by the Company to the action nor create any presumption that Indemnitee is not entitled to indemnification or advancement of Expenses under this Agreement.

(e) Indemnification of Certain Expenses. The Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred in connection with any hearing or proceeding under this Section 8 unless the Company prevails in that hearing or proceeding on the merits in all material respects.

9. Assumption of Defense. In the event the Company shall be requested by Indemnitee to indemnify Indemnitee and/or pay the Expenses of any proceeding, but only if appropriate, the Company shall be entitled, upon written notice by the Company to Indemnitee within ten days of the Company’s receipt of written notice pursuant to Section 8, to assume the defense of such proceeding, or to participate to the extent permissible in such proceeding, with counsel reasonably acceptable to Indemnitee (which approval shall not be unreasonably withheld, conditioned or delayed). Upon assumption of the defense by the Company and the retention of counsel by the Company, the Company shall not be liable to Indemnitee under this Agreement for any fees of counsel subsequently incurred by Indemnitee with respect to the same proceeding, except to the extent necessary to avoid any prejudice to Indemnitee’s ability to defend the action as a result of any failure by the Company to take prompt action in the defense of the claim. Notwithstanding the previous sentence, Indemnitee shall have the right to employ separate counsel in such a proceeding at Indemnitee’s sole cost and expense. If Indemnitee’s counsel delivers a written notice to the Company stating that such counsel has reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense or the Company shall not, in fact, have employed counsel or otherwise actively pursued the defense of such proceeding within a reasonable time, then the fees and Expenses of Indemnitee’s counsel to defend such proceeding shall be subject to the indemnification and advancement of Expenses provisions of this Agreement. In any circumstance where the Company and Indemnitee are represented by separate counsel, the party having responsibility for defense of a proceeding shall provide the other party and its legal counsel with all copies of pleadings and material correspondence relating to the proceeding. Indemnitee and the Company shall reasonably cooperate in the defense of any proceeding with respect to which indemnification is sought under this Agreement, regardless of whether the Company or Indemnitee assumes the defense of that proceeding.

10. Insurance.

(a) The Company shall use its best efforts to obtain and maintain in full force and effect an insurance policy or policies providing liability insurance for Agents (“D&O Insurance”). Indemnitee shall be covered by such policy or policies in accordance with its or their terms in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company’s independent directors, if Indemnitee is an independent director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, if Indemnitee is not an officer or director but is a key employee. If, at the time of the receipt of a notice of a claim pursuant to the terms of this Agreement, the Company has D&O Insurance in effect or otherwise potentially available, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the relevant policy or policies. The Company shall then take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.


(b) In the event of a Change in Control or the Company’s becoming insolvent (including being placed into receivership or entering the federal bankruptcy process), to the extent reasonably practicable, the Company shall maintain in force any and all insurance policies then maintained by the Company in providing insurance—directors’ and officers’ liability, fiduciary, employment practices or otherwise—in respect of Indemnitee, for a fixed period of six (6) years after the Change in Control or the Company’s becoming insolvent (a “Tail Policy”). Such coverage shall be non-cancellable. The Tail Policy shall be placed and serviced for the duration of its term by the Company’s incumbent insurance broker. Such broker shall place the Tail policy with the incumbent insurance carriers using the policies that were in place at the time of the Change in Control (unless the incumbent carriers will not offer such policies) in which case the Tail Policy placed by the Company’s insurance broker shall be substantially comparable in scope and amount as the expiring policies, and the insurance carriers for the Tail Policy shall have an AM Best rating that is the same or better than the AM Best ratings of the expiring policies).

11. Exceptions.

(a) Certain Matters. Despite any provision in this Agreement to the contrary, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee on account of any proceeding with respect to: (i) remuneration paid to Indemnitee if it is determined by final judgment not subject to further appeal that such remuneration was in violation of law; (ii) a final judgment not subject to further appeal rendered against Indemnitee for an accounting, disgorgement or repayment of profits made from the purchase or sale by Indemnitee of securities of the Company against Indemnitee or in connection with a settlement by or on behalf of Indemnitee to the extent it is acknowledged by Indemnitee and the Company that such amount paid in settlement resulted from Indemnitee’s conduct from which Indemnitee received monetary personal profit to which Indemnitee was not entitled, pursuant to the provisions of Section 16(b) of the Exchange Act, or other provisions of any federal, state or local statute or rules and regulations under those statutes; or (iii) on account of conduct that is established by a final judgment not subject to further appeal as constituting a breach of Indemnitee’s duty of loyalty to the Company or resulting in any personal profit or advantage to which Indemnitee is not legally entitled. For purposes of the foregoing sentence, a final judgment may be reached solely in the underlying proceeding.

(b) Claims Initiated by Indemnitee. Despite any provision in this Agreement to the contrary, the Company shall not be obligated to indemnify or advance Expenses to Indemnitee with respect to proceedings or claims initiated or brought by Indemnitee against the Company or its Agents and not by way of defense, except: (i) with respect to proceedings brought to establish or enforce a right to indemnification or advancement under this Agreement or under any other agreement, provision in the Bylaws or Certificate of Incorporation or applicable law; or (ii) with respect to any other proceeding initiated by Indemnitee that is either approved by the Board of Directors or Indemnitee’s participation is required by applicable law. However, indemnification or advancement of Expenses may be provided by the Company in specific cases if the Board of Directors determines it to be appropriate.

(c) Settlements. Despite any provision in this Agreement to the contrary, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee under this Agreement for any amounts paid in settlement of a proceeding effected without the Company’s written consent unless the Company is acting contrary to the terms of this Section 11. Neither the Company nor Indemnitee shall unreasonably withhold consent to any proposed settlement. The Company shall not settle any action or claim in any manner which would impose any penalty or limitation on the Indemnitee without Indemnitee’s written consent, which may be given or withheld in Indemnitee’s sole discretion. On its own behalf, the Company shall not settle any part of any Proceeding to which Indemnitee is party with respect to other parties (including the Company) without the written consent of Indemnitee if any portion of such settlement is to be funded from any corporate insurance policy under which Indemnitee is an insured and for which Indemnitees claims may be covered unless approved by: (i) the written consent of Indemnitee; or (ii) a majority of the independent directors of the Board of Directors. Notwithstanding the previous sentence, the right to constrain the Company’s use of corporate insurance as described in this Section 11 shall terminate at the time the Company concludes under the terms of this Agreement that: (i) Indemnitee is not entitled to indemnification pursuant to this agreement; or (ii) such indemnification obligation to Indemnitee has been fully discharged by the Company.

(d) Prior Payments. Subject to Section 5, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify or advance Expenses to Indemnitee under this Agreement for which payment has actually been made to or on behalf of Indemnitee under any Company insurance policy or other indemnity provision (excluding pursuant to Section 5, any Secondary Indemnitors), except with respect to any excess beyond the amount paid under any insurance policy or indemnity policy. Notwithstanding the previous sentence, payment made to Indemnitee pursuant to an insurance policy (either purchased and maintained by Indemnitee at his or her own expense or purchased in favor of Indemnitee by a Secondary Indemnitor) of any amounts otherwise indemnifiable or obligated to be made pursuant to this Agreement shall not reduce the Company’s obligations to Indemnitee pursuant to this Agreement.


12. Non-exclusivity and Survival of Rights. The provisions for indemnification and advancement of Expenses set forth in this Agreement shall not exclude or limit any other rights to which Indemnitee may at any time be entitled under any provision of applicable law, the Company’s Certificate of Incorporation, Bylaws or other agreements, both as to action in Indemnitee’s official capacity and Indemnitee’s action as an Agent, in any court in which a proceeding is brought. Indemnitee’s rights under this Agreement shall continue after Indemnitee has ceased acting as an Agent and shall inure to the benefit of the heirs, executors, administrators and assigns of Indemnitee. The obligations and duties of the Company to Indemnitee under this Agreement shall be binding on the Company and its successors and assigns until terminated in accordance with its terms. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by written agreement, expressly to: (i) assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place; and (ii) agree to indemnify Indemnitee to the fullest extent permitted by law.

No amendment, alteration or repeal of this Agreement or of any provision of this Agreement shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his or her corporate status prior to such amendment, alteration or repeal. To the extent that a change in the DGCL, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s Certificate of Incorporation, Bylaws and this Agreement, the parties acknowledge and agree that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy provided for in this Agreement is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given under this Agreement or now or after the date of this Agreement existing at law or in equity or otherwise. The assertion or employment of any right or remedy under this Agreement, or otherwise, by Indemnitee shall not prevent the concurrent assertion or employment of any other right or remedy by Indemnitee.

13. Term. This Agreement shall continue in effect until the later of: (a) ten years after the date that Indemnitee shall have ceased to serve as an Agent; or (b) for as long as any proceeding is pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses under this Agreement, even after Indemnitee has ceased to serve as an Agent, and for one year after the final termination of such proceeding, including any appeal, and of any proceeding commenced by Indemnitee pursuant to this Agreement relating to that initial proceeding.

14. Definitions and Construction of Certain Phrases.

(a) Agent. For purposes of this Agreement, the term “Agent” of the Company means any person who: (i) is or was a director, officer, employee, agent, or other fiduciary of the Company or a subsidiary of the Company; or (ii) is or was serving at the request of the Company or a subsidiary of the Company, as a director, officer, employee, agent, or other fiduciary of a foreign or domestic corporation, partnership, joint venture, trust or other enterprise. References to “serving at the request of the Company” shall include, but not be limited to, any service as a director, officer, employee or agent of the Company or any other entity which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries, including as a deemed fiduciary with respect to such employee benefit plan, its participants or beneficiaries.

(b) Change in Control. For purposes of this Agreement, a “Change in Control” means the time at which Ares Corporate Opportunities Fund IV, L.P. (together with its affiliates, “Ares”) and Ontario Teachers’ Pension Plan Board (together with its affiliates, “OTPP,” and, together with Ares, the “Sponsors”) cease to have, in the aggregate, beneficial ownership of a majority of the voting power of the Company’s outstanding capital stock (for this purpose, the term “beneficial ownership” has the meaning given to it in the rules under the Exchange Act).

(c) Disinterested Director. For purposes of this Agreement, the term “Disinterested Director” shall mean a director of the Company who is not and was not a party to the proceeding in respect of which indemnification is sought by Indemnitee.

(d) Exchange Act. For purposes of this Agreement, the term “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

(e) Expenses. For purposes of this Agreement, the term “Expenses” shall be broadly construed and shall include, without limitation, all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys’, witness, or other professional fees and related disbursements, and other out-of-pocket costs of whatever nature), actually and reasonably incurred by Indemnitee in connection with the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, the DGCL or otherwise. “Expenses” shall also include: (i) Expenses incurred in connection with any appeal resulting from any proceeding, including without limitation the premium, security for and other costs relating to any cost bond, supsedeas bond or other appeal bond or its equivalent; (ii) expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise; (iii) any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement (on a grossed up basis); and (iv) any interest, assessments or other charges in respect of the amounts in clauses (i) through (iii).


(f) Independent Counsel. For purposes of this Agreement, the term “Independent Counsel” means a law firm, or a partner (or, if applicable, member) of such a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five (5) years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either of them, or (ii) any other party to the proceeding giving rise to a claim for indemnification under this Agreement. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. The Company shall pay the reasonable fees and expenses of the Independent Counsel referred to above and to fully indemnify such counsel against any and all expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant to this Agreement.

(g) Liabilities. For purposes of this Agreement, the term “Liabilities” shall be broadly construed and shall include, but not be limited to, judgments, damages, deficiencies, liabilities, losses, penalties, excise taxes, fines, assessments and amounts paid in settlement, including any interest and any federal, state, local or foreign taxes imposed as a result of the actual or deemed receipt of any payment under this Agreement.

(h) Proceedings. For purposes of this Agreement, the term “proceeding” shall be broadly construed and shall include, but not be limited to, any threatened, pending, or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing, or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative or investigative nature, and whether formal or informal in any case, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness, or otherwise by reason of: (i) the fact that Indemnitee is or was a director or officer of the Company; (ii) the fact of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting as an Agent; or (iii) the fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, and in any such case described above, whether or not serving in any such capacity at the time any Liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses may be provided under this Agreement. If the Indemnitee believes in good faith that a given situation may lead to or culminate in the institution of a proceeding, this shall be considered a proceeding under this paragraph.

(i) Subsidiary. For purposes of this Agreement, the term “subsidiary” means any corporation, limited liability company, or other entity, of which more than 50% of the outstanding voting securities or equity interests are owned, directly or indirectly, by the Company and one or more of its subsidiaries, and any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise of which Indemnitee is or was serving at the request of the Company as an Agent.

(j) Voting Securities. For purposes of this Agreement, “Voting Securities” shall mean any securities of the Company that vote generally in the election of directors.

15. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of that payment to all of the rights of recovery of Indemnitee against other persons (other than the Sponsors or any insurer under a policy provided by the Sponsors), who, at the request and expense of the Company, shall execute all papers required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights.

16. Interpretation of Agreement. It is understood that the parties intend this Agreement to be interpreted and enforced so as to provide indemnification and advancement of Expenses to Indemnitee to the fullest extent permitted by law as of and following the date of this Agreement.

17. Severability/No Imputation. If any provision of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (a) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 16. The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Company or the Company itself shall not be imputed to Indemnitee for purposes of determining any rights under this Agreement.


18. Amendment and Waiver. No supplement, modification, amendment, or cancellation of this Agreement shall be binding unless executed in writing by the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision of this Agreement (whether or not similar) nor shall such waiver constitute a continuing waiver.

19. Notice. Except as otherwise provided in this Agreement, any notice or demand which, by the provisions of this Agreement, is required or which may be given to or served upon the parties shall be in writing and, if by electronic transmission, shall be deemed to have been validly served, given or delivered when sent, and, if by overnight delivery, courier or personal delivery, shall be deemed to have been validly served, given or delivered upon actual delivery, and, if mailed, shall be deemed to have been validly served, given or delivered three (3) business days after deposit in the United States mail, as registered or certified mail, with proper postage prepaid and addressed to the party or parties to be notified at the addresses set forth on the signature page of this Agreement (or such other address(es) as a party may designate for itself by like notice). If to the Company, notices and demands shall be delivered to the attention of the Secretary of the Company.

20. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware.

21. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original, but all of which together shall constitute but one and the same Agreement. Only one counterpart need be produced to evidence the existence of this Agreement.

22. Headings. The headings of the sections of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction of this Agreement.

23. Entire Agreement. Subject to Section 11, this Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements, understandings and negotiations, written and oral, between the parties with respect to the subject matter of this Agreement. Notwithstanding the previous sentence, this Agreement is a supplement to and in furtherance of the Company’s Certificate of Incorporation, Bylaws, the DGCL and any other applicable law, and shall not be deemed a substitute therefor, and does not diminish or abrogate any rights of Indemnitee under the Company’s Certificate of Incorporation, Bylaws, the DGCL and any other applicable law.

24. Determination of Good Faith/Safe Harbor. For purposes of any determination of good faith, Indemnitee shall be presumed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Company, including financial statements, or on information supplied to Indemnitee by the officers of the Company in the course of their duties, or on the advice of legal counsel for the Company or the Board of Directors or counsel selected by any committee of the Board of Directors or on information or records given or reports made to the Company by an independent certified public accountant or by an appraiser, investment banker, compensation consultant, or other expert selected with reasonable care by the Company or the Board of Directors or any committee of the Board of Directors. The provisions of this Section 24 shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct. Whether or not the foregoing provisions of this Section 24 are satisfied, it shall in any event be presumed that Indemnitee has at all times acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company.

25. Information Sharing. If Indemnitee is the subject of or is implicated in any way during an investigation, whether formal or informal, the Company shall promptly notify the Indemnitee of such investigation. The Company shall further share with Indemnitee any information it has turned over to any third parties concerning the investigation (“Shared Information”) at the time such information is so furnished, unless such notice is prohibited by any law, rule, regulation or formal order from a regulatory agency, would breach a confidentiality obligation owed to a third party or would waive the Company’s attorney-client privilege. By executing this agreement, Indemnitee agrees that such Shared Information is material non-public information that Indemnitee is obligated to hold in confidence and may not disclose publicly Notwithstanding the previous sentence, Indemnitee is permitted to use the Shared Information and to disclose such Shared information to Indemnitee’s legal counsel and third parties solely in connection with defending Indemnitee from legal liability.

26. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such proceeding; and/or (ii) the relative fault of the Company and Indemnitee in connection with such event(s) and/or transaction(s).


27. Consent to Jurisdiction. The Company and Indemnitee irrevocably and unconditionally: (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the “Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country; (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement; (iii) agree to appoint, to the extent such party is not otherwise subject to service of process in the State of Delaware, an agent in the State of Delaware as such party’s agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware; (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court; and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.


IN WITNESS WHEREOF, the parties hereto have entered into this Agreement effective as of the date first above written.

 

THE AZEK COMPANY INC.,
a Delaware corporation
By:  

 

 

Name:

Title:

Notice

Address

 

1330 W Fulton Street #350

Chicago, IL 60607

Attn: Chief Legal Officer

 

with a copy (which shall not constitute notice) to:

 

Sullivan & Cromwell LLP

1870 Embarcadero Rd.

Palo Alto, CA 94303

Attn: John L. Savva

Email: savvaj@sullcrom.com;

Attn: Rita-Anne O’Neill

Email: oneillr@sullcrom.com

 

INDEMNITEE
By:  

 

 

Name:

[Title:]

Notice Address   [•]

[Signature Page to Indemnification Agreement]

Exhibit 10.24

EMPLOYMENT AGREEMENT

THIS AGREEMENT is made effective as of the 26th day of May, 2016 by and among CPG International LLC, a Delaware corporation (“Employer”), and Jesse Singh (the “Executive”).

RECITALS

WHEREAS, the Executive desires to be employed by the Employer; and

WHEREAS, the Employer desires to employ the Executive and to utilize his management services as indicated herein, and the Executive has agreed to provide such management services to the Employer; and

WHEREAS, as a condition precedent and a material inducement for the Employer to employ and pay the Executive, the Executive has agreed to execute this Agreement and the Non-Competition Agreement (as defined below) and be bound by the provisions herein and therein; and

WHEREAS, capitalized terms used but not defined herein have the meaning ascribed to them in the Amended and Restated Agreement of Limited Partnership of AOT Building Properties, L.P. (the “Partnership”), dated September 30, 2013 (the “LP Agreement”);

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

PROVISIONS

1. Term and Duties.

(a) The Employer hereby agrees to employ the Executive as its President and Chief Executive Officer, with duties and responsibilities consistent with such positions, commencing on a date mutually agreed by the parties within ten (10) days of the date hereof (the “Start Date”) and continuing until either the Executive or the Employer terminates such employment (the “Employment Period”). On or as soon as practicable following the Start Date, the Executive will be appointed to the Board of Directors of the Employer (the “Board”). The Executive’s employment with the Employer will be for an unspecified duration and constitutes “at-will” employment.

(b) During the Employment Period, Executive will report directly to the Board. The Executive shall devote substantially all of his business time and attention and Executive’s best efforts (excepting vacation time, holidays, sick days and periods of disability) to Executive’s employment and service with the Employer and its Subsidiaries, consistent with and subject to the direction and control of the Board; provided, however, that this provision will not be interpreted as prohibiting the Executive from (i) managing Executive’s personal investments (so long as such investment activities are of a passive nature), (ii) engaging in charitable or civic activities, (iii) participating on the board of directors or similar body of up to one (1) outside corporation or entity with the consent of the Board, which shall not be unreasonably withheld or


(iv) participating on boards of directors or similar bodies of non-profit corporations and other organizations, so long as such activities in clauses (i) through (iv) in the aggregate do not (A) interfere with the performance of the Executive’s duties and responsibilities hereunder, (B) create a fiduciary conflict, or (C) violate any of the Executive’s restrictive covenants.

2. Principal Work Location. The Executive’s principal place of employment will be in Skokie, Illinois, subject to reasonable business travel consistent with the Executive’s duties and responsibilities. The Employer understands and agrees that the Executive’s current principal place of residence is Minneapolis, Minnesota. The Employer will provide the Executive with reimbursement for temporary housing in or near Skokie, Illinois, for twelve (12) months following the Start Date in an amount not to exceed $7,500 per month (including rent and utilities), or such higher amount as is mutually agreed by the parties. Employer will reimburse Executive for his weekly cost of travel to and from Minneapolis, Minnesota for six (6) months following the Start Date (or such longer period as mutually agreed by the parties).

3. Compensation While Employed.

(a) Base Compensation. In consideration of the services to be rendered by the Executive while employed, the Employer shall pay to the Executive, in the aggregate, $650,000 per year (“Base Compensation”), payable bi-weekly and prorated for any partial employment period. The Base Compensation will be subject to annual review and adjustment by the Employer; provided that such review shall not result in a decrease in Base Compensation from that in effect at the time of such review.

(b) Bonuses. Subject only to the limitations set forth in this Agreement, commencing with the fiscal year beginning October 1, 2015, while employed the Executive shall be eligible to receive an annual target bonus (the “Target Bonus”) equal to 100% of Base Compensation, based upon the achievement of objectives under the Employer’s annual management incentive plan, as the Compensation Committee of the Board shall determine in consultation with the Executive. The Executive’s 2016 fiscal year bonus will be equal to (i) $650,000, adjusted for the Employer’s actual performance on the same scale as that applicable to other senior executives of the Employer, multiplied by (ii) 7/12.

4. Benefits.

(a) Subject to Section 4(b) below, the Executive shall be eligible to participate in any benefit plans offered by the Employer, such as health, dental, life insurance, vision, vacations and 401(k) (but excluding any severance or bonus plans unless specifically referenced in this Agreement) offered by the Employer as in effect from time to time (collectively, “Benefit Plans”), on terms no less favorable than those generally available to other senior executives of the Employer, subject in each case to the generally applicable terms and conditions of the plan, benefit or program in question; provided that (i) this Section 4(a) is not a “most favored nations” provision and only entitles the Executive to receive benefits that are made generally available to other senior executives of the Employer; and (ii) in lieu of any long-term disability benefits generally available to the employees of the Employer, the Executive shall be entitled to a long-term disability insurance policy, funded by the Employer, which would provide at least $25,000 in monthly benefits, commencing no later than three (3) months following the date on which Executive becomes totally and permanently disabled.

 

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(b) Notwithstanding the foregoing, while employed the Executive shall be entitled, at a minimum, to the following: (i) major medical insurance coverage comparable to the insurance coverage provided by the Employer for executive officers; (ii) ten (10) days of paid sick leave during each full annual period (prorated for 2016) and (iii) five (5) weeks of paid vacation leave during each annual period (prorated for 2016).

5. Expenses.

(a) Unless otherwise determined by the Board, while employed, the Executive shall be authorized to incur necessary and reasonable travel, entertainment and other business expenses in connection with his duties hereunder. The Employer shall reimburse the Executive for such expenses upon presentation of an itemized account and appropriate supporting documentation, all in accordance with the Employer’s generally applicable policies.

(b) The Employer shall promptly reimburse Executive for all reasonable and customary relocation, travel and moving expenses incurred by him within eighteen (18) months of the Start Date as a direct result of his initial relocation from his current primary residence in Minnesota to a location within reasonable commuting distance of the Employer’s executive offices in the greater Chicago, Illinois, area (the “Relocation Expenses”). The Relocation Expenses that Executive may incur shall be as mutually agreed by the parties, but shall include reimbursement of reasonable realtor’s fees and such other fees as the parties may mutually agree; at least two (2) house-hunting trips to Chicago for Executive and/or his spouse and dependents as reasonably necessary or desirable; the cost of packing and moving Executive’s household goods and the moving of all automobiles (except those that Executive chooses to drive) from Minnesota to Executive’s place of accommodation in Chicago; the cost of temporary storage of Executive’s household goods for up to six (6) months; and airfare to Chicago for all members of Executive’s immediate family. The Relocation Expenses do not include payment of any losses in connection with any capital transaction, such as the sale of a home. In the event that any of the payments or benefits due to Executive under this Section 5(b) is taxable to Executive, the Employer shall promptly make additional “gross up” payments to Executive sufficient to cover such additional taxes. The Employer shall pay Executive any amounts due to him under this Section 5(b) within thirty (30) days after submission of written documentation substantiating such amounts, but no later than December 31 of the year following the year in which they were incurred, and payment thereof shall be administered in compliance with Code Section 409A (as defined in Section 11 below).

6. Equity Participation.

(a) Upon execution of this Agreement, the Executive will be awarded a grant (the “Special Signing Grant”) in the amount of $1,000,000, payable 50% in the form of cash and 50% in the form of Common Interests of the Partnership. The cash portion of the Special Signing Grant will be paid and the equity portion of the Special Signing Grant will vest upon the earlier of (i) the second anniversary of the Start Date, subject to the Executive’s continued employment with the Employer, and (ii) the Executive’s resignation with Good Reason or

 

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termination without Cause. The equity portion of the Special Signing Grant will be subject to the terms of the LP Agreement and the applicable LP Interest Agreement (which will be substantially in the form of Exhibit A attached hereto). Notwithstanding Article X of the LP Agreement, the equity portion of the Special Signing Grant will not be subject to redemption by the Partnership upon a termination of employment, but will be subject to redemption by the Partnership at “Fair Market Value” as defined in the LP Agreement (“FMV”) upon a material breach of the Non-Competition Agreement. If the Executive files a timely election under Section 83(b) of the Code with respect to the equity portion of the Special Signing Grant, the Employer will provide the Executive with a full recourse loan (the “Loan”) in the amount of up to $250,000 for the purpose of paying any resulting tax liabilities. The Loan will bear interest at the federal short-term rate that is in effect on the date that the Loan is made and will come due in two (2) years (or upon earlier termination of employment). Employer may effect the repayment of the Loan by deducting the outstanding balance of the Loan from the cash portion of the Special Signing Grant when paid or from any severance payment paid to the Executive by the Employer.

(b) Subject to the terms and conditions set forth in the LP Agreement, within ten (10) business days after the Start Date, Executive shall purchase 500 Common Interests of the Partnership at a price equal to $1,000 per Common Interest. Notwithstanding Article X of the LP Agreement, such Common Interests will not be subject to redemption by the Partnership upon a termination of employment but will be subject to redemption by the Partnership at FMV upon a material breach of the Non-Competition Agreement.

(c) Subject to the terms and conditions set forth in the LP Agreement and the applicable LP Interest Agreement (which shall be substantially in the form of Exhibit B attached hereto), promptly after the Start Date, Executive will be granted 7,565 Time Vested Profits Interests and 7,565 Performance Vested Profits Interests (the “Base Interests”).

(d) Subject to the terms and conditions set forth in the LP Agreement and the applicable LP Interest Agreement (which shall be substantially in the form of Exhibit C attached hereto), promptly after the Start Date, the Executive will be granted 1,500 Time Vested Profits interests (the “Additional Interests”). Notwithstanding Article X of the LP Agreement, such Additional Interests shall be subject to redemption by the Partnership at FMV upon a resignation without Good Reason within three (3) years of the grant date.

7. Termination. The Executive’s employment shall terminate upon the first to occur of the following (each a “Termination Date”):

(a) The Executive’s death or disability (mental, physical or emotional), so that the Executive cannot substantially perform his duties hereunder for a period of ninety (90) consecutive days or for one hundred eighty (180) days during any 365-day period;

(b) The Executive’s voluntary termination of his employment for any reason, upon not less than ten (10) business days’ written notice to the Employer; provided, however, that any termination by Executive pursuant to Section 7(d) shall not be treated as a voluntary termination under this Section 7(b);

 

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(c) The Employer’s termination of the Executive’s employment with or without Cause (as defined in Section 10(a) below); or

(d) The Executive’s termination of his employment for Good Reason (as defined in Section 10(b) below).

8. Termination Payments.

(a) Except as otherwise provided herein, if the Executive’s employment is terminated pursuant to Section 7, the Executive’s Base Compensation and other benefits (it being understood that no Target Bonus shall be payable), if any, shall terminate at the end of the month during which such termination occurs. In addition, upon Executive’s termination of employment for any reason, the Employer shall (i) pay to Executive his accrued and unpaid Base Compensation and accrued but unused vacation no later than the next payroll date following such termination, and (ii) within thirty (30) days following such termination, reimburse Executive his expenses under Section 5 hereof (clauses (i) and (ii), collectively, the “Accrued Compensation”).

(b) Upon termination of the Executive’s employment without Cause or upon the Executive’s termination of his employment for Good Reason, the Employer shall be obligated, in lieu of any other remedies available to the Executive, to pay the Executive (i) the sum of 2.0 times his current Base Compensation and 1.0 times his current Target Bonus in equal monthly payments over the 18 months following the Termination Date; (ii) a pro rata portion of the annual bonus for the full year of termination based on the actual performance of the Employer for the full year of termination and the number of days the Executive was employed in such year (payable at such times as annual bonuses are paid to the Employer’s executives generally); (iii) any unpaid bonus already earned but not paid for the prior year; and (iv) continued payment of health care premiums for twenty-four (24) months after the Termination Date or, if earlier, until the Executive obtains new health care benefits from another Employer (the “Termination Payment”); provided, however, that payment of the Termination Payment is conditioned on (x) the Executive’s execution of a release that becomes effective within sixty (60) days following the date of termination of employment in favor of the Employer and its affiliates in the form attached hereto as Exhibit D and (y) the Executive’s compliance with the Non-Competition Agreement attached hereto as Exhibit E (the “Non-Competition Agreement”). The Termination Payment is payable under this Section 8(b) in accordance with the payroll practices of the Employer and shall not commence until the first payroll period following the sixtieth (60th) day after the date of termination of employment. The first such payment under this Section 8(b) shall be equal to the aggregate amount that would have been paid to the Executive during the first sixty (60) days following the date of termination had the delay provided herein not applied.

(c) In the event of a termination of the Executive’s employment pursuant to Section 7(a) as a result of his death or disability, the Employer shall pay to the Executive, his estate or legal representative, as the case may be, any unpaid bonus already earned but not paid for the prior year, all amounts accrued to the date of termination and payable to the Executive under any bonus, incentive or other plan, and a pro rata portion of the annual bonus for the full year of termination based on the actual performance of the Employer for the full year of termination and the number of days the Executive was employed in such year (payable at such times as annual bonuses are paid to the Employer’s executives generally).

 

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(d) In the event of a termination of the Executive’s employment for Cause, the Executive’s termination of his employment without Good Reason, the Employer shall pay to the Executive all amounts accrued to the date of termination and payable to the Executive under any bonus, incentive or other plan.

(e) Any termination of the Executive’s employment shall not adversely affect or alter the Executive’s rights under any employee benefit plan of the Employer in which the Executive, at the date of termination, has a vested interest, unless otherwise provided in such employee benefit plan or any agreement or other instrument attendant thereto.

9. Restrictive Covenants. This Agreement is subject to the Executive’s entering into the Non-Competition Agreement.

10. Definitions.

(a) “Cause” as used herein shall mean the Executive’s (i) conviction for an act which constitutes common law fraud, embezzlement or a felony, or for an act of moral turpitude; (ii) gross negligence on the part of the Executive in the performance of his duties; (iii) breach of his duty of loyalty or care to the Employer that causes material injury to the Employer, except acts taken, or not taken, in good faith and with a reasonable belief that such acts (or inaction) were in the best interests of the Employer; (iv) ongoing willful refusal or failure to perform the Executive’s duties or willful refusal or failure conform to the reasonable direction of the Board of Directors, in each case after receiving written notice describing his noncompliance and being given a ten (10) days opportunity to cure (to the extent curable) such noncompliance; or (v) material breach by the Executive of this Agreement, the Non-Competition Agreement or any other material written agreement with the Employer, which is not cured (to the extent curable) within ten (10) business days following written notice from the Employer.

(b) “Good Reason” shall mean (i) there is a reduction of the level of the Employer’s base salary or target bonus, (ii) a material reduction in the Executive’s duties, authority, or scope of duties, provided that this clause (ii) shall not be triggered by the Sponsors’ hands-on involvement with the Employer; (iii) removal of the Executive from his position and responsibilities, which is not effected for Disability or for Cause, including without limitation, failure to appoint the Executive to the Board of Directors, (iv) failure to pay the Executive the compensation payable under the Agreement; (v) the relocation of the Employer’s office at which the Executive is principally employed to a location more than 35 miles from such office, except for required travel on the Employer’s business to an extent substantially consistent with the Executive’s business travel obligations, or (vi) a material breach by the Employer of this Agreement, in each case provided that the Executive has given the Employer written notice of the termination within ninety (90) days of the first date on which the Executive has knowledge of such event or conduct and the Executive has provided the Employer with at least thirty (30) days to cure (to the extent curable).

 

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11. Code Section 409A.

(a) The parties agree that this Agreement shall be interpreted to comply with or be exempt from Section 409A of the Code, and the regulations and guidance promulgated thereunder to the extent applicable (collectively, “Code Section 409A”), and all provisions of this Agreement be construed in a manner consistent with the requirements for avoiding taxes or penalties under Code Section 409A.

(b) A termination of employment shall not be deemed to have occurred, for purposes of any provision of this Agreement providing for the payment of any amounts or benefits considered “nonqualified deferred compensation” under Code Section 409A upon or following a termination of employment, unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms mean “separation from service.” If Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then with regard to any payment or the provision of any benefit that is considered nonqualified deferred compensation under Code Section 409A payable on account of a “separation from service,” such payment or benefit be made or provided at the date which is the earlier of (i) the expiration of the six (6)-month period measured from the date of such “separation from service” of Executive, and (ii) the date of Executive’s death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this Section 11(b) (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed on the first business day following the expiration of the Delay Period to Executive in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.

(c) With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits, to be provided in any other taxable year, provided, that, this clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Internal Revenue Code Section 105(b) solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) such payments shall be made on or before the last day of Executive’s taxable year following the taxable year in which the expense occurred.

(d) For purposes of Code Section 409A, Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Employer.

12. Consideration. The Executive acknowledges and agrees that the consideration set forth in the recitals to this Agreement and the rights and benefits hereunder are all and singularly valuable consideration which are sufficient for any or all of the Executive’s covenants set forth herein or in the Non-Competition Agreement.

 

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13. No Prior Agreements. The Executive represents and warrants that his performance of all the terms of this Agreement does not and shall not breach any fiduciary or other duty or any covenant, agreement or understanding (including, without limitation, any agreement relating to any proprietary information, knowledge or data acquired in confidence, trust or otherwise) to which he is a party or by the terms of which he may be bound. The Executive further covenants and agrees not to enter into any agreement or understanding, either written or oral, in conflict with the provisions of this Agreement.

14. Miscellaneous.

(a) Notices. All notices, requests, consents and demands by the parties hereto shall be delivered by hand, by confirmed facsimile transmission, by recognized national overnight courier service or by deposit in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to be notified at the addresses set forth below:

if to the Executive:

Jesse Singh

Address on file with the Employer

with copy to:

Ropes & Gray LLP

Prudential Tower

800 Boylston St.

Boston, MA 02199

Attn: Loretta R. Richard

if to the Employer:

Ares Corporate Opportunities Fund IV, L.P.

c/o Ares Management LLC

2000 Avenue of the Stars, 12th Floor

Los Angeles, CA 90067

Attn: Daniel Lukas

Ontario Teachers’ Pension Plan Board

5650 Yonge Street, 7th & 12th Floor

Toronto, ON M2M 4H5

Attn: Russell Hammond

 

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with copy to:

Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004

Attn: Alison S. Ressler

Rita-Anne O’Neill

Notices shall be effective immediately upon personal delivery or facsimile transmission, one (1) business day after deposit with an overnight courier service or three (3) business days after the date of mailing thereof. Other notices shall be deemed given on the date of receipt. Any party hereto may change the address specified herein by written notice to the other parties hereto.

(b) The Employer agrees that it will reimburse Executive for reasonable legal fees incurred in connection with the negotiation of this Agreement, subject to a maximum of $50,000.

15. No Mitigation or Offset. In the event of any termination of Executive’s employment hereunder, Executive shall be under no obligation to seek other employment or otherwise mitigate the obligations of the Employer under this Agreement, and there shall be no offset against amounts due Executive under this Agreement on account of future earnings by Executive.

16. Indemnification. The Executive will be indemnified by Partnership and the Employer to the extent provided in the by-laws and articles of incorporation of Partnership and the Employer for all services provided by the Executive as an officer or director of the Employer and/or Partnership, whether or not the claim is asserted during the Employment Period. The Employer agrees to maintain reasonable and customary directors’ and officers’ liability insurance with tail coverage of six (6) years following the termination of employment of the Executive.

17. Entire Agreement. This Agreement cancels and supersedes any and all prior agreements and understandings between the parties hereto with respect to the obligations of the Executive. The Executive hereby agrees that, as of the date hereof, this Agreement shall take effect and no further obligations of any kind whatsoever shall be owed by the Employer. This Agreement, the LP Agreement, the LP Interest Agreements referred to herein and the Non-Competition Agreement constitute the entire agreement between the parties with respect to the matters herein and therein provided, and no modifications or waiver of any provision hereof shall be effective unless in writing and signed by the Employer and Executive.

18. Binding Effect. All of the terms and provisions of this Agreement shall be binding upon the parties hereto and its or his heirs, executors, administrators, legal representatives, successors and assigns, and inure to the benefit of and be enforceable by the Employer and its successors and assigns, except that the duties and responsibilities of the Executive hereunder are of a personal nature and shall not be assignable or delegable in whole or in part.

 

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19. Employers Successors. Any successor to the Employer, whether by purchase, lease, merger, consolidation, liquidation or otherwise, or to all or substantially all of the Employer’s business and/or assets shall assume the obligations under (and be entitled to the benefits of and to enforce) this Agreement and shall expressly agree to perform the obligations under this Agreement in the same manner and to the same extent as the Employer would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “the Employer” shall include any successor to the Employer’s business and/or assets that executes and delivers an assumption agreement described in this Section 19 or that becomes bound by the terms of this Agreement by operation of law.

20. Severability. In the event that any provision of this Agreement or application thereof to anyone or under any circumstance is found to be invalid or unenforceable in any jurisdiction to any extent for any reason, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

21. Remedies; Waiver. No remedy conferred upon the Employer by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Employer in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the party possessing the same from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

22. Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

23. Governing Law. The validity, interpretation, construction, performance and enforcement of this Agreement shall be governed by the laws of the State of Illinois, without application of conflict of laws principles.

24. Headings. The captions and headings contained in this Agreement are for convenience only and shall not be construed as a part of the Agreement

25. Withholding Taxes. All payments hereunder will be subject to withholding federal, state, local and social security and other applicable withholding taxes.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

CPG INTERNATIONAL LLC
By:   /s/ Brian Cooper
Name: Brian Cooper
Title: General Counsel
THE EXECUTIVE:
 

 

Name: Jesse Singh


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

CPG INTERNATIONAL LLC
By:                   
Name:
Title:
THE EXECUTIVE:
/s/ Jesse Singh
Name: Jesse Singh

Exhibit 10.25

NON-COMPETITION AGREEMENT

AGREEMENT, made as of the 26th day of May, 2016 by and among CPG International LLC, a Delaware corporation (the “Company”), and Jesse Singh (the “Covenantor”).

W I T N E S S E T H:

WHEREAS, pursuant to that certain Employment Agreement (the “Employment Agreement”), dated as of May 26, 2016 (the “Effective Date”) by and among the Company and the Covenantor, the Covenantor performs services to the Company;

WHEREAS, the Covenantor, by reason of his intimate involvement in the operations and management of the business of the Company will acquire knowledge and expertise relating to the business and operations of the Company;

WHEREAS, the Company would not enter into the Employment Agreement without obtaining the agreement that the expertise and knowledge of the Covenantor will not be put to any use which may in any way harm the Company or its interests;

WHEREAS, Covenantor acknowledges that the Company would not enter into the Employment Agreement unless Covenantor executes and delivers this Agreement, and wishes to forego his right to compete therewith with respect to the business of the Company.

NOW, THEREFORE, in order to induce the Company to enter into the Employment Agreement and in consideration of the promises and of the mutual covenants and agreements contained herein and in the Employment Agreement, the parties hereto, intending legally to be bound, hereby agree as follows:

1. Non-Competition, Non-Solicitation.

(a) Subject to the provisions of Paragraph 1(c) herein below, from and after the date hereof and until twenty-four (24) months following the date of the Covenantor’s termination of employment from the Company, Covenantor shall not, without the prior written consent of the Company:

(i) directly or indirectly, as a sole proprietor, member of a partnership, stockholder, investor, officer or director of a corporation, including, without limitation, as an employee, associate, consultant or agent of any person, partnership, corporation or other business organization or entity, render any service to (including the making of investments in or otherwise providing capital to) any competitor (or any person or entity that is reasonably anticipated to become a competitor within the term hereof) of the Company or its subsidiaries, within the geographic areas described in Paragraph 1(b); it being understood that such a person, partnership, corporation or other business organization or entity is in competition with the Company if it is then engaging or planning to engage within the term hereof, itself or through any joint venture, partnership, or otherwise, in any business in which (A) the Company or any of its subsidiaries (1) has been engaged in prior to the date hereof (unless the Company and its subsidiaries have stopped engaging in such business) or (2) is presently engaged in at the date hereof, or (B) the Company or any of its subsidiaries is engaged in or has taken steps in preparation to engage in during the twelve (12) months prior to the date of Covenantor’s termination of employment from the Company,


(ii) induce or attempt to induce any person or entity which is or was a customer or client of the Company or its subsidiaries, or becomes a customer or client of the Company or its subsidiaries, to terminate or reduce its relationship or otherwise cease doing business in whole or in part with the Company or its subsidiaries,

(iii) solicit, entice, induce or hire any person who is an employee, becomes an employee, or was an employee in the twelve (12) months prior to the date of the Covenantor’s termination of employment from the Company, of the Company or its subsidiaries to become employed by any other person, firm, corporation or to leave his or her employment with the Company or its subsidiaries, or approach any such employee for such purpose or authorize or knowingly approve the taking of such actions by any other person, or

(iv) interfere with any relationship between the Company or its subsidiaries and any of its customers or clients so as to cause harm to the Company or its subsidiaries.

Notwithstanding the foregoing, the restrictions contained herein will not apply with respect to general solicitations or advertisements for positions, but the hiring or retention of employees or independent contractors responding to such solicitations or advertisements shall be prohibited.

(b) The restrictions contained in Paragraph 1(a) shall apply in the specific geographic areas and customer markets within such geographic areas served by the Company or its subsidiaries at any time during the term hereof.

(c) Nothing in this Paragraph 1 shall prohibit Covenantor from (i) engaging in any business that is not in competition with the Company or its subsidiaries, or (ii) investing in the securities of any corporation having securities listed on a national securities exchange, provided that such investment does not exceed 2% of any class of securities of any corporation engaged in business in competition with the Company or its subsidiaries, and provided that such investment represents a passive investment and that neither Covenantor nor any group of persons including him, in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations or otherwise takes any part in its business, other than exercising his or her rights as a shareholder, or seeks to do any of the foregoing.

2. Non-Disclosure of Confidential Information. Covenantor agrees that on and after the date of this Agreement he shall not, without the prior written consent of the Company, use for himself or others, or divulge, disclose or make accessible to any other person, firm, partnership, corporation or other entity, any Confidential Information pertaining to the business of the Company or its affiliates, except when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company, or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Covenantor to divulge, disclose or make accessible such information. All Confidential Information in any Covenantor’s possession shall be returned to the Company

 

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promptly following the date hereof. The term “Confidential Information” shall mean non-public information concerning the Company or its affiliates, including, but not limited to, financial data, strategic business plans, product development or other proprietary product data, customer lists, consulting or licensing agreements, vendor lists, lists of potential customers, pricing and credit techniques, private processes, marketing plans, reports, summaries, analyses or other proprietary information now or hereafter in the possession of Covenantor, except for specific items which have become publicly available information (other than such items which Covenantor knows have become publicly available through a breach of fiduciary duty or any confidentiality agreement). Notwithstanding the foregoing, nothing in this Agreement (including, without limitation, this Section 2) prevents Covenantor from providing truthful information to governmental or regulatory bodies, including disclosures under the whistleblower provisions of federal law or regulation.

3. Inventions. Covenantor shall promptly, and in any event no later than one (1) year after termination of his employment with the Company, with respect to Inventions (as defined below) made or conceived by Covenantor during his employment with the Company, either solely or jointly with others, if based on or related to or connected with the business of the Company or if the Company’s time, material, facilities or other employees contributed thereto:

(a) Promptly and fully inform the Company in writing of such Inventions;

(b) Assign, and Covenantor does hereby assign, to the Company all of Covenantor’s rights to such Inventions, if any, and to applications for letters patent and to letters patent granted upon such Inventions; and

(c) Acknowledge and deliver promptly to the Company (without charge to Covenantor but at the expense of the Company) such written instruments and do such other acts as may be reasonably necessary to obtain and maintain letters patent and to vest the entire right and title thereto in the Company.

All Inventions, regardless of whether or not they are considered “works for hire,” shall for all purposes be regarded as acquired and held by Covenantor for the benefit, and shall be the sole and exclusive property, of the Company. The term “Inventions” shall mean discoveries, developments, improvements, or inventions (whether patentable or not) related to the business of the Company.

 

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4. Non-Disparagement. From and after the Effective Date and following termination of the Covenantor’s employment with the Company, the Covenantor agrees not to make any statement that criticizes, ridicules, disparages or is otherwise derogatory of the Company or any of its subsidiaries, affiliates, employees, officers, directors or stockholders. Following the termination of Covenantor’s employment with the Company, the Company agrees that it will not issue any public statement, and it will instruct its officers and directors not to make any statement, that criticizes, ridicules, disparages or is otherwise derogatory of the Covenantor.

5. Remedy for Certain Breaches.

(a) Covenantor acknowledges and agrees that the restrictions on his activities under the provisions of Paragraphs 1, 2 and 3 above are required for the reasonable protection of the Company. Covenantor irrevocably and unconditionally (i) agrees that in addition to any other remedies which the Company may have under this Agreement or otherwise, all of which remedies shall be cumulative, the Company shall be entitled to apply to any court of competent jurisdiction for preliminary and permanent injunctive relief and other equitable relief, without the necessity of proving actual damage, restraining Covenantor from doing or continuing to do or perform any acts constituting such breach or threatened breach, (ii) agrees that such relief and any other claim by the Company pursuant hereto may be brought in the United States District Court for the Northern District of Illinois, or if such court does not have subject matter jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in the State of Illinois, (iii) consents to the nonexclusive jurisdiction of any such court in any such suit, action or proceeding, and (iv) waives any objection which Covenantor may have to the laying of venue of any such suit, action or proceeding in any such court.

(b) Covenantor agrees that the existence of any claim or cause of action by Covenantor against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by such company of the provisions of this Agreement.

6. Nature of Restrictions. Covenantor has carefully considered the nature and extent of the restrictions upon him and the rights and remedies conferred upon the Company under this Agreement, and hereby acknowledges and agrees that the same are reasonable in time and territory, are designed to eliminate competition which otherwise would be unfair to the Company, do not stifle the inherent skill and experience of Covenantor, would not operate as a bar to Covenantor’s sole means of support, are fully required to protect the legitimate interests of the Company and do not confer a benefit upon the Company disproportionate to the detriment to Covenantor.

7. Warranties. Covenantor warrants and represents that he has full power and authority to enter into this Agreement for and on behalf of himself and that such act, and the performance of his obligations hereunder, will not conflict with any other agreements or undertakings to which he is a party or to which he is bound.

 

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8. Notices. All notices, requests, consents and demands by the parties hereunder shall be delivered by hand, by confirmed facsimile transmission, by recognized national overnight courier service United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to be notified at the addresses set forth below:

If to Covenantor:

Jesse Singh

Address on file with the Company

If to the Company:

Ares Corporate Opportunities Fund IV, L.P.

c/o Ares Management LLC

2000 Avenue of the Stairs, 12th Floor

Los Angeles, CA 90067

Attn: Daniel Lukas

Ontario Teachers’ Pension Plan Board

5650 Yonge Street, 7th & 12th Floor

Toronto, ON M2M 4H5

Attn: Russell Hammond

With copy to:

Sullivan & Cromwell LLP

125 Broad Street

New York, NY 10004

Attn: Alison S. Ressler

Rita-Anne O’Neill

Notices shall be effective immediately upon personal delivery or facsimile transmission, one business day after deposit with an overnight courier service or three (3) business days after the date of mailing thereof. Other notices shall be deemed given on the date of receipt. Any party hereto may change the address specified herein by written notice to the other parties hereto.

9. Entire Agreement. This Agreement cancels and supersedes any and all prior agreements and parties hereto with respect to the obligations of Covenantor other than under an agreement between Covenantor and the Company. This Agreement constitutes the entire agreement between the parties with respect to the matters herein provided, and no modifications or waiver of any provision hereof shall be effective unless in writing and signed by the Company and Covenantor.

10. Binding Effect. All of the terms and provisions of this Agreement shall be binding upon the parties hereto and its or his heirs, executors, administrators, legal representatives, successors and inure to the benefit of and be enforceable by the Company and its successors and assigns, except that the duties and responsibilities of Covenantor hereunder are of a personal nature and shall not be assignable or delegable in whole or in part.

 

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11. Reformation of Agreement; Severability. In the event that any of the provisions of Paragraphs 1, 2 or 3 shall be found by a court of competent jurisdiction to be invalid or unenforceable to any extent for any reason such court shall exercise its discretion in reforming such provision(s) to the end that Covenantor shall be subject to non-disclosure, non-solicitation and non-competition covenants that are reasonable under the circumstances and enforceable by the Company. In the event that any other provision of this Agreement or application thereof to anyone or under any circumstance is found to be invalid or unenforceable in any jurisdiction to any extent for any reason, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

12. Remedies; Waiver. No remedy conferred upon the Company by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by the Company in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the party possessing the same from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

13. Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

14. Governing Law. The validity, interpretation, construction, performance and enforcement of this Agreement shall be governed by the laws of the State of Illinois, without application of conflict of laws principles.

15. Headings. The captions and headings contained in this Agreement are for convenience only and shall not be construed as part of the Agreement.

 

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IN WITNESS HEREOF, the parties have executed this Agreement as of the date and year first above written.

 

  CPG INTERNATIONAL LLC
By:   /s/ Brian Cooper
Name:   Brian Cooper
Title:   General Counsel
  COVENANTOR:
By:    
Name:   Jesse Singh

[Signature Page to Non-Competition Agreement]


IN WITNESS HEREOF, the parties have executed this Agreement as of the date and year first above written.

 

  CPG INTERNATIONAL LLC
By:    
Name:  
Title:  
  COVENANTOR:
By:   /s/ Jesse Singh
Name:   Jesse Singh

[Signature Page to Non-Competition Agreement]

Exhibit 10.26

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (“Agreement”), dated as of the 15th day of July, 2017, by and between CPO International LLC., a Delaware corporation (“Employer”) and Joe Ochoa (the “Executive”).

RECITALS

WHEREAS, Employer desires to procure the services of Executive as its President of Building Products Group and Executive is willing to be employed by the Employer upon the terms and subject to the conditions hereinafter set forth;

WHEREAS, Executive acknowledges and agrees that executing this Agreement is a necessary precondition for Executive to accept the offer of employment by the Employer and to receive the corresponding compensation and benefits;

WHEREAS, Executive acknowledges that this Agreement is reasonable and necessary because the Employer will provide Executive with access to its confidential, proprietary information, trade secrets and Employer’s customers and prospective customers, all of which the Employer is entitled to protect from disclosure, misappropriation and/or unfair exploitation; and

WHEREAS, Executive further acknowledges that during Executive’s employment with the Employer, Executive may have access to certain confidential, proprietary information and trade secrets belonging to the Employer’s subsidiaries and/or affiliates, including but not limited to CPO Building Products LLC, Scranton Products Inc. (including Vycom Corp.) and any new entities becoming subsidiaries or otherwise affiliated with the Employer after the date of this Agreement (collectively, the “Affiliates”), and Executive has an obligation not to disclose, misappropriate, and/or unfairly benefit from the Affiliates’ confidential, proprietary information, trade secrets, customers, prospective customers and good will.

NOW, THEREFORE, intending to be legally bound, and for good and valuable consideration, the Employer and Executive hereby agree as follows:

PROVISIONS

1.    Term and Duties. Employer hereby agrees to employ the Executive for a period commencing on July 15, 2017 and ending on July 14, 2018 (the “Initial Term”) or until terminated in accordance with this Section l or Section 4. Unless terminated by written notice of either party delivered at least thirty (30) days prior to the expiration of the Initial Term, the Executive’s employment shall continue for successive one (l) year terms (each one (l) year term hereinafter referred to as a “Subsequent Term” and together with the Initial Term, the “Term”) until terminated by written notice of either party delivered at least thirty (30) days prior to the expiration of the Subsequent Term. During the Term, the Executive shall serve as President of Building Products Group. Subject to the provisions of this Agreement, during the Term, the Executive shall devote his best efforts and abilities to the performance of the Executive’s duties on behalf of Employer and to the promotion of its interests consistent with and subject to the direction of Jesse Singh, the Chief Executive Officer of Employer, or his successor (the “CEO”).


2.    Exclusivity. The Executive shall devote all of his business time, energies, attention and abilities to the operation of the business of Employer and shall not be actively involved in any other trade or business or as an employee of any other trade or business. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Employer and to do no act which would directly or indirectly injure the Employer’s business, interests, or reputation. In keeping with Executive’s fiduciary duties to the Employer, Employer agrees that Executive shall not become involved in a conflict of interest with the Employer, or upon discovery thereof, allow such a conflict to continue. Moreover, Executive shall not engage in any activity that might involve a possible conflict of interest without first obtaining approval from Employer.

3.    Compensation.

(a)    Base Compensation. In consideration of the services to be rendered by the Executive during the Term, Employer shall pay to the Executive base compensation at a rate of $415,000 per year (“Base Compensation”) (pro-rated for any partial years). Base Compensation shall be paid to the Executive in accordance with Employer’s standard payroll policies. Executive shall not be entitled to receive the salary and benefits that are associated with the offered position unless Executive first executes and agrees to be bound by this Agreement.

(b)    Annual Bonus. For each calendar year during the Term, the Executive will be eligible to receive an annual bonus pursuant to Employer’s Key Employee Management Incentive Plan (the “Bonus Plan”). The Executive’s target bonus opportunity under the Bonus Plan for each year during the Term shall equal seventy-five percent (75%) of the Base Compensation (the “Annual Bonus”). The actual Annual Bonus paid for any year shall be subject to the terms and conditions of the Bonus Plan.

(c)    Sign-On Bonus. On or as soon as reasonably practicable following the date on which your employment with the Employer begins (your “Start Date”), the Employer will pay you a one-time sign-on bonus equal to $250,000 (the “Sign-On Bonus”). If you resign from your employment with the Employer for any reason, or if the Employer terminates your employment for Cause, within 24 months following your Start Date, then you agree to repay the Employer the Sign-On Bonus in full within (30) business days from the date on which your employment terminates. Employer will reduce amount due by 1/24 for each month served v. full repayment.

(d)    Benefits. During the Term, the Executive shall be eligible to participate in such benefit programs offered by Employer as are offered to similarly-situated employees of Employer (except in the case of equity-based incentive plans where awards are subject to approval of the Board of Directors of Employer or a committee thereof), subject in each case to the generally applicable terms and conditions of the plan, benefit or program in question. All matters of eligibility for coverage or benefits under any benefit plan or Employer policy shall be determined in accordance with the provisions of such plan or policy. The Employer reserves the right to change, alter or terminate any benefit in its sole discretion. For each calendar year during the Term, the Executive shall be entitled to four (4) weeks’ vacation (pro-rated for any partial years) annually, to be used subject to the terms of Employer’s applicable policies and procedures.

 

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4.    Termination of Employment.

(a)    Employer may terminate the Executive’s employment for any reason during the Term. If, during the Term, the Executive’s employment is terminated for any reason, the Employer shall be obligated to pay the Executive all earned but unpaid Base Compensation through the date of termination, unpaid expense reimbursements to which the Executive is entitled and accrued but unused vacation (the “Accrued Amounts”). If, during the Term, the Executive’s employment is terminated by Employer other than for Cause, Employer shall be obligated, in addition to the payment of the Accrued Amounts, to continue to pay to the Executive the Executive’s Base Compensation (and 50% of target bonus of 75%) at the rate then in effect for a period of twelve (12) months following the termination date (the “Termination Payments”). Employer’s obligation to make the Termination Payments shall be conditioned upon (i) Executive’s compliance with the Post-Employment Restrictive Covenants and his obligations with respect to Employer’s Confidential Information and (ii) the Executive’s execution, delivery and non-revocation of a valid and enforceable general release of claims in a form reasonably acceptable to Employer (the “Release”) that becomes effective within sixty (60) days following the date of termination of employment. Subject to Section 4(b), the Termination Payments shall be paid in installments on Employer’s regular payroll dates commencing on the first payroll date following the sixtieth (60th) day after the date of termination of employment with the first such payment including the aggregate amount that would have been paid to the Executive during the first sixty (60) days following the date of termination had the delay provided herein not applied. The Accrued Amounts shall be paid within sixty (60) days following the termination date.

(b)    If the Executive is a “specified employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, any payments required to be made pursuant to this Section 3 which are subject to Section 409A shall not commence until six (6) months from the termination date, with the first payment to be equal to the aggregate amount that would have been paid to the Executive under this Section 4 during the first six (6) months immediately following the termination date had this Section 4(b) not been applicable. Each installment of the Termination Payments shall be considered a “separate payment” for purposes of Section 409A. Notwithstanding any provision of this Agreement to the contrary, Executive acknowledges and agrees that the Employer shall not be liable for, and nothing provided or contained in this Agreement will be construed to obligate or cause the Employer to be liable for, any tax, interest or penalties imposed on Executive related to or arising with respect to any violation of Section 409A.

(c)    The foregoing payments upon termination of the Executive’s employment as described in this Section 4 shall constitute the exclusive severance payments due to the Executive upon a termination of his employment. Executive is not entitled to any Termination Payments in the event the Agreement terminates upon expiration of the Term as described in Section 1 or if Executive resigns for any reason.

(d)    “Cause” as used herein shall mean the Executive’s (i) commission of an act which constitutes common law fraud, embezzlement (other than occasional, customary and de minimis use of Employer’s property for personal purposes) or a felony, an act of moral turpitude, or of any tortious or unlawful act causing material harm to Employer’s business, standing or

 

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reputation or the business, standing or reputation of any of Employer’s Affiliates; (ii) gross negligence in the performance of his duties hereunder; (iii) breach of his duty of loyalty or care to Employer or any of its Affiliates; (iv) other misconduct that is materially detrimental to Employer or any of its Affiliates; (v) refusal or failure to perform the Executive’s duties or the deliberate and consistent refusal to conform to or follow any reasonable policy adopted by the Employer, in each case after receiving written notice describing his noncompliance and being given ten (10) business days to cure (to the extent curable) such non-compliance; (vi) breach of this Agreement or any other agreement with or for the benefit of Employer or any of its Affiliates to which the Executive is a party or by which the Executive is bound, which material breach is not cured (to the extent curable) within ten (10) business days following written notice from Employer; or (vii) Executive’s death or disability in which he cannot perform the essential functions of his job with or without a reasonable accommodation. (Employer will fund a life insurance/disability policy much like with prior offer to cover in event of death/disability.)

5.    Nondisclosure of Confidential Information.

(a)    Executive recognizes and acknowledges that the Employer and its Affiliates continually obtain and develop “Confidential Information” (defined below). During Executive’s employment and at all times thereafter, Executive will hold in strictest confidence and will not disclose, use, or publish any of the Confidential Information, except as such disclosure, use or publication may be required in connection with Executive’s work for the Employer. If at any time (including after termination of Executive’s employment with the Employer), a person, entity, governmental agency, or a court of competent jurisdiction requests or demands that Executive disclose Confidential Information, Executive will promptly notify the Employer, and will cooperate with the Employer or its Affiliates in their efforts to prevent or limit such disclosure. Disclosure of Confidential Information by Executive or by anyone else, whether done intentionally or inadvertently, will not affect Executive’s continuing obligations under this Agreement as to the disclosed Confidential Information.

(b)    “Confidential Information” as used herein includes, but is not limited to, Employer’s trade secrets, proprietary information and confidential information which may include, but is not limited to, technical information, such as methods, processes, formulas, compositions, inventions, product development, product designs, computer programs, special hardware, product hardware, related software development, research projects, improvements, systems methods and other confidential technical data, and business information, such as sales, sales volume, sales methods, sales proposals, customers and prospective customers, identity of key purchasing personnel in the employ of customers and prospective customers, proposals, sales leads, profit margins, service reports, amount or kind of customers’ purchases from the Employer and/or the Affiliates, sources of supply, supply costs, system documentation, pricing data and policies (including general price lists and prices charged to specific customers), and business methods, marketing strategies, production or merchandising systems or plans. Executive agrees that this Confidential Information includes such information from the Affiliates provided to Executive as a result of Executive’s employment with the Employer.

6.    Assignment of Intellectual Property. Except for those items specifically listed in Exhibit A attached hereto, Executive represents that Executive does not have any right, title or interest in, nor has Executive made or conceived wholly or in part prior to the execution of this

 

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Agreement any discovery, idea or invention. Executive shall disclose promptly to the Employer or its nominee any and all works, inventions, discoveries and improvements authored, conceived or made by Executive during the period of employment and related to the business or activities of the Employer, and hereby assigns and agrees to assign all Executive’s interest therein to the Executive or its nominee. Whenever requested to do so by the Employer, Executive shall execute any and all applications, assignments or other instruments which the Employer shall deem necessary to apply for and obtain Letter Patent or Copyrights of the United States or any foreign country or to otherwise protect the Employer’s interest therein. Such obligations shall continue beyond Executive’s termination of employment with respect to works, inventions, discoveries, and improvements authored or made by Executive during the period of employment, and shall be binding on Executive’s assigns, executors, administrators and other legal representatives.

7.    Post-Employment Restrictions. In order to protect the business interests and good will of the Employer and its Affiliates and to protect the Confidential Information, and in consideration of the provisions of this Agreement, Executive covenants and agrees as follows:

(a)    Non-solicitation of Customers or Prospective Customers. Executive agrees that during Executive’s employment and for the two (2) year period following Executive’s termination from employment with the Employer (regardless of reason), Executive will not solicit, attempt to obtain business from, accept business from, service, provide consulting services to or contact any Customer or Prospective Customer of the Employer or the Affiliates regarding the purchase, lease or license of a product or service that is the same as, similar to, or in competition with those products and/or services made, rendered, performed, offered or under development by the Employer or the Affiliates, except for the benefit of the Employer.

(i)    “Customer” as used herein shall mean any person or entity that procured any products or services from the Employer or any of its Affiliates during the preceding two (2) years.

(ii)    “Prospective Customers” as used herein shall mean any person or entity that Executive, Employer or the Affiliates solicited, contacted and/or communicated with for business purposes during the preceding two (2) years.

(b)    Non-solicitation of Employees and Independent Contractors.

(i)    Executive agrees that during his employment with the Employer and for the two (2) year period following termination of Executive’s employment (regardless of reason), Executive shall not, directly or indirectly, induce or attempt to induce any Employee to terminate employment, hire or participate in the hiring of any Employee or interfere with or attempt to disrupt the relationship, contractual or otherwise, between the Employer or any of the Affiliates and any Employee. “Employee” as used herein shall mean any person employed by the Employer or the Affiliates during the preceding two (2) years.

(ii)    Executive agrees that during Executive’s employment and for the two (2) year period following Executive’s termination from employment with the Employer (regardless of reason), Executive will not, directly or indirectly, induce or attempt to induce any person or entity who is engaged by the Employer or any of its Affiliates as an independent contractor to terminate or change its relationship with the Employer or its Affiliates.

 

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(c)    Non-Competition. Executive agrees that during his employment with the Employer and for the two (2) year period following termination of Executive’s employment (regardless of reason), Executive will not engage, directly or indirectly, whether as a consultant, independent contractor, agent, representative, employee, advisor owner (except in the case of passive ownership of less than five percent (5%) of any publicly traded corporation) or otherwise, alone or in association with any other person, corporation or other entity, in any Competing Business in the United States.

(d)    “Competing Business” as used herein, shall mean any person, business, enterprise or other entity which directly or indirectly sells or attempts to sell any product or services, or any combination thereof, which are the same as, or similar to the products and/or services sold, offered or under development by the Employer or the Affiliates at any time during the preceding two (2) years.

(e)    Executive acknowledges that the restrictions set forth in this Section extend nationwide. Executive further acknowledges that the geographic limitation in the restriction set forth above is reasonable because the Employer and the Affiliates offer their products and services and/or plan to offer their products and services throughout this geographic market. Executive further covenants and agrees that the geographic scope, length of term and types of activities restricted (non-competition restrictions) contained in this Agreement are reasonable and necessary to protect the legitimate business interests of the Employer and the Affiliates because of the scope of the Employer’s business and its relationship with the Affiliates, which share Confidential Information on a need-to-know basis. Executive acknowledges that these non-competition restrictions are reasonable and necessary and will not prevent Executive from being gainfully employed.

(f)    Enforceability. If a court of competent jurisdiction determines that one or more of these Post-Employment Restrictions are so broad as to be unenforceable, then such provision is to be reduced in scope or length, as the case may be, to the extent required to make it enforceable. The foregoing is not an admission or evidence that any of the terms or conditions of this Agreement are unreasonable.

(g)    Tacking. If Executive violates any of the above Post-Employment Restrictions, the time period for such restriction will be extended by that number of days which equals the aggregate of all days during which at any time any such violations occurred.

(h)    Notification by the Employer. Executive consents to the Employer and any of its Affiliates providing notice to any person or entity regarding Executive’s Post-Employment Restrictions under this Agreement.

(i)    Forfeiture of Termination Payments. In the event Executive violates the Post-Employment Restrictions or confidentiality obligations as set forth in this Agreement in any way, Executive’s right to receive or retain any Termination Payment, as described in Section 4, immediately ceases, and Executive must forfeit and return to the Employer all Termination Payments paid after the date of the first violation.

 

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8.    Return of Employer Property. Upon termination of Executive’s employment for any reason, Executive will deliver to the Employer any and all Employer equipment and property, access codes, documents, drawings, notes, memoranda, specifications, devices and formulas, together with all copies thereof, and any other material containing or disclosing any Confidential Information or other information regarding the Employer.

9.    Consideration. The Executive acknowledges and agrees that the consideration set forth in the recitals to this Agreement and the rights and benefits hereunder are all and singularly valuable consideration, which is sufficient for any or all of the Executive’s covenants set forth herein.

10.    No Prior Agreements. The Executive represents and warrants that his performance of all the terms of this Agreement does not and shall not breach any fiduciary or other duty or any covenant, agreement or understanding (including, without limitation, any agreement relating to any proprietary information, knowledge or data acquired in confidence, trust or otherwise) to which he is a party or by the terms of which he may be bound. The Executive further covenants and agrees not to enter into any agreement or understanding, either written or oral, in conflict with the provisions of this Agreement.

11.    Equitable Relief, Fees and Expenses. Executive stipulates and agrees that any breach of Sections 5, 6, 7 and 21 of this Agreement by Executive will result in immediate and irreparable harm to the Employer and the Affiliates, the amount of which will be extremely difficult to ascertain, and that the Employer and the Affiliates could not be reasonably or adequately compensated by damages in an action at law. For these reasons, the Employer and the Affiliates shall have the right, without objection from Executive, to obtain such preliminary, temporary or permanent injunctions or restraining orders or decrees as may be necessary to protect the Employer and the Affiliates against, or on account of, any breach by Executive of the provisions of this Agreement without requiring the Employer or the Affiliates to post any bond. Such right to equitable relief is in addition to all other legal remedies the Employer and the Affiliates may have to protect their rights. In the event the Employer and/or the Affiliates obtain any such injunction, order, decree or other relief, in law or in equity, Executive shall be responsible for reimbursing the Employer and/or the Affiliates for all costs associated with obtaining the relief, including attorneys’ fees, and expenses and costs of suit. Executive further covenants and agrees that any order of court or judgment obtained by the Employer and/or the Affiliates which enforces the Employer and/or the Affiliates’ rights under this Agreement may be transferred, without objection or opposition by Executive, to any court of law or other appropriate law enforcement body located in any other state in the U.S.A. where the Employer and/or the Affiliates do business, and that said court or body shall give full force and effect to said order and/or judgment.

12.    Withholding. All amounts paid to the Executive under this Agreement during or following the Term shall be subject to withholding and other employment taxes imposed by applicable law. The Executive shall be solely responsible for the payment of all taxes imposed on his relating to the payment or provision of any amounts or benefits hereunder.

 

7


13.    Notices. All notices, requests, consents and demands by the parties hereto shall be delivered by hand, by confirmed facsimile transmission, by recognized national overnight courier service or by deposit in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to be notified at the addresses set forth below:

if to the Executive:

Joe Ochoa

[Address]

if to Employer:

c/o CPG International LLC

5215 Old Orchard Road

Suite 725

Skokie, Illinois 60077

Attn: General Counsel

Notices shall be effective immediately upon personal delivery or facsimile transmission, one (1) business day after deposit with an overnight courier service or three (3) business days after the date of mailing thereof. Other notices shall be deemed given on the date of receipt. Any party hereto may change the address specified herein by written notice to the other parties hereto.

14.    Entire Agreement. This Agreement is the final, complete and exclusive agreement of the parties with respect to its subject matter and supersedes and merges all prior or contemporaneous discussions or agreements, whether written or oral, regarding the subject matter of this Agreement. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged. Any subsequent change or changes in Executive’s duties, salary, or benefits will not affect the validity or scope of this Agreement.

15.    Severability. In the event that any provision of this Agreement or application thereof to anyone or under any circumstance is found to be invalid or unenforceable in any jurisdiction to any extent for any reason, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

16.    Remedies; Waiver. No remedy conferred upon Employer by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by Employer in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the party possessing the same from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

 

8


17.    Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

18.    Choice of Law, Jurisdiction and Venue. This Agreement is governed by the laws of the State of Illinois without regard to its principles of conflicts of law. Executive shall be receiving resources and Confidential Information from Illinois and agrees to its laws governing this Agreement. The parties further agree that a federal court with jurisdiction in the Northern District of Illinois or state court with jurisdiction in Cook County shall be the exclusive forum for the resolution of any dispute arising from or relating to this Agreement unless the Employer, in its sole discretion, brings a claim in another court of competent jurisdiction. Each party consents to the personal jurisdiction and venue of any such federal or state court. Executive irrevocably waives Executive’s right to object to or challenge the above selected forum on the basis of inconvenience or unfairness.

19.    Successors and Assigns. The Employer shall have the right to assign this Agreement to a successor or assign, and Executive agrees to be obligated by this Agreement to any successor, assign or surviving entity. Any successor to or assignee of the Employer is an intended third-party beneficiary to this Agreement. Executive may not assign this Agreement. Executive further acknowledges and agrees that the Affiliates are third-party beneficiaries to this Agreement and shall be entitled to enforce this Agreement and the provisions herein to the extent Executive discloses or misappropriates Confidential Information belonging to them or unfairly competes with or solicits their customers, prospective customers, employees or independent contractors.

20.    Headings. The captions and headings contained in this Agreement are for convenience only and shall not be construed as a part of this Agreement.

21.    Nondisparagement. During Executive’s employment and thereafter, Executive shall make no negative or derogatory comments, oral or written, directly, indirectly or by innuendo about the Employer, its officers, directors or employees, as well as the Affiliates and their officers, directors or employees.

22.    Survivability. The terms of Sections 5, 6, 7 and 21 of this Agreement survive the termination of Executive’s employment with the Employer for any reason.

[signature pages follow]

 

9


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

CPG INTERNATIONAL LLC
By  

/s/ Dennis Kitchen

Name:   Dennis Kitchen
Title:   SVP & CHRO

 

/s/ Joe Ochoa

Joe Ochoa

 

10

Exhibit 10.27

 

LOGO

September 20, 2017

Jonathan Skelly

[Address]

Dear Jon,

I am pleased to present to you our provisional offer of employment as Senior Vice President of Business Development and Investor Relations for CPG International LLC reporting to Jesse Singh, Chief Executive Officer. Your annual base salary in this position will be $340,000 which is equivalent to $13,076.92 payable biweekly. You are also eligible to participate in a Management Incentive Program (MIP) which has the potential to add an additional 50% of your base salary in the form of an annual incentive bonus, equating to $170,000 on a full year annualized basis, should all goals and plan requirements be met.

A recommendation will be made to the Board of Directors of AOT Building Products GP Corp., as the General Partner of AOT Building Products, L.P. (the “Partnership”), for the authorization and approval of a grant of 1,750 Profit Interests in the Partnership to Jonathan Skelly. The authorization and approval of such grant of Profit Interests shall be in the sole and absolute discretion of the General Partner.

In addition, you will be granted 75 Common Interests of AOT Building Products, L.P. (the “Partnership”) at a price of $1,000 per Common Interest, on or before December 31st, 2017. The terms of the Common Interests will be set forth in the Partnership’s standard LP Interest Agreement, which the Partnership will provide to you in the event you decide to purchase the Common Interests.

You will be eligible to participate in a full range of benefits in accordance with the following schedule:

 

FIRST DAY OF
EMPLOYMENT

 

FIRST DAY OF MONTH
FOLLOWING EMPLOYMENT

 

FOLLOWING 90 DAYS
OF EMPLOYMENT

•  3 weeks of Vacation (prorated)

•  3 personal days

•  10 Paid Holidays

 

•  Medical/Vision/Drug/Dental Insurance

•  Life & AD&D Insurance

•  Short-Term & Long-Term Disability

•  Insurance Waiver Rebate

 

•  401(k) plan on the applicable open enrollment date

CPG will also provide a signing bonus of $60,000 (Subject to all applicable Federal, State and Local taxes) payable within 30 calendar days of the start of your employment. In exchange for the signing bonus, you agree if you voluntarily terminate your employment with CPG within one year of the start of your employment, you will repay the amount in full.

In the event that your employment is terminated for any reason other than cause, you will be eligible to receive a severance agreement of twelve (12) months base compensation including maintaining your current medical, vision and dental benefits through the severance period.

This provisional employment offer is contingent upon CPG’s receipt of your fully completed CPG International LLC application for employment (a copy of which is enclosed with this letter) and satisfactory completion of our employment screening process. This process includes a criminal background check, driving record check and substance abuse testing. This process will also include our procurement of a consumer credit report. You will be asked to sign certain consents and waivers in order to allow the


LOGO

 

process to proceed, including a Consent to the Procurement of a Consumer Credit Report and asked to provide your social security number. If necessary, you may be asked to participate in additional health screenings and/or actual physical examinations.

Should you successfully complete the employment screening process, employment with CPG International LLC will begin no later than Monday, October 30, 2017. There are several documents that you will be required to complete including payroll tax forms. Additionally, we require employees to provide documentation, which demonstrates their legal right to work in the United States and to sign Non-Competition, Non-Solicitation and Confidentiality Agreements (a copy of which is enclosed with this letter) as a condition of employment.

Please be aware that this letter is not an employment contract and should not be construed or interpreted as creating an implied or expressed guarantee of continued employment. The employment relationship at CPG International LLC is a mutual consent (Employment at Will). This means that employees have the right to terminate their employment relationship at any time and for any reason. Likewise, CPG International LLC reserves the right to terminate your employment with or without cause at any time and for any reason.

On behalf of the CPG International LLC Management Team, we look forward to you joining CPG International Inc. to help build our company. If you should have any questions regarding this employment offer, please feel to contact me at 847-626-1535 (office) or 224-229-8101 (cell).

Please sign and email back the enclosed documents to Taysha Allen at tallen@cpgint.com.

This offer of employment will be considered valid until the close of business on Wednesday, September 20, 2017.

I look forward to working with you.

Regards,

Dennis Kitchen

Chief Human Resources Officer

I accept this offer of employment as stated herein and I agree to execute all waivers and consents necessary to complete the screening process.

 

Name:  

/s/ Jonathan Skelly

Date:   9/25/17

Encl:

 

-

Employment Application

-

Confidentiality, Non-Solicitation & Non-Compete Agreement

-

ADP Background Consent Form

-

Management Incentive Plan (Profit Interest)

Exhibit 10.28

CONFIDENTIALITY AND NON-COMPETITION AGREEMENT

THIS CONFIDENTIALITY AND NON-COMPETITION AGREEMENT (the “Agreement”) is made as of September 15, 2017 between CPG International LLC (“Company”) and the undersigned employee, Jonathan Skelly (“Employee”).

WHEREAS, the Company’s business consists of manufacturing premium, low maintenance building products designed to replace wood, metal and other materials in the residential, commercial and industrial markets, including but not limited to: (1) trim products under the trademark AZEK® including AZEK Trimboards, AZEK Sheet, AZEK Beadboard, AZEK Cornerboards and AZEK Adhesive; (2) AZEK Mouldings; (3) AZEK Deck; (4) AZEK Porch; (5) AZEK Siding; (6) AZEK VAST Pavers; (7) railings and railing accessories under the Premier and Trademark® brand names; (8) Comtec and Hiny Hiders® bathroom partition systems; (9) TuffTec® and Duralife locker systems; (10) plastic partitions, privacy screens and plastic lockers; (11) Olefin and PVC sheet products for end uses, including but not limited to, graphic and display materials, fire safe materials, marine, RV and outdoor materials, chemical and corrosion resistant materials, food processing materials and playground or recreational materials; (12) composite and pvc decking; (13) composite fencing; (14) deck railing and railing accessories; (15) deck lighting; (16) fasteners; (17) vast pavers; (18) lines of product that are added to the existing product lines of the Company or the Affiliates (defined below) during Employee’s employment; and (19) product lines that are researched or tested during Employee’s employment (collectively “Business”).

WHEREAS, Employee agrees to execute this Agreement in consideration, among other things, of the offer of at-will employment, which is being accepted by Employee signing this Agreement. Employee desires to become employed by the Company on an at-will basis and receive the benefits of employment and signs this Agreement knowingly and willingly in order to receive those benefits and intending to honor all of the provisions herein.

WHEREAS, Employee acknowledges and agrees that executing this Agreement is a necessary precondition for Employee to accept the offer of employment by the Company and to receive the other corresponding compensation and benefits.

WHEREAS, Employee acknowledges that this Agreement is reasonable and necessary because the Company will provide Employee with access to its confidential, proprietary information, trade secrets and access to the Company’s customers and prospective customers, all of which the Company is entitled to protect from disclosure, misappropriation and/or unfair exploitation.

WHEREAS, Employee further acknowledges that during Employee’s employment with the Company, Employee may have access to certain confidential, proprietary information and trade secrets belonging to the Company’s subsidiaries and/or affiliates, including but not limited to CPG Building Products LLC, Scranton Products Inc. (including Vycom Corp.), and any new entities becoming subsidiaries or otherwise affiliated with the Company after the date of this Agreement (collectively, the


“Affiliates”), and Employee has an obligation not to disclose, misappropriate, and/or unfairly benefit from the Affiliate’s confidential, proprietary information, trade secrets, customers, prospective customers, and goodwill.

NOW, THEREFORE, in consideration of employment by the Company and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the parties, the Company and Employee agree as follows:

1.    Duties. Employee agrees to be responsible for such duties as are commensurate with and required by the position assigned to Employee by the Company. Employee further agrees to perform Employee’s duties in a diligent, trustworthy, loyal, businesslike, productive, and efficient manner and to use Employee’s best efforts to advance the Business and goodwill of the Company. Employee further agrees to devote substantially all of Employee’s business time, skill, energy and attention exclusively to the Business of the Company and to comply with all rules, regulations and procedures of the Company. During Employee’s employment under this Agreement, Employee may not engage in any other business for Employee’s own account or accept any employment from any other business entity, or render any services, give any advice or serve in a consulting capacity, whether gratuitously or otherwise, to or for any other person, firm or corporation, unless Employee obtains express written approval from the Company. During Employee’s employment under this Agreement, the Company may alter Employee’s duties according to business needs without breaching this Agreement.

2.    Compensation and Benefits. Employee’s annual base salary, benefits and other compensation shall be set at the discretion of the Company. The Company shall be entitled to withhold from any payments to Employee pursuant to the provisions of this Agreement, including any amounts required by any applicable taxing or other authority.

3.    Policies and Practices. Employee agrees to abide by all Company rules, regulations, policies, practices and procedures which the Company may amend from time to time.

4.    Employee Acknowledgments.

(a)    The Company, in the course of its Business, has developed certain “know- how,” including, but not limited to, certain technical information detailed below, which it regards as trade secrets, proprietary information and confidential information.

(b)    This information is the property of the Company and the use, misappropriation or disclosure of the information would constitute a breach of trust and would cause irreparable injury to the Company. Employee recognizes that it is essential to the protection of the goodwill of the Company and to the maintenance of its competitive position that the information be kept secret and that Employee not disclose it to others or use it to Employee’s own advantage or to the advantage of others.

 

  2   (Initial /s/ JS)


(c)    During the course of Employee’s employment with the Company, it will be necessary to provide Employee with specialized training and to disclose to Employee certain trade secrets, proprietary information and confidential information which may include, but is not limited to, technical information, such as methods, processes, formulas, compositions, inventions, product development, product designs, computer programs, special hardware, product hardware, related software development, research projects, improvements, systems methods and other confidential technical data, and business information, such as sales, sales volume, sales methods, sales proposals, customers and prospective customers, identity of key purchasing personnel in the employ of customers and prospective customers, proposals, sales leads, profit margins, service reports, amount or kind of customers’ purchases from the Company and/or the Affiliates, sources of supply, supply costs, system documentation, pricing data and policies (including general price lists and prices charged to specific customers), and business methods, marketing strategies, production or merchandising systems or plans (“Confidential Information”). Employee agrees that this Confidential Information includes such information from the Affiliates provided to Employee as a result of Employee’s employment with the Company.

(d)    It is essential for the proper protection of the Company and the Affiliates’ Confidential Information, its goodwill, its relationships with customers and prospective customers and its relationships with its employees that Employee be restrained within the parameters and in accordance with the provisions contained in this Agreement, which is ancillary to Employee’s employment.

(e)    Employee’s experience and capabilities are such that the provisions of this Agreement will not prevent Employee from earning a livelihood, subsequent to termination of employment with the Company and that the Company (as well as the Affiliates providing Confidential Information) will suffer serious and irreparable injury and cost if Employee were to breach Employee’s obligations under this Agreement.

(f)    Employee further recognizes and understands that Employee’s duties at the Company may include the preparation of materials, including written or graphic materials, and that any such materials conceived or written by Employee shall be done as “work made for hire” as defined and used in the Copyright Act of 1976.

5.    Nondisclosure and Nonuse of Confidential Information. Employee agrees to hold and safeguard all of the Confidential Information in trust and confidence for the Company and/or its Affiliates. Employee agrees that Employee shall not, without prior written consent of the Company, misappropriate, disclose or use or make available to any person or any entity for use outside the Company’s organization at any time, either during Employee’s employment with the Company or subsequent to termination of such employment with the Company, for any reason, any of the Confidential Information, whether or not it was developed by Employee. Employee agrees not to use said information to Employee’s own advantage or to the advantage of others except as required in the performance of Employee’s duties to the Company.

 

  3   (Initial /s/ JS)


6.    Non-Competition.

(a)    Employee covenants and agrees that Employee shall not engage, directly or indirectly, whether as a consultant, independent contractor, agent, representative, employee, advisor, owner (except in the case of passive ownership of less than five percent (5%) of any publicly traded corporation) or otherwise, alone or in association with any other person, corporation or other entity, in any Competing Business in the United States during Employee’s employment and for one (1) year from the date of termination (regardless of reason) of Employee’s employment with the Company (“Restricted Period”).

(b)     “Competing Business,” as used herein, shall mean any person, business, enterprise or other entity which directly or indirectly sells or attempts to sell any products or services, or any combination thereof, which are the same as, or similar to the products and/or services sold or offered by the Company or the Affiliates at any time during the one (1) year preceding Employee’s termination from employment.

(c)    Employee acknowledges that the restrictions set forth in this Section extend nationwide. Employee further acknowledges that the geographic limitation in the restriction set forth above is reasonable because the Company and the Affiliates offer their products and services and/or plan to offer their products and services throughout this geographic market. Employee further covenants and agrees that the geographic scope, length of term and types of activities restricted (non-competition restrictions) contained in this Agreement are reasonable and necessary to protect the legitimate business interests of the Company and the Affiliates because of the scope of the Company’s Business and its relationship with the Affiliates, which share Confidential Information on a need-to-know basis. Employee acknowledges that these non-competition restrictions are reasonable and necessary and will not prevent Employee from being gainfully employed.

7.    Non-Solicitation of Customers and Prospective Customers.

(a)    Employee agrees that during Employee’s employment and for the one (1) year period following Employee’s termination from employment with the Company (regardless of reason), Employee will not solicit, attempt to obtain business from, accept business from, service, provide consulting services to or contact any Customer or Prospective Customer of the Company or the Affiliates regarding the purchase, lease or license of a product or service that is the same as, similar to, or in competition with those products and/or services made, rendered, performed, offered or under development by the Company or the Affiliates, except for the benefit of the Company.

(b)     “Customer,” as used herein, shall mean any person or entity that procured any products or services from the Company or the Affiliates during the one (1) year preceding Employee’s termination from employment.

(c)     “Prospective Customer,” as used herein, shall mean any person or entity that Employee, the Company or the Affiliates solicited, contacted and/or communicated with for business purposes during the one (1) year preceding Employee’s termination from employment.

 

  4   (Initial /s/ JS)


8.    Non-Solicitation of Employees.

(a)    Employee agrees that during his employment with the Company and for one (1) year following termination of Employee’s employment (regardless of reason), Employee shall not, directly or indirectly, induce or attempt to induce any Company Employee to terminate employment, hire or participate in the hiring of any Company Employee or interfere with or attempt to disrupt the relationship, contractual or otherwise, between the Company or any of the Affiliates and any Company Employee.

(b)     “Company Employee,” as used herein, shall mean any person employed by the Company or the Affiliates during the one (1) year preceding Employee’s termination from employment.

9.    Return of Company Property. Employee agrees, upon request of the Company at any time but in any event no later than the time of Employee’s voluntary or involuntary termination of employment, to deliver only to the Company, and to not retain for Employee’s or others’ use, any and all of the Company or the Affiliates’ equipment, advertising, sales, financial, technical and other materials or articles of information, drawings, blueprints, notes, memoranda, specifications, devices, formulae, documents, marketing plans, rolodexes, customer lists, price lists, tapes, computer disks or programs, and any other material, and all copies thereof, relating to Employee’s work or the Company Business and all other documents or materials containing or constituting Confidential Information (including trade secrets). Employee agrees to maintain the integrity of all electronically or magnetically stored information and agrees not to alter, damage or destroy said information before returning it to the Company.

10.    Intellectual Property. Except for those items specifically listed in Exhibit A attached hereto, Employee represents that Employee does not have any right, title or interest in, nor has Employee made or conceived wholly or in part prior to the execution of this Agreement any discovery, idea or invention. Employee shall disclose promptly to the Company or its nominee any and all works, inventions, discoveries and improvements authored, conceived or made by Employee during the period of employment and related to the Business or activities of the Company, and hereby assigns and agrees to assign all Employee’s interest therein to the Company or its nominee. Whenever requested to do so by the Company, Employee shall execute any and all applications, assignments or other instruments which the Company shall deem necessary to apply for and obtain Letter Patent or Copyrights of the United States or any foreign country or to otherwise protect the Company’s interest therein. Such obligations shall continue beyond Employee’s termination of employment with respect to works, inventions, discoveries, and improvements authored or made by Employee during the period of employment, and shall be binding on Employee’s assigns, executors, administrators and other legal representatives.

 

  5   (Initial /s/ JS)


11.    Equitable Relief, Fees and Expenses. Employee stipulates and agrees that any breach of this Agreement by Employee will result in immediate and irreparable harm to the Company and the Affiliates, the amount of which will be extremely difficult to ascertain, and that the Company and the Affiliates could not be reasonably or adequately compensated by damages in an action at law. For these reasons, the Company and the Affiliates shall have the right, without objection from Employee, to obtain such preliminary, temporary or permanent injunctions or restraining orders or decrees as may be necessary to protect the Company and the Affiliates against, or on account of, any breach by Employee of the provisions of this Agreement without requiring the Company or the Affiliates to post any bond. Such right to equitable relief is in addition to all other legal remedies the Company and the Affiliates may have to protect their rights. In the event the Company and/or the Affiliates obtain any such injunction, order, decree or other relief, in law or in equity, Employee shall be responsible for reimbursing the Company and/or the Affiliates for all costs associated with obtaining the relief, including attorneys’ fees, and expenses and costs of suit. Employee further covenants and agrees that any order of court or judgment obtained by the Company and/or the Affiliates which enforces the Company and/or the Affiliates’ rights under this Agreement may be transferred, without objection or opposition by Employee, to any court of law or other appropriate law enforcement body located in any other state in the U.S.A. where the Company and/or the Affiliates do business, and that said court or body shall give full force and effect to said order and/or judgment.

12.    Tolling Period. The non-competition and non-solicitation obligations contained herein shall be extended by the length of time during which Employee shall have been in breach of the provisions contained in Paragraphs 6, 7 and 8.

13.    Amendments. No supplement, modification, amendment or waiver of the terms of this Agreement shall be binding on the parties hereto unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed to or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. Any failure to insist upon strict compliance with any of the terms and conditions of this Agreement shall not be deemed a waiver of any such terms or conditions.

14.    Full Understanding. Employee acknowledges that: (i) Employee has been afforded the opportunity to seek legal counsel, (ii) Employee has carefully read and fully understands all of the provisions of this Agreement, and (iii) Employee, in consideration for the compensation and benefits that correspond with employment, is voluntarily entering into this Agreement.

15.    Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as revised to

 

  6   (Initial /s/ JS)


be enforceable or, if the provision cannot be revised, as if such invalid, illegal or unenforceable provision had never been contained herein. The covenants stated herein survive the termination of Employee’s employment with the Company for any reason. In the event that a court of competent jurisdiction determines that one or more of the provisions of Paragraphs 6, 7 or 8 is so broad as to be unenforceable, such provision shall be deemed to be reduced in scope or length, as the case may be, to the extent required to make it enforceable.

16.    Other Agreements. Employee represents and warrants that Employee is not a party to or otherwise subject to or bound by the terms of any contract, agreements or understandings that would affect Employee’s right or abilities to perform under this Agreement. Employee further represents and warrants that Employee will not use, disclose, or provide any trade secret, proprietary or confidential information to the Company and the Affiliates. The Company has advised Employee that it has no interest in such information and Employee is prohibited from disclosing or using any such information in Employee’s employment.

17.    Choice of Law, Jurisdiction and Venue. This Agreement is governed by the laws of the Commonwealth of Pennsylvania without regard to its principles of conflicts of law. Employee shall be receiving resources and Confidential Information from Pennsylvania and agrees to its laws governing this Agreement. The parties further agree that a federal court with jurisdiction in the middle district of Pennsylvania or state court with jurisdiction in Luzerne County or Lackawanna County shall be the exclusive forum for the resolution of any dispute arising from or relating to this Agreement unless the Company, in its sole discretion, brings a claim in another court of competent jurisdiction. Each party consents to the personal jurisdiction and venue of any such federal or state court. Employee irrevocably waives Employee’s right to object to or challenge the above selected forum on the basis of inconvenience or unfairness under 28 U.S.C. § 1404, 42 Pa. C.S. § 5322 or similar state or federal statutes.

18.    Successors in Interest. The Company shall have the right to assign this Agreement to a successor or assign, and Employee agrees to be obligated by this Agreement to any successor, assign or surviving entity. Any successor to or assignee of the Company is an intended third-party beneficiary to this Agreement. Employee may not assign this Agreement. Employee further acknowledges and agrees that the Affiliates are third-party beneficiaries to this Agreement and shall be entitled to enforce this Agreement and the provisions herein to the extent Employee discloses or misappropriates Confidential Information belonging to them or unfairly competes with or solicits their customers or employees.

19.    Headings. The headings used in this Agreement are for convenience only and are not to be considered in construing or interpreting this Agreement.

20.    Survivability. The terms of this Agreement survive the termination of Employee’s employment with the Company for any reason.

 

  7   (Initial /s/ JS)


21.    Nondisparagement. During Employee’s employment and thereafter, Employee shall make no negative or derogatory comments, oral or written, directly, indirectly or by innuendo about the Company, its officers, directors or employees, as well as the Affiliates, its officers, directors or employees.

(Intentionally Left Blank)

 

  8   (Initial /s/ JS)


22.    Entire Agreement. This Agreement represents the entire agreement of the parties with respect to the subject matter hereof. To the extent Employee has entered into any other enforceable agreement with the Company that contains provisions that are not in direct conflict with the provisions in this Agreement, the terms of this Agreement shall not supersede, but shall be in addition to, any other such agreement. This Agreement does not affect Employee’s obligation to be bound by the Company’s policies and procedures to the extent those policies and procedures do not conflict with this Agreement.

IN WITNESS WHEREOF, the parties hereto, mutually intending to be legally bound hereby, have executed this Confidentiality and Non-Competition Agreement as of the 17th day of October, 2017.

 

CPG INTERNATIONAL LLC:
By:  

/s/ Alicia Canano

Name:   Alicia Canano
Title:   Sr Talent Manager
EMPLOYEE:
By:  

/s/ Jonathan Skelly

Name:   Jonathan Skelly

 

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Exhibit 10.29

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (“Agreement”), dated as of the 21st day of December, 2018, effective as of the Start Date (as defined below) by and between CPG International LLC, a Delaware limited liability company doing business as The Azek Company LLC (“Employer”) and Ralph Nicoletti (“Executive”).

RECITALS

WHEREAS, Employer desires to procure the services of Executive as its Chief Financial Officer and Executive is willing to be employed by the Employer, upon the terms and subject to the conditions hereinafter set forth; and

WHEREAS, in order to protect the business, confidential and proprietary information, trade secrets and good will of the Employer, the Employer desires to obtain certain confidentiality, non-competition and non-solicitation covenants from Executive and Executive desires to agree to such covenants in exchange for the benefits described in this Agreement.

NOW, THEREFORE, intending to be legally bound, and for good and valuable consideration, the Employer and Executive hereby agree as follows:

PROVISIONS

1. Term and Duties. The term of this Agreement shall commence on January 9, 2019 (the “Start Date”) and continue during Executive’s employment with the Employer and thereafter for those provisions designed to survive employment. Executive’s employment shall be at-will and may be terminated by either party pursuant to Section 4. Executive acknowledges that Executive has continuing obligations under this Agreement including, but not limited to, Sections 5, 6, 7 and 21, in the event that Executive’s employment is terminated, regardless of reason. Executive shall serve as the Employer’s Chief Financial Officer. Subject to the provisions of this Agreement, Executive shall devote Executive’s best efforts and abilities to the performance of Executive’s duties on behalf of the Employer and to the promotion of its interests consistent with and subject to the direction of the Chief Executive Officer of Employer.

2. Exclusivity. Executive shall devote all of Executive’s business time, energies, attention and abilities to the operation of the business of the Employer and shall not be actively involved in any other trade or business or as an employee of any other trade or business. Executive acknowledges and agrees that Executive owes a fiduciary duty of loyalty, fidelity and allegiance to act at all times in the best interests of the Employer and to do no act which would directly or indirectly injure the Employer’s business, interests, or reputation. In keeping with Executive’s fiduciary duties to the Employer, the Employer agrees that Executive shall not become involved in a conflict of interest with the Employer, or upon discovery thereof, allow such a conflict to continue. Moreover, Executive shall not engage in any activity that might involve a possible conflict of interest without first obtaining approval from the Employer. It is understood that the foregoing provisions of this Section 2 are not intended to prevent Executive from serving on the board of directors or in a similar capacity for another business, religious, charitable or community organization, provided such service does not substantially interfere with the performance by Executive of his duties and responsibilities hereunder or violate Sections 5, 6 or 7 of this Agreement.


3. Compensation.

(a) Base Compensation. In consideration of the services to be rendered by Executive, the Employer shall pay to Executive base compensation at a rate of $500,000 per year (“Base Compensation”) (pro-rated for any partial years). The Base Compensation shall be paid to Executive in accordance with the Employer’s standard payroll policies. Executive’s Base Compensation may be increased from time to time by the Employer at its discretion subject to the terms herein. Executive shall not be entitled to receive the salary and benefits that are associated with the offered position unless Executive first executes and agrees to be bound by this Agreement.

(b) Annual Bonus. Executive will be eligible to participate in any annual bonus program made available to senior executives of the Employer (the “Bonus Plan”), which as of the date of this Agreement is the Key Employee Management Incentive Plan. Executive’s target bonus opportunity under the Bonus Plan for each year shall equal seventy-five percent (75%) of the Base Compensation. The actual annual bonus paid for any year shall be subject to the terms and conditions of the Bonus Plan.

(c) Benefits. During Executive’s employment, Executive shall be eligible to participate in such benefit programs offered by the Employer as are offered to senior executives of Employer (except in the case of equity-based incentive plans), including but not limited to the Employer’s group health insurance and 401(k) plans, subject in each case to the generally applicable terms and conditions of the plan, benefit or program in question. All matters of eligibility for coverage or benefits under any benefit plan or Employer policy shall be determined in accordance with the provisions of such plan or policy. The Employer reserves the right to change, alter or terminate any benefit in its sole discretion. Executive shall be entitled to four (4) weeks’ vacation and sick leave per calendar year (pro-rated for any partial years), to be used subject to the terms of the Employer’s applicable policies and procedures. The Employer will reimburse Executive for all reasonable and necessary travel, entertainment and other business expenses incurred by Executive in the performance of Executive’s duties upon the presentation of reasonably itemized statements of such expenses in accordance with Employer’s applicable policies or procedures with respect to senior executives of Employer. The Employer shall pay Executive’s reasonable professional fees, in an amount up to $15,000, incurred to negotiate and prepare this Agreement and all related agreements.

(d) Sign-on Bonus. As soon as practicable following the date on which Executive’s employment with the Employer commences (the “Hire Date”), the Employer shall pay to Executive a cash sign-on bonus award equal to $250,000. In the event that Executive resigns his employment prior to the second anniversary of the Hire Date, Executive will be required to repay a pro-rated portion of the after-tax value of such sign-on bonus, determined based on the number of days (relative to 730) of such two-year period that follows Executive’s resignation.

(e) Equity Participation. The board of directors of AOT Building Products GP Corp. will grant Executive 4,750 Profits Interests in AOT Building Products L.P. (“Parent”) subject to the terms and conditions set forth in the Amended and Restated Agreement of Limited Partnership of AOT Building Products, L.P., dated as of September 30, 2013, among AOT Building Products GP Corp., Ares Corporate Opportunities Fund IV, L.P., 2384590 Ontario Limited and the other signatories thereto and the applicable LP Interest Agreement, promptly after the date of this Agreement.

 

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4. Termination of Employment.

(a) The Employer may terminate Executive’s employment for any reason or no reason. If Executive’s employment is terminated for any reason, the Employer shall be obligated to pay Executive all earned but unpaid Base Compensation through the date of termination, unpaid expense reimbursements to which Executive is entitled and accrued but unused vacation (the “Accrued Amounts”). If Executive’s employment is terminated by the Employer other than for Cause or by Executive for Good Reason, the Employer shall be obligated, in addition to the payment of the Accrued Amounts, to continue to pay to Executive the Executive’s Base Compensation at the rate then in effect for a period of twelve (12) months following the termination date (the “Termination Payments”). Employer’s obligation to make the Termination Payments shall be conditioned upon (i) Executive’s compliance with the covenants set forth in Section 7 (the “Post-Employment Restrictions”) and Executive’s obligations with respect to Employer’s Confidential Information (as defined below) and (ii) Executive’s execution, delivery and non-revocation of a valid and enforceable general release of claims in a form reasonably acceptable to Employer, and not imposing any post-employment restrictions on Executive that he had not agreed to prior to the termination date, (the “Release”) that becomes effective within sixty (60) days following the date of termination of employment. Subject to Section 4(b), the Termination Payments shall be paid in equal installments over the twelve-month period following Executive’s termination of employment on the Employer’s regular payroll dates commencing on the first payroll date following the sixtieth (60th) day after the date of termination of employment, with the first such payment including the aggregate amount that would have been paid to Executive during the first sixty (60) days following the date of termination had the delay provided herein not applied. The Accrued Amounts shall be paid within sixty (60) days following the termination date.

(b) If Executive is a “specified employee” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, to the minimum extent required under Section 409A any payments required to be made pursuant to this Section 4 which are subject to Section 409A shall not commence until six (6) months from the termination date, with the first payment to be equal to the aggregate amount that would have been paid to Executive under this Section 4 during the first six (6) months immediately following the termination date had this Section 4(b) not been applicable. Each installment of the Termination Payments shall be considered a “separate payment” for purposes of Section 409A. Notwithstanding any provision of this Agreement to the contrary, Executive acknowledges and agrees that the Employer shall not be liable for, and nothing provided or contained in this Agreement will be construed to obligate or cause the Employer to be liable for, any tax, interest or penalties imposed on Executive related to or arising with respect to any violation of Section 409A.

(c) The foregoing payments upon termination of Executive’s employment as described in this Section 4 shall constitute the exclusive severance payments due to Executive upon a termination of Executive’s employment. For the avoidance of doubt, Executive is not entitled to any Termination Payments in the event that Executive resigns (regardless of reason).

(d) “Cause” as used herein shall mean Executive’s (i) commission of an act which constitutes common law fraud or embezzlement (other than occasional, customary and de minimis use of Employer’s property for personal purposes); (ii) indictment for or conviction or entry of a plea of guilty or nolo contendere to (A) a felony or (B) any crime (whether or not a felony) involving moral turpitude; (iii) commission of any intentional tortious or intentional unlawful act in either such case causing material harm to Employer’s business, standing or reputation or the business, standing or reputation of

 

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any of Employer’s Affiliates; (iv) gross negligence in the performance of Executive’s duties hereunder; (v) breach of Executive’s duty of loyalty or care to Employer or any of its Affiliates; (vi) other misconduct that is materially detrimental to Employer or any of its Affiliates; (vii) refusal or willful failure to perform Executive’s duties or the deliberate and consistent refusal to conform to or follow any reasonable policy adopted by the Employer, in each case after receiving written notice describing Executive’s noncompliance and being given ten (10) business days to cure (to the extent curable) such non-compliance; (viii) material breach of this Agreement or any other agreement with or for the benefit of Employer or any of its Affiliates to which Executive is a party or by which Executive is bound, which breach is not cured (to the extent curable) within ten (10) business days following written notice from Employer; or (ix) Executive’s death or Disability.

(e) “Disability” as used herein shall mean that Executive is unable to perform the essential functions of Executive’s job, with a reasonable accommodation, due to illness or injury for such duration as entitles Executive to long-term disability payments under the Employer plan in which he participates.

(f) “Good Reason” as used herein shall mean a termination by Executive of his employment within ninety (90) days following the occurrence of any of the following events without the Executive’s consent that remains uncured for ten (10) business days after the receipt by Employer of written notice thereof from Executive: (i) a material reduction in Base Salary; (ii) a materially adverse change in title, duties or responsibilities (including reporting responsibilities); or (iii) a relocation of Executive’s principal place of business to a location that is more than 50 miles from Chicago, Illinois on the date of Executive’s employment commencement.

5. Nondisclosure of Confidential Information.

(a) Executive recognizes and acknowledges that the Employer and its “Affiliates” (defined below) continually obtain and develop “Confidential Information” (defined below). During Executive’s employment and at all times thereafter, Executive will hold in strictest confidence and will not disclose, use, or publish any of the Confidential Information, except as such disclosure, use or publication may be required in connection with Executive’s work for the Employer. If at any time (including after termination of Executive’s employment with the Employer), a person, entity, governmental agency, or a court of competent jurisdiction requests or demands that Executive disclose Confidential Information, to the extent permitted under applicable law or regulation, Executive will promptly notify the Employer, and will cooperate with the Employer or its Affiliates in their efforts to prevent or limit such disclosure. Disclosure of Confidential Information by Executive or by anyone else, whether done intentionally or inadvertently, will not affect Executive’s continuing obligations under this Agreement as to the disclosed Confidential Information. Notwithstanding anything herein to the contrary, Executive’s obligation to protect Confidential Information shall not prohibit Executive from disclosing matters that are protected under any applicable whistleblower laws, including reporting possible violations of laws or regulations, or responding to inquiries from, or testifying before, any governmental agency or self-regulating authority, all without notice to or consent from the Employer. Executive is hereby notified that the immunity provisions in Section 1833 of title 18 of the United States Code provide that an individual cannot be held criminally or civilly liable under any federal or state trade secret law for any disclosure of a trade secret that is made (1) in confidence to federal, state or local government officials, either directly or indirectly, or to an attorney, and is solely for the purpose of reporting or investigating a suspected violation of the law, (2) under seal in a complaint or other

 

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document filed in a lawsuit or other proceeding, or (3) to Executive’s attorney in connection with a lawsuit for retaliation for reporting a suspected violation of law (and the trade secret may be used in the court proceedings for such lawsuit) as long as any document containing the trade secret is filed under seal and the trade secret is not disclosed except pursuant to court order.

(b) “Confidential Information” as used herein includes, but is not limited to, the Employer and its Affiliates’ trade secrets, proprietary information and confidential information which may include, but is not limited to, technical information, such as methods, processes, formulas, compositions, inventions, product development, product designs, computer programs, special hardware, product hardware, related software development, research projects, improvements, systems methods and other confidential technical data, and business information, such as sales, sales volume, sales methods, sales proposals, customers and prospective customers, identity of key purchasing personnel in the employ of customers and prospective customers, proposals, sales leads, profit margins, service reports, amount or kind of customers’ purchases from the Employer and/or its Affiliates, sources of supply, supply costs, system documentation, pricing data and policies (including general price lists and prices charged to specific customers), and business methods, strategies, production or merchandising systems or plans.

(c) “Affiliates” as used herein includes CPG Building Products LLC, WES, LLC (including UltraLox Technology, LLC), CPG Sub I Corporation, Scranton Products Inc. (including Sanatec Sub I Corporation and Santana Products Inc.), Vycom Corp. and Versatex Building Products LLC and any other entities that are subsidiaries of Parent on or after the date of this Agreement.

6. Assignment of Intellectual Property. Executive assigns to the Employer any rights Executive may have or acquire in the Confidential Information, and in any other intellectual property developed by Executive in whole or in part while employed by Executive, including without limitation any development rights, drawings, patents, copyrights, and the like. Executive agrees that all such intellectual property is the sole property of the Employer and its assigns. Executive irrevocably designates and appoints the Employer and its duly authorized officers and agents as Executive’s agent and attorney in fact, which appointment is coupled with an interest, to act for and on Executive’s behalf to execute, verify, and file any documents and to do all other lawfully permitted acts to further the purposes of this assignment, with the same legal force and effect as if executed by Executive.

7. Post-Employment Restrictions. In order to protect the business interests and good will of the Employer and its Affiliates and to protect the Confidential Information, and in consideration of the provisions of this Agreement, Executive covenants and agrees as follows:

(a) Non-solicitation of Customers or Prospective Customers. Executive agrees that during Executive’s employment and for the twenty four (24) month period following Executive’s termination from employment with the Employer (regardless of reason), Executive will not, as an agent or employee, or on behalf of any person or entity, directly or indirectly (1) solicit, attempt to obtain business from, accept business from, do business with or service any Customers or Prospective Customers (except that this non-solicitation provision shall not apply if Executive is acting on the Employer’s behalf), (2) induce or attempt to induce any Customer or Prospective Customer to terminate or reduce its relationship or otherwise cease doing business in whole or in part with the Employer or any of its Affiliates or (3) interfere with any relationship, contractual or otherwise, between the Employer or any of its Affiliates and any of its Customers or Prospective Customers.

 

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(i) “Customer” as used herein shall mean any person or entity that procured any products or services from the Employer or any of its Affiliates during the preceding two (2) years.

(ii) “Prospective Customers” as used herein shall mean any person or entity that Executive, Employer or its Affiliates solicited, contacted and/or communicated with on the behalf of the Employer or any of its Affiliates for business purposes during the preceding two (2) years.

(b) Non-solicitation of Employees and Independent Contractors.

(i) Executive agrees that during Executive’s employment with the Employer and for the twenty four (24) month period following termination of Executive’s employment (regardless of reason), Executive shall not, directly or indirectly, induce or attempt to induce any Employee to terminate employment, hire or participate in the hiring of any Employee or interfere with or attempt to disrupt the relationship, contractual or otherwise, between the Employer or any of the Affiliates and any Employee. “Employee” as used herein shall mean any person employed by the Employer or any of its Affiliates or any person who was employed by the Employer or any of its Affiliates during the one (1) year preceding Executive’s termination from employment.

(ii) Executive agrees that during Executive’s employment and for the twenty four (24) month period following Executive’s termination from employment with the Employer (regardless of reason), Executive will not, directly or indirectly, induce or attempt to induce any person or entity who is engaged by the Employer or any of its Affiliates as an independent contractor to terminate or change its relationship with the Employer or its Affiliates.

(c) Non-Competition. Executive agrees that during Executive’s employment with the Employer and for the twenty four (24) month period following termination of Executive’s employment (regardless of reason), Executive shall not engage, directly or indirectly, whether as a consultant, independent contractor, agent, representative, employee, advisor, owner (except in the case of passive ownership of less than five percent (5%) of any publicly traded corporation) or otherwise, alone or in association with any other person, corporation or other entity, in any Competing Business in the United States.

(i) “Competing Business” shall mean any individual, corporation, partnership, business or other entity that provides or attempts to provide any products or services that are the same or similar to any products or services offered, under development or planned to be offered by the Employer or any of its Affiliates. A “Competing Business” shall not include (A) any business of a Successor, in which Employer or its Affiliates are not engaged immediately prior to the date of the transaction by which the Successor assumes this Agreement (the “Succession Date”) or (B) any portion of the business of a Successor to the extent located in a geographic area in which none of Employer or its Affiliates is engaged immediately prior to the Succession Date. For purposes of this paragraph, “Successor” means any successor to the business and assets of Employer.

(ii) Executive acknowledges that the restrictions set forth in this Section extend nationwide. Executive further acknowledges that the geographic limitation in the restriction set forth above is reasonable because the Employer and the Affiliates offer their products and services and/or plan to offer their products and services throughout this geographic market. Executive further covenants and agrees that the geographic scope, length of term and types of activities restricted

 

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(including non-competition restrictions) contained in this Agreement are reasonable and necessary to protect the legitimate business interests of the Employer and the Affiliates because of the scope of the Employer’s business and its relationship with the Affiliates, which share Confidential Information on a need-to-know basis. Executive acknowledges that these non-competition restrictions are reasonable and necessary and will not prevent Executive from being gainfully employed.

(d) Enforceability. If a court of competent jurisdiction determines that one or more of these Post-Employment Restrictions are so broad as to be unenforceable, then such provision is to be reduced in scope or length, as the case may be, to the extent required to make it enforceable. The foregoing is not an admission or evidence that any of the terms or conditions of this Agreement are unreasonable.

(e) Tacking. If Executive violates any of the above Post-Employment Restrictions, the time period for such restriction will be extended by that number of days which equals the aggregate of all days during which at any time any such violations occurred.

(f) Notification by the Employer. Executive consents to the Employer and any of its Affiliates providing notice to any person or entity regarding Executive’s Post-Employment Restrictions under this Agreement.

(g) Forfeiture of Termination Payments. In the event Executive violates the Post-Employment Restrictions or confidentiality obligations as set forth in this Agreement in any way, Executive’s right to receive or retain any Termination Payment, as described in Section 4, immediately ceases, and Executive must forfeit and return to the Employer all Termination Payments paid after the date of the first violation.

8. Return of Employer Property. Upon termination of Executive’s employment for any reason, Executive will deliver to the Employer any and all Employer equipment and property, access codes, documents, drawings, notes, memoranda, specifications, devices and formulas, together with all copies thereof, and any other material (including, but not limited to, email messages and other material in electronic format) containing or disclosing any Confidential Information or other information regarding the Employer.

9. Consideration. Executive acknowledges and agrees that the consideration set forth in the recitals to this Agreement and the rights and benefits hereunder are all and singularly valuable consideration, which is sufficient for any or all of Executive’s covenants set forth herein.

10. No Prior Agreements. Executive represents and warrants that Executive’s performance of all the terms of this Agreement does not and shall not breach any fiduciary or other duty or any covenant, agreement or understanding (including, without limitation, any agreement relating to any proprietary information, knowledge or data acquired in confidence, trust or otherwise) to which Executive is a party or by the terms of which she may be bound. Executive further covenants and agrees not to enter into any agreement or understanding, either written or oral, in conflict with the provisions of this Agreement.

 

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11. Equitable Relief. Executive stipulates and agrees that any breach of Sections 5, 6, 7 and 21 of this Agreement by Executive will result in immediate and irreparable harm to the Employer and the Affiliates, the amount of which will be extremely difficult to ascertain, and that the Employer and the Affiliates could not be reasonably or adequately compensated by damages in an action at law. For these reasons, the Employer and the Affiliates shall have the right, without objection from Executive, to obtain such preliminary, temporary or permanent injunctions or restraining orders or decrees as may be necessary to protect the Employer and the Affiliates against, or on account of, any breach by Executive of the provisions of this Agreement without requiring the Employer or the Affiliates to post any bond. Such right to equitable relief is in addition to all other legal remedies the Employer and the Affiliates may have to protect their rights.

12. Withholding. All amounts paid to Executive under this Agreement shall be subject to withholding and other employment taxes imposed by applicable law. Executive shall be solely responsible for the payment of all taxes imposed on him relating to the payment or provision of any amounts or benefits hereunder.

13. Notices. All notices, requests, consents and demands by the parties hereto shall be delivered by hand, by confirmed facsimile transmission, by recognized national overnight courier service or by deposit in the United States mail, postage prepaid, by registered or certified mail, return receipt requested, addressed to the party to be notified at the addresses set forth below:

if to Executive:

At the address on file with the Employer

if to the Employer:

CPG International LLC

1330 W. Fulton Street

Suite 350

Chicago, Illinois 60607

Attn:  Chief Human Resources Officer

Notices shall be effective immediately upon personal delivery or facsimile transmission, one (1) business day after deposit with an overnight courier service or three (3) business days after the date of mailing thereof. Other notices shall be deemed given on the date of receipt. Any party hereto may change the address specified herein by written notice to the other parties hereto.

14. Entire Agreement. This Agreement is the final, complete and exclusive agreement of the parties with respect to its subject matter and supersedes and merges all prior or contemporaneous discussions or agreements, whether written or oral, regarding the subject matter of this Agreement. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged. Any subsequent change or changes in Executive’s duties, salary, or benefits will not affect the validity or scope of this Agreement.

15. Severability. In the event that any provision of this Agreement or application thereof to anyone or under any circumstance is found to be invalid or unenforceable in any jurisdiction to any extent for any reason, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

 

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16. Remedies; Waiver. No remedy conferred upon Employer by this Agreement is intended to be exclusive of any other remedy, and each and every such remedy shall be cumulative and shall be in addition to any other remedy given hereunder or now or hereafter existing at law or in equity. No delay or omission by Employer in exercising any right, remedy or power hereunder or existing at law or in equity shall be construed as a waiver thereof, and any such right, remedy or power may be exercised by the party possessing the same from time to time and as often as may be deemed expedient or necessary by such party in its sole discretion.

17. Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

18. Choice of Law, Jurisdiction and Venue. This Agreement is governed by the laws of the State of Delaware without regard to its principles of conflicts of law. Executive shall be receiving resources and Confidential Information from Delaware and agrees to its laws governing this Agreement. The parties further agree that the state and federal courts sitting in Wilmington, Delaware shall be the exclusive forum for the resolution of any dispute arising from or relating to this Agreement unless the Employer, in its sole discretion, brings a claim in another court of competent jurisdiction. Each party consents to the personal jurisdiction and venue of any such federal or state court. Executive irrevocably waives Executive’s right to object to or challenge the above selected forum on the basis of inconvenience or unfairness.

19. Successors and Assigns. The Employer shall have the right to assign this Agreement to a successor or assign, and Executive agrees to be obligated by this Agreement to any successor, assign or surviving entity that assumes the obligations of Employer under this Agreement. Any successor to or assignee of the Employer is an intended third-party beneficiary to this Agreement. Executive may not assign this Agreement. Employer further acknowledges and agrees that the Employer and its Affiliates are third-party beneficiaries to this Agreement and shall be entitled to enforce this Agreement and the provisions herein to the extent Executive discloses or misappropriates Confidential Information belonging to them or unfairly competes with or solicits their customers, prospective customers, employees or independent contractors.

20. Headings. The captions and headings contained in this Agreement are for convenience only and shall not be construed as a part of this Agreement.

21. Nondisparagement. During Executive’s employment and thereafter, Executive shall not make or publish (or assist or participate in the making or publication of) any untruthful, negative or derogatory comments, oral or written, directly, indirectly or by innuendo about the Employer, its officers, directors or employees, as well as the Affiliates and their officers, directors or employees, or otherwise malign the Employer’s or its Affiliates’, businesses or reputations. During Executive’s employment and thereafter, none of the officers or directors of the Employer or any of its Affiliates, nor either of the Employer or any Affiliate via an authorized public statement, shall make or publish (or assist or participate in the making or publication of) any untruthful, negative or derogatory comments, oral or written, directly, indirectly or by innuendo about Executive or his business or reputation.

 

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22. Survivability. The terms of Sections 5, 6, 7, 21 and 23 of this Agreement survive the termination of Executive’s employment with the Employer for any reason.

23. Indemnification; D&O Insurance. Executive shall be indemnified and held harmless, at all times during which he may be subject to liability for his acts and omissions to act while an employee of the Employer, by Parent and the Employer to the maximum extent permitted under the governing instruments of Parent and the Employer and applicable law. During such period, Executive shall be covered as an insured under any contract of directors and officers liability insurance (including Side A coverage) that covers members of the board of directors of Parent, AOT Building Products GP Corp. or the Employer.

[signature pages follows]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

CPG INTERNATIONAL LLC
By:  

/s/ Brian Klos

  Name: Brian Klos
  Title: Authorized Signatory
EXECUTIVE

 

Ralph Nicoletti


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

CPG INTERNATIONAL LLC
By:  

                 

  Name:
  Title:
EXECUTIVE
/s/ Ralph Nicoletti
Ralph Nicoletti

Exhibit 10.31

AMENDED AND RESTATED INDUSTRIAL LEASE

BETWEEN

NORTH KEYSER PARTNERS, LLC

AND

VYCOM CORP.

DATED: May 10, 2005


AMENDED AND RESTATED INDUSTRIAL LEASE

This Amended and Restated Industrial Lease (this “Lease”) is made as of May 10, 2005 and entered into between North Keyser Partners, LLC (“Lessor”), a Delaware limited liability company, and Vycom Corp. (“Lessee”), a Delaware corporation.

WHEREAS, Lessor and Lessee entered into that certain Industrial Lease, dated December 27, 2004 (the “Original Lease”), for that certain Premises (as defined below) located at 888 North Keyser Avenue, Scranton, Lackawanna County, Pennsylvania;

WHEREAS, Compression Polymers Holdings LLC (“CPH”), an affiliate of Lessor, and Compression Polymers Holding II LP (“Purchaser”) have entered into that certain Stock Purchase Agreement, dated as of March 12, 2005 (the “Stock Purchase Agreement”) by and among CPH, Purchaser, Lessee and Compression Polymers Corp., a Delaware corporation;

WHEREAS, it is a condition to the consummation of the transactions contemplated by the Stock Purchase Agreement that Lessor has agreed to amend, modify, and restate the Original Lease in its entirety;

WHEREAS, the members of Lessor are also members, directly or indirectly, of CPH, and thus, will derive a direct benefit from the consummation of the transactions contemplated by the Stock Purchase Agreement; and

WHEREAS, Lessor and Lessee desire to amend, modify, and restate the Original Lease in its entirety.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth in this Lease, and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the parties hereto mutually covenant and agree that the entire Original Lease shall be amended, modified and restated as follows:

ARTICLE 1

PREMISES; TERM AND ORIGINAL LEASE

Section 1.1. Premises. Lessor leases to Lessee, and Lessee leases from Lessor, the real property and improvements situated at 888 North Keyser Avenue, Scranton, Lackawanna County, Pennsylvania, consisting of a 246,400 square foot building (the “Building”) located on approximately 27.28 acres of land (the “Land”), and more particularly described in Exhibit A attached to the Lease. The Building and the Land are collectively referred to herein as the “Premises”.

Section 1.2. Term of Lease. The initial term (“Initial Term”) of this Lease shall commence on May 10, 2005 and shall continue until May 10, 2009, unless sooner terminated as provided in this Lease.

 

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Section 1.3. Option to Extend Term. Lessee has the right to extend this Lease beyond the expiration date of the Initial Term provided in Section 1.2 on the following terms and conditions:

(a) Upon expiration of the Initial Term, Lessee may extend the term of this Lease for five (5) more additional four (4) year terms (each an “Extended Term”), with each Extended Term to begin on the day following the expiration date of the previous Term (as defined below). The meaning of “Term” as used herein shall mean the Initial Term and any Extended Term, if applicable. However, if at the date of expiration of the Initial Term or any Extended Term, Lessee is in default beyond any grace period provided in this Lease in the performance of any of the terms or provisions of this Lease, Lessee’s exercise of the option to extend the term of this Lease shall be null and void. All of the terms, covenants, and provisions of this Lease shall apply to the Extended Term except that the Fixed Rent (as defined below) for such Extended Term shall be adjusted as set forth in Section 2.1 hereof.

(b) Lessee may exercise the option to extend this Lease for any Extended Term by giving to Lessor notice of its intention to do so not later than one hundred and eighty (180) days prior to the expiration of the Initial Term or the applicable Extended Term. To constitute effective notice of an intention to exercise any option to extend this Lease, the notice must be sent by certified or registered mail or nationally recognized overnight courier to Lessor at the address and in accordance with the procedures provided in Section 16.1 of this Lease and must be postmarked no later than the date provided in this Section 1.3(b) for Lessee’s exercise of the option.

(c) “Lease Year”, as used herein, shall mean the twelve (12) month period beginning April 1 and ending March 31 of the subsequent year, provided that for purposes of Section 2.1, the first Lease Year shall end on March 31, 2006 and any subsequent Lease Year shall end on the corresponding date in any of the following years.

Section 1.4. Holdover. If Lessee holds over and wrongfully continues in possession of the Premises after expiration of the Term of this Lease without the permission of Lessor, other than as provided in Section 1.3, Lessee will be deemed to be occupying the Premises at sufferance on a month-to-month tenancy, without limitation on any of Lessor’s rights or remedies thereunder subject to all of the terms and conditions of this Lease except that the Fixed Rent and Additional Rent (each as defined below) shall be increased to twice the Fixed Rent and Additional Rent payable for the last month of the Term of this Lease prior to the holdover.

Section 1.5. Original Lease. Lessor hereby waives any noncompliance or any breach by Lessee of any of its obligations, agreements or covenants under the Original Lease.

 

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ARTICLE 2

RENT

Section 2.1. Fixed Rent. Lessee agrees to pay to Lessor the sum of $492,800.00 per annum in monthly installments of $41,066.66 on the first day of each month as a fixed rent for the succeeding month (“Fixed Rent”); provided that Fixed Rent in the first Lease Year shall be prorated on a per diem basis to the extent such Lease Year is not a full calendar year. Rent for any fractional month at the beginning or end of the Term shall be prorated on a per diem basis. The Fixed Rent will increase by one percent (1%) beginning with the second Lease Year and each Lease Year thereafter during the Initial Term and any Extended Term, if applicable. For example, the Fixed Rent for the second Lease Year shall be $497,728.00 per annum payable in monthly installments of $41,477.33; for the third Lease Year $502,705.28 per annum, payable in monthly installments of $41,892.10 and so forth during the remainder of the Initial Term and any Extended Term, if applicable. Lessee agrees to pay the Fixed Rent to Lessor at Lessor’s office, located at 801 Corey Street, Moosic, Pennsylvania 18507, or at such other location or locations as Lessor shall from time to time designate by written notice to Lessee.

Section 2.2. Taxes and Assessments as Additional Rent.

(a) In addition to the Fixed Rent specified in Section 2.1, Lessee shall pay as additional rent (“Additional Rent”) hereunder: (i) the full amount of all real property and personal property taxes, water and sewer charges, special assessments of any kind or nature whatsoever and all other public charges levied upon or assessed against the Premises or any portion thereof, or on the Building or improvements now or hereafter located thereon, or arising by reason of occupancy, use or possession thereof and any taxes on rent now or hereafter in force and any other similar charges now or hereafter in effect, whether or not such charges or any of them are or may become a lien on the Premises (collectively, the “Taxes”); (ii) all premiums on the insurance policies referred to in Article 8; and (iii) all sums which may become due by reason of the failure of Lessee to comply with any of the terms, covenants and conditions of this Lease to be kept and observed by Lessee. The Additional Rent shall be payable directly to the entity imposing the tax, assessment, or charge at least fifteen (15) days prior to the date on which the payment is due. Upon request by Lessor, Lessee shall provide Lessor with a receipt or other evidence of payment for each such tax, assessment, or charge paid as soon as a receipt or other evidence is available to Lessee.

(b) Lessee may, at its own expenses, contest any tax or assessment for which Lessee is responsible under Section 2.2(a). Except as provided in Section 2.2(c), Lessee need not pay the tax, assessment, or charge during the pendency of the contest. Except as provided in Section 2.2(c), Lessee may prevent Lessor from paying any tax, assessment or charge that Lessee is contesting under this Section 2.2(b) pending resolution of the contest, by depositing with Lessor the full amount of the tax or assessment, plus the amount of any penalty that might be imposed for failure to make timely payment. On final resolution of the tax assessment contest, Lessee may use the money deposited with Lessor to pay any tax or assessment, plus any penalty or interest, due under the final resolution, and keep the balance of the deposit, if any. If the deposit is insufficient to pay these amounts, Lessee must immediately pay the balance due to the entity imposing the tax, assessment or charge.

(c) The provisions of Section 2.2(b) notwithstanding, Lessor may pay, or require Lessee to pay, any tax, assessment, or charge for which Lessee is responsible under Section 2.2(a), pending resolution of Lessee’s contest of the tax, assessment, or charge, if payment is demanded by a holder of a Mortgage (as defined below) on the Premises or if failure to pay will subject all or part of the Premises to forfeiture or loss.

 

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Section 2.3. Lessee’s Costs. Notwithstanding anything in this Lease to the contrary, to the extent Lessee suffers a Loss (as defined below) for which Lessor has agreed to indemnify any Indemnified Party (as defined below) pursuant to this Lease, Lessee may set-off any such Loss against the Fixed Rent or Additional Rent that is otherwise owed by Lessee to Lessor.

ARTICLE 3

USE OF PREMISES

Section 3.1. Permitted Use. Lessee may use the Premises to operate and conduct a plastic manufacturing business and for any other purposes permitted under the applicable Zoning Ordinance of the City of Scranton, Pennsylvania, but in any event only in compliance with such ordinance and any applicable laws, rules, regulations, statutes and applicable ordinances now or hereafter in effect. Lessee may not use the Premises for any other purpose without the prior written consent of Lessor which consent may be withheld for any reason or no reason, in the sole discretion of Lessor.

Section 3.2. Waste, Nuisance, or Illegal Uses. Lessee shall not use or permit the use of the Premises in any manner that results in waste of the Premises or constitutes a nuisance or violates any statute, ordinance, rule or regulation applicable to the Premises or for any illegal purpose. Except with respect to costs in connection with Lessor’s obligations provided in Article 9, Lessee, at its sole cost, shall use commercially reasonable efforts to comply and cause its officers, employees, agents and invitees to comply with all applicable laws, ordinances, rules or regulations or any other requirements of any governmental entity or any duly constituted public authority having jurisdiction over the Premises or the use of the Premises, including, without limitation, the provisions of the Americans with Disabilities Act and Environmental Laws (as defined below).

ARTICLE 4

REPAIRS AND ALTERATIONS

Section 4.1. Prior Inspection by Lessee. Lessee acknowledges and agrees that Lessee is fully familiar with and has fully inspected the Premises, and has fully apprised itself (or waived its right to do so) about the physical condition thereof, the topography and possible presence of swamp, ponds, wetlands, flood plains or steep slopes on the Premises, or ground water or subsurface conditions under or near the Premises, the availability or unavailability of access to the Premises, the availability or unavailability of public water and sewer or other utility services to the Premises, the zoning, subdivision and other requirements applicable to the Premises, any environmental matters affecting the Premise including, but not limited to, the presence or absence of any asbestos containing materials, gasoline storage tanks, toxic waste or hazardous substances in, on, under, or in any manner affecting the Premises, the discharge of any hazardous substances under, onto or from the Premises, and that, subject to Article 9, the Premises is being leased in its “as is” “where is” condition without any representation by or on behalf of Lessor concerning the Premises, any surrounding properties or any quality thereof.

 

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Section 4.2. Repairs. Except as otherwise set forth in this Lease, Lessee shall, throughout the Term of this Lease, at its own expense and risk, maintain the Premises in good order and condition, including but not limited to, making all repairs and replacements, renewals and additions, interior and exterior, structural and non-structural, ordinary and extraordinary, foreseen and unforeseen, necessary to keep and maintain the Premises and all systems, equipment and apparatus appurtenant thereto or used in connection therewith and improvements in working order and condition. All maintenance, repairs and replacements required by this Section 4.2 will be performed reasonably promptly and in good and workmanlike manner. Lessee shall return the Premises to Lessor in at least as good order and condition at the expiration of the Term hereof as existed on the date hereof, ordinary wear and tear excepted.

Section 4.3. Failure of Lessee to Repair. In the event Lessee fails to perform its obligation to repair, replace, or maintain as set forth in Section 4.2, within a reasonable time after notice from Lessor of the need for such repair, replacement, or maintenance, Lessor may enter the Premises and make such repairs or replacements, or perform such maintenance or cause such repairs or replacements to be made or maintenance to be performed, at its own expense. Upon Lessor’s notice to Lessee of the performance and cost of any maintenance, repairs, or replacements, Lessee shall promptly reimburse Lessor for any reasonable costs actually incurred by Lessor in connection with such maintenance, repairs or replacements.

Section 4.4. Environmental Costs; Other Costs. Notwithstanding the foregoing, Lessor shall be responsible for all costs and expenses in connection with the performance of Lessor’s obligations provided in Article 9.

Section 4.5. Alterations.

(a) Except as otherwise provided in this Lease, Lessee shall not demolish the Building or make any alterations, additions or improvements (collectively, “Alterations”) to the Building or the Premises without the prior written consent of Lessor (other than non-structural and/or emergency Alterations) which consent shall not be unreasonably withheld, conditioned or delayed and if Lessor does not respond to a request for consent within thirty (30) days after receipt of such request, Lessor shall be deemed to have consented to the Alterations. Consent for non-structural Alterations shall not be required provided, (i) such non-structural Alterations shall not materially and adversely affect the structural soundness of the Premises or materially reduce the value of the Building or other improvements on the Premises, and (ii) the aggregate cost of all such additions, alterations or improvements does not exceed the sum of $100,000. Lessor hereby consents to the Contemplated Construction and Renovation Activities (as defined below) currently contemplated or initiated within one year of the date of this Lease.

(b) Lessor hereby acknowledges and agrees that Lessee shall have no obligation to remove any of the equipment or machinery located in, on or under the Premises at the expiration or earlier termination of the Lease. Lessee shall have no obligation to restore the Premises, and any Alterations made by Lessee that are existing in the Premises on the last day of the Term shall become the property of Lessor at the termination of the Lease.

 

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(c) Lessee shall, before making any Alterations, at its expense, obtain all permits, approvals and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval thereof and shall deliver promptly duplicates of all such permits, approvals and certificates to Lessor. Lessee agrees to carry, and to cause Lessee’s contractors and sub-contractors to carry such workmen’s compensation insurance and general liability insurance with limits of at least $5,000,000 single limit for injury to any one person or injuries in any one occurrence and property damage of $1,000,000. In addition, Lessor, at its option, may in any case in which its consent is required pursuant to Section 4.5(a), require Lessee to furnish Lessor with copies of the applicable plans and specifications and any relevant contract between Lessee and any contractor. Lessor may also require, at its option and as a condition precedent to giving any approval to an Alteration with a cost exceeding $1,000,000, (i) a performance bond and a labor and material payment bond, both in form and substance satisfactory to Lessor, given by an independent financially responsible corporate surety, to assure completion of the work in accordance with the plans and specifications, free of liens, and (ii) evidence that each contractor has adequate workmen’s compensation insurance and general liability insurance as described above, together with a certificate from the insurer to the effect that such insurance may not be canceled or substantially modified without at least thirty (30) days prior written notice to Lessor.

ARTICLE 5

UTILITIES AND REFUSE REMOVAL

Section 5.1. Utility Charges. Lessee shall pay all utility charges for water, electricity, heat, gas, steam, telephone or other services or utility used in and about the Premises during the Term. Lessee shall pay all such charges directly to the utility company, municipality or third party furnishing the service, before the charges shall become delinquent. Under no circumstances shall Lessor be required to furnish any utilities or any other services of any kind to the Premises or any part thereof.

Section 5.2. Refuse Removal. Lessee shall be responsible for and shall pay for the removal of all refuse and rubbish from the Premises during the Term of the Lease.

ARTICLE 6

TRADE FIXTURES AND SIGNS

Section 6.1. Trade Fixtures. Lessee has the right at all times to erect or install shelves, bins, machinery, equipment, or other trade fixtures in, on, or about the Premises, provided that Lessee complies with applicable governmental laws, ordinances and regulations regarding such fixtures including, without limitation, the American with Disabilities Act. Lessee has the right to remove all trade fixtures at the termination of this Lease, provided Lessee is not in default under the Lease and that the fixtures can be removed without structural damage to the building. Lessee must repair and restore any damage or injury to the Building, structures and improvements now or hereafter erected on the Premises caused by installation or removal of trade fixtures, and all such repairs must be completed prior to the termination of the Lease. Any trade fixtures that have not been removed by Lessee at the termination of the Lease shall be deemed abandoned by the Lessee and shall automatically become the property of Lessor.

 

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Section 6.2. Signs. Lessee shall have the right to erect signs on any portion of the Premises, including but not limited to, the exterior walls of the Building or any other structure on the Premises but only subject to, and in accordance with, all applicable laws, ordinances, rules and regulations. Lessee, at its sole cost, shall remove all signs at the termination of this Lease and repair any damage or injury resulting from the erection or removal of the signs.

ARTICLE 7

MECHANICS’ LIEN

Section 7.1. Mechanics’ Lien. Lessee shall not suffer or permit any mechanics’, laborers’ or materialmen’s liens to be recorded or filed against the Premises or any part thereof or against the interests therein of Lessee or Lessor as a result of any work performed by or on behalf of Lessee. If any such lien shall at any time be recorded or filed against the Premises or any such interest therein, Lessee shall cause the same to be discharged of record within sixty (60) days after Lessee receives notice of the recording or filing of the same, by either payment, deposit or bond. Notwithstanding the foregoing, Lessee shall have the right, after notice to Lessor, to contest by appropriate legal proceedings, diligently conducted in good faith, the amount or validity of any such mechanics’ or other lien filed against the Premises.

ARTICLE 8

INSURANCE

Section 8.1. Property Insurance. Lessee shall at its own expense, during the Term, keep the Buildings and all improvements on the Premises insured against loss or damage by fire or theft, and such other hazards, casualties and contingencies as are usually covered by the broadest form of extended coverage policy available in the area, boiler insurance (if appropriate), loss by windstorm, hail, explosion, flood or riot, and such other insurance as may be reasonably specified by Lessor from time to time. The fire and extended coverage insurance shall be in the amount of the full insurable value of the Premises, without deduction for depreciation, and the boiler insurance and other insurance, if any, shall be in such amounts as Lessor may reasonably require. The insurance is to be carried by one or more insurance companies licensed to do business in Pennsylvania. Such policy or policies of insurance shall name both Lessor and Lessee and, where appropriate, the holder of any Mortgage on the Premises, as named insureds as their interests may appear and/or Mortgage payee. The policies shall provide that any proceeds for loss or damage to Building or to improvements shall be payable solely to Lessor; which sum Lessor shall use for repair and restoration purposes as provided for herein.

Section 8.2. Liability Insurance. Lessee, at its own expense, shall provide and maintain in force during the term of this Lease, comprehensive general liability insurance protecting Lessor and Lessee against or damage to any person or property occurring in, on or about the Premises or any sidewalks, driveways or other areas appurtenant to the Premises.

 

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Such insurance shall be in the amount of at least $5,000,000.00, single limit for injury to any one person, or injuries in any once occurrence and $1,000,000.00 for property damage. Such policies shall name Lessor and Lessee as insureds. This insurance is to be carried by one or more insurance companies authorized to do business in Pennsylvania.

Section 8.3. Remedy for Failure to Provide Insurance. Lessee shall furnish Lessor with certificates of all insurance required by this Article 8. If Lessee does not provide such certificates or if Lessee allows any insurance required under this Article 8 to lapse, Lessor may, at its option, take out and pay the premiums on the necessary insurance to comply with Lessee’s obligations under the provisions of this Article 8. Lessor is entitled to reimbursement from Lessee for all amounts spent by it to procure and maintain such insurance.

Section 8.4. Hold-Harmless. Except with respect to costs in connection with Lessor’s obligations provided in Article 9 or as otherwise provided in this Lease, Lessor shall not be responsible for and is hereby relieved from all liability for any damage, expense, cause of action, suits, demands, judgments, and claims of any nature whatsoever, arising from or by reason of any injury to any person or persons or any damage to any property which may arise from the negligence of Lessee or its agents, servants or employees, or from present or future structural defects or other conditions in, on or about the Premises or any part thereof or any sidewalks, streets, driveways, railroad sidings, rights of way or roadways adjacent thereto, or in any manner growing out of or connected with the use and occupancy of the Premises or any part thereof by Lessee or any other party during the Term. Subject to Article 9, Lessee accepts and assumes such liability and agrees to protect, indemnify and hold Lessor harmless against any and all such claims, demands, damages, costs, and expenses, including reasonable attorneys’ fees for the defense of such claims and demands arising from the conduct or management of Lessee’s business on the Premises, or its use of the Premises or from any breach on the part of Lessee of any conditions of this Lease, or from any act or negligence of Lessee, its agents, contractors, employees, sublessees, concessionaires, or licensees in or about the Premises. In case of any action or proceeding brought against Lessor by reason of any such claim, Lessee, on notice from Lessor, agrees to defend the action or proceeding. This shall not be construed as in any way limiting Lessee’s obligations under this Lease.

Section 8.5. Additional Insurance.

(a) Lessee shall not take out separate insurance concurrent in form or contributing, in the event of loss, with that required to be furnished by Lessee pursuant to this Article 8, nor shall Lessee increase the amounts of any then existing increase by securing an additional policy or additional policies, without in either instance including Lessor as an insured party.

(b) The insurance policies referred to in Sections 8.1 and 8.2 above shall be underwritten by insurance companies with Best’s “A-” rating or better. Lessee shall deliver to Lessor certificates of all insurance policies on or before the first day of the term hereof and thereafter twenty days prior to the expiration of any such policy. At the request of Lessor, Lessee shall also deliver to Lessor receipts evidencing payment of all insurance premiums, which delivery shall be at least ten (10) days prior to the date such premiums are due.

 

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(c) Lessor and Lessee shall each include in each of its insurance policies a waiver of the insurer’s right of subrogation against the other party during the Term or, if such waiver should be unobtainable or unenforceable, (a) an express agreement that such policy shall not be invalidated if the assured waives the right of recovery against any party responsible for a casualty covered by the policy before the casualty or (b) any other form of permission for the release of the other party. Each party hereby releases the other party with respect to any claim (including a claim for negligence) which it might otherwise have against the other party for loss, damage or destruction with respect to is property occurring during the Term to the extent to which it is, or is required to be, insured under a policy or policies containing a waiver of subrogation or permission to release liability. Nothing contained in this Section 8.5(c) shall be deemed to relieve either party of any duty imposed elsewhere in this Lease to repair, restore or rebuild or to nullify any abatement of rents provided for elsewhere in this Lease.

ARTICLE 9

INDEMNIFICATION

Section 9.1. Definitions. For the purposes of this Lease, the following terms shall have the meanings indicated:

Contemplated Construction and Renovation Activities means any construction or renovation activities at the Premises conducted on or after commencement of Lessee’s occupancy of the Premises in connection with preparation of the Premises for operation as Lessee’s manufacturing facility, including without limitation the construction or installation of silos; mixers; heating, cooling and production equipment; roads; and a rail spur.

Environmental Condition means any condition at, on, under, within, or migrating onto or from the Premises, in each case arising out of any Environmental Matter that results in any Loss.

Environmental Laws means any federal, state or local law, statute, ordinance, rule or regulation governing Environmental Matters, including any common law cause of action providing any right or remedy relating to Environmental Matters, and all applicable judicial and administrative decisions, orders, and decrees relating to Environmental Matters.

Environmental Matter means any matter arising out of, relating to, or resulting from pollution, contamination, protection of the environment, protection of human health from environmental hazards, protection of health or safety of employees, and any matters relating to emissions, discharges, disseminations, releases or threatened releases, of hazardous materials, substances or wastes into the workplace, air, surface water, groundwater, soil, land surface or subsurface, or real property or otherwise arising out of, relating to, or resulting from the manufacture, processing, distribution, use, treatment, storage, disposal, transport, handling, release or threatened release of hazardous materials, substances or wastes.

Hazardous Substances means any and all hazardous and toxic substances, wastes or materials, any pollutants, contaminants, or dangerous materials (including, without limitation, polychlorinated biphenyls, friable asbestos, asbestos-containing materials, volatile and semi-volatile organic compounds, oil, petroleum or any by-products or fractions thereof, and any materials which include hazardous constituents or become hazardous, toxic, or dangerous when their composition or state is changed), or any other similar substances or materials which are regulated by or form the basis of liability under, any Environmental Laws.

 

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Losses shall mean each and all of the following items to the extent incurred: claims, losses, liabilities, damages, investigation, monitoring, removal, response and cleanup costs, natural resource damages, judgments, fines, penalties, amounts paid in settlement and reasonable costs and expenses incurred in connection therewith (including, without limitation, interest which is imposed in connection therewith, costs and expenses of suits and proceedings, and reasonable fees and disbursements of counsel).

Section 9.2. Indemnification by Lessor. Lessor shall indemnify and hold harmless Lessee, its respective officers, directors, shareholders, successors and permitted transferees and assigns from and against any and all Losses to the extent relating to (a) implementation, whether by Keyser Properties, Inc. or Keyser Partners, LLC, of any requirements of that certain Consent Order and Agreement, In the matter of Buyer-Seller Agreement re 888 North Keyser Avenue, Scranton, Pennsylvania, by and among the Commonwealth of Pennsylvania Department of Environmental Protection (PDEP”), Keyser Properties, Inc., and North Keyser Partners, LLC, dated December 27, 2004 (the PDEP Consent Order), and any other actions required to demonstrate compliance with the environmental remediation standards established in the Land Recycling and Environmental Remediation Standards Act (Act 2”), 35 P.S. § § 6026.101 et seq. with respect to any of the conditions of contamination giving rise to the PDEP Consent Order; (b) any other Environmental Condition, whether known or unknown, existing or occurring on or prior to the date hereof (including without limitation any Environmental Condition discovered following the date hereof in connection with any Contemplated Construction and Renovation Activities as to which until eight months following the date hereof there will be a rebuttable presumption that any such Environmental Condition was existing or occurring on or prior to the date hereof); (c) any third-party claims relating to the transportation, use, or disposal of, or arranging for the disposal of, any Hazardous Substances from the Premises at any off-site location (Off-site Claims”) (i) on or prior to the date hereof or (ii) in connection with any Contemplated Construction and Renovation Activities currently contemplated or initiated within one year of the date of this Lease; and/or (d) any interference with, or delay in, the PDEP Consent Order or any Contemplated Construction and Renovation Activities currently contemplated or initiated within one year of the date of this Lease, including without limitation all damages (excluding lost profits) caused by any interference with, or delay in, any such Contemplated Construction and Renovation Activities resulting from any requirement to obtain any PDEP approvals associated therewith provided that Lessee agrees to undertake commercially reasonable efforts to mitigate damages in connection with completing such construction and renovation activities.

Section 9.3. Environmental Indemnification by Lessee. Lessee shall indemnify and hold harmless Lessor from and against any and all Losses to the extent relating to any Environmental Conditions caused or occurring after the date hereof, including any Off-Site Claims relating thereto; provided, however, that the foregoing excludes (a) any matters indemnified pursuant to Section 9.2 or (b) any Environmental Conditions caused by Lessor, Keyser Properties, Inc. or their employees or agents.

 

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Section 9.4. Procedures. The procedures set forth in this Section 9.4 shall govern the indemnification obligations set forth in Article 9 hereof.

(b) The party bearing the greater proportion of the liability with respect to any matter covered by the indemnifications contained in this Amendment (the Principal Indemnitor) shall undertake and exercise control over any environmental investigatory, corrective or remedial action with respect to any claim for indemnification under this Amendment by a party indemnified hereunder (the Indemnified Party”), including any related negotiations or settlements with governmental authorities or third parties (“Principal Management”); provided, that the Indemnified Party shall be entitled to participate fully in the defense of any such action, including commenting on any submission to any governmental authority and attending any meeting with any third party. No Indemnified Party shall have any right to indemnification hereunder with respect to any environmental investigatory, corrective or remedial action except to the extent such action is required (A) for purposes of compliance with the PDEP Consent Order; or (B) either (i) lawfully required by any governmental authority, or (ii) required by any Environmental Laws and then only to the extent of any such action, approved by the Principal Indemnitor, such approval not to be unreasonably withheld or delayed, reasonably necessary to attain compliance in a cost effective manner with Environmental Laws assuming the same use of the subject property as currently in effect and employing risk based standards and institutional controls, if appropriate and available. Notwithstanding the foregoing, with respect to matters as to which Lessor is the Principal Indemnitor (including without limitation the ongoing investigation and remediation of the Premises under the direction of the PDEP), Lessor and, at Lessor’s option, North Keyser Properties, Inc., shall have the right to exercise Principal Management, which shall include the right to reasonable access to the Premises for purposes of completing environmental investigation and remediation, except that such parties shall, in exercising Principal Management, not unreasonably interfere with any Contemplated Construction and Renovation Activities or Lessee’s ongoing business use of the Premises.

(c) When any Indemnified Party receives notice of any claims made by third parties or has any other claim for indemnification under this Article 9 (collectively, Claims), such Indemnified Party shall give prompt written notice thereof to the other party reasonably indicating (to the extent known) the nature of such Claims, the basis thereof and, if reasonably practicable, the estimated amount of potential Losses associated with such Claim; provided, however, that the failure of such Indemnified Party to give prompt notice as provided herein shall not relieve the other party of any of its obligations hereunder unless and only to the extent that such other party shall have been materially prejudiced thereby.

Section 9.5. Transferability of PDEP Consent Order. Lessor hereby covenants and agrees to use its reasonable best efforts to request that PDEP additionally extend any liability protection conferred on Lessor pursuant to the PDEP Consent Order to Lessee (while maintaining the liability protection already conferred on Lessor) as soon as reasonably practicable.

Section 9.6. Survival. Each of the covenants, agreements, obligations, representations and warranties and indemnities set forth in this Article 9 shall survive the expiration or earlier termination of this Lease; provided, however, that at such time the Option Agreement is exercised, Sections 9.2(b), (c) and (d) shall expire unless an Claim has been made with respect thereto, in which case such Claim shall survive until resolution.

 

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ARTICLE 10

DAMAGE OR DESTRUCTION OF PREMISES

Section 10.1. Notice of Lessor. If the Building or the Premises, or any structures or improvements on the Premises, should be damaged or destroyed by fire, flood or other casualty (each a “Casualty”), Lessee shall give immediate written notice of the damage and, as far as known to Lessee, the cause of the damage.

Section 10.2. Repair by Lessor. Except as provided in this Article 10, in case of damage to the Premises from a Casualty, Lessee, with reasonable dispatch (but Lessee shall not be required to perform the same on an overtime or premium pay basis) after the collection and to the extent of the insurance proceeds so collected which are attributable to such Casualty, shall rebuild and restore the Premises to the condition which existed immediately prior to such Casualty. A Casualty shall not cause an abatement of rent or in any other way affect the respective obligations of Lessor and Lessee hereunder. Notwithstanding the foregoing, if by reason of a Casualty (i) the Premises shall be totally damaged or destroyed, (ii) the Premises shall be so damaged or destroyed that repair or restoration shall require more than 270 days or the expenditure of more than forty percent (40%) of the full insurable value of the Building (which, for purposes of this Section 10.2, shall mean replacement cost less the cost of footings, foundations and other structures below the street and first floors of the Building) immediately prior to the Casualty or (iii) more than fifty percent (50%) of the Building shall be damaged or destroyed (as estimated in any such case by a reputable contractor, architect or engineer designated by Lessee), then in any such case Lessee may terminate this Lease by notice given to Lessor within 180 days after the Casualty. If the holder of any Mortgage on the Premises shall have the right to apply the insurance proceeds which would otherwise be payable for restoration of the Premises on account of the Mortgage debt and does in fact so apply such proceeds, then Lessor may, at its option, either (i) make available to Lessee funds equivalent to such insurance proceeds or (ii) terminate this Lease by written notice given to Lessee within 30 days after the aforesaid Mortgage debt has been satisfied, and in any event no later than 90 days after the Casualty. If Lessor shall elect to terminate this Lease pursuant to this Section 10.2, then such termination shall be effective as of the last day of the calendar month in which such termination notice is given.

ARTICLE 11

CONDEMNATION

Section 11.1. Notice of Condemnation. In the event the Premises or any part thereof shall be condemned and taken for a public or a quasi-public use, Lessee will promptly give written notice thereof to Lessor generally describing the nature and extent of such condemnation or taking or the nature of such proceedings and negotiations and the nature and extent of the taking which might result therefrom, as they case may be. Any award made to compensate either Lessor or Lessee for its damage or loss shall be deposited with Lessor, or with any holder of a Mortgage encumbering the Premises, if required by said holder.

 

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Section 11.2. Partial Condemnation. In the event that a portion of the Premises, but less than the entire Premises, is taken or condemned by eminent domain as aforesaid, Lessor shall have the right, at its option, to require Lessee to make such repairs as are necessary to restore the Premises as nearly as possible to the condition they were in immediately prior to the taking, but only if and to the extent that Lessor shall make available to Lessee the net proceeds of the condemnation award (which shall be the total award less the sum of (i) any costs or expenses incurred by Lessor in collecting the award and (ii) so much of the award as may be allocated to land value) on the same terms and conditions as contained in hereof with respect to restoration or repair of the Premises in the event of damage by fire or other casualty.

If the Building cannot be restored to a complete architectural unit, or if the taking is so extensive that the Building would not, after restoration, be suitable for its present use as an industrial facility, the taking shall be considered total and Section 11.3 below will apply. If the holder of any Mortgage on the Premises shall apply the award to the principal balance of such Mortgage, Lessor shall make the election provided in Section 11.3(c) below.

Section 11.3. Abatement of Rent. In the event of a partial taking rent shall abate equitably in proportion to the area of the Premises condemned as of the day on which the condemning authority shall take possession of the condemned property.

(a) In the event the entire Premises are taken or condemned by any public or quasi-public authority exercising the right of eminent domain, this Lease shall terminate as of the date of condemning authority takes possession of the Premises, with the same force and effect as though such date were the date fixed herein for expiration of the term. The entire amount of any award for such taking shall belong to Lessor except for moving and business interruption expenses, if any, awarded directly to Lessee, and Lessee hereby waives any other right he may have to any portion of such award.

(b) If the condemning authority should take only the right to possession for a fixed period of time or for the duration of an emergency or other temporary condition, then, notwithstanding anything hereinabove provided, this Lease shall continue in full force and effect without any abatement of rent, and the amounts payable by condemning authority with respect to any period of time prior to the expiration or sooner termination of this Lease shall be paid by Lessor to Lessee out of the amount of the award and the condemning authority shall be considered a subtenant of Lessee.

(c) If Lessor and Lessee are unable to agree as to whether any taking is so substantial as to constitute a total taking for purposes of this Lease, or as to the amount of abatement of rent after a partial taking, the matter shall be submitted to arbitration in Lackawanna County, Pennsylvania in accordance with the rules of the American Arbitration Association then in force and the decision of the arbitrator shall be final and binding on both parties.

(d) In the event of a partial taking, if and to the extent the condemnation award exceeds the cost of reconstruction (as in the case of a road widening which requires no reconstruction) such excess shall belong to Lessor.

 

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ARTICLE 12

DEFAULT

Section 12.1. Events of Default. The following events or any one or more of them shall be an event of default (each, an Event of Default) under this Lease:

(a) Lessee shall fail to pay any Fixed Rent or Additional Rent within thirty (30) days after written notice from Lessor that the same is due and payable; or

(b) Lessee shall fail to perform or comply with any of the other terms, covenants, agreements or conditions hereof and such failure shall continue for more than thirty (30) days after written notice thereof from Lessor, provided if the default cannot be cured within thirty (30) days, Lessee shall not be considered in default if Lessee shall, within such period, have commenced with due diligence and dispatch to cure such default, and shall thereafter complete with due diligence the curing of such default; or

(c) Lessee shall make a general assignment for the benefit of creditors, or shall admit in writing its inability to pay its debts as they become due, or shall file a petition in bankruptcy, or shall be adjudicated a bankrupt or insolvent, or shall file a petition seeking any reorganization, arrangements, composition readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, or shall file an answer admitting or not contesting the material allegations of a petition against it in any such proceeding, or shall seek or consent to or acquiesce in the appointment of any trustee, receiver or liquidator of Lessee or any material part of its properties; or

(d) If within 60 days after the commencement of any proceeding against Lessee seeking any reorganization, arrangement, composition, readjustment, liquidation or dissolution or similar relief under any present or future statute, law or regulation, such proceeding shall not have been dismissed, or if, within 60 days after the appointment without the consent or acquiescence of Lessee, if any trustee, receiver or liquidator of Lessee, or of any material part of its properties, such appointment shall not have been vacated.

Section 12.2. Remedies. In the event of any Event of Default, (regardless of the pendency of any proceeding which has or might have the effect of preventing Lessee from complying with the terms of this Lease), Lessor at any time thereafter may exercise any one or more of the following remedies:

(a) Lessor may terminate this Lease, without any right by Lessee to reinstate its rights by payment of rent due or other performance of the terms and conditions hereof. Upon such termination Lessee shall immediately surrender possession of the Premises to Lessor.

 

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(b) With or without terminating this Lease, as Lessor may elect, Lessor may re-enter and repossess the Premises, or any part thereof, and lease them to any other person or entity upon such terms as Lessor shall deem reasonable, for a term within or beyond the Term of this Lease; provided, that any such reletting prior to termination shall be for the account of Lessee, and Lessee shall remain liable for (a) all Fixed Rent, Additional Rent and other sums which would be payable under this Lease by Lessee in the absence of such expiration, termination or repossession, less (b) the net proceeds, if any, of any reletting (including, without limitation, all repossession costs, brokerage commissions, legal expenses, attorneys’ fees and expenses, employees’ expenses, reasonable alteration costs, and expenses of preparation for such reletting). If the Premises are at the time of the Event of Default sublet or leased by Lessee to other tenants, Lessor may, as Lessee’s agent, collect rents due from any subtenant or other tenant and apply such rents to the rent and other amounts due hereunder without in any way affecting Lessee’s obligation to Lessor hereunder. Such agency, being given for security, is hereby declared to be irrevocable.

(c) Lessor may declare the Fixed Rent and all Additional Rent for the entire balance of the then current term immediately due and payable, together with all other charges, payments, costs, and expenses payable by Lessee as though such amounts were payable in advance on the date the event of default occurred.

No expiration or termination of this Lease pursuant to this Section 12.2 or by operation of law or otherwise (except as expressly provided herein), and no repossession of the Premises or any part thereof pursuant to Section 12.2 or otherwise shall relieve Lessee of its liabilities and obligations hereunder, all of which shall survive such expiration, termination or repossession, and Lessor may, at its option, sue for and collect rent and other charges due hereunder at any time and from time to time as and when such charges accrue.

Section 12.3. Interest. Any Fixed Rent or Additional Rent due to Lessor from Lessee overdue for a period of more than thirty (30) days shall bear interest at the rate of Wall Street Journal prime plus 5% per annum until unpaid.

Section 12.4. No Waiver. No waiver by Lessor of any breach of Lessee of any of its obligations, agreements or covenants hereunder shall be a waiver of any subsequent breach or of any other obligation, agreement or covenant, nor shall any forbearance by Lessor to seek a remedy for any breach by Lessee be a waiver by Lessor of its rights and remedies with respect to such or any subsequent breach.

Section 12.5. Removal of Property. Upon a default by Lessee pursuant to Section 12.1, with respect to any portion of the Premises which is vacant or which is physically occupied by Lessee, Lessor may remove all persons and property therefrom, and store such property in a public warehouse or elsewhere at the cost of and for the account of Lessee, without service of notice or resort to legal process (all of which Lessee expressly waives) and without being deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby, Lessor shall have a lien for the payment of all sums agreed to be paid by Lessee herein upon all Lessee’s property, which lien is to be in addition to any Lessor’s lien now or hereafter provided by law.

 

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Section 12.6. Waiver of Jury Trial. The parties hereby waive trial by jury in any action, proceeding, or counterclaim brought by either of them against the other on any matters arising out of or in any way connected with this Lease, the relationship of Lessor and Lessee, Lessee’s use or occupancy of the Premises, and/or any claim or injury or damage. In the event Lessor commences any proceedings for non-payment of Fixed Rent or Additional Rent, Lessee will not interpose any counterclaim of any nature or description in any such proceedings. This shall not be construed, however, as a waive of Lessee’s right to assert any such claims in any separate action brought by Lessee.

Section 12.7. Redemption. Lessee hereby expressly waives any and all rights of redemption granted by or under any present of future law in the event this Lease is terminated or Lessee is evicted or dispossessed by reason of violation of Lessee by any of the provisions of this Lease.

Section 12.8. Injunctive Relief. In the event of breach or threatened breach by Lessee of any provision of this Lease, Lessor shall have the right of injunction as if other remedies were not provided for herein.

Section 12.9. Remedies Cumulative. No right or remedy herein conferred upon or reserved to Lessor is intended to be exclusive of any other right or remedy herein or by law provided, but each shall be cumulative and in addition to every other right or remedy given herein or now or hereafter existing at law or in equity or by statute.

Section 12.10. Performance by Lessor. If Lessee shall default in the performance of any covenant required to be performed by it under this Lease, Lessor may perform the same for the account and at the expense of Lessee, after first giving notice to Lessee of its intention to do so. If Lessor at any time is compelled to pay, or elects to pay, any sum of money, by reason of the failure of Lessee to comply with any provisions hereof, or if Lessor is compelled to incur any expense, including reasonable counsel fees, in instituting, prosecuting or defending against any action or proceeding instituted by reason of any default of Lessee hereunder, the amount of such payments or expenses shall be paid by Lessee to Lessor as additional rent on the next day following such payment or the incurring of such expense upon which a regular monthly rental payment is due.

THE FOLLOWING PARAGRAPHS SET FORTH WARRANTS OF AUTHORITY FOR AN ATTORNEY TO CONFESS JUDGMENT AGAINST LESSEE. IN GRANTING THIS RIGHT TO CONFESS JUDGMENT AGAINST LESSEE, LESSEE HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, AND, ON THE ADVISE OF THE SEPARATE COUNSEL OF LESSEE, UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS LESSEE HAD OR MAY HAVE TO PRIOR NOTICE AND AN OPPORTUNITY FOR HEARING UNDER THE RESPECTIVE CONSTITUTIONS AND LAWS OF THE UNTIED STATE AND THE COMMONWEALTH OF PENNSYLVANIA.

Section 12.11. LESSEE HEREBY EMPOWERS ANY PROTHONOTARY OR ATTORNEY OF ANY COURT OF RECORD TO APPEAR FOR LESSEE IN ANY AND ALL ACTIONS WHICH MAY BE BROUGHT FOR RENT AND/OR THE CHARGES, PAYMENTS, COSTS AND EXPENSES HEREIN RESERVED AS RENT, OR HEREIN AGREED TO BE PAID BY LESSEE AND/OR TO SIGN FOR LESSEE AN AGREEMENT FOR ENTERING IN ANY COMPETENT COURT AN AMICABLE ACTION OR ACTIONS

 

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FOR THE RECOVERY OF SUCH RENT OR OTHER CHARGES OF EXPENSES, AND IN SAID SUITS OR IN SAID AMICABLE ACTION OR ACTIONS TO CONFESS JUDGMENT AGAINST LESSEE FOR ALL OR ANY PART OF THE RENT SPECIFIED IN THIS LEASE AND THEN DUE AND UNPAID, AND OTHER CHARGES, PAYMENTS, COSTS AND EXPENSES RESERVED AS RENT OR AGREED TO BE PAID BY LESSEE AND THEN DUE AND UNPAID, AND FOR INTEREST AND COSTS TOGETHER WITH A REASONABLE ATTORNEY’S COMMISSION. SUCH AUTHORITY SHALL NOT BE EXHAUSTED BY ONE EXERCISE THEREOF, BUT JUDGMENT MAY BE CONFESSED AS AFORESAID FROM TIME TO TIME AS OFTEN AS ANY OF SAID RENT AND/OR OTHER CHARGES RESERVED AS RENT OR AGREED TO BE PAID BY LESSEE SHALL FALL DUE OR BE IN ARREARS.

Section 12.12. UPON THE EXPIRATION OF THE THEN CURRENT TERM OF THIS LEASE OR THE EARLIER TERMINATION OR SURRENDER HEREOF AS PROVIDED IN THIS LEASE, IT SHALL BE LAWFUL FOR ANY ATTORNEY TO APPEAR AS ATTORNEY FOR LESSEE AS WELL AS FOR ALL PERSONS CLAIMING BY, THROUGH OR UNDER LESSEE AND TO SIGN AN AGREEMENT FOR ENTERING IN NAY COMPETENT COURT AN AMICABLE ACTION IN EJECTMENT AGAINST LESSEE AND ALL PERSON CLAIMING BY, THROUGH OR UNDER LESSEE AND THEREIN CONFESS JUDGMENT FOR THE RECOVERY BY LESSOR OR POSSESSION OF THE HEREIN PREMISES, FOR WHICH THIS LEASE SHALL BE ITS SUFFICIENT WARRANT, WHEREUPON, IF LESSOR SO DESIRES, A WRIT OF POSSESSION OR OTHER APPROPRIATE WRIT UNDER THE RULES OF CIVIL PROCEDURE THEN IN EFFECT MAY ISSUE FORTHWITH, WITHOUT ANY PRIOR WRIT OR PROCEEDING; PROVIDED HOWEVER, IF FOR ANY REASON AFTER SUCH ACTION SHALL HAVE BEEN COMMENCED, THE SAME SHALL BE DETERMINED AND THE POSSESSION OF THE PREMISE HEREBY DEMISED REMAIN IN OR BE RESTORED TO LESSEE, LESSOR SHALL HAVE THE RIGHT FOR THE SAME DEFAULT AND UPON ANY SUBSEQUENT DEFAULT OR DEFAULTS, OR UPON THE TERMINATION OF THIS LEASE UNDER ANY OF THE TERMS OF THIS LEASE TO BRING ONE OR MORE FURTHER AMICABLE ACTION OR ACTIONS AS HEREINBEFORE SET FORTH TO RECOVER POSSESSION OF THE SAID PREMISES AND CONFESS JUDGMENT FOR THE RECOVERY OF POSSESSION OF THE PREMISES AS HEREINABOVE PROVIDED.

Section 12.13. IN ANY AMICABLE ACTION OF EJECTMENT AND/OR FOR RENT IN ARREARS, LESSOR SHALL FIRST CAUSE TO BE FILED IN SUCH ACTION AN AFFIDAVIT MADE BY IT OR SOMEONE, ACTING FOR IT, SETTING FORTH THE FACTS NECESSARY TO AUTHORIZE THE ENTRY OF JUDGMENT, AND, IF A TRUE COPY OF THIS LEASE (AND OF THE TRUTH OF THE COPY OF SUCH AFFIDAVIT SHALL BE SUFFICIENT EVIDENCE) BE FILED IN SUCH ACTION, IT SHALL NOT BE NECESSARY TO FILE THE ORIGINAL AS A WARRANT OF ATTORNEY, ANY RULE OF COURT, CUSTOM OR PRACTICE TO THE CONTRARY NOTWITHSTANDING. LESSEE HEREBY RELEASES TO LESSOR AND TO ANY AND ALL ATTORNEYS WHO MAY APPEAR FOR LESSEE ALL ERRORS IN SAID PROCEEDINGS AND ALL LIABILITY THEREOF. IF PROCEEDINGS SHALL BE COMMENCED BY LESSOR TO RECOVERY POSSESSION UNDER THE ACTS OF ASSEMBLY AND RULES OF CIVIL PROCEDURE, EITHER AT THE END OF THE TERM OR EARLIER TERMINATION OF

 

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THIS LEASE, OR FOR NON-PAYMENT OF RENT OR ANY OTHER REASON, LESSEE SPECIFICALLY WAIVES THE RIGHT TO THE 3 MONTHS’ NOTICE AND TO THE 15 OR 30 DAYS’ NOTICE REQUIRED BY THE LESSOR AND LESSEE ACT OF 1951, AND AGREES THAT 5 DAYS’ NOTICE SHALL BE SUFFICIENT IN EITHER OR ANY SUCH CASE.

ARTICLE 13

INSPECTION BY LESSOR

Section 13.1. Entry by Lessor. Lessee shall permit Lessor and Lessor’s agents, representatives, and employees to enter the Premises at all reasonable times for the purpose of inspection, repair or any other purpose necessary to protect Lessor’s interest in the Premises or to perform Lessor’s duties under this Lease.

ARTICLE 14

ASSIGNMENT AND SUBLEASE

Section 14.1. Assignment and Subletting by Lessee. Lessee shall not assign this Lease or sublet the Premises or any part thereof without Lessor’s prior written consent, which consent Lessor agrees not to unreasonably withhold or delay; provided, however, that Lessee may, without Lessor’s consent assign this Lease or sublet the Premises or any part thereof to any affiliate of Lessee. Lessor hereby consents to Lessee subletting up to fifteen thousand (15,000) square feet of space in the Building to Mestek, Inc. for use as a laboratory and/or test facility.

Section 14.2. Assignment by Lessor. Prior to January 2, 2009, Lessor shall not assign or transfer any or all of its interests under this Lease without Lessee’s prior written consent, which consent Lessee agrees not to unreasonably withhold or delay. On or after January 2, 2009, Lessor may assign or transfer any or all of its interest under this Lease without Lessee’s prior consent; provided that Lessor may not assign or transfer any or all of its interests under this Lease to a competitor of Lessee, Compression Polymers Corp., or CPCapitol Acquisition Corp. or any of their affiliates.

ARTICLE 15

SUBORDINATION

Section 15.1. Subordination. This Lease shall be subject and subordinate to any mortgage or deed of trust which may now or hereafter be an encumbrance on the Premises and to all renewals, modifications, consolidations, replacements, extensions or refinancing thereof (collectively, a “Mortgage”).

Section 15.2. Nondisturbance. Notwithstanding any provision contained in this Lease to the contrary, Lessor shall cause the holder of any Mortgage (including the holder of any existing Mortgage), as a condition precedent to the subordination of this Lease to the Mortgage in question, to execute, acknowledge and deliver to Lessee a nondisturbance agreement on such mortgagee’s standard form and in recordable form (which Lessee shall promptly execute and

 

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deliver to the mortgagee), a non-disturbance and attornment agreement substantially to the effect that so long as Lessee is not in default hereunder beyond any applicable notice and grace periods, (i) this Lease will not be terminated or cut off nor shall Lessee’s possession hereunder be disturbed by enforcement of any rights given to such mortgagee pursuant to such Mortgage, and (ii) such mortgagee shall recognize Lessee as the tenant under this Lease.

ARTICLE 16

MISCELLANEOUS PROVISIONS

Section 16.1. Notices. All notices required under this Lease shall be effective given only if by certified mail, registered mail, or nationally recognized overnight courier service, addressed to the proper party, at the following address:

Lessor:

North Keyser Partners, LLC

801 East Corey Street

Moosic, Pennsylvania 18507

ATTN: Managing Member

Lessee:

Vycom Corp.

801 East Corey Street

Moosic, Pennsylvania 18507

ATTN: CEO

Section 16.2. Parties Bound. This Lease shall be binding on, and inure to the benefit of, the parties to this Lease and their respective heirs, executors, administrators, legal representatives, successors, and assigns when permitted by this Lease.

Section 16.3. Governing Law. This Lease shall be governed by and construed under the laws of the Commonwealth of Pennsylvania.

Section 16.4. Legal Construction. In the event any one or more of the provisions contained in this Lease shall for any reason be held by a court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Lease, and this Lease shall be construed as if the invalid, illegal, or unenforceable provision had never been included in this Lease.

Section 16.5. Prior Agreements Superseded. This Lease constitutes the only agreement between Lessor and Lessee and supersedes any prior understandings or written or oral agreements between the parties with respect to the subject matter of this Lease, including the Original Lease.

Section 16.6. Amendment. No amendment, modification, or alteration of the terms of this Lease shall be binding unless it is in writing, dated subsequent to the date of this Lease, and duly execute by Lessor and Lessee.

 

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Section 16.7. Attorneys’ Fees and Costs. In the event that at any time during the term of this Lease either Lessor or Lessee shall institute any action or proceeding against the other relating to the provisions of this Lease or any default of this Lease, then the unsuccessful party shall reimburse the successful party for reasonable attorneys’ fees and expenses incurred to enforce the Lease.

Section 16.8. Unavoidable Delay. Neither Lessor nor Lessee shall be required to perform any term, condition, or covenant in this Lease so long as such performance is hindered or prevented by unavoidable delays. For purposes of this Section, unavoidable delays shall mean natural disasters; strikes, lockouts, or labor disputes; governmental regulations, restrictions, or controls; enemy or hostile government actions; civil riots; fire, floods, or nuclear accident; or any other cause not reasonably in the control of Lessor or Lessee and that by the exercise of due diligence Lessor or Lessee is unable to overcome.

Section 16.9. Time of Essence. Time is and shall be of the essence of this Lease and all its provisions.

Section 16.10. Quiet Enjoyment. Lessor covenants and agrees with Lessee that upon payment by Lessee of the Fixed Rent and Additional Rent hereunder and upon the observance and performance of all of the terms, covenants and conditions on Lessee’s part to be observed and performed, Lessee may peaceably and quietly enjoy the Premises, free of all claims from Lessor but subject, nevertheless, to the terms and conditions of this Lease.

Section 16.11. Relationship of Parties. The relationship between the parties hereto shall be that of Lessor and Lessee and nothing contained herein shall be construed to change or modify that relationship so as to make Lessor and Lessee partners, joint ventures or debtor and creditor.

Section 16.12. Net Lease. The parties intend this to be a “net-net-net” Lease pursuant to which the rent payable hereunder shall be an absolutely net return to Lessor for the Term of this Lease, undiminished by the Taxes, or any of them or any part thereof, or any other carrying charges, maintenance charges or any other charges of any kind or nature whatsoever except any Mortgage now or hereafter placed upon the Premises by Lessor, and Lessor shall not be required to perform any services or furnish any utilities of any kind or nature whatsoever.

Section 16.13. Requirements of Public Authorities. Lessee will promptly and faithfully comply with, conform to, and obey all present and future laws, ordinances, rules, regulations and requirements of every duly constituted governmental authority or agency having jurisdiction over Lessee and/or the Premises or any part thereof, and of every Board of Underwriters having jurisdiction thereof.

Section 16.14. Estoppel Certificate. Lessee agrees to execute and deliver to any prospective mortgagee or purchaser of the Premises, within ten (10) days following request therefor, an “estoppel certificate” stating the amount of rent due from Lessee hereunder, that this Lease remains in full force and effect without modification, and that Lessee has no set-offs against rent; or, if this Lease has been modified, or if Lessee has any set-off against rent, the exact nature of the modification and the precise amount of set-off.

 

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Section 16.15. Brokers. Each of Lessor and Lessee warrant that it has had no dealings with any broker, agent or any other person in connection with the negotiation or execution of this Lease. Each of Lessor and Lessee agree to indemnify and hold harmless the other from and against any and all cost, expense, or liability for commissions or other compensation and charges claimed by any broker or agent with respect to this Lease on account of the acts of the indemnifying party.

Section 16.16. Number and Gender. For purposes of this Lease, the singular shall include the plural and the plural shall include the singular, and the masculine shall include the feminine and the neuter, as the context may require.

Section 16.17. Captions. The captions contained herein are for the convenience of the parties only. They do not in any way modify, amplify, alter or give full notice of the provisions hereof.

Section 16.18. Memorandum of Lease. Upon the execution and delivery of this Lease, the parties hereto shall execute, acknowledge and deliver a Memorandum of Lease, in recordable form, the form and substance of which shall conform to applicable laws, but may contain such other provisions of this Lease or the substance hereof, as either Party may reasonably require. The foregoing shall also apply with respect to each modification of this Lease.

Section 16.19. Reasonableness. Unless expressly stated herein, in all instances where Lessor and Lessee’s consent, permission, or approval is required, the same shall not be unreasonably withheld, conditioned or delayed.

[signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Lease to be executed as of the day first written above.

 

LESSOR   LESSEE:
NORTH KEYSER PARTNERS, LLC   VYCOM CORP.
By:  

    

    By:  

    

       Name:           Name:    
       Title:           Title:    


EXHIBIT A

PREMISES

All that certain lot, piece or parcel of land situate in the 21st Ward of the City of Scranton, County of Lackawanna and State of Pennsylvania, bounded and described as follows:

Beginning at a point located on the southeasterly right-of-way line of Legislative Route 35013, also known as North Keyser Avenue, said corner also being common to lands herein described and lands conveyed by Scranton Lackawanna Industrial Building Company to Redevelopment Authority of the City of Scranton, by Deed dated May 5, 1996, recorded in Lackawanna County in Deed Book 622, Page 378;

Thence along the southeasterly right-of-way line of North Keyser Avenue the following three courses and distances: (1) N. 45° 06’ E., 13.3 feet; (2) N. 44° 54’ W., 5.0 feet; and (3) N. 45° 06’ E., 1722.0 feet to a corner in the northerly line of Benjamin Tripp Tract and lands of the Glen Alden Coal Co;

Thence along said northerly line of said Tripp Tract and lands now or formerly of the Glen Alden Coal Co., S. 50° 01’ E., 524.5 feet to a corner in line of lands now or formerly of the Delaware, Lackawanna and Western Railroad Co., Keyser Valley Shop Grounds;

Thence along said line of said Railroad South 26° 00’ W., 821.12 feet to a corner;

Thence still along said Railroad Line S. 57° 27’ W., 1060.25 feet to a corner of lands of the Redevelopment Authority of the City of Scranton;

Thence along said Authority line the following two courses and distances: (1) N. 48° 47’ W., 369.0 feet; and (2) N. 29° 21’ W., 199.67 feet to the place of beginning.

Containing 27.27 acres of land, more or less, as shown on Drawing D-15-81 by John R. Hennemuth & Associates, Inc., dated June 9, 1981.

Exhibit 10.32

LOGO

801 Corey SL • Scranton, PA 18505

Phone: (570) 558-8000

August 2, 2013

Managing Member

North Keyser Partners, LLC

801 East Corey Street

Moosic, Pennsylvania 18507

Re:    Lease Extension – 888 North Keyser Ave.

Dear Sirs:

By way of this letter, Vycom Corp., lessee of the property located at 888 North Keyser Ave., Scranton, PA. (the “Property”), hereby provides notice of its intention to extend the lease term on the Property for an additional four (4) years pursuant to Section 1.3 of the Amended and Restated Industrial Lease between North Keyser Partners, LLC and Vycom Corp. dated May 10, 2005 (the “Lease”). Accordingly, the Extended Term shall be from May 11, 2013 through May 10, 2017. Lessor hereby waives Lessor’s failure in this instance to have provided one hundred and eighty (180) days’ notice of intent to extend the lease term as required under Section 1.3(b) of the Lease. However, such notice shall still be required in the future to extend the lease beyond May 2017.

Please confirm your agreement with the foregoing by signing and returning one copy of this notice to the undersigned.

 

Very truly yours,
CPG International Inc.
By:   /s/ Brian Cooper
Name:   Brian Cooper
Title:   General Counsel

 

Accepted and agreed as of the date first written above:
By:   /s/ James G. Andersen
Name:   James G. Andersen
Title:   Member

Exhibit 10.33

LOGO

5215 Old Orchard Road, Suite 725 • Skokie, IL 60077

Phone: (847) 626-1504

October 21, 2016

Jim Andersen

1010 Washington Blvd., 11th Floor

Stamford, CT 06901

Re:    Lease Extension – 888 North Keyser Ave.

Dear Sirs:

By way of this letter, Vycom Corp., lessee of the property located at 888 North Keyser Ave., Scranton, PA. (the “Property”), hereby provides notice of its intention to extend the lease term on the Property for an additional four (4) years pursuant to Section 1.3 of the Amended and Restated Industrial Lease between North Keyser Partners, LLC and Vycom Corp. dated May 10, 2005 (the “Lease”). Accordingly, the Extended Term shall be from May 11, 2017 through May 10, 2021. I request that you sign below acknowledging and agreeing to this extension and send a copy back to me.

Should you have any questions regarding this, please feel free to contact the undersigned.

 

Very truly yours,
CPG International LLC
By:   /s/ Brian Cooper
Name:   Brian Cooper
Title:   General Counsel

 

Accepted and agreed:
By:   /s/ James G. Andersen
Name:   James G. Andersen
Title:   Managing Member

Exhibit 10.34

THE AZEK COMPANY INC.

2020 OMNIBUS INCENTIVE COMPENSATION PLAN


Exhibit 10.34

THE AZEK COMPANY INC.

2020 OMNIBUS INCENTIVE COMPENSATION PLAN

ARTICLE I

GENERAL

1.1 Purpose

The purpose of The AZEK Company Inc. 2020 Omnibus Incentive Compensation Plan (as amended from time to time, the “Plan”) is to help the Company (as hereinafter defined): (1) attract, retain and motivate key employees (including prospective employees) and consultants and non-employee directors of The AZEK Company Inc., a Delaware corporation (“AZEK”); (2) align the interests of such persons with AZEK’s stockholders; and (3) promote ownership of AZEK’s equity.

1.2 Definitions of Certain Terms

For purposes of this Plan, the following terms have the meanings set forth below:

1.2.1 “Acquisition Awards” has the meaning set forth in Section 1.6.1.

1.2.2 “AOT Board” means the Board of Directors of AOT Building Products GP Corp., AZEK’s indirect parent.

1.2.3 “Award” means an award made pursuant to the Plan.

1.2.4 “Award Agreement” means the written document by which each Award is evidenced, and which may, but need not be (as determined by the Committee) executed or acknowledged by a Grantee as a condition to receiving an Award or the benefits under an Award, and which sets forth the terms and provisions applicable to Awards granted under the Plan to such Grantee. Any reference herein to an agreement in writing will be deemed to include an electronic writing to the extent permitted by applicable law.

1.2.5 “Board” means the Board of Directors of AZEK.

1.2.6 “Business Combination” has the meaning provided in the definition of Change in Control.

1.2.7 “Cause” means (a) with respect to a Grantee employed pursuant to a written employment agreement which agreement includes a definition of “Cause,” “Cause” as defined in that agreement or (b) with respect to any other Grantee, except as otherwise set forth in an Award Agreement, the occurrence of any of the following: (i) such Grantee’s conviction of, or plea of guilty or nolo contendere to, any felony or any crime involving fraud, dishonesty or moral turpitude under the laws of the United States or any state thereof or under the laws of any other jurisdiction, (ii) such Grantee’s attempted commission of, or participation in, a fraud or theft against the Company or any client of the Company, (iii) such Grantee’s engagement in gross misconduct that causes financial or reputation harm to the Company, (iv) such Grantee’s repeated failure to substantially perform his or her duties and responsibilities to the Company


(other than failure resulting from such Grantee’s Disability), (v) such Grantee’s material violation of any contract or agreement between the Grantee and the Company or any written Company policy or any provision of the Company’s code of business conduct and ethics (including any successor thereto) or any other Company-established code of conduct to which such Grantee is subject or (vi) such Grantee’s habitual abuse of narcotics.

1.2.8 “Certificate” means a stock certificate or other appropriate document or evidence of ownership representing Shares.

1.2.9 “Change in Control” means, except in connection with any initial public offering of the Common Stock or as otherwise set forth in an Award Agreement, the occurrence of any of the following events after the completion of the initial public offering of the Company:

(a) during any period of not more than 36 months, individuals who constitute the Board as of the beginning of the period (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the beginning of such period, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of AZEK in which such person is named as a nominee for director, without written objection to such nomination) will be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of AZEK as a result of an actual or publicly threatened election contest with respect to directors or as a result of any other actual or publicly threatened solicitation of proxies or consents by or on behalf of any person other than the Board will be deemed to be an Incumbent Director;

(b) any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act), is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of AZEK representing 50% or more of the combined voting power of AZEK’s then-outstanding securities eligible to vote for the election of the Board (“Company Voting Securities”); provided, however, that the event described in this paragraph (b) will not be deemed to be a Change in Control by virtue of the ownership, or acquisition, of Company Voting Securities: (A) by the Company, (B) by any employee benefit plan (or related trust) sponsored or maintained by the Company, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities or (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph (c) of this definition);

(c) the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving AZEK that requires the approval of AZEK’s stockholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than 50% of the total voting power of (x) the entity resulting from such Business Combination (the “Surviving Entity”), or (y) if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership of at least 95% of the voting power, is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, is represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power

 

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among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan (or related trust) sponsored or maintained by the Surviving Entity or the parent), is or becomes the beneficial owner, directly or indirectly, of 50% or more of the total voting power of the outstanding voting securities eligible to elect directors of the parent (or, if there is no parent, the Surviving Entity) and (C) at least a majority of the members of the board of directors of the parent (or, if there is no parent, the Surviving Entity) following the consummation of the Business Combination were Incumbent Directors at the time of the Board’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) of this paragraph (c) will be deemed to be a “Non-Qualifying Transaction”); or

(d) the consummation of a sale of all or substantially all of AZEK’s assets (other than to any Sponsor or any direct or indirect Subsidiary or affiliate of any Sponsor or an affiliate of AZEK); or

(e) AZEK’s stockholders approve a plan of complete liquidation or dissolution of AZEK.

Notwithstanding the foregoing, a Change in Control will not be deemed to occur solely because any person acquires beneficial ownership of more than 50% of the Company Voting Securities as a result of the acquisition of Company Voting Securities by the Company which reduces the number of Company Voting Securities outstanding; provided that if after such acquisition by the Company such person (other than any Sponsor or any direct or indirect Subsidiary or affiliate of any Sponsor) becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control will then occur.

1.2.10 “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto, and the applicable rulings and regulations thereunder.

1.2.11 “Committee” has the meaning set forth in Section 1.3.1.

1.2.12 “Common Stock” means the Class A common stock of AZEK, par value $0.001 per share, and any other securities or property issued in exchange therefor or in lieu thereof pursuant to Section 1.6.3.

1.2.13 “Company” means AZEK and any Subsidiary, and any successor entity thereto.

1.2.14 “Company Voting Securities” has the meaning provided in the definition of Change in Control.

1.2.15 “Consent” has the meaning set forth in Section 3.3.2.

1.2.16 “Consultant” means any individual (other than a non-employee Director), who is a natural person that provides bona fide consulting or advisory services to the Company, and such services are not in connection with the offer or sale of securities in a capital-raising transaction, and do not directly or indirectly promote or maintain a market for the registrant’s securities.

 

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1.2.17 “Covered Person” has the meaning set forth in Section 1.3.4.

1.2.18 “Director” means a member of the Board.

1.2.19 “Disability” means the Grantee is unable to perform the essential functions of Grantee’s job, with a reasonable accommodation, due to illness or injury for such duration as entitles Grantee to long-term disability payments under the AZEK plan in which Grantee participates.

1.2.20 “Effective Date” has the meaning set forth in Section 3.24.

1.2.21 “Employee” means a regular, active employee, but not including a non-employee Director.

1.2.22 “Employment” means a Grantee’s performance of services for the Company, as determined by the Committee. The terms “employ” and “employed” will have their correlative meanings. The Committee in its sole discretion may determine (a) whether and when a Grantee’s leave of absence results in a termination of Employment, (b) whether and when a change in a Grantee’s association with the Company results in a termination of Employment and (c) the impact, if any, of any such leave of absence or change in association on outstanding Awards. Unless expressly provided otherwise, any references in the Plan or any Award Agreement to a Grantee’s Employment being terminated will include both voluntary and involuntary terminations.

1.2.23 “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor thereto, and the applicable rules and regulations thereunder.

1.2.24 “Fair Market Value” means, with respect to a Share, the closing price reported for the Common Stock on the applicable date as reported on the New York Stock Exchange or, if not so reported, as determined in accordance with a valuation methodology approved by the Committee, unless determined as otherwise specified herein. For purposes of the grant of any Award, the applicable date will be the trading day on which the Award is granted or, if the date the Award is granted is not a trading day, the trading day immediately prior to the date the Award is granted. Notwithstanding the foregoing, with respect to a Share underlying any Award granted on the date of the Company’s initial public offering, the Fair Market Value shall be the price offered for a Share in such initial public offering. For purposes of the exercise of any Award, the applicable date is the date a notice of exercise is received by the Company or, if such date is not a trading day, the trading day immediately following the date a notice of exercise is received by the Company.

1.2.25 “Grantee” means an Employee, Consultant or Director who receives an Award.

1.2.26 “Incentive Stock Option” means a stock option to purchase Shares that is intended to be an “incentive stock option” within the meaning of Sections 421 and 422 of the Code, as now constituted or subsequently amended, or pursuant to a successor provision of the Code, and which is designated as an Incentive Stock Option in the applicable Award Agreement.

 

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1.2.27 “Incumbent Directors” has the meaning provided in the definition of Change in Control.

1.2.28 “Non-Qualifying Transaction” has the meaning provided in the definition of Change in Control.

1.2.29 “Other Stock-Based or Cash-Based Awards” has the meaning set forth in Section 2.8.1.

1.2.30 “Plan” has the meaning set forth in Section 1.1.

1.2.31 “Plan Action” has the meaning set forth in Section 3.3.1.

1.2.32 “Section 409A” means Section 409A of the Code, including any amendments or successor provisions to that section, and any regulations and other administrative guidance thereunder, in each case as they may be from time to time amended or interpreted through further administrative guidance.

1.2.33 “Securities Act” means the Securities Act of 1933, as amended from time to time, or any successor thereto, and the applicable rules and regulations thereunder.

1.2.34 “Share Limit” has the meaning set forth in Section 1.6.1.

1.2.35 “Shares” means shares of Common Stock.

1.2.36 “Sponsor” means either of Ares Management Corporation or Ontario Teachers’ Pension Plan Board.

1.2.37 “Subsidiary” means any corporation, partnership, limited liability company or other legal entity in which AZEK, directly or indirectly, owns stock or other equity interests possessing 50% or more of the total combined voting power of all classes of the then-outstanding stock or other equity interests.

1.2.38 “Surviving Entity” has the meaning provided in the definition of Change in Control.

1.2.39 “Ten Percent Stockholder” means a person owning stock possessing more than 10% of the total combined voting power of all classes of stock of AZEK and of any Subsidiary or parent corporation of AZEK.

1.2.40 “Treasury Regulations” means the regulations promulgated under the Code by the United States Treasury Department, as amended.

 

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1.3 Administration

1.3.1 The Compensation Committee of the Board (as constituted from time to time, and including any successor committee, the “Committee”) will administer the Plan. In particular, the Committee will have the authority in its sole discretion to:

(a) exercise all of the powers granted to it under the Plan;

(b) construe, interpret and implement the Plan and all Award Agreements;

(c) prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing the Committee’s own operations and, without limiting the foregoing, to make exceptions to any such rules or regulations if the Committee, in good faith, determines appropriate in light of extraordinary circumstances and for the benefit of the Company and so as to avoid unanticipated consequences or address unanticipated events (including any temporary closure of an applicable stock exchange, disruption of communications or natural catastrophe);

(d) make all determinations necessary or advisable in administering the Plan;

(e) correct any defect, supply any omission and reconcile any inconsistency in the Plan;

(f) amend the Plan to reflect changes in applicable law;

(g) grant, or recommend to the Board for approval to grant, Awards and determine who will receive Awards, when such Awards will be granted and the terms of such Awards, including setting forth provisions with regard to the effect of a termination of Employment on such Awards and conditioning the vesting of, or the lapsing of any applicable vesting restrictions or other vesting conditions on, Awards upon the attainment of performance goals and/or upon continued service;

(h) amend any outstanding Award Agreement in any respect including, without limitation, to

(1) accelerate the time or times at which the Award becomes vested, unrestricted or may be exercised (and, in connection with such acceleration, the Committee may provide that any Shares acquired pursuant to such Award will be restricted shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the Grantee’s underlying Award),

(2) accelerate the time or times at which Shares are delivered under the Award (and, without limitation on the Committee’s rights, in connection with such acceleration, the Committee may provide that any Shares delivered pursuant to such Award will be restricted shares, which are subject to vesting, transfer, forfeiture or repayment provisions similar to those in the Grantee’s underlying Award),

 

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(3) waive or amend any goals, restrictions, vesting provisions or conditions set forth in such Award Agreement, or impose new goals, restrictions, vesting provisions and conditions, subject to Section 3.1 or

(4) reflect a change in the Grantee’s circumstances (e.g., a change to part-time employment status or a change in position, duties or responsibilities); and

(i) determine at any time whether, to what extent and under what circumstances and method or methods, subject to Section 3.14,

(1) Awards may be

(A) settled in cash, Shares, other securities, other Awards or other property (in which event, the Committee may specify what other effects such settlement will have on the Grantee’s Award, including the effect on any repayment provisions under the Plan or Award Agreement),

(B) exercised or

(C) canceled, forfeited or suspended,

(2) Shares, other securities, other Awards or other property and other amounts payable with respect to an Award may be deferred either automatically or at the election of the Grantee thereof or of the Committee,

(3) the exercise price for any stock option (other than an Incentive Stock Option, unless the Committee determines that such a stock option will no longer constitute an Incentive Stock Option) or stock appreciation right may be reset, subject to Section 2.3.6.

1.3.2 Actions of the Committee may be taken by the vote of a majority of its members present at a meeting (which may be held telephonically). Any action may be taken by a written instrument signed by a majority of the Committee members, and action so taken will be as fully effective as if it had been taken by a vote at a meeting. The determination of the Committee on all matters relating to the Plan or any Award Agreement will be final, binding and conclusive. Subject to applicable law, Committee may allocate among its members and delegate to any person who is not a member of the Committee, or to any administrative group within the Company, any of its powers, responsibilities or duties. In delegating its authority, the Committee will consider the extent to which any delegation may cause Awards to fail to meet the requirements of Rule 16(b)-3(d)(1) or Rule 16(b)-3(e) under the Exchange Act. Except as specifically provided to the contrary, references to the Committee include any administrative group, individual or individuals to whom the Committee has delegated its duties and powers.

1.3.3 Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time to time, grant Awards or administer the Plan. In any such case, the Board will have all of the authority and responsibility granted to the Committee herein.

 

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1.3.4 No member of the Committee, person to whom the Committee delegates its powers, responsibilities or duties in writing, including by resolution or member of the AOT Board (each such person, a “Covered Person”), will have any liability to any person (including any Grantee) for any action taken or omitted to be taken or any determination made with respect to the Plan or any Award, except as expressly provided by statute. Each Covered Person will be indemnified and held harmless by the Company against and from:

(a) any loss, cost, liability or expense (including reasonable attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection with or resulting from any action, suit or proceeding to which such Covered Person may be a party or in which such Covered Person may be involved by reason of any action taken or omitted to be taken under the Plan or any Award Agreement, in each case, in good faith and

(b) any and all amounts paid by such Covered Person, with the Company’s approval, in settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person. The Company will have the right, at its own expense, to assume and defend any such action, suit or proceeding and, once the Company gives notice of its intent to assume the defense, the Company will have sole control over such defense with counsel of the Company’s choice.

The foregoing right of indemnification will not be available to a Covered Person to the extent that a court of competent jurisdiction in a final judgment or other final adjudication, in either case, not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith, fraud or willful misconduct. The foregoing right of indemnification will not be exclusive of any other rights of indemnification to which Covered Persons may be entitled under AZEK’s Certificate of Incorporation or Bylaws, in each case, as amended from time to time, pursuant to any individual indemnification agreements between such Covered Person and the Company, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such persons or hold them harmless.

1.4 Persons Eligible for Awards

Awards under the Plan may be made to Employees, Consultants and Directors.

1.5 Types of Awards Under Plan

Awards may be made under the Plan in the form of cash-based or stock-based Awards. Stock-based Awards may be in the form of any of the following, in each case in respect of Common Stock:

 

  (a)

stock options,

 

  (b)

stock appreciation rights,

 

  (c)

restricted shares,

 

  (d)

restricted stock units,

 

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  (e)

dividend equivalent rights and

 

  (f)

performance-based or other equity-based or equity-related Awards (as further described in Section 2.8), that the Committee determines to be consistent with the purposes of the Plan and the interests of the Company.

1.6 Shares of Common Stock Available for Awards

1.6.1 Common Stock Subject to the Plan. Subject to the other provisions of this Section 1.6, the total number of Shares that may be granted under the Plan will be _____ (the “Share Limit”). Shares of Common Stock subject to awards that are assumed, converted or substituted under the Plan as a result of the Company’s acquisition of another company (including by way of merger, combination or similar transaction) (“Acquisition Awards”) will not count against the number of shares that may be granted under the Plan. Available shares under a stockholder approved plan of an acquired company (as appropriately adjusted to reflect the transaction) may be used for Awards under the Plan and do not reduce the maximum number of shares available for grant under the Plan, subject to applicable stock exchange requirements. The Shares of Common Stock issued pursuant to Awards granted under this Plan may be Shares that are authorized and unissued or Shares that were reacquired by the Company, including treasury Shares or Shares purchased in the open market.

1.6.2 Replacement of Shares. Shares subject to an Award that is forfeited (including any restricted shares repurchased by the Company at the same price paid by the Grantee so that such Shares are returned to the Company), expires or is settled for cash (in whole or in part), to the extent of such forfeiture, expiration or cash settlement will be available for future grants of Awards under the Plan and will be added back in the same number of Shares as were deducted in respect of the grant of such Award. The payment of dividend equivalent rights in cash in conjunction with any outstanding Awards will not be counted against the Shares available for issuance under the Plan. Shares tendered by a Grantee or withheld by the Company in payment of the exercise price of a stock option or to satisfy any tax withholding obligation with respect to an Award will be available for future grants of Awards. With respect to Awards of stock-settled share appreciation rights, the Share Limit will be reduced by only the number of Shares actually delivered upon exercise of such Award.

1.6.3 Adjustments. The Committee will:

(a) adjust the number of Shares authorized pursuant to Section 1.6.1,

(b) adjust the number of Shares set forth in Section 2.3.2 that can be issued through Incentive Stock Options and

(c) adjust the terms of any outstanding Awards (including, without limitation, the number of Shares covered by each outstanding Award, the type of property or securities to which the Award relates and the exercise or strike price of any Award),

 

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in such manner as it deems appropriate (including, without limitation, by payment of cash) to prevent the enlargement or dilution of rights, as a result of any increase or decrease in the number of issued Shares (or issuance of shares of stock other than Shares) resulting from a recapitalization, stock split, reverse stock split, stock dividend, spinoff, split up, combination, reclassification or exchange of Shares, merger, consolidation, rights offering, separation, reorganization or liquidation or any other change in the corporate structure or Shares, including any extraordinary dividend or extraordinary distribution; provided that no such adjustment may be made if or to the extent that it would cause an outstanding Award to cease to be exempt from, or to fail to comply with, Section 409A.

1.7 Limits on Compensation to Non-Employee Directors

No non-employee Director may be granted (in any calendar year) compensation for service as a Director with a value in excess of $500,000, with the value of any equity-based awards based on the accounting grant date value of such award. The independent members of the Board may make exceptions to this limit for a non-executive chair of the Board, provided that the non-employee Director receiving such additional compensation may not participate in the decision to award such compensation.

ARTICLE II

AWARDS UNDER THE PLAN

2.1 Agreements Evidencing Awards

Each Award granted under the Plan will be evidenced by an Award Agreement that will contain such provisions and conditions as the Committee deems appropriate. Unless otherwise provided herein, the Committee may grant Awards in tandem with or, subject to Section 3.14, in substitution for or satisfaction of any other Award or Awards granted under the Plan or any award granted under any other plan of the Company. By accepting an Award pursuant to the Plan, a Grantee thereby agrees that the Award will be subject to all of the terms and provisions of the Plan and the applicable Award Agreement.

2.2 No Rights as a Stockholder

No Grantee (or other person having rights pursuant to an Award) will have any of the rights of a stockholder of AZEK with respect to Shares subject to an Award until the delivery of such Shares. Except as otherwise provided in Section 1.6.3, no adjustments will be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, Common Stock, other securities or other property) for which the record date is before the date the Certificates for the Shares are delivered, or in the event AZEK elects to use another system, such as book entries by the transfer agent, before the date in which such system evidences the Grantee’s ownership of such Shares.

2.3 Options

2.3.1 Grant. Stock options may be granted to eligible recipients in such number and at such times during the term of the Plan as the Committee may determine.

 

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2.3.2 Incentive Stock Options. At the time of grant, the Committee will determine:

(a) whether all or any part of a stock option granted to an eligible Employee will be an Incentive Stock Option and

(b) the number of Shares subject to such Incentive Stock Option; provided, however, that

(1) the aggregate Fair Market Value (determined as of the time the option is granted) of the stock with respect to which Incentive Stock Options are exercisable for the first time by an eligible Employee during any calendar year (under all such plans of AZEK and of any Subsidiary or parent corporation of AZEK) may not exceed $100,000 and

(2) no Incentive Stock Option (other than an Incentive Stock Option that may be assumed or issued by the Company in connection with a transaction to which Section 424(a) of the Code applies) may be granted to a person who is not eligible to receive an Incentive Stock Option under the Code.

The form of any stock option which is entirely or in part an Incentive Stock Option will clearly indicate that such stock option is an Incentive Stock Option or, if applicable, the number of Shares subject to the Incentive Stock Option. No more than _____ Shares (as adjusted pursuant to the provisions of Section 1.6.3) that can be delivered under the Plan may be issued through Incentive Stock Options. Incentive Stock Options may not be granted under the Plan after the tenth anniversary of the date of the Board’s most recent approval.

2.3.3 Exercise Price. The exercise price per share with respect to each stock option will be determined by the Committee but, except as otherwise permitted by Section 1.6.3 and except for any Acquisition Awards, may never be less than the Fair Market Value of a share of Common Stock (or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 110% of the Fair Market Value). Unless otherwise noted in the Award Agreement, the Fair Market Value of the Common Stock will be its Fair Market Value on the date of grant of the Award of stock options.

2.3.4 Term of Stock Option. In no event will any stock option be exercisable after the expiration of 10 years (or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 5 years) from the date on which the stock option is granted.

2.3.5 Vesting and Exercise of Stock Option and Payment for Shares. A stock option may vest and be exercised at such time or times and subject to such terms and conditions as will be determined by the Committee at the time the stock option is granted and set forth in the Award Agreement. Subject to any limitations in the applicable Award Agreement, any Shares not acquired pursuant to the exercise of a stock option on the applicable vesting date may be acquired thereafter at any time before the final expiration of the stock option.

To exercise a stock option, the Grantee must give written notice to the Company specifying the number of Shares to be acquired and accompanied by payment of the full purchase price therefor in cash or by certified or official bank check or in another form as determined by the Committee, which may include:

(a) personal check,

 

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(b) Shares, based on the Fair Market Value as of the exercise date,

(c) any other form of consideration approved by the Company and permitted by applicable law and

(d) any combination of the foregoing.

The Committee may also make arrangements for the cashless exercise of a stock option. Any person exercising a stock option will make such representations and agreements and furnish such information as the Committee may, in its sole discretion, deem necessary or desirable to effect or assure compliance by the Company on terms acceptable to the Company with the provisions of the Securities Act, the Exchange Act and any other applicable legal requirements. The Committee may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars. If a Grantee so requests, Shares acquired pursuant to the exercise of a stock option may be issued in the name of the Grantee and another jointly with the right of survivorship.

2.3.6 Repricing. Except as otherwise permitted by Section 1.6.3, the Committee shall not, without the approval of AZEK’s stockholders (a) reduce the exercise price of stock options issued and outstanding under the Plan, (b) amend or cancel a stock option when the exercise price exceeds the Fair Market Value of one share of Common Stock in exchange for the grant of a substitute Award or repurchase for cash or other consideration, in each case with the effect of reducing the exercise price and except in accordance with Section 3.6, or (c) take any other action with respect to a stock option that would be treated as a repricing under the rules and regulations of the principal U.S. national securities exchange on which the Common Stock is listed.

2.4 Stock Appreciation Rights

2.4.1 Grant. Stock appreciation rights may be granted to eligible recipients in such number and at such times during the term of the Plan as the Committee may determine.

2.4.2 Exercise Price. The exercise price per share with respect to each stock appreciation right will be determined by the Committee but, except as otherwise permitted by Section 1.6.3, may never be less than the Fair Market Value of the Common Stock. Unless otherwise noted in the Award Agreement, the Fair Market Value of the Common Stock will be its Fair Market Value on the date of grant of the Award of stock appreciation rights.

2.4.3 Term of Stock Appreciation Right. In no event will any stock appreciation right be exercisable after the expiration of 10 years from the date on which the stock appreciation right is granted.

2.4.4 Vesting and Exercise of Stock Appreciation Right and Delivery of Shares. Each stock appreciation right may vest and be exercised in such installments as may be determined in the Award Agreement at the time the stock appreciation right is granted. Subject to any limitations in the applicable Award Agreement, any stock appreciation rights not exercised on the applicable vesting date may be exercised thereafter at any time before the final expiration of the stock appreciation right.

 

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To exercise a stock appreciation right, the Grantee must give written notice to the Company specifying the number of stock appreciation rights to be exercised. Upon exercise of stock appreciation rights, Shares, cash or other securities or property, or a combination thereof, as specified by the Committee, equal in value to:

(a) the excess of:

(1) the Fair Market Value of the Common Stock on the date of exercise over

(2) the exercise price of such stock appreciation right

multiplied by

(b) the number of stock appreciation rights exercised, will be delivered to the Grantee.

Any person exercising a stock appreciation right will make such representations and agreements and furnish such information as the Committee may, in its sole discretion, deem necessary or desirable to effect or assure compliance by the Company on terms acceptable to the Company with the provisions of the Securities Act, the Exchange Act and any other applicable legal requirements. If a Grantee so requests, Shares purchased may be issued in the name of the Grantee and another jointly with the right of survivorship.

2.4.5 Repricing. Except as otherwise permitted by Section 1.6.3, the Committee shall not, without the approval of AZEK’s stockholders (a) reduce the exercise price of stock appreciation rights issued and outstanding under the Plan, (b) amend or cancel a stock appreciation right when the exercise price exceeds the Fair Market Value of one share of Common Stock in exchange for the grant of a substitute Award or repurchase for cash or other consideration, in each case with the effect of reducing the exercise price and except in accordance with Section 3.6, or (c) take any other action with respect to a stock stock appreciation right that would be treated as a repricing under the rules and regulations of the principal U.S. national securities exchange on which the Common Stock is listed.

2.5 Restricted Shares

2.5.1 Grants. The Committee may grant or offer for sale restricted shares in such amounts and subject to such terms and conditions as the Committee may determine. Upon the delivery of such shares, the Grantee will have the rights of a stockholder with respect to the restricted shares, subject to any other restrictions and conditions as the Committee may include in the applicable Award Agreement. Each Grantee of an Award of restricted shares will be issued a Certificate in respect of such shares, unless the Committee elects to use another system, such as book entries by the transfer agent, as evidencing ownership of such shares. In the event that a Certificate is issued in respect of restricted shares, such Certificate may be registered in the name of the Grantee, and will, in addition to such legends required by applicable securities laws, bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, but will be held by the Company or its designated agent until the time the restrictions lapse.

 

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2.5.2 Right to Vote and Receive Dividends on Restricted Shares. Each Grantee of an Award of restricted shares will, during the period of restriction, be the beneficial and record owner of such restricted shares and will have full voting rights with respect thereto. Unless the Committee determines otherwise in an Award Agreement, during the period of restriction, all ordinary cash dividends or other ordinary distributions paid upon any restricted share will be retained by the Company and will be paid to the relevant Grantee (without interest) when the Award of restricted shares vests and will revert back to the Company if for any reason the restricted share upon which such dividends or other distributions were paid reverts back to the Company (any extraordinary dividends or other extraordinary distributions will be treated in accordance with Section 1.6.3).

2.6 Restricted Stock Units

The Committee may grant Awards of restricted stock units in such amounts and subject to such terms and conditions as the Committee may determine. A Grantee of a restricted stock unit will have only the rights of a general unsecured creditor of AZEK, until delivery of Shares, cash or other securities or property is made as specified in the applicable Award Agreement. On the delivery date specified in the Award Agreement, the Grantee of each restricted stock unit not previously forfeited or terminated will receive one share of Common Stock, cash or other securities or property equal in value to a share of Common Stock or a combination thereof, as specified by the Committee.

2.7 Dividend Equivalent Rights

The Committee may include in the Award Agreement with respect to any Award that is subject to Section 409A a dividend equivalent right entitling the Grantee to receive amounts equal to all or any portion of the regular cash dividends that would be paid on the Shares covered by such Award if such Shares had been delivered pursuant to such Award. The grantee of a dividend equivalent right will have only the rights of a general unsecured creditor of AZEK until payment of such amounts is made as specified in the applicable Award Agreement. In the event such a provision is included in an Award Agreement, the Committee will determine whether such payments will be made in cash, in Shares or in another form, whether they will be conditioned upon the exercise of the Award to which they relate (subject to compliance with Section 409A), the time or times at which they will be made, and such other terms and conditions as the Committee will deem appropriate; provided that in no event may such payments be made unless and until the Award to which they relate vests.

2.8 Performance-Based and Other Stock-Based or Cash-Based Awards

2.8.1 Grant. The Committee may grant other types of equity-based, equity-related or cash-based Awards (including the grant or offer for sale of unrestricted Shares, performance share awards, and performance units settled in cash) (“Other Stock-Based or Cash-Based Awards”) in such amounts and subject to such terms and conditions as the Committee may

 

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determine. The terms and conditions set forth by the Committee in the applicable Award Agreement may relate to the achievement of performance goals, as determined by the Committee at the time of grant. Such Awards may entail the transfer of actual Shares to Award recipients and may include Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

Performance Criteria. The performance goals may be based on one or more of the following business criteria (either separately or in combination) with regard to AZEK (or a Subsidiary, division, other operational unit or administrative department of AZEK), or such other performance goal as the Committee determines appropriate: measures of efficiency (including operating efficiency, productivity ratios or other similar measures); measures of achievement of expense targets, costs reductions, working capital, cash levels or general expense ratios; asset growth; earnings per share or net earnings; enterprise value or value creation targets; combined net worth; debt to equity ratio; revenues, sales, net revenues or net sales measures; gross profit or operating profit measures (including before or after taxes or other similar measures); investment performance; income or operating income measures (with or without investment income or income taxes, before or after risk-adjustment, or other similar measures); cash flow; margin; net income, before or after taxes; earnings before interest, taxes, depreciation and/or amortization; return measures (including return on capital, invested capital, total capital, tangible capital, expenses, tangible expenses, equity, revenue, investment, assets, or net assets or total shareholder return or similar measures); market share measures; measures of balance sheet achievements (including debt reductions, leverage ratios or other similar measures); increase in the Fair Market Value of Common Stock; changes (or the absence of changes) in the per share or aggregate Fair Market Value of Common Stock (including total shareholder returns); and number of securities sold and funds from operations. Any of the foregoing performance goals may be measured in absolute terms or relative to historic performance or the performance of other companies or an index.

2.9 Repayment If Conditions Not Met

If the Committee determines that all terms and conditions of the Plan and a Grantee’s Award Agreement were not satisfied, and that the failure to satisfy such terms and conditions is material, then the Grantee will be obligated to pay the Company immediately upon demand therefor, (a) with respect to a stock option and a stock appreciation right, an amount equal to the excess of the Fair Market Value (determined at the time of exercise) of the Shares that were delivered in respect of such exercised stock option or stock appreciation right, as applicable, over the exercise price paid therefor, (b) with respect to restricted shares, an amount equal to the Fair Market Value (determined at the time such shares became vested) of such restricted shares and (c) with respect to restricted stock units, an amount equal to the Fair Market Value (determined at the time of delivery) of the Shares delivered with respect to the applicable delivery date, in each case with respect to clauses (a), (b) and (c) of this Section 2.9, without reduction for any amount applied to satisfy withholding tax or other obligations in respect of such Award.

 

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2.10 Minimum Vesting

All Awards (other than cash-based Awards) granted after the date of the Company’s initial public offering shall be subject to a minimum vesting schedule of at least twelve months following the date of grant of the Award, provided that the following Awards shall not be subject to the foregoing minimum vesting requirement: any (i) Awards granted in connection with the Company’s initial public offering, (ii) Acquisition Awards granted in connection with awards that are assumed, converted or substituted pursuant to a merger, acquisition or similar transaction entered into by the Company or any of its Subsidiaries, (iii) Shares delivered in lieu of fully vested cash Awards, (iv) Awards to non-employee Directors that vest on the earlier of the one-year anniversary of the date of grant and the next annual meeting of stockholders, and (v) any additional Awards the Committee may grant, up to a maximum of five percent of the available share reserve authorized for issuance under the Plan pursuant to Section 1.6.1 (subject to adjustment under Section 1.6.3); and, provided, further, that the foregoing restriction does not apply to the Committee’s discretion to provide for accelerated exercisability or vesting of any Award, including in cases of retirement, death, Disability or a Change in Control, in the terms of the Award Agreement or otherwise.

ARTICLE III

MISCELLANEOUS

3.1 Amendment of the Plan

3.1.1 Unless otherwise provided in the Plan or in an Award Agreement, the Board may at any time and from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever but, subject to Sections 1.6.3 and 3.7, no such amendment may materially adversely impair the rights of the Grantee of any Award without the Grantee’s consent. Subject to Sections 1.6.3 and 3.7, an Award Agreement may not be amended to materially adversely impair the rights of a Grantee without the Grantee’s consent.

3.1.2 Unless otherwise determined by the Board, stockholder approval of any suspension, discontinuance, revision or amendment will be obtained only to the extent necessary to comply with any applicable laws, regulations or rules of a securities exchange or self-regulatory agency; provided, however, if and to the extent the Board determines it is appropriate for the Plan to comply with the provisions of Section 422 of the Code, no amendment that would require stockholder approval under Section 422 of the Code will be effective without the approval of AZEK’s stockholders.

3.2 Tax Withholding

Grantees will be solely responsible for any applicable taxes (including, without limitation, income and excise taxes) and penalties, and any interest that accrues thereon, that they incur in connection with the receipt, vesting or exercise of any Award. As a condition to the delivery of any Shares, cash or other securities or property pursuant to any Award or the lifting or lapse of restrictions on any Award, or in connection with any other event that gives rise to a federal or other governmental tax withholding obligation on the part of the Company relating to an Award (including, without limitation, the Federal Insurance Contributions Act (FICA) tax),

(a) the Company may deduct or withhold (or cause to be deducted or withheld) from any payment or distribution to a Grantee whether or not pursuant to the Plan (including Shares otherwise deliverable),

 

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(b) the Committee will be entitled to require that the Grantee remit cash to the Company (through payroll deduction or otherwise) or

(c) the Company may enter into any other suitable arrangements to withhold, in each case in the Company’s discretion, amounts of such taxes required by law to be withheld, based upon the minimum required tax withholding rate for the Grantee (or such other rate that will not cause an adverse accounting consequence or cost).

3.3 Required Consents and Legends

3.3.1 If the Committee at any time determines that any Consent (as hereinafter defined) is necessary or desirable as a condition of, or in connection with, the granting of any Award, the delivery of Shares or the delivery of any cash, securities or other property under the Plan, or the taking of any other action thereunder (each such action a “Plan Action”), then, subject to Section 3.14 such Plan Action will not be taken, in whole or in part, unless and until such Consent will have been effected or obtained to the full satisfaction of the Committee. The Committee may direct that any Certificate evidencing Shares delivered pursuant to the Plan will bear a legend setting forth such restrictions on transferability as the Committee may determine to be necessary or desirable, and may advise the transfer agent to place a stop transfer order against any legended shares.

3.3.2 The term “Consent” as used in this Article III with respect to any Plan Action includes:

(a) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state, or local law, or law, rule or regulation of a jurisdiction outside the United States,

(b) any and all written agreements and representations by the Grantee with respect to the disposition of Shares, or with respect to any other matter, which the Committee may deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made,

(c) any and all other consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory body or any stock exchange or self-regulatory agency,

(d) any and all consents by the Grantee to:

(i) the Company’s supplying to any third party recordkeeper of the Plan such personal information as the Committee deems advisable to administer the Plan,

 

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(ii) the Company’s deducting amounts from the Grantee’s wages, or another arrangement satisfactory to the Committee, to reimburse the Company for advances made on the Grantee’s behalf to satisfy certain withholding and other tax obligations in connection with an Award and

(iii) the Company’s imposing sales and transfer procedures and restrictions and hedging restrictions on Shares delivered under the Plan and

(e) any and all consents or authorizations required to comply with, or required to be obtained under, applicable local law or otherwise required by the Committee. Nothing herein will require the Company to list, register or qualify the Shares on any securities exchange.

3.4 Right of Offset

The Company will have the right to offset against its obligation to deliver Shares (or other property or cash) under the Plan or any Award Agreement any outstanding amounts (including, without limitation, travel and entertainment or advance account balances, loans, repayment obligations under any Awards, or amounts repayable to the Company pursuant to tax equalization, housing, automobile or other employee programs) that the Grantee then owes to the Company and any amounts the Committee otherwise deems appropriate pursuant to any tax equalization policy or agreement. Notwithstanding the foregoing, if an Award provides for the deferral of compensation within the meaning of Section 409A, the Committee will have no right to offset against its obligation to deliver Shares (or other property or cash) under the Plan or any Award Agreement if such offset could subject the Grantee to the additional tax imposed under Section 409A in respect of an outstanding Award.

3.5 Nonassignability; No Hedging

Unless otherwise provided in an Award Agreement or written Company policy, or with the consent of the Committee in its sole discretion, no Award (or any rights and obligations thereunder) granted to any person under the Plan may be sold, exchanged, transferred, assigned, pledged, hypothecated or otherwise disposed of or hedged, in any manner (including through the use of any cash-settled instrument), whether voluntarily or involuntarily and whether by operation of law or otherwise, other than by will or by the laws of descent and distribution, and all such Awards (and any rights thereunder) will be exercisable during the life of the Grantee only by the Grantee or the Grantee’s legal representative. Any sale, exchange, transfer, assignment, pledge, hypothecation, or other disposition in violation of the provisions of this Section 3.5 will be null and void and any Award which is hedged in any manner will immediately be forfeited. All of the terms and conditions of the Plan and the Award Agreements will be binding upon any permitted successors and assigns.

3.6 Change in Control

3.6.1 Unless the Committee determines otherwise or as otherwise provided in the applicable Award Agreement or Grantee’s written employment agreement, if a Grantee’s Employment is terminated by the Company or any successor entity thereto without Cause on or within one (1) year after a Change in Control, (a) each Award granted to such Grantee prior to such Change in Control will become fully vested (including the lapsing of all restrictions and

 

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conditions) and, as applicable, exercisable and (b) any Shares deliverable pursuant to restricted stock units will be delivered promptly (but no later than 15 days) following such Grantee’s termination of Employment. As of the Change in Control date, any outstanding performance-based awards shall be deemed earned at the target level at the date of the Change in Control with respect to all open performance periods and will cease to be subject to any further performance conditions but will continue to be subject to time-based vesting following the Change in Control in accordance with the original performance period.

3.6.2 Notwithstanding the foregoing, in the event of a Change in Control, a Grantee’s Award will be treated, to the extent determined by the Committee to be permitted under Section 409A, in accordance with one or more of the following methods as determined by the Committee in its sole discretion: (a) settle such Awards for an amount (as determined in the sole discretion of the Committee) of cash or securities equal to their value, where in the case of stock options and stock appreciation rights, the value of such amount, if any, will be equal to the in-the-money spread value (if any) of such awards; (b) provide for the assumption of or the issuance of substitute awards that will substantially preserve the otherwise applicable terms of any affected Awards previously granted under the Plan, as determined by the Committee in its sole discretion; (c) modify the terms of such awards to add events, conditions or circumstances upon which the vesting of such Awards or lapse of restrictions thereon will accelerate; (d) deem any performance conditions satisfied at target, maximum or actual performance through closing or provide for the performance conditions to continue (as is or as adjusted by the Committee) after closing or (e) provide that for a period of at least 20 days prior to the Change in Control, any stock options or stock appreciation rights that would not otherwise become exercisable prior to the Change in Control will be exercisable as to all Shares subject thereto (but any such exercise will be contingent upon and subject to the occurrence of the Change in Control and if the Change in Control does not take place within a specified period after giving such notice for any reason whatsoever, the exercise will be null and void) and that any stock options or stock appreciation rights not exercised prior to the consummation of the Change in Control will terminate and be of no further force and effect as of the consummation of the Change in Control. In the event that the consideration paid in the Change in Control includes contingent value rights, earnout or indemnity payments or similar payments, then the Committee will determine if Awards settled under clause (i) above are (a) valued at closing taking into account such contingent consideration (with the value determined by the Committee in its sole discretion) or (b) entitled to a share of such contingent consideration. For the avoidance of doubt, in the event of a Change in Control where all stock options and stock appreciation rights are settled for an amount (as determined in the sole discretion of the Committee) of cash or securities, the Committee may, in its sole discretion, terminate any stock option or stock appreciation right for which the exercise price is equal to or exceeds the per share value of the consideration to be paid in the Change in Control transaction without payment of consideration therefor. Similar actions to those specified in this Section 3.6.2 may be taken in the event of a merger or other corporate reorganization that does not constitute a Change in Control.

3.7 No Continued Employment or Engagement; Right of Discharge Reserved

Neither the adoption of the Plan nor the grant of any Award (or any provision in the Plan or Award Agreement) will confer upon any Grantee any right to continued Employment, or other engagement, with the Company, nor will it interfere in any way with the right of the Company to terminate, or alter the terms and conditions of, such Employment or other engagement at any time.

 

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3.8 Nature of Payments

3.8.1 Any and all grants of Awards and deliveries of Common Stock, cash, securities or other property under the Plan will be in consideration of services performed or to be performed for the Company by the Grantee. Awards under the Plan may, in the discretion of the Committee, be made in substitution in whole or in part for cash or other compensation otherwise payable to a Grantee. Only whole Shares will be delivered under the Plan. Awards will, to the extent reasonably practicable, be aggregated in order to eliminate any fractional shares. Fractional shares may, in the discretion of the Committee, be forfeited or be settled in cash or otherwise as the Committee may determine.

3.8.2 All such grants and deliveries of Shares, cash, securities or other property under the Plan will constitute a special discretionary incentive payment to the Grantee, will not entitle the Grantee to the grant of any future Awards and will not be required to be taken into account in computing the amount of salary or compensation of the Grantee for the purpose of determining any contributions to or any benefits under any pension, retirement, profit-sharing, bonus, life insurance, severance or other benefit plan of the Company or under any agreement with the Grantee, unless the Company specifically provides otherwise.

3.9 Non-Uniform Determinations

3.9.1 The Committee’s determinations under the Plan and Award Agreements need not be uniform and any such determinations may be made by it selectively among persons who receive, or are eligible to receive, Awards under the Plan (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee will be entitled, among other things, to make non-uniform and selective determinations under Award Agreements, and to enter into non-uniform and selective Award Agreements, as to (a) the persons to receive Awards, (b) the terms and provisions of Awards and (c) whether a Grantee’s Employment has been terminated for purposes of the Plan.

3.9.2 To the extent the Committee deems it necessary, appropriate or desirable to comply with foreign law or practices and to further the purposes of the Plan, the Committee may, in its sole discretion and without amending the Plan, (a) establish special rules applicable to Awards to Grantees who are foreign nationals, are employed outside the United States or both and grant Awards (or amend existing Awards) in accordance with those rules and (b) cause AZEK to enter into an agreement with any local Subsidiary pursuant to which such Subsidiary will reimburse the Company for the cost of such equity incentives.

3.10 Other Payments or Awards

Nothing contained in the Plan will be deemed in any way to limit or restrict the Company from making any award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.

 

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3.11 Plan Headings

The headings in the Plan are for the purpose of convenience only and are not intended to define or limit the construction of the provisions hereof.

3.12 Termination of Plan

The Board reserves the right to terminate the Plan at any time; provided, however, that in any case, the Plan will terminate on the day before the tenth anniversary of the Effective Date, and provided further, that all Awards made under the Plan before its termination will remain in effect until such Awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Award Agreements.

3.13 Clawback/Recapture Policy

Awards under the Plan will be subject to any clawback or recapture policy that the Company may adopt from time to time to the extent provided in such policy and, in accordance with such policy, may be subject to the requirement that the Awards be repaid to the Company after they have been distributed to the Grantee.

3.14 Section 409A

3.14.1 All Awards made under the Plan that are intended to be “deferred compensation” subject to Section 409A will be interpreted, administered and construed to comply with Section 409A, and all Awards made under the Plan that are intended to be exempt from Section 409A will be interpreted, administered and construed to comply with and preserve such exemption. The Board and the Committee will have full authority to give effect to the intent of the foregoing sentence. To the extent necessary to give effect to this intent, in the case of any conflict or potential inconsistency between the Plan and a provision of any Award or Award Agreement with respect to an Award, the Plan will govern.

3.14.2 Without limiting the generality of Section 3.14.1, with respect to any Award made under the Plan that is intended to be “deferred compensation” subject to Section 409A:

(a) any payment due upon a Grantee’s termination of Employment will be paid only upon such Grantee’s separation from service from the Company within the meaning of Section 409A;

(b) any payment due upon a Change in Control of the Company will be paid only if such Change in Control constitutes a “change in ownership” or “change in effective control” within the meaning of Section 409A, and in the event that such Change in Control does not constitute a “change in the ownership” or “change in the effective control” within the meaning of Section 409A, such Award will vest upon the Change in Control and any payment will be delayed until the first compliant date under Section 409A;

 

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(c) to the extent necessary to avoid the imposition of taxes under Section 409A, any such payment to a specified employee (as determined in accordance with Section 409A of the Code) to be made with respect to such Award in connection with such Grantee’s separation from service from the Company within the meaning of Section 409A (and any other payment that would be subject to the limitations in Section 409A(a)(2)(B) of the Code) will be delayed until six months after such Grantee’s separation from service (or earlier death) in accordance with the requirements of Section 409A;

(d) to the extent necessary to comply with Section 409A, any other securities, other Awards or other property that the Company may deliver in lieu of Shares in respect of an Award will not have the effect of deferring delivery or payment beyond the date on which such delivery or payment would occur with respect to the Shares that would otherwise have been deliverable (unless the Committee elects a later date for this purpose in accordance with the requirements of Section 409A);

(e) with respect to any required Consent described in Section 3.3 or the applicable Award Agreement, if such Consent has not been effected or obtained as of the latest date provided by such Award Agreement for payment in respect of such Award and further delay of payment is not permitted in accordance with the requirements of Section 409A, such Award or portion thereof, as applicable, will be forfeited and terminate notwithstanding any prior earning or vesting;

(f) if the Award includes a “series of installment payments” (within the meaning of Section 1.409A-2(b)(2)(iii) of the Treasury Regulations), the Grantee’s right to the series of installment payments will be treated as a right to a series of separate payments and not as a right to a single payment;

(g) if the Award includes “dividend equivalents” (within the meaning of Section 1.409A-3(e) of the Treasury Regulations), the Grantee’s right to the dividend equivalents will be treated separately from the right to other amounts under the Award; and

(h) for purposes of determining whether the Grantee has experienced a separation from service from the Company within the meaning of Section 409A, “subsidiary” will mean a corporation or other entity in a chain of corporations or other entities in which each corporation or other entity, starting with AZEK, has a controlling interest in another corporation or other entity in the chain, ending with such corporation or other entity. For purposes of the preceding sentence, the term “controlling interest” has the same meaning as provided in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations, provided that the language “at least 20 percent” is used instead of “at least 80 percent” each place it appears in Section 1.414(c)-2(b)(2)(i) of the Treasury Regulations.

3.15 Section 280G

In the event that any payments or benefits otherwise payable to a Grantee (1) constitute “parachute payments” within the meaning of Section 280G of the Code, and (2) but for this Section 3.15, would be subject to the excise tax imposed by Section 4999 of the Code, then such payments and benefits will be either (x) delivered in full, or (y) delivered as to such lesser extent that would result in no portion of such payments and benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income and employment taxes and the excise tax imposed by

 

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Section 4999 of the Code (and any equivalent state or local excise taxes), results in the receipt by Grantee on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such payments and benefits may be taxable under Section 4999 of the Code. Any determination required under this Section 3.15 will be made in writing by a nationally-recognized firm selected by the Company, whose determination will be conclusive and binding upon the Grantee. Any reduction in payments and/or benefits required by this provision will occur in the following order: (1) reduction of cash payments; (2) reduction of vesting acceleration of equity awards; and (3) reduction of other benefits paid or provided to the Grantee. In the event that acceleration of vesting of equity awards under the Plan is to be reduced, such acceleration of vesting will be cancelled in the reverse order of the date of grant for equity awards. If two or more equity awards are granted on the same date, each award will be reduced on a pro-rata basis.

3.16 Governing Law

THE PLAN AND ALL AWARDS MADE AND ACTIONS TAKEN THEREUNDER WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.

3.17 Disputes; Choice of Forum

3.17.1 The Company and each Grantee, as a condition to such Grantee’s participation in the Plan, hereby irrevocably submit to the exclusive jurisdiction of the Delaware Court of Chancery, over any suit, action or proceeding arising out of or relating to or concerning the Plan or, to the extent not otherwise specified in any individual agreement between the Company and the Grantee, any aspect of the Grantee’s Employment with the Company or the termination of that Employment. The Company and each Grantee, as a condition to such Grantee’s participation in the Plan, acknowledge that the forum designated by this Section 3.17.1 has a reasonable relation to the Plan and to the relationship between such Grantee and the Company. Notwithstanding the foregoing, nothing herein will preclude the Company from bringing any action or proceeding in any other court for the purpose of enforcing the provisions of this Section 3.17.1.

3.17.2 The agreement by the Company and each Grantee as to forum is independent of the law that may be applied in the action, and the Company and each Grantee, as a condition to such Grantee’s participation in the Plan, (a) agree to such forum even if the forum may under applicable law choose to apply non-forum law, (b) hereby waive, to the fullest extent permitted by applicable law, any objection which the Company or such Grantee now or hereafter may have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding in any court referred to in Section 3.17.1, (c) undertake not to commence any action arising out of or relating to or concerning the Plan in any forum other than the forum described in this Section 3.17 and (d) agree that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any such suit, action or proceeding in any such court will be conclusive and binding upon the Company and each Grantee.

 

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3.17.3 Each Grantee, as a condition to such Grantee’s participation in the Plan, hereby irrevocably appoints the Chief Legal Officer of the Company as such Grantee’s agent for service of process in connection with any action, suit or proceeding arising out of or relating to or concerning the Plan, who will promptly advise such Grantee of any such service of process.

3.17.4 Each Grantee, as a condition to such Grantee’s participation in the Plan, agrees to keep confidential the existence of, and any information concerning, a dispute, controversy or claim described in Section 3.19, except that a Grantee may disclose information concerning such dispute, controversy or claim to the court that is considering such dispute, controversy or claim or to such Grantee’s legal counsel (provided that such counsel agrees not to disclose any such information other than as necessary to the prosecution or defense of the dispute, controversy or claim).

3.18 Waiver of Jury Trial

EACH GRANTEE WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THE PLAN.

3.19 Waiver of Claims

Each Grantee of an Award recognizes and agrees that before being selected by the Committee to receive an Award the Grantee has no right to any benefits under the Plan. Accordingly, in consideration of the Grantee’s receipt of any Award hereunder, the Grantee expressly waives any right to contest the amount of any Award, the terms of any Award Agreement, any determination, action or omission hereunder or under any Award Agreement by the Committee, the Company or the Board, or any amendment to the Plan or any Award Agreement (other than an amendment to the Plan or an Award Agreement to which his or her consent is expressly required by the express terms of an Award Agreement). Nothing contained in the Plan, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between the Company and any Grantee. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended (ERISA).

3.20 Severability; Entire Agreement

If any of the provisions of the Plan or any Award Agreement is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision will be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions will not be affected thereby; provided that if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision will be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award Agreements contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.

 

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3.21 No Liability of Company

Notwithstanding anything to the contrary contained herein, in no event will the Company be liable to a Grantee on account of: (a) an Award’s failure to (1) qualify for favorable United States or foreign tax treatment or (2) avoid adverse tax treatment under United States or foreign law, including, without limitation, Section 409A, or (b) the non-issuance or sale of Shares as to which the Company has been unable to obtain from any regulatory body having jurisdiction the authority deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder.

3.22 No Third-Party Beneficiaries

Except as expressly provided in an Award Agreement, neither the Plan nor any Award Agreement will confer on any person other than the Company and the Grantee of any Award any rights or remedies thereunder. The exculpation and indemnification provisions of Section 1.3.4 will inure to the benefit of a Covered Person’s estate and beneficiaries and legatees.

3.23 Successors and Assigns of the Company

The terms of the Plan will be binding upon and inure to the benefit of the Company and any successor entity, including as contemplated by Section 3.6.

3.24 Date of Adoption and Approval of Stockholders

The Plan was adopted by the AOT Board on January 24, 2020 and was approved by AZEK’s stockholders on [•], 2020 (the “Effective Date”).

 

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Exhibit 10.35

THE AZEK COMPANY INC.

RESTRICTED STOCK GRANT

(Replacement Award for AOT Building Products, L.P. Profits Interests)

THIS RESTRICTED STOCK GRANT (the “Agreement”), is made effective as of the date set forth on the Company signature page (the “Signature Page”) attached hereto (the “Date of Grant”), by and among The AZEK Company Inc., a Delaware corporation (together with its successors and assigns, the “Company”), the participant identified on the Signature Page attached hereto (“Participant”) and AOT Building Products, L.P., a Delaware limited partnership (“Parent”).

R E C I T A L S:

WHEREAS, Participant holds the number of Profits Interests of Parent (the “Profits Interests”) specified on the Signature Page, which Profits Interests were issued pursuant to the Amended and Restated Agreement of Limited Partnership of Parent (as amended from time to time, the “LP Agreement”) and one or more LP Interest Agreements (collectively, the “LP Interest Agreements”);

WHEREAS, all of the outstanding Common Interests of Parent are being exchanged (the “Common Exchange”) for shares (“Shares”) of common stock, par value $0.001, of the Company effective prior to or substantially concurrent with the consummation of the initial public offering (the “IPO”) of the common stock (the date such Common Exchange becomes effective, the “Exchange Date”);

WHEREAS, all of Participant’s Profits Interests are being exchanged (the “Exchange”) for Shares effective as of the Exchange Date;

WHEREAS, the Company has adopted The AZEK Company Inc. 2020 Omnibus Incentive Compensation Plan (the “Plan”), the terms of which Plan are incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined herein shall have the same meaning as in the Plan; and

WHEREAS, as of the Exchange Date, the Profits Interests will be cancelled and will cease to be issued and outstanding and Participant shall receive, in exchange, Shares with an equivalent value based on the IPO Price (as defined below), as described herein and otherwise subject to the terms hereof and the Plan, as applicable.

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:

1. Exchange Shares.

(a) Subject to the terms and conditions set forth in this Agreement and effective as of the Exchange Date, the Company and Parent will cause the Profits Interests to be exchanged for the number of vested Shares (“Vested Shares”) and unvested Shares (the “Restricted Shares”) calculated by the Compensation Committee of the Board of Directors of the Company (the “Committee”) in accordance with this Section 1(a), which will be specified on the Signature Page (the Vested Shares and Restricted Shares collectively, the “Exchange Shares”). In the event the IPO is not consummated within 30 days following the Date of Grant, this Award of Exchange Shares and the Exchange shall be null and void and of no further force or effect.


(i) The number of Vested Shares shall be calculated by the Committee in its reasonable good faith discretion, such that the aggregate value of such Vested Shares equals the aggregate Total Realizable Value (as defined below) of the vested Profits Interests held by Participant as of the Exchange Date. The Vested Shares shall not be subject to any forfeiture restrictions.

(ii) The number of Restricted Shares shall be calculated by the Committee in its reasonable good faith discretion, such that the aggregate value of such Restricted Shares equals the aggregate Total Realizable Value of the unvested Profits Interests held by Participant as of the Exchange Date. The Restricted Shares shall vest and become nonforfeitable Vested Shares in accordance with Schedule I attached hereto. The Restricted Shares shall be subject to the terms and conditions of the Plan.

(iii) For purposes of this Agreement, the “Total Realizable Value” of a Profits Interest award (or vested or unvested portion thereof) equals (x) the Adjusted IPO Price less the hurdle amount applicable to such Profits Interest award, multiplied by (y) the number of Profits Interests under such award (or such portion).

(A) The “Adjusted IPO Price” is the price at which a Share is sold in the Company’s initial public offering (the “IPO Price”) multiplied by the number of Shares for which each Common Interest of Parent is exchanged in the Common Exchange. By way of example only, if each Common Interest of Parent is exchanged for two Shares, and the IPO Price of a Share is $10, then the Adjusted IPO Price for purposes of calculating the value of a Profits Interest is $20.

(B) Any fractional Vested Shares or Unvested Restricted Shares will be settled in cash within 2 1/2 months from the Date of Grant.

(b) Within 10 days after the Exchange Date, Participant shall provide the Company with a copy of a completed election under Section 83(b) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder in the form of Exhibit A attached hereto. Participant shall timely (within 30 days of the Date of Grant) file (via certified mail, return receipt requested) such election with the Internal Revenue Service, and thereafter shall certify to the Company that Participant has made such timely filing and furnish a copy of such filing to the Company. Participant should consult his or her tax advisor regarding the consequences of a Section 83(b) election, as well as the receipt, vesting, holding and sale of the Restricted Shares.

(c) Participant acknowledges that the Exchange Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and accordingly, may not be sold or transferred except pursuant to an effective registration statement under the Securities Act or pursuant to an applicable exemption therefrom.

2. Prior Agreements. Participant acknowledges that (a) the unvested Profits Interests are subject to vesting conditions and (b) the Profits Interests are subject to a clawback that requires, in the event of the Participant’s willful or intentional material breach of a non-competition, non-solicitation or non-disclosure covenant (or failure to correct a material breach of any such covenant after written notice of such breach), that the Participant will automatically forfeit the Profits Interests and repay amounts distributed in respect of any Profits Interests in the 24 months prior to such breach (which forfeiture and repayment will be in addition to any other rights that the Company and its affiliates have). Participant acknowledges and agrees that (x) the Restricted Shares will remain subject to the vesting conditions that applied to the unvested Profits Interests, as provided in Schedule I and (y) the Exchange Shares will remain subject to the clawback terms as applied to the Profits Interests.

 

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3. Book Entry; Certificates. The Company may recognize Participant’s ownership of Shares through uncertificated book entry or through the issuance of certificates evidencing the Exchange Shares. Any such certificates shall be registered in Participant’s name on the stock transfer books of the Company promptly after the date hereof, but shall remain in the physical custody of the Company or its designee at all times prior to the later of (x) the vesting of Restricted Shares pursuant to this Agreement and (y) the expiration of any transfer restrictions set forth in this Agreement or otherwise applicable to the Exchange Shares. As soon as practicable following such time, any certificates for the Exchange Shares shall be delivered to Participant or to Participant’s legal guardian or representative along with the stock powers relating thereto. The Company shall not be liable to Participant for damages relating to any delays in issuing the certificates (if any) to Participant, any loss by Participant of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.

4. Rights as a Stockholder. Participant shall be the record owner of the Exchange Shares until or unless such Shares are forfeited pursuant to the terms of this Agreement, and as record owner shall be entitled to all rights of a common stockholder of the Company, including, without limitation, voting rights with respect to the Restricted Shares and rights to dividends or other distributions; provided, that the Exchange Shares shall be subject to the limitations on transfer and encumbrance set forth in Section 7.

5. Legend. To the extent applicable, all book entries (or certificates, if any) representing the Exchange Shares delivered to Participant as contemplated by Section 3 above shall be subject to the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, and any applicable Federal or state laws, and the Company may cause notations to be made next to the book entries (or a legend or legends put on certificates, if any) to make appropriate reference to such restrictions. Any such book entry notations (or legends on certificates, if any) shall include a description to the effect of the restrictions set forth in Sections 1 and 7 hereof.

6. No Right to Continued Employment. Neither the Plan nor this Agreement nor Participant’s receipt of the Exchange Shares hereunder shall impose any obligation on the Company or any Affiliate to continue the employment or engagement of Participant. Further, the Company or any Affiliate (as applicable) may at any time terminate the employment or engagement of such Participant, free from any liability or claim under the Plan or this Agreement, except as otherwise expressly provided herein.

7. Assignment Restrictions.

(a) The Restricted Shares may not, at any time prior to becoming vested pursuant to the terms of this Agreement, be Assigned and any such purported Assignment shall be void and unenforceable against the Company or any Affiliate; provided, that the designation of a beneficiary shall not constitute an Assignment.

(b) The Exchange Shares shall be subject to the lock-up restrictions provided to Participant separately (which are enclosed as Exhibit B), to which Participant agrees by signing this Agreement, and any other agreements to which Participant is or may become a party, including as applicable the Registration Rights Agreement by and among the Company, Ares Corporate Opportunities Fund IV, L.P., Ontario Teachers’ Pension Plan Board and certain stockholders.

(c) “Assign” or “Assignment” shall mean (in either the noun or the verb form, including with respect to the verb form, all conjugations thereof within their correlative meanings) with respect to any security, the gift, sale, assignment, transfer, pledge, hypothecation or other disposition (whether for or without consideration, whether directly or indirectly, and whether voluntary, involuntary or by operation of law) of such security or any interest therein.

 

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8. Withholding. The Company shall have the right and is hereby authorized to withhold, any applicable withholding taxes in respect of the Restricted Shares, their grant or vesting or any payment or transfer with respect to the Exchange Shares at the applicable statutory rates, and to take such action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such withholding taxes.

9. Securities Laws; Cooperation. Upon the vesting of any Restricted Shares, Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws, the Plan or with this Agreement. Participant further agrees to cooperate with the Company in taking any action reasonably necessary or advisable to consummate the transactions contemplated by this Agreement.

10. Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Chief Legal Officer at the principal executive office of the Company and to Participant at the address appearing in the personnel records of the Company for such Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

11. Choice of Law; Jurisdiction; Venue. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof. Any suit, action or proceeding with respect to this Agreement (or any provision incorporated by reference), or any judgment entered by any court in respect of any thereof, shall be brought in any court of competent jurisdiction in the State of Delaware, and each of Participant, the Company, and any transferees who hold Shares pursuant to a valid Assignment, hereby submits to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding, or judgment. Each of Participant, the Company, and any transferees who hold Shares pursuant to a valid Assignment hereby irrevocably waives (a) any objections which it may now or hereafter have to the laying of the venue of any suit, action, or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of Delaware, (b) any claim that any such suit, action, or proceeding brought in any such court has been brought in any inconvenient forum and (c) any right to a jury trial.

12. Shares Subject to Plan; Amendment. By entering into this Agreement, Participant agrees and acknowledges that Participant has received and read a copy of the Plan. The Restricted Shares granted hereunder are subject to the Plan. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein applicable to the Restricted Shares and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement, but no such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination shall materially adversely affect the rights of Participant hereunder without the consent of Participant. Notwithstanding anything in this Agreement or the Plan to the contrary, the Company may amend and update the number of Shares in the Equity Schedule set forth on the Signature Page hereto prior to or following the effective date of the IPO based on the IPO Price.

13. Other Awards. Subject to Section 2 and Schedule I, this Agreement, together with any other equity grants received in connection with the Exchange and the IPO, are in replacement of, and supersede in all respects, the Profits Interests.

14. Parent. Participant agrees and acknowledges that, upon consummation of the Exchange, Participant will (i) hold no Profits Interests, (ii) no longer be a member of Parent and (iii) have no surviving rights under the governing documents of Parent (including, without limitation, any plan or agreement under which Profits Interests were issued to Participant).

 

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15. Entire Agreement. This Agreement is the final, complete and exclusive agreement of the parties with respect to its subject matter and supersedes and merges all prior or contemporaneous discussions or agreements, whether written or oral, regarding the subject matter of this Agreement.

16. Severability. In the event that any provision of this Agreement or application thereof to anyone or under any circumstance is found to be invalid or unenforceable in any jurisdiction to any extent for any reason, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

17. Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

[Signatures on next page.]

 

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IN WITNESS WHEREOF, Participant acknowledges and accepts the terms of this Agreement, which shall be effective as of the date set forth below and countersignature by the Company.

 

Participant

 

Name:
Dated:  

                          

 

[Signature Page - Replacement Award for Profits Interests of AOT Building Products, L.P.]


Agreement acknowledged and confirmed:

 

AOT BUILDING PRODUCTS, L.P.          THE AZEK COMPANY INC.
By:  

                                      

    By:  

                                              

Name:       Name:  
Title:       Title:  

Equity Schedule1

Name:

Date of Acquisition of Profits Interests:

Date of Grant:

Vesting Reference Date:

 

Profits Interests

     Shares  
     Number of
Vested
Profits
Interests
     Number of
Unvested
Profits
Interests
     Number of
Vested
Shares
     Number of
Restricted
Shares
 

Time Vested Profits Interests

           

Performance Vested Profits Interests

     —             —       

Total

           

 

1 

Additional equity schedules to be added for Participants with more than one Profits Interests award.

 

[Signature Page - Replacement Award for Profits Interests of AOT Building Products, L.P.]


Schedule I

Vesting Terms – Restricted Shares

(a) Time-Based Vesting Shares. The Restricted Shares issued in respect of unvested time vested Profits Interests (as reflected in the Equity Schedule on the Signature Page) will continue to vest in the same proportion, and on the same schedule and terms (including forfeiture), as such time vested Profits Interests would have vested under the terms of the LP Interest Agreement. The Participant’s LP Interest Agreement(s) are attached as Exhibit C.

(b) Performance-Based Vesting Shares. The Restricted Shares issued in respect of unvested performance vested Profits Interests (as reflected in the Equity Schedule on the Signature Page) will continue to vest in the same proportion, and on the same terms (including forfeiture), as such performance vested Profits Interests would have vested under the terms of the LP Interest Agreement, except as provided below. The Participant’s LP Interest Agreement(s) are attached as Exhibit C.

(A) For purposes of the definition of “Proceeds,” the “Fair Value” of the Sponsors’ Shares (regardless of whether such Shares are freely tradable and marketable) shall be measured as follows:

(i) On expiration of the Sponsors’ lockup, the Fair Value of the Sponsors’ Shares will be measured based on the number of Shares owned by the Sponsors multiplied by the volume-weighted average trading price for the 45 trading days prior to the expiration of the Sponsors’ lockup (the “Post-Lockup Proceeds”). The performance-based Restricted Shares will vest to the extent that both (x) the Post-Lockup Proceeds results in the applicable performance criteria being met and (y) the closing price of a Share on the last trading day of the Sponsors’ lockup period multiplied by the number of Shares owned by the Sponsors results in the applicable performance criteria being met.

(ii) To the extent that any of the performance-based vesting conditions were not met at the end of the Sponsors’ lockup period in accordance with the prior paragraph, then the Fair Value of the Sponsors’ Shares will be measured after the end of each full calendar quarter that follows the end of the Sponsors’ lockup period (each, a “Measurement Date”). The performance-based Restricted Shares will vest on a Measurement Date to the extent that the applicable performance condition is met based on the volume-weighted average trading price of a Share over any consecutive 45 trading day period during such full calendar quarter.

(B) The Compensation Committee of the Board of Directors may, in its sole discretion, measure performance under this paragraph more frequently than each quarter end and vest performance-based Restricted Shares to the extent that performance conditions are met.

(C) Any employee whose employment terminates due to death or Disability, or whose employment is terminated other than for Cause (as such terms are defined in the Plan), during a quarter will remain eligible to vest in any performance-based Restricted Shares that vest as a result of performance in that quarter.


Exhibit A

ELECTION TO INCLUDE SHARES IN GROSS

INCOME PURSUANT TO SECTION 83(b) OF THE

INTERNAL REVENUE CODE

The undersigned acquired shares (the “Shares”) of The AZEK Company Inc. (the “Company”) on [ ], 2020 (the “Transfer Date”).

The undersigned desires to make an election to have the Shares taxed under the provision of Section 83(b) of the Internal Revenue Code of 1986, as amended (“Code §83(b)”), at the time the undersigned acquired the Shares.

Therefore, pursuant to Code §83(b) and Treasury Regulation §1.83-2 promulgated thereunder, the undersigned hereby makes an election, with respect to the Shares (described below), to report as taxable income for calendar year 2020 the excess, if any, of the Shares’ fair market value on the Transfer Date over the acquisition price thereof.

The following information is supplied in accordance with Treasury Regulation §1.83-2(e):

1. The name, address and social security number of the undersigned:

Name:

Address:

SSN: —

2. A description of the property with respect to which the election is being made: [___] Shares of the Company.

3. The date on which the property was transferred: the Transfer Date. The taxable year for which such election is made: calendar year 2020.

4. The restrictions to which the property is subject: The Shares are subject to time based and/or performance based vesting conditions. If the undersigned ceases to be employed by any of the Company or an affiliate under certain circumstances, all or a portion of the Shares may be subject to forfeiture. The Shares are also subject to transfer restrictions.

5. The aggregate fair market value on the Transfer Date of the property with respect to which the election is being made, determined without regard to any lapse restrictions: $[                    ]

6. The aggregate amount paid for such property: $[                    ]

A copy of this election has been furnished to the Secretary of the Company pursuant to Treasury Regulations §1.83-2(e)(7).

 

Dated:            , 2020    

 

    Name: [            ]


Exhibit B

LP Interest Agreement(s)

(Enclosed)


Exhibit C

LOCK-UP LETTER AGREEMENT

BARCLAYS CAPITAL INC.

BOFA SECURITIES, INC.

GOLDMAN SACHS & CO. LLC

JEFFERIES LLC

As Representatives of the several

Underwriters named in Schedule I of the Underwriting Agreement,

c/o Barclays Capital Inc.

745 Seventh Avenue

New York, New York 10019

Ladies and Gentlemen:

The undersigned understands that you and certain other firms (the “Underwriters”) propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) providing for the purchase by the Underwriters of shares (the “Stock”) of Class A Common Stock, par value $0.001 per share (the “Common Stock”), of The AZEK Company Inc., a Delaware corporation (the “Company”), and that the Underwriters propose to reoffer the Stock to the public (the “Offering”).

In consideration of the execution of the Underwriting Agreement by the Underwriters, and for other good and valuable consideration, the undersigned hereby irrevocably agrees that, without the prior written consent of Barclays Capital Inc. and BofA Securities, Inc., on behalf of the Underwriters, the undersigned will not, directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or would be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of Common Stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of Common Stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Common Stock, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, (3) make any demand for or exercise any right or cause to be publicly filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock or any other securities of the Company, or (4) publicly disclose the intention to do any of the foregoing for a period commencing on the date hereof and ending on the 180th day after the date of the Prospectus relating to the Offering (such 180-day period, the “Lock-Up Period”).


The foregoing paragraph shall not apply to (a) shares of Common Stock acquired from the Underwriters in the Offering or transactions relating to shares of Common Stock or other securities acquired in the open market after the completion of the Offering, (b) transfers of shares of Common Stock or any security convertible into Common Stock as a bona fide gift or gifts, (c) sales or other dispositions of shares of any class of the Company’s capital stock, in each case that are made exclusively between and among the undersigned or members of the undersigned’s family (including to any trust, limited partnership, limited liability company or other entity for the direct or indirect benefit of the undersigned or any members of the undersigned’s family), or affiliates of the undersigned, including its subsidiaries, partners (if a partnership), members (if a limited liability company), stockholders (if a corporation) or any investment fund or other entity controlling, controlled by, managing, or managed by or under common control with the undersigned or affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), (d) transfers of shares of Common Stock or any security convertible into Common Stock by will, testamentary document or intestate succession upon the death of the undersigned; provided that it shall be a condition to any transfer (i) pursuant to clauses (b)-(d) that the transferee/donee agrees to be bound by the terms of this Lock-Up Letter Agreement (including, without limitation, the restrictions set forth in the preceding sentence) to the same extent as if the transferee/donee were a party hereto, (ii) pursuant to clauses (b)-(d) that each party (donor, donee, transferor or transferee) shall not be required by law (including without limitation the disclosure requirements of the Securities Act of 1933, as amended (the Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to make, and shall agree to not voluntarily make, any filing or public announcement of the transfer or disposition prior to the expiration of the 180-day period referred to above (other than any required filed on Form 5), and (iii) pursuant to clauses (b) and (c) that the undersigned notifies Barclays Capital Inc. and BofA Securities, Inc. at least two business days prior to the proposed transfer or disposition, (f) the exercise (including cashless exercise) of warrants or the exercise of stock options granted pursuant to the Company’s stock option/incentive plans or otherwise outstanding on the date hereof; provided, that the restrictions shall apply to shares of Common Stock issued upon such exercise or conversion, (g) the establishment of any contract, instruction or plan that satisfies all of the requirements of Rule 10b5-1 (a “Rule 10b5-1 Plan”) under the Exchange Act; provided, however, that no sales of Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock, shall be made pursuant to a Rule 10b5-1 Plan prior to the expiration of the Lock-Up Period; provided further, that the Company is not required to report the establishment of such Rule 10b5-1 Plan in any public report or filing with the Commission under the Exchange Act during the lock-up period and does not otherwise voluntarily effect any such public filing or report regarding such Rule 10b5-1 Plan, (h) any demands or requests for, the exercise of any right with respect to, or the taking of any action in preparation of, the registration by the Company under the Securities Act of the undersigned’s shares of Common Stock, provided that no transfer of the undersigned’s shares of Common Stock registered pursuant to the exercise of any such right and no registration statement shall be publicly filed under the Securities Act with respect to any of the undersigned’s shares of Common Stock during the Lock-Up Period, (i) any transfer pursuant to a bona fide third party tender or exchange offer made to all holders of the Common Stock, merger, consolidation or other similar transaction involving a change of control (as defined below) of the Company, including voting in favor of any such transaction or taking any other action in connection with such transaction, (provided that in the event that such tender


offer, merger, consolidation or other such transaction is not completed, the undersigned shall remain subject to the restrictions contained in this Lock-Up Letter Agreement), (j) transfers to the Company for the purpose of satisfying any tax withholding obligations (including estimated taxes) due as a result of the exercise of options or as a result of the vesting of or upon the receipt of equity awards held by the undersigned, (k) the repurchase of Common Stock or securities convertible into Common Stock by the Company pursuant to equity award agreements or other contractual arrangements providing for the right of said repurchase in connection with the termination of the undersigned’s employment or service with the Company (l) the exchange of shares of Common Stock for shares of Class B common stock or the exchange of shares of Class B common stock for Common Stock (provided that the Common Stock or Class B common stock issued as a result of such exchange is subject to this Lock-Up Letter Agreement) and (m) transfers of shares of Common Stock or any security convertible into Common Stock by operation of law or pursuant to an order of a court or regulatory agency, provided, however, that for purposes of clauses (j) through (m), if the undersigned is legally required during the Lock-Up Period to file a report under the Exchange Act reporting a reduction in beneficial ownership of shares of Common Stock to the Company, the undersigned shall include a statement in such report clearly indicating the nature and conditions of such transfer. For purposes of clause (i) above, “change of control” shall mean the consummation of any bona fide third party tender or exchange offer, merger, purchase, consolidation or other similar transaction the result of which is that any “person” (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a majority of total voting power of the voting stock of the Company.

If the undersigned is an officer or director of the Company, (i) the undersigned agrees that the foregoing provisions shall be equally applicable to any issuer-directed Stock, as referred to in FINRA Rule 5131(d)(2)(A) that the undersigned may purchase in the Offering pursuant to an allocation of Stock that is directed in writing by the Company, (ii) Barclays Capital Inc. and BofA Securities, Inc., agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, Barclays Capital Inc. or BofA Securities, Inc. will notify the Company of the impending release or waiver and (iii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by issuing a press release through a major news service (as referred to in FINRA Rule 5131(d)(2)(B)) at least two business days before the effective date of the release or waiver. Any release or waiver granted by Barclays Capital Inc. and BofA Securities, Inc. hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if both (a) the release or waiver is effected solely to permit a transfer not for consideration, and (b) the transferee has agreed in writing to be bound by the same terms described in this letter that are applicable to the transferor, to the extent and for the duration that such terms remain in effect at the time of the transfer.

In furtherance of the foregoing, the Company and its transfer agent are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Letter Agreement.


It is understood that, if the Company notifies the Underwriters that it does not intend to proceed with the Offering, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Stock, the undersigned will be released from its obligations under this Lock-Up Letter Agreement.

The undersigned understands that the Company and the Underwriters will proceed with the Offering in reliance on this Lock-Up Letter Agreement.

Whether or not the Offering actually occurs depends on a number of factors, including, without limitation, market conditions. Any Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.

The undersigned hereby consents to receipt of this Lock-Up Letter Agreement in electronic form and understands and agrees that this Lock-Up Letter Agreement may be signed electronically. In the event that any signature is delivered by facsimile transmission, electronic mail or otherwise by electronic transmission evidencing an intent to sign this Lock-Up Letter Agreement, such facsimile transmission, electronic mail or other electronic transmission shall create a valid and binding obligation on the undersigned with the same force and effect as if such signature were an original execution, and delivery of this Lock-Up Letter Agreement by facsimile transmission, electronic mail or other electronic transmission is legal, valid and binding for all purposes.

This Lock-Up Letter Agreement shall automatically terminate upon the earliest to occur, if any, of (1) the termination of the Underwriting Agreement before the sale of any Stock to the Underwriters, (2) [•], in the event that the Underwriting Agreement has not been executed by that date, provided that the Company may, by written notice to the undersigned prior to such date, extend such date for a period of up to three additional months, (3) the filing by the Company of an application to withdraw the registration statement related to the Offering and (4) the Underwriters notifying the Company, or the Company notifying the Underwriters, in writing, prior to the execution of the Underwriting Agreement, that it has determined not to proceed with the Offering.

Exhibit 10.36

THE AZEK COMPANY INC.

NONQUALIFIED STOCK OPTION GRANT

(Option Award for AOT Building Products, L.P. Profits Interests)

THIS STOCK OPTION GRANT (the “Agreement”), is made effective as of the date set forth on the Company signature page (the “Signature Page”) attached hereto (the “Date of Grant”), by and among The AZEK Company Inc., a Delaware corporation (together with its successors and assigns, the “Company”), and the participant identified on the Signature Page attached hereto (“Participant”).

R E C I T A L S:

WHEREAS, Participant holds the number of Profits Interests (the “Profits Interests”) of AOT Building Products, L.P., a Delaware limited partnership (“Parent”) specified on the Signature Page, which Profits Interests were issued pursuant to the Amended and Restated Agreement of Limited Partnership of Parent (as amended from time to time, the “LP Agreement”) and one or more LP Interest Agreements (collectively, the “LP Interest Agreements”);

WHEREAS, all of the outstanding Common Interests of Parent are being exchanged (the “Common Exchange”) for shares (“Shares”) of common stock, par value $0.001, of the Company effective prior to or substantially concurrent with the consummation of the initial public offering (the “IPO”) of the common stock (the date such Common Exchange becomes effective, the “Exchange Date”);

WHEREAS, all of Participant’s Profits Interests are being exchanged (the “Exchange”) for Shares effective as of the Exchange Date;

WHEREAS, Participant is being granted options to purchase Shares (the “Options”) in order to restore the leverage that Participant had with respect to Participant’s Profits Interests prior to the Exchange;

WHEREAS, the Company has adopted The AZEK Company Inc. 2020 Omnibus Incentive Compensation Plan (the “Plan”), the terms of which Plan are incorporated herein by reference and made a part of this Agreement, and capitalized terms not otherwise defined herein shall have the same meaning as in the Plan; and

WHEREAS, immediately following the IPO, Participant shall receive a number of Options, as described herein and otherwise subject to the terms hereof and the Plan.

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties hereto agree as follows:

1. Grant of Options. Subject to the terms and conditions of the Plan and the terms and conditions set forth in this Agreement and effective as of the Date of Grant, the Company and Parent will grant a number of Options calculated by the Compensation Committee of the Board of Directors of the Company (the “Committee”) in accordance with this Section 1, which will be specified on the Signature Page. In the event the IPO is not consummated within 30 days following the Date of Grant, this Award of Options shall be null and void and of no further force or effect.

(a) The number of Options shall be calculated by the Committee in its reasonable good faith discretion, such that the aggregate number of Options equals (a) the Adjusted Profits Interests Number (as defined below), less (b) the number of Shares (including any Shares subject to restrictions) granted pursuant to the Exchange, rounded to the nearest whole Share. The Options shall vest and become nonforfeitable vested Options in accordance with Schedule I attached hereto.


(b) For purposes of this Agreement, the “Adjusted Profits Interests Number” is the total number of Profits Interests (whether vested or unvested), as set forth on the Signature Page, multiplied by the number of Shares for which each Common Interest of Parent is exchanged in the Common Exchange. By way of example only, if each Common Interest of Parent is exchanged for two Shares, and the Participant holds 10 Profits Interests, then the Adjusted Profits Interests Number is 20.

2. Exercise Price; Duration. The price at which Participant will be entitled to purchase Shares upon the exercise of the Options will be the price at which Shares are offered in the IPO (the “Exercise Price”), subject to adjustment as set forth in the Plan. The Options will be exercisable to the extent and in the manner provided in Section 2.3.5 of the Plan for a period of ten (10) years from the Date of Grant (the “Expiration Date”); provided, however, that the Options may be earlier terminated as provided herein. Notwithstanding the foregoing, (i) if Participant’s employment is terminated due to death or Disability (as defined in the Plan), each outstanding vested Option will remain exercisable for one year thereafter (but in no event beyond the Expiration Date), (ii) if Participant’s employment is terminated for Cause (as defined in the Plan), each outstanding vested Option will expire and immediately cease to be exercisable upon the date of the termination and (iii) if Participant’s employment with the Company Group is terminated for any other reason, each outstanding vested Option will remain exercisable for ninety (90) days thereafter (but in no event beyond the Expiration Date).

3. Prior Agreements. Participant acknowledges that (a) the unvested Profits Interests are subject to vesting conditions and (b) the Profits Interests are subject to a clawback that requires, in the event of the Participant’s willful or intentional material breach of a non-competition, non-solicitation or non-disclosure covenant (or failure to correct a material breach of any such covenant after written notice of such breach), that the Participant will automatically forfeit the Profits Interests and repay amounts distributed in respect of any Profits Interests in the 24 months prior to such breach (which forfeiture and repayment will be in addition to any other rights that the Company and its affiliates have). Participant acknowledges and agrees that (x) the Options will remain subject to the vesting conditions that applied to the unvested Profits Interests, as provided in Schedule I and (y) the Shares underlying the Options will remain subject to the clawback terms as applied to the Profits Interests.

4. Manner of Exercise and Payment.

(a) Subject to the terms and conditions of this Agreement, the Options may be exercised by delivery of written notice to the Company in the manner prescribed in Section 2.3.5 of the Plan and as otherwise set forth by the Committee from time to time. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part, provided that partial exercise will be for whole Shares only.

(b) Upon exercise of the Options pursuant to Section 4(a), unless otherwise determined by the Committee, the Company will withhold a number of Shares otherwise deliverable to Participant to pay (i) the full purchase price for the Shares in respect of which the Option is being exercised and (ii) an amount necessary to satisfy applicable U.S. and non-U.S. Federal, state or local tax or other withholding requirements, if any (“Withholding Taxes”) in accordance with Section 3.2 of the Plan (or such amount which would not result in adverse consequences under generally accepted accounting principals), unless otherwise agreed to in writing by Participant and the Company. The number of Shares to be withheld or otherwise used for payment will be calculated using the closing price per Share on the New York Stock Exchange (or other principal exchange on which the Shares then trade) on the date of determination, and will be rounded up to the nearest whole Share.

 

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(c) Upon receipt of the notice of exercise and any payment or other documentation as may be necessary pursuant to this Section 4 relating to the Shares in respect of which the Option is being exercised, the Company will, subject to the Plan and this Agreement, take such action as may be necessary to effect the transfer to Participant of the number of Shares as to which such exercise was effective. Notwithstanding the foregoing, unless otherwise determined by the Committee, Participant may otherwise elect to make all or a portion of such payments in cash, check, cash equivalent, and/or Shares, or as provided in Section 3.2 of the Plan.

(d) Participant will not be deemed to be the holder of, or to have any of the rights and privileges of a stockholder of the Company (including the right to vote or receive dividends) in respect of, Shares purchased upon exercise of the Option until (i) the Option has been exercised pursuant to the terms of this Agreement and Participant has paid the full purchase price for the number of Shares in respect of which the Option was exercised and any applicable Withholding Taxes and (ii) the Company has issued the Shares in connection with such exercise.

5. No Right to Continued Employment. Neither the Plan nor this Agreement nor Participant’s receipt of the Options hereunder shall impose any obligation on the Company or any Affiliate to continue the employment or engagement of Participant. Further, the Company or any Affiliate (as applicable) may at any time terminate the employment or engagement of such Participant, free from any liability or claim under the Plan or this Agreement, except as otherwise expressly provided herein.

6. Assignment Restrictions.

(a) The Options may not, at any time, be Assigned and any such purported Assignment shall be void and unenforceable against the Company or any Affiliate; provided, that the designation of a beneficiary shall not constitute an Assignment.

(b) The Options shall be subject to the lock-up restrictions provided to Participant separately (which are enclosed as Exhibit A), to which Participant agrees by signing this Agreement, and any other agreements to which Participant is or may become a party, including as applicable the Registration Rights Agreement by and among the Company, Ares Corporate Opportunities Fund IV, L.P., Ontario Teachers’ Pension Plan Board and certain stockholders.

(c) “Assign” or “Assignment” shall mean (in either the noun or the verb form, including with respect to the verb form, all conjugations thereof within their correlative meanings) with respect to any security, the gift, sale, assignment, transfer, pledge, hypothecation or other disposition (whether for or without consideration, whether directly or indirectly, and whether voluntary, involuntary or by operation of law) of such security or any interest therein.

7. Securities Laws; Cooperation. Upon the delivery of any Shares, Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws, the Plan or with this Agreement. Participant further agrees to cooperate with the Company in taking any action reasonably necessary or advisable to consummate the transactions contemplated by this Agreement.

8. Notices. Any notice necessary under this Agreement shall be addressed to the Company in care of its Chief Legal Officer at the principal executive office of the Company and to Participant at the address appearing in the personnel records of the Company for such Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

 

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9. Choice of Law; Jurisdiction; Venue. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and performed wholly within the State of Delaware, without giving effect to the conflict of laws provisions thereof. Any suit, action or proceeding with respect to this Agreement (or any provision incorporated by reference), or any judgment entered by any court in respect of any thereof, shall be brought in any court of competent jurisdiction in the State of Delaware, and each of Participant, the Company, and any transferees who hold Shares pursuant to a valid Assignment, hereby submits to the exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding, or judgment. Each of Participant, the Company, and any transferees who hold Shares pursuant to a valid Assignment hereby irrevocably waives (a) any objections which it may now or hereafter have to the laying of the venue of any suit, action, or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of Delaware, (b) any claim that any such suit, action, or proceeding brought in any such court has been brought in any inconvenient forum and (c) any right to a jury trial.

10. Shares Subject to Plan; Amendment. By entering into this Agreement, Participant agrees and acknowledges that Participant has received and read a copy of the Plan. The Options granted hereunder are subject to the Plan. The terms and provisions of the Plan, as it may be amended from time to time, are hereby incorporated herein by reference. In the event of a conflict between any term or provision contained herein and a term or provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail. The Committee may waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate this Agreement, but no such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination shall materially adversely affect the rights of Participant hereunder without the consent of Participant. Notwithstanding anything in this Agreement or the Plan to the contrary, the Company may amend and update the number of Options in the Equity Schedule set forth on the Signature Page hereto prior to or following the effective date of the IPO.

11. Section 409A. It is the Company’s intent that payments under this Agreement are exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and that the Agreement be administered accordingly.

12. Entire Agreement. This Agreement is the final, complete and exclusive agreement of the parties with respect to its subject matter and supersedes and merges all prior or contemporaneous discussions or agreements, whether written or oral, regarding the subject matter of this Agreement.

13. Severability. In the event that any provision of this Agreement or application thereof to anyone or under any circumstance is found to be invalid or unenforceable in any jurisdiction to any extent for any reason, such invalidity or unenforceability shall not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and shall not invalidate or render unenforceable such provision or application in any other jurisdiction.

14. Counterparts. This Agreement may be executed in several counterparts, each of which is an original and all of which shall constitute one instrument. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts.

[Signatures on next page.]

 

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IN WITNESS WHEREOF, Participant acknowledges and accepts the terms of this Agreement, which shall be effective as of the date set forth below and countersignature by the Company.

 

Participant

 

Name:

 

Dated:

 

 

[Signature Page - Replacement Award for Profits Interests of AOT Building Products, L.P.]


Agreement acknowledged and confirmed:

 

THE AZEK COMPANY INC.
By:  

 

Name:  
Title:  

Equity Schedule1

Name:

Date of Acquisition of Profits Interests:

Date of Grant:

Vesting Reference Date:

 

Profits Interests

     Shares    Options  
     Number
of
Vested
Profits
Interests
     Number
of
Unvested
Profits
Interests
     Number
of
Shares
   Number
of Shares
of
Restricted
Stock
   Number
of
Vested
Options
     Number
of
Unvested
Options
 

Time Vested Profits Interests

              

Performance Vested Profits Interests

                      

Total

              

 

1 

Additional equity schedules to be added for Participants with more than one Profits Interests award.

 

[Signature Page - Replacement Award for Profits Interests of AOT Building Products, L.P.]


Schedule I

Vesting Terms – Options

(a) Vested Options. The Options issued in respect of vested Profits Interests (as reflected in the Equity Schedule on the Signature Page) will be fully vested on the Date of Grant.

(a) Time-Based Vesting Shares. The Options issued in respect of unvested time vested Profits Interests (as reflected in the Equity Schedule on the Signature Page) will continue to vest in the same proportion, and on the same schedule and terms (including forfeiture), as such time vested Profits Interests would have vested under the terms of the LP Interest Agreement. The Participant’s LP Interest Agreement(s) are attached as Exhibit B.

(b) Performance-Based Vesting Shares. The Options issued in respect of unvested performance vested Profits Interests (as reflected in the Equity Schedule on the Signature Page) will continue to vest in the same proportion, and on the same terms (including forfeiture), as such performance vested Profits Interests would have vested under the terms of the LP Interest Agreement, except as provided below. The Participant’s LP Interest Agreement(s) are attached as Exhibit B.

(A) For purposes of the definition of “Proceeds,” the “Fair Value” of the Sponsors’ Shares (regardless of whether such Shares are freely tradable and marketable) shall be measured as follows:

(i) On expiration of the Sponsors’ lockup, the Fair Value of the Sponsors’ Shares will be measured based on the number of Shares owned by the Sponsors multiplied by the volume-weighted average trading price for the 45 trading days prior to the expiration of the Sponsors’ lockup (the “Post-Lockup Proceeds”). The performance-based Options will vest to the extent that both (x) the Post-Lockup Proceeds results in the applicable performance criteria being met and (y) the closing price of a Share on the last trading day of the Sponsors’ lockup period multiplied by the number of Shares owned by the Sponsors results in the applicable performance criteria being met.

(ii) To the extent that any of the performance-based vesting conditions were not met at the end of the Sponsors’ lockup period in accordance with the prior paragraph, then the Fair Value of the Sponsors’ Shares will be measured after the end of each full calendar quarter that follows the end of the Sponsors’ lockup period (each, a “Measurement Date”). The performance-based Options will vest on a Measurement Date to the extent that the applicable performance condition is met based on the volume-weighted average trading price of a Share over any consecutive 45 trading day period during such full calendar quarter.

(B) The Compensation Committee of the Board of Directors may, in its sole discretion, measure performance under this paragraph more frequently than each quarter end and vest performance-based Options to the extent that performance conditions are met.

(C) Any employee whose employment terminates due to death or Disability, or whose employment is terminated other than for Cause (as such terms are defined in the Plan), during a quarter will remain eligible to vest in any performance-based Options that vest as a result of performance in that quarter.


Exhibit A

LP Interest Agreement(s)

(Enclosed)


Exhibit B

LOCK-UP LETTER AGREEMENT

BARCLAYS CAPITAL INC.

BOFA SECURITIES, INC.

GOLDMAN SACHS & CO. LLC

JEFFERIES LLC

As Representatives of the several

Underwriters named in Schedule I of the Underwriting Agreement,

c/o Barclays Capital Inc.

745 Seventh Avenue

New York, New York 10019

Ladies and Gentlemen:

The undersigned understands that you and certain other firms (the “Underwriters”) propose to enter into an Underwriting Agreement (the “Underwriting Agreement”) providing for the purchase by the Underwriters of shares (the “Stock”) of Class A Common Stock, par value $0.001 per share (the “Common Stock”), of The AZEK Company Inc., a Delaware corporation (the “Company”), and that the Underwriters propose to reoffer the Stock to the public (the “Offering”).

In consideration of the execution of the Underwriting Agreement by the Underwriters, and for other good and valuable consideration, the undersigned hereby irrevocably agrees that, without the prior written consent of Barclays Capital Inc. and BofA Securities, Inc., on behalf of the Underwriters, the undersigned will not, directly or indirectly, (1) offer for sale, sell, pledge, or otherwise dispose of (or enter into any transaction or device that is designed to, or would be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock (including, without limitation, shares of Common Stock that may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and shares of Common Stock that may be issued upon exercise of any options or warrants) or securities convertible into or exercisable or exchangeable for Common Stock, (2) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of Common Stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, (3) make any demand for or exercise any right or cause to be publicly filed a registration statement, including any amendments thereto, with respect to the registration of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock or any other securities of the Company, or (4) publicly disclose the intention to do any of the foregoing for a period commencing on the date hereof and ending on the 180th day after the date of the Prospectus relating to the Offering (such 180-day period, the “Lock-Up Period”).


The foregoing paragraph shall not apply to (a) shares of Common Stock acquired from the Underwriters in the Offering or transactions relating to shares of Common Stock or other securities acquired in the open market after the completion of the Offering, (b) transfers of shares of Common Stock or any security convertible into Common Stock as a bona fide gift or gifts, (c) sales or other dispositions of shares of any class of the Company’s capital stock, in each case that are made exclusively between and among the undersigned or members of the undersigned’s family (including to any trust, limited partnership, limited liability company or other entity for the direct or indirect benefit of the undersigned or any members of the undersigned’s family), or affiliates of the undersigned, including its subsidiaries, partners (if a partnership), members (if a limited liability company), stockholders (if a corporation) or any investment fund or other entity controlling, controlled by, managing, or managed by or under common control with the undersigned or affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), (d) transfers of shares of Common Stock or any security convertible into Common Stock by will, testamentary document or intestate succession upon the death of the undersigned; provided that it shall be a condition to any transfer (i) pursuant to clauses (b)-(d) that the transferee/donee agrees to be bound by the terms of this Lock-Up Letter Agreement (including, without limitation, the restrictions set forth in the preceding sentence) to the same extent as if the transferee/donee were a party hereto, (ii) pursuant to clauses (b)-(d) that each party (donor, donee, transferor or transferee) shall not be required by law (including without limitation the disclosure requirements of the Securities Act of 1933, as amended (the Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) to make, and shall agree to not voluntarily make, any filing or public announcement of the transfer or disposition prior to the expiration of the 180-day period referred to above (other than any required filed on Form 5), and (iii) pursuant to clauses (b) and (c) that the undersigned notifies Barclays Capital Inc. and BofA Securities, Inc. at least two business days prior to the proposed transfer or disposition, (f) the exercise (including cashless exercise) of warrants or the exercise of stock options granted pursuant to the Company’s stock option/incentive plans or otherwise outstanding on the date hereof; provided, that the restrictions shall apply to shares of Common Stock issued upon such exercise or conversion, (g) the establishment of any contract, instruction or plan that satisfies all of the requirements of Rule 10b5-1 (a “Rule 10b5-1 Plan”) under the Exchange Act; provided, however, that no sales of Common Stock or securities convertible into, or exchangeable or exercisable for, Common Stock, shall be made pursuant to a Rule 10b5-1 Plan prior to the expiration of the Lock-Up Period; provided further, that the Company is not required to report the establishment of such Rule 10b5-1 Plan in any public report or filing with the Commission under the Exchange Act during the lock-up period and does not otherwise voluntarily effect any such public filing or report regarding such Rule 10b5-1 Plan, (h) any demands or requests for, the exercise of any right with respect to, or the taking of any action in preparation of, the registration by the Company under the Securities Act of the undersigned’s shares of Common Stock, provided that no transfer of the undersigned’s shares of Common Stock registered pursuant to the exercise of any such right and no registration statement shall be publicly filed under the Securities Act with respect to any of the undersigned’s shares of Common Stock during the Lock-Up Period, (i) any transfer pursuant to a bona fide third party tender or exchange offer made to all holders of the Common Stock, merger, consolidation or other similar transaction involving a change of control (as defined below) of the Company, including voting in favor of any such transaction or taking any other action in connection with such transaction, (provided that in the event that such tender


offer, merger, consolidation or other such transaction is not completed, the undersigned shall remain subject to the restrictions contained in this Lock-Up Letter Agreement), (j) transfers to the Company for the purpose of satisfying any tax withholding obligations (including estimated taxes) due as a result of the exercise of options or as a result of the vesting of or upon the receipt of equity awards held by the undersigned, (k) the repurchase of Common Stock or securities convertible into Common Stock by the Company pursuant to equity award agreements or other contractual arrangements providing for the right of said repurchase in connection with the termination of the undersigned’s employment or service with the Company (l) the exchange of shares of Common Stock for shares of Class B common stock or the exchange of shares of Class B common stock for Common Stock (provided that the Common Stock or Class B common stock issued as a result of such exchange is subject to this Lock-Up Letter Agreement) and (m) transfers of shares of Common Stock or any security convertible into Common Stock by operation of law or pursuant to an order of a court or regulatory agency, provided, however, that for purposes of clauses (j) through (m), if the undersigned is legally required during the Lock-Up Period to file a report under the Exchange Act reporting a reduction in beneficial ownership of shares of Common Stock to the Company, the undersigned shall include a statement in such report clearly indicating the nature and conditions of such transfer. For purposes of clause (i) above, “change of control” shall mean the consummation of any bona fide third party tender or exchange offer, merger, purchase, consolidation or other similar transaction the result of which is that any “person” (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a majority of total voting power of the voting stock of the Company.

If the undersigned is an officer or director of the Company, (i) the undersigned agrees that the foregoing provisions shall be equally applicable to any issuer-directed Stock, as referred to in FINRA Rule 5131(d)(2)(A) that the undersigned may purchase in the Offering pursuant to an allocation of Stock that is directed in writing by the Company, (ii) Barclays Capital Inc. and BofA Securities, Inc., agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, Barclays Capital Inc. or BofA Securities, Inc. will notify the Company of the impending release or waiver and (iii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by issuing a press release through a major news service (as referred to in FINRA Rule 5131(d)(2)(B)) at least two business days before the effective date of the release or waiver. Any release or waiver granted by Barclays Capital Inc. and BofA Securities, Inc. hereunder to any such officer or director shall only be effective two business days after the publication date of such press release. The provisions of this paragraph will not apply if both (a) the release or waiver is effected solely to permit a transfer not for consideration, and (b) the transferee has agreed in writing to be bound by the same terms described in this letter that are applicable to the transferor, to the extent and for the duration that such terms remain in effect at the time of the transfer.

In furtherance of the foregoing, the Company and its transfer agent are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Letter Agreement.

It is understood that, if the Company notifies the Underwriters that it does not intend to proceed with the Offering, if the Underwriting Agreement does not become effective, or if the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Stock, the undersigned will be released from its obligations under this Lock-Up Letter Agreement.


The undersigned understands that the Company and the Underwriters will proceed with the Offering in reliance on this Lock-Up Letter Agreement.

Whether or not the Offering actually occurs depends on a number of factors, including, without limitation, market conditions. Any Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Underwriters.

The undersigned hereby consents to receipt of this Lock-Up Letter Agreement in electronic form and understands and agrees that this Lock-Up Letter Agreement may be signed electronically. In the event that any signature is delivered by facsimile transmission, electronic mail or otherwise by electronic transmission evidencing an intent to sign this Lock-Up Letter Agreement, such facsimile transmission, electronic mail or other electronic transmission shall create a valid and binding obligation on the undersigned with the same force and effect as if such signature were an original execution, and delivery of this Lock-Up Letter Agreement by facsimile transmission, electronic mail or other electronic transmission is legal, valid and binding for all purposes.

This Lock-Up Letter Agreement shall automatically terminate upon the earliest to occur, if any, of (1) the termination of the Underwriting Agreement before the sale of any Stock to the Underwriters, (2) [•], in the event that the Underwriting Agreement has not been executed by that date, provided that the Company may, by written notice to the undersigned prior to such date, extend such date for a period of up to three additional months, (3) the filing by the Company of an application to withdraw the registration statement related to the Offering and (4) the Underwriters notifying the Company, or the Company notifying the Underwriters, in writing, prior to the execution of the Underwriting Agreement, that it has determined not to proceed with the Offering.

Exhibit 10.37

THE AZEK COMPANY INC.

2020 OMNIBUS INCENTIVE COMPENSATION PLAN

IPO NONQUALIFIED STOCK OPTION AWARD AGREEMENT

This Nonqualified Stock Option Award Agreement (this “Award Agreement”) evidences an award of nonqualified stock options (“Options”) by The AZEK Company Inc., a Delaware corporation (“AZEK”) under The AZEK Company Inc. 2020 Omnibus Incentive Compensation Plan (the “Plan”). Capitalized terms not defined in the Award Agreement have the meanings given to them in the Plan.

 

Name of Grantee:    Gary Hendrickson (the “Grantee”).
Grant Date:    __________ (the “Grant Date”).
Number of Options:   

______________________.

 

Each Option represents the right to purchase one share of common stock, par value $0.001 (each, a “Share”), of AZEK at the Exercise Price set forth below on the terms and conditions set forth herein.

Exercise Price:    The Exercise Price will be $_______ (the “Exercise Price”).
Vesting Dates:   

A number of Options equal to 25% of the Options (rounded to the nearest whole number) shall vest on each of the first three anniversaries of the closing of AZEK’s initial public offering (“IPO”), and the remaining Options will vest on the fourth anniversary of the closing of AZEK’s IPO (each such anniversary, a “Vesting Date”).

 

The Options will vest only if the Grantee is, and has been, continuously serving as a Non-Employee Director on AZEK’s board of directors (the “Board”) from the Grant Date through the applicable Vesting Date, and any unvested Options will be forfeited upon the termination of the Grantee’s service as a Non-Employee Director for any reason.

 

Notwithstanding the foregoing, upon a Change in Control, any outstanding, unvested Options will be treated in accordance with the Plan.

Term:    The latest date the Option will expire is on the tenth anniversary of the Grant Date (the “Expiration Date”). However, in the event the Grantee’s service terminates for any reason prior to the Expiration Date, vested Options shall remain exercisable for the period as set forth below, unless the Board determines otherwise:

 

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•  Upon a termination of the Grantee’s service for any reason other than for Cause, Disability or death, the Grantee may exercise the Options until the date that is 90 days following the date of the termination of service, but in no event later than the Expiration Date.

 

•  Upon a termination of the Grantee’s service for Cause, the Options shall expire and immediately cease to be exercisable upon the date of the termination of service.

 

•  Upon a termination of the Grantee’s service due to death or Disability, the Options shall expire one year after the date of the Grantee’s termination, but in no event later than the Expiration Date.

Exercise of Option:   

Vested Options may be exercised by submitting to AZEK a written notice specifying the number of Options to be exercised accompanied by the full Exercise Price in cash or by certified or official bank check or in another form as determined by the Compensation Committee of the Board (the “Committee”). The Committee may also make arrangements for the cashless exercise of an Option.

 

As soon as reasonably practicable following AZEK’s determination that the Option has been validly exercised, AZEK will issue the relevant number of Shares to be allocated to the Grantee, subject to applicable tax withholding as provided in Section 3.2 of the Plan.

Regular Fees:    This grant of Options will be in addition to any regular fees to which you are entitled for service on the Board (or a committee of the Board), but will be in lieu of (i) any additional compensation to which you would otherwise be entitled for service as Chair of the Board until the Options are vested in full and (ii) any inaugural grant to members of the Board in connection with the Company’s initial public offering.
Section 409A:    It is AZEK’s intent that payments under this Award Agreement are exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and that the Award Agreement be administered accordingly.
Tax Representations; Withholding:    The Grantee is advised to review with his/her own tax advisors the federal, state and local tax consequences of receiving and exercising the Options. The Grantee hereby represents to AZEK that he/she is relying solely on such advisors and not on any statements or representations of AZEK, its Affiliates or any of their respective agents. If, in connection with the exercise of the Options, AZEK is required to withhold any amounts by reason of any federal, state or local tax, such withholding shall be effected in accordance with Section 3.2 of the Plan.


Transfer Restrictions:    The Grantee may not sell, exchange, transfer, assign, pledge, hypothecate or otherwise encumber the Options or the Grantee’s right under the Options to receive Shares, other than to the extent provided in Section 3.5 of the Plan.
Amendment:    The Committee reserves the right at any time to amend the terms and conditions set forth in this Award Agreement, except that the Committee shall not make any amendment in a manner unfavorable to the Grantee (other than if immaterial), without the Grantee’s consent. Any amendment of this Award Agreement shall be in writing and signed by an authorized member of the Committee or a person or persons designated by the Committee.
Governing Law:    This Award Agreement shall be deemed to be made under, and in all respects be interpreted, construed and governed by and in accordance with, the laws of the State of [Delaware] without regard to conflict of law principles.
All Other Terms:    As set forth in the Plan.

The Plan is incorporated herein by reference. Except as otherwise set forth in the Award Agreement, the Award Agreement and the Plan constitute the entire agreement and understanding of the parties with respect to the Options. In the event that any provision of the Award Agreement is inconsistent with the Plan, the terms of the Plan will control. By accepting this Award, the Grantee agrees to be subject to the terms and conditions of the Plan.

This Award Agreement may be executed in counterparts, which together will constitute one and the same original.


IN WITNESS WHEREOF, the parties have caused this Award Agreement to be duly executed and effective as of the Grant Date.

 

THE AZEK COMPANY INC.
By:    
  Name:
  Title:
Acknowledged and Agreed:

 

Gary Hendrickson

Exhibit 10.38

THE AZEK COMPANY INC.

2020 OMNIBUS INCENTIVE COMPENSATION PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT FOR

NON-EMPLOYEE DIRECTORS

This Restricted Stock Unit Award Agreement (this “Award Agreement”) evidences an award of restricted stock units (“RSUs”) by The AZEK Company Inc., a Delaware corporation (“AZEK”) under The AZEK Company Inc. 2020 Omnibus Incentive Compensation Plan (the “Plan”). Capitalized terms not defined in the Award Agreement have the meanings given to them in the Plan.

 

Name of Grantee:    ______________ (the “Grantee”).
Grant Date:    ______________ (the “Grant Date”).
Number of RSUs:    ______________.
Vesting Dates:    ______________ (the “Vesting Date”).
   The RSUs will vest only if the Grantee is, and has been, continuously serving as a non-employee Director on AZEK’s board of directors (the “Board”) from the Grant Date through the Vesting Date [(the “Vesting Period”)], and any unvested RSUs will be forfeited upon any termination of the Grantee’s service as a non-employee Director for any reason.
   Notwithstanding the foregoing and any provision in the Plan:
  

A. [Upon a termination of the Grantee’s service as a non-employee Director due to Disability or a separation of service on or after attainment of age 75 or (“Retirement”), the RSUs will remain outstanding and continue to vest on the Vesting Date as if the Grantee had continued to serve as a non-employee Director through the Vesting Date;]

  

B. [Upon a termination of the Grantee’s service as a non-employee Director by AZEK without Cause or due to death, a prorated number of RSUs will immediately vest based on the date of such termination relative to the length of the Vesting Period; and]

  

C. Upon a Change in Control, any outstanding, unvested RSUs will immediately vest as of the date of such Change in Control.


Delivery Date:    No later than 30 days after the Vesting Date (or, if earlier, the date of [termination of the Grantee’s service as a non-employee Director by AZEK without Cause or due to death or ]a Change in Control), AZEK will issue to the Grantee one share of common stock, par value $0.001 per share (each, a “Share”), of AZEK for each vested RSU, subject to applicable tax withholding as provided in Section 3.2 of the Plan (the date the Shares are so issued, a “Delivery Date”).
Dividend Equivalents and Voting:    On each Delivery Date, AZEK will pay to the Grantee a cash amount equal to the product of (x) all cash dividends or other distributions (other than cash dividends or other distributions pursuant to which the RSUs were adjusted pursuant to Section 1.6.3 of the Plan), if any, paid on a Share from the Grant Date to the applicable Delivery Date and (y) the number of Shares delivered to the Grantee on the applicable Delivery Date (including for this purpose any Shares which would have been delivered on the applicable Delivery Date but for being withheld to satisfy tax withholding obligations). The Grantee will have no voting rights with respect to any of the Shares underlying any RSUs until such Shares are issued and delivered to the Grantee and the Grantee’s name is entered as a stockholder of record on the books of AZEK.
[Regular Fees:    This grant of RSUs will be in addition to any regular fees to which you are entitled for service on the Board (or a committee of the Board).]
Section 409A:    Payments under this Award Agreement are intended to be exempt from or comply with Section 409A of the Internal Revenue Code (“Section 409A”) to the extent applicable, and this Award Agreement shall be administered accordingly. Notwithstanding anything to the contrary contained in this Award Agreement, to the extent that any payment under this Award Agreement is determined by AZEK to constitute “non-qualified deferred compensation” subject to Section 409A and is payable to the Grantee by reason of termination of the Grantee’s service as a non-employee Director, then (a) such payment shall be made to the Grantee only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if the Grantee is a “specified employee” (within the meaning of Section 409A and as determined by AZEK), such payment shall not be made before the date that is six months after the date of the Grantee’s separation from service (or the Grantee’s earlier death). Each payment under this Award Agreement shall be treated as a separate payment for purposes of Section 409A.


Tax Representations; Withholding:    The Grantee is advised to review with his/her own tax advisors the federal, state and local tax consequences of receiving the RSUs. The Grantee hereby represents to AZEK that he/she is relying solely on such advisors and not on any statements or representations of AZEK, its Affiliates or any of their respective agents. If, in connection with the RSUs, AZEK is required to withhold any amounts by reason of any federal, state or local tax, such withholding shall be effected in accordance with Section 3.2 of the Plan. If the RSUs vest prior to payment, then the Grantee agrees to cooperate with AZEK to satisfy any tax withholding obligations, in such manner as determined by the Committee in its sole discretion.
Transfer Restrictions:    The Grantee may not sell, exchange, transfer, assign, pledge, hypothecate or otherwise encumber the RSUs or the Shares underlying the RSUs, other than to the extent provided in Section 3.5 of the Plan.
Amendment:    The Committee reserves the right at any time to amend the terms and conditions set forth in this Award Agreement, except that the Committee shall not make any amendment in a manner unfavorable to the Grantee (other than if immaterial), without the Grantee’s consent. Any amendment of this Award Agreement shall be in writing and signed by an authorized member of the Committee or a person or persons designated by the Committee.
Governing Law:    This Award Agreement shall be deemed to be made under, and in all respects be interpreted, construed and governed by and in accordance with, the laws of the State of Delaware without regard to conflict of law principles.
All Other Terms:    As set forth in the Plan.

The Plan is incorporated herein by reference. Except as otherwise set forth in the Award Agreement, the Award Agreement and the Plan constitute the entire agreement and understanding of the parties with respect to the RSUs. In the event that any provision of the Award Agreement is inconsistent with the Plan, the terms of the Plan will control. By accepting this Award, the Grantee agrees to be subject to the terms and conditions of the Plan.

This Award Agreement may be executed in counterparts, which together will constitute one and the same original.


IN WITNESS WHEREOF, the parties have caused this Award Agreement to be duly executed and effective as of the Grant Date.

 

THE AZEK COMPANY INC.
By:    
  Name:
  Title:
[NAME OF GRANTEE]

 

Exhibit 10.39

THE AZEK COMPANY INC.

2020 OMNIBUS INCENTIVE COMPENSATION PLAN

RESTRICTED STOCK UNIT AWARD AGREEMENT

This Restricted Stock Unit Award Agreement (this “Award Agreement”) evidences an award of restricted stock units (“RSUs”) by The AZEK Company Inc., a Delaware corporation (“AZEK”) under The AZEK Company Inc. 2020 Omnibus Incentive Compensation Plan (the “Plan”). Capitalized terms not defined in the Award Agreement have the meanings given to them in the Plan.

 

Name of Grantee:    ______________ (the “Grantee”).
Grant Date:    ______________ (the “Grant Date”).
Number of RSUs:    ______________.
Vesting Dates:    ______________ (a “Vesting Date”).
   The RSUs will vest only if the Grantee is, and has been, continuously employed by AZEK from the Grant Date through the applicable Vesting Date, and any unvested RSUs will be forfeited upon any termination of Employment for any reason.
   Notwithstanding the foregoing and any provision in the Plan:
  

A. Upon a termination of Employment due to death or Disability, any unvested RSUs scheduled to vest within 12 months of the Grantee’s date of termination will immediately vest as of the date of such termination;

  

B. Upon an involuntary termination of Employment by AZEK without Cause[ or by the Grantee for Good Reason (as defined in the Employment Agreement)], and subject to the Grantee’s continued compliance with any restrictive covenants in any employment or other agreement with AZEK, any unvested RSUs scheduled to vest within 12 months of the Grantee’s date of termination will remain outstanding and continue to vest on the applicable Vesting Date as if the Grantee had remained Employed through such applicable Vesting Date; and

  

C. Upon a termination of Employment by AZEK without Cause[ or by the Grantee for Good Reason] on or within 24 months following a Change in Control, any outstanding, unvested RSUs will immediately vest as of the date of such termination.


Delivery Date:    No later than 30 days after the applicable Vesting Date (or, if earlier, the date of the Grantee’s termination of Employment due to death or Disability or without Cause[ or for Good Reason] on or within 24 months following a Change in Control), AZEK will issue to the Grantee one share of common stock, par value $0.001 per share (each, a “Share”), of AZEK for each vested RSU, subject to applicable tax withholding as provided in Section 3.2 of the Plan (each of the dates on which the Shares are so issued, a “Delivery Date”).
Dividend Equivalents and Voting:    On each Delivery Date, AZEK will pay to the Grantee a cash amount equal to the product of (x) all cash dividends or other distributions (other than cash dividends or other distributions pursuant to which the RSUs were adjusted pursuant to Section 1.6.3 of the Plan), if any, paid on a Share from the Grant Date to the applicable Delivery Date and (y) the number of Shares delivered to the Grantee on the applicable Delivery Date (including for this purpose any Shares which would have been delivered on the applicable Delivery Date but for being withheld to satisfy tax withholding obligations). The Grantee will have no voting rights with respect to any of the Shares underlying any RSUs until such Shares are issued and delivered to the Grantee and the Grantee’s name is entered as a stockholder of record on the books of AZEK.
Section 409A:    Payments under this Award Agreement are intended to be exempt from or comply with Section 409A of the Internal Revenue Code (“Section 409A”) to the extent applicable, and this Award Agreement shall be administered accordingly. Notwithstanding anything to the contrary contained in this Award Agreement or any employment agreement the Grantee has entered into with AZEK (“Employment Agreement”), to the extent that any payment under this Award Agreement is determined by AZEK to constitute “non-qualified deferred compensation” subject to Section 409A and is payable to the Grantee by reason of termination of the Grantee’s Employment, then (a) such payment shall be made to the Grantee only upon a “separation from service” as defined for purposes of Section 409A under applicable regulations and (b) if the Grantee is a “specified employee” (within the meaning of Section 409A and as determined by AZEK), such payment shall not be made before the date that is six months after the date of the Grantee’s separation from service (or the Grantee’s earlier death). Each payment under this Award Agreement shall be treated as a separate payment for purposes of Section 409A.


Tax Representations; Withholding:    The Grantee is advised to review with his/her own tax advisors the federal, state and local tax consequences of receiving the RSUs. The Grantee hereby represents to AZEK that he/she is relying solely on such advisors and not on any statements or representations of AZEK, its Affiliates or any of their respective agents. If, in connection with the RSUs, AZEK is required to withhold any amounts by reason of any federal, state or local tax, such withholding shall be effected in accordance with Section 3.2 of the Plan. If the RSUs vest prior to payment, then the Grantee agrees to cooperate with AZEK to satisfy any tax withholding obligations, in such manner as determined by the Committee in its sole discretion.
Transfer Restrictions:    The Grantee may not sell, exchange, transfer, assign, pledge, hypothecate or otherwise encumber the RSUs or the Shares underlying the RSUs, other than to the extent provided in Section 3.5 of the Plan.
Clawback:    The RSUs will be subject to any clawback or recapture policy that the Company may adopt from time to time to the extent provided in such policy and, in accordance with such policy, may be subject to the requirement that the RSUs be repaid to the Company after they have been distributed to the Grantee.
Amendment:    The Committee reserves the right at any time to amend the terms and conditions set forth in this Award Agreement, except that the Committee shall not make any amendment in a manner unfavorable to the Grantee (other than if immaterial), without the Grantee’s consent. Any amendment of this Award Agreement shall be in writing and signed by an authorized member of the Committee or a person or persons designated by the Committee.
Governing Law:    This Award Agreement shall be deemed to be made under, and in all respects be interpreted, construed and governed by and in accordance with, the laws of the State of Delaware without regard to conflict of law principles.
All Other Terms:    As set forth in the Plan.

The Plan is incorporated herein by reference. Except as otherwise set forth in the Award Agreement, the Award Agreement and the Plan constitute the entire agreement and understanding of the parties with respect to the RSUs. In the event that any provision of the Award Agreement is inconsistent with the Plan, the terms of the Plan will control. Except as specifically provided herein, in the event that any provision of this Award Agreement is inconsistent with any Employment Agreement, the terms of the Employment Agreement will control. By accepting this Award Agreement, the Grantee agrees to be subject to the terms and conditions of the Plan.

This Award Agreement may be executed in counterparts, which together will constitute one and the same original.


IN WITNESS WHEREOF, the parties have caused this Award Agreement to be duly executed and effective as of the Grant Date.

 

THE AZEK COMPANY INC.
By:    
  Name:
  Title:
[NAME OF GRANTEE]

 

Exhibit 10.40

THE AZEK COMPANY INC.

2020 OMNIBUS INCENTIVE COMPENSATION PLAN

NONQUALIFIED STOCK OPTION AWARD AGREEMENT

This Nonqualified Stock Option Award Agreement (this “Award Agreement”) evidences an award of nonqualified stock options (“Options”) by The AZEK Company Inc., a Delaware corporation (“AZEK”) under The AZEK Company Inc. 2020 Omnibus Incentive Compensation Plan (the “Plan”). Capitalized terms not defined in the Award Agreement have the meanings given to them in the Plan.

 

Name of Grantee:    ______________ (the “Grantee”).
Grant Date:    __________ (the “Grant Date”).
Number of Options:   

______________________.

 

Each Option represents the right to purchase one share of common stock, par value $0.001 (each, a “Share”), of AZEK at the Exercise Price set forth below on the terms and conditions set forth herein.

Exercise Price:    The Exercise Price will be $_______ (the “Exercise Price”).
Vesting Dates:   

_______________________, a “Vesting Date”).

 

The Options will vest only if the Grantee is, and has been, continuously employed by AZEK from the Grant Date through the applicable Vesting Date, and any unvested Options will be forfeited upon any termination of Employment for any reason.

 

Notwithstanding the foregoing, and any provision in the Plan:

 

A. Upon a termination of Employment due to death or Disability, any unvested Options scheduled to vest within 12 months of the Grantee’s date of termination will immediately vest as of the date of such termination;

 

B. Upon an involuntary termination of Employment by AZEK without Cause[ or by the Grantee for Good Reason (as defined in the Employment Agreement)], and subject to the Grantee’s continued compliance with any restrictive covenants in any employment or other agreement with AZEK, any unvested Options scheduled to vest within 12 months of the Grantee’s date of termination will remain outstanding and continue to vest on the applicable Vesting Date as if the Grantee had remained Employed through such applicable Vesting Date; and

 

-1-


  

C. Upon a termination of Employment by AZEK without Cause[ or by the Grantee for Good Reason] on or within 24 months following a Change in Control, any outstanding, unvested Options will immediately vest as of the date of such termination.

Term:   

The latest date the Option will expire is on the tenth anniversary of the Grant Date (the “Expiration Date”). However, in the event the Grantee’s Employment terminates for any reason prior to the Expiration Date, vested Options shall remain exercisable for the period as set forth below, unless the Board determines otherwise:

 

•  Upon a termination of Employment for any reason other than for Cause, Disability or death, the Grantee may exercise the Options until the date that is 90 days following the later of the date of the termination of Employment or the date the Options vest in accordance with the terms of this Award Agreement, but in no event later than the Expiration Date.

 

•  Upon a termination of Employment for Cause, the Options shall expire and immediately cease to be exercisable upon the date of the termination of Employment.

 

•  Upon a termination of Employment due to death or Disability, the Options shall expire one year after the date of the termination of Employment, but in no event later than the Expiration Date.

Exercise of Option:   

Vested Options may be exercised by submitting to AZEK a written notice specifying the number of Options to be exercised accompanied by the full Exercise Price in cash or by certified or official bank check or in another form as determined by the Compensation Committee of the Board (the “Committee”). The Committee may also make arrangements for the cashless exercise of an Option.

 

As soon as reasonably practicable following AZEK’s determination that the Option has been validly exercised, AZEK will issue the relevant number of Shares to be allocated to the Grantee, subject to applicable tax withholding as provided in Section 3.2 of the Plan.


Section 409A:    It is AZEK’s intent that payments under this Award Agreement are exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and that the Award Agreement be administered accordingly.
Tax Representations; Withholding:    The Grantee is advised to review with his/her own tax advisors the federal, state and local tax consequences of receiving and exercising the Options. The Grantee hereby represents to AZEK that he/she is relying solely on such advisors and not on any statements or representations of AZEK, its Affiliates or any of their respective agents. If, in connection with the exercise of the Options, AZEK is required to withhold any amounts by reason of any federal, state or local tax, such withholding shall be effected in accordance with Section 3.2 of the Plan.
Transfer Restrictions:    The Grantee may not sell, exchange, transfer, assign, pledge, hypothecate or otherwise encumber the Options or the Grantee’s right under the Options to receive Shares, other than to the extent provided in Section 3.5 of the Plan.
Clawback    The Options will be subject to any clawback or recapture policy that the Company may adopt from time to time to the extent provided in such policy and, in accordance with such policy, may be subject to the requirement that the Options be repaid to the Company after they have been distributed to the Grantee.
Amendment:    The Committee reserves the right at any time to amend the terms and conditions set forth in this Award Agreement, except that the Committee shall not make any amendment in a manner unfavorable to the Grantee (other than if immaterial), without the Grantee’s consent. Any amendment of this Award Agreement shall be in writing and signed by an authorized member of the Committee or a person or persons designated by the Committee.
Governing Law:    This Award Agreement shall be deemed to be made under, and in all respects be interpreted, construed and governed by and in accordance with, the laws of the State of Delaware without regard to conflict of law principles.
All Other Terms:    As set forth in the Plan.

The Plan is incorporated herein by reference. Except as otherwise set forth in the Award Agreement, the Award Agreement and the Plan constitute the entire agreement and understanding of the parties with respect to the Options. In the event that any provision of the Award Agreement is inconsistent with the Plan, the terms of the Plan will control. Except as specifically provided herein, in the event that any provision of this Award Agreement is inconsistent with any Employment Agreement, the terms of the Employment Agreement will control. By accepting this Award Agreement, the Grantee agrees to be subject to the terms and conditions of the Plan.


This Award Agreement may be executed in counterparts, which together will constitute one and the same original.


IN WITNESS WHEREOF, the parties have caused this Award Agreement to be duly executed and effective as of the Grant Date.

 

THE AZEK COMPANY INC.
By:    
  Name:
  Title:

Acknowledged and Agreed:

 

[NAME OF GRANTEE]

Exhibit 10.41

February 5, 2020

Mr. Gary Hendrickson

 

  Re:

Chairman IPO Award

Dear Gary:

As you are aware, CPG Newco LLC (to be converted to a corporation named The Azek Company Inc., the “Company”) is contemplating an initial public offering (“IPO”) of its shares of common stock, par value $0.001 (“Shares”). In recognition of the services that you are expected to provide as the Chair of the Company’s Board of Directors (the “Board”) following the IPO, the Board of Directors of AOT Building Products GP Corp. (“GP Board”), in its capacity as General Partner of AOT Building Products, L.P., which is indirectly the sole member and manager of the Company, has determined that you will be entitled to an award in connection with the IPO subject to the terms described below.

On the closing of the Company’s IPO (the “Closing”), subject to your continued service on the GP Board through the Closing, the Company will grant you options to purchase Shares (the “Options”). The number of Options will equal 0.35% of the Company’s Shares outstanding (on a fully diluted basis) on the Closing and each Option will have an exercise price equal to the price at which a Share is offered in the IPO. The Options will vest in substantially equal installments on each of the first four anniversaries of the Closing, subject to your continued service as Chair of the Board, and will be subject to the other terms and conditions set forth in the Company’s equity plan under which the Options will be granted. The Options will be in addition to any regular fees to which you are entitled for service on the Board (or a committee of the Board), but will be in lieu of (i) any additional compensation to which you would otherwise be entitled for service as Chair until the Options are vested in full and (ii) any inaugural grant to members of the Board in connection with the IPO.

This letter agreement, which will be governed by and construed in accordance with the laws of the state of Delaware, sets forth the entire agreement between you and the Company (and its affiliates) regarding the Options and supersedes any other discussions or agreements regarding the matters addressed herein. Nothing in this letter agreement suggests a guaranteed period of service on the GP Board or Board. If the IPO does not close for any reason, or if your service on the GP Board ends before the Closing for any reason, then this letter agreement will be void ab initio and will have no further force or effect. This letter agreement may be executed in several counterparts (including, without limitation, by facsimile, PDF or electronic transmission), each of which will be deemed an original, and such counterparts will constitute one and the same instrument.

[Remainder of Page Intentionally Left Blank]


To indicate your agreement with the foregoing, please sign and return this letter agreement to me. This letter agreement will become effective as of the date on which you sign below.

 

Very truly yours,
CPG NEWCO LLC
By:   /s/ Ralph Nicoletti
  Name:   Ralph Nicoletti
  Title:   Chief Financial Officer

 

Accepted and Agreed:

/s/ Gary Hendrickson

Name:   Gary Hendrickson
Date:   2/5/2020

[Signature Page to Letter Agreement]

Exhibit 21.1

CPG Newco LLC (a Delaware limited liability company to be converted to a corporation named The AZEK Company Inc.)

List of Subsidiaries

 

Entity

  

State

  

Country

CPG International LLC (d/b/a The AZEK Company LLC)    Delaware    United States
Vycom Corp.    Delaware    United States
Scranton Products Inc.    Delaware    United States
Sanatec Sub I Corporation    Delaware    United States
Santana Products Inc.    Delaware    United States
CPG Sub I Corporation    Delaware    United States
CPG Building Products LLC    Delaware    United States
WES, LLC    Minnesota    United States
UltraLox Technology, LLC    Minnesota    United States
Versatex Holdings, LLC    Delaware    United States
Versatex Building Products, LLC    Pennsylvania    United States

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the use in this Registration Statement on Form S-1 of CPG Newco LLC of our report dated December 23, 2019 relating to the financial statements of CPG Newco LLC, 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

Chicago, Illinois

February 7, 2020

 

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