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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2019
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
Commission File Number 001-37443
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Univar Solutions Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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26-1251958
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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3075 Highland Parkway, Suite 200
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Downers Grove,
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Illinois
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60515
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code: (331) 777-6000
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading symbol(s)
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Name of each exchange on which registered
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Common Stock ($0.01 par value)
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UNVR
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New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
Warrants to acquire 0.1525 shares of common stock, $0.01 par value per share, of Univar Solutions Inc. and $1.51 in cash
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
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.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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Emerging growth company
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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 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
Aggregate market value of common stock held by non-affiliates of registrant on June 28, 2019: $3.4 billion (see Item 12, under Part III hereof), based on a closing price of registrant’s Common Stock of $22.04 per share.
At February 12, 2020, 168,848,248 shares of the registrant’s common stock, $0.01 par value, were outstanding.
Documents Incorporated by Reference
Certain portions of the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held May 7, 2020 and to be filed within 120 days after the registrant’s fiscal year ended December 31, 2019 (hereinafter referred to as “Proxy Statement”) are incorporated by reference into Part III.
Univar Solutions Inc.
Form 10-K
TABLE OF CONTENTS
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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SUPPLEMENTAL INFORMATION
In this Annual Report on Form 10-K, “Univar Solutions,” “Company,” “we,” “our” and “us” refer to Univar Solutions Inc., a Delaware corporation, and its subsidiaries included in the consolidated financial statements, except as otherwise indicated or as the context otherwise requires.
Our fiscal year ends on December 31, and references to “fiscal” when used in reference to any twelve month period ended December 31, refer to our fiscal years ended December 31.
The term “GAAP” refers to accounting principles generally accepted in the United States of America.
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Forward-looking statements and information
Certain parts of this annual report on Form 10-K contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are generally accompanied by words such as “believes,” “expects,” “may,” “will,” “should,” “could,” “seeks,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. All forward-looking statements made in this Annual Report on Form 10-K are qualified by these cautionary statements.
Any forward-looking statements represent our views only as of the date of this report and should not be relied upon as representing our views as of any subsequent date, and we undertake no obligation, other than as may be required by law, to update any forward-looking statement. We caution you that forward-looking statements are not guarantees of future performance and that our actual performance may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report on Form 10-K. Forward-looking statements include, but are not limited to, statements about:
•our ability to solve customer technical challenges and accelerate product development cycles;
•demand for new products that meet regulatory and customer sustainability standards and preferences and our ability to provide such products and systems to maintain our competitive position;
•our ability to sell specialty products at higher profit;
•the cyclicality of our Agricultural business;
•the continuation of the trend of outsourcing of chemical distribution by chemical manufacturers;
•significant factors that may adversely affect us and our industry;
•the outcome and effect of ongoing and future legal proceedings;
•market conditions and outlook;
•our liquidity outlook and the funding thereof, and cash requirements and adequacy of resources to fund them;
•future contributions to our pension plans and cash payments for postretirement benefits; and
•the impact of ongoing tax guidance and interpretations.
Potential factors that could affect such forward-looking statements include, among others:
•fluctuations in general economic conditions, particularly in industrial production and the demands of our customers;
•significant changes in the business strategies of producers or in the operations of our customers;
•increased competitive pressures, including as a result of competitor consolidation;
•significant changes in the pricing, demand and availability of chemicals;
•our indebtedness, the restrictions imposed by our debt instruments, and our ability to obtain additional financing;
•the broad spectrum of laws and regulations that we are subject to, including extensive environmental, health and safety laws and regulations;
•an inability to integrate the business and systems of companies we acquire or to realize the anticipated benefits of such acquisitions;
•potential business disruptions and security breaches, including cybersecurity incidents;
•an inability to generate sufficient working capital;
•increases in transportation and fuel costs and changes in our relationship with third party providers;
•accidents, safety failures, environmental damage, product quality and liability issues and recalls;
•major or systemic delivery failures involving our distribution network or the products we carry;
•ongoing litigation and other legal and regulatory risks;
•challenges associated with international operations;
•exposure to interest rate and currency fluctuations;
•negative developments affecting our pension plans and multi-employer pensions;
•labor disruptions associated with the unionized portion of our workforce; and
•the other factors described in “Risk Factors” in Item 1A of this Annual Report on Form 10-K.
PART I
ITEM 1. BUSINESS
General
We are a leading global chemical and ingredient distributor and provider of value-added services to customers across a wide range of diverse industries. We purchase chemicals and ingredients from thousands of chemical producers worldwide to warehouse, repackage, blend, dilute, transport and sell those chemicals to more than 100,000 customer locations across approximately 130 countries. We operate an extensive worldwide chemical and ingredient distribution network, comprised of more than 650 facilities and serviced by hundreds of tractors, railcars, tankers and trailers operating daily through our facilities.
Chemical and ingredient producers rely on us to warehouse, repackage, transport, and sell their products as a way to expand their market access, enhance their geographic reach, lower their cost to serve, and grow their business. Customers who purchase products and services from us benefit from a lower total cost of ownership, as they are able to simplify their chemical sourcing process by outsourcing functions to us such as “just-in-time delivery,” product availability and selection, packaging, mixing, blending and technical expertise. They also rely on us for safe and secure delivery and off-loading of chemicals fully compliant with increasing local and federal regulations.
Originally formed in 1924 as a brokerage business and through the continued expansion with various acquisitions, we were acquired in 2007 by investment funds advised by CVC Capital Partners Advisory (US), Inc. (“CVC”) and in 2010 by investment funds controlled by Clayton, Dubilier & Rice, LLC (“CD&R”). We closed our initial public offering (“IPO”) on June 23, 2015. As of December 31, 2019, all of the foregoing investment funds have fully divested or reduced ownership in the Company and are no longer considered significant stockholders.
The effects of market conditions on our operations are discussed in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Recent Developments
On February 28, 2019, we acquired Nexeo Solutions, Inc. (“Nexeo”), a leading global chemicals and plastics distributor. The acquisition expanded and strengthened our presence in North America and provides expanded opportunities to create the largest North American sales force in chemical and ingredients distribution coupled with a broad and deep product offering.
On March 29, 2019, we sold the plastics distribution business of Nexeo to an affiliate of One Rock Capital Partners, LLC and on December 31, 2019, we sold our Environmental Sciences business to affiliates of AEA Investors LP.
See “Note 3: Business combinations” and “Note 4: Discontinued operations and dispositions” in Item 8 of this Annual Report on Form 10-K for additional information.
Our Segments
Our business is organized and managed in four geographical segments: Univar Solutions USA (“USA”), Univar Solutions Canada (“Canada”), Univar Solutions Europe and the Middle East and Africa (“EMEA”), and Univar Solutions Latin America (“LATAM”), which includes developing businesses in Latin America (including Brazil and Mexico) and the Asia-Pacific region. For additional information on our geographical segments, see “Note 23: Segments” in Item 8 of this Annual Report on Form 10-K for additional information.
The following graph reflects the breakdown by segment of our 2019 consolidated net sales of $9.3 billion.
USA
We supply a broad offering of commodity and specialty chemicals and ingredients, as well as specialized services to a wide range of end markets, touching a majority of the manufacturing and industrial production sectors in the United States. We believe our close proximity to customers, combined with our deep product knowledge and end market expertise, serves as a competitive advantage.
We repackage and blend bulk chemicals for shipment by our transportation fleet as well as common carriers. Our sales force is deployed through a geographic sales district model as well as by end-use market and industry (e.g., coatings and adhesives), food ingredients and products, pharmaceutical ingredients and products, personal care, homecare and industrial cleaning and energy (upstream, midstream and downstream).
Canada
Our Canadian operations are regionally focused, with a sales force supplying a broad offering of commodity and specialty chemicals and specialized services. We sell into the industrial, agricultural and energy markets. In agriculture, we formulate and distribute inoculants, crop protection and fertilizer products to independent retailers and specialty applicators servicing the agricultural end markets in both Western Canada and Eastern Canada and we provide support services to agricultural chemical producers throughout the country. In Eastern Canada, we primarily focus on industrial markets such as food ingredients, pharmaceutical ingredients, coatings and adhesives, and chemical manufacturing. We also service the cleaning and sanitation, personal care, mining, and energy markets. In Western Canada, we focus on forestry, chemical manufacturing, mining, and energy markets (e.g., midstream gas pipeline, oil sands processing and oil refining).
EMEA
We maintain a strong presence in the United Kingdom and continental Europe with sales offices in 21 countries. We also have three sales offices in the Middle East and Africa.
We execute primarily on a pan-European basis, leveraging centralized or shared information technology systems, raw materials procurement, logistics, route operations and the management of producer relationships where possible to benefit from economies of scale and improve cost efficiency. We have strong end market expertise and key account management capability across Europe to better support sales representatives in each country and for serving our key customer end markets, in industrial production, pharmaceutical ingredients, food ingredients, coating and adhesives and personal care.
LATAM
We offer generic and specialty chemicals and ingredients, as well as technical and market expertise, specialized services and key account management to a wide range of end markets including industrial production, personal care, coatings and adhesives, energy and agriculture through sales offices, Solution Centers and distribution sites in Mexico, Brazil, Colombia and
to a lesser extent the Asia-Pacific region. With the acquisition of Tagma Brasil Ltda. (“Tagma”) in 2017, we started to provide formulation services for crop protection manufacturers in Brazil.
Product and End Markets
We source and inventory chemicals and ingredients in large quantities such as barge loads, railcars or full truck loads from chemical producers and break down the bulk quantities to repackage, sell and distribute smaller quantities to our customers.
In addition to selling and distributing chemicals, we use our transportation and warehousing infrastructure, along with our broad knowledge of chemicals and hazardous materials handling to provide important distribution and specialized services for our producers and our customers.
We have state-of-the-art Solutions Centers at locations across the globe, consisting of formulation labs, development and research centers, and test kitchens, with specialized industry expertise and innovative technical capabilities to solve our customer's technical challenges and accelerate product development cycles.
Our key global end markets include:
•Agricultural. Within the agriculture industry we are a leading wholesale distributor of crop protection products to independent retailers and specialty applicators in Canada. To support this end market, we distribute herbicides, fungicides, insecticides, seed, seed treatments, inoculants, micronutrients, macronutrients, horticultural products and fertilizers among other products. In addition, we provide storage, packaging and logistics services for major crop protection companies.
•Beauty and Personal Care. We are a full-line distributor in the beauty and personal care industry providing a wide variety of specialty and basic chemicals and ingredients used in skin and hair care products.
•Chemical Manufacturing. We distribute a full suite of chemical products in support of the chemical manufacturing industry (organic, inorganic and polymer chemistries).
•Coatings and Adhesives. We sell resins, pigments, solvents, thickeners, dispersants and other additives used to make paints, inks, and coatings. Our product line includes epoxy resins, polyurethanes, titanium dioxide, fumed silica, esters, plasticizers, silicones and specialty amines.
•Energy (up, mid and downstream). We provide chemicals and service to midstream pipeline and downstream refinery operators primarily in the US and Canada, including oil sands production. We also service the upstream US shale hydraulic-fracturing sector, by providing bulk chemicals to drill sites.
•Food Ingredients and Products. We distribute a diverse portfolio of commodity and specialty products that are sold into the food industry. The major food and beverage markets we serve are meat processing, baked goods, dairy, grain mill products, processed foods, carbonated soft drinks, fruit drinks and alcoholic beverages.
•Forestry, Lumber, Paper. We serve the forest industry across Canada, supplying a complete range of chemical products for use at all stages of production, from sap stain prevention to pulp and paper manufacturing.
•Homecare & Industrial Cleaning. We offer an extensive range of quality ingredients for cleaners, detergents, and disinfectant products. We distribute chemicals manufactured by many of the industry’s leading producers of enzymes, surfactants, solvents, dispersants, thickeners, bleaching aides, builders, sealants, acids, alkalis and other chemicals that are used as ingredients and processing aids in the manufacturing of cleaning and sanitation products.
•Metalworking & Lubricants. Our broad and diverse range of products include base stocks, performance-enhancing additives for both lubricants and metalworking fluids.
•Pharmaceutical Ingredients and Finished Products. Our portfolio includes products along the medicinal production chain, where we offer a broad portfolio of excipients, solvents, reactants, active pharmaceutical ingredients and intermediates to pharmaceutical ingredient producers.
•Water Treatment. We offer a broad portfolio of products for water treatment that includes pH adjusters, flocculants, coagulants, dechlorinators and disinfectants.
Commodity chemicals and ingredients represent the largest portion of our business by sales and volume. Our commodity portfolio includes acids and bases, surfactants, glycols, inorganic compounds, alcohols and general chemicals used extensively throughout most end markets. Our specialty chemicals and ingredient sales represent an important, high-value, higher-growth portion of the chemical distribution market. We typically sell specialty products in lower volumes, but at a higher profit than commodity products.
Services
In addition to selling and distributing chemicals, we use our transportation and warehousing infrastructure, along with our broad knowledge of chemicals and hazardous materials handling, to provide distribution and specialized services for our producers and our customers. These services include:
•Chemical Waste Removal and Environmental Response Services. Our ChemCare waste management service collects both hazardous and non-hazardous waste products at customer locations in the United States and Canada, and then works with select vendors in the waste disposal business to safely transport these materials to licensed third party treatment, storage and disposal facilities. We also provide our customers with industrial cleaning, site remediation and emergency environmental response services.
•Inventory Management. We manage our inventory in order to meet customer demands on short notice whenever possible. Our value as channel partners of chemical producers also enables us to obtain access to chemicals in times of short supply, when smaller chemical distributors may not be able to obtain or maintain stock. Further, our global distribution network permits us to stock products locally to enhance “just-in-time” delivery, providing outsourced inventory management to our customers in a variety of end markets.
•Mixing, Blending and Repackaging. We provide a full suite of blending and repackaging services for our customers across diverse industries. Additionally, we can fulfill small orders through our repackaging services, enabling customers to maintain smaller inventories.
•Specialized Formulation and Blending. Leveraging our technical expertise, we are able to utilize our blending and mixing capabilities to create specialty chemical formulations to meet specific customer performance demands for agriculture and energy products.
Suppliers
We source materials from thousands of producers around the globe and we typically maintain relationships with multiple producers in order to protect against disruption in supply and distribution logistics, as well as to ensure competitive pricing of our supply. We typically maintain relationships with multiple producers in order to protect against disruption in supply and distribution logistics, as well as to ensure competitive pricing of our supply. For the year ended December 31, 2019, our 10 largest producers accounted for approximately 37% of our total chemical purchases.
Distribution Channels
We have multiple channels to market, including both warehouse delivery and direct-to-consumer delivery. The principal determinants of the way a customer is serviced include the size, scale and level of customization of a particular order, the nature of the product and the customer, and the location of the product inventories.
Warehouse distribution
Our warehouse distribution channel is the core of our operations and connects large producers with smaller volume customers whose consumption patterns tend to make them uneconomical to be served directly by producers. Thus, the core customer serviced via our warehouses is a small or medium-volume consumer of chemicals and ingredients. We purchase chemicals and ingredients in truck load or larger quantities from producers based on contracted demands of our customers and our estimates of anticipated customer purchases. Once received, products are stored in one or more of our distribution facilities for sale and distribution in smaller, less-than-truckload quantities to our customers. Our warehouses have various facilities for services such as repackaging, blending and mixing to create specialized solutions needed by our customers in ready-to-use formulations.
Direct distribution
In direct distribution, we sell and service large quantity purchases that are shipped directly from producers through our logistics infrastructure, which provides our customers with sourcing and logistics support services for inventory management and delivery.
Competition
The chemical and ingredient distribution and sales markets are highly competitive. Most of the products that we distribute are made to standard specifications and are either produced by or available from multiple sources.
Chemical and ingredient distribution itself is a fragmented market in which only a small number of competitors have substantial international operations. Our principal international competitor is Brenntag, which has a particularly strong position in Europe due to its strong market position in Germany.
Many other chemical distributors operate on a regional, national or local basis and may have a strong relationship with local producers and customers that may give them a competitive advantage in their local market, while others are niche players which focus on a specific end market, either industry or product-based. In addition to Brenntag, some of our regional competitors in North America include Helm America, Hydrite Chemical, Azelis, IMCD and Maroon Group and some of our regional competitors in Europe include Azelis, Helm and IMCD.
Chemical and ingredient producers may also sell their products through a direct sales force or through multiple chemical distributors, limit their use of third party distributors, particularly with respect to higher margin products, or to partner with other chemical and ingredient producers for distribution. Each of which could increase our competition.
We compete on the basis of service, on-time delivery, product breadth and availability, product and market knowledge and insights, safety and environmental compliance, global reach, product price, as well as our ability to provide certain additional value-added services.
Environmental Matters
We operate in a number of jurisdictions and are subject to numerous international, federal, state and local laws and regulations related to the protection of the environment, human health and safety, including laws regulating discharges of hazardous substances into the soil, air and water, blending, managing, handling, storing, selling, transporting and disposing of hazardous substances, investigation and remediation of contaminated properties and protecting the safety of our employees and others. Some of these laws and regulations include the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund), the Toxic Substances Control Act (TSCA), the Resource Conservation and Recovery Act (RCRA), Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), among others. Some of our operations are required to hold environmental permits and licenses to be compliant and certain of our services businesses are also impacted by these laws.
Information related to environmental matters is included in this Annual Report on Form 10-K, including: (i) Part I, Item 1A - Risk Factors; (ii) Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and (iii) “Note 2: Significant accounting policies” and “Note 21: Commitments and contingencies” in Item 8 of this Annual Report on Form 10-K.
Sustainability
We expect that there will be a continued increase in demand for products, systems and services that meet growing customer sustainability standards, expectations and preferences. We recognize that our ability to continue to provide these
products and services requires our business to further advance environmentally and socially responsible means of operating, reflecting the challenges and opportunities presented through increased legal requirements, climate parameters and market developments. We believe that our ability to meet these increased sustainability demands will be necessary to enhance our competitive position in the marketplace.
Patents, Licenses and Trademarks
We consider intellectual property, particularly trade secrets, proprietary technology and other similar intellectual property, as important to our success. We hold some patents and have registered numerous trademarks in multiple jurisdictions. Further, we have various patent and trademark applications pending in jurisdictions worldwide. Although we consider our patents, trademarks, trade secrets and licenses to constitute valuable assets, we do not regard any of our businesses as being materially dependent upon an individual patent, trademark, trade secret, or license.
Significant Customers
No single customer accounted for more than 10% of net sales in any of the years presented.
Employees
As of December 31, 2019, we had approximately 10,300 employees on a full-time equivalent basis worldwide.
Other
No material part of our business is subject to renegotiation of profits or termination of contracts or subcontracts at the election of any government.
Because we generally fill orders upon receipt, no segment has any significant order backlog.
Information about our Executive Officers
See Part III, Item 10, Directors, Executive Officers and Corporate Governance.
Available Information
We maintain a website at www.univarsolutions.com and make available free of charge at this website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. The information on our website is not, and will not be deemed to be, a part of this Annual Report on Form 10-K, or incorporated into any of our other filings with the SEC, except where we expressly incorporated such information. If you wish to receive a paper copy of any exhibit to our reports filed with or furnished to the SEC, the exhibit may be obtained by writing to: Corporate Secretary, Univar Solutions Inc., 3075 Highland Parkway Suite 200, Downers Grove, Illinois 60515.
Item 1A. RISK FACTORS
We are affected by general economic conditions, particularly fluctuations in industrial production and consumption, and an economic downturn could adversely affect our operations and financial results.
We sell chemicals that are used in manufacturing processes and as components of or ingredients in other products. Our sales are correlated with and affected by fluctuations in the levels of industrial production, manufacturing output, and general economic activity. For example, demand for our oil, gas and mining products and services is affected by factors such as the level of exploration, drilling, development and production activity of, and the corresponding capital spending by, oil, gas and mining companies and oilfield service providers, and trends in oil, gas and mineral prices. Producers of commodity and specialty chemicals are likely to reduce their output in periods of significant contraction in industrial and consumer demand, while demand for the products we distribute depends largely on trends in demand in the end markets our customers serve. A majority of our sales are in North America and Europe and our business is therefore susceptible to downturns in those economies as well as, to a lesser extent, the economies in the rest of the world. Our profit margins, as well as overall demand for our products and services, could decline as a result of a large number of factors outside our control, including economic recessions, reduced customer demand (whether due to changes in production processes, consumer preferences, the industries in which the customer operates, laws and regulations affecting the chemicals industry and the manner in which they are enforced, or other factors), inflation, fluctuations in interest and currency exchange rates, and changes in the fiscal or monetary policies of governments in the regions in which we operate.
General economic conditions and macroeconomic trends, as well as the creditworthiness of our customers, could affect overall demand for chemicals. Any overall decline in the demand for chemicals could significantly reduce our sales and profitability. If the creditworthiness of our customers declines, we would face increased credit risk. In addition, volatility and
disruption in financial markets could adversely affect our sales and results of operations by limiting our customers’ ability to obtain financing necessary to maintain or expand their own operations.
A historical feature of past economic weakness has been significant destocking of inventories, including inventories of chemicals used in industrial and manufacturing processes. It is possible that an improvement in our net sales in a particular period may be attributable in part to restocking of inventories by our customers and represent a level of sales or sales growth that will not be sustainable over the longer term. Further economic weakness could lead to insolvencies among our customers or producers, as well as among financial institutions that are counterparties on financial instruments or accounts that we hold. Any of these developments could have a material adverse effect on our business, financial condition and results of operations.
Significant changes in the business strategies of producers or in the operations of our customers could adversely affect our business.
Significant changes in the business strategies of producers could disrupt our supply. Large chemical manufacturers may elect to sell certain products (or products in certain regions) directly to customers, instead of relying on distributors such as us. While we do not believe that our results depend materially on access to any individual producer’s products, a reversal of the trend toward more active use of distributors would likely result in increasing margin pressure or products becoming unavailable to us.
In addition, unpredictable events may have a significant impact on the industries in which many of our customers operate, reducing demand for products that we normally distribute in significant volumes. Significant disruptions of supply and disruptions in customer industries could have a material adverse effect on our business, financial condition and results of operations.
The markets in which we operate are highly competitive and we may not be able to compete successfully.
The chemical distribution market is highly competitive. Chemicals can be purchased from a variety of sources, including traders, brokers, wholesalers and other distributors, as well as directly from producers. Many of the products we distribute or finish are essentially fungible with products offered by our competition, including emerging competitors. The competitive pressure we face is particularly strong in sectors and markets where local competitors have strong positions or where new competitors can easily enter. Increased competition from distributors of products similar to or competitive with ours could result in price reductions, reduced margins and a loss of market share.
We expect to continue to experience significant and increasing levels of competition in the future. We must also compete with smaller companies that have been able to develop strong local or regional customer bases. In certain countries, some of our competitors are more established, benefit from greater name recognition and have greater resources within those countries than we do.
Consolidation of our competitors in the markets in which we operate could place us at a competitive disadvantage and reduce our profitability.
We operate in an industry, which is highly fragmented on a global scale, but in which there has been a trend toward consolidation in recent years. Consolidation of our competitors may also further enhance their financial position, provide them with the ability to offer more competitive prices to customers for whom we compete, and allow them to achieve increased efficiencies in their consolidated operations that enable them to more effectively compete for customers. This may jeopardize the strength of our positions in one or more of the markets in which we operate and any advantages we currently enjoy due to the comparative scale of our operations. Losing some of those advantages could adversely affect our business, financial condition and results of operations, as well as our growth potential.
The prices and costs of the products we purchase may be subject to large and significant price increases. We might not be able to pass such cost increases through to our customers. We could experience financial losses if our inventories of one or more chemicals exceed our sales and the price of those chemicals decreases significantly while in our inventories or if our inventories fall short of our sales and the purchase price of those chemicals increases significantly.
We purchase and sell a wide variety of chemicals, the price and availability of which may fluctuate, and may be subject to large and significant price increases. Many of our contracts with producers include chemical prices that are not fixed or are tied to an index, which allows our producers to change the prices of the chemicals we purchase as the price of the chemicals fluctuates in the market. Changes in chemical prices affect our net sales and cost of goods sold, as well as our working capital requirements, levels of debt and financing costs. We might not always be able to reflect increases in our chemical costs, transportation costs and other costs in our own pricing. Any inability to pass cost increases onto customers may adversely affect our business, financial condition and results of operations.
In order to meet customer demand, we typically maintain significant inventories, and we are therefore subject to a number of risks associated with our inventory levels, including the following:
•declines in the prices of chemicals that are held by us;
•the need to maintain a significant inventory of chemicals that may be in limited supply and therefore difficult to procure;
•buying chemicals in bulk for the best pricing and thereby holding excess inventory;
•responding to the fluctuating demand for chemicals;
•cancellation of customer orders; and
•responding to customer requests for rapid delivery.
In order to manage our inventories successfully, we must estimate demand from our customers and purchase chemicals that substantially correspond to that demand. If we overestimate demand and purchase too much of a particular chemical, we face a risk that the price of that chemical will fall, leaving us with inventory that we cannot sell profitably or have to write down such inventory from its recorded value. If we underestimate demand and purchase insufficient quantities of a particular chemical and prices of that chemical rise, we could be forced to purchase that chemical at a higher price and forego profitability in order to meet customer demand. Our business, financial condition and results of operations could suffer a material adverse effect if either or both of these situations occur frequently or in large volumes.
Our indebtedness may adversely affect our business, financial condition and operating results.
As of December 31, 2019, we had $2,713.8 million of total debt. Our indebtedness may have material adverse effects on our business, financial condition and operating results. The amount of our debt, as well as any additional debt or other obligations that we may incur in the future, could have important consequences for holders of our common stock, including, but not limited to:
•our ability to satisfy obligations to lenders or note holders may be impaired, resulting in possible defaults on and acceleration of our indebtedness;
•our ability to obtain additional financing for refinancing of existing indebtedness, working capital, capital expenditures, product and service development, acquisitions, general corporate purposes and other purposes may be impaired;
•our assets that currently serve as collateral for our debt may be insufficient, or may not be available, to support future financings;
•a substantial portion of our cash flow from operations could be used to repay the principal and interest on our debt;
•we may be increasingly vulnerable to economic downturns and increases in interest rates;
•our flexibility in planning for and reacting to changes in our business and the markets in which we operate may be limited; and
•we may be placed at a competitive disadvantage relative to other companies in our industry with less debt or comparable debt at more favorable interest rates.
The agreements governing our indebtedness contain operating covenants and restrictions that limit our operations and could lead to adverse consequences if we fail to comply with them.
The agreements governing our indebtedness contain certain operating covenants and other restrictions relating to, among other things, limitations on indebtedness (including guarantees of additional indebtedness) and liens, mergers, consolidations and dissolutions, sales of assets, investments and acquisitions, dividends and other restricted payments, repurchase of shares of capital stock and options to purchase shares of capital stock and certain transactions with affiliates. In addition, our North American ABL Facility and Euro ABL Facility include certain financial covenants.
Failure to comply with these financial and operating covenants could result from, among other things, changes in our results of operations, the incurrence of additional indebtedness, the pricing of our products, our success at implementing cost reduction initiatives, our ability to successfully implement our overall business strategy or changes in general economic conditions, which may be beyond our control. The breach of any of these covenants or restrictions could result in a default under the agreements that govern these facilities that would permit the lenders to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. If we are unable to repay such amounts, lenders having secured obligations could proceed against the collateral securing these obligations. This could have serious consequences on our financial condition and results of operations and could cause us to become bankrupt or otherwise insolvent. In addition, these covenants may restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our business and stockholders. We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility.
As a result of our current and past operations, we are subject to extensive environmental, health and safety laws and regulations, which expose us to risks that could have a material adverse effect on our business, financial condition and results of operations.
We are subject to extensive environmental, health and safety laws and regulations in multiple jurisdictions because we blend, manage, handle, store, sell, transport and arrange for the disposal of chemicals, hazardous materials and hazardous waste. These include laws and regulations governing our management, storage, transportation and disposal of chemicals; product regulation; air, water and soil contamination; greenhouse gas emissions; and the investigation and cleanup of contaminated sites, including any spills or releases that may result from our management, handling, storage, sale, transportation of chemicals and other products. Compliance with these laws and regulations, and with the permits and licenses we hold, requires that we expend significant amounts for ongoing compliance, investigation and remediation. If we fail to comply with such laws, regulations, permits or licenses, we may be subject to fines, damages and other civil, administrative or criminal sanctions and investigations, including the revocation of permits and licenses necessary to continue our business activities. In addition, future changes in laws and regulations, or the interpretation of existing laws and regulations, could have an adverse effect on us by adding restrictions, reducing our ability to do business, increasing our costs of doing business, reducing our profitability or reducing the demand for our products.
Previous operations, including those of acquired companies, have resulted in contamination at a number of current and former sites, which must be investigated and remediated. We have ongoing investigations and remediation activities, or are contributing to cleanup costs, at approximately 107 currently or formerly owned, operated or used sites or other sites impacted by our operations. We have spent substantial sums on such investigation and remediation and we expect to continue to incur such expenditures in the future. We may incur losses in connection with investigation and remediation obligations that exceed our environmental reserve. There is no guarantee that our estimates will be accurate, that new contamination will not be discovered or that new environmental laws or regulations will not require us to incur additional costs. Any such inaccuracies, discoveries or new laws or regulations, or the interpretation of existing laws and regulations, could have a material adverse effect on our business, financial condition and results of operations.
We could be held liable for the costs to investigate, remediate or otherwise address contamination at any real property we have ever owned, leased, operated or used or other sites impacted by our operations. Some environmental laws could impose on us the entire cost of cleanup of contamination present at a site even though we did not cause all of the contamination. These laws often identify parties who can be strictly and jointly and severally liable for remediation. The discovery of previously unknown contamination at current or former sites or the imposition of other environmental liabilities or obligations in the future, including additional investigation or remediation obligations with respect to contamination that has impacted other properties, could lead to additional costs or the need for additional reserves that have a material adverse effect on our business, financial condition and results of operations. In addition, we may be required to pay damages or civil judgments related to third party claims, including those relating to personal injury (including exposure to hazardous materials or chemicals we blend, handle, store, sell, transport or dispose of), product quality issues, property damage or contribution to remedial obligations. We have been identified as a potentially responsible party at certain third party sites at which we have arranged for the disposal of our hazardous wastes. We may be identified as a potentially responsible party at additional sites beyond those for which we currently have financial obligations. Such developments could have a material adverse effect on our business, financial condition and results of operations.
Societal concerns regarding the safety of chemicals in commerce and their potential impact on the environment have resulted in a growing trend towards increasing levels of product safety and environmental protection regulations. These concerns could influence public perceptions, impact the commercial viability of the products we sell and increase the costs to comply with increasingly complex regulations, which could have a negative impact on our business, financial condition and results of operations. Additional findings by government agencies that chemicals pose significant environmental, health or safety risks may lead to their prohibition in some or all of the jurisdictions in which we operate.
We may be unable to integrate the business of Nexeo successfully or realize the anticipated benefits of the acquisition.
We are required to devote significant management attention and resources to integrating the business practices and operations of Nexeo and the Company. Potential difficulties that we may encounter as part of the integration process include the following:
•the inability to successfully combine Nexeo and manage the combined business in a manner that permits us to achieve, on a timely basis, or at all, the enhanced revenue opportunities and cost savings and other benefits anticipated to result from the Nexeo acquisition; and
•complexities associated with managing the combined businesses, including difficulty addressing possible differences in corporate cultures and management philosophies and the challenge of integrating complex systems, technology, networks and other assets of each of the companies in a seamless manner that minimizes any adverse impact on customers, suppliers, employees and other constituencies.
These issues could adversely affect our ability to maintain relationships with customers, suppliers, employees and other constituencies or achieve the anticipated benefits of the acquisition, or could reduce our earnings or otherwise adversely affect our business and financial results following the acquisition.
Our business could be seriously impacted by business disruptions and security breaches, including cybersecurity incidents.
Business and/or supply chain disruptions, plant downtime, and/or power outages, and information technology system and/or network disruptions, regardless of cause, including acts of sabotage, employee error or other actions, geo-political activity, military actions, terrorism (including cyber-attacks), weather events, and natural disasters could seriously harm our operations as well as the operations of our customers and suppliers. Any such event could have a negative impact on our business, results of operations, financial condition, and cash flows.
Cyber-attacks or security breaches could compromise confidential, business critical information, cause a disruption in the Company’s operations or harm the Company’s reputation. While the Company has a comprehensive cyber-security program that is continuously reviewed, maintained and upgraded, there can be no assurance that such procedures, controls, and intelligence will be sufficient to prevent security breaches from occurring. If any security breaches were to occur, they could lead to losses of sensitive information, critical infrastructure or capabilities essential to our operations and could have a material adverse effect on our reputation, financial position, results of operations or cash flows, and could result in claims being brought against us.
We require significant working capital, and we expect our working capital needs to increase in the future, which could result in having lower cash available for, among other things, capital expenditures and acquisition financing.
We require significant working capital to purchase chemicals from chemical producers and distributors and sell those chemicals efficiently and profitably to our customers. Our working capital needs may increase if the price of products we purchase and inventory increase. Our working capital needs also increase at certain times of the year, as our customers’ requirements for chemicals increase. For example, our customers in the agricultural sector require significant deliveries of chemicals within a growing season that can be very short and depend on weather patterns in a given year. We need inventory on hand to have product available to ensure timely delivery to our customers. If our working capital requirements increase and we are unable to finance our working capital on terms and conditions acceptable to us, we may not be able to obtain chemicals to respond to customer demand, which could result in a loss of sales.
In addition, the amount of working capital we require to run our business is expected to increase in the future due to expansions in our business activities. If our working capital needs increase, the amount of free cash we have at our disposal to devote to other uses will decrease. A decrease in free cash could, among other things, limit our flexibility, including our ability to make capital expenditures and to acquire suitable acquisition targets that we have identified. If increases in our working capital occur and have the effect of decreasing our free cash, it could have a material adverse effect on our business, financial condition and results of operations.
We depend on transportation assets, some of which we do not own, in order to deliver products to our customers.
Although we maintain a significant portfolio of owned and leased transportation assets, including trucks, trailers and rail cars, we also rely on transportation and warehousing provided by third parties (including common carriers and rail companies) to deliver products to our customers. Our access to third party transportation is not guaranteed, and we may be unable to transport chemicals at economically attractive rates in certain circumstances, particularly in cases of adverse market conditions or disruptions to transportation infrastructure. We are also subject to increased costs that we may not always be able to recover from our customers, including fuel prices, as well as charges imposed by common carriers, leasing companies and other third parties involved in transportation.
Accidents, safety failures, environmental damage, product quality issues, major or systemic delivery failures involving our distribution network or the products we carry, or adverse health effects or other harm related to hazardous materials we blend, manage, handle, store, sell, transport or dispose of could damage our reputation and result in substantial damages or remedial obligations.
Our business depends to a significant extent on our customers’ and producers’ trust in our reputation for reliability, quality, safety and environmental responsibility. Actual or alleged instances of safety deficiencies, mistaken or incorrect deliveries, inferior product quality, exposure to hazardous materials resulting in illness, injury or other harm to persons, property or natural resources, or of damage caused by us or our products, could damage our reputation and lead to customers and producers curtailing the volume of business they do with us. Also, there may be safety, personal injury or other environmental risks related to our products which are not known today. Any of these events, outcomes or allegations could also subject us to substantial legal claims, and we could incur substantial expenses, including legal fees and other costs, in defending such legal claims, which could materially impact our financial position and results of operations.
Actual or alleged accidents or other incidents at our facilities or that otherwise involve our personnel or operations could also subject us to claims for damages by third parties. Because many of the chemicals that we handle are dangerous, we are subject to the ongoing risk of hazards, including leaks, spills, releases, explosions and fires, which may cause property damage, illness, physical injury or death. We sell products used in hydraulic fracturing, a process that involves injecting water, sand and chemicals into subsurface rock formations to release and capture oil and natural gas. The use of such hydraulic fracturing fluids by our customers may result in releases that could impact the environment and third parties. Several of our distribution facilities are located near high-density population centers. If any such events occur, whether through our own fault, through preexisting conditions at our facilities, through the fault of a third party or through a natural disaster, terrorist incident or other event outside our control, our reputation could be damaged significantly. We could also become responsible, as a result of environmental or other laws or by court order, for substantial monetary damages or expensive investigative or remedial obligations related to such events, including but not limited to those resulting from third party lawsuits or environmental investigation and cleanup obligations on and off-site. The amount of any costs, including fines, damages and/or investigative and remedial obligations, that we may become obligated to pay under such circumstances could substantially exceed any insurance we have to cover such losses.
Any of these risks, if they materialize, could have a material adverse effect on our business, financial condition and results of operations.
Our business exposes us to significant risks, not all of which are covered by insurance.
Because we are engaged in the blending, managing, handling, storing, selling, transporting and disposing of chemicals, chemical waste products and other hazardous materials, product liability, health impacts, fire damage, safety, cyber security and environmental risks are significant concerns for us. We are also exposed to present and future chemical exposure claims by employees, contractors on our premises, other persons located nearby, as well as related workers' compensation claims. Although we carry insurance to protect us against many risks involved in the conduct of our business, we do not insure against all such risks and the insurance we carry is subject to limitations, including exclusions, deductibles and coverage limits. Due to the variable condition of the insurance market, we have experienced and may experience in the future, increased deductible retention levels and increased premiums. We also may be unable to obtain at commercially reasonable rates in the future adequate insurance coverage for the risks we currently insure against, and certain risks are or could become completely uninsurable or eligible for coverage only to a reduced extent. Increased insurance premiums or the occurrence of significant uncovered losses could have a material adverse effect on our business, financial condition and results of operations.
Our business exposes us to potential product liability claims and recalls, which could adversely affect our financial condition and performance.
The repackaging, blending, mixing, manufacture, sale and distribution of chemical products by us, including products used in hydraulic fracturing operations and products produced with food ingredients or with pharmaceutical and nutritional supplement applications, involve an inherent risk of exposure to product liability claims, product recalls, product seizures and related adverse publicity, including, without limitation, claims for exposure to our products, spills or escape of our products, personal injuries, food related claims and property damage or environmental claims. A product liability claim, judgment or recall against our customers could also result in substantial and unexpected expenditures for us, affect consumer confidence in our products and divert management’s attention from other responsibilities. Although we maintain product liability insurance, there can be no assurance that the type or level of coverage is adequate or that we will be able to continue to maintain our existing insurance or obtain comparable insurance at a reasonable cost, if at all. A product recall or a partially or completely uninsured judgment against us could have a material adverse effect on our business, financial condition and results of operation.
Our business is subject to additional general regulatory requirements, which increase our cost of doing business, could result in claims and enforcement actions, and could restrict our business in the future.
Our general business operations are subject to a broad spectrum of international, federal, state, and local laws and regulations, including, without limitation, those relating to antitrust, food and drug, labor and human resources, tax, unclaimed property, transportation, anti-bribery, banking and treasury, privacy and data protection (including the European Union's General Data Protection Regulation), hydraulic fracturing or other oil and gas production activities, among others. These laws and regulations add cost to our conduct of business and could, in some instances, result in claims or enforcement actions or could reduce our ability to pursue business opportunities. Any changes in the laws and regulations applicable to us, the enactment of any additional laws or regulations, or the failure to comply with, or increased enforcement activity of, such laws and regulations, could significantly impact our products and services and have a material adverse effect on our business, financial condition and results of operations. Additionally, governmental agencies may refuse to grant or renew our operating licenses and permits.
We are exposed to litigation and other legal and regulatory actions and risks in the ordinary course of our business, and we could incur significant liabilities and substantial legal fees.
We are subject to the risk of litigation, other legal claims and proceedings, and regulatory enforcement actions in the ordinary course of our business. Also, there may be safety or personal injury risks related to our products which are not known today. The results of legal proceedings cannot be predicted with certainty. We cannot guarantee that the results of current or future legal proceedings will not materially harm our business, reputation or brand, nor can we guarantee that we will not incur losses in connection with current or future legal proceedings that exceed any provisions we may have set aside in respect of such proceedings or that exceed any applicable insurance coverage. The occurrence of any of these events could have a material adverse effect on our business, financial condition or results of operations.
Many of the products we sell have “long-tail” exposures, giving rise to liabilities many years after their sale and use. Insurance purchased at the time of sale may not be available when costs arise in the future and producers may no longer be available to provide indemnification.
There is uncertainty surrounding the effect of Brexit and other global conditions, which may cause increased economic volatility and have a material adverse effect on our business, financial condition and results of operations.
In June 2016 the U.K. electorate voted in a referendum to voluntarily depart from the E.U., known as Brexit and in December 2019, the U.K. approved the Withdrawal Agreement and left the European Union (“Brexit”) on January 31, 2020.
The potential impact on our results of operations and liquidity resulting from Brexit remains unclear. The actual effects of Brexit will depend upon many factors and significant uncertainty remains with respect to the terms of the ultimate resolution of the Brexit negotiations. The final terms of the withdrawal may impact certain of our commercial and general business operations in the U.K. and the E.U. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations, including tax and free trade agreements, supply chain logistics, environmental, health and safety laws and regulations and employment laws, as the U.K. determines which E.U. laws to replace or replicate. We cannot predict the direction Brexit-related developments will take nor the impact of those developments on our European operations and the economies of the markets where we operate. This may cause us to adjust our strategy in order to compete effectively in global markets and could adversely affect our business, financial condition, operating results and cash flows.
Our results of operations could suffer if we are unable to expand into new geographic markets or manage the various risks related to our international activities.
Our profitability and longer-term success may be adversely affected if we fail to continue to expand our penetration in certain foreign markets and to enter new and emerging foreign markets. The profitability of our international operations will largely depend on our continued success in the following areas:
•securing key producer relationships to help establish our presence in international markets;
•hiring and training personnel capable of supporting producers and our customers and managing operations in foreign countries;
•localizing our business processes to meet the specific needs and preferences of foreign producers and customers;
•building our reputation and awareness of our services among foreign producers and customers; and
•implementing new financial, management information and operational systems, procedures and controls to monitor our operations in new markets effectively, without causing undue disruptions to our operations and customer and producer relationships.
In addition, we are subject to risks associated with operating in foreign countries, including:
•varying and often unclear legal and regulatory requirements that may be subject to inconsistent or disparate enforcement, particularly regarding environmental, health and safety issues and security or other certification requirements, as well as other laws and business practices that favor local competitors, such as exposure to possible expropriation, nationalization, restrictions on investments by foreign companies or other governmental actions;
•less stable supply sources;
•competition from existing market participants that may have a longer history in and greater familiarity with the foreign markets where we operate;
•tariffs, export duties, quotas and other barriers to trade; as well as possible limitations on the conversion of foreign currencies into US dollars or remittance of dividends and other payments by our foreign subsidiaries;
•divergent labor regulations and cultural expectations regarding employment and agency;
•different cultural expectations regarding industrialization, international business and business relationships;
•foreign taxes and related regulations, including foreign taxes that we may not be able to offset against taxes imposed upon us in the United States, and foreign tax and other laws limiting our ability to repatriate earnings to the United States;
•extended payment terms and challenges in our ability to collect accounts receivable;
•changes in a specific country’s or region’s political or economic conditions;
•compliance with anti-bribery laws such as the US Foreign Corrupt Practices Act, the UK Bribery Act and similar anti-bribery laws in other jurisdictions, the violation of which could expose us to severe criminal or civil sanctions; and
•compliance with anti-boycott, privacy, economic sanctions, anti-dumping, antitrust, import and export laws and regulations by our employees or intermediaries acting on our behalf, the violation of which could expose us to significant fines, penalties or other sanctions.
Increases in interest rates would increase the cost of servicing our debt and could reduce our profitability.
Certain of our outstanding debt bears interest at variable rates. As a result, increases in interest rates would increase the cost of servicing our debt and could materially reduce our profitability and cash flows. Approximately $1.8 billion, or 67 percent of our debt is indexed to LIBOR as a benchmark for establishing the rate and we may hold other operational contracts, including leases, that are also indexed to LIBOR. The U.K. Financial Conduct Authority, which regulates LIBOR, has announced that it intends to phase out LIBOR by the end of 2021. If LIBOR ceases to exist, we may need to amend our debt and other certain agreements that use LIBOR as a benchmark and we cannot predict what alternative index or other amendments may be negotiated with our counterparties. As a result, our interest or operating expense could increase and our available cash flow for general corporate requirements may be adversely affected. For additional information on our indebtedness, debt service obligations and sensitivity to interest rate fluctuations, see “Qualitative and Quantitative Disclosures About Market Risk” in Item 7A of this Annual Report on Form 10-K.
We may have future capital needs and may not be able to obtain additional financing on acceptable terms, or at all.
We have historically relied on debt financing to fund our operations, capital expenditures and expansion. The macroeconomic conditions that affect the markets in which we operate and our credit ratings could have a material adverse effect on our ability to secure financing on acceptable terms, if at all. The terms of additional financing may limit our financial and operating flexibility, and if financing is not available when needed, or is not available on acceptable terms, we may be unable to take advantage of business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition and results of operations.
If we raise additional funds through further issuances of equity, convertible debt securities or other securities convertible into equity, our existing stockholders could suffer significant dilution in their percentage ownership of our company, and any new securities we issue could have rights, preferences and privileges senior to those of holders of our common stock.
Fluctuations in currency exchange rates may adversely affect our results of operations.
We have sizable sales and operations in Canada, Europe, Middle East, Africa, Asia, and Latin America. We report our consolidated results in US dollars and the results of operations and the financial position of our local operations are generally reported in the relevant local currencies and then translated into US dollars at the applicable exchange rates. As a result, our financial performance is impacted by currency fluctuations. For additional details on our currency exposure and risk management practices, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of this Annual Report on Form 10-K.
The integration of our business systems may negatively impact our operations.
We are currently in the process of integrating our legacy business systems into the legacy Nexeo business systems (the “Systems Integration”). The Systems Integration is anticipated to be completed at the end of 2021. Since we will process and reconcile our information from multiple systems until the Systems Integration is complete, the chance of errors is greater. Inconsistencies in the information from multiple systems could adversely impact our ability to manage our business efficiently and may result in heightened risk to our ability to maintain our books and records and comply with regulatory requirements. Any disruptions, delays or deficiencies in the Systems Integration could adversely affect our ability to process orders, track inventory, ship products in a timely manner, prepare invoices to our customers, maintain regulatory compliance and otherwise carry on our business in the ordinary course. The Systems Integration involves numerous risks, including:
•diversion of management’s attention away from normal daily business operations;
•loss of, or delays in accessing, data;
•increased demand on our operations support personnel;
•initial dependence on unfamiliar systems while training personnel to use new systems; and
•increased operating expenses resulting from training, conversion and transition support activities.
Any of the foregoing or if we are unable to implement the Systems Integration successfully, could result in a material increase in information technology compliance or other related costs, and could have a negative impact on our business, financial condition and results of operations.
Our balance sheet includes significant goodwill and intangible assets, the impairment of which could affect our future operating results.
We carry significant goodwill and intangible assets on our balance sheet. As of December 31, 2019, our goodwill and intangible assets totaled approximately $2.3 billion and $0.3 billion, respectively. At least annually, the Company assesses goodwill for impairment. If testing indicates that goodwill is impaired, the carrying value is written down based on fair value with a charge against earnings. Where the Company utilizes a discounted cash flow methodology in determining fair value, weakened demand for a specific product line or business could result in an impairment. Intangible assets are amortized for book purposes over their respective useful lives and are tested for impairment if any event occurs or circumstances change that indicates that carrying value may not be recoverable. Accordingly, any determination requiring the write-off of a significant portion of goodwill or intangible assets could negatively impact the Company's financial condition and results of operations. See “Note 15: Goodwill and intangible assets” in Item 8 of this Annual Report on Form 10-K for a discussion of our 2019 impairment review.
We have in the past and may in the future make acquisitions, ventures and strategic investments, some of which may be significant in size and scope, which have involved in the past and will likely involve in the future numerous risks. We may not be able to address these risks without substantial expense, delay or other operational or financial problems.
Acquisitions or investments have involved in the past and will likely involve in the future various risks, such as:
•integrating the technologies, operations and personnel of any acquired business;
•the potential disruption of our ongoing business, including the diversion of management attention;
•the possible inability to obtain the desired financial and strategic benefits from the acquisition or investment;
•customer attrition arising from preferences to maintain redundant sources of supply;
•producer attrition arising from overlapping or competitive products;
•assumption of contingent or unanticipated liabilities or regulatory liabilities;
•dependence on the retention and performance of existing management and work force of acquired businesses for the future performance of these businesses;
•regulatory risks associated with acquired businesses (including the risk that we may be required for regulatory reasons to dispose of a portion of our existing or acquired businesses); and
•the risks inherent in entering geographic or product markets in which we have limited prior experience.
Future acquisitions and investments may need to be financed in part through additional financing from banks, through public offerings or private placements of debt or equity securities or through other arrangements, and could result in substantial cash expenditures. The necessary acquisition financing may not be available to us on acceptable terms if and when required, particularly if our debt leverage levels make it difficult or impossible for us to secure additional financing for acquisitions.
Negative developments affecting our pension and multi-employer pension plans in which we participate may occur.
We operate a number of pension and post-retirement plans for our employees and have obligations with respect to several multi-employer pension plans sponsored by labor unions in the United States. The terms of these plans vary from country to country. The recognition of costs and liabilities associated with the pension and postretirement plans is affected by assumptions made by management and used by actuaries engaged by us to calculate the benefit obligations and the expenses recognized for these plans. The inputs used in developing the required estimates are calculated using a number of assumptions, which represent management’s best estimate of the future. The assumptions that have the most significant impact on costs and liabilities are the discount rate, the estimated long-term return on plan assets for the funded plans, retirement rates, and mortality rates. Changes to the funded status of our pension plans as a result of updates to actuarial assumptions and actual experience that differs from our estimates are recognized as gains or losses in the period incurred under our “mark to market” accounting policy, and could result in a requirement for additional funding.
As of December 31, 2019, our pension plans were underfunded by $234.4 million and our unfunded postretirement plan liabilities were approximately $1.4 million. In recent years, declining interest rates have negatively impacted the funded status of our pension and postretirement plans. If the interest rates continue to decline, funding requirements for our pension plans may become more significant. If our cash flows and capital resources are insufficient to fund our obligations under these pension and postretirement plans, we could be forced to reduce or delay investments and capital expenditures, seek additional capital, or incur indebtedness.
The union sponsored multi-employer pension plans in which we participate are also underfunded, including the substantially underfunded New England Teamsters and Trucking Industry Pension Fund and Central States, Southeast and Southwest Areas Pension Plan, which have liabilities that exceed its assets. Often, this requires us to make substantial withdrawal liability payments when we close a facility covered by one of these plans, which could hinder our ability to make otherwise appropriate management decisions to operate as efficiently as possible.
A portion of our workforce is unionized and labor disruptions could decrease our profitability.
As of December 31, 2019, approximately 22% of our labor force is covered by a collective bargaining agreement, including approximately 11%, 20%, and 46% of our labor force in the USA, Canada and Europe, respectively. Approximately 3% of our labor force is covered by a collective bargaining agreement that will expire within one year. These arrangements grant certain protections to employees and subject us to employment terms that are similar to collective bargaining agreements. We cannot guarantee that we will be able to negotiate these or other collective bargaining agreements or arrangements with works councils on the same or more favorable terms as the current agreements or arrangements, or at all, and without interruptions, including labor stoppages at the facility or facilities subject to any particular agreement or arrangement. A prolonged labor dispute, which could include a work stoppage, could have a material adverse effect on our business, financial condition and results of operations.
We depend on a limited number of key personnel who would be difficult to replace. If we lose the services of these individuals, or are unable to attract new talent, our business will be adversely affected.
We depend upon the ability and experience of a number of our executive management and other key personnel who have substantial experience with our operations, the chemicals and chemical distribution industries and the selected markets in which we operate. The loss of the services of one or a combination of our senior executives or key employees could have a material adverse effect on our results of operations. We also might suffer an additional impact on our business if one of our senior executives or key employees is hired by a competitor.
Anti-takeover provisions in our charter documents and Delaware law could discourage, delay or prevent a change in control of our company and may affect the trading price of our common stock.
Our Certificate of Incorporation and By-laws include a number of provisions that may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. For example, our Certificate of Incorporation and By-laws currently:
•authorize the issuance of “blank check” preferred stock that could be issued by our Board of Directors to thwart a takeover attempt;
•limit the ability of stockholders to remove 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 stockholder meetings.
These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt or before our Board becomes fully declassified, the existence of these provisions may adversely affect the prevailing market price of our common stock if the provisions are viewed as discouraging takeover attempts in the future. Our Certificate of Incorporation and By-laws may also make it difficult for stockholders to replace or remove our management. These provisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests of our stockholders.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our principal executive office is located in Downers Grove, Illinois under a lease expiring in June 2024. As of December 31, 2019, we had 354 locations in the United States in 47 states and 336 locations outside of the United States in 30 countries. Our warehouse facilities are nearly equally comprised of owned, leased and third party warehouses and our office space is generally leased. Our facilities focus on the storing, repackaging and blending of chemicals and ingredients for distribution. Such facilities do not require substantial investments in equipment, can be opened fairly quickly and replaced with little disruption. As such, we believe that none of our facilities on an individual basis is material to the operation of our business.
ITEM 3. LEGAL PROCEEDINGS
See “Note 21: Commitments and contingencies” in Item 8 of this Annual Report on Form 10-K for information regarding legal proceedings, the content of which is incorporated by reference to this Item 3.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information for Common Stock
Our common stock is listed on the New York Stock Exchange under the symbol UNVR.
Holders of Record
As of December 31, 2019, there were 12 holders of our Common Stock, as determined by counting our record holders and the number of participants reflected in a security position listing provided to us by the Equiniti Trust Company (EQ). Because such EQ participants are brokers and other institutions holding shares of our Common Stock on behalf of their customers, we do not know the actual number of unique shareholders represented by these record holders.
Stock Performance
The following graph shows a comparison of cumulative total shareholder return, calculated on a dividend reinvested basis, for the Company, the S&P 500 and the S&P 500 Chemical Index for the period beginning on June 17, 2015 through year ended December 31, 2019. The graph assumes $100 was invested in each of the Company's common stock, the S&P 500 and S&P 500 Chemical Index as of the market close on June 17, 2015. Note that historic stock price performance is not necessarily indicative of future stock price performance.
Dividend Policy
We have never declared or paid any cash dividend on our common stock. We currently intend to retain any future earnings and we have no current plans to pay dividends in the near future. In addition, our credit facilities contain limitations on our ability to pay dividends.
ITEM 6. SELECTED FINANCIAL DATA
This “Selected Financial Data” should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K and our audited consolidated financial statements and related notes included in Item 8 of this Annual Report on Form 10-K.
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Year ended December 31,
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2019 (1)
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2018
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2017
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2016
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2015
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(in millions, except per share data)
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Consolidated Statements of Operations
|
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Net sales
|
$
|
9,286.9
|
|
|
$
|
8,632.5
|
|
|
$
|
8,253.7
|
|
|
$
|
8,073.7
|
|
|
$
|
8,981.8
|
|
|
Operating income (2)
|
187.3
|
|
|
387.4
|
|
|
338.0
|
|
|
138.4
|
|
|
259.3
|
|
|
Net (loss) income from continuing operations
|
(105.6)
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|
|
172.3
|
|
|
119.8
|
|
|
(68.4)
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|
|
16.5
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|
|
Net (loss) income
|
(100.2)
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|
|
172.3
|
|
|
119.8
|
|
|
(68.4)
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|
|
16.5
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|
(Loss) income per common share from continuing operations– diluted
|
(0.64)
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|
|
1.21
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|
|
0.85
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|
|
(0.50)
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|
|
0.14
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(Loss) income per common share – diluted
|
(0.61)
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|
|
1.21
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|
|
0.85
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|
|
(0.50)
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|
|
0.14
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Consolidated Balance Sheet
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Cash and cash equivalents
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$
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330.3
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$
|
121.6
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|
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$
|
467.0
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|
|
$
|
336.4
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|
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$
|
188.1
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Total assets
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6,494.8
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|
|
5,272.4
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|
5,732.7
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|
5,389.9
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|
5,612.4
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Long-term liabilities
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3,312.6
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|
2,746.1
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|
|
3,223.2
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|
|
3,240.5
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|
|
3,502.2
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|
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Stockholders’ equity
|
1,732.8
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|
|
1,191.7
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|
|
1,090.1
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|
|
809.9
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|
|
816.7
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|
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Other Financial Data
|
|
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|
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Cash provided by operating activities (3)
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$
|
363.9
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|
|
$
|
289.9
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|
|
$
|
282.6
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|
|
$
|
450.0
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|
|
$
|
356.0
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Cash used by investing activities
|
(433.1)
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|
|
(99.0)
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|
|
(79.1)
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|
|
(136.0)
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|
|
(294.4)
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|
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Cash provided (used) by financing activities (3)
|
295.2
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|
|
(518.3)
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|
|
(112.4)
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|
|
(166.5)
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|
|
(19.8)
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|
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Capital expenditures
|
122.5
|
|
|
94.6
|
|
|
82.7
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|
|
90.1
|
|
|
145.0
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|
|
Adjusted EBITDA (2)(4)
|
704.2
|
|
|
640.4
|
|
|
593.8
|
|
|
547.4
|
|
|
573.3
|
|
|
Adjusted EBITDA margin (2)(4)
|
7.6
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%
|
|
7.4
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%
|
|
7.2
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%
|
|
6.8
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%
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
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(1)Effective January 1, 2019, the Company adopted new guidance on lease accounting. Prior year amounts have not been adjusted. Refer to “Note 2: Significant accounting policies” for more information. On February 28, 2019, the Company completed the Nexeo acquisition. See “Note 3: Business combinations.”
(2)Operating income, Adjusted EBITDA and Adjusted EBITDA margin were restated for 2017 and prior to reflect the adoption of ASU 2017-07 “Compensation - Retirement Benefits” (Topic 715) - “Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost” which the Company adopted on January 1, 2018.
(3)Cash provided by operating activities and cash (used) provided by financing activities were restated for 2017 and prior to reflect the adoption of ASU 2016-15 “Statement of Cash Flows” (Topic 230) - “Classification of Certain Cash Receipts and Cash Payments” which the Company adopted on January 1, 2018.
(4)Non-GAAP financial measures. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K for further discussion and reconciliation to the most comparable GAAP financial measure. We define Adjusted EBITDA margin as Adjusted EBITDA divided by net sales.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is based on financial data derived from the financial statements prepared in accordance with the United States (“US”) generally accepted accounting principles (“GAAP”) and certain other financial data that is prepared using non-GAAP measures. For a reconciliation of each non-GAAP financial measure to its most comparable GAAP measure, see “Analysis of Segment Results” within this Item and “Note 23: Segments” to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K. Refer to “Non-GAAP Financial Measures” within this Item for more information about our use of Non-GAAP financial measures.
Our MD&A is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition and cash flow. This section of this Annual Report on Form 10-K discusses year-to-year comparisons between 2019 and 2018. Discussions of year-to-year comparisons between 2018 and 2017 that are not included in this Annual Report on Form 10-K can be found in “Management's Discussion and Analysis of
Financial Condition and Results of Operations” in Part II, Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 21, 2019.
Overview
Univar Solutions Inc. is a leading global chemical and ingredient distributor and provider of value-added services to customers across a wide range of diverse industries. We purchase chemicals from thousands of chemical producers worldwide and warehouse, repackage, blend, dilute, transport and sell those chemicals to more than 100,000 customer locations across approximately 130 countries.
Our operations are structured into four reportable segments that represent the geographic areas under which we operate and manage our business. These segments are Univar Solutions USA (“USA”), Univar Solutions Canada (“Canada”), Univar Solutions Europe and the Middle East and Africa (“EMEA”), and Univar Solutions Latin America (“LATAM”), which includes developing businesses in Latin America (including Brazil and Mexico) and the Asia-Pacific region. Prior to its renaming in 2019, LATAM was previously referred to as “Rest of World.”
Recent Developments and Items Impacting Comparability
On February 28, 2019, we completed the acquisition of 100% of the equity interest of Nexeo, a leading global chemicals and plastics distributor. The acquisition expands and strengthens Univar Solutions’ presence in North America and provides expanded opportunities to create the largest North American sales force in chemical and ingredients distribution and the broadest product offering. On March 29, 2019, the Company completed the sale of the Nexeo plastics distribution business which is presented as a discontinued operation in the Company’s results of operations for the year ended December 31, 2019.
On December 31, 2019, we sold our Environmental Sciences business. The sale of the business did not meet the criteria to be classified as a discontinued operations in the Company's financial statements.
Market Conditions and Outlook
We sell chemicals that are used in manufacturing processes and as components of or ingredients in other products. Our sales are correlated with and affected by fluctuations in the levels of industrial production, manufacturing output, and general economic activity. The level of industrial production, which tends to decline in the fourth quarter of each year, can impact our sales.
Certain of our end markets experience seasonal fluctuations, which also affect our net sales and results of operations. For example, our sales to the agricultural end market, particularly in Canada, tend to peak in the second quarter in each year, depending in part on weather-related variations in demand for agricultural chemicals. Sales to other end markets such as paints and coatings may also be affected by changing seasonal weather conditions, the construction industry and automotive production. Demand for our oil, gas and mining products and services is affected by factors such as the level of exploration, drilling, development and production activity of, and the corresponding capital spending by, oil, gas and mining companies and oilfield service providers, and trends in oil, gas and mineral prices.
Executive Summary
Management is focused, in the near and long term, on the following priorities:
•growth through our sales force, utilizing our realigned sales territories;
•delivering technical and application development excellence through our global network of Solutions Centers;
•investing in, and continued advancement, of our digital capabilities, bringing value to customers and suppliers as we work to attain our goal of being the easiest to do business with;
•network optimization, as we progress with the integration of Nexeo, continuing to realize synergy cost savings;
•continuing to successfully achieve important ERP migration milestones;
•delivering on our commitment to focus on our core chemical and ingredient businesses through strategic divestitures and acquisitions globally; and
•strengthening our balance sheet and pursuing ways to deleverage.
Constant Currency
Currency impacts on consolidated and segment results have been derived by translating current period financial results in local currency using the average exchange rate for the prior period to which the financial information is being compared. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance.
Results of Operations
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
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Year Ended
|
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Favorable
(unfavorable)
|
|
% Change
|
|
Impact of
currency*
|
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(in millions)
|
December 31, 2019
|
|
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|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
9,286.9
|
|
|
100.0
|
%
|
|
$
|
8,632.5
|
|
|
100.0
|
%
|
|
$
|
654.4
|
|
|
7.6
|
%
|
|
(1.7)
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%
|
|
Cost of goods sold (exclusive of depreciation)
|
7,146.1
|
|
|
76.9
|
%
|
|
6,732.4
|
|
|
78.0
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%
|
|
(413.7)
|
|
|
6.1
|
%
|
|
1.7
|
%
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outbound freight and handling
|
364.8
|
|
|
3.9
|
%
|
|
328.3
|
|
|
3.8
|
%
|
|
(36.5)
|
|
|
11.1
|
%
|
|
1.4
|
%
|
|
Warehousing, selling and administrative
|
1,068.8
|
|
|
11.5
|
%
|
|
931.4
|
|
|
10.8
|
%
|
|
(137.4)
|
|
|
14.8
|
%
|
|
14.5
|
%
|
|
Other operating expenses, net
|
298.2
|
|
|
3.2
|
%
|
|
73.5
|
|
|
0.9
|
%
|
|
(224.7)
|
|
|
305.7
|
%
|
|
1.0
|
%
|
|
Depreciation
|
155.0
|
|
|
1.7
|
%
|
|
125.2
|
|
|
1.5
|
%
|
|
(29.8)
|
|
|
23.8
|
%
|
|
1.3
|
%
|
|
Amortization
|
59.7
|
|
|
0.6
|
%
|
|
54.3
|
|
|
0.6
|
%
|
|
(5.4)
|
|
|
9.9
|
%
|
|
1.3
|
%
|
|
Impairment charges
|
7.0
|
|
|
0.1
|
%
|
|
—
|
|
|
—
|
%
|
|
(7.0)
|
|
|
N/M
|
|
|
—
|
%
|
|
Total operating expenses
|
$
|
1,953.5
|
|
|
21.0
|
%
|
|
$
|
1,512.7
|
|
|
17.5
|
%
|
|
$
|
(440.8)
|
|
|
29.1
|
%
|
|
1.6
|
%
|
|
Operating income
|
$
|
187.3
|
|
|
2.0
|
%
|
|
$
|
387.4
|
|
|
4.5
|
%
|
|
$
|
(200.1)
|
|
|
(51.7)
|
%
|
|
(2.6)
|
%
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
7.7
|
|
|
0.1
|
%
|
|
3.2
|
|
|
—
|
%
|
|
4.5
|
|
|
140.6
|
%
|
|
(12.5)
|
%
|
|
Interest expense
|
(147.2)
|
|
|
(1.6)
|
%
|
|
(135.6)
|
|
|
(1.6)
|
%
|
|
(11.6)
|
|
|
8.6
|
%
|
|
0.4
|
%
|
|
Gain on sale of business
|
41.4
|
|
|
0.4
|
%
|
|
—
|
|
|
—
|
%
|
|
41.4
|
|
|
N/M
|
|
|
—
|
%
|
|
Loss on extinguishment of debt
|
(19.8)
|
|
|
(0.2)
|
%
|
|
(0.1)
|
|
|
—
|
%
|
|
(19.7)
|
|
|
N/M
|
|
|
—
|
%
|
|
Other expense, net
|
|
(70.5)
|
|
|
(0.8)
|
%
|
|
(32.7)
|
|
|
(0.4)
|
%
|
|
(37.8)
|
|
|
115.6
|
%
|
|
2.1
|
%
|
|
Total other expense
|
|
$
|
(188.4)
|
|
|
(2.0)
|
%
|
|
$
|
(165.2)
|
|
|
(1.9)
|
%
|
|
$
|
(23.2)
|
|
|
14.0
|
%
|
|
0.5
|
%
|
|
(Loss) income from continuing operations before income taxes
|
|
(1.1)
|
|
|
—
|
%
|
|
222.2
|
|
|
2.6
|
%
|
|
(223.3)
|
|
|
(100.5)
|
%
|
|
(4.1)
|
%
|
|
Income tax expense from continuing operations
|
|
104.5
|
|
|
1.1
|
%
|
|
49.9
|
|
|
0.6
|
%
|
|
(54.6)
|
|
|
109.4
|
%
|
|
4.4
|
%
|
|
Net (loss) income from continuing operations
|
|
$
|
(105.6)
|
|
|
(1.1)
|
%
|
|
$
|
172.3
|
|
|
2.0
|
%
|
|
$
|
(277.9)
|
|
|
(161.3)
|
%
|
|
(4.0)
|
%
|
|
Net income from discontinued operations
|
|
5.4
|
|
|
0.1
|
%
|
|
—
|
|
|
—
|
%
|
|
5.4
|
|
|
N/M
|
|
|
—
|
%
|
|
Net (loss) income
|
|
$
|
(100.2)
|
|
|
(1.1)
|
%
|
|
$
|
172.3
|
|
|
2.0
|
%
|
|
$
|
(272.5)
|
|
|
(158.2)
|
%
|
|
(4.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Foreign currency translation is included in the percentage change. Unfavorable impacts from foreign currency translation are designated with parentheses.
Net sales
Net sales were $9,286.9 million in the year ended December 31, 2019, an increase of $654.4 million, or 7.6%, from the year ended December 31, 2018. On a constant currency basis, net sales increased from the February 2019 Nexeo acquisition in USA, Canada and LATAM and the May 2018 Earthoil acquisition in EMEA. The increase was partially offset by lower sales volumes primarily due to lower global demand and by unfavorable changes in sales pricing due to chemical price deflation in USA, Canada and LATAM. Refer to the “Analysis of Segment Results” for additional information.
Gross profit (exclusive of depreciation)
Gross profit (exclusive of depreciation) increased $240.7 million, or 12.7%, to $2,140.8 million for the year ended December 31, 2019. The increase in gross profit (exclusive of depreciation) is attributable to changes in market and product mix and sales force execution. The increase in gross profit (exclusive of depreciation) from acquisitions was attributable to the February 2019 Nexeo acquisition in USA, Canada and LATAM segments and the May 2018 Earthoil acquisition in EMEA. Included in gross profit (exclusive of depreciation) is a $5.3 million charge in USA related to the inventory fair value step-up adjustment resulting from our February 2019 Nexeo acquisition and a $9.7 million benefit in LATAM related to the Brazil VAT recovery. Excluding these impacts, gross profit (exclusive of depreciation) increased $236.3 million, or 12.4%, to $2,136.4 million for the year ended December 31, 2019. Refer to the “Analysis of Segment Results” for additional information.
Outbound freight and handling
Outbound freight and handling expenses increased $36.5 million, or 11.1%, to $364.8 million for the year ended December 31, 2019. On a constant currency basis, outbound freight and handling expenses increased $40.9 million, or 12.5%, primarily due to the February 2019 Nexeo acquisition partially offset by lower sales volumes. Refer to the “Analysis of Segment Results” for additional information.
Warehousing, selling and administrative
Warehousing, selling and administrative expenses increased $137.4 million, or 14.8%, to $1,068.8 million for the year ended December 31, 2019. On a constant currency basis, the $153.9 million increase is primarily due to incremental expenses from the February 2019 Nexeo acquisition. These costs were partially offset by cost containment efforts across all of our segments. Refer to the “Analysis of Segment Results” for additional information.
Other operating expenses, net
Other operating expenses, net increased $224.7 million, or 305.7%, to $298.2 million for the year ended December 31, 2019. The increase was primarily due to higher acquisition and integration related expenses, expenses related to the saccharin legal settlement, higher other facility exit costs and higher other employee termination costs in connection with the February 2019 Nexeo acquisition. Refer to “Note 6: Other operating expenses, net” in Item 8 of this Annual Report on Form 10-K for additional information.
Depreciation and amortization
Depreciation expense increased $29.8 million, or 23.8%, to $155.0 million for the year ended December 31, 2019. On a constant currency basis, the increase of $31.4 million, or 25.1%, was primarily due to the February 2019 Nexeo acquisition and accelerated depreciation of legacy software.
Amortization expense increased $5.4 million, or 9.9%, to $59.7 million for the year ended December 31, 2019. On a constant currency basis, the increase of $6.1 million was primarily attributable to the February 2019 Nexeo acquisition.
Impairment charges
Impairment charges of $7.0 million were recorded in the year ended December 31, 2019 related to property, plant and equipment in connection with the announced closure of certain production facilities. Refer to “Note 16: Impairment charges” in Item 8 of this Annual Report on Form 10-K for additional information.
Interest expense
Interest expense increased $11.6 million, or 8.6%, to $147.2 million for the year ended December 31, 2019 primarily due to higher average outstanding borrowings in connection with the February 2019 Nexeo acquisition. Refer to “Note 18: Debt” in Item 8 of this Annual Report on Form 10-K for additional information.
Gain on sale of business
A gain of $41.4 million was recorded in the year ended December 31, 2019 related to the sale of the Environmental Sciences business. Refer to “Note 4: Discontinued operations and dispositions” in Item 8 of this Annual Report on Form 10-K for additional information.
Loss on extinguishment of debt
Loss on extinguishment of debt of $19.8 million for the year ended December 31, 2019 was due to the February and November 2019 debt refinancing and repayment activities.
Other expense, net
Other expense, net increased $37.8 million, or 115.6%, to $70.5 million for the year ended December 31, 2019. The change was primarily related to the increase in pension mark to market loss, losses on undesignated foreign currency derivative instruments, losses on interest rate swaps as well as the reduction in non-operating pension income. The change was partially offset by foreign currency denominated loan revaluation gains. Refer to “Note 8: Other expense, net” in Item 8 of this Annual Report on Form 10-K for additional information.
Income tax expense from continuing operations
Income tax expense was $104.5 million for the year ended December 31, 2019, resulting in an effective income tax rate of (9500.0)%, compared to the US federal statutory rate of 21.0%. The Company’s effective income tax rate for the year ended December 31, 2019 was primarily driven by increased international tax impacts, including those related to US tax reform and transactions with foreign subsidiaries, tax gain in excess of book gain on the sale of the Environmental Sciences business, nondeductible expenses, including the Saccharin legal settlement, the Nexeo shareholder settlement and state taxes. These increases to the effective income tax rate are partially offset by the release of valuation allowances on certain tax attributes.
Income tax expense was $49.9 million for the year ended December 31, 2018, resulting in an effective income tax rate of 22.5%. The Company’s effective income tax rate for the year ended December 31, 2018 was higher than the US federal statutory rate of 21.0%, primarily due to international tax impacts, including those related to US tax reform and state income taxes. These increases to the effective income tax rate are partially offset by the release of valuation allowances on certain tax attributes.
Net income from discontinued operations
Net income from discontinued operations was $5.4 million for the year ended December 31, 2019. Discontinued operations for 2019 represents one month of the Nexeo plastics distribution business. Refer to “Note 4: Discontinued operations and dispositions” in Item 8 of this Annual Report on Form 10-K for additional information.
Results of Reportable Business Segments
The Company’s operations are structured into four reportable segments that represent the geographic areas under which we operate and manage our business. Management believes Adjusted EBITDA is an important measure of operating performance, which is used as the primary basis for the chief operating decision maker to evaluate the performance of each of our reportable segments. We believe certain other financial measures that are not calculated in accordance with US GAAP provide relevant and meaningful information concerning the ongoing operating results of the Company. These financial measures include gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin and adjusted gross margin. Such non-GAAP financial measures are used from time to time herein but should not be viewed as a substitute for GAAP measures of performance. See “Note 23: Segments” in Item 8 of this Annual Report on Form 10-K and “Analysis of Segment Results” within this Item for additional information.
Analysis of Segment Results
USA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
Favorable (unfavorable)
|
|
% Change
|
|
(in millions)
|
2019
|
|
2018
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
External customers
|
$
|
5,828.5
|
|
|
$
|
4,961.0
|
|
|
$
|
867.5
|
|
|
17.5
|
%
|
|
Inter-segment
|
100.2
|
|
|
126.6
|
|
|
(26.4)
|
|
|
|
(20.9)
|
%
|
|
Total net sales
|
$
|
5,928.7
|
|
|
$
|
5,087.6
|
|
|
$
|
841.1
|
|
|
|
16.5
|
%
|
|
Cost of goods sold (exclusive of depreciation)
|
4,550.9
|
|
|
3,959.3
|
|
|
(591.6)
|
|
|
|
14.9
|
%
|
|
Inventory step-up adjustment (1)
|
5.3
|
|
|
—
|
|
|
(5.3)
|
|
|
|
N/M
|
|
|
Outbound freight and handling
|
254.6
|
|
|
215.6
|
|
|
(39.0)
|
|
|
|
18.1
|
%
|
|
Warehousing, selling and administrative
|
673.8
|
|
|
536.3
|
|
|
(137.5)
|
|
|
|
25.6
|
%
|
|
Adjusted EBITDA
|
$
|
454.7
|
|
|
$
|
376.4
|
|
|
$
|
78.3
|
|
|
|
20.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
Favorable (unfavorable)
|
|
% Change
|
|
(in millions)
|
2019
|
|
2018
|
|
|
|
|
|
Gross profit (exclusive of depreciation):
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
5,928.7
|
|
|
$
|
5,087.6
|
|
|
$
|
841.1
|
|
|
|
16.5
|
%
|
|
Cost of goods sold (exclusive of depreciation)
|
4,550.9
|
|
|
3,959.3
|
|
|
(591.6)
|
|
|
|
14.9
|
%
|
|
Gross profit (exclusive of depreciation)
|
$
|
1,377.8
|
|
|
$
|
1,128.3
|
|
|
$
|
249.5
|
|
|
|
22.1
|
%
|
|
Inventory step-up adjustment (1)
|
5.3
|
|
|
—
|
|
|
(5.3)
|
|
|
|
N/M
|
|
|
Adjusted gross profit (exclusive of depreciation) (1)
|
$
|
1,383.1
|
|
|
$
|
1,128.3
|
|
|
$
|
254.8
|
|
|
|
22.6
|
%
|
|
|
|
|
|
|
|
|
|
(1)See definition of adjusted gross profit (exclusive of depreciation) at the end of this Item under “Non-GAAP Financial Measures.” Adjusted gross profit (exclusive of depreciation) excludes the inventory fair value step-up adjustment resulting from our February 2019 Nexeo acquisition.
External sales in the USA segment were $5,828.5 million, an increase of $867.5 million, or 17.5%, in the year ended December 31, 2019. External sales increased primarily due to the February 2019 Nexeo acquisition, partially offset by lower sales volumes attributable to soft demand.
Gross profit (exclusive of depreciation) increased $249.5 million, or 22.1%, to $1,377.8 million in the year ended December 31, 2019. Gross profit (exclusive of depreciation) increased due to the February 2019 Nexeo acquisition and due to favorable changes in pricing and product mix, partially offset by lower sales volumes. Excluding the $5.3 million impact related to the inventory fair value step-up adjustment from the Nexeo acquisition, adjusted gross profit (exclusive of depreciation) increased $254.8 million, or 22.6%, to $1,383.1 million. Both gross margin and adjusted gross margin increased during the year ended December 31, 2019 due to the beneficial impact of product mix, sales force execution and margin management efforts.
Outbound freight and handling expenses increased $39.0 million, or 18.1%, to $254.6 million in the year ended December 31, 2019 primarily due to the February 2019 Nexeo acquisition partially offset by lower sales volumes.
Warehousing, selling and administrative expenses increased $137.5 million, or 25.6%, to $673.8 million in the year ended December 31, 2019 primarily due to incremental expenses from the February 2019 Nexeo acquisition. The increase was also attributable to higher environmental remediation expense partially offset by strong cost containment. Warehousing, selling and administrative expenses as a percentage of external sales increased from 10.8% in the year ended December 31, 2018 to 11.6% in the year ended December 31, 2019.
Adjusted EBITDA increased by $78.3 million, or 20.8%, to $454.7 million in the year ended December 31, 2019 primarily as a result of higher gross profit (exclusive of depreciation). Adjusted EBITDA margin increased from 7.6% in the year ended December 31, 2018 to 7.8% in the year ended December 31, 2019 primarily as a result of higher gross margin, partially offset by increased operating expenses as a percentage of sales.
Canada
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
Favorable (unfavorable)
|
|
% Change
|
|
(in millions)
|
2019
|
|
2018
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
External customers
|
$
|
1,217.8
|
|
|
$
|
1,302.3
|
|
|
$
|
(84.5)
|
|
|
|
(6.5)
|
%
|
|
Inter-segment
|
6.2
|
|
|
9.3
|
|
|
(3.1)
|
|
|
|
(33.3)
|
%
|
|
Total net sales
|
$
|
1,224.0
|
|
|
$
|
1,311.6
|
|
|
$
|
(87.6)
|
|
|
|
(6.7)
|
%
|
|
Cost of goods sold (exclusive of depreciation)
|
990.3
|
|
|
1,080.1
|
|
|
89.8
|
|
|
|
(8.3)
|
%
|
|
Outbound freight and handling
|
41.9
|
|
|
42.5
|
|
|
0.6
|
|
|
|
(1.4)
|
%
|
|
Warehousing, selling and administrative
|
91.6
|
|
|
84.3
|
|
|
(7.3)
|
|
|
|
8.7
|
%
|
|
Adjusted EBITDA
|
$
|
100.2
|
|
|
$
|
104.7
|
|
|
$
|
(4.5)
|
|
|
|
(4.3)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
Favorable (unfavorable)
|
|
% Change
|
|
(in millions)
|
2019
|
|
2018
|
|
|
|
|
|
Gross profit (exclusive of depreciation):
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,224.0
|
|
|
$
|
1,311.6
|
|
|
$
|
(87.6)
|
|
|
|
(6.7)
|
%
|
|
Cost of goods sold (exclusive of depreciation)
|
990.3
|
|
|
1,080.1
|
|
|
89.8
|
|
|
|
(8.3)
|
%
|
|
Gross profit (exclusive of depreciation)
|
$
|
233.7
|
|
|
$
|
231.5
|
|
|
$
|
2.2
|
|
|
|
1.0
|
%
|
External sales in the Canada segment were $1,217.8 million, a decrease of $84.5 million, or 6.5%, in the year ended December 31, 2019. On a constant currency basis, external sales decreased $55.6 million, or 4.3%, primarily due to lower sales volumes attributable to the weather-impacted agriculture market as well as lower demand from Canada's energy sector. The decrease also resulted from lower average selling prices due to chemical price deflation and changes in market and product mix, partially offset by the increase due to the February 2019 Nexeo acquisition.
Gross profit (exclusive of depreciation) increased $2.2 million, or 1.0%, to $233.7 million in the year ended December 31, 2019. On a constant currency basis, gross profit (exclusive of depreciation) increased $7.7 million, or 3.3%, due to contributions from the February 2019 Nexeo acquisition, partially offset by lower sales volumes in agriculture. Gross margin increased from 17.8% in the year ended December 31, 2018 to 19.2% in the year ended December 31, 2019 as a result of higher margins on certain commodity chemicals.
Outbound freight and handling expenses decreased $0.6 million, or 1.4%, to $41.9 million in the year ended December 31, 2019 due to lower sales volumes.
Warehousing, selling and administrative expenses increased by $7.3 million, or 8.7%, to $91.6 million in the year ended December 31, 2019 primarily due to incremental expenses from the February 2019 Nexeo acquisition. Warehousing, selling and administrative expenses as a percentage of external sales increased from 6.5% in the year ended December 31, 2018 to 7.5% in the year ended December 31, 2019 due to higher bad debt charges and higher maintenance and repair expenses. On a constant currency basis, warehousing, selling and administrative expenses increased $9.4 million, or 11.2%.
Adjusted EBITDA decreased by $4.5 million, or 4.3%, to $100.2 million in the year ended December 31, 2019. On a constant currency basis, Adjusted EBITDA decreased $2.1 million, or 2.0%, primarily due to lower demand in the agriculture and energy sector. Adjusted EBITDA margin increased from 8.0% in the year ended December 31, 2018 to 8.2% in the year ended December 31, 2019, primarily as a result of higher margins on certain commodity chemicals.
EMEA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
Favorable (unfavorable)
|
|
% Change
|
|
(in millions)
|
2019
|
|
2018
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
External customers
|
$
|
1,785.5
|
|
|
$
|
1,975.7
|
|
|
$
|
(190.2)
|
|
|
(9.6)
|
%
|
|
Inter-segment
|
3.3
|
|
|
4.0
|
|
|
(0.7)
|
|
|
(17.5)
|
%
|
|
Total net sales
|
$
|
1,788.8
|
|
|
$
|
1,979.7
|
|
|
$
|
(190.9)
|
|
|
(9.6)
|
%
|
|
Cost of goods sold (exclusive of depreciation)
|
1,363.9
|
|
|
1,525.6
|
|
|
161.7
|
|
|
(10.6)
|
%
|
|
Outbound freight and handling
|
59.1
|
|
|
62.4
|
|
|
3.3
|
|
|
(5.3)
|
%
|
|
Warehousing, selling and administrative
|
222.5
|
|
|
240.5
|
|
|
18.0
|
|
|
(7.5)
|
%
|
|
Adjusted EBITDA
|
$
|
143.3
|
|
|
$
|
151.2
|
|
|
$
|
(7.9)
|
|
|
(5.2)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
Favorable (unfavorable)
|
|
% Change
|
|
(in millions)
|
2019
|
|
2018
|
|
|
|
|
|
Gross profit (exclusive of depreciation):
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
1,788.8
|
|
|
$
|
1,979.7
|
|
|
$
|
(190.9)
|
|
|
(9.6)
|
%
|
|
Cost of goods sold (exclusive of depreciation)
|
1,363.9
|
|
|
1,525.6
|
|
|
161.7
|
|
|
(10.6)
|
%
|
|
Gross profit (exclusive of depreciation)
|
$
|
424.9
|
|
|
$
|
454.1
|
|
|
$
|
(29.2)
|
|
|
(6.4)
|
%
|
External sales in the EMEA segment were $1,785.5 million, a decrease of $190.2 million, or 9.6%, in the year ended December 31, 2019. On a constant currency basis, external sales decreased $88.5 million, or 4.5%, primarily due to lower sales volumes attributable to soft demand, partially offset by incremental sales from the May 2018 Earthoil acquisition.
Gross profit (exclusive of depreciation) decreased $29.2 million, or 6.4%, to $424.9 million in the year ended December 31, 2019. On a constant currency basis, gross profit (exclusive of depreciation) decreased $5.5 million, or 1.2%, due to lower sales volumes and increased market pressure in the pharmaceutical finished goods product line. Gross margin increased from 23.0% in the year ended December 31, 2018 to 23.8% in the year ended December 31, 2019 primarily due to the favorable change in product mix and margin management initiatives.
Outbound freight and handling expenses decreased $3.3 million, or 5.3%, to $59.1 million. On a constant currency basis, outbound freight and handling expenses remained flat.
Warehousing, selling and administrative expenses decreased $18.0 million, or 7.5%, to $222.5 million in the year ended December 31, 2019, and increased as a percentage of external sales from 12.2% in the year ended December 31, 2018 to 12.5% in the year ended December 31, 2019. On a constant currency basis, operating expenses decreased $5.7 million, or 2.4%.
Adjusted EBITDA decreased by $7.9 million, or 5.2%, to $143.3 million in the year ended December 31, 2019. On a constant currency basis, Adjusted EBITDA increased $0.2 million, or 0.1%, primarily due effective cost containment partially offset by soft demand. In the year ended December 31, 2019, the pharmaceutical finished goods product line represented approximately 27% of Adjusted EBITDA in the EMEA segment, declining from approximately 30% in prior year due to increased market pressures. Adjusted EBITDA margin increased from 7.7% in the year ended December 31, 2018 to 8.0% in the year ended December 31, 2019.
LATAM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
Favorable (unfavorable)
|
|
% Change
|
|
(in millions)
|
2019
|
|
2018
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
External customers
|
$
|
455.1
|
|
|
$
|
393.5
|
|
|
$
|
61.6
|
|
|
|
15.7
|
%
|
|
Inter-segment
|
—
|
|
|
0.2
|
|
|
(0.2)
|
|
|
|
(100.0)
|
%
|
|
Total net sales (1)
|
$
|
455.1
|
|
|
$
|
393.7
|
|
|
$
|
61.4
|
|
|
|
15.6
|
%
|
|
Cost of goods sold (exclusive of depreciation)
|
350.7
|
|
|
307.5
|
|
|
(43.2)
|
|
|
|
14.0
|
%
|
|
Outbound freight and handling
|
9.2
|
|
|
7.8
|
|
|
(1.4)
|
|
|
|
17.9
|
%
|
|
Warehousing, selling and administrative
|
50.8
|
|
|
45.1
|
|
|
(5.7)
|
|
|
|
12.6
|
%
|
|
Brazil VAT recovery (1)
|
(8.3)
|
|
|
—
|
|
|
8.3
|
|
|
|
N/M
|
|
|
Adjusted EBITDA (1)
|
$
|
36.1
|
|
|
$
|
33.3
|
|
|
$
|
2.8
|
|
|
|
8.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
Favorable (unfavorable)
|
|
% Change
|
|
(in millions)
|
2019
|
|
2018
|
|
|
|
|
|
Gross profit (exclusive of depreciation):
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
455.1
|
|
|
$
|
393.7
|
|
|
$
|
61.4
|
|
|
|
15.6
|
%
|
|
Cost of goods sold (exclusive of depreciation)
|
350.7
|
|
|
307.5
|
|
|
(43.2)
|
|
|
|
14.0
|
%
|
|
Gross profit (exclusive of depreciation) (1)
|
$
|
104.4
|
|
|
$
|
86.2
|
|
|
$
|
18.2
|
|
|
|
21.1
|
%
|
|
Brazil VAT recovery (1)
|
(9.7)
|
|
|
|
—
|
|
|
9.7
|
|
|
|
N/M
|
|
|
Adjusted gross profit (exclusive of depreciation)
|
$
|
94.7
|
|
|
$
|
86.2
|
|
|
$
|
8.5
|
|
|
|
9.9
|
%
|
|
|
|
|
|
|
|
|
|
(1)Included in net sales and gross profit (exclusive of depreciation) is a $9.7 million benefit related to a Brazil VAT recovery. The benefit of $8.3 million, net of associated fees, is excluded from Adjusted EBITDA. See “Note 21: Commitments and contingencies” in Item 8 of this Annual Report on Form 10-K for further information regarding the Brazil VAT recovery for the year ended December 31, 2019.
External sales in the LATAM segment were $455.1 million, an increase of $61.6 million, or 15.7%, in the year ended December 31, 2019. On a constant currency basis, external sales increased $75.6 million, or 19.2%, which includes $9.7 million related to the Brazil VAT recovery. The increase was also due to the February 2019 Nexeo acquisition along with contributions from the Brazilian agriculture sector.
Gross profit (exclusive of depreciation) increased $18.2 million, or 21.1%, to $104.4 million in the year ended December 31, 2019. On a constant currency basis, gross profit (exclusive of depreciation) increased $22.5 million, or 26.1%, primarily due to the Brazil VAT recovery impact of $9.7 million and the February 2019 Nexeo acquisition. Excluding the $9.7 million impact related to the Brazil VAT recovery, adjusted gross profit (exclusive of depreciation) increased $8.5 million, or 9.9%, to $94.7 million. Gross margin inclusive of the Brazil VAT recovery increased from 21.9% to 22.9% and excluding the Brazil VAT recovery decreased from 21.9% to 21.3% in the year ended December 31, 2018 when compared to December 31, 2019.
Outbound freight and handling expenses increased $1.4 million, or 17.9%, to $9.2 million in the year ended December 31, 2019 primarily due to incremental expenses from the February 2019 Nexeo acquisition and higher sales volumes.
Warehousing, selling and administrative expenses increased $5.7 million, or 12.6%, to $50.8 million in the year ended December 31, 2019 and decreased as a percentage of external sales from 11.5% in the year ended December 31, 2018 to 11.2% in the year ended December 31, 2019. On constant currency basis, warehousing, selling and administrative expenses increased
$7.6 million, or 16.9%, primarily due to incremental expenses from the February 2019 Nexeo acquisition as well as from associated fees related to the Brazil VAT recovery, partially offset by strong cost control.
Adjusted EBITDA increased by $2.8 million, or 8.4%, to $36.1 million in the year ended December 31, 2019. On a constant currency basis, Adjusted EBITDA increased $5.0 million, or 15.0%, primarily as a result of higher gross profit (exclusive of depreciation). Adjusted EBITDA margin inclusive of the Brazil VAT recovery decreased from 8.5% to 7.9% and excluding the Brazil VAT recovery decreased from 8.5% to 8.1% in the year ended December 31, 2018 when compared to December 31, 2019.
Liquidity and Capital Resources
Our primary source of liquidity is cash generated from our operations as well as borrowings under our committed credit facilities. As of December 31, 2019, our total liquidity was approximately $931.2 million, comprised of $600.9 million available under our credit facilities and $330.3 million of cash and cash equivalents. Our primary liquidity and capital resource needs are to service our debt and to finance working capital, capital expenditures, other liabilities and general corporate purposes. We have significant working capital needs, although we have implemented several initiatives to improve our working capital and reduce the related financing requirements. The nature of our business, however, requires that we maintain inventories that enable us to deliver products to fill customer orders. As of December 31, 2019, we maintained inventories of $796.0 million, equivalent to approximately 43.6 days of sales.
Total debt as of December 31, 2019 was $2,714.5 million, consisting of senior term loans, asset backed loans, senior unsecured notes, finance lease obligations and short-term financing. We may from time to time repurchase our debt or take other steps to reduce our debt or interest cost. These actions may include open market repurchases, negotiated repurchases or opportunistic refinancing of debt. The amount of debt, if any, that may be repurchased or refinanced will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations. Refer to “Note 18: Debt” in Item 8 of this Annual Report on Form 10-K for further information.
Our defined benefit pension plans had an underfunded status of $234.4 million and $212.4 million as of December 31, 2019 and 2018, respectively. Based on current projections of minimum funding requirements, we expect to make cash contributions of $22.9 million to our defined benefit pension plans in 2020. The timing for any such requirement in future years is uncertain given the implicit uncertainty regarding the future developments of factors described in “Risk Factors” in Item 1A of this Annual Report on Form 10-K.
As a result of the 2017 US Tax Act, the Company recorded in 2017 a one-time Section 965 repatriation tax of $76.5 million. After offsetting allowable tax credits, we elected to pay the remaining balance of $14.9 million over eight years, of which $9.2 remains at December 31, 2019.
We expect our 2020 capital expenditures for maintenance, safety and cost improvements and investments in our digital capabilities to be approximately $120 million to $130 million. Interest payments for 2020 are expected to be $115 million to $130 million. We expect to fund our capital expenditures and our interest payments with cash from operations or cash on hand.
We believe funds provided by our primary sources of liquidity will be adequate to meet our liquidity and capital resource needs for at least the next 12 months under current operating conditions.
Cash Flows
The following table presents a summary of our cash flow activity:
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|
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|
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|
|
|
Year Ended December 31,
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
Net cash provided by operating activities
|
|
$
|
363.9
|
|
|
$
|
289.9
|
|
|
$
|
282.6
|
|
|
Net cash used by investing activities
|
|
(433.1)
|
|
|
(99.0)
|
|
|
(79.1)
|
|
|
Net cash provided (used) by financing activities
|
|
295.2
|
|
|
(518.3)
|
|
|
(112.4)
|
|
Year Ended December 31, 2019 Compared to Year Ended December 31, 2018
Cash Provided by Operating Activities
Cash provided by operating activities increased $74.0 million to $363.9 million for the year ended December 31, 2019 from $289.9 million for the year ended December 31, 2018. The increase is primarily due to changes in trade working capital and prepaid expenses and other current assets, partially offset by changes in net income, exclusive of non-cash items. The change in net income, exclusive of non-cash items, provided net cash outflows of $238.4 million related to reduced cash inflows when compared to the change in the prior year. Net income, exclusive of non-cash items, provided net cash inflows of $150.0 million and $388.4 million for the years ended December 31, 2019 and December 31, 2018, respectively.
The change in trade working capital, which includes trade accounts receivable, net, inventories, and trade accounts payable, provided net cash inflows of $233.5 million when compared to the change in the prior year. Trade working capital provided cash inflows of $195.1 million for the year end December 31, 2019 compared to cash outflows of $38.4 million for the year ended December 31, 2018. Cash inflows from trade accounts receivable, net is attributable to improvements in the timing of customer payments and reduced sales volumes, excluding acquisitions, during the current year. Inventory cash inflows on a year-over-year basis are primarily related to reductions in the USA segment inventories due to reduced sales volumes and favorable supplier partner pricing. The year-over-year cash outflows related to trade accounts payable are primarily attributable to decreased inventory purchases in the current year.
The change in prepaid expenses and other current assets is primarily due to payment timing differences and favorable changes in expected product returns from customers. The change in pension and other postretirement benefit liabilities is primarily due to unfavorable changes in actuarial valuations, partially offset by favorable changes in expected returns on plan assets.
Cash Used by Investing Activities
Cash used by investing activities increased $334.1 million to $433.1 million for the year ended December 31, 2019 from $99.0 million for the year ended December 31, 2018. The increase is primarily related to the acquisition of the Nexeo business in 2019, net of the proceeds received for the sale and dispositions of Nexeo Plastics and the Environmental Sciences business. In 2018, the Company acquired Earthoil and Kemetyl. Refer to “Note 3: Business combinations” and “Note 4: Discontinued operations and dispositions” in Item 8 of this Annual Report on Form 10-K for additional information related to the Company's acquisitions and dispositions.
Cash Provided (Used) by Financing Activities
Cash provided (used) by financing activities increased $813.5 million to cash provided of $295.2 million for the year ended December 31, 2019 from cash used of $518.3 million for the year ended December 31, 2018. The increase in financing cash flows is primarily due to raising additional debt to finance the February 2019 Nexeo acquisition and debt refinancing activities that occurred during the fourth quarter of 2019. The increase in financing activities were partially offset by increased debt repayments primarily due to the sale of Nexeo Plastics, where proceeds were used to pay down debt, and 2019 fourth quarter refinancing activities. Refer to “Note 18: Debt” in Item 8 of this Annual Report on Form 10-K for additional information related to the Company’s debt.
Contractual Obligations and Commitments
Our contractual obligations and commitments as of December 31, 2019 are as follows:
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|
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|
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|
|
Payment Due by Period
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Total
|
|
2020
|
|
2021 - 2022
|
|
2023 - 2024
|
|
Thereafter
|
|
Short-term financing (1)
|
$
|
0.7
|
|
|
$
|
0.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Finance leases
|
74.6
|
|
|
22.6
|
|
|
34.6
|
|
|
11.1
|
|
|
6.3
|
|
|
Long-term debt, including current maturities (1)
|
2,668.9
|
|
|
4.0
|
|
|
138.9
|
|
|
1,646.0
|
|
|
880.0
|
|
|
Interest (2)
|
560.4
|
|
|
111.7
|
|
|
204.5
|
|
|
159.9
|
|
|
84.3
|
|
|
Minimum operating lease payments
|
185.2
|
|
|
53.6
|
|
|
73.1
|
|
|
33.8
|
|
|
24.7
|
|
|
Estimated environmental liability payments (3)
|
84.3
|
|
|
25.0
|
|
|
19.1
|
|
|
12.9
|
|
|
27.3
|
|
|
2017 US repatriation tax
|
9.2
|
|
|
—
|
|
|
2.5
|
|
|
6.7
|
|
|
—
|
|
|
Other (4)
|
112.6
|
|
|
54.6
|
|
|
28.0
|
|
|
30.0
|
|
|
—
|
|
|
Total (5)
|
$
|
3,695.9
|
|
|
$
|
272.2
|
|
|
$
|
500.7
|
|
|
$
|
1,900.4
|
|
|
$
|
1,022.6
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)See “Note 18: Debt” in Item 8 of this Annual Report on Form 10-K for additional information.
(2)Interest payments on debt are calculated for future periods using interest rates in effect as of December 31, 2019 and obligations on that date. Projected interest payments include the related effects of interest rate swap agreements. Certain of these projected interest payments may differ in the future based on changes in floating interest rates, foreign currency fluctuations or other factors or events.
(3)Included in the less than one year category is $11.7 million related to environmental liabilities for which the timing is uncertain. The timing of payments is unknown and could differ based on future events. For more information see “Note 21: Commitments and contingencies” in Item 8 of this Annual Report on Form 10-K.
(4)Commitments related to capital expenditures and other contractual obligations.
(5)This table excludes our pension and postretirement medical benefit obligations. Based on current projections of minimum funding requirements, we expect to make cash contributions of $22.9 million to our defined benefit pension plans in the year ended December 31, 2020. The timing for any such requirement in future years is uncertain given the implicit uncertainty regarding the future developments of factors described in “Risk Factors” in Item 1A of this Annual Report on Form 10-K and “Note 11: Employee benefit plans” in Item 8 of this Annual Report on Form 10-K.
We expect that we will be able to fund our remaining obligations and commitments with cash flow from operations. To the extent we are unable to fund these obligations and commitments with cash flow from operations; we intend to fund these obligations and commitments with proceeds from available borrowing capacity under our New Senior ABL Facility or under future financings.
Off-Balance Sheet Arrangements
With the exception of letters of credit, we had no material off-balance sheet arrangements as of December 31, 2019.
Critical Accounting Estimates
Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Actual results may differ from these estimates under different assumptions or conditions.
Our significant accounting policies are described in “Note 2: Significant accounting policies” in Item 8 of this Annual Report on Form 10-K. We consider an accounting estimate to be critical if that estimate requires that we make assumptions about matters that are highly uncertain at the time we make that estimate and if different estimates that we could reasonably have used or changes in accounting estimates that are reasonably likely to occur could materially affect our consolidated financial statements. Our critical accounting estimates are as follows:
Goodwill
We perform an annual impairment assessment of goodwill at the reporting unit level as of October 1 of each year, or more frequently if indicators of potential impairment exist. The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment. The reporting unit’s carrying value used in an impairment test represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and debt.
Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit. Additionally, as part of this assessment, we may perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in measuring a reporting unit’s fair value.
Our quantitative impairment test considers both the income approach and the market approach to estimate a reporting unit’s fair value. Significant estimates include forecasted EBITDA, market segment growth rates, estimated costs, and discount rates based on a reporting unit's weighted average cost of capital (“WACC”). The use of different assumptions, estimates or judgments could significantly impact the estimated fair value of a reporting unit, and therefore, impact the excess fair value above carrying value of the reporting unit.
We test the reasonableness of the inputs and outcomes of our discounted cash flow analysis against available market data. In the current year, the fair value of the Canada reporting unit, exceeded the carrying value by 11 percent. Key assumptions in our goodwill impairment test include an 11 percent estimated WACC for the Canada business and a residual growth rate of 2.5 percent. A 100 basis point change in the discount rate and a terminal growth assumption of zero would not have reduced the fair values of the Canada reporting unit below carrying value. The fair value for all other reporting units substantially exceeds their carrying value.
Business Combinations
We allocate the purchase price paid for assets acquired and liabilities assumed in connection with our acquisitions based on their estimated fair values at the time of acquisition. This allocation involves a number of assumptions, estimates, and judgments in determining the fair value, as of the acquisition date, of the following:
•intangible assets, including the valuation methodology, estimations of future cash flows, discount rates, recurring revenues attributed to customer relationships, and our assumed market segment share, as well as the estimated useful life of intangible assets;
•deferred tax assets and liabilities, uncertain tax positions, and tax-related valuation allowances;
•inventory; property, plant and equipment; pre-existing liabilities or legal claims; and
•goodwill as measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed.
Our assumptions and estimates are based upon comparable market data and information obtained from our management and the management of the acquired companies. We allocate goodwill to the reporting units of the business that are expected to benefit from the business combination.
Purchase Accounting for the Nexeo Solutions Acquisition
Our acquisition of Nexeo Solutions in 2019 was accounted for with ASC Topic 805, Business Combinations, as amended. As of December 31, 2019, the allocation of the purchase price to the acquired assets and assumed liabilities was considered preliminary. See “Note 3: Business combinations” in Item 8 of this Annual Report on Form 10-K for additional information.
Determining the fair value of assets acquired and liabilities assumed requires management’s judgment, and we utilized an independent valuation expert in the valuation of the tangible and intangible assets. Critical estimates used in valuing tangible and intangible assets include, but are not limited to, future expected cash flows, discount rates, market prices and asset lives. The valuation of customer relationships utilized an income approach, using an excess earnings methodology. Additionally, the total recurring revenue attributable to the customer relationship was based upon the relative split between specialty and commodity chemicals. Key assumptions used in the business enterprise valuation include the forecasted cash flows discounted using the WACC, which reflects the macroeconomic, industry and geographic factors of the risk of achieving the forecasted cash flows, and ranged from 10.5 percent to 19.0 percent, depending on the country.
Environmental Liabilities
We recognize environmental liabilities for probable and reasonably estimable losses associated with environmental remediation. The estimated environmental liability includes incremental direct costs of investigations, remediation efforts and post-remediation monitoring. The total environmental reserve at December 31, 2019 and 2018 was $78.7 million and $83.5 million, respectively. See “Note 21: Commitments and contingencies” in Item 8 of this Annual Report on Form 10-K.
Our environmental reserves are subject to numerous uncertainties that affect our ability to estimate our costs, or our share of costs if multiple parties are responsible. These uncertainties involve the legal, regulatory and enforcement parameters governing environmental assessment and remediation, the nature and extent of contamination at these sites, the extent and cost of assessment and remediation efforts required, our insurance coverage for these sites and, in the case of sites with multiple responsible parties, the number and financial strength of those parties. In addition, our determination as to whether a loss is probable may change, particularly as new facts emerge as to the causes of contamination. We evaluate each environmental site as new information and facts become available and make adjustments to reserves based upon our assessment of these factors, using technical experts, legal counsel and other specialists.
Defined Benefit Pension and Other Postretirement Obligations
We sponsor defined benefit pension plans in the US and other countries. The accounting for these plans depends on assumptions made by management, which are used by actuaries we engage to calculate the projected and accumulated benefit obligations and the annual expense recognized for these plans. These assumptions include discount rates, expected return on assets, mortality and retirement rates and for certain plans, rates for compensation increases. Actual experience different from those estimated assumptions can result in the recognition of gains and losses in earnings as our accounting policy is to recognize changes in the fair value of plan assets and each plan’s projected benefit obligation in the fourth quarter of each year (the “mark to market” adjustment), unless an earlier remeasurement is required. For the year ended December 31, 2019 and 2018, we recorded a mark to market loss of $50.9 million and $34.9 million, respectively. See “Note 11: Employee benefit plans” in Item 8 of this Annual Report on Form 10-K for additional information.
Due to the phasing out of benefits under our postretirement plans, changes in assumptions have an immaterial effect on that obligation.
A change in the assumed discount rate and return on plan asset rate would have the following effects:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in
|
|
|
|
(in millions)
|
Percentage Change
|
|
2020 Net Benefit Cost
|
|
2019 Pension Benefit Obligation
|
|
Discount rate
|
25 bps decrease
|
|
$
|
(2.0)
|
|
|
$
|
51.4
|
|
|
Discount rate
|
25 bps increase
|
|
1.8
|
|
|
(48.4)
|
|
|
Expected return on plan assets
|
100 bps decrease
|
|
10.4
|
|
|
N/A
|
|
Expected return on plan assets
|
100 bps increase
|
|
(10.4)
|
|
|
N/A
|
Income Taxes
The Company is subject to income taxes in the jurisdictions in which it sells products and earn revenues. We record income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on the future tax consequences to temporary differences between the financial statement carrying values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply in the years in which the temporary differences are expected to be recovered or paid. A reduction of the carrying values of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. In evaluating the Company’s ability to realize its deferred tax assets, in full or in part, the Company considered all available positive and negative evidence, including its past operating results, forecasted and appropriate character of future taxable income, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused and feasible tax strategies. The Company has a valuation allowance on certain deferred tax assets, primarily related to foreign tax credits, net operating loss carry forwards and deferred interest.
Effective in 2018, the Company is subject to global intangible low tax income (“GILTI”), which is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. We elect to treat taxes due on future US inclusions in taxable income related to GILTI as a current-period expense when incurred and during the year ended December 31, 2019 and 2018, we recorded $22.8 million and $19.9 million, respectively, due to the impact of GILTI.
Recently Issued Accounting Pronouncements
See “Note 2: Significant accounting policies” in Item 8 of this Annual Report on Form 10-K.
Non-GAAP Financial Measures
We monitor the results of our reportable segments separately for the purposes of making decisions about resource allocation and performance assessment. We evaluate performance using Adjusted EBITDA. We define Adjusted EBITDA as consolidated net (loss) income, plus the sum of net income from discontinued operations, net interest expense, income tax expense, depreciation, amortization, impairment charges, loss on extinguishment of debt, other operating expenses, net, and other expense, net (see “Note 6: Other operating expenses, net” and “Note 8: Other expense, net” in Item 8 of this Annual Report on Form 10-K for additional information), and in 2019, inventory step-up adjustment and Brazil VAT recovery. For a reconciliation of the non-GAAP financial measures to its most comparable GAAP measure, see below and “Analysis of Segment Results” within this Item and for a reconciliation of net (loss) income to Adjusted EBITDA, the most comparable measure calculated in accordance with GAAP, see “Note 23: Segments” to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
We believe that other financial measures that do not comply with US GAAP provide relevant and meaningful information concerning the ongoing operating results of the Company. These financial measures include gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin, adjusted gross margin and Adjusted EBITDA margin. We define these financial measures as follows:
•Gross profit (exclusive of depreciation): net sales less cost of goods sold (exclusive of depreciation);
•Adjusted gross profit (exclusive of depreciation): net sales less cost of goods sold (exclusive of depreciation) plus inventory step-up adjustment and Brazil VAT recovery;
•Gross margin: gross profit (exclusive of depreciation) divided by external sales on a segment level and by net sales on a consolidated level;
•Adjusted gross margin: adjusted gross profit (exclusive of depreciation) divided by external sales on a segment level and by net sales on a consolidated level; and
•Adjusted EBITDA margin: Adjusted EBITDA divided by external sales on a segment level and by net sales on a consolidated level.
Management believes Adjusted EBITDA, Adjusted EBITDA margin, gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin and adjusted gross margin are important measures in assessing operating performance. The non-GAAP financial measures are included as a complement to results provided in accordance with GAAP because management believes these non-GAAP financial measures help investors’ ability to analyze underlying trends in the Company’s business, evaluate its performance relative to other companies in its industry and provide useful information to both management and investors by excluding certain items that may not be indicative of the Company’s core operating results. Additionally, the Company uses Adjusted EBITDA in setting performance incentive targets to align management compensation measurement with operational performance. Adjusted EBITDA, Adjusted EBITDA margin, gross profit (exclusive of depreciation), adjusted gross profit (exclusive of depreciation), gross margin and adjusted gross margin are not measures calculated in accordance with GAAP and should not be considered a substitute for net income or any other measure of financial performance presented in accordance with GAAP. Additionally, other companies may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.
The following is a quantitative reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial performance measure, which is net (loss) income:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
Net (loss) income
|
$
|
(100.2)
|
|
|
$
|
172.3
|
|
|
$
|
119.8
|
|
|
$
|
(68.4)
|
|
|
$
|
16.5
|
|
|
Net (income) loss from discontinued operations
|
(5.4)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Depreciation and amortization
|
214.7
|
|
|
179.5
|
|
|
200.4
|
|
|
237.9
|
|
|
225.0
|
|
|
Interest expense, net
|
139.5
|
|
|
132.4
|
|
|
148.0
|
|
|
159.9
|
|
|
207.0
|
|
|
Income tax expense (benefit) from continuing operations
|
104.5
|
|
|
49.9
|
|
|
49.0
|
|
|
(11.2)
|
|
|
10.2
|
|
|
EBITDA
|
$
|
353.1
|
|
|
$
|
534.1
|
|
|
$
|
517.2
|
|
|
$
|
318.2
|
|
|
$
|
458.7
|
|
|
Acquisition and integration related expenses
|
152.1
|
|
|
22.0
|
|
|
3.1
|
|
|
5.5
|
|
|
7.1
|
|
|
Saccharin legal settlement
|
62.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(Gain) loss on sale of business, property, plant and equipment and other assets (1)
|
(51.3)
|
|
|
2.0
|
|
|
(11.3)
|
|
|
(0.7)
|
|
|
(2.8)
|
|
|
Pension mark to market loss (2)
|
50.4
|
|
|
34.2
|
|
|
3.8
|
|
|
68.6
|
|
|
21.1
|
|
|
Pension curtailment and settlement gains (2)
|
(1.3)
|
|
|
—
|
|
|
(9.7)
|
|
|
(1.3)
|
|
|
(4.0)
|
|
|
Non-operating retirement benefits (2)
|
(2.2)
|
|
|
(11.0)
|
|
|
(9.9)
|
|
|
(15.3)
|
|
|
(26.8)
|
|
|
Restructuring, employee severance and other facility closure costs (3)
|
40.9
|
|
|
21.2
|
|
|
13.6
|
|
|
8.0
|
|
|
33.8
|
|
|
Stock-based compensation expense
|
25.1
|
|
|
20.7
|
|
|
19.7
|
|
|
10.4
|
|
|
7.5
|
|
|
Loss (gain) on undesignated derivative contracts (6)
|
26.7
|
|
|
(1.1)
|
|
|
1.9
|
|
|
(8.3)
|
|
|
10.7
|
|
|
Loss on extinguishment of debt and debt refinancing costs (4)
|
21.0
|
|
|
0.1
|
|
|
9.1
|
|
|
—
|
|
|
28.6
|
|
|
Brazil VAT recovery
|
(8.3)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Foreign currency (gains) losses (6)
|
(7.4)
|
|
|
7.5
|
|
|
22.5
|
|
|
14.3
|
|
|
(8.1)
|
|
|
Impairment charges (5)
|
7.0
|
|
|
—
|
|
|
—
|
|
|
133.9
|
|
|
—
|
|
|
Inventory step-up adjustment
|
5.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other operating and non-operating expenses (3)(6)
|
30.6
|
|
|
10.7
|
|
|
10.4
|
|
|
8.7
|
|
|
18.5
|
|
|
Business transformation costs
|
—
|
|
|
—
|
|
|
23.4
|
|
|
5.4
|
|
|
—
|
|
|
Contract termination and advisory fees to CVC & CD&R
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29.0
|
|
|
Adjusted EBITDA
|
$
|
704.2
|
|
|
$
|
640.4
|
|
|
$
|
593.8
|
|
|
$
|
547.4
|
|
|
$
|
573.3
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Refer to the consolidated statement of operations and “Note 6: Other operating expenses, net” in Item 8 of this Annual Report on Form 10-K for more information.
(2)Represents charges or gains recorded for both the defined benefit pension and other postretirement benefit plans (“The Plans”). The Plans' mark to market loss is measured and recognized in its entirety within the statement of operations annually on December 31 and results from changes in actuarial assumptions and plan experience between the prior and current measurement dates, as well as the difference between the expected return on plan assets and the actual return on plan assets. For 2019, the pension mark to market loss of $50.4 million reflects a measurement loss of $169.1 million resulting from changes since the prior measurement date in actuarial assumptions and plan experience, offset by the difference between the expected and actual return on plan assets of $118.7 million attributable to the performance of plan assets during 2019. See “Note 11: Employee benefit plans” in Item 8 of this Annual Report on Form 10-K for additional information on pension mark to market loss, pension curtailment and settlement gains and non-operating retirement benefits.
(3)Refer to “Note 6: Other operating expenses, net” in Item 8 of this Annual Report on Form 10-K for more information.
(4)Refer to the consolidated statement of operations and “Note 8: Other expense, net” in Item 8 of this Annual Report on Form 10-K for more information.
(5)The 2016 impairment charges primarily related to the impairment of intangible assets and property, plant and equipment. See “Note 16: Impairment charges” in Item 8 on this Annual Report on Form 10-K for further information regarding the year ended December 31, 2019.
(6)Refer to “Note 8: Other expense, net” in Item 8 of this Annual Report on Form 10-K for more information.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial Risk Management Objectives and Policies
The principal risks arising from our financial instruments are interest rate and foreign currency risk. We use derivative financial instruments to reduce exposure to fluctuations in foreign exchange rates and interest rates in certain limited circumstances described below. We follow a strict policy that prohibits trading in financial instruments other than to acquire
and manage these hedging positions. We do not hold or issue derivative or other financial instruments for speculative purposes, or to hedge translation risk.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our long-term debt obligations. Under our hedging policy, we seek to maintain an appropriate amount of fixed-rate debt obligations, either directly or effectively through interest rate derivative contracts that fix the interest rate payable on all or a portion of our floating rate debt obligations. We assess the anticipated mix of the fixed versus floating amount of debt once a year, in connection with our annual budgeting process, with the purpose of hedging variability of interest expense and interest payments on our variable rate bank debt and maintaining a mix of both fixed and floating rate debt. As of December 31, 2019, approximately 81% of our debt was fixed rate after consideration of interest rate swap contracts. Refer to “Note 18: Debt” in Item 8 of this Annual Report on Form 10-K for additional information.
Below is a chart showing the sensitivity of both a 100 basis point and 200 basis point increase in interest rates (including the impact of derivatives), with other variables held constant on our earnings before tax.
|
|
|
|
|
|
|
|
(in millions)
|
Year Ended December 31, 2019
|
|
100 basis point increase in variable interest rates
|
$
|
5.2
|
|
|
200 basis point increase in variable interest rates
|
10.4
|
|
Foreign Currency Risk
Because we conduct our business on an international basis in multiple currencies, we may be adversely affected by foreign exchange rate fluctuations. Although we report financial results in US dollars, a substantial portion of our net sales and expenses are denominated in currencies other than the US dollar, particularly the euro, the Canadian dollar and European currencies other than the euro, including the British pound sterling. Fluctuations in exchange rates could therefore significantly affect our reported results from period to period as we translate results in local currencies into US dollars. We have not used derivative instruments to hedge the translation risk related to earnings of foreign subsidiaries.
Additionally, our investments in EMEA, Canada and LATAM are subject to foreign currency risk. Currency fluctuations result in non-cash gains and losses that do not impact income before income taxes, but instead are recorded as accumulated other comprehensive loss in equity in our consolidated balance sheet. We do not hedge our investment in non-US entities because those investments are viewed as long-term in nature.
The majority of our currency risk arising on cash, accounts receivable, accounts payable and loan balances denominated in currencies other than those which we record the financial results for a business operation stem from exposures to the US dollar, euro or British pound sterling. The following table illustrates the sensitivity of our 2019 consolidated earnings before income taxes (including the impact of foreign currency derivative instruments), to a 10% increase in the value of the US dollar, euro, and British pound sterling with all other variables held constant.
|
|
|
|
|
|
|
|
(in millions)
|
Year ended December 31, 2019
|
|
10% strengthening of US dollar
|
$
|
2.3
|
|
|
10% strengthening of Euro
|
(0.4)
|
|
|
10% strengthening of British pound
|
(0.3)
|
|
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Univar Solutions Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Univar Solutions Inc. as of December 31, 2019 and 2018, and the related consolidated statements of operations, comprehensive income (loss), changes in stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2019 and the related notes and financial statement schedule listed in the Index at Item 15(a) (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 at December 31, 2019 and 2018, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission 2013 framework and our report dated February 25, 2020 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the 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 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 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
|
|
|
|
|
|
|
|
|
Environmental Liabilities
|
|
Description of the Matter
|
At December 31, 2019, the Company’s environmental liability balance was $78.7 million. As discussed in Note 21 of the financial statements, the Company is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively “environmental remediation work”) at approximately 130 locations. In determining the appropriate level of environmental reserves, the Company considers several factors such as information obtained from investigatory studies; required scope and estimated costs of remediation; the interpretation, application and enforcement of laws and regulations; the development of alternative cleanup technologies and methods; and the level of the Company’s responsibility for remediating at various sites.
|
|
|
|
|
|
Auditing management’s accrual for environmental liabilities was especially challenging because it involves judgmental underlying assumptions, including remediation methods, remediation time horizon and remediation cost estimates. These assumptions have a significant effect on the accrual for environmental liabilities.
|
|
|
|
|
|
|
|
|
|
|
|
How we addressed the Matter in Our Audit
|
We tested management’s controls that address the risks of material misstatement relating to the measurement and valuation of the environmental liabilities. For example, we tested controls over management’s review of the environmental liability calculations and, the significant assumptions and the data inputs provided to management’s specialists.
|
|
|
|
|
|
To test the accrual for environmental liabilities, we involved our specialist to assist us in evaluating the reasonableness of the Company’s calculation and underlying assumptions. We performed audit procedures that included, among others, assessing key methodologies and testing the significant assumptions and the underlying data used by the management’s specialists. For example, we tested the site’s current remediation status and remediation strategy, which included an analysis of the site’s remediation timeline, regulatory requirements, remediation actions and related technologies and eligibility for discounting. In addition, we performed a search of various data sources for any unidentified environmental liabilities for which the Company may be a potential responsible party.
|
|
|
|
|
|
Accounting for Nexeo Solutions Acquisition
|
|
Description of the Matter
|
During 2019, the Company completed its acquisition of Nexeo Solutions, Inc (Nexeo) for net consideration of $1,814.8 million, as discussed in Note 3 to the consolidated financial statements. The Company accounted for the acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values. Assets acquired included intangible assets representing customer relationships of approximately $138.7 million.
|
|
|
|
|
|
Auditing the Company’s accounting for its acquisition of Nexeo was complex due to the highly judgmental nature of the significant assumptions used to estimate the fair value of the intangible assets including the discount rates and certain assumptions that form the basis of the forecasted results such as sales growth rates, percentage of revenue attributable to customer relationships, customer attrition rates, and EBITDA margin. These significant assumptions are forward looking and could be affected by future economic and market conditions.
|
|
|
|
|
How we addressed the Matter in Our Audit
|
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s process for determining the fair value of the acquired intangible assets, including controls over management’s review of the significant assumptions described above.
|
|
|
|
|
|
To test the estimated fair value of the acquired intangible assets, we performed audit procedures that included, among others, evaluating the Company’s use of the income approach which utilized the excess earnings method and testing the significant assumptions used in the model, including the completeness and accuracy of the underlying data. For example, we compared the significant assumptions to current industry, market and economic trends, to the assumptions used to value similar assets in other acquisitions, to the historical results of the acquired business and to other guidelines used by companies within the same industry. We compared the prospective financial information for consistency with other prospective financial information prepared by the Company. We involved our specialists to assist in our evaluation of the significant assumptions described above.
|
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2010.
Chicago, Illinois
February 25, 2020
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of Univar Solutions Inc.
Opinion on Internal Control over Financial Reporting
We have audited Univar Solutions Inc.’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Univar Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on the COSO criteria.
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Nexeo Solutions, Inc., which is included in the 2019 consolidated financial statements of the Company and constituted 32.5% total assets, as of December 31, 2019 and 16% of revenues, for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Nexeo Solutions Inc.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2019 consolidated financial statements of Univar Solutions Inc. and our report dated February 25, 2020, expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and applicable rules and regulation of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitation of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Chicago, Illinois
February 25, 2020
UNIVAR SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions, except per share data)
|
Note
|
|
2019
|
|
2018
|
|
2017
|
|
Net sales
|
|
|
$
|
9,286.9
|
|
|
$
|
8,632.5
|
|
|
$
|
8,253.7
|
|
|
Cost of goods sold (exclusive of depreciation)
|
|
|
7,146.1
|
|
|
6,732.4
|
|
|
6,448.2
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Outbound freight and handling
|
|
|
364.8
|
|
|
328.3
|
|
|
292.0
|
|
|
Warehousing, selling and administrative
|
|
|
1,068.8
|
|
|
931.4
|
|
|
919.7
|
|
|
Other operating expenses, net
|
6
|
|
|
298.2
|
|
|
73.5
|
|
|
55.4
|
|
|
Depreciation
|
|
|
155.0
|
|
|
125.2
|
|
|
135.0
|
|
|
Amortization
|
|
|
59.7
|
|
|
54.3
|
|
|
65.4
|
|
|
Impairment charges
|
16
|
|
7.0
|
|
|
—
|
|
|
—
|
|
|
Total operating expenses
|
|
|
$
|
1,953.5
|
|
|
$
|
1,512.7
|
|
|
$
|
1,467.5
|
|
|
Operating income
|
|
|
|
$
|
187.3
|
|
|
$
|
387.4
|
|
|
$
|
338.0
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
7.7
|
|
|
3.2
|
|
|
4.0
|
|
|
Interest expense
|
|
|
(147.2)
|
|
|
(135.6)
|
|
|
(152.0)
|
|
|
Gain on sale of business
|
4
|
|
|
41.4
|
|
|
—
|
|
|
—
|
|
|
Loss on extinguishment of debt
|
18
|
|
|
(19.8)
|
|
|
(0.1)
|
|
|
(3.8)
|
|
|
Other expense, net
|
|
8
|
|
|
(70.5)
|
|
|
(32.7)
|
|
|
(17.4)
|
|
|
Total other expense
|
|
|
|
$
|
(188.4)
|
|
|
$
|
(165.2)
|
|
|
$
|
(169.2)
|
|
|
(Loss) income before income taxes
|
|
|
|
(1.1)
|
|
|
222.2
|
|
|
168.8
|
|
|
Income tax expense from continuing operations
|
|
9
|
|
|
104.5
|
|
|
49.9
|
|
|
49.0
|
|
|
Net (loss) income from continuing operations
|
|
|
|
$
|
(105.6)
|
|
|
$
|
172.3
|
|
|
$
|
119.8
|
|
|
Net income from discontinued operations
|
|
4
|
|
|
$
|
5.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Net (loss) income
|
|
|
|
$
|
(100.2)
|
|
|
$
|
172.3
|
|
|
$
|
119.8
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income per common share:
|
|
|
|
|
|
|
|
|
|
Basic from continuing operations
|
10
|
|
|
$
|
(0.64)
|
|
|
$
|
1.22
|
|
|
$
|
0.85
|
|
|
Basic from discontinued operations
|
10
|
|
|
0.03
|
|
|
—
|
|
|
—
|
|
|
Basic (loss) income per common share
|
|
|
|
$
|
(0.61)
|
|
|
$
|
1.22
|
|
|
$
|
0.85
|
|
|
Diluted from continuing operations
|
10
|
|
|
$
|
(0.64)
|
|
|
$
|
1.21
|
|
|
$
|
0.85
|
|
|
Diluted from discontinued operations
|
10
|
|
|
0.03
|
|
|
—
|
|
|
—
|
|
|
Diluted (loss) income per common share
|
|
|
|
$
|
(0.61)
|
|
|
$
|
1.21
|
|
|
$
|
0.85
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
10
|
|
|
164.1
|
|
|
141.2
|
|
|
140.2
|
|
|
Diluted
|
10
|
|
|
164.1
|
|
|
142.2
|
|
|
141.4
|
|
The accompanying notes are an integral part of these consolidated financial statements.
UNIVAR SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
Note
|
|
2019
|
|
2018
|
|
2017
|
|
Net (loss) income
|
|
|
|
$
|
(100.2)
|
|
|
$
|
172.3
|
|
|
$
|
119.8
|
|
|
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
|
|
Impact due to adoption of ASU 2018-02
|
2
|
|
(3.2)
|
|
|
—
|
|
|
—
|
|
|
Impact due to adoption of ASU 2017-12 (1)
|
|
|
—
|
|
|
0.5
|
|
|
—
|
|
|
Foreign currency translation
|
13
|
|
22.8
|
|
|
(97.0)
|
|
|
107.1
|
|
|
Pension and other postretirement benefits adjustment
|
13
|
|
0.1
|
|
|
0.1
|
|
|
(2.4)
|
|
|
Derivative financial instruments
|
13
|
|
(25.8)
|
|
|
1.7
|
|
|
6.7
|
|
|
Total other comprehensive (loss) income, net of tax
|
|
|
|
$
|
(6.1)
|
|
|
$
|
(94.7)
|
|
|
$
|
111.4
|
|
|
Comprehensive (loss) income
|
|
|
|
$
|
(106.3)
|
|
|
$
|
77.6
|
|
|
$
|
231.2
|
|
|
|
|
|
|
|
|
|
|
(1)Impact due to the adoption of Accounting Standards Update (“ASU”) 2017-12 “Targeted Improvements to Accounting for Hedging Activities” on January 1, 2018.
The accompanying notes are an integral part of these consolidated financial statements.
UNIVAR SOLUTIONS INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
(in millions, except per share data)
|
Note
|
|
2019
|
|
2018
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
330.3
|
|
|
$
|
121.6
|
|
|
Trade accounts receivable, net
|
|
|
1,160.1
|
|
|
1,094.7
|
|
|
Inventories
|
|
|
796.0
|
|
|
803.3
|
|
|
Prepaid expenses and other current assets
|
|
|
167.2
|
|
|
169.1
|
|
|
Total current assets
|
|
|
$
|
2,453.6
|
|
|
$
|
2,188.7
|
|
|
Property, plant and equipment, net
|
14
|
|
|
1,152.4
|
|
|
955.8
|
|
|
Goodwill
|
15
|
|
|
2,280.8
|
|
|
1,780.7
|
|
|
Intangible assets, net
|
15
|
|
|
320.2
|
|
|
238.1
|
|
|
Deferred tax assets
|
9
|
|
|
21.3
|
|
|
24.8
|
|
|
Other assets (1)
|
|
|
266.5
|
|
|
84.3
|
|
|
Total assets
|
|
|
$
|
6,494.8
|
|
|
$
|
5,272.4
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Short-term financing
|
18
|
|
|
$
|
0.7
|
|
|
$
|
8.1
|
|
|
Trade accounts payable
|
|
|
895.0
|
|
|
925.4
|
|
|
Current portion of long-term debt
|
18
|
|
|
25.0
|
|
|
21.7
|
|
|
Accrued compensation
|
|
|
103.6
|
|
|
93.6
|
|
|
Other accrued expenses (1)
|
17
|
|
|
425.1
|
|
|
285.8
|
|
|
Total current liabilities
|
|
|
$
|
1,449.4
|
|
|
$
|
1,334.6
|
|
|
Long-term debt
|
18
|
|
|
2,688.8
|
|
|
2,350.4
|
|
|
Pension and other postretirement benefit liabilities
|
11
|
|
|
295.6
|
|
|
254.4
|
|
|
Deferred tax liabilities
|
9
|
|
|
56.3
|
|
|
42.9
|
|
|
Other long-term liabilities (1)
|
|
|
271.9
|
|
|
98.4
|
|
|
Total liabilities
|
|
|
$
|
4,762.0
|
|
|
$
|
4,080.7
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
Preferred stock, 200.0 million shares authorized at $0.01 par value with no shares issued or outstanding as of December 31, 2019 and 2018, respectively
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Common stock, 2.0 billion shares authorized at $0.01 par value with 168.7 million and 141.7 million shares issued and outstanding at December 31, 2019 and 2018, respectively
|
|
|
1.7
|
|
|
1.4
|
|
|
Additional paid-in capital
|
|
|
2,968.9
|
|
|
2,325.0
|
|
|
Accumulated deficit
|
|
|
(858.5)
|
|
|
(761.5)
|
|
|
Accumulated other comprehensive loss
|
13
|
|
|
(379.3)
|
|
|
(373.2)
|
|
|
Total stockholders’ equity
|
|
|
$
|
1,732.8
|
|
|
$
|
1,191.7
|
|
|
Total liabilities and stockholders’ equity
|
|
|
$
|
6,494.8
|
|
|
$
|
5,272.4
|
|
|
|
|
|
|
|
|
(1)Operating lease assets and operating lease liabilities are included in other assets, other accrued expenses and other long-term liabilities in 2019. Refer to “Note 22: Leasing” for more information.
The accompanying notes are an integral part of these consolidated financial statements.
UNIVAR SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
Note
|
|
2019
|
|
2018
|
|
2017
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
|
$
|
(100.2)
|
|
|
$
|
172.3
|
|
|
$
|
119.8
|
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
214.7
|
|
|
179.5
|
|
|
200.4
|
|
|
Impairment charges
|
16
|
|
|
7.0
|
|
|
—
|
|
|
—
|
|
|
Amortization of deferred financing fees and debt discount
|
|
|
8.9
|
|
|
7.6
|
|
|
7.9
|
|
|
Amortization of pension cost (credits) from accumulated other comprehensive loss
|
11
|
|
|
0.1
|
|
|
2.7
|
|
|
(0.2)
|
|
|
Gain on sale of business
|
4
|
|
|
(41.4)
|
|
|
—
|
|
|
—
|
|
|
Loss on extinguishment of debt
|
18
|
|
|
13.1
|
|
|
0.1
|
|
|
3.8
|
|
|
(Gain) loss on sale of property, plant and equipment and other assets
|
|
|
|
(9.9)
|
|
|
2.0
|
|
|
(11.3)
|
|
|
Deferred income taxes
|
9
|
|
|
24.3
|
|
|
2.8
|
|
|
11.7
|
|
|
Stock-based compensation expense
|
12
|
|
|
25.1
|
|
|
20.7
|
|
|
19.7
|
|
|
Charge for inventory step-up of acquired inventory
|
|
|
5.3
|
|
|
—
|
|
|
—
|
|
|
Other
|
|
|
3.0
|
|
|
0.7
|
|
|
(0.7)
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Trade accounts receivable, net
|
|
|
197.0
|
|
|
(62.1)
|
|
|
(58.5)
|
|
|
Inventories
|
|
|
69.0
|
|
|
14.4
|
|
|
(47.7)
|
|
|
Prepaid expenses and other current assets
|
|
|
54.3
|
|
|
(19.3)
|
|
|
(8.7)
|
|
|
Trade accounts payable
|
|
|
(70.9)
|
|
|
9.3
|
|
|
53.6
|
|
|
Pensions and other postretirement benefit liabilities
|
|
|
21.9
|
|
|
(15.4)
|
|
|
(51.8)
|
|
|
Other, net
|
|
|
(57.4)
|
|
|
(25.4)
|
|
|
44.6
|
|
|
Net cash provided by operating activities
|
|
|
|
$
|
363.9
|
|
|
$
|
289.9
|
|
|
$
|
282.6
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
$
|
(122.5)
|
|
|
$
|
(94.6)
|
|
|
$
|
(82.7)
|
|
|
Proceeds from sale of property, plant and equipment and other assets
|
|
|
54.8
|
|
|
14.5
|
|
|
29.2
|
|
|
Purchases of businesses, net of cash acquired
|
3
|
|
|
(1,201.0)
|
|
|
(18.6)
|
|
|
(24.4)
|
|
|
Proceeds from sale of business
|
4
|
|
|
838.3
|
|
|
—
|
|
|
—
|
|
|
Other
|
|
|
(2.7)
|
|
|
(0.3)
|
|
|
(1.2)
|
|
|
Net cash used by investing activities
|
|
|
|
$
|
(433.1)
|
|
|
$
|
(99.0)
|
|
|
$
|
(79.1)
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of long-term debt
|
18
|
|
|
$
|
1,845.8
|
|
|
$
|
—
|
|
|
$
|
4,477.8
|
|
|
Payments on long-term debt and finance lease obligations
|
18
|
|
|
(1,545.9)
|
|
|
(561.9)
|
|
|
(4,588.7)
|
|
|
Net proceeds under revolving credit facilities
|
18
|
|
|
7.2
|
|
|
41.7
|
|
|
3.0
|
|
|
Short-term financing, net
|
18
|
|
|
(9.2)
|
|
|
0.5
|
|
|
(22.2)
|
|
|
Financing fees paid
|
18
|
|
|
(7.9)
|
|
|
(1.1)
|
|
|
(7.7)
|
|
|
Taxes paid related to net share settlements of stock-based compensation awards
|
|
|
(2.8)
|
|
|
(4.1)
|
|
|
(8.5)
|
|
|
Stock option exercises
|
12
|
|
|
6.6
|
|
|
5.9
|
|
|
36.5
|
|
|
Contingent consideration payments
|
|
|
—
|
|
|
(0.4)
|
|
|
(3.7)
|
|
|
Other
|
|
|
1.4
|
|
|
1.1
|
|
|
1.1
|
|
|
Net cash provided (used) by financing activities
|
|
|
|
$
|
295.2
|
|
|
$
|
(518.3)
|
|
|
$
|
(112.4)
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
$
|
(17.3)
|
|
|
$
|
(18.0)
|
|
|
$
|
39.5
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
208.7
|
|
|
(345.4)
|
|
|
130.6
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
121.6
|
|
|
467.0
|
|
|
336.4
|
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
330.3
|
|
|
$
|
121.6
|
|
|
$
|
467.0
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
$
|
42.5
|
|
|
$
|
65.0
|
|
|
$
|
29.9
|
|
|
Interest, net of capitalized interest
|
|
|
146.1
|
|
|
128.2
|
|
|
140.2
|
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
Fair value of common stock issued for acquisition of business
|
3
|
|
|
$
|
613.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Additions of property, plant and equipment included in trade accounts payable and other accrued expenses
|
|
|
9.8
|
|
|
14.6
|
|
|
7.4
|
|
|
Additions of property, plant and equipment under a finance lease obligation
|
|
|
23.3
|
|
|
23.6
|
|
|
19.9
|
|
|
Additions of assets under an operating lease obligation
|
|
|
25.5
|
|
|
—
|
|
|
—
|
|
The accompanying notes are an integral part of these consolidated financial statements.
UNIVAR SOLUTIONS INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per share data)
|
Common
stock
(shares)
|
|
Common
stock
|
|
Additional
paid-in
capital
|
|
Accumulated
deficit
|
|
Accumulated
other
comprehensive
income (loss)
|
|
Total
|
|
Balance, January 1, 2017
|
138.8
|
|
|
$
|
1.4
|
|
|
$
|
2,251.8
|
|
|
$
|
(1,053.4)
|
|
|
$
|
(389.9)
|
|
|
$
|
809.9
|
|
|
Impact due to adoption of ASU, net of tax $0.2 (1)
|
—
|
|
|
—
|
|
|
0.7
|
|
|
(0.5)
|
|
|
—
|
|
|
0.2
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
119.8
|
|
|
—
|
|
|
119.8
|
|
|
Foreign currency translation adjustment, net of tax $(2.1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
107.1
|
|
|
107.1
|
|
|
Pension and other postretirement benefits adjustment, net of tax $0.6
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.4)
|
|
|
(2.4)
|
|
|
Derivative financial instruments, net of tax $(4.3)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6.7
|
|
|
6.7
|
|
|
Restricted stock units vested
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Tax withholdings related to net share settlements of stock-based compensation awards
|
(0.3)
|
|
|
—
|
|
|
(8.5)
|
|
|
—
|
|
|
—
|
|
|
(8.5)
|
|
|
Stock option exercises
|
1.8
|
|
|
—
|
|
|
36.5
|
|
|
—
|
|
|
—
|
|
|
36.5
|
|
|
Employee stock purchase plan
|
—
|
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
19.7
|
|
|
—
|
|
|
—
|
|
|
19.7
|
|
|
Balance, December 31, 2017
|
141.1
|
|
|
$
|
1.4
|
|
|
$
|
2,301.3
|
|
|
$
|
(934.1)
|
|
|
$
|
(278.5)
|
|
|
$
|
1,090.1
|
|
|
Impact due to adoption of ASU, net of tax $(0.3) (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
0.5
|
|
|
0.8
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
172.3
|
|
|
—
|
|
|
172.3
|
|
|
Foreign currency translation adjustment, net of tax $2.4
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(97.0)
|
|
|
(97.0)
|
|
|
Pension and other postretirement benefits adjustment, net of tax $(0.1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
Derivative financial instruments, net of tax $(0.4)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.7
|
|
|
1.7
|
|
|
Restricted stock units vested
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Tax withholdings related to net share settlements of stock-based compensation awards
|
(0.1)
|
|
|
—
|
|
|
(4.1)
|
|
|
—
|
|
|
—
|
|
|
(4.1)
|
|
|
Stock option exercises
|
0.3
|
|
|
—
|
|
|
5.9
|
|
|
—
|
|
|
—
|
|
|
5.9
|
|
|
Employee stock purchase plan
|
—
|
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
20.7
|
|
|
—
|
|
|
—
|
|
|
20.7
|
|
|
Other
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
Balance, December 31, 2018
|
141.7
|
|
|
$
|
1.4
|
|
|
$
|
2,325.0
|
|
|
$
|
(761.5)
|
|
|
$
|
(373.2)
|
|
|
$
|
1,191.7
|
|
|
Impact due to adoption of ASU (3)
|
—
|
|
|
—
|
|
|
—
|
|
|
3.2
|
|
|
(3.2)
|
|
|
—
|
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(100.2)
|
|
|
—
|
|
|
(100.2)
|
|
|
Foreign currency translation adjustment, net of tax $4.9
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22.8
|
|
|
22.8
|
|
|
Pension and other postretirement benefits adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
Derivative financial instruments, net of tax $7.0
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(25.8)
|
|
|
(25.8)
|
|
|
Common stock issued for the Nexeo acquisition (4)
|
27.9
|
|
|
0.3
|
|
|
649.0
|
|
|
—
|
|
|
—
|
|
|
649.3
|
|
|
Shares canceled
|
(1.5)
|
|
|
|
|
|
(35.5)
|
|
|
—
|
|
|
—
|
|
|
(35.5)
|
|
|
Restricted stock units vested
|
0.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Tax withholdings related to net share settlements of stock-based compensation awards
|
(0.2)
|
|
|
—
|
|
|
(2.8)
|
|
|
—
|
|
|
—
|
|
|
(2.8)
|
|
|
Stock option exercises
|
0.3
|
|
|
—
|
|
|
6.6
|
|
|
—
|
|
|
—
|
|
|
6.6
|
|
|
Employee stock purchase plan
|
0.1
|
|
|
—
|
|
|
1.4
|
|
|
—
|
|
|
—
|
|
|
1.4
|
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
25.1
|
|
|
—
|
|
|
—
|
|
|
25.1
|
|
|
Other
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
Balance, December 31, 2019
|
168.7
|
|
|
$
|
1.7
|
|
|
$
|
2,968.9
|
|
|
$
|
(858.5)
|
|
|
$
|
(379.3)
|
|
|
$
|
1,732.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Adjusted due to the adoption of ASU 2016-09 “Improvement to Employee Share-Based Payment Accounting” on January 1, 2017.
(2)Adjusted due to the adoption of ASU 2014-09 “Revenue from Contracts with Customers” on January 1, 2018.
(3)Refer to “Note 2: Significant accounting policies” for more information.
(4)Refer to “Note 3: Business combinations” for more information.
The accompanying notes are an integral part of these consolidated financial statements.
UNIVAR SOLUTIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2019 AND 2018 AND
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017
1. Nature of operations
Headquartered in Downers Grove, Illinois, Univar Solutions Inc. (“Company” or “Univar Solutions”) is a leading global chemical and ingredients distributor and provider of specialty services. The Company’s operations are structured into four reportable segments that represent the geographic areas under which the Company manages its business:
•Univar Solutions USA (“USA”)
•Univar Solutions Canada (“Canada”)
•Univar Solutions Europe, the Middle East and Africa (“EMEA”)
•Univar Solutions Latin America (“LATAM”)
In 2019, the Company renamed its “Rest of World” segment “Latin America,” which includes certain developing businesses in Latin America (including Brazil and Mexico) and the Asia-Pacific region.
2. Significant accounting policies
Basis of consolidation and presentation
The consolidated financial statements include the financial statements of the Company and its majority-owned subsidiaries. Subsidiaries are consolidated if the Company has a controlling financial interest, which may exist based on ownership of a majority of the voting interest, or based on the Company’s determination that it is the primary beneficiary of a variable interest entity (“VIE”). The Company does not have any material interests in VIEs. All intercompany balances and transactions are eliminated in consolidation. Unless otherwise indicated, all financial data presented in these consolidated financial statements are expressed in US dollars.
On our consolidated statements of cash flows for 2018 and 2017, the amounts included in “net proceeds under revolving credit facilities,” which were previously included in “proceeds from the issuance of long-term debt,” are now presented separately to conform to the current year presentation.
Use of estimates
The preparation of consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions affecting the amounts reported and disclosed in the financial statements and accompanying notes. Actual results could differ materially from these estimates.
Recently issued and adopted accounting pronouncements
On January 1, 2019, the Company adopted ASU 2016-02 “Leases” (Topic 842), which supersedes the lease recognition requirements in ASC Topic 840, “Leases,” using the modified retrospective method by applying the new guidance to all leases existing at the date of initial application and not restating comparative periods. The Company has elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the historical lease classification to carry forward. The Company recognized the cumulative effect of initially applying the new
lease standard as an adjustment to the 2019 opening balance sheet and also includes adjustments related to previously unrecognized finance leases as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Balance at December 31, 2018
|
|
Adjustments due to ASU 2016-02
|
|
Balance at January 1, 2019
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
$
|
955.8
|
|
|
|
$
|
5.4
|
|
|
|
$
|
961.2
|
|
|
Other assets
|
|
84.3
|
|
|
|
166.8
|
|
|
|
251.1
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
21.7
|
|
|
$
|
(4.5)
|
|
|
$
|
17.2
|
|
|
Other accrued expenses
|
|
285.8
|
|
|
43.8
|
|
|
329.6
|
|
|
Long-term debt
|
|
2,350.4
|
|
|
9.9
|
|
|
2,360.3
|
|
|
Other long-term liabilities
|
|
98.4
|
|
|
123.0
|
|
|
221.4
|
|
On January 1, 2019, the Company adopted ASU 2018-02 “Income Statement - Reporting Comprehensive Income” (Topic 220) “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (“AOCI”) which enabled the Company to reclassify from AOCI to retained earnings, certain stranded tax effects, resulting from the Tax Cuts and Jobs Act. Upon adoption, we reclassified $3.2 million of the stranded tax effects from AOCI to accumulated deficit.
Accounting pronouncements issued but not yet adopted
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments - Credit Losses” (Topic 326) which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. The Company will adopt this guidance effective January 1, 2020 and is finalizing the impacts which are not expected to be material.
In August 2018, the FASB issued ASU 2018-13 “Fair Value Measurement” (Topic 820) which modifies the requirements related to fair value disclosures. The Company will adopt this guidance effective January 1, 2020 and is finalizing the impacts that will be reflected in the financial statement disclosures, which are not expected to be material.
In August 2018, the FASB issued ASU 2018-14 “Compensation - Retirement Benefits - Defined Benefit Plans - General” (Subtopic 715-20) which amends the disclosure requirements related to defined benefit pension and other postretirement plan. The Company will adopt this guidance effective January 1, 2021 and is currently determining the impacts that will be reflected in financial statement disclosures.
In August 2018, the FASB issued ASU 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” which aligns the requirements for capitalizing implementation costs incurred in a service contract hosting arrangement with those for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company will adopt this guidance effective January 1, 2020 and is finalizing the impacts which are not expected to be material.
In December 2019, the FASB issued ASU 2019-12 “Income Taxes” (Topic 740) – “Simplifying the Accounting for Income Taxes” which simplifies the accounting for income taxes. The Company will adopt this guidance effective January 1, 2021 and is currently determining the impacts of the guidance on our consolidated financial statements.
Cash and cash equivalents
Cash and cash equivalents include highly-liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash.
Trade accounts receivable, net
Trade accounts receivable are stated at the invoiced amount, net of an allowance for doubtful accounts of $12.9 million and $11.2 million at December 31, 2019 and 2018, respectively. The allowance for doubtful accounts is estimated based on an individual assessment of collectability based on factors that include current ability to pay, bankruptcy and payment history, as well as a general reserve related to prior experience.
Inventories
Inventories consist primarily of products purchased for resale and are stated at the lower of cost or net realizable value. Inventory cost is determined based on the weighted average cost method and includes purchase price from producers net of rebates received, inbound freight and handling, and direct labor and other costs incurred to blend and repackage product, but excludes depreciation expense.
Property, plant and equipment, net
Property, plant and equipment are carried at historical cost, net of accumulated depreciation. Depreciation is recorded on a straight-line basis over the estimated useful life of each asset as follows:
|
|
|
|
|
|
|
|
Buildings
|
10-50 years
|
|
Main components of tank farms
|
5-40 years
|
|
Containers
|
2-15 years
|
|
Machinery and equipment
|
5-20 years
|
|
Furniture, fixtures and others
|
5-20 years
|
|
Information technology
|
3-10 years
|
The Company evaluates the useful life and carrying value of property, plant and equipment for impairment if an event occurs or circumstances change that would indicate the carrying value may not be recoverable. If the carrying amount of the asset group is not recoverable on an undiscounted cash flow basis, an impairment loss is recognized to the extent that the asset group's carrying amount exceeds its estimated fair value.
Goodwill and intangible assets
Goodwill represents the excess of the aggregate purchase price over the fair value of the net assets acquired in business combinations. Goodwill is tested for impairment annually on October 1, or between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company’s reporting units are USA, Canada, EMEA, Latin America and Asia-Pacific.
For each of the reporting units, the Company has the option to perform either the qualitative or the quantitative test. In the event a reporting unit fails the qualitative assessment, it is required to perform the quantitative test. If the fair value of the reporting unit is less than its carrying value, the reporting unit will recognize an impairment for the lesser of either the amount by which the reporting unit's carrying amount exceeds the fair value of the reporting unit or the reporting unit’s goodwill carrying value.
Intangible assets have finite lives and are amortized over their respective useful lives of 2 to 20 years. Intangible assets are tested for impairment if an event occurs or circumstances change that indicates the carrying value may not be recoverable.
Short-term financing
Short-term financing includes bank overdrafts and short-term lines of credit.
Income taxes
Deferred tax assets and liabilities are determined based on differences between financial reporting and tax basis of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences reverse. Deferred tax assets are also recognized for the estimated future effects of tax loss carryforwards. The effect on deferred taxes of changes in tax rates is recognized in the period in which the revised tax rate is enacted.
The Company records valuation allowances to reduce deferred tax assets to the extent it believes it is more likely than not that such assets will not be realized. In making such determinations, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, forecasted and appropriate character of future taxable income, tax planning strategies, our experience with operating loss and tax credit carryforwards not expiring unused, tax planning strategies and the ability to carry back losses to prior years.
The Company is subject to the global intangible low tax income (“GILTI”), which is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The Company treats taxes due on future US inclusions in taxable income related to GILTI as a current-period expense when incurred.
The Company recognizes interest and penalties related to unrecognized tax benefits within interest expense and warehousing, selling and administrative, respectively, in the accompanying consolidated statements of operations. Accrued interest and penalties are included in other accrued expenses and other long-term liabilities in the consolidated balance sheets.
Defined benefit plans
The Company sponsors several defined benefit plans and recognizes actuarial gains or losses, known as “mark to market” adjustments, at the measurement date, December 31. The mark to market adjustments primarily include gains and losses resulting from changes in discount rates and the difference between the expected and actual rate of return on plan assets. Settlement gains and losses are recognized in the period in which the settlement occurs.
The fair value of plan assets is used to calculate the expected return on assets component of the net periodic benefit cost.
Leases
At the commencement date of a lease, the Company recognizes a liability to make lease payments and an asset representing the right to use the underlying asset during the lease term. The lease liability is measured at the present value of lease payments over the lease term, including variable fees that are known or subject to a minimum floor. The lease liability includes lease component fees, while non-lease component fees are expensed as incurred for all asset classes. When a contract excludes an implicit rate, the Company utilizes an incremental borrowing rate based on information available at the lease commencement date including, lease term and geographic region. The initial valuation of the right-of-use (“ROU”) asset includes the initial measurement of the lease liability, lease payments made in advance of the lease commencement date and initial direct costs incurred by the Company and excludes lease incentives.
Leases with an initial term of 12 months or less are classified as short-term leases and are not recorded on the consolidated balance sheets. The lease expense for short-term leases is recognized on a straight-line basis over the lease term.
Legal costs
We expense legal costs as incurred.
Environmental liabilities
Environmental liabilities are recognized for probable and reasonably estimable losses associated with environmental remediation. Incremental direct costs of the investigation, remediation effort and post-remediation monitoring are included in the estimated environmental liabilities. Expected cash outflows related to environmental remediation for the next 12 months and amounts for which the timing is uncertain are reported as current within other accrued expenses in the consolidated balance sheets. The long-term portion of environmental liabilities is reported within other long-term liabilities in the consolidated balance sheets on an undiscounted basis, except for sites for which the amount and timing of future cash payments are fixed or reliably determinable. Environmental remediation expenses are included within warehousing, selling and administrative expenses in the consolidated statements of operations, unless associated with disposed operations, in which case such expenses are included in other operating expenses, net.
Revenue recognition
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring a good or providing a service. Since the term between invoicing and payment is less than a year, the Company has not recognized a significant financing component. Revenue for bill-and-hold arrangements is recognized if the Company has a substantive customer request, the materials are properly segregated and designated as belonging to the customer, materials are ready to be transferred to the customer and the Company is unable to direct the materials to service another customer.
Chemical Distribution
Revenue is recognized when performance obligations under the terms of the contract are satisfied, which generally occurs when goods are transferred to a customer under the terms of the sale. Net sales include product sales and billings for freight and handling charges, net of discounts, expected returns, customer price and volume incentives, and sales or other revenue-based taxes. The Company estimates price and volume incentives, which are expected to be provided to customers, and expected returns based on historical experience.
Crop Sciences
The Company generates revenue when control for products is transferred to customers. The amount of consideration recorded varies due to price movements and rights granted to customers to return product. Customer payment terms often extend through a growing season, which may be up to six months.
Transaction prices may move during an agricultural growing season and are affected by special offers or volume discounts, which affect the amount of consideration the Company will receive. Customers also may be provided rights to return eligible products. The Company estimates the expected returns and changes in the transaction price based on the combination of historical experience and the impact of weather on the current agriculture season. The adjustments to the transaction price and estimate of returns impacts revenues recognized.
Services
The Company generates revenue from services as they are performed and economic value is transferred to customers. Services provided to customers are primarily related to waste management services and warehousing services.
Foreign currency translation
Assets and liabilities of foreign subsidiaries are translated into US dollars at period-end exchange rates. Income and expense accounts of foreign subsidiaries are translated into US dollars at the average exchange rates for the period. The net exchange gains and losses arising on this translation are reflected as a component of currency translation within AOCI.
Transaction gains and losses are recognized in other expense, net in the consolidated statements of operations. Transaction gains and losses relating to intercompany borrowings that are an investment in a foreign subsidiary are reflected as a component of currency translation within AOCI in stockholders’ equity.
Stock-based compensation plans
The Company measures the total amount of employee stock-based compensation expense based on the grant date fair value of each award. Expense is recognized for each separately vesting tranche on a straight-line basis over the requisite service period, which is the shorter of the service period of the award or the period until the employees' retirement eligibility date. The Company recognizes forfeitures when incurred.
Fair value
Certain assets and liabilities are required to be recorded at fair value. The estimated fair values of those assets and liabilities have been determined using market information and valuation methodologies. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. There are three levels of inputs that may be used to measure fair value:
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
Quoted prices for identical instruments in active markets.
|
|
|
|
|
|
|
Level 2
|
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuation in which all significant inputs and significant value drivers are observable in active markets.
|
|
|
|
|
|
|
Level 3
|
Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
Derivatives
The Company uses derivative financial instruments to manage risks associated with foreign currency and interest rate fluctuations. We do not use derivative instruments for speculative trading purposes. The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles. The fair value of interest rate swaps is determined by estimating the net present value of amounts to be paid under the agreement offset by the net present value of the expected cash inflows based on market rates and associated yield curves. For derivative contracts with the same counterparty where the Company has a master netting arrangement with the counterparty, the fair value of the asset/liability is presented on a net basis within the consolidated balance sheets. Changes in the fair value of derivative financial instruments are recognized in the consolidated statements of operations within interest expense or other expense, net, unless specific hedge accounting criteria are met. Cash flows associated with derivative financial instruments are recognized in the operating section of the consolidated statements of cash flows.
For derivatives designated as cash flow hedges, changes in the fair value of the derivative are recorded to AOCI and are reclassified to earnings when the underlying forecasted transaction affects earnings. For contracts designated as cash flow hedges, we reassess the probability of the underlying forecasted transactions occurring on a quarterly basis. For derivatives not designated as hedging instruments, all changes in fair value are recorded to earnings in the current period.
Earnings per share
Basic earnings per share is based on the weighted average number of common shares outstanding during each period. Diluted earnings per share is based on the weighted average number of common shares and dilutive common share equivalents outstanding during each period. The Company reflects common share equivalents relating to stock options, non-vested restricted stock and non-vested restricted stock units in its computation of diluted weighted average shares outstanding, unless the effect of inclusion is anti-dilutive. The effect of dilutive securities is calculated using the treasury stock method.
We consider restricted stock awards to be participating securities, since holders of such shares have non-forfeitable dividend rights in the event the Company declares a common stock dividend.
3. Business combinations
Year ended December 31, 2019
Acquisition of Nexeo Solutions
On February 28, 2019, the Company completed an acquisition of 100% of the equity interest of Nexeo Solutions, Inc., a leading global chemicals and plastics distributor. The acquisition expands and strengthens Univar Solutions’ presence in North America and provides expanded opportunities to create the largest North American sales force in chemical and ingredients distribution and the broadest product offering.
The total purchase price of the acquisition was $1,814.8 million, composed of $1,201.0 million of cash paid (net of cash acquired of $46.8 million) and $613.8 million of newly issued shares of Univar Solutions common stock, which represented approximately 26.4 million shares, based on Univar Solutions’ closing stock price of $23.29 on February 27, 2019. The final 26.4 million shares issued include the cancellation of 1.5 million shares in connection with the appraisal litigation settlement, see “Note 21: Commitments and contingencies” for more information.
The cash portion of the purchase price, acquisition related costs and repayment of approximately $936.3 million of Nexeo’s debt and other long-term liabilities were funded using the proceeds from the issuance of Term B Loans, borrowings under the New Senior ABL Facility and the ABL Term Loan issued on February 28, 2019. Refer to “Note 18: Debt” for more information.
As of December 31, 2019, the Company updated the purchase price allocation to reflect fair value adjustments from the third-party valuation firm’s report valuing Nexeo’s tangible and intangible assets, working capital adjustments associated with the sale of the Nexeo plastics distribution business (“Nexeo Plastics”) as well as tax adjustments. The initial accounting for this acquisition is considered preliminary and is subject to adjustments on receipt of additional information relevant to the acquisition to complete the opening balances for deferred income taxes. The preliminary values and measurement period adjustments are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
At Acquisition Date
|
|
Measurement Period Adjustments
|
|
As Adjusted
|
|
Trade accounts receivable, net
|
|
$
|
286.9
|
|
|
$
|
9.4
|
|
|
$
|
296.3
|
|
|
Inventories
|
|
149.0
|
|
|
1.2
|
|
|
150.2
|
|
|
Prepaid expenses and other current assets
|
|
27.2
|
|
|
38.2
|
|
|
65.4
|
|
|
Assets held for sale
|
|
1,030.9
|
|
|
(142.7)
|
|
|
888.2
|
|
|
Property, plant and equipment, net
|
|
227.4
|
|
|
34.9
|
|
|
262.3
|
|
|
Goodwill
|
|
682.2
|
|
|
(126.5)
|
|
|
555.7
|
|
|
Intangible assets, net
|
|
173.9
|
|
|
(35.2)
|
|
|
138.7
|
|
|
Other assets
|
|
37.0
|
|
|
0.4
|
|
|
37.4
|
|
|
Trade accounts payable
|
|
(133.7)
|
|
|
(4.0)
|
|
|
(137.7)
|
|
|
Other accrued expenses
|
|
(94.9)
|
|
|
(50.9)
|
|
|
(145.8)
|
|
|
Liabilities held for sale
|
|
(390.9)
|
|
|
169.4
|
|
|
(221.5)
|
|
|
Deferred tax liabilities
|
|
(102.3)
|
|
|
98.1
|
|
|
(4.2)
|
|
|
Other long-term liabilities
|
|
(77.9)
|
|
|
7.7
|
|
|
(70.2)
|
|
|
Purchase consideration, net of cash
|
|
$
|
1,814.8
|
|
|
$
|
—
|
|
|
$
|
1,814.8
|
|
Assets and liabilities held for sale are related to the Nexeo plastics distribution business. Nexeo Plastics was not aligned with the Company’s strategic objectives and on March 29, 2019, the business was sold for total proceeds of $664.3 million, net of cash disposed. Refer to “Note 4: Discontinued operations and dispositions” for further information.
The Company recorded $555.7 million of goodwill, consisting of $540.1 million in the USA segment, $3.8 million in Canada and $11.8 million in LATAM. The goodwill is primarily attributable to expected synergies from combining operations. The Company expects approximately $108.3 million of goodwill to be deductible for income tax purposes.
The identified intangible assets were related to customer relationships which have a weighted-average amortization period of ten years.
The Company assumed 50.0 million warrants, equivalent to 25.0 million Nexeo shares, with an estimated aggregate fair value of $26.0 million at the February 28, 2019 closing date. The warrants were converted into the right to receive, upon
exercise, the merger consideration consisting of approximately 7.6 million shares of Univar Solutions common stock plus cash. The warrants have an exercise price of $27.80 and will expire on June 9, 2021. The warrants as other long-term liabilities within the consolidated balance sheets. Refer to “Note 19: Fair value measurements” for more information.
The amounts of net sales and net income from continuing operations related to the Nexeo chemical distribution business, included in the Company’s consolidated statements of operations from March 1, 2019 to December 31, 2019 are as follows:
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
Net sales
|
|
$
|
1,489.3
|
|
|
Net loss from continuing operations
|
|
(12.1)
|
|
The following unaudited pro forma financial information combines the unaudited results of operations as if the acquisition of Nexeo had occurred at the beginning of the periods presented below and exclude the results of operations related to Nexeo Plastics, as this divestiture was reflected as discontinued operations. Refer to “Note 4: Discontinued operations and dispositions” for additional information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended December 31,
|
|
|
|
Year ended December 31,
|
|
|
|
(in millions)
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Net sales
|
|
$
|
2,155.0
|
|
|
$
|
2,437.4
|
|
|
$
|
9,612.9
|
|
|
$
|
10,685.5
|
|
|
Net (loss) income from continuing operations
|
|
(54.8)
|
|
|
(72.9)
|
|
|
(94.3)
|
|
|
154.8
|
|
The pro forma financial information is for comparative purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2018.
The unaudited pro forma information is based upon accounting estimates and judgments the Company believes are reasonable and reflects adjustments directly attributed to the business combination including amortization on acquired intangible assets, interest expense, transaction and acquisition related costs, depreciation related to purchase accounting fair value adjustments and the related tax effects.
Year ended December 31, 2018
In the year ended December 31, 2018, the Company completed two acquisitions. On January 4, 2018, the Company completed a $7.5 million acquisition of Kemetyl Norge Industri AS (“Kemetyl”) as well as a definitive asset purchase agreement with Kemetyl Aktiebolag, leading distributors of chemical products in the Nordic region which provide bulk and specialty chemicals. On May 31, 2018, the Company completed a $13.3 million acquisition of Earthoil Plantations Limited (“Earthoil”), a supplier of pure, organic, fair trade essential and cold-pressed vegetable seed oils. The accounting for both acquisitions was completed in 2019.
4. Discontinued operations and dispositions
Discontinued operations
On March 29, 2019, the Company completed the sale of the Nexeo Plastics to an affiliate of One Rock Capital Partners, LLC (“Buyer”) for total proceeds of $664.3 million (net of cash disposed of $2.4 million), including $26.7 million for a working capital adjustment. The Nexeo preliminary purchase price allocation is inclusive of these working capital adjustments. Refer to “Note 3: Business combinations” for more information.
In connection with the transaction, the Company entered into a Transition Services Agreement (TSA), a Warehouse Service Agreement (WSA) and Real Property Agreements with the Buyer which are designed to ensure and facilitate an orderly transfer of business operations and will terminate at various times, between six and twenty-four months and can be renewed with a maximum of two twelve-month periods. The income and expense for the services will be reported as other operating expenses, net in the consolidated statements of operations. The Real Property Agreements will have a maximum tenure of 3 years. These arrangements do not constitute significant continuing involvement in the plastics distribution business.
The following table summarizes the operating results of the Company’s discontinued operations related to the sale described above for the year ended December 31, 2019, as presented in “Net income from discontinued operations” on the consolidated statements of operations.
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Year Ended December 31, 2019
|
|
External sales
|
|
$
|
156.9
|
|
|
Cost of goods sold (exclusive of depreciation)
|
|
136.7
|
|
|
Outbound freight and handling
|
|
3.5
|
|
|
Warehousing, selling and administrative
|
|
7.9
|
|
|
Other expenses
|
|
1.4
|
|
|
Income from discontinued operations before income taxes
|
|
$
|
7.4
|
|
|
Income tax expense from discontinued operations
|
|
2.0
|
|
|
Net income from discontinued operations
|
|
$
|
5.4
|
|
There were no significant non-cash operating activities from the Company’s discontinued operations related to the plastics distribution business.
Dispositions
On December 31, 2019, the Company completed the sale of the Environmental Sciences business to AEA Investors LP for total cash proceeds of $174.0 million (net of cash disposed of $0.7 million and $5.9 million of transaction expenses) plus a $5.0 million ($2.4 million present value) subordinated note receivable (the “Transaction”) and subject to a working capital adjustment. The Company recorded a $41.4 million gain on sale of this business in the consolidated statements of operations and was included in the USA and Canada segments. The sale of the business did not meet the criteria to be classified as a discontinued operation in the Company’s financial statements because the disposition did not represent a strategic shift, that has, or will have, a major effect on the Company's operations and financial results.
The following summarizes the income before income taxes attributable to the Environmental Sciences business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
|
2019
|
|
2018
|
|
2017
|
|
Income before income taxes
|
|
$
|
28.6
|
|
|
$
|
28.2
|
|
|
$
|
28.7
|
|
5. Revenue
The Company disaggregates revenues with customers by both geographic segments and revenue contract types. Geographic reportable segmentation is pertinent to understanding Univar Solutions’ revenues, as it aligns to how the Company reviews the financial performance of its operations. Revenue contract types are differentiated by the type of good or service since the contractual terms necessary for revenue recognition are unique to each of the identified revenue contract types.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
USA
|
|
Canada
|
|
EMEA
|
|
LATAM
|
|
Consolidated
|
|
|
|
Year Ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
Chemical Distribution
|
|
$
|
5,507.2
|
|
|
$
|
852.8
|
|
|
$
|
1,784.2
|
|
|
$
|
443.7
|
|
|
$
|
8,587.9
|
|
|
Crop Sciences
|
|
—
|
|
|
318.0
|
|
|
—
|
|
|
—
|
|
|
318.0
|
|
|
Services
|
|
321.3
|
|
|
47.0
|
|
|
1.3
|
|
|
11.4
|
|
|
381.0
|
|
|
Total external customer net sales
|
|
$
|
5,828.5
|
|
|
$
|
1,217.8
|
|
|
$
|
1,785.5
|
|
|
$
|
455.1
|
|
|
$
|
9,286.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
USA
|
|
Canada
|
|
EMEA
|
|
LATAM
|
|
Consolidated
|
|
|
|
Year Ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
Chemical Distribution
|
|
$
|
4,775.2
|
|
|
$
|
877.6
|
|
|
$
|
1,974.4
|
|
|
$
|
383.8
|
|
|
$
|
8,011.0
|
|
|
Crop Sciences
|
|
—
|
|
|
381.6
|
|
|
—
|
|
|
—
|
|
|
381.6
|
|
|
Services
|
|
185.8
|
|
|
43.1
|
|
|
1.3
|
|
|
9.7
|
|
|
239.9
|
|
|
Total external customer net sales
|
|
$
|
4,961.0
|
|
|
$
|
1,302.3
|
|
|
$
|
1,975.7
|
|
|
$
|
393.5
|
|
|
$
|
8,632.5
|
|
Deferred revenue
Deferred revenues are recognized as a contract liability when customers provide Univar Solutions with consideration prior to the Company satisfying a performance obligation. The following table provides information pertaining to the deferred revenue balance and account activity:
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
|
|
Deferred revenue as of January 1, 2019
|
|
$
|
45.6
|
|
|
Deferred revenue as of December 31, 2019
|
|
65.5
|
|
|
Revenue recognized that was included in the deferred revenue balance at the beginning of the period
|
|
44.5
|
|
The deferred revenue balances are all expected to have a duration of one year or less and are recorded within the other accrued expenses line item of the consolidated balance sheet.
6. Other operating expenses, net
Other operating expenses, net consisted of the following items:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
Acquisition and integration related expenses
|
$
|
152.1
|
|
|
$
|
22.0
|
|
|
$
|
3.1
|
|
|
Stock-based compensation expense
|
25.1
|
|
|
20.7
|
|
|
19.7
|
|
|
Restructuring charges
|
2.6
|
|
|
4.8
|
|
|
5.5
|
|
|
Other employee severance costs
|
31.2
|
|
|
16.4
|
|
|
8.1
|
|
|
Other facility closure costs (1)
|
7.1
|
|
|
—
|
|
|
—
|
|
|
(Gain) loss on sale of property, plant and equipment and other assets
|
(9.9)
|
|
|
2.0
|
|
|
(11.3)
|
|
|
Saccharin legal settlement
|
62.5
|
|
|
—
|
|
|
—
|
|
|
Business transformation costs
|
—
|
|
|
—
|
|
|
23.4
|
|
|
Other
|
27.5
|
|
|
7.6
|
|
|
6.9
|
|
|
Total other operating expenses, net
|
$
|
298.2
|
|
|
$
|
73.5
|
|
|
$
|
55.4
|
|
|
|
|
|
|
|
|
(1)Other facility closure costs includes $3.6 million recorded as an estimated withdrawal liability associated with a multi-employer pension plan related to an announced facility closure.
7. Restructuring charges
Restructuring charges relate to the implementation of several regional strategic initiatives aimed at streamlining the Company’s cost structure and improving its operations. These actions primarily resulted in workforce reductions, lease termination costs and other facility rationalization costs. Restructuring charges are recorded in other operating expenses, net in the consolidated statement of operations.
2018 Restructuring
During 2018, management approved a plan to consolidate departments resulting in restructuring charges of $3.2 million in USA, consisting of $3.1 million in severance costs and $0.1 million in other costs and in Other, the Company recorded $0.9 million, relating to severance costs. In 2019, under the same program the Company recorded restructuring charges of $2.4 million in USA and $0.3 million in Other consisting of severance costs. The Company expects to incur approximately $0.4 million of additional severance over the next year and expects this program to be substantially completed by 2020.
Also during the year ended December 31, 2018, the Company recorded restructuring charges of $0.9 million in EMEA relating to employee termination costs. The Company recorded restructuring charges of $0.1 million in facility exit costs during the year ended December 31, 2019 and reduced its estimate by $0.2 million within employee termination costs for this program. The actions associated with this program are complete as of December 31, 2019.
In 2018, the Company recorded restructuring charges of $0.7 million for the LATAM segment, consisting of $0.4 million in employee termination costs, $0.2 million in facility exit costs and $0.1 million in other exit costs. The actions associated with this program were completed as of December 31, 2018.
2014 to 2017 Restructuring
Between 2014 through 2017, management implemented several regional strategic initiatives aimed at streamlining the Company’s cost structure and improving its operations. During the year ended December 31, 2018, the Company reduced its estimate in the amount of $0.9 million within facility exit costs relating to a favorable lease buyout for USA. The actions associated with the restructuring programs were completed as of June 30, 2018, although cash payments will be made into the future.
The following table summarizes the cumulative activities recorded through December 31, 2018 related to the Company's 2014 to 2017 restructuring charges by segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
USA
|
|
Canada
|
|
EMEA
|
|
LATAM
|
|
Other
|
|
Total
|
|
Employee termination costs
|
$
|
16.5
|
|
|
$
|
5.7
|
|
|
$
|
22.5
|
|
|
$
|
6.2
|
|
|
$
|
5.8
|
|
|
$
|
56.7
|
|
|
Facility exit costs
|
21.3
|
|
|
—
|
|
|
3.7
|
|
|
0.2
|
|
|
—
|
|
|
25.2
|
|
|
Other exit costs
|
1.7
|
|
|
—
|
|
|
6.6
|
|
|
—
|
|
|
0.8
|
|
|
9.1
|
|
|
Total
|
$
|
39.5
|
|
|
$
|
5.7
|
|
|
$
|
32.8
|
|
|
$
|
6.4
|
|
|
$
|
6.6
|
|
|
$
|
91.0
|
|
The following tables summarize activity related to the restructuring liability:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
January 1, 2019
|
|
Charge to
earnings
|
|
Cash paid
|
|
Non-cash
and other
|
|
December 31, 2019
|
|
Employee termination costs
|
$
|
4.2
|
|
|
$
|
2.5
|
|
|
$
|
(3.0)
|
|
|
$
|
—
|
|
|
$
|
3.7
|
|
|
Facility exit costs
|
5.0
|
|
|
0.1
|
|
|
(3.2)
|
|
|
—
|
|
|
1.9
|
|
|
Other exit costs
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
Total
|
$
|
9.4
|
|
|
$
|
2.6
|
|
|
$
|
(6.2)
|
|
|
$
|
—
|
|
|
$
|
5.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
January 1, 2018
|
|
Charge to
earnings
|
|
Cash paid
|
|
Non-cash
and other
|
|
December 31, 2018
|
|
Employee termination costs
|
$
|
3.0
|
|
|
$
|
5.3
|
|
|
$
|
(3.4)
|
|
|
$
|
(0.7)
|
|
|
$
|
4.2
|
|
|
Facility exit costs
|
10.2
|
|
|
(0.7)
|
|
|
(4.4)
|
|
|
(0.1)
|
|
|
5.0
|
|
|
Other exit costs
|
(0.5)
|
|
|
0.2
|
|
|
(0.1)
|
|
|
0.6
|
|
|
0.2
|
|
|
Total
|
$
|
12.7
|
|
|
$
|
4.8
|
|
|
$
|
(7.9)
|
|
|
$
|
(0.2)
|
|
|
$
|
9.4
|
|
Restructuring liabilities of $5.3 million and $5.9 million were classified as current in other accrued expenses and $0.5 million and $3.5 million were recorded in other long-term liabilities in the consolidated balance sheets as of December 31, 2019 and 2018, respectively. The long-term portion primarily consists of facility exit costs that are expected to be paid within the next five years.
While the Company believes the recorded restructuring liabilities are adequate, revisions to current estimates may be recorded in future periods based on new information as it becomes available.
8. Other expense, net
Other expense, net consisted of the following (losses) gains:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
Pension mark to market loss (1)(2)
|
$
|
(50.4)
|
|
|
$
|
(34.2)
|
|
|
$
|
(3.8)
|
|
|
Pension curtailment and settlement gains (1)
|
1.3
|
|
|
—
|
|
|
9.7
|
|
|
Non-operating retirement benefits (1)(2)
|
2.2
|
|
|
11.0
|
|
|
9.9
|
|
|
Foreign currency transactions
|
(10.1)
|
|
|
(6.7)
|
|
|
(4.6)
|
|
|
Foreign currency denominated loans revaluation
|
17.5
|
|
|
(0.8)
|
|
|
(17.9)
|
|
|
Undesignated foreign currency derivative instruments (3)
|
(23.7)
|
|
|
1.1
|
|
|
0.3
|
|
|
Undesignated interest rate swap contracts (3)
|
(3.0)
|
|
|
—
|
|
|
(2.2)
|
|
|
Debt refinancing costs (4)
|
(1.2)
|
|
|
—
|
|
|
(5.3)
|
|
|
Other
|
(3.1)
|
|
|
(3.1)
|
|
|
(3.5)
|
|
|
Total other expense, net
|
|
$
|
(70.5)
|
|
|
$
|
(32.7)
|
|
|
$
|
(17.4)
|
|
|
|
|
|
|
|
|
(1)Refer to “Note 11: Employee benefit plans” for more information.
(2)Represents mark to market loss and non-operating retirement benefits for both the defined benefit pension and other postretirement benefit plans.
(3)Refer to “Note 20: Derivatives” for more information.
(4)Refer to “Note 18: Debt” for more information.
9. Income taxes
For financial reporting purposes, (loss) income before income taxes includes the following components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
(Loss) income before income taxes
|
|
|
|
|
|
|
United States
|
$
|
(194.5)
|
|
|
$
|
36.6
|
|
|
$
|
1.5
|
|
|
Foreign
|
193.4
|
|
|
185.6
|
|
|
167.3
|
|
|
Total (loss) income before income taxes
|
|
$
|
(1.1)
|
|
|
$
|
222.2
|
|
|
$
|
168.8
|
|
The expense for income taxes is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
Current:
|
|
|
|
|
|
|
Federal
|
$
|
33.9
|
|
|
$
|
13.8
|
|
|
$
|
6.8
|
|
|
State
|
7.1
|
|
|
2.1
|
|
|
2.0
|
|
|
Foreign
|
39.2
|
|
|
31.2
|
|
|
28.5
|
|
|
Total current
|
$
|
80.2
|
|
|
$
|
47.1
|
|
|
$
|
37.3
|
|
|
Deferred:
|
|
|
|
|
|
|
Federal
|
$
|
12.2
|
|
|
$
|
6.5
|
|
|
$
|
26.5
|
|
|
State
|
3.4
|
|
|
(0.5)
|
|
|
—
|
|
|
Foreign
|
8.7
|
|
|
(3.2)
|
|
|
(14.8)
|
|
|
Total deferred
|
$
|
24.3
|
|
|
$
|
2.8
|
|
|
$
|
11.7
|
|
|
Total income tax expense from continuing operations
|
|
$
|
104.5
|
|
|
$
|
49.9
|
|
|
$
|
49.0
|
|
For our continuing operations, differences between actual provisions for income taxes and provisions for income taxes at the US federal statutory rate (21.0% in 2019 and 2018 and 35.0% in 2017) were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
US federal statutory income tax (benefit) expense applied to (loss) income before income taxes
|
$
|
(0.2)
|
|
|
$
|
46.7
|
|
|
$
|
59.1
|
|
|
State income taxes, net of federal benefit
|
10.7
|
|
|
1.1
|
|
|
1.4
|
|
|
Foreign tax rate differential
|
8.7
|
|
|
8.1
|
|
|
(18.0)
|
|
|
Effect of flow-through entities
|
30.6
|
|
|
(0.6)
|
|
|
8.9
|
|
|
Distributions from foreign subsidiaries
|
31.9
|
|
|
9.0
|
|
|
17.6
|
|
|
Global intangible low-taxed income
|
22.8
|
|
|
19.9
|
|
|
—
|
|
|
Gain on disposal
|
12.9
|
|
|
—
|
|
|
—
|
|
|
Change in valuation allowance, net
|
(18.8)
|
|
|
(11.6)
|
|
|
(18.1)
|
|
|
Foreign tax credit
|
(13.5)
|
|
|
(38.3)
|
|
|
(47.6)
|
|
|
Fines and penalties
|
5.6
|
|
|
—
|
|
|
0.2
|
|
|
Non-deductible employee expenses
|
4.4
|
|
|
3.9
|
|
|
2.5
|
|
|
Non-deductible acquisition costs
|
3.5
|
|
|
0.3
|
|
|
0.2
|
|
|
Shareholder settlements
|
2.7
|
|
|
—
|
|
|
—
|
|
|
Withholding and other taxes based on income
|
1.7
|
|
|
0.5
|
|
|
0.5
|
|
|
Warrants
|
1.5
|
|
|
—
|
|
|
—
|
|
|
Change in statutory income tax rates
|
(1.1)
|
|
|
—
|
|
|
(17.5)
|
|
|
Adjustment to prior year due to change in estimate
|
1.0
|
|
|
(0.8)
|
|
|
(0.5)
|
|
|
Net stock-based compensation
|
0.6
|
|
|
—
|
|
|
(3.7)
|
|
|
Foreign exchange rate remeasurement
|
(0.4)
|
|
|
(0.2)
|
|
|
0.3
|
|
|
Unrecognized tax benefits
|
(0.3)
|
|
|
(2.7)
|
|
|
(1.7)
|
|
|
Non-deductible expense
|
0.3
|
|
|
0.6
|
|
|
0.4
|
|
|
2017 US repatriation tax
|
—
|
|
|
13.0
|
|
|
76.5
|
|
|
Non-taxable interest income
|
—
|
|
|
(0.7)
|
|
|
(11.4)
|
|
|
Expiration of tax attributes
|
—
|
|
|
—
|
|
|
0.1
|
|
|
Foreign losses not benefited
|
—
|
|
|
—
|
|
|
0.7
|
|
|
Non-deductible interest expense
|
—
|
|
|
—
|
|
|
0.1
|
|
|
Other
|
(0.1)
|
|
|
1.7
|
|
|
(1.0)
|
|
|
Total income tax expense from continuing operations
|
|
$
|
104.5
|
|
|
$
|
49.9
|
|
|
$
|
49.0
|
|
|
Effective income tax rate
|
|
(9,500.0)
|
%
|
|
22.5
|
%
|
|
29.0
|
%
|
The consolidated deferred tax assets and liabilities are detailed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
Deferred tax assets:
|
|
|
|
|
Net operating loss carryforwards (“NOLs”)
|
$
|
39.1
|
|
|
$
|
49.4
|
|
|
Environmental reserves
|
20.9
|
|
|
22.9
|
|
|
Interest
|
17.3
|
|
|
25.9
|
|
|
Tax credit and capital loss carryforwards
|
60.1
|
|
|
57.8
|
|
|
Pension
|
79.6
|
|
|
66.3
|
|
|
Flow-through entities
|
—
|
|
|
2.7
|
|
|
Compensation
|
16.0
|
|
|
12.2
|
|
|
Inventory
|
5.4
|
|
|
4.5
|
|
|
Property, plant and equipment, net
|
1.2
|
|
|
4.8
|
|
|
Other temporary differences
|
20.9
|
|
|
17.0
|
|
|
Gross deferred tax assets
|
$
|
260.5
|
|
|
$
|
263.5
|
|
|
Valuation allowance
|
(87.5)
|
|
|
(106.3)
|
|
|
Deferred tax assets, net of valuation allowance
|
$
|
173.0
|
|
|
$
|
157.2
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Property, plant and equipment, net
|
$
|
(111.7)
|
|
|
$
|
(102.3)
|
|
|
Intangible assets
|
(78.3)
|
|
|
(63.6)
|
|
|
Other temporary differences
|
(18.0)
|
|
|
(9.4)
|
|
|
Deferred tax liabilities
|
$
|
(208.0)
|
|
|
$
|
(175.3)
|
|
|
Net deferred tax liability
|
|
$
|
(35.0)
|
|
|
$
|
(18.1)
|
|
As of December 31, 2019, the Company has approximately $39.1 million (tax effected) of NOLs. Approximately $2.4 million of NOLs will expire in the period 2020 through 2026, and approximately $4.1 million will expire in the period 2027 through 2039. The remaining $32.6 million has no expiration. Additionally, the Company has approximately $57.8 million of foreign tax credits. The Company does not expect future earnings of the appropriate character of taxable income which would allow it to utilize its excess FTC balance in future tax years, in addition to other required adjustments which reduce the amount of future foreign source income available to be offset by an FTC. Therefore, the Company will maintain a valuation allowance on the remaining provisional $57.8 million.
Foreign Tax Effects
The Company earns a significant amount of its operating income outside of the US. As of December 31, 2019, the Company is indefinitely reinvested with respect to its US directly-owned subsidiary earnings. Therefore, the Company has not recognized a deferred tax liability on its investment in foreign subsidiaries. The Company is subject to US income tax on substantially all foreign earnings under the GILTI provisions of the 2017 Tax Cut and Jobs Act, while a significant portion of remaining foreign earnings are eligible for the new dividends received deduction. As a result, a portion of any future repatriation of $264.8 million of undistributed earnings may be subject to US income tax, as well as state and local income taxes, and currency translation gains or losses. It is impracticable to calculate the exact amount. Additionally, gains and losses on any future taxable dispositions of US-owned foreign affiliates continue to be subject to US income tax.
Tax Contingencies
The changes in unrecognized tax benefits included in other long-term liabilities, excluding interest and penalties, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
Beginning balance
|
$
|
0.4
|
|
|
$
|
3.1
|
|
|
Increase for tax positions of prior years related to acquired business
|
1.3
|
|
|
—
|
|
|
Reductions due to the statute of limitations expiration
|
(0.1)
|
|
|
(2.7)
|
|
|
Foreign exchange
|
(0.5)
|
|
|
—
|
|
|
Ending balance
|
$
|
1.1
|
|
|
$
|
0.4
|
|
At December 31, 2019 and 2018, there are $1.1 million and $0.4 million of unrecognized tax benefits that if recognized would affect the annual effective tax rate. The Company files income tax returns in the US and various state and foreign jurisdictions. Generally, tax years are open for review by taxing authorities for a period of three years. As of December 31, 2019, the Company has limited audit activity for tax years back to 2007 and 2008, as well as for the periods 2012 through 2018. The Company continues to believe its positions are supportable; however, due to uncertainties in any tax audit outcome, the Company’s estimates of the ultimate settlement of uncertain tax positions may change and the actual tax benefits may differ from the estimates.
The Company recognized $0.5 million, $0.1 million and $0.4 million of interest and/or penalties related to income tax matters in interest expense related to unrecognized tax benefits in the consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017, respectively. The Company had $1.3 million and $1.1 million of interest and penalties reflected in the consolidated balance sheets as of December 31, 2019 and 2018, respectively.
10. Earnings per share
The following table presents the basic and diluted earnings per share computations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions, except per share data)
|
2019
|
|
2018
|
|
2017
|
|
Basic:
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
|
$
|
(105.6)
|
|
|
$
|
172.3
|
|
|
$
|
119.8
|
|
|
Net income from discontinued operations
|
5.4
|
|
|
—
|
|
|
—
|
|
|
Net (loss) income
|
$
|
(100.2)
|
|
|
$
|
172.3
|
|
|
$
|
119.8
|
|
|
Less: earnings allocated to participating securities
|
—
|
|
|
0.3
|
|
|
0.2
|
|
|
Earnings (loss) allocated to common shares outstanding
|
$
|
(100.2)
|
|
|
$
|
172.0
|
|
|
$
|
119.6
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
164.1
|
|
|
141.2
|
|
|
140.2
|
|
|
Basic (loss) income per common share from continuing operations
|
|
$
|
(0.64)
|
|
|
$
|
1.22
|
|
|
$
|
0.85
|
|
|
Basic income per common share from discontinued operations
|
|
0.03
|
|
|
—
|
|
|
—
|
|
|
Basic (loss) income per common share
|
$
|
(0.61)
|
|
|
$
|
1.22
|
|
|
$
|
0.85
|
|
|
Diluted:
|
|
|
|
|
|
|
Net (loss) income from continuing operations
|
|
$
|
(105.6)
|
|
|
$
|
172.3
|
|
|
$
|
119.8
|
|
|
Net income from discontinued operations
|
5.4
|
|
|
—
|
|
|
—
|
|
|
Net (loss) income
|
|
$
|
(100.2)
|
|
|
$
|
172.3
|
|
|
$
|
119.8
|
|
|
Less: earnings allocated to participating securities
|
—
|
|
|
—
|
|
|
—
|
|
|
Earnings (loss) allocated to common shares outstanding
|
$
|
(100.2)
|
|
|
$
|
172.3
|
|
|
$
|
119.8
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
164.1
|
|
|
141.2
|
|
|
140.2
|
|
|
Effect of dilutive securities: stock compensation plans (2)
|
—
|
|
|
1.0
|
|
|
1.2
|
|
|
Weighted average common shares outstanding – diluted
|
164.1
|
|
|
142.2
|
|
|
141.4
|
|
|
Diluted (loss) income per common share from continuing operations
|
$
|
(0.64)
|
|
|
$
|
1.21
|
|
|
$
|
0.85
|
|
|
Diluted income per common share from discontinued operations
|
0.03
|
|
|
—
|
|
|
—
|
|
|
Diluted (loss) income per common share
|
$
|
(0.61)
|
|
|
$
|
1.21
|
|
|
$
|
0.85
|
|
|
|
|
|
|
|
|
(1)Stock options to purchase 3.0 million, 1.6 million, and 0.8 million shares of common stock were outstanding during the years ended December 31, 2019, 2018 and 2017, respectively and restricted stock of 0.8 million in 2019 and nil in both 2018 and 2017 were outstanding, but were not included in the calculation of diluted (loss) income per share as the impact of these stock options would have been anti-dilutive. Diluted shares outstanding also did not include 6.4 million shares of common stock issuable on the exercise of warrants because the warrants were out-of-the-money during the year ended December 31, 2019.
11. Employee benefit plans
Defined benefit pension plans
The Company sponsors defined benefit plans that provide pension benefits for employees upon retirement in certain jurisdictions including the US, Canada, United Kingdom and several other European countries. The US, Canada and United Kingdom defined benefit pension plans are closed to new entrants.
The following summarizes the Company’s defined benefit pension plans’ projected benefit obligations, plan assets and funded status:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
Foreign
|
|
|
|
Total
|
|
|
|
|
Year ended
December 31,
|
|
|
|
Year ended
December 31,
|
|
|
|
Year ended
December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Change in projected benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial present value of benefit obligations at beginning of year
|
$
|
625.7
|
|
|
$
|
721.9
|
|
|
$
|
537.5
|
|
|
$
|
612.0
|
|
|
$
|
1,163.2
|
|
|
$
|
1,333.9
|
|
|
Service cost
|
—
|
|
|
—
|
|
|
2.4
|
|
|
2.7
|
|
|
2.4
|
|
|
2.7
|
|
|
Interest cost
|
27.2
|
|
|
27.3
|
|
|
15.6
|
|
|
15.4
|
|
|
42.8
|
|
|
42.7
|
|
|
Benefits paid
|
(33.5)
|
|
|
(37.5)
|
|
|
(28.4)
|
|
|
(26.7)
|
|
|
(61.9)
|
|
|
(64.2)
|
|
|
Plan amendments
|
—
|
|
|
—
|
|
|
—
|
|
|
2.5
|
|
|
—
|
|
|
2.5
|
|
|
Settlement
|
—
|
|
|
(38.5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(38.5)
|
|
|
Curtailment
|
|
—
|
|
|
—
|
|
|
(1.3)
|
|
|
—
|
|
|
(1.3)
|
|
|
—
|
|
|
Actuarial loss (gain)
|
|
103.0
|
|
|
(47.5)
|
|
|
66.6
|
|
|
(33.6)
|
|
|
169.6
|
|
|
(81.1)
|
|
|
Foreign exchange and other
|
—
|
|
|
—
|
|
|
21.6
|
|
|
(34.8)
|
|
|
21.6
|
|
|
(34.8)
|
|
|
Actuarial present value of benefit obligations at end of year
|
$
|
722.4
|
|
|
$
|
625.7
|
|
|
$
|
614.0
|
|
|
$
|
537.5
|
|
|
$
|
1,336.4
|
|
|
$
|
1,163.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in the fair value of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan assets at beginning of year
|
$
|
428.6
|
|
|
$
|
532.3
|
|
|
$
|
522.2
|
|
|
$
|
574.9
|
|
|
$
|
950.8
|
|
|
$
|
1,107.2
|
|
|
Actual return (loss) on plan assets
|
86.6
|
|
|
(39.9)
|
|
|
77.3
|
|
|
(19.7)
|
|
|
163.9
|
|
|
(59.6)
|
|
|
Contributions by employer
|
13.5
|
|
|
12.2
|
|
|
13.8
|
|
|
26.5
|
|
|
27.3
|
|
|
38.7
|
|
|
Benefits paid
|
(33.5)
|
|
|
(37.5)
|
|
|
(28.4)
|
|
|
(26.7)
|
|
|
(61.9)
|
|
|
(64.2)
|
|
|
Settlement
|
—
|
|
|
(38.5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(38.5)
|
|
|
Foreign exchange and other
|
—
|
|
|
—
|
|
|
21.9
|
|
|
(32.8)
|
|
|
21.9
|
|
|
(32.8)
|
|
|
Plan assets at end of year
|
$
|
495.2
|
|
|
$
|
428.6
|
|
|
$
|
606.8
|
|
|
$
|
522.2
|
|
|
$
|
1,102.0
|
|
|
$
|
950.8
|
|
|
Funded status at end of year
|
$
|
(227.2)
|
|
|
$
|
(197.1)
|
|
|
$
|
(7.2)
|
|
|
$
|
(15.3)
|
|
|
$
|
(234.4)
|
|
|
$
|
(212.4)
|
|
Net amounts related to the Company’s defined benefit pension plans recognized in the consolidated balance sheets consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
Foreign
|
|
|
|
Total
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Overfunded net benefit obligation in other assets
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
65.4
|
|
|
$
|
46.1
|
|
|
$
|
65.4
|
|
|
$
|
46.1
|
|
|
Current portion of net benefit obligation in other accrued expenses
|
(3.5)
|
|
|
(3.5)
|
|
|
(2.1)
|
|
|
(2.0)
|
|
|
(5.6)
|
|
|
(5.5)
|
|
|
Long-term portion of net benefit obligation in pension and other postretirement benefit liabilities
|
(223.7)
|
|
|
(193.6)
|
|
|
(70.5)
|
|
|
(59.4)
|
|
|
(294.2)
|
|
|
(253.0)
|
|
|
Net liability recognized at end of year
|
$
|
(227.2)
|
|
|
$
|
(197.1)
|
|
|
$
|
(7.2)
|
|
|
$
|
(15.3)
|
|
|
$
|
(234.4)
|
|
|
$
|
(212.4)
|
|
The following table summarizes defined benefit pension plans with accumulated benefit obligations in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
Foreign
|
|
|
|
Total
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Accumulated benefit obligation
|
$
|
722.4
|
|
|
$
|
625.7
|
|
|
$
|
202.0
|
|
|
$
|
187.7
|
|
|
$
|
924.4
|
|
|
$
|
813.4
|
|
|
Fair value of plan assets
|
495.2
|
|
|
428.6
|
|
|
155.0
|
|
|
147.7
|
|
|
650.2
|
|
|
576.3
|
|
The following table summarizes defined benefit pension plans with projected benefit obligations in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
Foreign
|
|
|
|
Total
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Projected benefit obligation
|
$
|
722.4
|
|
|
$
|
625.7
|
|
|
$
|
227.7
|
|
|
$
|
209.1
|
|
|
$
|
950.1
|
|
|
$
|
834.8
|
|
|
Fair value of plan assets
|
495.2
|
|
|
428.6
|
|
|
155.0
|
|
|
147.7
|
|
|
650.2
|
|
|
576.3
|
|
The following table summarizes the components of net periodic benefit cost (income) recognized in the consolidated statements of operations related to defined benefit pension plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
|
Service cost (1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2.4
|
|
|
$
|
2.7
|
|
|
$
|
2.5
|
|
|
$
|
2.4
|
|
|
$
|
2.7
|
|
|
$
|
2.5
|
|
|
Interest cost (2)
|
27.2
|
|
|
27.3
|
|
|
30.8
|
|
|
15.6
|
|
|
15.4
|
|
|
16.2
|
|
|
42.8
|
|
|
42.7
|
|
|
47.0
|
|
|
Expected return on plan assets (2)
|
(25.1)
|
|
|
(31.3)
|
|
|
(30.9)
|
|
|
(20.1)
|
|
|
(25.1)
|
|
|
(26.0)
|
|
|
(45.2)
|
|
|
(56.4)
|
|
|
(56.9)
|
|
|
Amortization of unrecognized prior service cost (credits) (2)
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
2.7
|
|
|
(0.2)
|
|
|
0.1
|
|
|
2.7
|
|
|
(0.2)
|
|
|
Settlement (3)
|
—
|
|
|
—
|
|
|
(9.7)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9.7)
|
|
|
Curtailment (3)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.3)
|
|
|
—
|
|
|
—
|
|
|
(1.3)
|
|
|
—
|
|
|
—
|
|
|
Actuarial loss (4)
|
41.5
|
|
|
23.7
|
|
|
0.8
|
|
|
9.4
|
|
|
11.2
|
|
|
3.2
|
|
|
50.9
|
|
|
34.9
|
|
|
4.0
|
|
|
Net periodic benefit cost (income)
|
$
|
43.6
|
|
|
$
|
19.7
|
|
|
$
|
(9.0)
|
|
|
$
|
6.1
|
|
|
$
|
6.9
|
|
|
$
|
(4.3)
|
|
|
$
|
49.7
|
|
|
$
|
26.6
|
|
|
$
|
(13.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Service cost is included in warehouse, selling and administrative expenses.
(2)These amounts are included in other expense, net, and represent non-operating retirement benefits.
(3)In 2017, the settlement gain is related to a lump sum offering accepted by participants. Both settlements and curtailments are included in other expense, net.
(4)Actuarial loss, or mark to market, includes measurement gains and losses resulting from changes since the prior measurement date in assumptions and plan experience as well as the difference between the expected and actual return on plan assets. These amounts are recorded in other expense, net.
The following summarizes pre-tax amounts included in AOCI at December 31, 2019 related to pension plan amendments:
|
|
|
|
|
|
|
|
(in millions)
|
Defined benefit pension plans
|
|
Net prior service cost
|
$
|
(1.1)
|
|
The following summarizes the amounts in AOCI at December 31, 2019 that are expected to be amortized as components of net periodic benefit cost (income) during the next year related to pension amendments:
|
|
|
|
|
|
|
|
(in millions)
|
Defined benefit pension plans
|
|
Prior service cost
|
$
|
(0.1)
|
|
Other postretirement benefit plan
The Company previously maintained a health care plan for retired employees in the US. The obligation associated with this plan as of December 31, 2019 and 2018 was $1.4 million and $1.8 million, respectively.
Actuarial assumptions
Defined benefit pension plans
The significant weighted average actuarial assumptions used in determining the benefit obligations and net periodic benefit cost (income) for the Company’s defined benefit plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
Foreign
|
|
|
|
|
December 31,
|
|
|
|
December 31,
|
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Actuarial assumptions used to determine benefit obligations at end of period:
|
|
|
|
|
|
|
|
|
Discount rate
|
3.28
|
%
|
|
4.47
|
%
|
|
2.14
|
%
|
|
2.92
|
%
|
|
Expected annual rate of compensation increase
|
N/A
|
|
N/A
|
|
2.85
|
%
|
|
2.85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
|
|
|
|
Foreign
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
2019
|
|
2018
|
|
2017
|
|
Actuarial assumptions used to determine net periodic benefit cost (income) for the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
4.47
|
%
|
|
3.87
|
%
|
|
4.39
|
%
|
|
2.92
|
%
|
|
2.61
|
%
|
|
2.84
|
%
|
|
Expected rate of return on plan assets
|
6.75
|
%
|
|
6.75
|
%
|
|
7.00
|
%
|
|
3.83
|
%
|
|
4.43
|
%
|
|
5.01
|
%
|
|
Expected annual rate of compensation increase
|
N/A
|
|
N/A
|
|
N/A
|
|
2.85
|
%
|
|
2.87
|
%
|
|
2.87
|
%
|
Discount rates are used to measure benefit obligations and the interest cost component of net periodic benefit cost (income). The Company selects its discount rates based on the consideration of equivalent yields on high-quality fixed income investments at each measurement date. Discount rates are based on a benefit cash flow-matching approach and represent the rates at which the Company’s benefit obligations could effectively be settled as of the measurement date.
For domestic defined benefit plans, the discount rates are based on a hypothetical bond portfolio approach. The hypothetical bond portfolio is constructed to comprise AA-rated corporate bonds whose cash flow from coupons and maturities match the expected future plan benefit payments.
The discount rate for the foreign defined benefit plans are based on a yield curve approach. For plans in countries with a sufficient corporate bond market, the expected future benefit payments are matched with a yield curve derived from AA-rated corporate bonds, subject to minimum amounts outstanding and meeting other selection criteria. For plans in countries without a sufficient corporate bond market, the yield curve is constructed based on prevailing government yields and an estimated credit spread to reflect a corporate risk premium.
The expected long-term rate of return on plan assets reflects management’s expectations on long-term average rates of return on funds invested to provide for benefits included in the benefit obligations. The long-term rate of return assumptions are based on the outlook for equity and fixed income returns, with consideration of historical returns, asset allocations, investment strategies and premiums for active management when appropriate. Assumptions reflect the expected rates of return at the beginning of the year.
Plan assets
Plan assets for defined benefit plans are invested in global equity and debt securities through professional investment managers with the objective to achieve targeted risk adjusted returns and to maintain liquidity sufficient to fund current benefit payments. Each funded defined benefit plan has an investment policy that is administered by plan trustees with the objective of meeting targeted asset allocations based on the circumstances of that particular plan. The investment strategy followed by the Company varies by country depending on the circumstances of the underlying plan. Less mature plan benefit obligations are funded by using more equity securities as they are expected to achieve long-term growth while exceeding inflation. More mature plan benefit obligations are funded using a higher allocation of fixed income securities as they are expected to produce current income with limited volatility. The Company has adopted a dynamic investment strategy whereby as the plan funded status improves, the investment strategy is migrated to more liability matching assets, and return seeking assets are reduced. Risk management practices include the use of multiple asset classes for diversification purposes. Specific guidelines for each asset class and investment manager are implemented and monitored.
The weighted average target asset allocation for defined benefit pension plans in the year ended December 31, 2019 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
Foreign
|
|
Asset category:
|
|
|
|
|
Equity securities
|
50.0
|
%
|
|
15.3
|
%
|
|
Debt securities
|
45.0
|
%
|
|
79.3
|
%
|
|
Other
|
5.0
|
%
|
|
5.4
|
%
|
|
Total
|
100.0
|
%
|
|
100.0
|
%
|
Plan asset valuation methodologies are described below:
|
|
|
|
|
|
|
|
Fair value methodology
|
Description
|
|
Cash
|
This represents cash at banks at fair value.
|
|
|
|
|
Investment funds
|
Values are based on the net asset value of the units held at year end. The net asset values are based on the fair value of the underlying assets of the funds, minus their liabilities, and then divided by the number of units outstanding at the valuation date. The funds are traded on private markets that are not active; however, the unit price is based primarily on observable market data of the fund’s underlying assets.
|
|
|
|
|
Insurance contracts
|
The fair value is based on the present value of the accrued benefit.
|
Domestic defined benefit plan assets
The following summarizes the fair value of domestic plan assets by asset category and level within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
(in millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Cash
|
$
|
2.5
|
|
|
$
|
2.5
|
|
|
$
|
—
|
|
|
Investments funds (1)
|
492.7
|
|
|
—
|
|
|
492.7
|
|
|
Total
|
$
|
495.2
|
|
|
$
|
2.5
|
|
|
$
|
492.7
|
|
|
|
|
|
|
|
|
(1)This category includes investments in 30.2% in US equities, 19.7% in non-US equities, 45.0% in US corporate bonds and 5.1% in other investments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
(in millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Cash
|
$
|
2.4
|
|
|
$
|
2.4
|
|
|
$
|
—
|
|
|
Investments funds (1)
|
426.2
|
|
|
—
|
|
|
426.2
|
|
|
Total
|
$
|
428.6
|
|
|
$
|
2.4
|
|
|
$
|
426.2
|
|
|
|
|
|
|
|
|
(1)This category includes investments in 29.6% in US equities, 19.4% in non-US equities, 46.3% in US corporate bonds and 4.7% in other investments.
Foreign defined benefit plan assets
The following summarizes the fair value of foreign plan assets by asset category and level within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
(in millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Cash
|
$
|
3.4
|
|
|
$
|
3.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
Investment funds (1)
|
581.2
|
|
|
—
|
|
|
581.2
|
|
|
—
|
|
|
Insurance contracts
|
22.2
|
|
|
—
|
|
|
—
|
|
|
22.2
|
|
|
Total investments
|
$
|
603.4
|
|
|
$
|
—
|
|
|
$
|
581.2
|
|
|
$
|
22.2
|
|
|
Total
|
$
|
606.8
|
|
|
$
|
3.4
|
|
|
$
|
581.2
|
|
|
$
|
22.2
|
|
|
|
|
|
|
|
|
|
|
(1)This category includes investments in 2.1% in US equities, 14.1% in non-US equities, 13.5% in non-US corporate bonds, 68.6% in non-US government bonds and 1.7% in other investments.
Changes in the foreign plan assets valued using significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
(in millions)
|
Insurance
contracts
|
|
Balance at January 1, 2019
|
$
|
18.5
|
|
|
Actual return to plan assets:
|
|
|
Related to assets still held at year end
|
3.6
|
|
|
Purchases, sales and settlements, net
|
0.5
|
|
|
Foreign exchange
|
(0.4)
|
|
|
Balance at December 31, 2019
|
$
|
22.2
|
|
The following summarizes the fair value of foreign plan assets by asset category and level within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
(in millions)
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Cash
|
$
|
9.7
|
|
|
$
|
9.7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
Investment funds (1)
|
494.0
|
|
|
—
|
|
|
494.0
|
|
|
—
|
|
|
Insurance contracts
|
18.5
|
|
|
—
|
|
|
—
|
|
|
18.5
|
|
|
Total investments
|
$
|
512.5
|
|
|
$
|
—
|
|
|
$
|
494.0
|
|
|
$
|
18.5
|
|
|
Total
|
$
|
522.2
|
|
|
$
|
9.7
|
|
|
$
|
494.0
|
|
|
$
|
18.5
|
|
|
|
|
|
|
|
|
|
|
(1)This category includes investments in 8.0% in US equities, 17.5% in non-US equities, 34.2% in non-US corporate bonds, 36.3% in non-US government bonds and 4.0% in other investments.
Changes in the foreign plan assets valued using significant unobservable inputs (Level 3):
|
|
|
|
|
|
|
|
(in millions)
|
Insurance
contracts
|
|
Balance at January 1, 2018
|
$
|
18.2
|
|
|
Actual return on plan assets:
|
|
|
Related to assets still held at year end
|
0.7
|
|
|
Purchases, sales and settlements, net
|
0.4
|
|
|
Foreign exchange
|
(0.8)
|
|
|
Balance at December 31, 2018
|
$
|
18.5
|
|
Contributions
The Company expects to contribute approximately $19.4 million and $3.5 million to its domestic and foreign defined benefit pension plan funds in 2020, respectively, including direct payments to plan participants in unfunded plans.
Benefit payments
Benefit payments that are projected to be paid from plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit pension plans
|
|
|
|
|
|
(in millions)
|
Domestic
|
|
Foreign
|
|
Total
|
|
2020
|
$
|
35.6
|
|
|
$
|
17.5
|
|
|
$
|
53.1
|
|
|
2021
|
36.7
|
|
|
17.1
|
|
|
53.8
|
|
|
2022
|
37.6
|
|
|
19.5
|
|
|
57.1
|
|
|
2023
|
38.5
|
|
|
19.4
|
|
|
57.9
|
|
|
2024
|
39.2
|
|
|
21.3
|
|
|
60.5
|
|
|
2024 through 2028
|
204.1
|
|
|
115.6
|
|
|
319.7
|
|
Defined contribution plans
The Company provides defined contribution plans and had contribution expense of $29.9 million, $32.0 million and $30.0 million in the years ended December 31, 2019, 2018 and 2017, respectively.
Multi-employer plans
The Company contributes to several multi-employer pension plans based on obligations arising from collective bargaining agreements. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects:
•Assets contributed to the multi-employer plan by the Company may be used to provide benefits to employees of other participating employers.
•If the Company stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers. Similarly, the Company could be liable for underfunded obligations of other, departed employers.
•If the Company chooses to stop participating in some of its multi-employer plans, it may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The Company’s participation in these plans for the annual period ended December 31, 2019 is outlined in the table below. The Pension Protection Act (PPA) zone status is the most recently available and is certified by the plan's actuary. Among other factors, plans in the “red zone” are less than 65 percent funded, plans in the “yellow zone” are less than 80 percent funded and plans in the “green zone” are at least 80 percent funded. There are no minimum contributions required for future periods by the collective-bargaining agreements, statutory obligations or other contractual obligations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension fund
|
EIN/Pension
plan number
|
|
PPA zone status
|
|
|
|
FIP/RP
status
pending/
implemented
|
|
Contributions (1)
|
|
|
|
|
|
Surcharge
imposed
|
|
Expiration
dates of
collective
bargaining
agreement(s)
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
|
|
Western Conference of Teamsters Pension Plan
|
91-6145047/001
|
|
Green as of January 1, 2018
|
|
Green as of January 1, 2017
|
|
No
|
|
$
|
1.5
|
|
|
$
|
1.5
|
|
|
$
|
1.5
|
|
|
No
|
|
April 30, 2020
to
July 31, 2023
|
|
Central States, Southeast and Southwest Areas Pension Plan
|
36-6044243/001
|
|
Red as of January 1, 2018
|
|
Red as of January 1, 2017
|
|
Implemented
|
|
1.1
|
|
|
1.0
|
|
|
1.1
|
|
|
No
|
|
January 31, 2020
to
March 31, 2023
|
|
New England Teamsters and Trucking Industry Pension Fund
|
04-6372430/001
|
|
Red as of October 1, 2017
|
|
Red as of October 1, 2016
|
|
Implemented
|
|
0.1
|
|
|
0.2
|
|
|
0.1
|
|
|
No
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
Total
contributions:
|
|
$
|
2.7
|
|
|
$
|
2.7
|
|
|
$
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)The plan contributions by the Company did not represent more than five percent of total contributions to the plans as indicated in the plans’ most recently available annual report.
12. Stock-based compensation
In May 2017, the Company replaced and succeeded the Univar Inc. 2015 Stock Incentive Plan (the “2015 Plan”) with the Univar Inc. 2017 Omnibus Equity Incentive Plan (the “2017 Plan”). There were no changes to the outstanding awards related to the 2015 Plan and the Univar Inc. 2011 Stock Incentive Plan (together with the 2015 Plan and the 2017 Plan, the “Plans”).
The 2017 Plan allows the Company to issue awards to employees, consultants, and directors of the Company and its subsidiaries. Awards may be made in the form of stock options, stock purchase rights, restricted stock, restricted stock units, performance shares, performance units, stock appreciation rights, dividend equivalents, deferred share units or other stock-based awards. As of December 31, 2019, there were 9.2 million shares authorized under the Plans.
For the years ended December 31, 2019, 2018 and 2017, the Company recognized total stock-based compensation expense within other operating expenses, net of $25.1 million, $20.7 million and $19.7 million, and a net tax (benefit) expense relating to stock-based compensation expense of $(2.4) million, $(2.6) million and $(3.7) million, respectively.
Stock options
Stock options expire ten years after the grant date and generally become exercisable over a four-year period or less, based on continued employment, with annual vesting. The exercise price of a stock option is determined based upon the fair value of the common stock at the time of each grant. Participants have no stockholder rights until the time of exercise. The Company will issue new shares upon exercise of stock options granted under the Plans.
The following reflects stock option activity under the Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
stock
options
|
|
Weighted-
average
exercise price
|
|
Weighted-
average
remaining
contractual
term (in years)
|
|
Aggregate
intrinsic value
(in millions)
|
|
Outstanding at January 1, 2019
|
3,044,154
|
|
|
$
|
24.06
|
|
|
|
|
|
|
Granted
|
1,204,550
|
|
|
21.77
|
|
|
|
|
|
|
Exercised
|
(349,845)
|
|
|
18.74
|
|
|
|
|
|
|
Forfeited
|
(208,234)
|
|
|
24.81
|
|
|
|
|
|
|
Outstanding at December 31, 2019
|
3,690,625
|
|
|
$
|
23.77
|
|
|
|
|
|
|
Exercisable at December 31, 2019
|
1,901,291
|
|
|
$
|
23.72
|
|
|
4.4
|
|
$
|
4.4
|
|
|
Expected to vest after December 31, 2019
|
1,789,334
|
|
|
$
|
23.83
|
|
|
8.7
|
|
$
|
0.7
|
|
As of December 31, 2019, the Company has unrecognized stock-based compensation expense related to non-vested stock options of approximately $3.4 million, which will be recognized over a weighted-average period of 0.9 years.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
Total intrinsic value of stock options exercised
|
$
|
0.9
|
|
|
$
|
2.4
|
|
|
$
|
16.7
|
|
|
Fair value of stock options vested
|
7.9
|
|
|
|
8.1
|
|
|
|
7.8
|
|
Restricted stock
Non-vested restricted stock primarily relates to awards for members of the Company’s Board of Directors which vest over 12 months. The grant date fair value of restricted stock is based on the market price of the common stock on that date. Non-vested shares of restricted stock may not be sold or transferred and are subject to forfeiture until vesting. Both vested and non-vested shares of restricted stock are included in the Company’s shares outstanding. Dividend equivalents are available for non-vested shares of restricted stock if dividends are declared by the Company during the vesting period.
The following table reflects restricted stock activity under the Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Restricted
stock
|
|
Weighted
average
grant-date
fair value
|
|
Non-vested at January 1, 2019
|
28,780
|
|
|
$
|
28.50
|
|
|
Granted
|
33,744
|
|
|
21.34
|
|
|
Vested
|
(28,780)
|
|
|
28.50
|
|
|
Forfeited
|
(5,624)
|
|
|
21.34
|
|
|
Non-vested at December 31, 2019
|
28,120
|
|
|
$
|
21.34
|
|
As of December 31, 2019, the Company has unrecognized stock-based compensation expense related to non-vested restricted stock awards of approximately $0.2 million, which will be recognized over a weighted-average period of 0.4 years.
The weighted-average grant-date fair value of restricted stock was $28.50 and $29.92 in 2018 and 2017, respectively.
Restricted stock units (RSUs)
RSUs awarded to employees generally vest in three or four equal annual installments, subject to continued employment. Each RSU converts into one share of Univar Solutions common stock on the applicable vesting date. RSUs may not be sold, pledged or otherwise transferred until they vest and are subject to forfeiture. The grant date fair value is based on the market price of Univar Solutions stock on that date.
The following table reflects RSUs activity under the Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Restricted Stock Unit
|
|
Weighted-
average
grant-date fair value
|
|
Non-vested at January 1, 2019
|
801,200
|
|
|
$
|
23.98
|
|
|
Granted
|
719,183
|
|
|
21.99
|
|
|
Vested
|
(364,820)
|
|
|
20.89
|
|
|
Forfeited
|
(66,145)
|
|
|
24.86
|
|
|
Non-vested at December 31, 2019
|
1,089,418
|
|
|
$
|
23.67
|
|
As of December 31, 2019, the Company has unrecognized stock-based compensation expense related to non-vested RSUs awards of approximately $10.3 million, which will be recognized over a weighted-average period of 1.2 years.
Performance-based restricted stock units (PRSUs)
The Company awards performance based shares to certain employees. These awards vest upon the passage of time and the achievement of performance criteria. For grants with Company based performance criteria, the vesting period is over three years with some shares vesting over each annual period. We review progress toward the attainment of the performance criteria each quarter during the vesting period. When it is probable the minimum performance criteria for the award will be achieved, we begin recognizing the expense equal to the proportionate share of the total fair value. The total expense recognized over the duration of performance awards will equal the date of grant multiplied by the number of shares ultimately awarded based on the level of attainment of the performance criteria. For grants with market performance criteria, the fair value is determined on the grant date and is calculated using the same inputs for expected volatility, and risk-free rate as stock options, with a duration of two years. The total expense recognized over the duration of the award will equal the fair value, regardless if the market performance criteria is met.
The following table reflects PRSUs activity under the Plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Performance-Based Restricted Stock Unit
|
|
Weighted-
average
grant-date fair value
|
|
Non-vested at January 1, 2019
|
256,568
|
|
|
$
|
27.18
|
|
|
Granted
|
275,725
|
|
|
22.71
|
|
|
Vested
|
(5,343)
|
|
|
30.98
|
|
|
Forfeited
|
(7,122)
|
|
|
26.90
|
|
|
Non-vested at December 31, 2019
|
519,828
|
|
|
$
|
24.77
|
|
As of December 31, 2019, the Company has unrecognized stock-based compensation expense related to non-vested PRSUs awards of approximately $1.9 million, which will be recognized over a weighted-average period of 1.6 years.
Fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
Fair value of restricted stock, RSUs and PRSUs vested
|
8.6
|
|
|
11.8
|
|
|
22.8
|
|
Employee stock purchase plan
The Univar Solutions Inc. Employee Stock Purchase Plan, or ESPP, authorizing the issuances of up to 2.0 million shares of the Company’s common stock allows qualified participants to purchase the Company’s common stock at 95% of its market price during the last day of two offering periods in each calendar year. The first offering period is January through June, and the second from July through December. As of December 31, 2019, the total number of shares issued under the plan for the two offering periods in 2019 was 64,740 shares.
Stock-based compensation fair value assumptions
The fair value of the Company’s stock that is factored into the fair value of stock options and utilized for restricted stock, RSUs and PRSUs with internally developed performance conditions is based on the grant date closing price on the New York Stock Exchange.
The Black-Scholes-Merton option valuation model was used to calculate the fair value of stock options. The weighted average grant-date fair value of stock options was $6.31, $8.69 and $8.40 for the years ended December 31, 2019, 2018 and 2017 respectively. The weighted-average assumptions used under the Black-Scholes-Merton option valuation model were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
|
2019
|
|
2018
|
|
2017
|
|
Risk-free interest rate (1)
|
2.6
|
%
|
|
2.7
|
%
|
|
2.1
|
%
|
|
Expected dividend yield
|
—
|
|
|
—
|
|
|
—
|
|
|
Expected volatility (2)
|
23.7
|
%
|
|
23.2
|
%
|
|
25.5
|
%
|
|
Expected term (years) (3)
|
6.0
|
|
6.0
|
|
5.9
|
|
|
|
|
|
|
|
(1)The risk-free interest rate is based on the US Treasury yield for a term consistent with the expected term of the stock options at the time of grant.
(2)As the Company does not have sufficient historical volatility data, the expected volatility is based on the average historical data of a peer group of public companies over a period equal to the expected term of the stock options.
(3)As the Company does not have sufficient historical exercise data under the Plans, the expected term is based on the average of the vesting period of each tranche and the original contract term of 10 years.
13. Accumulated other comprehensive loss
The following table presents the changes in accumulated other comprehensive loss by component, net of tax.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Cash flow
hedges
|
|
Defined
benefit
pension
|
|
Currency
translation
|
|
Total AOCI
|
|
Balance as of January 1, 2017
|
$
|
—
|
|
|
$
|
1.2
|
|
|
$
|
(391.1)
|
|
|
$
|
(389.9)
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
4.4
|
|
|
(2.2)
|
|
|
107.1
|
|
|
109.3
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
2.3
|
|
|
(0.2)
|
|
|
—
|
|
|
2.1
|
|
|
Net current period other comprehensive income (loss)
|
|
$
|
6.7
|
|
|
$
|
(2.4)
|
|
|
$
|
107.1
|
|
|
$
|
111.4
|
|
|
Balance as of December 31, 2017
|
$
|
6.7
|
|
|
$
|
(1.2)
|
|
|
$
|
(284.0)
|
|
|
$
|
(278.5)
|
|
|
Impact due to adoption of ASU 2017-12 (1)
|
0.5
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
8.3
|
|
|
(2.0)
|
|
|
(97.0)
|
|
|
(90.7)
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
(6.6)
|
|
|
2.1
|
|
|
—
|
|
|
(4.5)
|
|
|
Net current period other comprehensive income (loss)
|
|
$
|
2.2
|
|
|
$
|
0.1
|
|
|
$
|
(97.0)
|
|
|
$
|
(94.7)
|
|
|
Balance as of December 31, 2018
|
$
|
8.9
|
|
|
$
|
(1.1)
|
|
|
$
|
(381.0)
|
|
|
$
|
(373.2)
|
|
|
Impact due to adoption of ASU 2018-02 (2)
|
$
|
1.5
|
|
|
$
|
—
|
|
|
$
|
(4.7)
|
|
|
$
|
(3.2)
|
|
|
Other comprehensive (loss) income before reclassifications
|
|
(23.6)
|
|
|
—
|
|
|
22.8
|
|
|
(0.8)
|
|
|
Amounts reclassified from accumulated other comprehensive loss
|
(2.2)
|
|
|
0.1
|
|
|
—
|
|
|
(2.1)
|
|
|
Net current period other comprehensive (loss) income
|
|
$
|
(24.3)
|
|
|
$
|
0.1
|
|
|
$
|
18.1
|
|
|
$
|
(6.1)
|
|
|
Balance as of December 31, 2019
|
$
|
(15.4)
|
|
|
$
|
(1.0)
|
|
|
$
|
(362.9)
|
|
|
$
|
(379.3)
|
|
|
|
|
|
|
|
|
|
|
(1)Adjusted due to the adoption of ASU 2017-12 “Targeted Improvements to Accounting for Hedging Activities” on January 1, 2018.
(2)Adjusted due to the adoption of ASU 2018-02 on January 1, 2019. Refer to “Note 2: Significant accounting policies” for more information.
The following is a summary of the amounts reclassified from accumulated other comprehensive loss to net (loss) income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
Year ended December 31, 2019 (1)
|
|
Year ended December 31, 2018 (1)
|
|
Year ended December 31, 2017 (1)
|
|
Location of impact on
statement of operations
|
|
Amortization of defined benefit pension items:
|
|
|
|
|
|
|
|
|
Prior service cost (credits)
|
$
|
0.1
|
|
|
$
|
2.7
|
|
|
$
|
(0.2)
|
|
|
Other expense, net
|
|
Tax benefit
|
—
|
|
|
(0.6)
|
|
|
—
|
|
|
Income tax expense
|
|
Net of tax
|
$
|
0.1
|
|
|
$
|
2.1
|
|
|
$
|
(0.2)
|
|
|
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
|
Interest rate swap contracts
|
$
|
(8.0)
|
|
|
$
|
(8.1)
|
|
|
$
|
3.8
|
|
|
Interest expense
|
|
Cross-currency swap contracts
|
5.2
|
|
|
—
|
|
|
—
|
|
|
Interest expense and other expense, net
|
|
Tax expense
|
0.6
|
|
|
1.5
|
|
|
(1.5)
|
|
|
Income tax expense
|
|
Net of tax
|
$
|
(2.2)
|
|
|
$
|
(6.6)
|
|
|
$
|
2.3
|
|
|
|
|
Total reclassifications for the period
|
$
|
(2.1)
|
|
|
$
|
(4.5)
|
|
|
$
|
2.1
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Amounts in parentheses indicate credits to net income in the consolidated statement of operations.
Refer to “Note 11: Employee benefit plans” for additional information regarding the amortization of defined benefit pension items, “Note 20: Derivatives” for cash flow hedging activity.
14. Property, plant and equipment, net
Property, plant and equipment, net consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
Land and buildings
|
$
|
875.9
|
|
|
$
|
790.9
|
|
|
Tank farms
|
283.9
|
|
|
276.0
|
|
|
Machinery, equipment and other
|
983.8
|
|
|
836.7
|
|
|
Less: Accumulated depreciation
|
(1,037.9)
|
|
|
(970.1)
|
|
|
Subtotal
|
$
|
1,105.7
|
|
|
$
|
933.5
|
|
|
Work in progress
|
46.7
|
|
|
22.3
|
|
|
Property, plant and equipment, net
|
$
|
1,152.4
|
|
|
$
|
955.8
|
|
15. Goodwill and intangible assets
Goodwill
The following is a summary of the activity in goodwill by segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
USA
|
|
Canada
|
|
EMEA
|
|
LATAM
|
|
Total
|
|
Balance, January 1, 2018
|
$
|
1,325.2
|
|
|
$
|
468.7
|
|
|
$
|
1.2
|
|
|
$
|
23.3
|
|
|
$
|
1,818.4
|
|
|
Additions
|
—
|
|
|
—
|
|
|
7.6
|
|
|
—
|
|
|
7.6
|
|
|
Purchase price adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.2)
|
|
|
(3.2)
|
|
|
Other adjustments
|
—
|
|
|
(2.4)
|
|
|
—
|
|
|
—
|
|
|
(2.4)
|
|
|
Foreign exchange
|
—
|
|
|
(36.4)
|
|
|
(0.5)
|
|
|
(2.8)
|
|
|
(39.7)
|
|
|
Balance, December 31, 2018
|
$
|
1,325.2
|
|
|
$
|
429.9
|
|
|
$
|
8.3
|
|
|
$
|
17.3
|
|
|
$
|
1,780.7
|
|
|
Additions
|
540.1
|
|
|
3.8
|
|
|
—
|
|
|
11.8
|
|
|
555.7
|
|
|
Other adjustments
|
(63.0)
|
|
|
(14.2)
|
|
|
—
|
|
|
—
|
|
|
(77.2)
|
|
|
Foreign exchange
|
—
|
|
|
21.6
|
|
|
0.1
|
|
|
(0.1)
|
|
|
21.6
|
|
|
Balance, December 31, 2019
|
$
|
1,802.3
|
|
|
$
|
441.1
|
|
|
$
|
8.4
|
|
|
$
|
29.0
|
|
|
$
|
2,280.8
|
|
Additions to goodwill in 2019 related to the acquisition of Nexeo and in 2018 related to the acquisition of Kemetyl and Earthoil. Refer to “Note 3: Business combinations” for further information. The purchase price adjustments in 2018 related to the Tagma acquisition. Other adjustments to goodwill in 2019 relate to the disposition of the Environmental Sciences business and in 2018 relate to immaterial dispositions. Accumulated impairment losses on goodwill were $253.9 million, $255.6 million and $271.3 million at December 31, 2019, December 31, 2018 and January 1, 2018, respectively.
As of October 1, 2019, the Company performed its annual impairment review and concluded the fair value exceeded the carrying value for all reporting units. There were no events or circumstances from the date of the assessment through December 31, 2019 that would affect this conclusion.
Intangible assets, net
The gross carrying amounts and accumulated amortization of the Company’s intangible assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
(in millions)
|
Gross
|
|
Accumulated
amortization
|
|
Net
|
|
Gross
|
|
Accumulated
amortization
|
|
Net
|
|
Customer relationships
|
$
|
986.4
|
|
|
$
|
(680.8)
|
|
|
$
|
305.6
|
|
|
$
|
846.1
|
|
|
$
|
(620.3)
|
|
|
$
|
225.8
|
|
|
Other
|
182.0
|
|
|
(167.4)
|
|
|
14.6
|
|
|
175.1
|
|
|
(162.8)
|
|
|
12.3
|
|
|
Total intangible assets
|
$
|
1,168.4
|
|
|
$
|
(848.2)
|
|
|
$
|
320.2
|
|
|
$
|
1,021.2
|
|
|
$
|
(783.1)
|
|
|
$
|
238.1
|
|
Other intangible assets consist of intellectual property trademarks, trade names, producer relationships and contracts, non-compete agreements and exclusive distribution rights.
The estimated annual amortization expense in each of the next five years is as follows:
|
|
|
|
|
|
|
|
(in millions)
|
|
|
2020
|
$
|
54.1
|
|
|
2021
|
50.5
|
|
|
2022
|
45.3
|
|
|
2023
|
41.4
|
|
|
2024
|
32.0
|
|
16. Impairment charges
During the third quarter of 2019, the Company announced closure of certain production facilities in USA. The Company determined that these decisions indicated a triggering event, requiring the assessment of recoverability of these long-lived assets. Testing the assets for recoverability involves developing estimates of future cash flows directly associated with, and that are expected to arise as a direct result of, the use and eventual disposition of the assets. As the inputs for testing recoverability are largely based on management’s judgments and are not generally observable in active markets, the Company considers such measurements to be Level 3 measurements in the fair value hierarchy.
The Company tested the recoverability of its long-lived assets and determined the carrying amount of the assets exceeded the sum of the expected undiscounted future cash flows. As a result, the Company recorded a non-cash, pretax impairment charge of $7.0 million related to property, plant and equipment within its consolidated statements of operations during the year ended December 31, 2019.
17. Other accrued expenses
As of December 31, 2019, other accrued expenses that were greater than five percent of total current liabilities consisted of current tax liabilities of $87.1 million, comprised of income, VAT and local indirect taxes payable and customer prepayments and deposits of $81.5 million. As of December 31, 2018, there were no components within other accrued expenses that were greater than five percent of total current liabilities.
18. Debt
Short-term financing
Short-term financing consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
Amounts drawn under credit facilities
|
$
|
0.5
|
|
|
$
|
4.7
|
|
|
Bank overdrafts
|
0.2
|
|
|
3.4
|
|
|
Total
|
$
|
0.7
|
|
|
$
|
8.1
|
|
The weighted average interest rate on short-term financing was 3.8% and 3.0% as of December 31, 2019 and 2018, respectively.
As of December 31, 2019 and 2018, the Company had $158.5 million and $139.4 million, respectively, in outstanding letters of credit.
Long-term debt
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
Senior Term Loan Facilities:
|
|
|
|
|
Term B-3 Loan due 2024, variable interest rate of 4.05% and 4.77% at December 31, 2019 and December 31, 2018, respectively
|
$
|
1,438.0
|
|
|
$
|
1,747.8
|
|
|
Term B-5 Loan due 2026, variable interest rate of 3.80% at December 31, 2019
|
400.0
|
|
|
—
|
|
|
Asset Backed Loan (ABL) Facilities:
|
|
|
|
|
North American ABL Facility due 2024, variable interest rate of 5.25% at December 31, 2019
|
200.0
|
|
|
—
|
|
|
Canadian ABL Term Loan due 2022, variable interest rate of 4.31% at December 31, 2019
|
130.9
|
|
|
—
|
|
|
Euro ABL Facility due 2023, variable interest rate of 1.75% at December 31, 2018
|
—
|
|
|
58.5
|
|
|
North American ABL Facility due 2020, variable interest rate of 4.19% at December 31, 2018
|
—
|
|
|
134.7
|
|
|
Senior Unsecured Notes:
|
|
|
|
|
Senior Unsecured Notes due 2027, fixed interest rate of 5.13% at December 31, 2019
|
500.0
|
|
|
—
|
|
|
Senior Unsecured Notes due 2023, fixed interest rate of 6.75% at December 31, 2018
|
—
|
|
|
399.5
|
|
|
Finance lease obligations
|
71.2
|
|
|
54.8
|
|
|
Total long-term debt before discount
|
$
|
2,740.1
|
|
|
$
|
2,395.3
|
|
|
Less: unamortized debt issuance costs and discount on debt
|
(26.3)
|
|
|
(23.2)
|
|
|
Total long-term debt
|
$
|
2,713.8
|
|
|
$
|
2,372.1
|
|
|
Less: current maturities
|
(25.0)
|
|
|
(21.7)
|
|
|
Total long-term debt, excluding current maturities
|
$
|
2,688.8
|
|
|
$
|
2,350.4
|
|
The weighted average interest rate on long-term debt was 4.25% and 4.29% as of December 31, 2019 and 2018, respectively.
As of December 31, 2019, future contractual maturities of long-term debt, excluding finance lease obligations, are as follows:
|
|
|
|
|
|
|
|
(in millions)
|
|
|
2020
|
$
|
4.0
|
|
|
2021
|
134.9
|
|
|
2022
|
4.0
|
|
|
2023
|
4.0
|
|
|
2024
|
1,642.0
|
|
|
Thereafter
|
880.0
|
|
|
Total
|
$
|
2,668.9
|
|
Refer to “Note 22: Leasing” for additional information regarding finance lease obligations.
Senior Term Loan Facilities
In the first quarter of 2019 to finance the acquisition of Nexeo, the Company entered into the Fourth Amendment to its credit agreement, dated July 1, 2015, which provided a new Term B-4 Loan facility in an aggregate principal amount of $300.0 million (“Term B-4 Loan”) and a new Euro Term B-2 Loan facility in an aggregate principal amount of €425.0 million (“EUR Term B-2 Loan”). In the second quarter of 2019, using the proceeds from the sale of Nexeo Plastics, the Company repaid a portion of its outstanding EUR Term B-2, Term B-3 and Term B-4 Loans. As a result of the prepayment, no mandatory principal payments are required until 2024 for the Term B-3 Loan.
In the fourth quarter of 2019, the Company repaid in full the remaining Term B-4 Loan and entered into the Fifth Amendment which provided a new Term B-5 Loan facility in an aggregate principal amount of $400.0 million that matures on July 1, 2026 (“Term B-5 Loan”). The proceeds from the new Term B-5 loan were used to repay in full the remaining EUR Term B-2 Loan. The Term B-5 Loan is payable in quarterly installments of 0.25% of the aggregate initial principal amount. The interest rate applicable to the Term Loan B-5 is based on, at the borrower’s option, (i) a fluctuating rate of interest determined by reference to a base rate plus an applicable margin equal to 1.00% or (ii) a Eurocurrency rate plus an applicable margin equal to 2.00%. The Company can repay the Term B-5 Loan in whole or part without penalty.
As a result of the Fifth Amendment of the Term B-5 Loan and the repayment of the Term B-4 Loan, the Company recognized a loss on extinguishment of debt of $9.4 million during the year ended December 31, 2019.
ABL Facilities
In 2019, the Company amended and restated its July 28, 2015 ABL credit facility. The 2019 amendment, which matures on February 28, 2024, provides a five year senior secured ABL credit facility in an aggregate amount of $1.2 billion and $325.0 million, for the US and Canadian revolving commitments (“North American ABL Facility”), respectively, and a three year $175.0 million aggregate secured Canadian dollar ABL term loan facility (“ABL Term Loan”) (collectively, the “New Senior ABL Facility”). Borrowing availability is determined by a borrowing base consisting of eligible inventory and eligible accounts receivable.
The interest rate on the ABL Term Loan is on a quarterly adjusted rate of interest determined by reference to either a prime or BA rate, at our option, plus an applicable margin. For the US and Canadian revolving loans, the adjusted interest rate is a base or eurocurrency rate plus an applicable margin. The ABL Term Loan is payable in quarterly installments with a final maturity on February 28, 2022.
As a result of the 2019 amendment related to the New Senior ABL Facility, the Company recognized a loss on extinguishment of debt of $0.7 million during the year ended December 31, 2019.
Senior Unsecured Notes
During 2019, the Company issued $500.0 million in Senior Unsecured Notes, due December 1, 2027 (“2027 Senior Notes”), with a fixed interest rate of 5.125%. The net proceeds were used to repay all $399.5 million principal outstanding under the 6.75% Notes due 2023 and a portion of the debt outstanding under the North American ABL Facility. The Company can prepay the 2027 Senior Notes in whole or part at a premium on or after December 1, 2022 and without a premium on or after December 1, 2024.
As a result of this transaction, we recorded a loss on extinguishment of debt of $9.7 million during the year ended December 31, 2019.
Borrowing availability and assets pledged as collateral
Availability of our credit facilities is determined based upon available qualifying collateral, as defined in the North American ABL Facility and Euro ABL Facility credit agreement.
Unused line fees are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2019
|
|
2018
|
|
$1.525 billion North American ABL Facility
|
0.300
|
%
|
|
0.375
|
%
|
|
€200 million Euro ABL Facility
|
0.375
|
%
|
|
0.375
|
%
|
The North American ABL Facility is secured by a first priority lien of accounts receivable and inventories of our US and Canadian operating subsidiaries. In addition, 65% of the shares of certain foreign subsidiaries have been pledged as security.
The Senior Term Loan Facilities are secured by substantially all of the assets of the US operating and management subsidiaries and are secured by a second priority lien on such accounts receivable and inventory.
The Euro ABL Facility is primarily secured by accounts receivable and inventories of the Company’s subsidiaries in Belgium, France, the Netherlands, and United Kingdom.
Assets pledged are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
Cash
|
$
|
230.8
|
|
|
$
|
45.5
|
|
|
Trade accounts receivable, net
|
981.4
|
|
|
906.1
|
|
|
Inventories
|
668.8
|
|
|
674.0
|
|
|
Prepaid expenses and other current assets
|
206.3
|
|
|
96.9
|
|
|
Property, plant and equipment, net
|
956.1
|
|
|
743.0
|
|
|
Total
|
$
|
3,043.4
|
|
|
$
|
2,465.5
|
|
Debt covenants
The Company is in compliance with all debt covenants. The North American ABL Facility and ABL Term Loan are subject to comply with a minimum fixed charge coverage ratio. As of December 31, 2019 and 2018, we exceeded the minimum ratio and therefore the financial covenant remains inapplicable.
Other Information
The fair values of debt were based on current market quotes for similar borrowings and credit risk adjusted for liquidity, margins, and amortization, as necessary and are classified as level 2 in the fair value hierarchy.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
December 31, 2018
|
|
|
|
(in millions)
|
Carrying
amount
|
|
Fair
value
|
|
Carrying
amount
|
|
Fair
value
|
|
Fair value of debt
|
$
|
2,713.8
|
|
|
$
|
2,770.7
|
|
|
$
|
2,372.1
|
|
|
$
|
2,314.3
|
|
The Company is exposed to credit loss and loss of liquidity availability if the financial institutions or counterparties issuing us debt securities fail to perform. We minimize exposure to these credit risks by dealing with a diversified group of investment grade financial institutions. We manage credit risk by monitoring the credit ratings and market indicators of credit risk of our lending counterparties. We do not anticipate any non-performance by any of the counterparties.
19. Fair value measurements
The Company classifies its financial instruments according to the fair value hierarchy described in “Note 2: Significant accounting policies.”
Items measured at fair value on a recurring basis
The following table presents the Company’s gross assets and liabilities measured on a recurring basis and classified as level 2 within the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets
|
|
|
|
|
Derivative Liabilities
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
December 31,
|
|
|
|
(in millions)
|
Balance Sheet Location
|
|
2019
|
|
2018
|
|
Balance Sheet Location
|
2019
|
|
2018
|
|
Designated Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
Cross currency swap contracts
|
Prepaid expenses and other current assets
|
|
|
$
|
7.2
|
|
|
$
|
—
|
|
|
Other long-term liabilities
|
|
$
|
12.1
|
|
|
|
$
|
—
|
|
|
Interest rate swap contracts
|
Prepaid expenses and other current assets
|
|
|
—
|
|
|
12.4
|
|
|
Other accrued expenses
|
|
6.4
|
|
|
|
—
|
|
|
Interest rate swap
|
Other assets
|
|
|
—
|
|
|
1.5
|
|
|
Other long-term liabilities
|
|
14.0
|
|
|
|
—
|
|
|
Undesignated Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts
|
Prepaid expenses and other current assets
|
|
|
$
|
0.5
|
|
|
$
|
0.3
|
|
|
Other accrued expenses
|
|
$
|
1.0
|
|
|
|
$
|
0.2
|
|
|
Cross currency swap contracts
|
Prepaid expenses and other current assets
|
|
|
|
0.4
|
|
|
—
|
|
|
|
Other long-term liabilities
|
|
0.6
|
|
|
|
—
|
|
|
Interest rate swap contracts
|
Prepaid expenses and other current assets
|
|
|
—
|
|
|
—
|
|
|
Other accrued expenses
|
|
1.0
|
|
|
|
—
|
|
|
Interest rate swap contracts
|
Other assets
|
|
|
—
|
|
|
—
|
|
|
Other long-term liabilities
|
|
1.9
|
|
|
|
—
|
|
The net amounts by legal entity related to foreign currency contracts included in prepaid and other current assets were $0.2 million and $0.3 million as of December 31, 2019 and 2018, respectively. The net amounts related to foreign currency contracts included in other accrued expenses were $0.7 million and $0.2 million as of December 31, 2019 and 2018, respectively.
The following table is a reconciliation of the fair value measurements that use significant unobservable inputs (Level 3), which consist of the warrant liability related to the Nexeo acquisition for 2019 and contingent consideration liabilities (i.e. earn-outs) related to the Tagma acquisition for 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant Liability
|
|
Contingent Consideration
|
|
(in millions)
|
2019
|
|
2018
|
|
Fair value as of January 1
|
$
|
—
|
|
|
$
|
0.4
|
|
|
Additions
|
26.0
|
|
|
—
|
|
|
Fair value adjustments
|
7.0
|
|
|
1.0
|
|
|
Payments
|
—
|
|
|
(1.4)
|
|
|
Fair value as of December 31
|
$
|
33.0
|
|
|
$
|
—
|
|
The fair value of the warrant liability is calculated using the Black-Scholes-Merton option valuation model. The fair value of the warrants was computed using the following assumptions: expected option life two years, volatility 27.48%, and risk-free interest rate of 1.58%. As the Company does not have sufficient historical volatility data, the expected volatility is based on the average historical data of a peer group of public companies over a period equal to the expected term of the warrants. The risk-free interest rate assumption was based on the US Treasury rates.
Fair value adjustments are recorded within other operating expenses, net in the consolidated statement of operations. Changes in the fair value of contingent consideration are recorded in the other, net line item of the operating activities within the consolidated statement of cash flows. Cash payments up to the amount of the original acquisition value are recorded within financing activities of the consolidated statement of cash flows. The portion of contingent consideration cash payments in excess of the original acquisition value are recorded within operating activities of the consolidated statement of cash flows.
20. Derivatives
Foreign currency derivatives
The Company uses forward currency contracts to hedge earnings from the effects of foreign exchange relating to certain of the Company’s intercompany and third-party receivables and payables denominated in a foreign currency. These derivative instruments are not formally designated as hedges by the Company and the terms of these instruments range from one to three months.
Interest rate swaps
The objective of the designated interest rate swap contracts is to offset the variability of cash flows in LIBOR indexed debt interest payments attributable to changes in the aforementioned benchmark interest rate related to the Term B-3 Loan and a portion of debt outstanding under the North American ABL Facility. The swaps have maturities at various dates through June 2024. On December 17, 2019, the Company terminated $750.0 million of the 2017 swaps resulting in a $1.1 million gain. As the hedge was considered to be effective and the forecasted transaction was considered probable of occurring, part of the gain remained in accumulated other comprehensive loss and will be amortized as a reduction to interest expense over the term of the forecasted Term B Loan.
Cross currency swap contracts
Cross currency swap contracts are used to effectively convert the Term B-5 Loan’s principal amount of floating rate US dollar denominated debt of $400.0 million, including interest payments, to fixed-rate Euro denominated debt maturing in November 2024. As of December 31, 2019, approximately 95% of the cross currency swaps are designated as a cash flow hedge.
The Company uses both undesignated interest rate swap contracts and cross currency swaps to manage interest rate variability and mitigate foreign exchange exposure.
Notional amounts and fair value of derivative instruments
The following table presents the notional amounts of the Company’s outstanding derivative instruments by type:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
Interest rate swap contracts
|
$
|
1,050.0
|
|
|
$
|
2,000.0
|
|
|
Cross currency swap contracts
|
381.0
|
|
|
—
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
Interest rate swap contracts
|
200.0
|
|
|
—
|
|
|
Foreign currency derivatives
|
141.4
|
|
|
108.1
|
|
|
Cross currency swap contracts
|
19.0
|
|
|
—
|
|
The fair values of derivative instruments on the consolidated statements of operations and the consolidated statements of comprehensive income for the years ended December 31, 2019, 2018 and 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of gain (loss) reclassified from other comprehensive loss into income (effective and ineffective portion)
|
|
|
|
|
|
Amount to be reclassified to consolidated statement of operations within the next 12 months
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
|
|
Derivatives in cash flow hedging relationships
|
|
Income statement classification
|
|
2019
|
|
2018
|
|
2017
|
|
|
|
Interest rate swap contracts
|
|
Interest expense
|
|
$
|
8.0
|
|
|
$
|
8.1
|
|
|
$
|
(3.8)
|
|
|
$
|
(6.4)
|
|
|
Cross currency swap contracts
|
|
Interest expense
|
|
0.7
|
|
|
—
|
|
|
—
|
|
|
7.2
|
|
|
|
|
Other expense, net
|
|
(5.9)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Refer to “Note 8: Other expense, net” for the gains and losses related to derivatives not designated as hedging instruments and “Note 19: Fair value measurements” regarding the gross and net balances of derivative instruments.
21. Commitments and contingencies
Litigation
In the ordinary course of business the Company is subject to pending or threatened claims, lawsuits, regulatory matters and administrative proceedings from time to time. Where appropriate the Company has recorded provisions in the consolidated financial statements for these matters. The liabilities for injuries to persons or property are in some instances covered by liability insurance, subject to various deductibles and self-insured retentions.
The Company is not aware of any claims, lawsuits, regulatory matters or administrative proceedings, pending or threatened, that are likely to have a material effect on its overall financial position, results of operations, or cash flows. However, the Company cannot predict the outcome of any present or future claims or litigation or the potential for future claims or litigation and adverse developments could negatively impact earnings or cash flows in a particular future period.
The Company is subject to liabilities from claims alleging personal injury from exposure to asbestos. The claims result primarily from an indemnification obligation related to Univar Solutions USA Inc.’s (“Univar”) 1986 purchase of McKesson Chemical Company from McKesson Corporation (“McKesson”). Univar’s obligation to defend and indemnify McKesson for settlements and judgments arising from asbestos claims is the amount which is in excess of applicable insurance coverage, if any, which may be available under McKesson’s historical insurance coverage. Univar is also a defendant in a small number of asbestos claims. As of December 31, 2019, there were fewer than 130 asbestos-related claims for which the Company has liability for defense and indemnity pursuant to the indemnification obligation; however, this number tends to fluctuate up and down over time. Historically, the vast majority of the claims against both McKesson and Univar have been dismissed without payment or with a negligible payment. While the Company is unable to predict the outcome of these matters, it does not believe, based upon current available facts, that the ultimate resolution of any of these matters will have a material effect on its overall financial position, results of operations, or cash flows.
Merger-related Appraisal Litigation
In connection with the acquisition of Nexeo, on June 26, 2019, the Company reached an agreement with BCIM to resolve a dispute regarding the fair value of 5.0 million shares of Nexeo common stock, for which BCIM sought appraisal in a petition filed in the Delaware Court of Chancery, captioned BCIM Strategic Value Master Fund, LP v. Nexeo Solutions, Inc., No. 2019-0363-KSJM. The terms of the agreement, among other matters, provide that, in exchange for a release and dismissal of all asserted claims, the Company would make a cash payment of $63.5 million to BCIM and, as a result, BCIM will relinquish any and all rights to approximately $15.1 million in cash and 1.5 million shares of Univar Solutions common stock valued at $35.5 million in the custody of Equiniti, the transfer agent. With this resolution, the cash and shares were returned to the Company. During the third quarter of 2019, the Company paid the $63.5 million due to BCIM. The period during which former holders of Nexeo common stock were eligible to seek appraisal has expired, and no other such claims are pending.
Environmental
The Company is subject to various federal, state and local environmental laws and regulations that require environmental assessment or remediation efforts (collectively “environmental remediation work”) and from time to time becomes aware of compliance matters regarding possible or alleged violations of these laws or regulations. For example, over the years, the Company has been identified as a “potentially responsible party” (“PRP”) under the Comprehensive Environmental Response, Compensation and Liability Act and/or similar state laws that impose liability for costs relating to environmental remediation work at various sites. As a PRP, the Company may be required to pay a share of the costs of investigation and cleanup of certain sites. The Company is currently engaged in environmental remediation work at approximately 129 locations, some that are now or were previously Company-owned/occupied and some that were never Company-owned/occupied (“non-owned sites”).
The Company’s environmental remediation work at some sites is being conducted pursuant to governmental proceedings or investigations. At other sites, the Company, with appropriate state or federal agency oversight and approval, is conducting the environmental remediation work voluntarily. The Company is currently undergoing remediation efforts or is in the process of active review of the need for potential remediation efforts at approximately 107 current or formerly Company-owned/occupied sites. In addition, the Company may be liable as a PRP for a share of the clean-up of approximately 22 non-owned sites. These non-owned sites are typically (a) locations of independent waste disposal or recycling operations with alleged or confirmed contaminated soil and/or groundwater to which the Company may have shipped waste products or drums for re-conditioning, or (b) contaminated non-owned sites near historical sites owned or operated by the Company or its predecessors from which contamination is alleged to have arisen.
In determining the appropriate level of environmental reserves, the Company considers several factors such as information obtained from investigatory studies; changes in the scope of remediation; the interpretation, application and enforcement of laws and regulations; changes in the costs of remediation programs; the development of alternative cleanup technologies and methods; and the relative level of the Company’s involvement at various sites for which the Company is
allegedly associated. The level of annual expenditures for remedial, monitoring and investigatory activities will change in the future as major components of planned remediation activities are completed and the scope, timing and costs of existing activities are changed. Project lives, and therefore cash flows, range from 2 to 30 years, depending on the specific site and type of remediation project.
Although the Company believes that its reserves are adequate for environmental contingencies, it is possible, due to the uncertainties noted above; that additional reserves could be required in the future that could have a material effect on the overall financial position, results of operations, or cash flows in a particular period. This additional loss or range of losses cannot be recorded at this time, as it is not reasonably estimable.
Changes in total environmental liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
Environmental liabilities at January 1
|
$
|
83.5
|
|
|
$
|
89.2
|
|
|
Revised obligation estimates
|
13.3
|
|
|
12.6
|
|
|
Environmental payments
|
(18.0)
|
|
|
(18.1)
|
|
|
Foreign exchange
|
(0.1)
|
|
|
(0.2)
|
|
|
Environmental liabilities at December 31
|
$
|
78.7
|
|
|
$
|
83.5
|
|
Environmental liabilities of $25.0 million and $32.1 million were classified as current in other accrued expenses in the consolidated balance sheets as of December 31, 2019 and 2018, respectively. The long-term portion of environmental liabilities is recorded in other long-term liabilities in the consolidated balance sheets. The total discount on environmental liabilities was $5.5 million and $5.0 million at December 31, 2019 and 2018, respectively. The discount rate used in the present value calculation was 1.9% and 2.7% as of December 31, 2019 and 2018, respectively, which represent risk-free rates.
The Company manages estimated cash flows by project. These estimates are subject to change if there are modifications to the scope of the remediation plan or if other factors, both external and internal, change the timing of the remediation activities. The Company periodically reviews the status of all existing or potential environmental liabilities and adjusts its accruals based on all available, relevant information. Based on current estimates, the expected payments for environmental remediation for the next five years and thereafter at December 31, 2019 are as follows, with projects for which timing is uncertain estimated at $11.7 million included within the 2020 estimated amount below:
|
|
|
|
|
|
|
|
(in millions)
|
|
|
2020
|
$
|
25.0
|
|
|
2021
|
11.0
|
|
|
2022
|
8.1
|
|
|
2023
|
6.8
|
|
|
2024
|
6.1
|
|
|
Thereafter
|
27.3
|
|
|
Total
|
$
|
84.3
|
|
Customs and International Trade Laws
On April 3, 2019, the Company reached a settlement in a previously disclosed case with the Department of Justice (the “DOJ”) regarding saccharin that allegedly transshipped from the People’s Republic of China through the Republic of China and entered into commerce of the United States between 2007 and 2012. Under the settlement, the Company agreed to pay $62.5 million to fully resolve the matter, which was paid on April 8, 2019. The Company does not admit any liability and the DOJ has dismissed the complaint in its entirety.
Tax Matters
During 2017, the Brazilian Federal Supreme Court (the “Court”) ruled that the inclusion of the state VAT tax collected by a taxpayer in the taxpayer’s federal social contribution calculation base is unconstitutional. In 2019, the Court ruled in the Company's favor allowing the recoverability of amounts previously paid, plus interest. As a result, the Company recorded a benefit of $10.9 million in net sales, of which $9.7 million related to prior years, and $4.6 million in interest income in the consolidated statement of operations during the fourth quarter of 2019.
22. Leasing
The Company leases certain warehouses and distribution centers, office space, transportation equipment, and other machinery and equipment.
Leases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Balance Sheet Location
|
|
December 31, 2019
|
|
Assets
|
|
|
|
|
|
Operating lease assets
|
|
Other assets
|
|
$
|
157.3
|
|
|
Finance lease assets
|
|
Property, plant and equipment, net (1)
|
|
69.5
|
|
|
Total lease assets
|
|
|
|
$
|
226.8
|
|
|
Liabilities
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Current portion of operating lease liabilities
|
|
Other accrued expenses
|
|
$
|
47.4
|
|
|
Current portion of finance lease liabilities
|
|
Current portion of long-term debt
|
|
20.9
|
|
|
Noncurrent liabilities:
|
|
|
|
|
|
Operating lease liabilities
|
|
Other long-term liabilities
|
|
114.5
|
|
|
Finance lease liabilities
|
|
Long-term debt
|
|
50.3
|
|
|
Total lease liabilities
|
|
|
|
$
|
233.1
|
|
|
|
|
|
|
|
(1)Finance lease right-of-use assets are recorded net of accumulated amortization of $52.1 million as of December 31, 2019.
Lease cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
|
|
|
|
(in millions)
|
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
|
Cost of goods sold (exclusive of depreciation)
|
|
$
|
16.9
|
|
|
|
$
|
—
|
|
|
$
|
16.9
|
|
|
Outbound freight and handling
|
|
7.8
|
|
|
|
—
|
|
|
7.8
|
|
|
Warehousing, selling and administrative
|
|
34.2
|
|
|
|
—
|
|
|
34.2
|
|
|
Depreciation
|
|
—
|
|
|
|
20.0
|
|
|
20.0
|
|
|
Interest expense
|
|
—
|
|
|
|
2.8
|
|
|
2.8
|
|
|
Total gross lease component cost
|
|
$
|
58.9
|
|
|
$
|
22.8
|
|
|
$
|
81.7
|
|
|
Variable lease costs
|
|
|
|
|
|
1.1
|
|
|
Short-term lease costs
|
|
|
|
|
|
23.7
|
|
|
Total gross lease costs
|
|
|
|
|
|
$
|
106.5
|
|
|
Sublease income
|
|
|
|
|
|
2.8
|
|
|
Total net lease cost
|
|
|
|
|
|
$
|
103.7
|
|
Lease term and discount rate
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
December 31, 2019
|
|
Weighted-average remaining lease term (years)
|
|
|
|
Operating leases
|
|
5.0
|
|
Finance leases
|
|
4.0
|
|
Weighted-average discount rate
|
|
|
|
Operating leases
|
|
4.95
|
%
|
|
Finance leases
|
|
4.33
|
%
|
Other information
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
|
Year Ended December 31, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
59.2
|
|
|
Operating cash flows from finance leases
|
|
2.7
|
|
|
Financing cash flows from finance leases
|
|
20.7
|
|
Maturity of lease liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2019
|
|
|
|
|
|
(in millions)
|
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
|
2020
|
|
$
|
53.6
|
|
|
|
$
|
22.6
|
|
|
$
|
76.2
|
|
|
2021
|
|
41.4
|
|
|
|
18.9
|
|
|
60.3
|
|
|
2022
|
|
31.7
|
|
|
|
15.7
|
|
|
47.4
|
|
|
2023
|
|
21.1
|
|
|
|
6.9
|
|
|
28.0
|
|
|
2024
|
|
12.7
|
|
|
|
4.2
|
|
|
16.9
|
|
|
2025 and After
|
|
24.7
|
|
|
|
6.3
|
|
|
31.0
|
|
|
Total lease payments
|
|
$
|
185.2
|
|
|
$
|
74.6
|
|
|
$
|
259.8
|
|
|
Less: interest
|
|
23.7
|
|
|
|
7.2
|
|
|
|
|
Present value of lease liabilities, excluding guaranteed residual values (1)
|
|
$
|
161.5
|
|
|
$
|
67.4
|
|
|
|
|
Plus: present value of guaranteed residual values (1)
|
|
0.4
|
|
|
|
3.8
|
|
|
|
|
Present value of lease liabilities
|
|
$
|
161.9
|
|
|
$
|
71.2
|
|
|
|
|
|
|
|
|
|
|
|
(1)The Company is not expected to have cash outflows related to the present value of guaranteed residual values. The Company’s current present value of lease liabilities includes guaranteed residual values related to leases in effect prior to ASC 842 due to the Company’s practical expedient elections denoted within “Note 2: Significant accounting policies.” The gross value of the guaranteed residual values for operating and finance leases is $0.4 million and $4.1 million as of December 31, 2019, respectively.
Disclosures related to periods prior to the adoption of the New Lease Standard
The table below includes minimum rental commitments under non-cancelable operating lease in excess of one year and capital lease obligations for the year ended December 31, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2018
|
|
|
|
|
|
(in millions)
|
|
Operating Leases
|
|
Capital Leases
|
|
Total
|
|
2019
|
|
$
|
54.9
|
|
|
|
$
|
21.7
|
|
|
$
|
76.6
|
|
|
2020
|
|
40.4
|
|
|
|
12.3
|
|
|
52.7
|
|
|
2021
|
|
30.0
|
|
|
|
9.3
|
|
|
39.3
|
|
|
2022
|
|
24.6
|
|
|
|
7.6
|
|
|
32.2
|
|
|
2023
|
|
16.3
|
|
|
|
2.8
|
|
|
19.1
|
|
|
2024 and After
|
|
30.0
|
|
|
|
1.1
|
|
|
31.1
|
|
|
Total lease payments
|
|
$
|
196.2
|
|
|
$
|
54.8
|
|
|
$
|
251.0
|
|
23. Segments
Management monitors the operating results of its reportable segments separately for the purpose of making decisions about resource allocation and performance assessment. Management evaluates performance on the basis of Adjusted EBITDA. Adjusted EBITDA is defined as consolidated net (loss) income, plus the sum of: interest expense, net of interest income; income tax expense (benefit); depreciation; amortization; other operating expenses, net (see “Note 6: Other operating expenses, net” for more information); impairment charges; loss on extinguishment of debt; and other expense, net (see “Note 8: Other expense, net” for more information). For 2019, Adjusted EBITDA also includes an adjustment to remove the charge of the inventory fair value step-up recorded in connection with the Nexeo purchase price allocation and to remove the benefit related to a Brazil VAT recovery.
Transfer prices between reportable segments are set on an arms-length basis in a similar manner to transactions with third parties. Corporate operating expenses that directly benefit segments have been allocated to the reportable segments. Allocable operating expenses are identified through a review process by management. These costs are allocated to the reportable segments on a basis that reasonably approximates the use of services. This is typically measured on a weighted distribution of margin, asset, headcount or time spent.
Financial information for the Company’s reportable segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
USA
|
|
Canada
|
|
EMEA
|
|
LATAM
|
|
Other/
Eliminations (1)
|
|
Consolidated
|
|
|
Year ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
$
|
5,828.5
|
|
|
$
|
1,217.8
|
|
|
$
|
1,785.5
|
|
|
$
|
455.1
|
|
|
$
|
—
|
|
|
$
|
9,286.9
|
|
|
Inter-segment
|
100.2
|
|
|
6.2
|
|
|
3.3
|
|
|
—
|
|
|
(109.7)
|
|
|
—
|
|
|
Total net sales
|
$
|
5,928.7
|
|
|
$
|
1,224.0
|
|
|
$
|
1,788.8
|
|
|
$
|
455.1
|
|
|
$
|
(109.7)
|
|
|
$
|
9,286.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
$
|
454.7
|
|
|
$
|
100.2
|
|
|
$
|
143.3
|
|
|
$
|
36.1
|
|
|
$
|
(30.1)
|
|
|
$
|
704.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets (2)
|
$
|
853.6
|
|
|
$
|
197.3
|
|
|
$
|
185.4
|
|
|
$
|
34.7
|
|
|
$
|
38.7
|
|
|
$
|
1,309.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
USA
|
|
Canada
|
|
EMEA
|
|
LATAM
|
|
Other/
Eliminations (1)
|
|
Consolidated
|
|
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
$
|
4,961.0
|
|
|
$
|
1,302.3
|
|
|
$
|
1,975.7
|
|
|
$
|
393.5
|
|
|
$
|
—
|
|
|
$
|
8,632.5
|
|
|
Inter-segment
|
126.6
|
|
|
9.3
|
|
|
4.0
|
|
|
0.2
|
|
|
(140.1)
|
|
|
—
|
|
|
Total net sales
|
$
|
5,087.6
|
|
|
$
|
1,311.6
|
|
|
$
|
1,979.7
|
|
|
$
|
393.7
|
|
|
$
|
(140.1)
|
|
|
$
|
8,632.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
$
|
376.4
|
|
|
$
|
104.7
|
|
|
$
|
151.2
|
|
|
$
|
33.3
|
|
|
$
|
(25.2)
|
|
|
$
|
640.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets (2)
|
$
|
597.6
|
|
|
$
|
141.3
|
|
|
$
|
156.7
|
|
|
$
|
30.2
|
|
|
$
|
30.0
|
|
|
$
|
955.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
USA
|
|
Canada
|
|
EMEA
|
|
LATAM
|
|
Other/
Eliminations (1)
|
|
Consolidated
|
|
|
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
External customers
|
$
|
4,657.1
|
|
|
$
|
1,371.5
|
|
|
$
|
1,821.2
|
|
|
$
|
403.9
|
|
|
$
|
—
|
|
|
$
|
8,253.7
|
|
|
Inter-segment
|
121.9
|
|
|
9.1
|
|
|
4.5
|
|
|
0.5
|
|
|
(136.0)
|
|
|
—
|
|
|
Total net sales
|
$
|
4,779.0
|
|
|
$
|
1,380.6
|
|
|
$
|
1,825.7
|
|
|
$
|
404.4
|
|
|
$
|
(136.0)
|
|
|
$
|
8,253.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
$
|
350.0
|
|
|
$
|
114.1
|
|
|
$
|
129.2
|
|
|
$
|
28.7
|
|
|
$
|
(28.2)
|
|
|
$
|
593.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets (2)
|
$
|
636.1
|
|
|
$
|
147.7
|
|
|
$
|
158.0
|
|
|
$
|
33.5
|
|
|
$
|
27.7
|
|
|
$
|
1,003.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Other/Eliminations represents the elimination of intersegment transactions as well as unallocated corporate costs consisting of costs specifically related to parent company operations that do not directly benefit segments, either individually or collectively.
(2)Long-lived assets consist of property, plant and equipment, net and operating lease assets in 2019. Operating lease assets are excluded from 2018 and 2017 as the new leasing standard was adopted in 2019 using the modified retrospective method. Refer to “Note 2: Significant accounting policies” for more information.
The following is a reconciliation of net (loss) income to Adjusted EBITDA for the years ended December 31, 2019, 2018 and 2017, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
|
|
(in millions)
|
2019
|
|
2018
|
|
2017
|
|
Net (loss) income
|
$
|
(100.2)
|
|
|
|
$
|
172.3
|
|
|
|
$
|
119.8
|
|
|
Net income from discontinued operations
|
(5.4)
|
|
|
|
—
|
|
|
|
—
|
|
|
Depreciation
|
155.0
|
|
|
|
125.2
|
|
|
|
135.0
|
|
|
Amortization
|
59.7
|
|
|
|
54.3
|
|
|
|
65.4
|
|
|
Interest expense, net
|
139.5
|
|
|
|
132.4
|
|
|
|
148.0
|
|
|
Income tax expense
|
104.5
|
|
|
|
49.9
|
|
|
|
49.0
|
|
|
Other operating expenses, net
|
298.2
|
|
|
|
73.5
|
|
|
|
55.4
|
|
|
Other expense, net
|
70.5
|
|
|
|
32.7
|
|
|
|
17.4
|
|
|
Impairment charges
|
7.0
|
|
|
|
—
|
|
|
|
—
|
|
|
Gain on sale of business
|
(41.4)
|
|
|
|
—
|
|
|
|
—
|
|
|
Loss on extinguishment of debt
|
19.8
|
|
|
|
0.1
|
|
|
|
3.8
|
|
|
Brazil VAT recovery
|
(8.3)
|
|
|
|
—
|
|
|
|
—
|
|
|
Inventory step-up adjustment
|
5.3
|
|
|
—
|
|
|
—
|
|
|
Adjusted EBITDA
|
$
|
704.2
|
|
|
$
|
640.4
|
|
|
$
|
593.8
|
|
Business line information
The Company’s net sales from external customers relate to its chemical distribution business. Commodity chemicals and ingredients represent the largest portion of our business by sales and volume. Other sales to external customers primarily relate to services for collecting and arranging for the transportation of hazardous and non-hazardous waste.
Risks and Concentrations
No single customer accounted for more than 10% of net sales in any of the years presented.
The Company has portions of its labor force that are a part of collective bargaining agreements. A work stoppage or other limitation on operations could occur as a result of disputes under existing collective bargaining agreements with labor unions or government based work counsels or in connection with negotiation of new collective bargaining agreements. As of December 31, 2019, approximately 22% of the Company’s labor force is covered by a collective bargaining agreement. As of December 31, 2019, approximately 3% of the Company’s labor force is covered by a collective bargaining agreement that will expire within one year.
Other segment information
Information on segment assets is not disclosed as our chief operating decision maker does not evaluate reportable segments using asset information.
24. Quarterly financial information (unaudited)
The following tables contain selected unaudited statement of operations information for each quarter of the year ended December 31, 2019 and 2018. The tables include all adjustments, consisting only of normal recurring adjustments, that is
necessary for fair presentation of the consolidated financial position and operating results for the quarters presented. Our business is affected by seasonality, which historically has resulted in higher sales volume during our second and third quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
Quarter ended
|
|
|
|
|
|
|
|
(in millions, except per share data)
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31 (1)
|
|
Net sales
|
$
|
2,160.0
|
|
|
$
|
2,584.6
|
|
|
$
|
2,387.3
|
|
|
$
|
2,155.0
|
|
|
Operating (loss) income
|
|
(52.3)
|
|
|
79.0
|
|
|
88.0
|
|
|
72.6
|
|
|
Net (loss) income from continuing operations
|
|
(70.0)
|
|
|
17.0
|
|
|
2.5
|
|
|
(55.1)
|
|
|
Net income (loss) from discontinued operations
|
|
6.1
|
|
|
(0.7)
|
|
|
—
|
|
|
—
|
|
|
Net (loss) income
|
|
(63.9)
|
|
|
16.3
|
|
|
2.5
|
|
|
(55.1)
|
|
|
(Loss) income per common share:
|
|
|
|
|
|
|
|
|
|
Basic and diluted from continuing operations (2)
|
$
|
(0.47)
|
|
|
$
|
0.10
|
|
|
$
|
0.01
|
|
|
$
|
(0.33)
|
|
|
Basic and diluted from discontinued operations (2)
|
0.04
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Basic and diluted (loss) income per common share (2)
|
$
|
(0.43)
|
|
|
$
|
0.10
|
|
|
$
|
0.01
|
|
|
$
|
(0.33)
|
|
|
Shares used in computation of (loss) income per share:
|
|
|
|
|
|
|
|
|
Basic
|
149.2
|
|
169.8
|
|
168.6
|
|
168.6
|
|
Diluted
|
149.2
|
|
170.7
|
|
169.5
|
|
168.6
|
|
|
|
|
|
|
|
|
|
(1)Included in the fourth quarter of 2019 was a loss of $50.4 million relating to the annual mark to market adjustment on the defined benefit pension and postretirement plans and a gain of $41.4 million relating to the disposition of the Environmental Sciences business. Refer to “Note 11: Employee benefit plans and “Note 4: Discontinued operations and dispositions” for further information.
(2)As a result of changes in the number of shares outstanding during the year and rounding, the sum of the quarters’ earnings per share may not equal the earnings per share for any year-to-date period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
Quarter ended
|
|
|
|
|
|
|
|
(in millions, except per share data)
|
March 31
|
|
June 30
|
|
September 30
|
|
December 31 (1)
|
|
Net sales
|
$
|
2,158.0
|
|
|
$
|
2,372.6
|
|
|
$
|
2,130.7
|
|
|
$
|
1,971.2
|
|
|
Operating income
|
|
107.9
|
|
|
117.4
|
|
|
99.6
|
|
|
62.5
|
|
|
Net income
|
|
65.4
|
|
|
56.1
|
|
|
49.6
|
|
|
1.2
|
|
|
Income per share:
|
|
|
|
|
|
|
|
|
|
Basic and diluted (2)
|
$
|
0.46
|
|
|
$
|
0.40
|
|
|
$
|
0.35
|
|
|
$
|
0.01
|
|
|
Shares used in computation of income (loss) per share:
|
|
|
|
|
|
|
|
|
Basic
|
140.9
|
|
|
141.1
|
|
|
141.2
|
|
|
141.4
|
|
|
Diluted
|
142.0
|
|
|
142.0
|
|
|
142.3
|
|
|
142.2
|
|
|
|
|
|
|
|
|
|
|
(1)Included in the fourth quarter of 2018 was a loss of $34.2 million relating to the annual mark to market adjustment on the defined benefit pension and postretirement plans. Refer to “Note 11: Employee benefit plans” for further information.
(2)As a result of changes in the number of shares outstanding during the year and rounding, the sum of the quarters’ earnings per share may not equal the earnings per share for any year-to-date period.
25. Subsequent events
On January 7, 2020, using the proceeds from the sale of the Environmental Sciences business, the Company repaid $174.0 million of the Term B-3 Loan due 2024.
Schedule II - Valuation and qualifying accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
|
|
|
|
|
|
|
|
(in millions)
|
Balance at beginning of period
|
|
Charged to costs and other expenses
|
|
Charged to other accounts
|
|
Deductions
|
|
Balance at end of period
|
|
Year ended December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Income tax valuation allowance
|
$
|
106.3
|
|
|
|
$
|
4.9
|
|
|
|
$
|
0.1
|
|
|
|
$
|
(23.8)
|
|
|
|
$
|
87.5
|
|
|
Year ended December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
Income tax valuation allowance
|
$
|
117.2
|
|
|
|
$
|
21.4
|
|
|
|
$
|
(1.5)
|
|
|
|
$
|
(30.8)
|
|
|
|
$
|
106.3
|
|
|
Year ended December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
Income tax valuation allowance
|
$
|
167.9
|
|
|
|
$
|
30.6
|
|
|
|
$
|
6.7
|
|
|
|
$
|
(88.0)
|
|
|
|
$
|
117.2
|
|
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of December 31, 2019, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 as amended). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (“SEC”), and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) of the Exchange Act during the period covered by this Annual Report on Form 10-K that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the company. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use, or disposition of company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
In accordance with the guidance issued by the SEC, companies are permitted to exclude acquisitions from their final assessment of internal control over financial reporting for the first fiscal year in which the acquisition occurred. Our management’s evaluation of internal control over financial reporting excluded the internal control activities of Nexeo Solutions, which we acquired in February 2019. Nexeo represented 32.5% of the total assets and 16.0% of the Company’s net sales as of and for the year ended December 31, 2019. The Company’s acquisition of Nexeo is discussed in Note 3 to its consolidated financial statements.
Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of December 31, 2019 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an audit report on the Company’s internal control over financial reporting, which appears in Part II, Item 8 of this Annual Report on Form 10-K.
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
All information required by this Item will be included in our Proxy Statement relating to our 2020 Annual Meeting of Stockholders to be filed pursuant to Regulation 14A within 120 days after the end of the fiscal year ended December 31, 2019 (“2020 Proxy Statement”) and is incorporated herein by reference.*
ITEM 11. EXECUTIVE COMPENSATION
All information required by this Item will be included in our 2020 Proxy Statement and is incorporated herein by reference.*
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
All information required by this Item will be included in our 2020 Proxy Statement and is incorporated herein by reference.*
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE
All information required by this Item will be included in our 2020 Proxy Statement and is incorporated herein by reference.*
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
All information required by this Item will be included in our 2020 Proxy Statement and is incorporated herein by reference.*
*Except for information or data specifically incorporated herein by reference under Items 10 through 14, other information and data appearing in our 2020 Proxy Statement are not deemed to be a part of this Annual Report on Form 10-K or deemed to be filed with the SEC as part of this report.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1)(2) Financial Statements and Financial Statement Schedules
Reference is made to the information set forth in Part II, Item 8 of this Annual Report on Form 10-K, which information is incorporated herein by reference.
(a)(3) Exhibits
|
|
|
|
|
|
|
|
|
|
|
Exhibit Number
|
|
Exhibit Description
|
|
|
|
|
|
|
|
Agreement and Plan of Merger, dated September 17, 2018, by and among Nexeo, Univar, Pilates Merger Sub I Corp and Pilates Merger Sub II LLC, incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of the Company, filed on September 18, 2018.
|
|
|
|
|
|
|
|
Purchase and Sale Agreement, by and among Nexeo Solutions, Inc., Neon Holdings, Inc. and Univar Inc., dated as of February 8, 2019, incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of the Company filed on March 1, 2019.
|
|
|
|
|
|
|
|
Amended and Restated Securities Purchase Agreement, dated December 30, 2019, by and among Univar Solutions Inc., Univar Solutions USA Inc., Univar Canada LTD., ENS Holdings III Corp., ENS Canada Holdings Corp. and ENS Holdings II Corp.
|
|
|
|
|
|
|
|
Third Amended and Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-8 of the Company, filed on June 23, 2015.
|
|
|
|
|
|
|
|
Certificate of Amendment of Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Company, filed on August 23, 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificate of Amendment of the Certificate of Incorporation, incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of the Company, filed on August 22, 2019.
|
|
|
|
|
|
|
|
Third Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of the Company, filed on August 22, 2019.
|
|
|
|
|
|
|
|
Form of Common Stock Certificate, incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1 of the Company, filed on June 8, 2015.
|
|
|
|
|
|
|
|
Description of Univar Solutions Inc. Securities registered pursuant to Section 12 of the Securities Exchange Act of 1934.
|
|
|
|
|
|
|
|
Fourth Amended and Restated Stockholders’ Agreement, incorporated by reference to Exhibit 4.2 to the Form 10-K of the Company, filed on March 3, 2016.
|
|
|
|
|
|
|
|
Indenture, dated as of November 22, 2019, between Univar Solutions USA Inc., Univar Solutions Inc., the guarantors listed on the signature pages thereto and U.S. Bank National Association, incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of the Company filed on November 22, 2019.
|
|
|
|
|
|
|
|
First Supplemental Indenture, dated as of November 22, 2019, between Univar Solutions USA Inc., Univar Solutions Inc., the guarantors listed on the signature pages thereto and U.S. Bank National Association, incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of the Company filed on November 22, 2019.
|
|
|
|
|
|
|
|
Form of 5.125% Senior Notes due 2027 (included in Exhibit 4.5 hereto), incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of the Company filed on November 22, 2019.
|
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European ABL Facility Agreement, dated as of March 24, 2014, as amended and restated on December 19, 2018, by and among Univar B.V., the other borrowers from time to time party thereto, Univar Inc., as guarantor, JPMorgan Chase Bank, N.A., as sole lead arranger and joint bookrunner, Bank of America, N.A., as joint bookrunner and syndication agent, and J.P. Morgan Europe Limited, as administrative agent and collateral agent, incorporated by reference to Exhibit 10.1 to the Form 10-K of the Company, filed on February 21, 2019.
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Credit Agreement, dated as of July 1, 2015 between Univar USA Inc., Univar Inc., the several banks and financial institutions from time to time party thereto and Bank of America, N.A., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed on July 7, 2015.
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First Amendment to Credit Agreement and Amended Credit Agreement, dated as of January 19, 2017 between Univar USA Inc., Univar Inc., the several banks and financial institutions from time to time party thereto and Bank of America, N.A., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed on January 20, 2017.
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Second Amendment to Credit Agreement, dated as of November 28, 2017 between Univar USA Inc., Univar Inc., the several banks and financial institutions from time to time party thereto and Bank of America, N.A., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed November 29, 2017.
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Third Amendment, dated as of February 23, 2019, to Credit Agreement between Univar USA Inc., Univar Inc., the several banks and financial institutions from time to time party thereto and Bank of America, N.A.
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Fourth Amendment and the Amended Credit Agreement, dated as of February 28, 2019 between Univar USA Inc., Univar Inc., the several banks and financial institutions from time to time party thereto and Bank of America, N.A., incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company, filed on March 1, 2019.
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Fifth Amendment, dated November 22, 2019, among Univar Solutions USA Inc., Univar Solutions Inc., Univar Netherlands Holding B.V, the several banks and financial institutions from time to time party thereto, Goldman Sachs Bank USA and Bank of America, N.A., to the Credit Agreement dated July 1, 2015, between Univar Solutions USA Inc., Univar Solutions Inc., Univar Netherlands Holding B.V., the several banks and financial institutions from time to time party thereto and Bank of America, N.A., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed on November 22, 2019.
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Term Loan Guarantee and Collateral Agreement, dated as of July 1, 2015, made by Univar Inc., Univar USA Inc. and the guarantors listed on the signature pages thereto in favor of Bank of America, N.A, as collateral agent for the banks and other financial institutions that are parties to the Credit Agreement, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company, filed on July 7, 2015.
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Amendment No. 1 to Term Loan Guarantee and Collateral Agreement, dated as of November 22, 2019, made by Univar Solutions Inc., Univar Solutions USA Inc. and the guarantors listed on the signature pages thereto in favor of Bank of America, N.A, as collateral agent.
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Amended and Restated ABL Credit Agreement, dated as of February 28, 2019 between Univar Inc. and certain of its subsidiaries, the several banks and financial institutions from time to time party thereto and Bank of America, N.A., incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company, filed on March 1, 2019.
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First Amendment dated November 22, 2019, among Univar Solutions Inc. and certain of its subsidiaries, the several banks and financial institutions from time to time party thereto and Bank of America, N.A., to the Amended and Restated ABL Credit Agreement, dated as of February 28, 2019, between Univar Solutions Inc. and certain of its subsidiaries, the several banks and financial institutions from time to time party thereto and Bank of America, N.A., incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company, filed on November 22, 2019.
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Amended and Restated ABL Guarantee and Collateral Agreement, dated as of February 28, 2019, made by the Company and certain of its Domestic Subsidiaries in favor of Bank of America, N.A, as collateral agent.
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Form of Director Indemnification Agreement, incorporated by reference to Exhibit 10.56 to the Registration Statement on Form S-1 of the Company, filed on June 8, 2015.
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Form of Employee Stock Option Agreement, incorporated by reference to Exhibit 10.34 to the Registration Statement on Form S-1 of the Company, filed on August 14, 2014.
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2014 Form of Employee Stock Option Agreement, incorporated by reference to Exhibit 10.62 to the Registration Statement on Form S-1 of the Company, filed on May 26, 2015.
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Form of Employee Stock Option Agreement for awards granted between June 23, 2015 and February 1, 2017, 2015 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.5 to the Registration Statement on Form S-8 of the Company, filed June 23, 2015.
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Form of Employee Stock Option Agreement for awards granted after February 1, 2017, 2015 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.67 to the Form 10-K of the Company filed on February 28, 2017.
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Form of Employee Stock Option Agreement for awards granted after April 13, 2017, 2015 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to the Form 10-Q of the Company filed on May 5, 2017.
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Form of Employee Stock Option Agreement, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q of the Company filed on May 5, 2017.
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Form of Employee Stock Option Agreement for awards granted on or after February 7, 2018, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.2 to the Form 10-Q of the Company, filed on May 10, 2018.
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Stock Option Agreement, dated as of February 7, 2018, by and between Univar Inc. and Stephen D. Newlin. 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.3 to the Form 10-Q of the Company, filed on May 10, 2018.
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Form of Employee Stock Option Agreement for awards granted on or after February 6, 2019, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.4 to the Form 10-Q of the Company, filed on May 9, 2019.
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Form of Employee Stock Option Agreement for awards granted on or after February 21, 2020, 2017 Omnibus Equity Incentive Plan.
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Employee Restricted Stock Unit Agreement, dated as of January 30, 2017, by and between Univar Inc. and Mr. Newlin, incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of the Company filed on January 30, 2017.
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Form of Employee Restricted Stock Unit Agreement for awards granted after February 1, 2017, 2015 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.68 to the Form 10-K of the Company filed on February 28, 2017.
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Form of Employee Restricted Stock Unit Agreement for awards granted after April 13, 2017, 2015 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.2 to the Form 10-Q of the Company filed on May 5, 2017.
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Form of Employee Restricted Stock Unit Agreement, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.4 to the Form 10-Q of the Company filed on May 5, 2017.
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Form of Employee Restricted Stock Unit Agreement for awards granted on or after February 7, 2018, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.4 to the Form 10-Q of the Company, filed on May 10, 2018.
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Restricted Stock Unit Agreement, dated as of February 7, 2018, by and between Univar Inc. and Stephen D. Newlin, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.5 to the Form 10-Q of the Company, filed on May 10, 2018.
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Form of Employee Restricted Stock Unit Agreement for awards granted on or after February 6, 2019, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.5 to the Form 10-Q of the Company, filed on May 9, 2019.
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Form of Employee Restricted Stock Unit Agreement for awards granted on or after February 21, 2020, 2017 Omnibus Equity Incentive Plan.
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Univar Solutions Supplemental Savings Plan (previously named Univar USA Inc. Supplemental Valued Investment Plan), effective June 1, 2017.
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First Amendment to the Univar Solutions Supplemental Savings Plan, dated October 9, 2018.
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Second Amendment to the Univar Solutions Supplemental Savings Plan, dated December 30, 2019.
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Univar Canada Ltd. Supplemental Benefits Plan, dated as of June 1, 2007, incorporated by reference to Exhibit 10.28 to the Form 10-K of the Company, filed on March 3, 2016.
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Univar USA Inc. Supplemental Benefits Retirement Plan, dated as of July 1, 2004, incorporated by reference to Exhibit 10.45 to the Registration Statement on Form S-1 of the Company, filed on August 14, 2014.
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First Amendment to the Univar USA Inc. Supplemental Retirement Plan, dated as of May 17, 2005, incorporated by reference to Exhibit 10.30 to the Form 10-K of the Company, filed on March 3, 2016.
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Second Amendment to the Univar USA Inc. Supplemental Retirement Plan, dated as of August 24, 2006, incorporated by reference to Exhibit 10.31 to the Form 10-K of the Company, filed on March 3, 2016.
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Third Amendment to the Univar USA Inc. Supplemental Retirement Plan, dated as of June 11, 2007, incorporated by reference to Exhibit 10.32 to the Form 10-K of the Company, filed on March 3, 2016.
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Fourth Amendment to the Univar USA Inc. Supplemental Retirement Plan, dated as of December 6, 2007, incorporated by reference to Exhibit 10.46 to the Registration Statement on Form S-1 of the Company, filed on August 14, 2014.
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Fifth Amendment to the Univar USA Inc. Supplemental Retirement Plan, dated as of December 6, 2007, incorporated by reference to Exhibit 10.34 to the Form 10-K of the Company, filed on March 3, 2016.
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Sixth Amendment to the Univar USA Inc. Supplemental Retirement Plan, dated as of December 19, 2007, incorporated by reference to Exhibit 10.35 to the Form 10-K of the Company, filed on March 3, 2016.
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Seventh Amendment to the Univar USA Inc. Supplemental Retirement Plan, dated as of June 19, 2008, incorporated by reference to Exhibit 10.36 to the Form 10-K of the Company, filed on March 3, 2016.
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Eighth Amendment to the Univar USA Inc. Supplemental Retirement Plan, dated as of December 23, 2008, incorporated by reference to Exhibit 10.37 to the Form 10-K of the Company, filed on March 3, 2016.
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Ninth Amendment to the Univar USA Inc. Supplemental Retirement Plan, dated as of December 21, 2009, incorporated by reference to Exhibit 10.38 to the Form 10-K of the Company, filed on March 3, 2016.
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Univar Inc. 2011 Stock Incentive Plan, effective as of March 28, 2011, incorporated by reference to Exhibit 10.32 to the Registration Statement on Form S-1 of the Company, filed on August 14, 2014.
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Amendment No. 1 to the Univar Inc. 2011 Stock Incentive Plan, dated as of November 30, 2012, incorporated by reference to Exhibit 10.33 to the Registration Statement on Form S-1 of the Company, filed on August 14, 2014.
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Univar Inc. 2015 Omnibus Equity Incentive Plan is incorporated by reference to Exhibit 10.3 to the Registration Statement on Form S-8 of the Company, filed June 23, 2015.
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Univar Inc. 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.6 to the Form 10-Q of the Company filed on May 5, 2017.
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First Amendment to Univar Inc. 2017 Omnibus Equity Incentive Plan dated as of December 6, 2019.
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Employment Agreement, effective as of January 1, 2017 by and between Univar Europe Limited and Nick Powell, incorporated by reference to Exhibit 10.65 to the Form 10-K of the Company, filed on February 28, 2018.
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Letter Agreement, by and between Nick Powell and Univar Inc., dated as of February 27, 2019 (incorporated by reference to Exhibit 5.1 to the Current Report on Form 8-K of the Company filed on March 1, 2019).
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Form of Severance and Change in Control Agreement by and Between Univar Inc. and Certain Executives, incorporated by reference to Exhibit 10.3 to the Form 10-Q of the Company, filed on November 6, 2018.
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Severance and Change of Control Agreement, dated as of January 6, 2020, between the Company and Nicholas W. Alexos, incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of the Company filed on December 16, 2019.
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Univar Inc. Employee Stock Purchase Plan is incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-8 of the Company, filed June 23, 2015.
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First Amendment to Univar Solutions Inc. Employee Stock Purchase Plan dated as of December 6, 2019.
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Form of Employee Performance-Based Restricted Stock Unit Agreement for awards granted on or after February 7, 2018, 2017 Omnibus Equity Incentive Plan., incorporated by reference to Exhibit 10.6 to the Form 10-Q of Univar Inc., filed on May 10, 2018.
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Performance-Based Restricted Stock Unit Agreement dated as of February 7, 2018, by and between Univar Inc. and Stephen D. Newlin, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.7 to the Form 10-Q of the Company, filed on May 10, 2018.
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Form of Employee Performance Based Restricted Stock Unit Agreement for awards granted on or after February 6, 2019, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.6 to the Form 10-Q of the Company, filed on May 9, 2019.
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Form of Amended and Restated Employee Performance-Based Restricted Stock Unit Agreement for awards granted on or after February 6, 2019, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.1 to the Form 10-Q of the Company, filed on November 5, 2019.
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Form of Employee Performance Based Restricted Stock Unit Agreement for awards granted on or after February 21, 2020, 2017 Omnibus Equity Incentive Plan.
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Form of Director Deferred Share Unit Agreement for awards granted on or after February 7, 2018, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.8 to the Form 10-Q of the Company, filed on May 10, 2018.
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Form of Director Deferred Share Unit Agreement for awards granted on or after February 7, 2019, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.7 to the Form 10-Q of the Company, filed on May 9, 2019.
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Form of Director Deferred Share Unit Agreement for cash retainer granted on or after February 21, 2020, 2017 Omnibus Equity Incentive Plan.
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Form of Director Deferred Share Unit Agreement for equity awards granted on or after February 21, 2020, 2017 Omnibus Equity Incentive Plan.
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Form of Director Restricted Stock Agreement for awards granted on or after February 7, 2019, 2017 Omnibus Equity Incentive Plan, incorporated by reference to Exhibit 10.9 to the Form 10-Q of the Company, filed on May 9, 2019.
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Form of Director Restricted Stock Agreement for awards granted on or after February 21, 2020, 2017 Omnibus Equity Incentive Plan.
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Form of Director Restricted Stock Unit Agreement for awards granted on or after February 21, 2020, 2017 Omnibus Equity Incentive Plan.
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Univar Inc. Omnibus Waiver regarding Whistleblower Protections, dated as of May 3, 2017, incorporated by reference to Exhibit 10.8 to the Form 10-Q of the Company filed on May 5, 2017.
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Code Handbook
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List of Subsidiaries
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Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
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Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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101.INS
|
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
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101.SCH
|
|
Inline XBRL Taxonomy Extension Schema Document
|
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101.CAL
|
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
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101.DEF
|
|
Inline XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
|
|
Inline XBRL Taxonomy Extension Label Linkbase Document
|
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101.PRE
|
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
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104
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
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†
|
Identifies each management compensation plan or arrangement.
|
|
*
|
Filed herewith.
|
|
**
|
Furnished herewith.
|
ITEM 16. FORM 10-K SUMMARY
None.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Univar Solutions Inc.
|
|
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|
|
By: /s/ NICHOLAS W. ALEXOS
|
|
Nicholas W. Alexos, Executive Vice President and
Chief Financial Officer
|
Dated February 25, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
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By: /s/ DAVID C. JUKES
|
|
By: /s/ NICHOLAS W. ALEXOS
|
|
David C. Jukes, President and Chief Executive Officer
(Principal Executive Officer)
|
|
Nicholas W. Alexos, Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
By: /s/ JEANETTE A. PRESS
|
|
By: /s/ STEPHEN D. NEWLIN
|
|
Jeanette A. Press,
Vice President and Corporate Controller
(Principal Accounting Officer)
|
|
Stephen D. Newlin,
Chairman of the Board
|
|
By: /s/ CHRISTOPHER D. PAPPAS
|
|
By: /s/ RHONDA GERMANY BALLINTYN
|
|
Christopher D. Pappas, Lead Director
|
|
Rhonda Germany Ballintyn, Director
|
|
By: /s/ MARK J. BYRNE
|
|
By: /s/ DANIEL P. DOHENY
|
|
Mark J. Byrne, Director
|
|
Daniel P. Doheny, Director
|
|
By: /s/ RICHARD P. FOX
|
|
By: /s/ EDWARD J. MOONEY
|
|
Richard P. Fox, Director
|
|
Edward J. Mooney, Director
|
|
By: /s/ WILLIAM S. STAVROPOULOS
|
|
By: /s/ KERRY PREETE
|
|
William S. Stavropoulos, Director
|
|
Kerry Preete, Director
|
|
By: /s/ ROBERT L. WOOD
|
|
By: /s/ JOAN BRACA
|
|
Robert L. Wood, Director
|
|
Joan Braca, Director
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CONFIDENTIAL
|
EXECUTION VERSION
|
Amended and Restated Securities Purchase Agreement
by and among
Univar Solutions Inc.
Univar Solutions USA Inc.
Univar Canada LTD.
ENS Holdings III Corp.
ENS Canada Holdings Corp. and
ENS Holdings II Corp.
for the purchase and sale of
all of the outstanding equity securities of
ES OpCo USA LLC
Sistemas Ecólogicos Para el Control de Plagas S.A. de C.V.
and
ES OpCo Canada II ULC
Date: December 30, 2019
2070531.0005/156709340
20067292
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Page
|
|
ARTICLE I DEFINITIONS
|
2
|
|
1.1 Definitions
|
2
|
|
1.2 Interpretive Matters
|
2
|
|
ARTICLE II SALE AND PURCHASE OF THE COMPANY GROUP SECURITIES
|
4
|
|
2.1 Sale and Purchase of the Company Group Securities
|
4
|
|
ARTICLE III CONSIDERATION
|
5
|
|
3.1 Consideration
|
5
|
|
3.2 Payment of Purchase Price
|
5
|
|
3.3 Closing Statement
|
6
|
|
3.4 Final Closing Statement; Adjustments and Payments
|
6
|
|
3.5 Purchase Price Allocation
|
10
|
|
3.6 Withholding
|
10
|
|
ARTICLE IV CLOSING AND TERMINATION
|
11
|
|
4.1 Closing Date
|
11
|
|
4.2 Termination of Agreement
|
11
|
|
4.3 Effect of Termination
|
12
|
|
4.4 Termination Fee
|
12
|
|
ARTICLE V REPRESENTATIONS AND WARRANTIES OF SELLER
|
14
|
|
5.1 Organization and Good Standing
|
14
|
|
5.2 Authorization of Agreement
|
14
|
|
5.3 Conflicts; Consents
|
15
|
|
5.4 Ownership and Transfer of the Company Group Securities
|
16
|
|
5.5 Capitalization
|
16
|
|
5.6 No Subsidiaries or Minority Investments
|
17
|
|
5.7 Financial Information
|
17
|
|
5.8 Absence of Certain Changes; Undisclosed Liabilities; Indebtedness
|
17
|
|
5.9 Taxes
|
18
|
|
5.10 Real Property
|
21
|
|
5.11 Tangible Personal Property
|
23
|
|
5.12 Intellectual Property; Data Privacy
|
24
|
|
5.13 Material Contracts
|
26
|
|
5.14 Employee Benefits Plans
|
29
|
|
5.15 Labor
|
32
|
|
5.16 Litigation
|
33
|
|
5.17 Compliance with Laws; Permits
|
34
|
|
5.18 Environmental Matters
|
36
|
Table of Contents
(continued)
|
|
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|
Page
|
|
5.19 Company Group Guarantees; Transactions with Affiliates; Shared Contracts and Facilities
|
38
|
|
5.20 Financial Advisors
|
38
|
|
5.21 Sufficiency of Assets
|
38
|
|
5.22 Insurance
|
39
|
|
5.23 Suppliers; Customers; Distributors
|
39
|
|
5.24 Product Compliance; Warranty and Liability
|
40
|
|
5.25 Accounts Receivable and Payable
|
41
|
|
5.26 Inventory; Supplies
|
41
|
|
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PURCHASER
|
41
|
|
6.1 Organization and Good Standing
|
42
|
|
6.2 Authorization of Agreement
|
42
|
|
6.3 Conflicts; Consents
|
42
|
|
6.4 Securities Matters
|
43
|
|
6.5 Financial Advisors
|
43
|
|
6.6 Representation and Warranty Insurance
|
43
|
|
6.7 Financing
|
43
|
|
ARTICLE VII COVENANTS
|
44
|
|
7.1 Access to Information
|
44
|
|
7.2 Conduct of the Business Pending the Closing
|
46
|
|
7.3 Consents
|
51
|
|
7.4 Regulatory Approvals
|
51
|
|
7.5 Efforts and Cooperation; Further Assurances
|
53
|
|
7.6 Confidentiality
|
54
|
|
7.7 D&O Indemnification and Exculpation
|
55
|
|
7.8 Preservation of Records
|
56
|
|
7.9 Publicity
|
57
|
|
7.10 Employment and Employee Benefits
|
57
|
|
7.11 Separation
|
61
|
|
7.12 Affiliate Contracts and Company Guarantees; Intercompany Balances
|
63
|
|
7.13 Tax Matters.
|
63
|
|
7.14 Insurance
|
66
|
|
7.15 Exclusivity
|
67
|
|
7.16 Distributions
|
67
|
|
7.17 Data Room Documentation
|
67
|
|
7.18 Enforcement of Restrictive Covenants
|
68
|
Table of Contents
(continued)
|
|
|
|
|
|
|
|
|
Page
|
|
7.19 Indemnification
|
68
|
|
7.20 Non-Competition and Non-Solicitation
|
76
|
|
7.21 Financing; Lien Releases
|
77
|
|
7.22 Mail; Deliveries
|
80
|
|
7.23 Additional Asset Transfers
|
80
|
|
7.24 IP Matters
|
81
|
|
7.25 ISRA Compliance
|
83
|
|
7.26 Shared Contracts
|
83
|
|
7.27 Privilege and Legal Cooperation
|
84
|
|
ARTICLE VIII CONDITIONS TO CLOSING
|
85
|
|
8.1 Conditions Precedent to Obligations of Purchaser
|
85
|
|
8.2 Conditions Precedent to Obligations of Seller
|
88
|
|
8.3 Frustration of Closing Conditions
|
89
|
|
ARTICLE IX LIMITATIONS ON LIABILITY; WAIVERS
|
90
|
|
9.1 Waivers of Representations and Warranties
|
90
|
|
9.2 Other Limitations and Waivers
|
90
|
|
9.3 No Right of Set-off
|
91
|
|
9.4 Waiver of Damages
|
91
|
|
ARTICLE X MISCELLANEOUS
|
91
|
|
10.1 Payment of Transfer Taxes
|
91
|
|
10.2 Expenses
|
91
|
|
10.3 Forum; Consent to Service of Process; Waiver of Jury Trial
|
91
|
|
10.4 Entire Agreement; Amendments and Waivers
|
93
|
|
10.5 Governing Law
|
93
|
|
10.6 Notices
|
94
|
|
10.7 Severability
|
95
|
|
10.8 Binding Effect; No Third Party Beneficiaries; Assignment
|
95
|
|
10.9 Specific Performance
|
96
|
|
10.10 Non-Recourse
|
96
|
|
10.11 Counterparts
|
97
|
|
10.12 Waiver of Conflicts; Transaction Privilege
|
97
|
Annexes
Annex A Definitions
Exhibits
Exhibit A Form of U.S. Contribution Agreement
Exhibit B Form of Canada Contribution Agreement
Exhibit C Letter of Credit
Exhibit D Form of Target 1 Securities Assignment
Exhibit E Form of Target 3 Securities Assignment
Exhibit F Form of § 1445 Certificate
Exhibit G Form of License Agreement (CropWeb)
Exhibit H Form of Real Property License Agreement
Exhibit I Form of 3PL Agreement
Exhibit J Form of HoldCo Note
Exhibit K Form of Seller Parent IP Assignment
Exhibit L Form of Transition Services Agreement
AMENDED AND RESTATED SECURITIES Purchase Agreement
This Amended and Restated Securities Purchase Agreement (this “Agreement”), dated December 30, 2019, is made by and among UNIVAR SOLUTIONS INC., a Delaware corporation (“Seller Parent”), UNIVAR SOLUTIONS USA INC., a Washington corporation (“Seller 1”), UNIVAR CANADA LTD., an Alberta limited corporation (“Seller 2” and, collectively with Seller 1 and Seller Parent, referred to herein as “Seller”), ENS HOLDINGS III CORP., a Delaware corporation (“Purchaser 1”), ENS CANADA HOLDINGS CORP., British Columbia corporation (“Purchaser 2”), and ENS HOLDINGS II CORP., a Delaware corporation (“Purchaser 3”, and collectively, with Purchaser 1 and Purchaser 2, referred to herein as “Purchaser”). Seller Parent, Seller 1, Seller 2, Purchaser 1, Purchaser 2 and Purchaser 3 are referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
The Parties entered into that certain Securities Purchase Agreement, dated as of December 5, 2019 (as in effect immediately prior to the effectiveness of this Agreement, the “Original SPA”).
The Parties have agreed to amend and restate the Original SPA, in the form hereof.
Seller 1 owns all of the issued and outstanding equity securities (the “Target 1 Securities”) of ES OpCo USA LLC, a Delaware limited liability company (“Target 1”);
Seller Parent and Seller 1 collectively own all of the issued and outstanding equity securities (the “Target 2 Securities”) of Sistemas Ecólogicos Para el Control de Plagas S.A. de C.V., a Mexican sociedad anónima de capital variable (“Target 2”);
Seller 2 owns all of the issued and outstanding equity securities (the “Target 3 Securities” and, together with the Target 1 Securities and the Target 2 Securities, the “Company Group Securities”) of ES OpCo Canada II ULC, a British Columbia unlimited liability corporation (“Target 3” and, together with Target 1 and Target 2, the “Company Group” and each a “Company Group Entity”);
Seller Parent, directly or indirectly, owns all of the issued and outstanding equity securities of each of Seller 1 and Seller 2;
On October 28, 2019, Seller 1 formed Target 1, and on December 12, 2019, Seller 2 formed Target 3;
Prior to the Closing, Seller 1 and Target 1, will enter into the contribution agreement substantially in the form attached hereto as Exhibit A (with changes mutually agreed between the Parties, acting reasonably, the “U.S. Contribution Agreement”), pursuant to which Seller 1 will contribute, assign, transfer, convey and deliver to Target 1 certain of the Business Assets and Target 1 will assume certain of the Assumed Liabilities (such transactions collectively, the “U.S. Business Restructuring”);
Prior to the Closing, Seller 2 and Target 3, will enter into the contribution agreement substantially in the form attached hereto as Exhibit B (with changes mutually agreed between the Parties, acting reasonably, the “Canadian Contribution Agreement” and collectively with the U.S. Contribution Agreement, the “Contribution Agreements”), pursuant to which Seller 2 will contribute, assign, transfer, convey and deliver to Target 3 certain of the Business Assets and Target 3 will issue 100 common shares of its capital to Seller 2 and assume certain of the Assumed Liabilities (such transactions collectively, the “Canadian Business Restructuring” and, together with the U.S. Business Restructuring, the Corporativo Employee Transfer, the Pre-Closing Asset Transfers and any other asset transfer contemplated by Section 7.23, the “Restructuring”);
Concurrently with the execution of the Original SPA, AEA Investors SBF IV LP and AEA Investors Small Business Fund III LP (collectively, the “Sponsor”) and Seller entered into a Limited Guarantee (the “Limited Guarantee”);
Concurrently with the execution and delivery of the Original SPA, the individuals listed on Schedule 1.1(a) entered into employment agreements; and
Seller desires to sell to Purchaser, and Purchaser desires to purchase from Seller, after the consummation of the U.S. Business Restructuring and the Canadian Business Restructuring, the Company Group Securities in exchange for the Purchase Price (as adjusted in accordance herewith) and upon the terms and subject to the conditions hereinafter set forth.
AGREEMENT
In consideration of the foregoing premises and the representations, warranties, covenants and agreements hereinafter contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. All capitalized terms used in this Agreement, unless otherwise defined in the main body of this Agreement, have the meaning given to such terms in Annex A attached hereto.
1.2 Interpretive Matters.
(a) When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in beginning the calculation of such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.
(b) Any reference in this Agreement to $ shall mean U.S. dollars. All accounting terms used herein shall, to the extent not inconsistent with the express terms of this Agreement, be construed in conformity with GAAP.
(c) All references in this Agreement to any “Annex”, “Exhibit” or “Schedule” are to the corresponding Annex, Exhibit or Schedule to this Agreement, unless otherwise specified. The Annexes, Exhibits and Schedules to this Agreement are an integral part of this Agreement. All Annexes, Exhibits and Schedules to this Agreement are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any Annexes, Schedule or Exhibit to this Agreement but not otherwise defined therein shall have the meanings set forth in this Agreement. The disclosure of any matter or item in any Schedule to this Agreement shall not be deemed to constitute an acknowledgment that any such matter is required to be disclosed therein.
(d) Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.
(e) The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings in this Agreement are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any “ARTICLE” or “Section” are to the corresponding ARTICLE or Section of this Agreement, unless otherwise specified.
(f) As used in this Agreement, the words “hereby,” “herein,” “hereinafter,” “hereof,” “hereto” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear, unless the context otherwise requires.
(g) As used in this Agreement, the word “including” or any variation thereof means “including, without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
(h) An item arising with respect to a specific representation or warranty contained in this Agreement shall be deemed to be “reflected on” or “set forth in” a balance sheet or financial statements, to the extent (i) there is a reserve, accrual or other similar item underlying a number on such balance sheet or financial statement for such item, (ii) such item is otherwise specifically set forth on such balance sheet or financial statement, or (iii) such item is reflected on the balance sheet or financial statement and is specifically set forth in the notes thereto.
(i) When used herein, the word “extent” and the phrase “to the extent” shall mean the degree to which a subject or other thing extends, and such word or phrase shall not simply mean “if.”
(j) Any reference in this Agreement to Law or a Law (including a Law specifically identified and defined herein) means such Law as from time to time amended,
modified or supplemented (including by succession of comparable successor Laws). Except as otherwise provided in this Agreement, any reference in this Agreement to a Contract or other document means such agreement (i) as from time to time amended prior to the date hereof, provided that a true, correct and complete copy of such agreement, as so amended, has been made available to all of the Parties hereto prior to the execution of the Original SPA or (ii) as amended following the date hereof as expressly required pursuant to the terms of this Agreement.
(k) The word “or” shall be deemed to mean “and/or”.
(l) The phrase “provided” or “delivered” or “made available” when used in reference to anything made available to the Purchaser or its Representatives, shall be deemed to mean uploaded to and made available to Purchaser and its Representatives in the on-line data room hosted on behalf of the Seller or otherwise delivered to, or being in the possession of, Purchaser or its Representatives at least two (2) Business Days prior to the date hereof.
(m) Whenever this Agreement requires Seller or any of its Subsidiaries to take any action, such requirement shall be deemed to involve an undertaking on the part of any Seller to take such action or to cause the other Seller and such Subsidiary to take such action. The obligations of Seller hereunder are joint and several.
(n) The Parties have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement; the language used herein will be deemed to be the language chosen by the Parties to express their mutual intent. Further, prior drafts of this Agreement or any of the Ancillary Agreements hereto or the fact that any clauses have been added, deleted or otherwise modified from any prior drafts of this Agreement or any Ancillary Agreements hereto shall not be used to construe this Agreement or any Ancillary Agreements hereto or otherwise constitute evidence of the intent of the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of such prior drafts.
(o) The phrases “the date hereof”, “the date of this Agreement” and “to date”, or any variation thereof, when used in this Agreement shall refer to the Original SPA Date.
ARTICLE II
SALE AND PURCHASE OF THE COMPANY GROUP SECURITIES
2.1 Sale and Purchase of the Company Group Securities. Upon the terms and subject to the conditions contained herein, at the Closing, (a) Seller 1 shall, and shall cause its Affiliates to, sell, transfer, assign, convey and deliver to Purchaser 1, and Purchaser 1 shall purchase, acquire and accept from Seller and such Affiliates, all of Seller 1’s and such Affiliates’ right, title and interest in and to the Target 1 Securities, (b) Seller 1 and Seller Parent shall, and shall cause their Affiliates to, sell, transfer, assign, convey and deliver to Purchaser 1 and Purchaser 3,
respectively, and Purchaser 1 and Purchaser 3 shall purchase, acquire and accept from Seller 1, Seller Parent and such Affiliates, all of Seller 1’s, Seller Parent and such Affiliates’ right, title and interest in and to the Target 2 Securities, and (c) Seller 2 shall, and shall cause its Affiliates to, sell, transfer, assign, convey and deliver to Purchaser 2 and Purchaser 2 shall purchase, acquire and accept from Seller 2, all of Seller 2’s and such Affiliates’ right, title and interest in and to the Target 3 Securities, in each case, free and clear of all Liens (other than transfer restrictions imposed by securities Laws).
ARTICLE III
CONSIDERATION
3.1 Consideration. The aggregate purchase price for the Company Group Securities shall be an amount in cash equal to:
(a) $195,000,000.00 (One Hundred Ninety-Five Million Dollars) (the “Purchase Price”), subject to
(b) the adjustments to the purchase price as provided in Sections 3.3 and 3.4.
3.2 Payment of Purchase Price. At the Closing,
(a) Each of Purchaser 1, Purchaser 2 and Purchaser 3 shall pay, or cause to be paid, to Seller, an amount equal to the portion of the Adjusted Purchase Price (as defined below) allocable to the Company Group Securities (as set forth in the allocation agreed to under Section 3.5 below) to be purchased by such Purchaser, which amount shall be paid by wire transfer of immediately available funds into an account designated by Seller,
(b) Purchaser 3 shall deliver to Seller the Holdco Note,
(c) Seller shall deliver or cause to be delivered to Purchaser a receipt for the Adjusted Purchase Price, duly executed by Seller, and
(d) Purchaser 1 shall pay, or cause to be paid, the Estimated Seller Transaction Expenses in such amounts and to such accounts as specified by Seller by written notice given to Purchaser no less than one (1) Business Day prior to the Closing Date; provided, however, that in the case of Estimated Seller Transaction Expenses, if any, owed to employees of any Company Group Entity at Closing, Purchaser 1 shall pay, or cause to be paid, such amounts to the applicable Seller Group Member upon the Closing and Seller shall cause the applicable Seller Group Member to pay such amounts (less applicable withholding and any Taxes required to be paid by the applicable Seller Group Member with respect thereto) to the applicable employees promptly following the Closing.
To the extent requested by Purchaser, Seller shall cooperate with Purchaser to make available to Purchaser as of the Closing the Estimated Cash for use by Purchaser to fund the payments contemplated in this Section 3.2.
3.3 Closing Statement. At least five (5) Business Days prior to the Closing Date (the “Closing Statement Delivery Date”), Seller shall cause to be prepared and delivered to Purchaser a written statement that is duly executed by an authorized officer of Seller (the “Closing Statement”) setting forth Seller’s good faith estimate of the following, together with reasonable supporting documentation for such estimates:
(a) Working Capital Adjustment Amount (“Estimated Working Capital Adjustment Amount”);
(b) the Cash Amount as of the Effective Time (“Estimated Cash”);
(c) Indebtedness of the Company Group as of the Effective Time (“Estimated Indebtedness”);
(d) Seller Transaction Expenses as of the Effective Time (“Estimated Seller Transaction Expenses”); and
(e) the corresponding Adjusted Purchase Price to be paid at the Closing (which, subject to Section 3.4, shall conclusively constitute the adjusted purchase price at the Closing, absent manifest error).
The preparation of the Closing Statement shall be for the purpose of determining the Estimated Working Capital Adjustment Amount, the amounts for Estimated Cash, Estimated Indebtedness and Estimated Seller Transaction Expenses, and the Adjusted Purchase Price to be paid at the Closing. Not less than two (2) Business Days prior to the anticipated Closing Date, Purchaser shall notify Seller in the event that it disputes any aspect of the Closing Statement or the calculations therein, and prior to the Closing Date, Purchaser and Seller shall negotiate in good faith to resolve any such dispute (or any aspect thereof) and any resolution so mutually agreed in writing by Purchaser and Seller prior to the Closing Date shall be deemed to modify the Closing Statement for purposes of this Agreement; provided, however, that (i) neither Seller nor Purchaser shall be obligated to agree to any proposed resolution and (ii) no dispute or negotiations related to the Closing Statement shall delay or condition the occurrence of the Closing or the payment to Seller of the amounts set forth in the Closing Statement.
3.4 Final Closing Statement; Adjustments and Payments.
(a) As promptly as practicable, but no later than 90 days after the Closing Date, Purchaser shall cause to be prepared and delivered to Seller a statement (the “Final Closing Statement”) setting forth Purchaser’s calculation of the following, together with reasonable supporting documentation for such calculations:
(i) the Working Capital Adjustment Amount (“Final Working Capital Adjustment Amount”);
(ii) the Cash Amount as of the Effective Time (“Final Cash”);
(iii) Indebtedness of the Company Group as of the Effective Time (“Final Indebtedness”); and
(iv) Seller Transaction Expenses as of the Effective Time (“Final Seller Transaction Expenses” and together with the calculations of the items in clauses (i)-(iii) and of the Final Adjusted Purchase Price, collectively, the “Final Closing Calculations”).
The preparation of the Final Closing Statement shall be for the purpose of determining the Final Working Capital Adjustment Amount, the amounts for Final Cash, Final Indebtedness and Final Seller Transaction Expenses, and the Final Adjusted Purchase Price.
(b) During the 45-day period following Seller’s receipt of the Final Closing Statement, Seller and its accountants and other Representatives will be permitted reasonable access to review the books and records and other information of Purchaser and the Company Group used in the preparation of the Final Closing Statement during regular business hours and shall be entitled to reasonable access to the personnel in its employ responsible for preparing the information used in, and the preparation of, the Final Closing Statement to respond to the reasonable inquiries of, or request for information by, Seller its accountants and other Representatives; provided that such review and evaluation will only be upon reasonable notice, will not unreasonably disrupt personnel and operations of either Purchaser or the Company Group and will be at Seller’s sole cost and expense and neither Purchaser nor any of its Affiliates shall have any obligation to make available any information or materials if doing so would violate attorney-client privilege, non-disclosure obligations with third parties or applicable Law (and in such circumstance of non-disclosure obligations with third parties, Purchaser shall use commercially reasonable efforts to obtain removal of such non-disclosure limitations from such third parties).
(c) If Seller disagrees with the Final Closing Calculations set forth in the Final Closing Statement delivered pursuant to Section 3.4(a), Seller may, within 45 days after receipt of the Final Closing Statement, deliver a written notice to Purchaser disagreeing with such Final Closing Calculations and setting forth Seller’s calculations included in the Final Closing Calculations. If Seller fails to deliver such a notice of disagreement within such 45-day period, the Final Closing Statement and the amounts set forth therein shall be deemed to have been accepted by Seller and shall be final and binding upon all of the Parties to this Agreement for all purposes hereof. Any such notice of disagreement shall specify in reasonable detail those calculations, items and amounts as to which Seller disagrees (including its calculation of the amounts in dispute), and Seller shall be deemed to have agreed with all other calculations, items and amounts contained in the Final Closing Statement delivered pursuant to Section 3.4(a).
(d) If a notice of disagreement shall be duly delivered pursuant to Section 3.4(c), Seller and Purchaser shall, during the 15 days after such delivery (or such additional period as may be mutually agreed to by the Seller and Purchaser), use their respective commercially reasonable efforts to reach agreement on the disputed calculations, items and amounts included in the Final Closing Calculations in order to determine, as may be
required, the Final Adjusted Purchase Price, including the Final Working Capital Adjustment Amount, which amount shall not be less than the amount thereof shown in Purchaser’s calculation delivered pursuant to Section 3.4(a) nor more than the amount thereof shown in Seller’s calculation delivered pursuant to Section 3.4(c). If during such period, Seller and Purchaser are unable to reach agreement as to all of the disputed items or amounts, they shall promptly thereafter appoint Deloitte, or if Deloitte is unable or unwilling to act, another internationally recognized independent accounting firm reasonably acceptable to Seller and Purchaser (the “Accounting Referee”) to review this Agreement and the disputed calculations, items and amounts for the purpose of calculating the Final Closing Calculations. Purchaser and Seller shall execute any agreement reasonably required by the Accounting Referee for its engagement hereunder. In making such calculations, the Accounting Referee shall consider only those calculations, items or amounts in the Final Closing Statement and Purchaser’s calculations of the Final Closing Calculations as to which Seller has disagreed (and which have not been subsequently resolved in writing by Seller and Purchaser), and the Accounting Referee’s calculation of both individual line items and the aggregate Final Adjusted Purchase Price must be within the range of values assigned to each such item in the Final Closing Statement delivered by Purchaser and the notice of disagreement delivered by Seller, respectively. Seller and Purchaser shall instruct the Accounting Referee to deliver to Seller and Purchaser, as promptly as practicable (but in any case no later than 45 days from the date of engagement of the Accounting Referee, unless the Seller and Purchaser mutually agree to a later date), a report setting forth such calculations; provided, however, that in no event will any of the disputed items or amounts determined by the Accounting Referee be:
(i) less than Purchaser’s calculation thereof in the Final Closing Statement where a lower amount would benefit Purchaser;
(ii) more than Seller’s calculation thereof in their notice of disagreement delivered pursuant to Section 3.4(c) where a higher amount would benefit Seller;
(iii) more than Purchaser’s calculation thereof in the Final Closing Statement where a higher amount would benefit Purchaser; or
(iv) less than Seller’s calculation thereof in their notice of disagreement delivered pursuant to Section 3.4(c) where a lower amount would benefit Seller.
Such report shall be final and binding upon Seller and Purchaser, absent mathematical error by the Accounting Referee or fraud. The Parties agree that the Accounting Referee’s report shall constitute an arbitral award and may be enforced as an arbitral award. The Parties will provide the Accounting Referee with all documents requested by it as soon as reasonably practicable. The Accounting Referee will be instructed to grant the Parties the opportunity to state their points of view, and, upon request by a Party, the Accounting Referee will conduct a hearing on any disputed items or amounts as to which Seller and Purchaser have not reached written agreement. All submissions by Seller or Purchaser to the Accounting Referee will be in
writing and will be delivered simultaneously to the other Party, and there will be no ex parte communication with the Accounting Referee. The fees and expenses of the Accounting Referee will be borne in the same proportion as the aggregate dollar amount of the unresolved matters that are submitted to the Accounting Referee pursuant to this Section 3.4(d) that are unsuccessfully disputed by each Party (as finally determined by the Accounting Referee) bears to the aggregate dollar amount of all of the unresolved matters that are submitted to the Accounting Referee.
(e) Subject to the limitations in Section 3.4(b), Seller and Purchaser shall use commercially reasonable efforts to cooperate and assist in the preparation of the Final Closing Statement and the calculation of the Final Closing Calculations and in the conduct of the review and dispute resolution process provided for in this Section 3.4; provided, however, that notwithstanding the foregoing, none of Purchaser or any of its Affiliates, or the Representatives of Purchaser or any of their Affiliates, will be entitled to review the Tax Returns of Seller or any Affiliate of Seller for any purpose; provided, further that such review and evaluation will only be upon reasonable notice and in compliance with all applicable Laws, will not unreasonably disrupt personnel and operations of Seller, Purchaser or the Company Group, as applicable, and will be at the requesting party’s sole cost and expense.
(f) If the Final Adjusted Purchase Price exceeds the Adjusted Purchase Price, Purchaser shall pay, or cause to be paid, to Seller the amount of such excess. If the Adjusted Purchase Price exceeds the Final Adjusted Purchase Price, Seller shall pay, or shall cause to be paid, to Purchaser the amount of such excess. All payments made pursuant to this Section 3.4(f) shall be made within five Business Days after the Final Closing Calculations have been finally determined, and each payment shall be made by wire transfer by Purchaser or Seller, as the case may be, of immediately available funds to the account of such other Party as may be designated in writing by such other Party.
(g) The process set forth in this Section 3.4 will be the sole and exclusive remedy of the Parties and their respective Affiliates for any disputes related to the Final Closing Calculations and the calculations and amounts on which they are based or set forth in the related statements and notices delivered in connection therewith. For the avoidance of doubt, the calculations to be made pursuant to this Section 3.4 are not intended to be used to adjust for errors or omissions that may be found with respect to the Financial Records, or any inconsistencies between the Financial Records or the Agreed Accounting Principles, on the one hand, and any other accounting standards, guidelines, principles or practices, on the other hand. After the final determination of the Final Closing Calculations pursuant to this Section 3.4, none of the Parties will have the right to make any claim pursuant to this Section 3.4 based upon the calculation of such amounts as of the Closing (even if subsequent events or subsequently discovered facts would have affected the determination of such amounts had such subsequent events or subsequently discovered facts been known at the time of the final determination of such amounts pursuant to this Section 3.4); provided this Section 3.4(g) shall in no way affect the rights of any Party under Section 7.13 or Section 7.19.
3.5 Purchase Price Allocation. The Parties hereto agree to allocate the Purchase Price among the Company Group Securities in accordance with Schedule 3.5, which allocation shall be used for all Tax purposes among the Company Group Securities. No later than thirty (30) Business Days following the determination of the Final Adjusted Purchase Price, Purchaser shall allocate the Final Adjusted Purchase Price, the Holdco Note and any assumed liabilities (as determined for U.S. federal income tax purposes), among the tangible and intangible assets of each Company Group Entities in accordance with Section 1060 of the Code and the Treasury Regulations thereunder (the “Tax Allocation”) and shall deliver a written statement to Seller describing such Tax Allocation (the “Tax Allocation Statement”). If Seller disagrees with any portion of the Tax Allocation Statement, Seller shall notify Purchaser in writing of such disagreement within thirty (30) days after delivery by Purchaser to Seller of the Tax Allocation Statement. If Seller notifies Purchaser of its disagreement with any portion of the Tax Allocation Statement, then Purchaser and Seller shall work in good faith to resolve such disagreement and after such resolution, the agreed upon Tax Allocation shall be considered final and each of Seller and Purchaser and each of their Affiliates shall use such Tax Allocation Statement for U.S. federal income Tax purposes. If Purchaser and Seller are unable to resolve all disagreements within twenty (20) days of Seller first notifying Purchaser of its disagreement, then Purchaser and Seller may separately determine the allocation of the Final Adjusted Purchase Price for Tax purposes and use its own separate allocation in filing its own Tax Returns.
3.6 Withholding. The Purchaser shall be entitled to deduct and withhold from any payment made hereunder, such amounts as may be required or permitted to be deducted and withheld with respect to the making of such payment under the Code or the ITA, or under any applicable provision of U.S. or Canadian federal, state, provincial, local or foreign Tax Law; provided, if possible, that at least five (5) Business Days prior to the Closing Date the Purchaser will (a) use commercially reasonable efforts to provide the Seller with written notice of its intention to withhold (including the basis for the withholding obligation) and (b) cooperate with Seller to the extent commercially reasonable in efforts to eliminate or reduce such deduction or withholding. To the extent that amounts are so withheld and paid over to the appropriate taxing authority, such amounts shall be treated for all purposes of this Agreement as having been paid to the person in respect of which the Purchaser made such deduction or withholding.
Notwithstanding the above, regarding the transfer of Target 2 Securities, the Purchaser shall not deduct and withhold from any payment made in connection with the Target 2 Securities, and Seller Parent and Seller 1 shall deliver to Purchaser within twenty (20) Business Days following the Closing Date (i) the relevant Tax returns filed with the Mexican tax authorities either by Seller Parent and Seller 1 and (ii) proof of payment of such Tax returns. Seller Parent and Seller 1 shall also deliver the corresponding invoices for the sale of Target 2 Securities, which shall comply with the provisions contained in articles 29 and 29-A of the Federal Fiscal Code (Código Fiscal de la Federación), rule 2.7.1.16. of the Tax Miscellaneous Resolution (Resolución Miscelánea Fiscal) for fiscal year 2019 in force, or any successor provisions.
If Seller Parent and Seller 1 elect to submit to the Mexican Tax authorities a tax report (dictamen fiscal) issued by a registered public accountant according to the provisions of article
161 of the Mexican Income Tax Law (Ley del Impuesto Sobre la Renta), Seller Parent and Seller 1 shall deliver to the Purchaser and Target 2 within five (5) Business Days following its filing a copy of the tax report cover letters filed before the Mexican tax authorities as a result of the execution and performance of this Agreement, in terms of the aforementioned tax provisions (for the avoidance of doubt, the “Carta de presentación del dictamen de enajenación de acciones”, Official Format 40 issued by the Mexican tax authorities).
ARTICLE IV
CLOSING AND TERMINATION
4.1 Closing Date. Subject to the satisfaction of the conditions set forth in Sections 8.1 and 8.2 (or the waiver thereof by the Party entitled to waive that condition), the consummation of the sale and purchase of the Company Group Securities provided for in Section 2.1 (the “Closing”) shall take place by either electronic delivery of documentation or physical delivery of documentation (at the offices of Stinson LLP located at 7700 Forsyth Boulevard, Suite 1100, St. Louis, MO 63105), as mutually determined by the Parties, at 9:00 a.m. CS, on the second Business Day after the satisfaction or waiver of each condition to the Closing set forth in ARTICLE VIII (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), unless another date is mutually agreed to in writing by the Parties; provided that, notwithstanding anything to the contrary contained in this Agreement, the Closing shall not occur prior to December 31, 2019 or such earlier date specified by Purchaser to Seller upon not less than two (2) Business Days’ prior written notice (and in any event subject to the satisfaction or waiver of the conditions to Closing as of the Closing). The date on which the Closing actually occurs is referred to in this Agreement as the “Closing Date.”
4.2 Termination of Agreement. Notwithstanding anything in this Agreement to the contrary, this Agreement may be terminated prior to the Closing as follows:
(a) by either Seller or Purchaser, by written notice to the other Party, after December 31, 2019 (the “Termination Date”), if the Closing shall not have occurred by the close of business on December 31, 2019; provided the right to terminate this Agreement pursuant to this Section 4.2(a) shall not be available to any party whose breach of any representation, warranty, covenant or agreement of such party in this Agreement caused, or resulted in, the failure of the Closing to have occurred prior to such time;
(b) by mutual written agreement of Seller and Purchaser;
(c) by either Seller or Purchaser, by written notice to the other Party, if there shall be in effect any Law or final nonappealable Order of a Governmental Body of competent jurisdiction permanently restraining, enjoining or otherwise prohibiting consummation of the transactions contemplated hereby;
(d) by Purchaser, by written notice to Seller, if there has been a breach of any representation, warranty, covenant or agreement made by the Seller in this Agreement, or any such representation and warranty shall have become untrue after the date of this
Agreement, such that the conditions set forth Section 8.1(a) or 8.1(b) would not be satisfied and such breach or failure to be true is not curable or, if curable, is not cured prior to the date that is two (2) Business Days prior to the Termination Date; provided that Purchaser shall not have the right to terminate this Agreement pursuant to this Section 4.2(d) if Purchaser is then in breach of any of its representations, warranties, covenants or agreements under this Agreement such that the conditions set forth Section 8.2(a) or 8.2(b) would not be satisfied if the Closing occurred at such time;
(e) by Seller, by written notice to Purchaser, if there has been a breach of any representation, warranty, covenant or agreement made by the Purchaser in this Agreement, or any such representation and warranty shall have become untrue after the date of this Agreement, such that the conditions set forth Section 8.2(a) or 8.2(b) would not be satisfied and such breach or failure to be true is not curable or, if curable, is not cured prior to the date that is two (2) Business Days prior to the Termination Date; provided that Seller shall not have the right to terminate this Agreement pursuant to this Section 4.2(e) if Seller is then in breach of any of its representations, warranties, covenants or agreements under this Agreement such that the conditions set forth Section 8.1(a) or 8.1(b) would not be satisfied if the Closing occurred at such time; or
(f) by Seller if (i) Purchaser fails to consummate the Closing on the date the Closing is required to have occurred pursuant to Section 4.1, (ii) all of the conditions precedent to Purchaser’s obligations to consummate the Closing under Section 8.1 (other than any such condition which by its nature is to be satisfied on the Closing Date, but subject to such conditions being capable of being satisfied assuming the Closing occurs on such date) have been satisfied and continue to be satisfied, (iii) Seller confirmed by written notice to Purchaser that the date the Closing should have occurred pursuant to Section 4.1 has occurred and Seller irrevocably certifies that they are ready, willing and able to consummate the Closing on the date of such written notice and throughout the immediately subsequent two (2) Business Day period, and (iv) Purchaser fails to consummate the Closing within two (2) Business Days following receipt of such written certification.
4.3 Effect of Termination. If this Agreement is validly terminated pursuant to Section 4.2, this Agreement shall thereupon become null and void and of no further force and effect and each of the Parties shall be relieved of their duties and obligations arising under this Agreement after such termination and such termination shall be without Liability to Purchaser or Seller (other than the rights and obligations provided for in this Section 4.3 (Effect of Termination), Section 4.4 (Termination Fee), Section 7.6 (Confidentiality), Section 7.9 (Publicity), and ARTICLE X (Miscellaneous)); provided that, subject to Section 4.4(b), no such termination shall relieve any Party from Liability for any intentional fraud or Intentional Breach of this Agreement prior to such termination (except that the Purchaser and its Affiliates, their respective shareholders, partners, equityholders, employees, directors, officers, Representatives and Affiliates shall not be liable for any breach if the Termination Fee (and any costs which are due and payable to Seller under Section 4.4(b)) has been paid).
4.4 Termination Fee.
(a) In the event that this Agreement is validly terminated (i) by Seller in accordance with Section 4.2(e) or Section 4.2(f) or (ii) by Purchaser in accordance with Section 4.2(a) at a time when Seller had the right to validly terminate this Agreement under Section 4.2(e) or Section 4.2(f), then, Purchaser shall pay or cause to be paid to Seller Parent, within five (5) Business Days following such termination, an amount in cash equal to $11,700,000.00 (Eleven Million Seven Hundred Thousand Dollars) (the “Termination Fee”) by wire transfer of immediately available funds to an account designated in writing by Seller Parent.
(b) Notwithstanding anything to the contrary in this Agreement, in the event that the Termination Fee is payable in accordance with the terms of this Agreement, (i) Seller Parent’s right to receive the Termination Fee pursuant to Section 4.4(a) and the Enforcement Costs pursuant to this Section 4.4(b) shall be the sole and exclusive remedy of the Seller and any other Person against Purchaser, the Debt Financing Sources, the Sponsor, their Affiliates and their respective Representatives (and, without limiting Section 10.10, no such Person shall have any other Liability for any or all Losses suffered or incurred by Seller or any other Person) relating to or arising out of this Agreement and the transactions contemplated hereby, including any failure of the Closing to be consummated, and (ii) upon payment of Termination Fee (and the Enforcement Costs, if any), no such Person shall have any further Liability relating to or arising out of this Agreement or the transactions contemplated hereby, including the Limited Guarantee. For the avoidance of doubt, under no circumstances shall Seller be permitted or entitled to receive both a grant of specific performance and any money damage, including all or any portion of the Termination Fee. If Purchaser fails to pay the Termination Fee pursuant to Section 4.4(a), and, in order to obtain such payment, Seller Parent commences a Legal Proceeding that results in a final, nonappealable judgment against Purchaser for the payment of the Termination Fee pursuant to Section 4.4(a), Purchaser shall pay, or cause to be paid, in addition to the Termination Fee, to Seller Parent, Seller Parent’s reasonable out-of-pocket costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Seller Parent in connection with such Legal Proceeding (the “Enforcement Costs”).
(c) The Parties acknowledge and agree that the agreements contained in this Section 4.4 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, the Parties would not otherwise enter into this Agreement. The Parties acknowledge and agree that (i) under no circumstances will the Seller or any of its Affiliates, indirectly and collectively, seek to recover, or be entitled to recover, any money damages or other Losses of any kind, character or description in excess of the Termination Fee (and the Enforcement Costs, if any), (ii) in no event shall Purchaser be required to pay the Termination Fee on more than one occasion and (iii) any payment of the Termination Fee, as applicable, described in this Section 4.4 is not a penalty but is liquidated damages in a reasonable amount that will compensate the Seller in the circumstances in which such fees are payable for the efforts and resources expended and the opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated by this Agreement, which amount would otherwise be impossible to calculate with precision.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Purchaser as of the date hereof and as of Closing that:
5.1 Organization and Good Standing.
(a) Seller Parent is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware and has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as now conducted. Seller 1 is a corporation duly organized, validly existing and in good standing under the Laws of the State of Washington and has all requisite limited liability company power and authority to own and operate its properties and assets and to carry on its business as now conducted. Seller 2 is a company duly organized, validly existing and in good standing under the Laws of Alberta and has all requisite company power and authority to own and operate its properties and assets and to carry on its business as now conducted. Each Company Group Entity is duly organized, validly existing and in good standing under the Laws of its respective state or country of formation and has all requisite power and authority to own and operate its properties and assets and to carry on its business, including, as of the Closing, the Business. Seller is duly qualified or authorized to do business and is in good standing under the Laws of each jurisdiction in which it owns real property and each other jurisdiction in which the conduct of its business or the ownership of its properties and assets requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing would not reasonably be expected to, individually or in the aggregate, to prohibit or materially impair Seller’s ability to consummate the transactions contemplated by this Agreement or the Ancillary Agreements.
(b) Each Company Group Entity is duly qualified or authorized to do business and is in good standing under the Laws of each jurisdiction in which it owns real property and each other jurisdiction in which its conduct of the Business or the ownership of its properties and assets requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing would not reasonably be expected to be material to the Business, taken as a whole. Seller has made available to Purchaser accurate and complete copies of the Organizational Documents of each Company Group Entity, as amended to date and currently in effect. Other than the Seller Parent IP, the Seller Parent holds no Business Assets.
(c) Each of Target 1 and Target 3 was formed solely for the purpose of effecting the transactions contemplated by this Agreement and, except pursuant to the Restructuring, neither Target 1 nor Target 3 was engaged in any business activities, conducted any operations whatsoever, had any employees, assets or Liabilities, or paid any dividends or other distributions.
5.2 Authorization of Agreement. Seller has all requisite power, authority and legal capacity to execute and deliver this Agreement and each other agreement or document contemplated by this Agreement (including the Ancillary Agreements) to be executed by Seller
in connection with the consummation of the transactions contemplated by this Agreement (the “Seller Documents”), and to perform its obligations thereunder (including to consummate the Transactions). The execution and delivery of this Agreement and each of the Seller Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all required action on the part of Seller. This Agreement has been, and each of the Seller Documents will be at or prior to the Closing, duly and validly executed and delivered by Seller, and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each Seller Document, when so executed and delivered will constitute, the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar Laws affecting creditors’ rights and remedies generally and to general principles of equity (the “General Enforceability Exceptions”).
5.3 Conflicts; Consents. Except as set forth on Schedule 5.3:
(a) none of the execution and delivery by Seller of this Agreement or the Seller Documents, the compliance by Seller with any of the provisions hereof or thereof or the consummation of the Transactions will:
(i) conflict with or result in any violation of the Organizational Documents of Seller or any Company Group Entity;
(ii) conflict with, or result in any breach or violation of or default (with or without notice or lapse of time, or both) or payment obligation under, or give rise to a right of termination or cancellation of any right or benefit under, or result in the loss of rights under (or constitute an event which, with notice or lapse of time, or both, would constitute a violation, default or breach under), any Material Contract or Permit or Real Property Lease to which Seller or any Company Group Entity is a party or by which Seller, any Company Group Entity or any of the properties or assets of Seller or the Company Group are bound (other than Contracts that have been terminated or will expire by their terms before or upon the Closing and Contracts with Affiliates of Seller that will be terminated before or upon the Closing), except where the conflict, breach, violation, default, termination or cancellation would not be material to the Business, taken as a whole;
(iii) result in any violation of any Law or Order applicable to the Seller or the Company Group or the Business or by which any of the properties or assets of Seller or the Company Group or the Business are bound, except where the violation would not be material to the Business, taken as a whole; or
(iv) result in the imposition or creation of a Lien upon or with respect to any of the properties or assets of Seller or the Company Group or the Business (other than Permitted Exceptions); and
(b) none of the execution and delivery by Seller of this Agreement or the Seller Documents, the compliance by Seller with any of the provisions hereof or thereof or the consummation of the Transactions will require Seller or the Company Group to obtain any Order, Permit or waiver of, or declare or file with, or give notification to, any Person (including any Governmental Body), except for:
(i) compliance with the applicable requirements of the HSR Act and any other Laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (collectively, the “Antitrust Laws”); and
(ii) such Orders, Permits, waivers, declarations, filings and notifications as to which the failure to obtain, make or give the same would not be material to the Business, taken as a whole or prohibit or materially impair Seller’s ability to consummate the transactions contemplated by this Agreement or the Ancillary Agreements.
5.4 Ownership and Transfer of the Company Group Securities. Seller is the record and beneficial owner of all of the Company Group Securities, free and clear of any and all Liens other than transfer restrictions imposed by securities Laws and those set forth on Schedule 5.4, which shall be released at or prior to Closing. Seller has the power and authority to sell, transfer, assign and deliver the Company Group Securities as provided in this Agreement, and such delivery will convey to Purchaser good and marketable title to the Company Group Securities, free and clear of any and all Liens, other than transfer restrictions imposed by securities Laws and Liens created by Purchaser.
5.5 Capitalization.
(a) The authorized Equity Interests and the number of issued and outstanding Equity Interests of each Company Group Entity is set forth on Schedule 5.5(a). The Company Group Securities have been duly authorized for issuance, are validly issued and fully paid and nonassessable, were not issued in violation of any securities Laws or preemptive rights and are owned of record and beneficially by the applicable Seller.
(b) Other than this Agreement there is no Contract to which Seller or any of its Affiliates is a party requiring the delivery of any of the Company Group Securities by Seller, or the issuance of any Company Group Securities by any Company Group Entity, to another Person, at the option of such Person or otherwise. Neither Seller nor any Company Group Entity is a party to any voting trust or other Contract with respect to the voting, redemption, sale, transfer or other disposition of the Company Group Securities. Except as set forth on Schedule 5.5(b), there are no options, warrants, calls, purchase rights, subscription rights, rights of first refusal, preemptive rights, conversion rights, exchange rights or rights of conversion or other similar rights, agreements, arrangements, contracts or commitments obligating any Company Group Entity to issue or sell any Equity Interests, other than, in each case, pursuant to this Agreement.
(c) There are no securities of the Company Group outstanding that, upon conversion, exchange or exercise thereof, would require the issuance of any securities of any Company Group Entity or other securities convertible into or exchangeable or exercisable for securities of any Company Group Entity. There are no outstanding or authorized calls, stock options, stock appreciation, restricted stock, restricted stock unit, phantom stock, profit participation or other similar equity rights or equity-based incentive awards with respect to any Company Group Entity, and no repurchase, redemption or other obligation to acquire for value any shares of any class of capital stock or Equity Interests of such Company Group Entity.
5.6 No Subsidiaries or Minority Investments. The Company Group does not have any Equity Interest in any Person. The Company Group has not agreed and is not obligated to make any future investment in or capital contribution to any Person.
5.7 Financial Information. Schedule 5.7 sets forth or refers to the following financial statements and information with respect to the Business (the “Financial Records”): (i) the unaudited combined balance sheet of the Business as of December 31, 2017 and December 31, 2018 and the unaudited combined statement of income for the Business for the twelve (12) month periods then ended, and (ii) the unaudited combined balance sheet of the Business as of July 31, 2019 and the unaudited statement of income for the Business for the seven (7) month period then ended (“Interim Financial Records”). Except as set forth on Schedule 5.7, the Financial Records (1) have been prepared based on the books and records of the Seller and its Affiliates, as applicable, (2) have been prepared in all material respects consistent with the accounting policies of the Seller and its Affiliates and (3) fairly present, in all material respects, the combined financial condition and combined results of operation of the Business as of the dates and for the periods presented. The records of the Seller, the Company Group and the Business have been maintained in material compliance with applicable legal and accounting requirements, and such records accurately reflect, in all material respects, all transactions in respect of the Business and the properties, assets and Liabilities of the Business as of the dates presented. Each of Seller, the Company Group and the Business makes and keeps books, records and accounts which, in reasonable detail, accurately and fairly reflect the assets, Liabilities, revenues, expenses and equity of such Person, in each case other than due to inaccuracies or misrepresentations which are not, individually or in the aggregate, material to the Business. Notwithstanding anything to the contrary herein, (A) the Financial Records were prepared solely for the purpose of this Agreement, and (B) the Business was not conducted on a stand-alone basis as a separate entity during the time periods indicated in the Financial Records. The revenues of the Business reflected in the Financial Records are directly attributable to the Business. Associated costs represent all the direct costs of operating the Business but exclude certain costs for the services described in the schedules to the Transition Services Agreement that were provided by the Seller and its Affiliates to the Business during the applicable time periods.
5.8 Absence of Certain Changes; Undisclosed Liabilities; Indebtedness.
(a)
(i) Except as set forth on Schedule 5.8(a), since December 31, 2018, the Seller and its Subsidiaries (including the Company Group) have conducted the Business in all material respects only in the Ordinary Course of Business;
(ii) since December 31, 2018, there has not been any Event that has had or would reasonably be expected to have a Material Adverse Effect; and
(iii) Except as set forth on Schedule 5.8(a), since July 31, 2019, neither Seller nor its Subsidiaries (including the Company Group) has taken any action that, had it been taken after the date of this Agreement would have violated the provisions of Section 7.2.
(b) Except as set forth on Schedule 5.8(b), there are no Liabilities related to the Business or of the Company Group other than:
(i) Liabilities reflected on or set forth in the Financial Records;
(ii) Liabilities arising after December 31, 2018 in the Ordinary Course of Business, which are immaterial and do not arise from any breach of Contract, violation of Law or any tort; and
(iii) immaterial Liabilities arising in connection with this Agreement and the transactions contemplated hereby.
(c) Except as set forth on Schedule 5.8(c), neither the Business nor the Company Group has, or at the Closing will have, any Indebtedness.
5.9 Taxes.
(a) Except as set forth on Schedule 5.9:
(i) each Company Group Entity, or the ultimate Tax parent of the Company Group, as applicable, has duly and timely filed all Tax Returns required to be filed by it (taking into account requests for extensions to file such returns) in accordance with applicable Laws; all such Tax Returns are true, correct and complete in all material respects; and all Taxes required to be paid or remitted by it (whether or not set out on any Tax Return) have been paid or remitted (as applicable) when due or (if not yet due) have been properly provided for in the Financial Records;
(ii) all amounts of Taxes required to be withheld or remitted by any Company Group Entity, have been withheld and have been (or will be) duly and timely paid to the proper taxing authority;
(iii) each Company Group Entity has charged, collected and remitted on a timely basis all Taxes as required under any applicable Law on any sale, supply or delivery whatsoever, made by it, and each such corporation is validly registered as a vendor with the relevant taxing authority for the collection of such Taxes;
(iv) no deficiencies for any Taxes have been proposed, asserted or assessed against any Company Group Entity that are still pending;
(v) Seller and its Affiliates (including the Company Group Entities) have received no written notice of any audit, investigation, assessment, reassessment or other action with respect to Taxes of any Company Group Entity or the Business and, to the Knowledge of Seller, no such action is pending;
(vi) no requests for waivers of the time to assess any amounts of Taxes against any Company Group Entity has have been made that are still pending;
(vii) the Company Group has not participated in any “reportable transaction” as defined in Section 6707A of the Code or Treasury Regulation Section 1.6011-4 (or any predecessor provision) or any similar provision of foreign, state or local Law;
(viii) no Company Group Entity has been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code;
(ix) since January 1, 2016, no Company Group Entity has been party to any transaction treated by the parties thereto as one to which Sections 355 or 361 of the Code applied;
(x) no Company Group Entity is a party to, bound by, or has any Liability under any Tax allocation agreement, Tax indemnification agreement, Tax sharing agreement or similar Contract, other than a Contract entered into in the ordinary course of business, the principal purpose of which is not related to Taxes (such agreement, a “Tax Sharing Agreement”);
(xi) no Company Group Entity has (x) received a written notice of a claim by any taxing authority in any jurisdiction where such Company Group Entity does not file Tax Returns stating that such Company Group Entity is or may be subject to taxation by, or required to file Tax Returns with, that jurisdiction or (y) received or requested any
ruling, closing agreement, transfer pricing agreement or similar agreement from any taxing authority with respect to any Tax;
(xii) no Company Group Entity has (x) ever been included in an Affiliated Group (other than a group the parent of which is Seller or a Company Group Entity) or (y) any Liability for the Taxes of any person (other than the other Company Group Entities) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local, or foreign Law), as a transferee or successor, by Contract or otherwise;
(xiii) the Company Group has not agreed, nor is required, to make any adjustment to taxable income in any period (or portion thereof) ending after the Closing Date by reason of any (w) change in method of accounting made or required to be made for any period (or portion thereof) ending on or before the Closing Date, (x) installment sale or open transaction disposition made on or prior to the Closing Date, (y) election under either Section 108(i) or Section 965 of the Code (or any similar provision of state or local Law), or (z) prepaid amount received on or prior to the Closing Date;
(xiv) no Tax Return of any Company Group Entity has been the subject of a Tax Proceeding for the past five (5) fiscal years; no written notice of a Tax Proceeding has been received by the Company Group; to the Knowledge of Seller, no Tax Proceeding is in progress or pending with regard to any Taxes of, or with respect to, the Company Group; and, to the Knowledge of Seller, no taxing authority has asserted or threatened to assert any Tax Proceeding or assessments with respect to the Company Group;
(xv) there are no Liens for Taxes on any of the assets of the Company Group, other than Permitted Exceptions;
(xvi) the Company Group has retained, within the statute of limitations, all Tax, accounting and other Records required by applicable Law to support any Tax position, filing or Tax Proceeding made by them with respect to Taxes;
(xvii) the Company Group Entities are in compliance with all transfer pricing regulations as per applicable Law, including any applicable requirement to maintain contemporaneous documentation substantiating the transfer pricing practices of the Company Group Entities;
(xviii) apart from Target 3, no Company Group Entity has ever (i) had any liability for Tax in Canada, (ii) filed, or had any
obligation to file, Tax Returns with any Canadian Governmental Body, (iii) been resident in or carried on business in Canada for the purposes of the ITA, or (iv) owned any property in Canada;
(xix) Target 3 has not entered into an agreement contemplated in section 191.3, or subsection 18(2.3), 127(13) to (17), 127(20) of the ITA or any analogous provision of any comparable Law of any province or territory of Canada;
(xx) there are no transactions or events that have resulted, and no circumstances existing, including those contemplated in Section 7.12 of this Agreement, which could result in the application to Target 3 of sections 78, 80, 80.01, 80.02, 80.03, 80.04 of the ITA or any analogous provision of any comparable Law of any province or territory of Canada; and
(xxi) Target 3 has not acquired property from a Person not dealing at arm’s length (for purposes of the ITA) with it in circumstances that would result in Target 3 becoming liable to pay Taxes of such Person under subsection 160(1) of the ITA or any analogous provision of any comparable Law of any province or territory of Canada.
(b) Seller has delivered or otherwise made available to Purchaser true, correct and complete copies of (i) all Tax Returns with respect to the Company Group and the Business for all Tax periods beginning on or after January 1, 2016 (other than any Tax Returns of Seller that report or include items unrelated to the Company Group) and (ii) any statements of deficiencies assessed against or agreed to by any Company Group Entity, since January 1, 2016; and
(c) Target 1 and Target 3 are classified as disregarded entities for U.S. federal income tax purposes under all applicable laws and regulations, and neither entity has ever filed an election to be treated as a corporation for U.S. federal income tax purposes.
(d) Seller 2 is not a non-resident of Canada for purposes of the ITA.
(e) None of the Target 1 Securities or Target 2 Securities are “taxable Canadian property” within the meaning of the ITA.
5.10 Real Property.
(a) Schedule 5.10(a) sets forth a true, complete and correct list of all leases, subleases, licenses or other agreements for use and occupancy of real property (individually, a “Company Property” and collectively, the “Company Properties”) by the Company Group or used in the Business, together with all amendments, renewals, and guaranties (individually, a “Real Property Lease” and collectively, the “Real Property Leases”).
(b) Except as set forth on Schedule 5.10(b):
(i) the applicable Company Group Entity has good and valid leasehold interests to the Company Property, free and clear of Liens of any nature whatsoever except for Permitted Exceptions;
(ii) no Company Group Entity is a party to any Contract providing another Person with the right to purchase from the applicable Company Group Entity, or granting any preferential right with respect to, any Company Property or any portion thereof;
(iii) no Company Group Entity has leased or otherwise granted to any Person the right to use or occupy any Company Property or any portion thereof except for Permitted Exceptions; and
(iv) no Company Group Entity is a party to any Contract providing the applicable Company Group Entity with the right or obligation to purchase from another Person any real property or any interest in real property.
(c) Except as set forth on Schedule 5.10(c), the Company Property constitutes all of the real property that is currently used in connection with the operation of the Business.
(d) Except as set forth on Schedule 5.10(d):
(i) Seller has delivered or otherwise made available to Purchaser a true, correct and complete copy of each Real Property Lease;
(ii) each Real Property Lease is in full force and effect and is the valid, binding and enforceable obligation of the applicable Company Group Entity, and to the Knowledge of Seller, each other party to such Real Property Lease, in accordance with its terms, in each case subject to the General Enforceability Exceptions;
(iii) neither the Company Group nor, to the Knowledge of Seller, any other Person is in material breach or violation of, or material default (with or without notice or lapse of time, or both) under, any Real Property Lease or has failed to perform all material obligations required to be performed by it to date under a Real Property Lease; and
(iv) no party to any Real Property Lease has exercised any termination rights with respect thereto, and, to the Knowledge of Seller, no party has given notice of any intention to terminate or material dispute with respect to any Real Property Lease, or has amended, cancelled, terminated, relinquished, waived, or released any Real
Property Lease or any material right thereunder (other than the expiration of a Real Property Lease in accordance with its terms).
5.11 Tangible Personal Property. The Company Group has good and valid title to all tangible personal property reflected on the Financial Records as being owned by the Company Group, free and clear of all Liens except for Permitted Exceptions, other than tangible personal property sold or disposed of by the Company Group since December 31, 2018 in the Ordinary Course of Business.
(a) Schedule 5.11(a) sets forth a true, correct and complete list, as of the date of this Agreement, of all leases of tangible personal property by the Company Group or the Business (“Personal Property Leases”) involving annual payments in excess of $50,000, other than:
(i) such leases that have been terminated or will expire by their terms before or upon the Closing; and
(ii) leases with Affiliates of Seller that will be terminated before or upon the Closing.
(b) Except as set forth on Schedule 5.11(b):
(i) Seller has delivered or otherwise made available to Purchaser a true, correct and complete copy of each Personal Property Lease required to be disclosed on Schedule 5.11(a);
(ii) each such Personal Property Lease is in full force and effect and is the valid, binding and enforceable obligation of the Company Group, and to the Knowledge of Seller, each other party to such Personal Property Lease, in accordance with its terms, in each case subject to the General Enforceability Exceptions;
(iii) neither the Company Group nor, to the Knowledge of Seller, any other Person is in material breach or violation of, or material default (with or without notice or lapse of time, or both) under, any such Personal Property Lease, or has failed to perform material obligations required to be performed by it to date under a Personal Property Lease; and
(iv) no party to any Personal Property Lease has exercised any termination rights with respect thereto, and, to the Knowledge of Seller, no party has given written notice of any intention to terminate or material dispute with respect to any Personal Property Lease, or has amended, cancelled, terminated, relinquished, waived, or released any Personal Property Lease or any material right thereunder (other than the expiration of a Personal Property Lease in accordance with its terms).
5.12 Intellectual Property; Data Privacy.
(a) Schedule 5.12(a)(i) sets forth a true and complete list of (i) all Registered Owned Intellectual Property, (ii) all Registered Intellectual Property that is a Business Asset (indicating for each such item in (i) and (ii), as applicable, the application or registration number, date and jurisdiction of filing or issuance, and the identity of the current applicant or registered owner), (iii) all unregistered Trademarks included in the Owned Intellectual Property or that are otherwise Business Assets (including social media names), and (iv) a high-level description of all material trade secrets owned by the Company Group or that are otherwise a Business Asset. No such Intellectual Property has been cancelled or held unenforceable, and no Legal Proceedings are pending or, to the Knowledge of Seller, threatened making such claims. Each item of Registered Owned Intellectual Property and Registered Intellectual Property that is a Business Asset is valid, subsisting and enforceable and is, or as of the Closing will be, duly registered or filed in the name of one of the Company Group Entities. Except as set forth on Schedule 5.12(a)(ii) (the Intellectual Property set forth on Schedule 5.12(a)(ii), collectively, the “Excluded IP”), the Company Group owns, or has the right to use pursuant to a Contract, all Intellectual Property used by the Business as it is conducted as of the date of this Agreement and as it is proposed to be conducted, and all such rights will survive consummation of the Transactions. A Company Group Entity exclusively owns the Owned Intellectual Property, or will as of the Closing own the Owned Intellectual Property that is a Business Asset, free and clear of all Liens (other than Permitted Exceptions).
(b) Except as set forth on Schedule 5.12(b), no unresolved claims are pending before any Governmental Body or, to the Knowledge of Seller, threatened in writing against the Company Group or the Seller (with respect to the Business) by any Person alleging that the conduct of the Business infringes on the Intellectual Property rights of any Person. To the Knowledge of Seller, the conduct of the Business does not infringe, violate or misappropriate the Intellectual Property of any Person and has not done so since January 1, 2016, and to the Knowledge of Seller, no Person is infringing, violating or misappropriating, or has since January 1, 2016, infringed, violated or misappropriated, any Intellectual Property used in the Business.
(c) Except as set forth on Schedule 5.12(c), since January 1, 2016, Seller (with respect to the Business) and the Company Group have used commercially reasonable efforts to protect the secrecy, confidentiality and value of the Business’ trade secrets and other confidential information and to prevent the disclosure of Intellectual Property (other than the Excluded IP) owned by the Company Group which it intends to maintain as a trade secret. To the Knowledge of Seller, no such trade secrets or confidential information has been disclosed to or discovered by any Person except pursuant to non-disclosure agreements that obligate that Person to maintain the confidentiality of the trade secrets or confidential information.
(d) To the Knowledge of Seller, no current or former director, employee, contractor, shareholder or agent of the Seller or any of its Affiliates (including the Company Group) is in default or breach of any employment agreement, non-disclosure agreement, assignment of invention agreement or similar agreement relating to the protection, ownership,
development, use or transfer of Intellectual Property used in the Business. Except as set forth on Schedule 5.12(d), Seller or a Company Group Entity is a party to valid and enforceable written agreements with all Persons (including all employees and contractors) that have conceived, developed, acquired or created Intellectual Property for the Business or the Company Group, pursuant to which agreements the entire and unencumbered right, title and interest in and to those Intellectual Property are assigned to Seller or a Company Group Entity.
(e) Schedule 5.12(e) lists all Software (other than Software owned by the Company Group or that is otherwise a Business Asset (the “Owned Software”)) that is incorporated or embedded in, or distributed or otherwise used in connection with, the Business’ Software products and services (such as Univar Inventory Manager and PestWeb). The Company Group possesses the source code, object code, and internal technical documentation (including complete source code files) for all Owned Software. All source code and other documentation for the Owned Software is sufficiently documented to enable a software developer of reasonable skill to understand, modify, debug, enhance, compile, support and otherwise utilize all aspects of software to which it pertains. Except as set forth on Schedule 5.12(e), no such source code has been delivered or licensed to any other Person (nor has any other Person had unauthorized access thereto), or is subject to any obligation (whether present, contingent or otherwise) that would require the Company Group to divulge, license or otherwise provide to any Person the source code for any such software. Except as set forth on Schedule 5.12(e), the consummation of the Transactions will not cause the release, disclosure, or delivery of any such source code to any Person.
(f) To the Knowledge of Seller, the IT Assets owned by the Company Group (including the Owned Software) or that are otherwise Business Assets are free from material bugs and other material defects, have not materially malfunctioned or failed within the past three (3) years, and do not contain any virus, malware, trojan horse, worm, back door, time bomb, drop dead device or other program, routine, instruction, device, code, contaminant, logic or effect designed or intended to disable, disrupt, erase, enable any Person to access without authorization, or otherwise adversely affect the functionality of, any Software or other IT Asset.
(g) Since January 1, 2016, Seller (with respect to the Business) and the Company Group have complied at all times with the terms of all Contracts governing the use or distribution of Open Source Software with respect to the Business, and no use of or activities with respect to Open Source Software by or on behalf of such Person, or its customers, (i) requires the licensing, disclosure or distribution of any Software (other than the Open Source Software) or Owned Intellectual Property to any other Person, or (ii) prohibits or limits the (A) receipt of consideration in connection with licensing or otherwise distributing any Software, or (B) imposition of contractual restrictions on the rights of licensees or other recipients to decompile, disassemble or otherwise reverse-engineer any Software.
(h) Except as set forth on Schedule 5.12(h), after Closing, there will be no Intellectual Property or IT Assets owned or used by Seller or any of its Affiliates that is
necessary for or used by the Business as of the Closing as to which no provision is made in this Agreement or the Ancillary Agreements for continued use thereof after the Closing by the Company Group. The consummation of the Transactions will not result in any of the following pursuant to the terms of any Contract to which Seller (with respect to the Business) or a Company Group Entity is a party or by which any of its or their properties or assets are bound: (i) the grant, license or assignment to any Person of any interest in or to, the modification or loss of any rights with respect to, or the creation of any Lien on, any Intellectual Property owned by or licensed to a Purchaser or any of its Affiliates prior to the Closing, or (ii) a Purchaser or any of its Affiliates being bound by or subject to any non-compete, licensing or modified payment obligation, covenant not to sue, or other restriction on or modification of the current or contemplated operation or scope of its business, which that Person was not bound by or subject to prior to the Closing.
(i) Seller (with respect to the Business) and each Company Group Entity has complied since January 1, 2016 in all material respects, and each is currently in compliance in all material respects, with all privacy policies, contractual obligations, applicable Laws concerning personal data and personally identifiable and non-public personal information (including General Data Protection Regulation (2016/679), and all implementing regulations and requirements, and other similar laws), and any rules of applicable self-regulatory organizations to which any of them is or has been a member or to which they are required to comply, including (to the extent applicable) the Payment Card Industry Data Security Standards. The consummation of the Transactions, nor any disclosure or transfer of information in connection therewith, will breach or otherwise cause any violation of any of the foregoing or require the consent, waiver or authorization of, or declaration, filing or notification to, any Person under any of the foregoing, and there is no Legal Proceeding pending or, to the Knowledge of Seller, threatened against the Seller (with respect to the Business) or the Company Group concerning the foregoing.
(j) Seller (with respect to the Business) and the Company Group have established and are in compliance in all material respects with an information security program that: (i) includes administrative, technical and physical safeguards designed to safeguard the security, confidentiality, and integrity of transactions of personal data and personally identifiable and non-public personal information; and (ii) uses reasonable encryption methods for transmission of information across wireless and wired networks and storage of personal data and personally identifiable and non-public personal information according to its sensitivity and proportional to the risk that the inappropriate use or disclosure of that information could cause financial, physical, or reputational harm to an individual. Seller (with respect to the Business) and the Company Group require all Persons that have access to the Business’s IT Assets to comply with such information security program. To the Knowledge of Seller, there has been no loss, damage, unauthorized access, unauthorized use, unauthorized modification, or other breach of security of any personal data and personally identifiable and non-public personal information maintained by or on behalf of Seller (with respect to the Business) or the Company Group.
5.13 Material Contracts.
(a) Schedule 5.13(a) sets forth a true, correct and complete list, as of the date of this Agreement, of all of the following Contracts to which Seller Parent or any of its Subsidiaries (with respect to the Business) or a Company Group Entity is a party or by which it or any of its assets or properties are bound (collectively, the “Material Contracts”):
(i) (A) employment agreements, offer letters, severance agreements, or other similar Contracts providing for annual base compensation or severance payments and benefits in excess of $100,000 with respect to any Business Employee, or (B) any Contract providing for a change in control, transaction, retention, guaranteed or “stay” or similar bonus, payment or benefit to any Business Employee;
(ii) Collective bargaining agreements or any other Contracts with any works council, labor union or association representing any Business Employee;
(iii) Contracts containing covenants limiting the freedom of any Seller or any Company Group Entity to compete in any line of business or with any Person or in any geographic area or market or granting to another Person a right of exclusivity, or Contracts purporting to limit the Business or the manner or locations in which the Business engages or prohibiting or limiting the right of the Company Group or the Business to make, sell or distribute any products or services in any material respect;
(iv) (A) Contracts providing any customer with pricing, discounts or benefits that change based on the pricing, discounts or benefits offered to other customers or by other suppliers to such customer, including Contracts containing “most favored nation,” “most favored customer” or similar provisions; (B) Contracts that include minimum purchase requirements or commitments or take-or-pay obligations or similar mandatory purchase or sale obligations or any restrictions on the purchase or sale of goods or services in any territory or to any customers, and (C) any exclusive arrangement provisions with any Material Customer or Material Suppliers;
(v) Contracts granting to any Person a first refusal, first offer or other similar right to purchase any of the properties or assets of the Business or the Company Group;
(vi) (A) Contracts obliging any Company Group Entity to acquire any operating business or the equity of any other Person and (B) Contracts containing a put, call or similar right pursuant to which Seller (with respect to the Business) or a Company Group Entity would be required to purchase or sell, as applicable, any Equity Interests of any Person or assets at a purchase price which would reasonably be likely to
exceed, or the fair market value of the Equity Interests or assets of which would be reasonably likely to exceed, $250,000;
(vii) Contract for the transportation or delivery of supplies, materials or products providing for, or which would reasonably likely to result in, annual payments in excess of $250,000;
(viii) Contracts relating to Indebtedness;
(ix) Contracts with any Material Supplier, Material Customer, Material Service Provider or Governmental Body;
(x) Contracts concerning the use, licensing, development or maintenance of Intellectual Property or IT Assets, in each case, that are material to the Business;
(xi) (A) partnership, strategic alliance, joint marketing or joint venture agreement Contracts and (B) Contracts that involve the payment of any commissions or royalty payments;
(xii) any Contract that obligates the Company Group or the Business to make any capital commitment or investment (in each case, in the form of a loan, capital contribution or similar transaction) or capital expenditure (including pursuant to any joint venture) in excess of $250,000;
(xiii) any Contract since January 1, 2016 providing for an acquisition, divestiture, merger or similar transaction of material assets or properties that contains representations, covenants, indemnities or other obligations of the Company Group or the Business that are still in effect and are, or are reasonably likely to be, material to any party thereto;
(xiv) any Contract that is a settlement or similar Contract (x) with any Governmental Body, (y) which would reasonably be expected to require the Company Group to pay more than $250,000 (net of any insurance coverage) after the date of this Agreement or (z) that subjects the Company Group to any material ongoing requirements or restrictions, other than confidentiality requirements or restrictions or similar administrative requirements;
(xv) any Contract requiring a Company Group Entity to purchase or sell a stated portion of its requirements or outputs, that are not cancelable upon notice of ninety (90) calendar days or less;
(xvi) Contracts (other than the Real Property Leases, Personal Property Leases and Business Benefit Plans) between any Company Group Entity, on the one hand, and any other Person, on the other hand, pursuant to which the Company Group is obligated to pay, more than $250,000 in consideration in a calendar year; and
(xvii) Contracts (other than the Real Property Leases, Personal Property Leases and any Business Benefit Plans) between any Company Group Entity pursuant to which the counterparty is obligated to pay, more than $250,000 in consideration in a calendar year to the applicable Company Group Entity.
(b) Except as set forth on Schedule 5.13(b):
(i) Seller has delivered or otherwise made available to Purchaser a true, correct and complete copy of each Material Contract, as in effect on the date hereof;
(ii) each Material Contract is in full force and effect and is the valid, binding and enforceable obligation of the applicable Seller or Company Group Entity, and, to the Knowledge of Seller, each other party to such Material Contract, in accordance with its terms, in each case subject to the General Enforceability Exceptions;
(iii) neither Seller nor the Company Group nor, to the Knowledge of Seller, any other Person is in material breach or violation of, or material default (with or without notice or lapse of time, or both) under, any Material Contract or has failed to perform all material obligations required to be performed by it to date under a Material Contract; and
(iv) no party to any Material Contract has exercised any termination rights with respect thereto, and, to the Knowledge of Seller, no party has given notice of any intention to terminate or material dispute with respect to any Material Contract, or has amended, cancelled, terminated, relinquished, waived, or released any Material Contract or any material right thereunder (other than the expiration of a Material Contract in accordance with its terms).
5.14 Employee Benefits Plans.
(a) Schedule 5.14(a) sets forth a true, correct and complete list, as of the date of this Agreement, of each Business Benefit Plan and specifies which Business Benefit Plans are applicable to Business Employees located outside the U.S., and which Business Benefit Plans are Assumed Benefit Plans. No Assumed Benefit Plan is a “registered pension plan” as that term is defined in Section 248(1) of the ITA.
(b) Seller has made available to Purchaser true, correct and complete copies of the following, to the extent applicable:
(i) each Business Benefit Plan, together with all amendments thereto (or, in the case of any such Business Benefit Plan that is unwritten, descriptions thereof);
(ii) the most recent employee booklet and summary plan description for each Business Benefit Plan for which such summary plan description is required;
(iii) in the case of any Assumed Benefit Plan that is intended to be qualified under Section 401(a) of the Code, the most recent determination or opinion letter from the Internal Revenue Service;
(iv) in the case of any Business Benefit Plan for which Forms 5500 are required to be filed, the two (2) most recently filed Forms 5500,
(v) the most recent audited financial statements and actuarial or other valuation reports prepared with respect to each Assumed Benefit Plan, and
(vi) all material correspondence and documentation related to, and all non-routine filings made, with any Governmental Body with respect to each Assumed Benefit Plan within the last three (3) years.
The Business Benefit Plans are, and since January 1, 2016 have been, administered and in compliance in all material respects with their terms and the applicable provisions of ERISA, the Code and all other applicable Laws.
(c) To the Knowledge of Seller:
(i) each Business Benefit Plan that is intended to be tax qualified under Section 401(a) of the Code has received or is entitled to rely on a favorable determination letter, or for a prototype plan, an opinion letter, and has at all times been so qualified; and
(ii) no event has occurred since the date of such determination or opinion letter that would adversely affect the qualification of such Business Benefit Plan.
(d) All contributions, assessments, premiums and benefit payments under or in connection with the Assumed Benefit Plans that are required to have been timely and properly made as of the date hereof in accordance with the terms of the Assumed Benefit
Plans have been timely made or have been properly accrued and reflected in the Financial Records.
(e) No Assumed Benefit Plan is under audit or investigation by any Governmental Body and neither is any such audit or investigation pending or, to the Knowledge of Seller, threatened. There are no existing or pending (or, to the Knowledge of Seller, threatened) claims, suits, or actions involving the Company Group with respect to any Assumed Benefit Plan, its assets, or any fiduciary thereof (in such Person’s capacity as a fiduciary of such Assumed Benefit Plan) (other than routine claims for benefits brought by participants therein or beneficiaries thereof).
(f) No Assumed Benefit Plan is subject to Title IV of ERISA and, none of the Company Group Entities nor any of their ERISA Affiliates has incurred or is reasonably expected to incur any liability (contingent or otherwise) under Title IV of ERISA that has not been satisfied in full, including, without limitation, liability arising under Section 4062, 4063, 4069, or Subtitle E of Title IV of ERISA (relating to multiemployer plans). No Assumed Benefit Plan is a (i) “single employer plan” within the meaning of Section 4001(a)(15) of ERISA, (ii) “multiple employer plan” within the meaning of Section 413 of the Code, or (iii) “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA.
(g) No Assumed Benefit Plan provides medical, or life insurance benefits or coverage following retirement or other termination of employment.
(h) Each Assumed Benefit Plan that constitutes in any part a nonqualified deferred compensation plan within the meaning of Section 409A of the Code and that is subject to Section 409A of the Code has been operated and maintained in all material respects in operational and documentary compliance with Section 409A of the Code and applicable guidance thereunder during the respective time periods in which such operational or documentary compliance has been required. There is no Contract pursuant to which any of the Company Group Entities is a party or by which Seller Parent or any of its Subsidiaries are bound to compensate any current or former Business Employee for excise Taxes paid pursuant to Section 409A of the Code.
(i) Except as set forth on Schedule 5.14(i), neither the execution and delivery of this Agreement nor the consummation of the Transactions could, either alone or in combination with any other event (including, but not limited to, the passage of time), (i) result in any payment becoming due to any current or former Business Employee, including any entitlement to severance pay, (ii) increase any benefits under any Business Benefit Plan with respect to any current or former Business Employee, (iii) result in the acceleration of the time of payment, vesting or funding or increase the amount of, any compensation or benefits due to any current or former Business Employee, or (iv) result in the triggering or imposition of any restrictions or limitations on the right of Seller Parent or any of its Subsidiaries to amend or terminate any Assumed Benefit Plan (or result in any adverse consequences for so doing).
(j) Neither the execution of this Agreement nor the consummation of the Transactions will (either alone or upon the occurrence of any additional or subsequent events
or the passage of time), constitute an event under any Business Benefit Plan or other Contract to which any Business Employee is a party, that will or may result in the payment of any amount that may constitute an “excess parachute payment” within the meaning of Section 280G of the Code. There is no Contract pursuant to which any of the Company Group Entities is a party or by which Seller Parent or any of its Subsidiaries are bound to compensate any current or former Business Employee for excise Taxes paid pursuant to Section 4999 of the Code.
5.15 Labor.
(a) Except as set forth on Schedule 5.15(a), no Business Employees are subject to or bound by, and no Company Group Entity is, or has been within the past five (5) years, a party to or bound by any labor or collective bargaining agreement, and to the Knowledge of Seller, there are no organizational campaigns, certification drives, petitions or other unionization activities seeking recognition of a collective bargaining unit that would affect the Company Group, nor is any Company Group Entity currently negotiating any collective bargaining agreement.
(b) Except as set forth on Schedule 5.15(b), since January 1, 2016, Seller Parent, each of its Subsidiaries including each Company Group Entity, and the Business has been in material compliance with all applicable Laws relating to labor and employment, including applicable Laws relating to the payment of wages, hours, overtime, worker classification, equal employment opportunities, employment discrimination and harassment, human rights, retaliation, occupational safety and health, workers’ compensation or workplace safety and insurance, immigration and work authorization, leave, accessibility, labor relations, employment equity, pay equity, language of work, and WARN as it relates to the Business and the Business Employees. No Company Group Entity is a party to or has received notice in relation to any Legal Proceeding or order or, to the Knowledge of Seller, inquiry or investigation relating to any Business Employee or any former employee or current or former independent contractor or service provider of the Business, and nor, except as set forth on Schedule 5.15(b), to the Knowledge of Seller, is there any factual or legal basis for any such Legal Proceeding, investigation or order.
(c) Except as set forth on Schedule 5.15(c), there are no:
(i) strikes, material work stoppages or slowdowns, or lockouts pending or, to the Knowledge of Seller, threatened in writing against or involving the Business, any Business Employees, or the Company Group; or
(ii) unfair labor practice charges, material grievances or complaints or other claims, disputes, actions, grievances, or disciplinary actions pending or, to the Knowledge of Seller, threatened in writing by or on behalf of any current or former Business Employee or any other current or former employee or group of employees of the Company Group.
(d) Except as set forth on Schedule 5.15(d), none of Seller Parent nor any of its Subsidiaries has any Liability for the misclassification of any Business Employee as an independent contractor, temporary employee, leased employee or any other service provider compensated other than through reportable wages (as an employee) paid by any of Seller Parent or any of its Subsidiaries (any such Person, a “Contingent Worker”), and no Contingent Worker has been improperly excluded from any Business Benefit Plan. None of the Business Employees are leased employees within the meaning of Section 414(n) of the Code.
(e) Schedule 5.15(e) sets forth a true, correct and complete list (the “Business Employee Schedule” and each employee listed thereon is a “Business Employee”) of, as of the date hereof, all Business Employees, indicating for each his or her:
(i) name and initial service date;
(ii) position;
(iii) status as being active or inactive (and if inactive, the reason for the absence and anticipated return to work date if known), full-time or part-time, and exempt or non-exempt, and visa status, if applicable;
(iv) location of employment; and
(v) base annual salary or hourly wage and current cash-based incentive opportunity or eligibility.
(f) All current assessments under applicable workers’ compensation legislation that relate to the Company Group have been paid or accrued, and no Company Group Entity is currently subject to any specialty or penalty assessment under such legislation which has not been paid and to the Knowledge of Seller, no such assessments are past due. There are no outstanding orders made or pending charges under applicable occupational health and safety legislation relating to the business of any of the Company Group Entities. Each of the Company Group Entities has complied in all respects with any remedial orders issued under occupational health and safety laws.
(g) Except as set forth in Schedule 5.16, there are no claims, disputes or actions pending or, to the Knowledge of Seller, threatened, by or between the Company Group and any Employee(s).
5.16 Litigation. Except as set forth on Schedule 5.16:
(a) there are no Legal Proceedings, material claims or contractual disputes pending or, to the Knowledge of Seller, threatened against Seller or any of its Affiliates (in each case relating to the Business) or the Company Group or any of its properties or assets that if adversely decided could reasonably be expected to result in (i) monetary damages in excess of $200,000 (excluding any applicable insurance coverage), (ii) injunctive or equitable
relief, (iii) any fine, penalty or sanction by any Governmental Body, or (iv) that would prevent, materially delay or materially impair the ability of Seller to consummate the Transactions, nor has there been any such Legal Proceeding, material claims or contractual disputes pending or, to the Knowledge of Seller, threatened since January 1, 2016;
(b) there are no Legal Proceedings, material claims or contractual disputes pending or threatened by Seller or any of its Affiliates (in each case relating to the Business) or the Company Group against a third party that would reasonably be expected to be material to the Business or the Company Group; and
(c) neither Seller or its Affiliates (in each case with respect to the Business) nor any of the Company Group is a party to or subject to the provisions of any Order that imposes any unsatisfied or outstanding obligations or requirements or that would prevent, materially delay or materially impair the ability of Seller to consummate the transactions contemplated by this Agreement.
5.17 Compliance with Laws; Permits.
(a) Except as set forth on Schedule 5.17(a):
(i) the Company Group and the Business are, and since January 1, 2016 have been, in compliance in all material respects with Laws applicable to the Company Group, the Business and their respective properties and assets;
(ii) since January 1, 2016, none of Seller or any of their respective Affiliates or the Business have received any written, or to the Knowledge of Seller, oral, notice from any Governmental Body alleging, or been charged with, a material violation of any Laws relating to the Business;
(iii) (A) other than resolved ordinary course routine industry-specific investigations, since January 1, 2016, neither the Company Group nor the Business has been notified in writing of any investigation or review by any Governmental Body with respect to the Business (or the Company Property), (B) to the Knowledge of Seller, no such investigation or review is pending and (C) no Governmental Body has indicated in writing an intention to conduct the same, except for such investigations or reviews the outcome of which would not, individually or in the aggregate, reasonably be likely to be material to the Business;
(iv) the Company Group and the Business has all material Permits that are necessary under applicable Laws, including Environmental Laws, to conduct, own and operate the Business, assets and properties as it is conducted as of the date of this Agreement (the “Required Permits”). All Required Permits are valid and in full force and
effect, and (except as would not be material to the Business) since January 1, 2016, have been obtained and maintained, including all appropriate applications and renewals having been timely filed. To the Knowledge of Seller, there is no reasonable basis for the refusal to grant, revocation, suspension or non-renewal of any such Required Permit or the imposition of any material conditions or restrictions associated with renewal or grant of any such Required Permits;
(v) the Company Group and the Business are in compliance in all material respects with all such Required Permits; and
(vi) none of the Business or the Company Group is, and since January 1, 2016, none of the Business or the Company Group has been, in material breach or violation of, or material default (with or without notice or lapse of time, or both) under, any Required Permit and have not received any written notice regarding any revocation, withdrawal, suspension, cancellation, termination or material and adverse modification of any Required Permit which remains unresolved.
(b) Schedule 5.17(b) sets forth a list of all Required Permits to the extent required under Environmental Law.
(c) For the past five (5) years, none of Seller Parent, Seller, or the Company Group or the Business, nor any of their respective officers, directors, employees, or agents has, directly or indirectly: (i) unlawfully 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, directly or indirectly to or for the benefit of any Government Official, for the purpose of (A) inducing such Government Official to do or omit to do any act in violation of a lawful duty, (B) obtaining or retaining business for or with any Person, or (C) otherwise securing any improper advantage; (ii) paid, offered or agreed or promised to make or offer any bribe, kickback, unlawful rebate or other similar unlawful payment of any nature; or (iii) violated any provision of any applicable anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977 (the “FCPA”), the U.K. Bribery Act of 2010, or any other applicable laws or regulations relating to bribery or corruption (collectively, “Anti-Corruption Laws”), in each case with respect to the Business. For the past five (5) years, there have been no intentionally false or fictitious entries made in the books or records of the Business relating to any illegal payment or secret or unrecorded fund. For the past five (5) years, there have been no claims, complaints, charges, whistleblower reports, internal investigations, voluntary disclosures or Legal Proceedings or, to the Knowledge of Seller, external investigations relating to the Business, or threatened Proceedings involving suspected or confirmed violations of Anti-Corruption Laws. The Business maintains policies and procedures reasonably designed to ensure compliance with all applicable Anti-Corruption Laws and to the Knowledge of Seller, for the past five (5) years, there have been no material violations of any such policies and procedures. Seller and Seller Parent represent that no portion of the consideration for the transactions contemplated hereby will be used, directly or indirectly, for
any payments to any governmental officer or employee, political party, official of a political party, candidate for political office or anyone else acting an official capacity, in order to obtain, retain or direct business or obtain any improper advance, in violation of any applicable Anti-Corruption Laws.
(d) The Company Group and Business, and the directors, officers, and employees involved in the Business, the Seller, and to the Knowledge of Seller, any agents acting on behalf of the Business or the Company Group, are and, for the past five (5) years, have been in compliance with U.S. and any applicable foreign economic sanctions laws and regulations, including economic sanctions administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control (collectively, “Sanctions”) and U.S. and applicable foreign laws and regulations pertaining to export and import controls, including those administered by the U.S. Departments of Commerce and State, and applicable anti-money laundering laws and regulations (collectively, “Trade Controls”), in each case with respect to the Business. None of the Company Group or the Business, or the directors, officers, and employees involved in the Business, the Seller, and to the Knowledge of Seller, any agents acting on behalf of the Business or the Company Group, is or, for the past five (5) years, has been (i) identified on any Sanctions-related list of restricted or blocked persons; (ii) organized, resident, or located in any country or territory that is itself the subject of Sanctions; or (iii) owned or controlled by any Person or Persons described in clause (i) or (ii). For the past five (5) years, there have been no claims, complaints, charges, investigations, voluntary disclosures, or proceedings under Trade Controls involving the Company Group or the Business, and to the Knowledge of Seller, there are no pending or threatened claims or investigations involving suspect or confirmed violations thereof.
5.18 Environmental Matters.
(a) Except as set forth on Schedule 5.18(a):
(i) the Company Group and the Business are, and since January 1, 2016 have been, in compliance in all material respects with all applicable Environmental Laws;
(ii) since January 1, 2016, the Company Group and the Business have not received any written notice from a Governmental Body alleging a material violation of any Environmental Law by the Company Group or the Business, or alleging that the Company Group or the Business may have any material Liability under any Environmental Law;
(iii) there have been no Releases or threatened Releases of or exposure to Hazardous Materials (1) at, on, about, under or migrating to or from any Facilities or any real property previously owned, operated or leased by the Company Group or the Business or any of their predecessors, or (2) arising from or relating to the operations of or, to the Knowledge of Seller, any products manufactured, marketed, sold or distributed, by the Company Group or the Business or any of their
predecessors; in each case that would reasonably be likely to give rise to material violations by, or liabilities or obligations of the Business or the Company Group under, any Environmental Law;
(iv) there are no material Legal Proceedings pending or, to the Knowledge of Seller, since January 1, 2016, threatened against the Company Group, the Business, any of the Facilities, or properties or assets previously owned, operated or leased by the Company Group or the Business or any of their predecessors; in each case, pursuant to any Environmental Law;
(v) there are no unsatisfied Orders or Contracts with a Governmental Body against or involving the Facilities, the Company Group, the Business or any properties or assets previously owned, operated or leased by the Company Group or the Business relating to:
(A) Environmental Laws;
(B) Remedial Action; or
(C) any Release or threatened Release of a Hazardous Material;
(vi) to the Knowledge of Seller, there are no investigations by any Governmental Body of the Company Group, the Business, the Facilities or any properties or assets, or of any real property previously owned, operated or leased by the Company Group, the Business, or any of their predecessors, pending or threatened in writing that would reasonably be expected to result in the imposition on the Company Group of any material Liability pursuant to any Environmental Law; and
(vii) the Company Group and the Business have not provided or assumed a contractual obligation to any other Person in a merger, acquisition or divestiture agreement (or similar agreement) which remains outstanding and that would reasonably be expected to result in the Company Group or the Business incurring material Liabilities under Environmental Laws.
(b) The Seller has delivered to Purchaser true, correct and complete copies and results of all reports, studies, analyses, tests or monitoring and other material documents or correspondence possessed by or in the control of the Seller, the Company Group, or the Business, pertaining to Environmental Law or Hazardous Materials and relating to the Company Group or the Business or any of their predecessors, or otherwise relating to conduct for which the Company Group or the Business are or would reasonably be expected to be held responsible.
5.19 Company Group Guarantees; Transactions with Affiliates; Shared Contracts and Facilities.
(a) Schedule 5.19(a) sets forth a true, correct and complete list, as of the date of this Agreement, of all Company Guarantees.
(b) Except as set forth on Schedule 5.19(b), none of Seller or any of its Affiliates, or, any employee, officer, director, shareholder or partner of Seller or its Affiliates (each, a “Related Person”) (A) (i) owes, or prior to the Closing will owe, any amount to the Company Group or the Business, nor has any Company Group Entity committed to make any loan or extend or guarantee credit to or for the benefit of, any Related Person, (ii) has any claim or cause of action pending against the Company Group, or (iii) owns any direct or indirect interest of any kind in, or controls or is a director, officer, employee or partner of, or consultant to, or lender to or borrower from or has the right to participate in the profits of, any Person which is a competitor, supplier, customer, landlord, tenant, creditor or debtor of the Business, (B) will own or have a right to use (other than any rights provided to it pursuant to the Ancillary Agreements) following the Closing any Business Assets or other assets, properties or rights primarily used in, related to or necessary to the conduct of, the Business, or (C) provides any service to the Business that is not provided by Seller under any of the Ancillary Agreements or included in the Business Assets.
(c) Except as contemplated by the Ancillary Agreements or as set forth on Schedule 5.19(c), none of Seller or any of its Affiliates (A) is a party to, or bound by, any Contract that relates to both the Business and another business of Seller or any other Related Person (each such Contract, a “Shared Contract”), which Contract provides for payments during any twelve- month period in excess of $50,000 or is otherwise material to the Business (each such Shared Contract, a “Material Shared Contract”), or (B) owns, leases or uses (or prior to the Closing will own, use or lease) any Company Property or any other warehouses, distribution facility or other facility that is used by, or related to, the Business and any other business of Seller or any other Related Person (any such real property or facilities, a “Shared Facility”). Schedule 5.19(c) sets forth a list of (i) each Shared Facility and (ii) each Material Shared Contract (and the subject matter thereof).
(d) There have not been any transfers of personnel between the Excluded Business and the Business other than in the Ordinary Course of Business or as expressly required by this Agreement.
5.20 Financial Advisors. Except for Piper Jaffray & Co. (“PJC”), no Person has acted, directly or indirectly, as a broker, finder or financial advisor for Seller or the Company Group in connection with the transactions contemplated by this Agreement, and no Person is entitled to any fee or commission or like payment from Purchaser in respect thereof.
5.21 Sufficiency of Assets. Except as set forth on Schedule 5.21, as of the Closing, Seller and its Affiliates have completed the Restructuring in all material respects. Except as set forth on Schedule 5.21, Company Group has, and Purchaser will have immediately following the Closing, good and marketable title to, or in the case of any leased asset, a valid leasehold interest
in, and a valid and enforceable right to use and operate, all of the Business Assets, in each case free and clear of all Liens, other than Permitted Exceptions. Except as set forth on Schedule 5.21, all of the Business Assets are in good condition and repair (ordinary wear and tear excepted), free of material defect, have been maintained in accordance with industry practice and applicable Law and are fit for use in the Ordinary Course of Business as currently conducted and are suitable for the purposes used, and such assets, to the extent leased is in all material respects in the condition required of such assets by the terms of the lease applicable thereto during the term of the lease. Except as set forth on Schedule 5.21, immediately following the Closing (and after giving effect to the Restructuring and taking into account the Transition Services Agreement (and the rights granted and services to be performed thereunder)), the Business Assets shall be sufficient, and constitute all of the assets, rights and properties (including all permits) that are necessary for the Company Group to conduct the Business following the Closing in the same manner as it is conducted by Seller and its Affiliates on the date hereof.
5.22 Insurance. The Business has been continuously covered since January 1, 2016 by valid and currently effective insurance policies or binders of insurance issued in favor of the Business listed on Schedule 5.22(a) (the “Insurance Policies”). Schedule 5.22(b) provides a summary of all policies and programs of or agreements for insurance and interests in insurance pools and programs (in each case including self- insurance and insurance from Affiliates) maintained for, at the expense of or for the benefit of the Business (the “Available Insurance Policies Schedule”), including a list of all pending claims made thereunder relating to the Business. Each such Insurance Policy is in full force and effect, all premiums due to date thereunder have been timely paid in full and neither Seller nor any Affiliate (including the Company Group) have been in default with respect to any other obligations thereunder. Except as set forth on Schedule 5.22(b), there are no material claims by the Company Group, or with respect to the Business, pending under any of such insurance policies. No written notice of cancellation or nonrenewal, in whole or in part, with respect to any such Insurance Policy, other than notices of cancellation due to pending expiration of any policy period received in the ordinary course of business, has been received by Seller or its Affiliates, and neither Seller nor its Affiliates has experienced any historical gap in insurance coverage relating to the Business since January 1, 2016. Since January 1, 2016, there has been no material claim by or with respect to the Business pending under any Insurance Policy as to which coverage has been questioned, denied or disputed by the underwriter of such Insurance Policy or in respect of which such underwriter has reserved its rights or refused to cover all or any portion of such claims.
5.23 Suppliers; Customers; Distributors. Schedule 5.23 contains a true, correct and complete list of (i) the top twenty customers of the Business (on the basis of revenue generated) (collectively, the “Material Customers”), (ii) the top twenty suppliers of the Business (on the basis of expenditures) (collectively, the “Material Suppliers”), and (iii) the top twenty service providers of the Business (on the basis of expenditures) (collectively, the “Material Service Providers”), in the case of each of the foregoing clauses (i), (ii) and (iii), with respect to the fiscal year ended December 31, 2018 and the six month period ended June 30, 2019, and discloses for each such Material Customer and Material Supplier the revenue generated or the expenditures, as applicable, with respect thereto for the periods then ended. Except as set forth on Schedule 5.23, since January 1, 2019 to the date hereof, no Material Customer, Material Supplier or Material
Service Provider has terminated or discontinued its relationship or any Contract with Seller or its Affiliates, or materially reduced, restricted, suspended or modified, or given written or, to the Knowledge of Seller, oral, notice of an intent to terminate or materially reduce, restrict, suspend or modify, its business (including the pricing or payment terms or volumes of sales or purchases) with the Business. Except as set forth on Schedule 5.23, there are no pending, or to the Knowledge of Seller, threatened actions involving the Business and any Material Customer, Material Supplier or Material Service Provider.
5.24 Product Compliance; Warranty and Liability.
(a) Except as set forth on Schedule 5.24, since January 1, 2016, each service provided or product manufactured, sold or delivered by the Business has been in material conformity with all applicable Laws and all service or product specifications and industry standards applicable to such products, including manufacturing, labeling and safety laws in effect at the time of such manufacture, sale, lease, license or delivery. Schedule 5.24 identifies each product recall, market withdrawal, stock recovery or service bulletin (collectively, “Recall”) (whether voluntary or compulsory) and the circumstances surrounding each Recall, involving any products of the Business since January 1, 2016. Since January 1, 2016, the Business has maintained accurate sales records, order backlog and other information with respect to all products and services. No product currently manufactured, sold, leased, licensed or delivered by the Business is subject to a voluntary or mandatory Recall required by any Governmental Body and the Business does not have any plans to initiate a voluntary Recall. To the Knowledge of Seller, there is no existing fact or circumstance that could be reasonably expected to result in a Recall.
(b) To the Knowledge of Seller, none of the Seller Parent or its Subsidiaries has, with respect to the Business, any material Liabilities to any Person in connection with the provision of products or services in relation to the Business, including any material Liability for damage caused to the property of any customer or other Person or relating to the replacement or repair thereof or other material damages in connection therewith, subject only to any reserve for service warranty claims accrued in the Financial Records; and no product or service provided by the Business since January 1, 2016 is subject to any material guaranty, warranty or other indemnity beyond the applicable standard terms and conditions with respect thereto. The Business has not extended the warranty on any products supplied by it beyond those provided by the manufacturer.
(c) Schedule 5.24(c) sets forth a complete and accurate description of any guarantee, warranty or other indemnity given by a Company Group or the Business in connection with its products and services in relation to the Business, other than in the Ordinary Course of Business. To the Knowledge of Seller, neither the Seller, the Company Group nor the Business has any material Liability arising out of any injury to individuals or property as a result of the ownership, possession, or use of any product designed, manufactured, assembled, repaired, maintained, delivered, sold or installed, or services rendered, by or on behalf of the Business. There has been no act committed or failed to be committed, which would reasonably be likely to result in, and there has been no occurrence
which would give rise to or form the basis of, any product Liability or Liability for breach of warranty (whether covered by insurance or not) on the part of a Company Group Entity or the Business with respect to products designed, manufactured, assembled, repaired, maintained, delivered, sold or installed or services rendered by or on behalf the Business and to the extent that such Liability would be material to the Business.
5.25 Accounts Receivable and Payable.
(a) All of the outstanding accounts receivable shown on the Financial Records have been valued in all material respects consistent with the accounting policies of Seller Parent and represent, as of the respective dates thereof, valid assets arising from sales actually made or services actually performed, in each case, in the Ordinary Course of Business. All of the outstanding accounts receivable deemed uncollectible have been reserved against on the Financial Records in accordance with the Agreed Accounting Principles. The accounts receivable created since the date of the latest Interim Financial Records provided have been created in the Ordinary Course of Business. Since July 31, 2019, neither the Seller Parent, its Subsidiaries nor any Company Group Entity, with respect to the Business, have canceled, or agreed to cancel, in whole or in part, any accounts receivable except in the Ordinary Course of Business.
(b) The accounts payable of the Business reflected in the Financial Records or accrued since the date of the latest Interim Financial Records provided arose from bona fide transactions in the Ordinary Course of Business.
5.26 Inventory; Supplies. All supplies (in relation to the Business) and items of Inventory acquired or manufactured by the Business have been acquired or manufactured, sold and maintained in the Ordinary Course of Business, and, except as set forth on Schedule 5.26, are in good and marketable condition in all material respects and are usable and of a quantity and quality saleable in the Ordinary Course of Business. The supplies (in relation to the Business) and items of Inventory, and reserves and allowances with respect thereto, set forth in the Financial Records and in the Final Working Capital Adjustment Amount will be stated in accordance Agreed Accounting Principles. The supplies (in relation to the Business) and Inventory of the Business constitute sufficient quantities for the normal operation of its business in the Ordinary Course of Business, and the ordering and procurement of such supplies and Inventory have been conducted by the Seller and its Affiliates and each of their employees in the Ordinary Course of Business since January 1, 2019. No event has occurred or condition exists that has had or would reasonably be expected to have a materially adverse impact on the quantity, quality, usability or marketability of any of the supplies (in relation to the Business) or Inventory of the Business. Except as set forth on Schedule 5.26, no supply or item of Inventory is encumbered with any Lien or other rights of any third party, including rights of any Affiliate of a Company Group, except for Permitted Exceptions.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller that:
6.1 Organization and Good Standing. Purchaser 1 is a corporation duly organized, validly existing and in good standing under the Laws of Delaware and has all requisite corporate power and authority to own, lease and operate properties and assets and carry on its business as conducted as of the date of this Agreement. Purchaser 2 is a corporation duly organized, validly existing and in good standing under the Laws of British Columbia and has all requisite corporate power and authority to own, lease and operate properties and assets and carry on its business as conducted as of the date of this Agreement. Purchaser 3 is a corporation duly organized, validly existing and in good standing under the Laws of Delaware and has all requisite corporate power and authority to own, lease and operate properties and assets and carry on its business as conducted as of the date of this Agreement.
6.2 Authorization of Agreement. Purchaser has all requisite corporate power, authority and legal capacity to execute and deliver this Agreement and each other agreement or document contemplated by this Agreement (including the Ancillary Agreements) to be executed by Purchaser in connection with the consummation of the transactions contemplated by this Agreement (the “Purchaser Documents”), and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and each of the Purchaser Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all required corporate action on the part of Purchaser. This Agreement has been, and each of the Purchaser Documents will be at or prior to the Closing, duly and validly executed and delivered by Purchaser, and (assuming the due authorization, execution and delivery by the other parties hereto and thereto) this Agreement constitutes, and each Purchaser Document, when so executed and delivered, will constitute, the legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, subject to the General Enforceability Exceptions.
6.3 Conflicts; Consents. Except as set forth on Schedule 6.3:
(a) none of the execution and delivery by Purchaser of this Agreement or the Purchaser Documents, the consummation of the transactions contemplated hereby or thereby or the compliance by Purchaser with any of the provisions hereof or thereof will:
(i) conflict with or result in any violation of the Organizational Documents of Purchaser;
(ii) conflict in any material respect with, or result in any material breach or violation of or material default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation of any material right or benefit under, any Contract, Permit or Order to which Purchaser is a party or by which Purchaser or any of its properties or assets is bound (other than Contracts that have been terminated or will expire by their terms before or upon the Closing); provided, however, that no representation or warranty is made in the foregoing clauses (ii) with respect to matters that would not reasonably be expected to prevent or materially impair or materially
delay the ability of Purchaser to consummate the transactions contemplated hereby; or
(iii) result in any material violation of any Law by which Purchaser or any of its properties or assets is bound; and
(b) none of the execution and delivery by Purchaser of this Agreement or the Purchaser Documents, the consummation of the transactions contemplated hereby or thereby or the compliance by Purchaser with any of the provisions hereof or thereof will require Purchaser to obtain any Order, Permit or waiver of, or declare or file with, or give notification to, any Person (including any Governmental Body), except for:
(i) compliance with the applicable requirements of the HSR Act and any other Antitrust Laws; and
(ii) such Orders, Permits, waivers, declarations, filings and notifications as to which the failure to obtain, make or give the same would not reasonably be expected to prevent or materially interfere with Purchaser’s ability to consummate the transactions contemplated by this Agreement and the Purchaser Documents.
6.4 Securities Matters. Purchaser 1, Purchaser 2 and Purchaser 3 are each an “accredited investor” as defined in Rule 501 under the Securities Act of 1933 (the “Act”), and is acquiring the Company Group Securities solely for its own account and not with a view to any distribution or disposition thereof. Purchaser understands that:
(a) the Company Group Securities have not been registered under the Act or registered or qualified under any applicable state securities Laws in reliance upon specific exemptions therefrom; and
(b) the Company Group Securities may not be transferred or sold except in a transaction registered or exempt from registration under the Act and registered or qualified or exempt from registration or qualification under any applicable state securities Laws.
6.5 Financial Advisors. No Person has acted, directly or indirectly, as a broker, finder or financial advisor for Purchaser in connection with the transactions contemplated by this Agreement and no Person is entitled to any fee or commission or like payment in respect thereof, in each case that would result in any material Liability on the part of Seller.
6.6 Representation and Warranty Insurance. Purchaser has obtained a buy-side representation and warranty indemnity insurance policy, a true, correct and complete copy of which has been provided to Seller (the “R&W Policy”). Purchaser has not amended, repealed or modified any provision of the R&W Policy in a manner that is materially adverse to Seller.
6.7 Financing.
(a) Purchaser has delivered to Seller complete and accurate fully executed copies of (i) an equity commitment letter (the “Equity Commitment Letter”), dated as of the date hereof, between Purchaser and the Sponsor, pursuant to which the Sponsor has, among other things, and subject to the terms and conditions thereof, committed to provide equity financing in the amount set forth therein (the “Equity Financing”) to Purchaser in connection with the transactions contemplated hereby, and (ii) a debt commitment letter and a related fee letter (redacted to remove the economic terms, “flex” provisions and other customarily-redacted provisions set forth therein so long as such redacted information does not adversely affect the conditionality or aggregate amount of the Debt Financing) (collectively, the “Debt Commitment Letter” and, together with the Equity Commitment Letter, the “Commitment Letters”), dated as of the date hereof, among the Debt Financing Sources party thereto and Purchaser, pursuant to which such Debt Financing Sources have committed to provide or cause to be provided debt financing to Purchaser in connection with the transactions contemplated hereby (such debt financing (the “Debt Financing” and, together with the Equity Financing, the “Financing”)). As of the date hereof, the aggregate proceeds to be disbursed pursuant to the agreements contemplated by the Commitment Letters, together with all other funds of Purchaser, is, sufficient to allow Purchaser to pay the Adjusted Purchase Price and any expenses incurred by Purchaser in connection with the transactions contemplated by this Agreement.
(b) As of the date hereof, the Commitment Letters constitute all of the agreements entered into between the parties thereto with respect to the financing arrangements contemplated thereby. As of the date hereof, the Commitment Letters are not subject to any contingency or condition of any kind whatsoever, including any subsequent approval process, related to the funding of the full amount of the financing contemplated by the Commitment Letters (including any “market flex” provisions or similar provisions affecting the structure, pricing, maturity, amortization or any other terms) other than as set forth in the executed copies thereof. As of the date hereof, the Commitment Letters are in full force and effect, constitute the legal, valid and binding obligations of Purchaser and have not been modified or amended in any respect, and the respective commitments contained in the Commitment Letters have not been withdrawn or rescinded. As of the date hereof, (x) neither Purchaser nor any of its Affiliates is in breach of any of the Commitment Letters, and (y) neither Purchaser nor any of its Affiliates has knowledge of any breach of the Commitment Letters by any of the other parties thereto. Purchaser has paid in full any and all commitment fees and/or other fees required to be paid on or prior to the date hereof under the terms of the Commitment Letters. The obligations of Purchaser under this Agreement are not subject to any conditions regarding Purchaser’s ability to obtain the Financing.
ARTICLE VII
COVENANTS
7.1 Access to Information. Prior to the Closing, (i) Purchaser shall be entitled, through its Representatives, to make such investigation of the Business and the properties and assets of the Company Group and such examination of the books and records (including books and records relating to Taxes) of the Company Group as it reasonably requests and to make
extracts and copies of such books and records and to have access to the senior employees and executives of the Business, and (ii) each Seller shall, and shall cause the Company Group to, furnish to Purchaser and its Representatives such additional financial and operating data and other information regarding the Business, to the extent in the possession or under the control of such Seller or any of its Affiliates, as Purchaser or its Representatives may from time to time reasonably request for the purposes of consummating the transactions contemplated herein and preparing to operate the Business following the Closing; provided that such examination shall not include:
(a) information that, if provided to Purchaser, would violate applicable Law;
(b) bids, letters of intent, expressions of interest or other proposals received from others in connection with the transactions contemplated by this Agreement or documents, information or analyses relating to such communications or containing information pertaining to such communications;
(c) any information, the disclosure of which would jeopardize any legal privilege available to any Seller, the Company Group or any of their respective Affiliates relating to such information; provided, that at Purchaser’s reasonable request, such Seller shall work in good faith with Purchaser to implement arrangements that would permit disclosure in a manner that would not result in breach of such restrictions or legal obligations or the waiver of legal privilege; or
(d) any valuations of the Company Group or the Company Group Securities or information or analysis relating to such valuations.
The access contemplated by this Section 7.1 shall include Purchaser having reasonable access to, and the reasonable participation and cooperation of, the executives of Seller and its Affiliates set forth on Schedule 1.1(a) during normal business hours to assist Purchaser with respect to transition matters. Any such investigation and examination shall be subject to the provisions of Section 7.4, shall be conducted during regular business hours and under commercially reasonable circumstances and shall be subject to restrictions under applicable Law, including Antitrust Laws. Seller shall, and shall cause the Company Group and the respective Representatives of Seller and the Company Group to, cooperate with Purchaser and Purchaser’s Representatives in connection with such investigation and examination, and Purchaser shall, and shall cause its Representatives to, reasonably cooperate with Seller, the Company Group and their respective Representatives and use commercially reasonable efforts to minimize any disruption to the Business or the business of Seller. Purchaser shall, and shall cause its Representatives to, abide by any safety rules or rules of conduct reasonably imposed by Seller, the Company Group or any operator of properties or assets of the Company Group, as the case may be, in connection with access provided pursuant to this Section 7.1. Notwithstanding anything to the contrary contained herein, prior to the Closing, without the prior written consent of Seller (which consent shall not be unreasonably withheld, conditioned or delayed), Purchaser shall neither contact any suppliers to, or customers of, the Company Group in connection with this Agreement (other than to facilitate the consummation of the transactions including to give any notice or seek any consent
that may be required in connection with the transactions) nor perform invasive or subsurface investigations of the properties of the Company Group.
7.2 Conduct of the Business Pending the Closing. From the date hereof and until the Closing, except as set forth on Schedule 7.2, as required by applicable Law, as otherwise expressly contemplated by this Agreement or with the prior written consent of Purchaser (which consent shall not be unreasonably withheld, delayed or conditioned):
(a) Seller shall, and shall cause the Company Group to:
(i) conduct the Business only in the Ordinary Course of Business; and
(ii) use its commercially reasonable efforts to maintain and preserve the Business, its operations, organization and goodwill, including its business relationships and goodwill with customers and suppliers, regulators and others having relationships with the Business, maintain all material structures and equipment and other tangible personal property of the Business in their present repair, order and condition, except for depletion and ordinary wear and tear and keep available the services of its key employees.
(b) Other than (I) as expressly required by this Agreement, or (II) with the Purchaser’s prior written consent, Seller shall not (to the extent related to the Business or any Company Group), and shall cause the Company Group and the Business not to:
(i) declare, set aside, make or pay any dividend or other distribution (other than cash to the extent such dividends or distributions are paid prior to the Effective Time) on any capital stock of any Company Group or repurchase, redeem or otherwise acquire any outstanding equity interest in the Company Group;
(ii) (A) issue or sell any equity interest or other securities of the Company Group, subject to a Lien or grant options, warrants, calls or other rights to purchase or otherwise acquire any equity interests or other securities of the Company Group or (B) issue or grant (or authorize the issuance or grant of) options, restricted stock units, phantom shares, or other equity- or equity-based incentive awards in, or other rights to purchase or otherwise acquire any equity interests or other securities of, Seller Parent or any of its Subsidiaries, in each case, to any Business Employee;
(iii) effect any split, combination, subdivision, recapitalization, reclassification or like change in the capitalization of the Company Group;
(iv) amend the Organizational Documents of the Company Group or amend or change the entity type or jurisdiction of any Company Group;
(v) other than required by the terms of any Business Benefit Plan or applicable Law:
(A) grant or increase the rate or terms of compensation, compensation opportunities or benefits due, owing, or payable to any Business Employee, except for any broad-based increases in the Ordinary Course of Business for Business Employees with annual base compensation less than or equal to $150,000;
(B) grant any unusual or extraordinary bonus, benefit or other direct or indirect compensation (including any severance or termination pay or transaction or retention bonus unless such payment is in accordance with Seller’s standard severance program) to any Business Employee, or accelerate the time of payment, funding, or vesting of any compensation or benefit payable to any Business Employee;
(C) materially increase the coverage or benefits available under or materially modify or amend the terms of, or terminate, any Business Benefit Plan, in each case, with respect to any Business Employee, or adopt, enter into, amend, or terminate any plan, policy, program, agreement or other arrangement that would constitute an Assumed Benefit Plan if it had been in effect on the date hereof; or
(D) enter into any collective bargaining agreement, works council agreement, or other collective labor arrangement governing any Business Employees; or
(E) make any representations or issue any communications to Business Employees that are materially inconsistent with this Agreement or the transactions contemplated hereby;
(F) other than as may be necessary to fill vacant positions in the Ordinary Course of Business (other than any vacant positions for which the annual base compensation is in excess of $150,000), hire or engage or offer to hire or engage any individual who would have
been a Business Employee if he or she had been employed or engaged as of the date hereof (except, notwithstanding the other terms of this paragraph, Target 3 shall not hire any employees other than in accordance with Section 7.10);
(G) other than for cause, terminate the employment of any Business Employee;
(H) institute any general layoff of Business Employees or implement any early retirement plan or announce the planning of any such action, in either case, impacting any Business Employee; or
(I) other than in the Ordinary Course of Business, make any loans, advances, or extensions of credit to any Business Employee;
(vi) subject any of the properties or assets (whether tangible or intangible) of the Business or the Company Group to any Lien, except for Permitted Exceptions or subject any of the Company Group Securities to any Lien;
(vii) acquire any properties or assets of any Person (whether by merger, consolidation, purchase of property or assets or otherwise) or sell, assign, license, transfer, convey, lease or otherwise dispose of any of the properties or assets of the Company Group or the Business, except the sale of inventory in the Ordinary Course of Business;
(viii) other than in the Ordinary Course of Business (which, in the aggregate, are not material), waive, release, amend or relinquish any claim or right of the Company Group or the Business or cancel or compromise any debts owed to any Company Group or the Business;
(ix) enter into any commitment for capital expenditures of the Company Group or the Business in excess of $100,000 for all commitments in the aggregate;
(x) permit the Company Group to enter into or agree to enter into any merger or consolidation with any Person, or restructure or reorganize, or completely or partially liquidate, or acquire the securities of any other Person;
(xi) make any material change in any method of financial accounting or accounting practice or policy used by the Business in the preparation of its financial statements, other than such changes as are consistent with the Agreed Accounting Principles or changes required by GAAP or applicable Law which, in each case, also otherwise apply generally to Seller and its Affiliates;
(xii) enter into any settlement or release with respect to any Legal Proceeding, or commence any material Legal Proceeding relating to the Business, other than any such settlement or release of a Legal Proceeding that (A) is with a non-Governmental Body and does not involve amounts in excess of $100,000 individually or $250,000 in the aggregate, or (B) is in the Ordinary Course of Business and does not involve any injunctive or equitable relief or imposes restrictions on the business activities of Seller and its Subsidiaries or Purchaser and its Subsidiaries (including the Company Group); provided, that the Company Group shall not make any admissions without the consent of Purchaser;
(xiii) enter into, materially amend, terminate or waive or assign any material right under any Material Contract, or (B) enter into a new Contract that would be a Material Contract if entered into prior to the date hereof, in each case, other than in the Ordinary Course of Business;
(xiv) modify in any material respect any payment terms with any customers or suppliers pursuant to any Material Contract, other than changes in the Ordinary Course of Business not initiated by Seller or its Affiliates;
(xv) fail to maintain all existing material insurance policies of the Business;
(xvi) enter into any distribution, joint venture, strategic alliance or joint marketing or any similar arrangement or agreement that relates to the Business, other than in the Ordinary Course of Business;
(xvii) sell, transfer, assign, lease, sublease, license, mortgage, pledge, encumber or otherwise dispose of any of the Company Properties;
(xviii) materially amend, modify or terminate any of the Real Property Leases;
(xix) with respect to the Business, acquire any real property or enter into any leases, licenses or subleases or arrangements to use or occupy for real property without Purchaser’s prior written consent
(if Purchaser’s consent is obtained, then any purchased real property shall be considered Company Property and any fully executed leases shall be considered a Real Property Lease);
(xx) engage in any promotional sales, discount, price reduction or other activity that has or would reasonably be expected to have the primary effect of accelerating to the Pre-Closing Period any sales that would otherwise reasonably be expected to occur in post-Closing periods or the primary effect of delaying to post-Closing periods any liabilities that would otherwise reasonably be expected to occur in the Pre-Closing Period;
(xxi) incur any Indebtedness, or make any loans, capital contributions or advances, in each case, other than (A) in the Ordinary Course of Business, or (B) pursuant to intercompany borrowing arrangements that, in the case of this clause (B), will be settled or repaid in full, or canceled or terminated, at or before the Closing;
(xxii) except as set forth in this Agreement or otherwise required by applicable Law, (A) make, change or revoke any Tax election, (B) adopt or change any Tax accounting method, (C) file any amended Tax Return or claim for refund, (D) prepare any Tax Returns in a manner that is inconsistent with past practice with respect to the treatment of items on such Tax Returns, (E) enter into any ruling request, closing agreement or similar agreement with respect to Taxes, (F) settle and/or compromise any Tax claim, (G) consent to any claim or assessment relating to Taxes or waive the statute of limitations for any such claim or assessment, or (H) take any other similar action relating to the filing of any Tax Return or the payment of any Tax, Seller shall not be prohibited to take the actions set forth in (A) through (H) above if such actions (x) would not reasonably be expected to have an adverse impact on any of the Company Group Entities in any taxable period ending after the Closing Date that is material and (y) relate to any consolidated, unitary or affiliated Tax Return of Seller;
(xxiii) disclose any confidential information to any Person except pursuant to non-disclosure agreements that obligate that Person to maintain the confidentiality thereof; or
(xxiv) enter into any Contract or otherwise agree or commit to do anything prohibited by this Section 7.2(b).
Nothing contained in this Section 7.2 or elsewhere in this Agreement is intended to give Purchaser, directly or indirectly, the right to control or direct the Business or any portion thereof prior to the Closing. Prior to the Closing, the Company Group shall exercise, consistent with the
terms and conditions of this Agreement and applicable Law, complete control and supervision over the Business.
7.3 Consents. Seller shall cooperate with Purchaser, upon Purchaser’s reasonable request, in endeavoring to obtain the consent of, or authorization from, any Person required by any provision of any Real Property Lease, Personal Property Lease, Material Contract or Permit, or that otherwise may be required, in connection with the Transactions or the subsequent operation of the Business by the Company Group Entities after Closing (the “Third Party Consents”). Nothing in this Agreement or any Ancillary Agreement nor the consummation of the Transactions shall be construed as an attempt or agreement to assign or transfer any Business Asset if an attempted assignment or transfer, without the consent of, or other action by, any third party would constitute a breach thereunder or adversely affect in any respect the rights of the Business thereunder (collectively, the “Non-Assignable Assets”) unless and until such consent or other action by such third party shall be given or taken. If any such Third Party Consent or authorization is not obtained prior to the Closing or there exists any Non-Assignable Asset, then Seller shall provide Purchaser a list of all such Third Party Consents or authorizations or Non-Assignable Assets no later than five (5) days prior to Closing and, pending receipt of all applicable Third Party Consents or authorizations, reasonably cooperate with Purchaser in any lawful and reasonable arrangement reasonably requested by Purchaser under which Purchaser (or one of its Subsidiaries) shall obtain, to the extent practicable, the rights and benefits under the Non-Assignable Asset. Such reasonable arrangement may include the entering into of a transition service, subcontract, sublicense, sublease or other similar arrangement between Seller and Purchaser and/or their applicable Subsidiaries, provided each such arrangement shall provide that Purchaser (or the applicable Subsidiary of Purchaser) shall be responsible for all reasonable (the terms of any current Contract (or extension of the same) shall be deemed reasonable), documented costs and expenses incurred under the Non-Assignable Asset to the extent arising out of such arrangement. During the period from Closing until such Third Party Consents, or other consents or approvals required to assign and transfer the Non-Assignable Assets, are obtained (or, solely with respect to a Non-Assignable Asset under any Contract, until the expiration of the current term of such Contract to the extent the same is not renewed or extended by Seller (in Seller’s sole discretion)), Seller will use reasonable best efforts to (i) continue to seek to obtain any such consents or approvals and (ii) enforce the Non-Assignable Assets or other Contracts, assets or rights subject to such Third Party Consent subject to an arrangement described in the preceding sentence for the benefit of Purchaser and/or its applicable Subsidiary. Notwithstanding anything to the contrary herein, Seller shall not agree to any economic concessions (including any fee reduction nor waiver) in connection with obtaining any Third Party Consent without the written consent of Purchaser. Seller shall be responsible for making payments, incurring Liabilities and providing any financial accommodation to obtain any Third Party Consent. Once the Third Party Consents (or other consents or approvals) required to assign and transfer a Non-Assignable Asset is obtained, Seller shall or shall cause its applicable Affiliates to, assign and transfer such asset to Purchaser (or one of its Subsidiaries) at no additional cost.
7.4 Regulatory Approvals.
(a) Each of Purchaser and Seller shall:
(i) have made all filings required of each of them or any of their respective Affiliates under the Antitrust Laws with respect to the transactions contemplated hereby as of the date of this Agreement;
(ii) comply as promptly as reasonably practicable with any request under the HSR Act or other Antitrust Laws for additional information, documents or other materials received by each of them or any of their respective Affiliates from the Federal Trade Commission (the “FTC”), the Antitrust Division of the U.S. Department of Justice (the “Antitrust Division”) or any other Governmental Body in respect of such filings or such transactions;
(iii) cooperate with each other in connection with any such filing (including, to the extent permitted by applicable Law, by responding to any reasonable requests of the other Party for copies of documents or other materials prior to filing and considering all reasonable additions, deletions or changes suggested by the other Party in connection therewith) and in connection with resolving any investigation or other inquiry of any of the FTC, the Antitrust Division or any other Governmental Body under any Antitrust Laws with respect to any such filing or any such transaction; and
(iv) use its reasonable best efforts to furnish to each other all information required for any application or other filing to be made pursuant to any applicable Law in connection with the transactions contemplated by this Agreement.
(b) Each of Purchaser and Seller may, as it deems advisable and necessary, reasonably designate any competitively sensitive material provided to the other Party under this Section 7.4 as “antitrust counsel only.” Material so designated and the information contained therein shall be given only to the antitrust legal counsel of the other Party, and the other Party shall cause such antitrust counsel not to disclose such materials or information to any other Representatives of the other Party, unless express written permission is obtained in advance from the source of the materials. Each of Purchaser and Seller shall promptly inform the other Party of any oral communication with, and provide copies of written communications with, any Governmental Body regarding any such filings or any such transaction. Neither Purchaser nor Seller shall independently participate in any formal meeting with any Governmental Body in respect of any filing, investigation or other inquiry contemplated by this Section 7.4 without giving the other Party prior notice of the meeting and, to the extent permitted by such Governmental Body, the opportunity to attend and/or participate in such meeting. Subject to applicable Law, each of Purchaser and Seller will consult and cooperate with the other Party in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or
on behalf of either Party relating to proceedings under the HSR Act or other Antitrust Laws. Purchaser shall pay all filing fees in connection with all filings under the Antitrust Laws.
(c) Each of Purchaser and Seller shall use its reasonable best efforts to resolve such objections, if any, as may be asserted by any Governmental Body with respect to the transactions contemplated by this Agreement under the Antitrust Laws. In connection therewith, if any Legal Proceeding is instituted challenging any transaction contemplated by this Agreement as in violation of any Antitrust Law, each of Purchaser and Seller shall cooperate and use its reasonable best efforts to resolve, contest and resist any such Legal Proceeding; provided, however, that Purchaser shall not be required to, and Seller shall not, without prior written approval of Purchaser, commence litigation with any Governmental Body or third-party or defend any judicial action challenging any transaction contemplated by this Agreement. Each of Purchaser and Seller shall use its reasonable best efforts to take such action as may be required to cause the expiration of the notice periods under the HSR Act or other Antitrust Laws with respect to such transactions as promptly as possible after the execution of the Original SPA.
7.5 Efforts and Cooperation; Further Assurances.
(a) From the date hereof until the Closing, each Party shall:
(i) use its commercially reasonable efforts to:
(A) take all actions necessary or appropriate to consummate the transactions contemplated by this Agreement; and
(B) cause the fulfillment as soon as reasonably practicable of all of the conditions to the obligations of the other Parties to consummate the transactions contemplated by this Agreement;
(ii) reasonably cooperate with the other Party in connection with such efforts of the other Party; and
(iii) keep the other Party reasonably apprised of the status of the matters relating to the completion of the Transactions, including with respect to the satisfaction of the Closing conditions of the other Party.
(b) After the Closing, each Party will execute and deliver such documents and take such other actions as may be reasonably requested by the other Party in order to carry out the provisions of this Agreement and make effective the transactions contemplated hereby.
(c) If at any time after the Closing, Seller or any of its Affiliates receives a payment intended for the Company Group or any of its Affiliates, or otherwise possesses any
asset of the Company Group or any of its Affiliates, Seller shall promptly deliver, or cause to be delivered, such payment or asset to the Company Group. If at any time after the Closing, the Company Group or any of its Affiliates receives a payment intended for Seller or any of its Affiliates, or otherwise possesses any asset of Seller or any of its Affiliates, Purchaser shall promptly deliver, or cause to be delivered, such payment or asset to Seller.
7.6 Confidentiality.
(a) Purchaser acknowledges that the information provided to it in connection with this Agreement and the transactions contemplated hereby are subject to the terms of the confidentiality and business evaluation agreement between AEA Investors SBF LP and PJC on behalf of Seller dated July 24, 2019 (the “Confidentiality Agreement”), the terms of which are incorporated herein by reference. Effective upon, and only upon, the Closing, the Confidentiality Agreement shall terminate. Notwithstanding the foregoing, Purchaser and its Affiliates may share confidential information regarding the Business with the Debt Financing Sources identified in the Debt Commitment Letter, subject to the confidentiality provisions contained in the Debt Commitment Letter, and Purchaser, its Affiliates and such Debt Financing Sources may share such information with other potential Debt Financing Sources in connection with any marketing efforts (including any syndication) in connection with the Debt Financing; provided that the recipients of such information agree to customary (including “click through”) confidentiality arrangements.
(b) During the Restricted Period, (I) Seller shall hold and shall cause its Subsidiaries to hold, and shall use commercially reasonable efforts to cause its and their respective Representatives to hold, in confidence, and not disclose or use (except in accordance with the express terms of any Ancillary Agreement), any and all confidential information, whether written or oral, to the extent related to the Company Group or the Business, and (II) Purchaser shall hold and shall cause its Subsidiaries to hold, and shall use commercially reasonable efforts to cause its and their respective Representatives to hold, in confidence, and not disclose or use (except in accordance with the express terms of any Ancillary Agreement), any and all confidential information, whether written or oral, to the extent related to the Excluded Business,
(i) except to the extent that such information:
(A) is generally available to or known by the public through no fault of such applicable Party, its Affiliates or their respective Representatives; or
(B) is lawfully acquired by such Party, its Affiliates or their respective Representatives from and after the Closing from sources which are not prohibited, to the Knowledge of Seller or Purchaser, as applicable, from disclosing such information by nondisclosure obligations or duties; or
(C) is disclosed to enforce such Party’s rights or remedies under this Agreement or any of the Ancillary Agreements, or
(ii) unless such Party determines, after consulting with counsel, that disclosure of such information is required by applicable Law. If such Party determines that disclosure of such information is required by applicable Law, such Party shall use its commercially reasonable efforts consistent with applicable Law to consult with the other Party with respect thereto and to obtain, at such Party’s sole expense, appropriate confidential treatment, if available, of such information as such Party may reasonably request;
provided, in the case of Purchaser or any of its Affiliates, the foregoing restriction shall not prohibit any use or disclosure reasonably required to operate the Business in the ordinary course. Notwithstanding anything to the contrary set forth in this Agreement, Purchaser and its Subsidiaries and Representatives shall be deemed to have satisfied their obligations hereunder if they exercise the same degree of care (but no less than a reasonable degree of care) as they take to preserve confidentiality for their own similar information and nothing herein shall prevent Purchaser and its Affiliates from disclosing or using information used or held for use in the Business after the Closing.
7.7 D&O Indemnification and Exculpation.
(a) Subject to Seller’s compliance with its obligations under Section 7.7(b), from and after the Closing Date, Purchaser shall cause the Company Group to, except as otherwise required by applicable Law, indemnify, defend and hold harmless, to the fullest extent provided under the Organizational Documents of the Company Group now in effect, the individuals who on or prior to the Closing Date were directors or officers of the Company Group (collectively, the “Indemnitees”) with respect to all acts or omissions by them in their capacities as such or taken at the request of the Company Group at any time prior to the Closing Date. Purchaser agrees that all rights of the Indemnitees to indemnification and exculpation from Liabilities for acts or omissions occurring at or prior to the Closing Date as provided in the Organizational Documents of the Company Group as now in effect, and the indemnification agreements or arrangements of the Company Group set forth on Schedule 7.7(a), shall survive the Closing Date and shall continue in full force and effect in accordance with their terms. Such rights shall not be amended or otherwise modified in any manner that would materially adversely affect the rights of the Indemnitees, unless such modification is required by Law.
(b) For a period of six (6) years from the Closing Date (the “D&O Tail Period”), Seller shall, and shall cause its Affiliates to, use reasonable efforts to maintain, in full force and effect, the coverage provided to the Indemnitees under any Insurance Policies in force as of the date of this Agreement 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) and further agrees to preserve and, at Purchaser’s direction,
pursue such officers’ and directors’ coverage rights under such Insurance Policies. In the event Seller cancels, amends, modifies, terminates or waives any such Insurance Policies or coverage available thereunder during such period, the Seller shall obtain “tail” insurance policies with a claims period of the duration of the remaining D&O Tail Period (for the benefit of the Company Group) 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 Company Group, 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).
(c) The provisions of this Section 7.7:
(i) are intended to be for the benefit of, and shall be enforceable by, each Indemnitee, his or her heirs and his or her legal representatives; and
(ii) are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such Indemnitee may have by Contract or otherwise.
(d) If Purchaser or any of its successors or assigns consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, or transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of Purchaser shall assume all of the obligations thereof set forth in this Section 7.7.
(e) The obligations of Purchaser under this Section 7.7 shall not be terminated or modified in such a manner as to materially adversely affect any Indemnitee to whom this Section 7.7 applies without the consent of the affected Indemnitee (it being expressly agreed that the Indemnitees to whom this Section 7.7 applies are intended third party beneficiaries of this Section 7.7).
7.8 Preservation of Records.
(a) Purchaser shall cause the Company Group to preserve and keep the records relating to the Business and the Company Group Entities existing as of Closing and in its possession for a period of seven years from the Closing Date. Subject to provisions of Section 7.27, Purchaser shall cause the Company Group to make available to Seller and its Representatives such records, and personnel of the Company Group familiar therewith, as may be reasonably requested by Seller in connection with claims by or against Seller or any of its Affiliates related to the Company Group or the transactions contemplated by this Agreement or compliance by Seller with its obligations under this Agreement or any Seller Document. If Purchaser wishes to destroy such records during such time, Purchaser shall cause the Company Group first to give 90 days prior written notice to Seller, and Seller shall have the right at its option and expense, upon prior written notice given to Purchaser within
that 90 day period, to take possession of the records within 180 days after the date of such notice.
(b) Seller shall preserve and keep the records relating to the Business existing as of Closing and in its possession for a period of seven years from the Closing Date. Subject to provisions of Section 7.27, Seller shall make available to Purchaser and its Representatives such records, and personnel of Seller familiar therewith, as may be reasonably requested by Purchaser in connection with claims by or against Purchaser or any of its Affiliates related to the Business, the Company Group or the transactions contemplated by this Agreement or compliance by Purchaser with its obligations under this Agreement or any Purchaser Document. If Seller wishes to destroy such records during such time, Seller shall first give 90 days prior written notice to Purchaser, and Purchaser shall have the right at its option and expense, upon prior written notice given to Seller within that 90 day period, to take possession of the records within 180 days after the date of such notice.
7.9 Publicity.
(a) Neither Purchaser nor Seller shall, and each of Purchaser and Seller shall cause its Affiliates not to, issue any press release or public announcement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other Party (which approval will not be unreasonably withheld, delayed or conditioned) unless such Party determines, after consulting with counsel, that disclosure is required by applicable Law. If a Party so determines that disclosure of such information is required by applicable Law, such Party shall use its commercially reasonable efforts consistent with applicable Law to consult with the other Party with respect thereto; provided, further, that upon and after the Closing, Purchaser and its Affiliates (including the Sponsor), on the one hand, and Seller and its respective Affiliates, on the other hand, shall be entitled to provide general information, including issuing a press release or similar such public announcement, concerning the transactions contemplated hereby to their respective investors and prospective investors who are subject to customary confidentiality restrictions for the purpose of customary fundraising, marketing or reporting or informational activities, in each case without obtaining such prior approval.
(b) Neither Purchaser nor Seller shall, and each of Purchaser and Seller shall cause its Affiliates not to, disclose or otherwise make available to the public the terms of this Agreement or publicly file or otherwise make available to the public copies of this Agreement unless such Party determines, after consulting with counsel, that such disclosure, availability or filing is required by applicable Law. If a Party so determines that such disclosure, availability or filing is required by applicable Law, such Party shall use its commercially reasonable efforts to consult with the other Party with respect thereto and to obtain appropriate confidential treatment, if available, thereof as the other Party may reasonably request.
7.10 Employment and Employee Benefits.
(a) No later than six (6) Business Days prior to the Closing Date, Seller shall deliver to Purchaser a final version of the Business Employee Schedule, and indicating which such Business Employees set forth thereon, if any, are on approved short- or long-term leaves of absence (“Leave Offered Employees”).
(b) No later than five (5) Business Days prior to the Closing Date, Target 3 will provide notice to the Business Employees assigned to work in Target 3 of the transfer of employment of such Business Employees to Target 3. Such offers of employment shall be conditional and effective on or after the Closing, shall describe the new employee benefit plans (“Target 3 Benefit Plans”) in which such Business Employees will participate as of the Closing Date. Such offers of employment are to be on terms and conditions including a base salary or base wage which is no less favorable to those existing as of the Closing Date, and such Target 3 Benefit Plans (including health and welfare, defined contribution retirement, opportunities for commissions, bonuses, severance benefits, and other cash-based incentive pay, but excluding equity-based incentive compensation, employee stock purchase plan, defined benefit pension schemes, deferred compensation arrangements, and retiree medical or other post-employment health and welfare coverage) are to be substantially comparable, in the aggregate, to those provided to such Business Employees immediately prior to the Closing. In such offer, the individual’s years of service shall be recognized for all purposes. The Business Employees who accept such offers of employment and commence employment with Target 3 shall become Continuing Employees (as defined below). Seller shall remain responsible for all Liabilities in any way relating to the Business Employees assigned to work at Target 3 who do not become Continuing Employees in accordance with this Section 7.10(b).
(c) Subject to Sections 7.10(b) and 7.10(d), Seller shall take all reasonable actions to cause each Business Employee to be employed or engaged by a Company Group Entity no later than immediately prior to the Closing. The Parties intend that the transactions contemplated by this Agreement (including the Restructuring) shall not constitute a separation, termination or severance of employment of any Business Employee prior to or upon the consummation of the transactions contemplated herein (including the Restructuring) and that the Business Employees will have continuous and uninterrupted employment immediately before and immediately after the Closing Date. Seller shall use all reasonable efforts to minimize the likelihood of incurring or triggering any severance payment, statutory severance or termination payment due to any Business Employees resulting from the consummation of the transactions contemplated by this Agreement (including the Restructuring), provided however, Purchaser acknowledges that the Transaction shall result in a termination of employment for certain Continuing Employees holding equity-based incentive awards in Seller Parent.
(d) Following the Closing, (i) Purchaser and Seller shall take all reasonable actions necessary to cause each Corporativo Employee to be transferred to an entity designated by Purchaser no later than March 31, 2020, and (ii) the Parties shall take all actions necessary in order for the Corporativo Employees to be transferred pursuant to and in accordance with the terms and conditions of this Agreement through the following process (A) for employment purposes, through an employer substitution process under Article 41 of
the Mexican Federal Labor Law (Ley Federal del Trabajo), and (B) for social security purposes, the entity designated by Purchaser to hire the Corporativo Employees shall enroll them within the social security mandatory regime before the Mexican Social Security Institute within five (5) working days (in Mexico) of the date on which the employer substitution implemented for employment purposes becomes effective, using its employer’s registration number. Subsequently, Univar Corporativo, S.A. de C.V. (“Univar Corporativo”) shall submit the discharge of such Corporativo Employees from the social security mandatory regime (such transfer, the “Corporativo Employee Transfer”). Notwithstanding the foregoing, and except as would be prohibited by any applicable disability discrimination Laws, to the extent that a Business Employee in Mexico is a Leave Offered Employee, such Leave Offered Employee shall remain an employee of Seller Group Members until the time the applicable leave ends and such Leave Offered Employee is eligible to return to work. If and when such a Leave Offered Employee is able to return to work and presents himself or herself to Purchaser or its Affiliates for employment, such Leave Offered Employee shall be eventually transferred to the entity designated by Purchaser.
(e) Notwithstanding the foregoing, and except as would be prohibited by any applicable disability discrimination Laws, to the extent that a Business Employee in Canada is a Leave Offered Employee, such Leave Offered Employee shall remain an employee of Seller Group Members until the time the applicable leave ends and the Leave Offered Employee is eligible to return to work. If and when a Leave Offered Employee is able to return to work and presents himself or herself to Purchaser or its Affiliates (including, after the Closing, the Company Group Entities) for employment, Purchaser shall, or shall cause one of its Affiliates to offer employment to such Leave Offered Employee and, if such offer is accepted, such employee’s commencement of employment with Purchaser or its Affiliates shall be the date on which such employee commences employment with the Purchaser or one of its Affiliates and such employee shall thereafter be deemed a Continuing Employee and all years of service with Seller Group Members as disclosed on the Business Employee Schedule shall be recognized by the Company Group Entity for all purposes.
(f) For a period of one year after the Closing Date, or such longer period of time required by applicable Law, Purchaser shall, or shall cause one or more of its Affiliates to, provide the Business Employees who were employed by of one of the Company Group Entities or with Corporativo with respect to Target 2 immediately prior to the Closing (the “Continuing Employees”), who remain employed with Purchaser or an Affiliate of Purchaser, with (i) a base salary or base wage that is no less favorable than the base salary or base wage provided to such Continuing Employee immediately prior to the Closing, and (ii) employee benefits (including health and welfare, defined contribution retirement, opportunities for commissions, bonuses, severance benefits, and other cash-based incentive pay, but excluding equity-based incentive compensation, employee share purchase programs, defined benefit pension schemes, deferred compensation arrangements, and retiree medical or other post-employment health and welfare coverage) that are substantially comparable, in the aggregate, to those provided to such Continuing Employees immediately prior to the Closing; provided, however, to the extent that the Continuing Employee is located outside of, or primarily provides services outside of, the U.S. (a “Foreign Continuing Employee”), such Foreign
Continuing Employee shall be entitled to compensation and benefits required by applicable Law if such compensation and/or benefits are greater than those set forth in clauses (i) and (ii) above, respectively. In addition, immediately following the Closing, Purchaser shall, or shall cause one or more of its Affiliates to, provide each Continuing Employee with a location of employment and job duties that are, in each case, substantially similar to those provided to such Continuing Employees immediately prior to the Closing. Notwithstanding the foregoing or anything in this Agreement to the contrary, the foregoing is not an obligation owing from Purchaser nor any of its Affiliates to continue to employ or engage any Business Employee for any period of time following the Closing Date to any Business Employee.
(g) For purposes of eligibility, benefit levels and vesting (but not benefit accrual) under the employee benefit plans established or maintained by Purchaser or one of its Affiliates, in which Continuing Employees are eligible to participate following the Closing (the “Purchaser Plans”), Purchaser shall credit each Continuing Employee with his or her years of service with the Company Group to the same extent as such Continuing Employee was entitled to credit for such service under any similar Business Benefit Plan immediately prior to the Closing (excluding any defined benefit pension plans, retiree or other post-employment medical or health coverage, or deferred compensation plans), except to the extent that it would result in the duplication of benefits. Purchaser and its Affiliates shall use commercially reasonable efforts to ensure that the Purchaser Plans do not deny Continuing Employees coverage on the basis of pre-existing conditions and credit such Continuing Employees in the year of initial participation in the Purchaser Plans for any deductibles and out-of-pocket expenses paid by such Continuing Employees under the Business Benefit Plans. Seller shall provide to Purchaser within 90 days after the Closing a listing of deductibles and out-of-pocket expenses for the current year for those Continuing Employees and their dependents who provide authorization for release of such data.
(h) Seller shall take such actions as are necessary to permit and allow Continuing Employees to continue participation in Business Benefit Plans providing medical, dental, vision, prescription drug, life, disability and accident benefits after Closing pursuant to the Transition Services Agreement, until the earlier of (i) the date upon which Purchaser or an Affiliate of Purchaser has established all plans required under Section 7.10(f) including all benefit plans providing medical, dental, vision, prescription drug, life, disability and accident benefits or (ii) May 15, 2020; provided that Purchaser shall be responsible for all premiums and cost associated with the participation of the Continuing Employees in such Business Benefit Plans as set forth in the Transition Services Agreement. Except as otherwise provided under the Transition Services Agreement, the Continuing Employees shall cease to accrue benefits under all Business Benefit Plans that are not Assumed Benefit Plans effective on Closing. Seller shall retain responsibility for all amounts payable by reason of or in connection with any and all claims incurred under the Business Benefit Plans by the Continuing Employees (and their eligible dependents) prior to the Effective Time. Purchaser, the Purchaser Plans, and the Assumed Benefit Plans shall be responsible for all amounts payable by reason of or in connection with any and all claims incurred under the Business Benefit Plans by the Continuing Employees (and their eligible dependents) after the Effective Time. For the purposes of this Section 7.10(h), a claim shall be deemed to have been incurred
(i) with respect to a death or dismemberment claim, on the actual date of death or dismemberment; (ii) with respect to a short-term or long-term disability claim, the date of occurrence of the injury or accident or the date of diagnosis of the illness or other event giving rise to such claim or series of related claims; (iii) with respect to a health care claim, including vision, dental and medical treatments, the date of treatment; and (iv) with respect to a prescription drug claim, the date the prescription is filled.
(i) Seller shall take such actions necessary to permit and allow Continuing Employees to continue participation in the current defined contribution plan that includes a qualified cash or deferred arrangement within the meaning of Section 401(k) of the Code (the “Current 401(k) Plan”) after Closing pursuant to the Transition Services Agreement until the earlier of (i) the date upon which Purchaser or an Affiliate of Purchaser has established a defined contribution plan that includes a qualified cash or deferred arrangement within the meaning of Section 401(k) of the Code (the “New 401(k) Plan”), or (ii) May 15, 2020; provided that Purchaser shall be responsible for all cost incurred by Seller in connection with the participation of the Continuing Employees in the Current 401(k) Plan including but not limited to any required contributions to the accounts of Continuing Employees. As promptly as practicable after the New 401(k) Plan is established, Seller shall reasonably cooperate with Purchaser to effect a “trust-to-trust” transfer of the account balances of the applicable Continuing Employees from the Current 401(k) Plan to the New 401(k) Plan in accordance with applicable Law.
(j) Prior to the Closing Date, with respect to the Univar USA Inc. Supplemental Valued Investment Plan (“SVIP”), Seller Parent or one of its Subsidiaries, as applicable, shall take, or cause to be taken, all action necessary, to make any matching or other contributions owed thereunder in respect of any Continuing Employees participating in the SVIP for all periods prior to and through the Closing as required under the SVIP.
(k) Following the Closing Date, Purchaser or one of its Affiliates shall be solely responsible for any continuation coverage required under Section 4980 of the Code, Part 6 of Title I of ERISA or applicable state Law (“COBRA”) to each Continuing Employee or any Person related to such Continuing Employee who is a “qualified beneficiary” as that term is defined in COBRA whose first “qualifying event” (as defined in COBRA) occurs on or prior to the Closing.
(l) The provisions of this Section 7.10 are for the sole benefit of the Parties and nothing herein, expressed or implied, is intended or shall be construed to (i) constitute an amendment or modification to any of the Business Benefit Plans or any of compensation and benefits plans maintained for or provided to Continuing Employees prior to or following the Closing or (ii) confer upon or give to any Person, other than the Parties and their respective permitted successors and assigns, any legal or equitable or other rights or remedies with respect to the matters provided for in this Section 7.10 or elsewhere in this Agreement under or by reason of any provision of this Agreement.
7.11 Separation.
(a) For the 18 month period from and after Closing, Seller shall reimburse Purchaser and the Company Group for any and all costs, fees and expenses incurred, in good faith, from time to time by Purchaser or any Company Group Entity that are identifiable as attributable to or resulting from the separation of the Business, including the items identified on Schedule 7.11 (“Separation Costs”); provided that (i) once Seller has reimbursed Purchaser for $10,000,000 (Ten Million Dollars), in aggregate, of Separation Costs, Seller’s ongoing reimbursement obligation pursuant to this Section 7.11(a) shall be limited to 80% of the incremental Separation Costs in excess of $10,000,000 (Ten Million Dollars) and (ii) in no event shall Seller’s obligations pursuant to this Section 7.11(a) exceed $18,000,000 (Eighteen Million Dollars) in the aggregate. From time to time, Purchaser may, in good faith, submit to Seller a written reimbursement request indicating the Separation Costs for which Purchaser would like to be reimbursed and reasonable documentation with respect to any third party Separation Costs reflected in such request. Seller, in good faith, may dispute in writing any reimbursement requests by Purchaser, so long as Seller has delivered such written notice of dispute to Purchaser within 20 Business Days following receipt of the written request for reimbursement. Within the later of (i) 20 Business Days after receiving any written reimbursement request which is not disputed or (ii) if disputed, within 5 Business Days after Seller and Purchaser mutually agree, in good faith, as to the correct amount of such reimbursement or such dispute is resolved by the Accounting Referee using the processes set forth in Section 3.4(d) (adapted as necessary for this Section 7.11(a)), Seller shall pay to Purchaser an amount equal to the amount set forth in such request. In order to support Seller’s obligations under this Section 7.11(a), at Closing, Seller shall provide to Purchaser a letter of credit issued to Purchaser or other entity designated by Purchaser (the “Letter of Credit”), in the form and on the terms attached hereto as Exhibit C, for an amount of $18,000,000 (Eighteen Million Dollars) from Bank of America, NA that may be drawn upon solely to the extent Seller has not made any payment (when due) to Purchaser required under this Section 7.11(a).
(b) As of the date hereof, Seller shall reasonably cooperate in good faith to assist Purchaser in the development of a workplan regarding the provision of services under the Transition Services Agreement and the build-out of the business support systems, infrastructure and functions of the Company Group provided however, the foregoing shall not expand upon or replace any obligations of the Seller under any other Ancillary Agreement nor shall this provision be used to avoid amounts owing for services provided by Seller and its Affiliates under the Transition Services Agreement.
(c) Seller Group Members shall not have any right to set-off, net or offset any Separation Costs against any payments to be made or owed by Purchaser or its Affiliates pursuant to this Agreement, the Ancillary Agreements or any other agreement among the Parties.
(d) Seller and Purchaser agree to treat any payment made pursuant to this Section 7.11 as an adjustment to the purchase price for foreign, federal (including U.S. federal income Tax), state and local income Tax purposes, to the extent permitted by applicable Law.
7.12 Affiliate Contracts and Company Guarantees; Intercompany Balances. Except as set forth on Schedule 7.12 (the “Surviving Arrangements”), all Contracts (including any Tax sharing or allocation agreements) between and among any Company Group Entity, on the one hand, and Seller or any of its Affiliates (other than the Company Group), on the other hand, and all Company Guarantees provided to Seller or any of its Affiliates, shall be terminated in their entirety upon the Closing, by the parties thereto and shall be deemed voided, cancelled and discharged in their entirety. Except as set forth on Schedule 7.12, all intercompany balances between and among any Company Group Entity, on the one hand, and Seller or any of its Affiliates (other than the Company Group), on the other hand, shall be eliminated by capital contribution, discharge or otherwise in their entirety upon the Closing.
7.13 Tax Matters.
(a) Subject to a cap equal to the Purchase Price, and subject to any limitation set forth in Section 7.19 that expressly applies to this Section 7.13, Seller shall be liable for and pay, and agrees to indemnify and hold harmless the Purchaser Indemnified Parties from and against, all Losses arising out of, relating to or resulting from (A) Taxes imposed on or with respect to the Company Group for any taxable year or period that ends on or before the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period ending on and including the Closing Date, (B) Taxes of Sellers and their Affiliates (excluding the Company Group), including Taxes imposed on or with respect to the Excluded Business and Group Taxes and (C) any inaccuracy or beach of any representation or warranty set forth in Sections 5.9(a)(x), 5.9(c), 5.9(d), or 5.9(e) (such Losses, “Seller Taxes”), in each case, only to the extent such Seller Tax was not already taken into account in the determination of the Final Adjusted Purchase Price. Purchaser shall be liable for and pay, and shall indemnify and hold harmless Seller and its Affiliates from and against any and all Taxes imposed on any member of the Company Group, or for which any Company Group Entity may otherwise be liable, for any taxable year or period that begins after the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period beginning after the Closing Date (such Losses, “Purchaser Taxes”).
(b) For purposes of Section 7.13(a), whenever it is necessary to determine the Liability for Taxes of the Company Group for a Straddle Period, the determination of such Taxes for the portion of the Straddle Period ending on and including, and the portion of the Straddle Period beginning after, the Closing Date shall be determined by assuming that the Straddle Period consisted of two taxable periods, one which ended at the close of the Closing Date and the other which began at the beginning of the day following the Closing Date, and Taxes based upon or measured by net income, gain, loss, receipts, proceeds, profits or similar items of the Company Group for the Straddle Period shall be allocated between such two taxable periods on a “closing of the books basis” by assuming that the books of the Company Group Entities were closed at the end of the day on the Closing Date; provided, however, that Taxes other than those described above shall be allocated to the portion of a taxable year or period ending on the Closing Date based on the total amount due for the entire Straddle Period, multiplied by (x) the number of days in such Straddle Period through the Closing Date divided by (y) the total number of days in such Straddle Period.
(c) Seller shall timely file or cause to be timely filed when due (taking into account all extensions properly obtained) (A) all Group Tax Returns that are required to be filed by or with respect to the Company Group on a combined, consolidated or unitary basis with Seller or any Affiliate thereof (other than any Group Tax Returns with respect to an Affiliated Group for which one of the Company Group Entities is the common parent) and (B) all other Tax Returns that are required to be filed with respect to the Company Group for taxable years or periods ending on or before the Closing Date. All such Tax Returns shall be prepared and filed in a manner consistent with past practice, in each case, except as otherwise required by applicable law. Seller shall provide Purchaser with a copy of a Tax Return, including any portion of a Group Tax Return, that relates to a Company Group Entity not less than thirty (30) days prior to the due date for such Tax Return, taking into account extensions (or, if such due date is within thirty (30) days following the Closing Date, as promptly as practicable following the Closing Date), for its review and comment, and Seller shall, acting reasonably, consider Purchaser’s comments prior to the filing of such Tax Return. Seller shall timely remit or cause to be remitted any Taxes due in respect of such Tax Returns. For the avoidance of doubt, notwithstanding the foregoing, Seller shall not be required to provide Purchaser (and Purchaser shall not be entitled to review) any income Tax Return of Seller not relating to a member of the Company Group.
(d) Purchaser shall timely file or cause to be timely filed when due (taking into account all extensions properly obtained) all other Tax Returns that are required to be filed by or with respect to the Company Group for (A) taxable years or periods beginning after the Closing Date and (B) any Straddle Periods and all such Tax Returns for the Straddle Period shall be prepared in a manner consistent with past practice, in each case, except as otherwise required by applicable law. With respect to any such Tax Return for the Straddle Period, not less than thirty (30) days prior to the due date for such Tax Return, taking into account extensions (or, if such due date is within thirty (30) days following the Closing Date, as promptly as practicable following the Closing Date), Purchaser shall provide Seller with a draft copy of such Tax Return for its review and comment and Purchaser shall, acting reasonably, consider such comments before filing such Tax Return. At least five (5) days prior to the due date for such Tax Return, Seller will pay its portion of the Taxes due with respect to such Tax Return to Purchaser, as determined pursuant to Section 7.13(a). Purchaser shall remit or cause to be remitted any Taxes due in respect of such Tax Returns.
(e) From and after the Closing, each Party shall furnish or cause to be furnished to the other Party, upon the other Party’s reasonable request, as promptly as practicable, such information and assistance related to the Company Group and the Business as is reasonably necessary for (i) the filing of any Tax Return or (ii) the preparation for or the prosecution or defense of any claim, audit, examination or other proposed change or adjustment by any taxing authority, as well as any notice of assessment (or proposed notice of assessment) and any notice and demand for payment, concerning any Income Taxes or other Taxes (a “Tax Proceeding”).
(f) Both Parties shall promptly notify the other Party in writing upon receipt by it or any of its Affiliates of notice of any pending or threatened Tax Proceeding
which might affect the Taxes for which the other Party may be liable pursuant to this Section 7.13; provided, however, that the failure or delay to provide any such notice promptly shall not relieve any Party of its obligations hereunder. Seller shall have the right to control and represent the Company Group’s interests in any Tax Proceeding relating to taxable periods ending on or before the Closing Date and to employ counsel of its choice at its expense; provided that, Purchaser shall be (i) kept apprised of the conduct of any such Tax Proceeding to the extent it relates to a Company Group Entity and (ii) entitled to participate in all aspects of such Tax Proceeding at Purchaser’s expense. Seller shall not agree to any settlement or compromise of such Tax Proceeding without obtaining Purchaser’s prior written consent thereto, such consent not to be unreasonably withheld, conditioned or delayed. In the case of a Straddle Period, Seller shall be (i) kept apprised of the conduct of any Tax Proceeding relating (in whole or in part) to Taxes attributable to the portion of such Straddle Period ending on and including the Closing Date (ii) entitled to participate at its expense in such Tax Proceeding with the prior written consent of Purchaser, and (iii) Purchaser shall not agree to any settlement or compromise of such Tax Proceeding without obtaining Purchaser’s prior written consent thereto, such consent not to be unreasonably withheld, conditioned or delayed.
(g) Seller 2 shall, if available under applicable Law, at its discretion, prepare and file elections under (i) Subsection 85(l) of the ITA (and under similar applicable provincial laws), (ii) Section 22 of the ITA (and under similar applicable provincial laws), and (iii) Section 156 or 167 of the Excise Tax Act (Canada), with respect to the transfer, prior to the Closing Date, of assets from Seller 2 to Target 3. Drafts of the forms, to the extent not required to be filed prior to the Closing Date, for any such elections shall be provided to Target 3 for review and comment at least 30 days before the deadline for the filing thereof, and Seller 2 shall consider in good faith any comments thereon provided by Target 3 at least 10 days before the deadline for filing. If, following such review by Target 3, Seller 2 provides Target 3 with a completed (apart from execution by Target 3) copy of such election then Purchaser 2 shall promptly cause Target 3 to execute such form. Apart from causing any duly completed election form to be executed (as described above), neither Target 3 nor the Purchaser shall have any responsibility for any such election made pursuant to this Section 7.13(g) nor bear any liability for any costs, expenses, losses or other damages in respect of any such election, including any costs, expenses, losses or other damages arising from any non-filing or late filing of, or errors or omissions contained in, or otherwise in respect of any such election, and Seller shall indemnify Target 3 and Purchaser against the same.
(h) Seller shall be entitled to any refund of Taxes of the Company Group Entities allocable to any taxable year or period that ends on or before the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period ending on or before the Closing Date, in each case net of any Tax and other costs incurred in connection with such refund. Purchasers shall be entitled to any refund of Taxes of the Company Group Entities allocable to any taxable year or period that begins on or after the Closing Date and, with respect to any Straddle Period, the portion of such Straddle Period beginning on or after the Closing Date.
(i) All Tax Sharing Agreements with respect to or involving any Company Group Entity, if any, shall be terminated no later than the Closing Date and, after the Closing Date, none of the Company Group Entities shall be bound thereby or have any Liability thereunder. The Seller shall take, or cause to be taken, all actions necessary to terminate any such Tax Sharing Agreements.
(j) With respect to Target 2, Purchaser is authorized, after the Closing Date, to make an election under Section 338(g) of the Code. Purchaser and Seller agree to file all applicable Tax Returns consistent with such Section 338(g) election, if any.
(k) The Seller and Purchaser hereby agree that the acquisition of the interests in Target 1 pursuant to the transactions contemplated under this Agreement will be treated as a taxable sale of the assets of Target 1 by Seller 1 for U.S. federal income tax purposes. The Seller and Purchaser hereby agree that the acquisition of the interests in Target 3 pursuant to the transactions contemplated under this Agreement will be treated as a taxable sale of the assets of Target 3 by Seller 2 for U.S. federal income tax purposes.
(l) Seller Parent and Seller 1 shall each appoint a legal representative in Mexico that meets the requirements established in Article 174 of the Mexican Income Tax Act (Ley del Impuesto sobre la Renta) and the respective legal representative shall file the corresponding and respective Tax Return and remit the income Tax payable within fifteen (15) Business Days after the Closing Date. Seller shall deliver to Purchaser the corresponding copy of each Tax Return stamped as filed with evidence of payment with the competent taxing authority and of the appointment of the legal representative in Mexico for such purposes.
7.14 Insurance.
(a) (i) Seller shall, and shall cause its Affiliates to, use reasonable best efforts to maintain, in full force and effect until the Closing, the coverage provided to the Business by the Insurance Policies in force as of the date of this Agreement, including renewing any policies expiring during such period, and (ii) Seller shall not cause any intentional breach, default or cancellation (other than expiration and replacement of policies in the ordinary course of business consistent with past practices) of such Insurance Policies or agreements that would have had or would reasonably be expected to have a material and adverse effect on the Business. Seller shall, and it shall cause its Affiliates to, (I) prior to the Closing, report to the applicable third-party insurance provider under each such applicable Insurance Policy events, acts, errors, accidents, omissions, incidents, injuries or other forms of occurrences that first occur or exist prior to Closing (“Pre-Closing Occurrence”) to the extent actually known to the Seller and relating to the Business, any Company Group Entity or the properties, assets, operations, employees, officers or directors of the Business or any Company Group Entity and (II) take commercially reasonable actions necessary to preserve and pursue the Business’s or the Company Group’s coverage rights for such Pre-Closing Occurrences.
(b) From and after the Closing, Purchaser shall not, and shall cause the Company Group not to, assert any right, title or interest in, to or under any Insurance Policies (other than those under which the Company Group is the sole insured) or rights to proceeds thereof in effect on or prior to the Closing Date relating to the Company Group, other than (i) with respect to insurance proceeds that constitute Business Assets; and (ii) for claims brought under the Insurance Policies for any Pre-Closing Occurrence.
(c) Purchaser shall pay, or cause to be paid, all costs and expenses required to be paid by Purchaser under the R&W Policy when due pursuant to the express terms of the R&W Policy, including the total premium, underwriting costs, brokerage commissions and other fees and expenses in connection with such policy. Purchaser shall not agree in writing to any amendment, modification or waiver to or of the waiver of subrogation provision in the R&W Policy in any manner that is materially adverse to Seller and/or its Affiliates without the consent of Seller.
7.15 Exclusivity. Following the date of this Agreement, Seller shall not and shall cause its Affiliates (including the Company Group) not to, and shall use commercially reasonable efforts to cause its and their respective Representatives not to, directly or indirectly, solicit, initiate, consider, facilitate, encourage or accept, or furnish to any other Person any information with respect to, any proposals from any Person (other than the Purchaser) relating to any (i) acquisition or purchase of all or any of the issued Company Group Securities, or all or substantially all of the properties and assets of the Company Group or the Business (other than the sale of inventory in the Ordinary Course of Business), (ii) any merger, consolidation, business combination, recapitalization, restructuring, dissolution or liquidation of or involving the Business or the Company Group, or (iii) any other acquisition or equity investment transaction involving or otherwise relating to the Business or the Company Group other than with Purchaser or any of its Affiliates, including the formation of a partnership or joint venture (collectively in clauses (i) through (iii), a “Competing Proposal”). Following the date of this Agreement, Seller shall and shall cause its Affiliates (including the Company Group) to, and shall use commercially reasonable efforts to cause its and their respective Representatives to, immediately cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Person conducted heretofore with respect to any of the foregoing and not enter into any agreement, arrangement or understanding relating to any potential Competing Proposal.
7.16 Distributions. Notwithstanding anything in this Agreement (including, for the avoidance of doubt, the Schedules) to the contrary, nothing in this Agreement shall prohibit Seller from causing the Company Group to pay cash dividends, and/or make cash distributions at any time prior to the Closing.
7.17 Data Room Documentation. As promptly as practicable, and in any event within five Business Days after the Closing Date, Seller will, at its expense, authorize Donnelley Financial Solutions, Inc. to, and request that it, copy to a suitable electronic medium all documents posted to the data room hosted by it as of the Closing Date in the same order and
manner as such documents are set forth in such data room and deliver one such copy to Purchaser.
7.18 Enforcement of Restrictive Covenants. To the extent permitted by applicable Law, Seller shall, and shall cause its Affiliates to, assign to Purchaser and its applicable Affiliates the right to enforce any provisions in any agreement to which any former employee of the Business who does not become a Continuing Employee is bound and for any Continuing Employee, to the extent such provision relates primarily or exclusively to the Business, including any assignment of inventions, work made for hire, confidentiality, non-competition or non-solicitation provisions contained in any such agreements and such restrictions shall no longer run in favor of Seller and its Affiliates.
7.19 Indemnification.
(a) Subject to this Section 7.19, from and after the Closing, Seller shall indemnify and hold harmless Purchaser and its Affiliates (including the Company Group) and each of its and its Affiliates’ respective stockholders, members, directors, equityholders, principals, officers, managers, partners, employees, representatives, agents, successors and assigns (collectively, the “Purchaser Indemnified Parties”) from, against and in respect of any and all Losses that any such Purchaser Indemnified Party suffers, sustains or incurs (whether or not in connection with a third-party claim) arising out of, relating to or resulting from:
(i) Seller Taxes (not otherwise taken into account in the determination of the Final Adjusted Purchase Price) subject to the limits and payable by Seller pursuant to Section 7.13;
(ii) any inaccuracy in or breach of any of the Seller Fundamental Representations, or in any certificate delivered hereunder to the extent relating to such Seller Fundamental Representations (which indemnification obligations under this subclause (ii) shall not exceed an amount equal to the Purchase Price);
(iii) the Excluded Liabilities (which indemnification obligations under this subclause (iii) shall not exceed an amount equal to the Purchase Price);
(iv) any breach of or failure to perform by Seller or any of its Affiliates of any of their respective covenants or agreements contained in this Agreement (other than pre-closing covenants or agreements in Section 7.10 (Employment and Employee Benefits) or Section 7.23 (Additional Asset Transfers)) (which indemnification obligations under this subclause (iv) shall not exceed an amount equal to the Purchase Price);
(v) any escheatment or unclaimed property matters, in each case arising out of or relating to any conditions, events,
circumstances, facts, activities, practices, incidents, actions or omissions first occurring or existing on or prior to the Closing (which indemnification obligations under this subclause (v) shall not exceed an amount equal to the Purchase Price);
(vi) any inaccuracy in or breach of any of the representations and warranties set forth in Section 5.18 (Environmental Representation) (which indemnification under this subclause (vi) shall not exceed an amount equal to the Purchase Price);
(vii) any inaccuracy in or breach of any of the representations and warranties set forth in Section 5.15 (Labor) or any breach of or failure to perform by Seller or any of its Affiliates of any of their respective pre-closing covenants or agreements contained in Section 7.10 (Employment and Employee Benefits) (which indemnification obligations under this subclause (vii) shall not exceed an amount equal to 35% of the Purchase Price);
(viii) any third party claim for any product sold or delivered by Seller or any of its Affiliates prior to Closing (including any product recalls) (which indemnification obligations under this subclause (viii) shall not exceed an amount equal to 10% of the Purchase Price); or
(ix) any inaccuracy or breach of Section 5.21 (Sufficiency of Assets) or any breach of or failure to perform by Seller or any of its Affiliates of any of their respective covenants or agreements contained in Section 7.23 (Additional Asset Transfers) (which indemnification obligations under this subclause (ix) shall not exceed an aggregate amount equal to 10% of the Purchase Price).
(b) Subject to this Section 7.19, from and after the Closing, Purchaser (for purposes of this Section 7.19(b), the Company Group) shall indemnify and hold harmless Seller and its Affiliates and each of its and its Affiliates’ respective stockholders, members, directors, equityholders, principals, officers, managers, partners, employees, representatives, agents, successors and assigns (collectively, the “Seller Indemnified Parties”) from, against and in respect of any and all Losses that any such Seller Indemnified Party suffers, sustains or incurs (whether or not in connection with a third-party claim) arising out of, relating to or resulting from:
(i) any inaccuracy in or breach of any of the Purchaser Fundamental Representations, or in any certificate delivered hereunder to the extent relating to such Purchaser Fundamental Representations (which indemnification obligations under this subclause (i) shall not exceed an amount equal to the Purchase Price);
(ii) the Assumed Liabilities (excluding Liabilities indemnified by Seller as contemplated by Section 7.13 or Section 7.19) (which indemnification obligations under this subclause (ii) shall not exceed an amount equal to the Purchase Price);
(iii) Purchaser Taxes (which indemnification obligations under this subclause (iii) shall not exceed an amount equal to the Purchase Price); or
(iv) any breach of or failure to perform by Purchaser or any of its Affiliates of any of their respective covenants or agreements contained in this Agreement (which indemnification obligations under this subclause (iv) shall not exceed an amount equal to the Purchase Price).
(c) Any claim for indemnification under this Section 7.19 must be asserted in accordance with this Section 7.19 prior to the end of the applicable survival period for such claim (and any claim for indemnification under this Section 7.19 asserted after the applicable survival period for such claim under this Section 7.19 shall be null and void), which are set forth below:
(i) with respect to any indemnification claim under Section 7.19(a)(iv) (Seller Covenants), sixty (60) days after the end of the applicable statute of limitations with respect to such matters;
(ii) with respect to any indemnification claim under Sections 7.19(a)(i) (Seller Taxes), 7.19(a)(ii) (Fundamental Representations), 7.19(a)(iii) (Excluded Liabilities), or 7.19(a)(v) (Escheatment), sixty (60) days after the end of the applicable statute of limitations with respect to such matters;
(iii) with respect to any indemnification claim under Section 7.19(a)(vi) (Environmental Representation), the fifth anniversary of the Closing Date;
(iv) with respect to any indemnification claim under Section 7.19(a)(vii) (Labor), the third anniversary of the Closing Date;
(v) with respect to any indemnification claim under Section 7.19(a)(viii) (Pre-closing Products), the third anniversary of the Closing Date;
(vi) with respect to any indemnification claim under Section 7.19(a)(ix) (Sufficiency of Assets), the first anniversary of the Closing Date; and
(vii) with respect to any indemnification claim under Sections 7.19(b)(i)-(iv) sixty (60) days after the end of the applicable statute of limitations with respect to such matters.
provided, however, that any obligations under Section 7.19(c) shall not terminate with respect to any claims or Losses as to which the Person to be indemnified shall have given notice to the indemnifying party in accordance with Section 7.19 before the termination of the applicable survival period.
(d) Except as otherwise set forth in Section 7.13 or this Section 7.19, neither the coverage nor the absence of coverage under the R&W Policy, for any reason, will alter or otherwise affect Seller’s liability under this Agreement.
(e) Any Purchaser Indemnified Party or Seller Indemnified Party seeking indemnification under this Section 7.19 (an “Indemnified Party”) shall give written notice (the “Claims Notice”) to the Party from which indemnification is sought (an “Indemnifying Party”) containing (i) a description of the Losses for which indemnification is sought by the Indemnified Party and, if known, the estimated amount of such Losses incurred or reasonably expected to be incurred by the Indemnified Party, (ii) a reasonable explanation of the basis for the Claims Notice to the extent of the facts then known by the Indemnified Party, and (iii) a demand for payment of those Losses. A failure by the Indemnified Party to give such Claims Notice in the manner required pursuant to this Section 7.19(e) shall not limit or otherwise affect the obligations of the Indemnifying Party under this Section 7.19, except to the extent that such Indemnifying Party is actually prejudiced with respect to the rights available to the Indemnifying Party with respect to such Losses, and then only to the extent of any such actual prejudice. If the Indemnifying Party rejects all or any part of a claim, the Indemnified Party shall be free to seek enforcement of its rights to indemnification under this Agreement in accordance with the terms of this Agreement.
(f) Indemnification payments shall be made by an Indemnifying Party promptly after (i) the amount of such payments has been determined by the mutual written agreement of the Indemnifying Party and Indemnified Party or (ii) both the amount of such payments and the Indemnifying Party’s obligation to make such payments have been determined by the final nonappealable Order of a court; provided that the prevailing party in any Legal Proceeding to enforce the indemnification rights set forth herein shall be entitled to recover its reasonable legal fees and costs, including attorney’s fees.
(g) If an Indemnified Party seeks indemnification under this Section 7.19 in connection with any Legal Proceeding instituted, or claim asserted, against such Indemnified Party by a third party (a “Third Party Claim”), the Indemnified Party shall, promptly upon gaining knowledge of such Third Party Claim, deliver to the Indemnifying Party a Claims Notice relating to such Third Party Claim; provided, that a failure by the Indemnified Party to give such Claims Notice in the manner required pursuant to this Section 7.19(g) shall not limit or otherwise affect the obligations of the Indemnifying Party under this Section 7.19, except to the extent that such Indemnifying Party is actually prejudiced with respect to the rights available to the Indemnifying Party with respect to such Third Party Claims, and then only to
the extent of any such actual prejudice. The Indemnifying Party shall have the right, at its sole option and expense, to appoint counsel of its choice, which must be reasonably satisfactory to the Indemnified Party, and to defend against, negotiate, settle or otherwise deal with such Third Party Claim. If the Indemnifying Party elects to defend against, negotiate, settle or otherwise deal with such Third Party Claim, it shall within 30 (thirty) days provide written notice to the Indemnified Party of its intent to do so; provided that the Indemnifying Party shall not be entitled to assume the control and defense of such Third Party Claim, if (i) such Third Party Claim is an Indemnified Party Defense Matter, or (ii) the Indemnifying Party has not notified the Indemnified Party in writing of its desire to defend the Indemnified Party against a Third Party Claim within the time period set forth above. Notwithstanding the foregoing, if a Third Party Claim (A) seeks relief other than the payment of monetary damages or seeks the imposition of a consent order, injunction or decree that would materially restrict the future activity or conduct of the Indemnified Party or any of its Affiliates, (B) is a criminal Legal Proceeding or alleges, or seeks a finding or admission of a violation of Law or violation of the rights of any Person by the Indemnified Party or any of its Affiliates or a civil Legal Proceeding by a Governmental Body, (C) if adversely determined would reasonably be expected to result in monetary liability of the Indemnified Party (after giving effect to the indemnification available hereunder) that is greater than the maximum amount of the Indemnifying Party’s indemnification obligations hereunder with respect to such Third Party Claim; or (D) is asserted by a material customer or supplier of the Indemnified Party (any such claim, an “Indemnified Party Defense Matter”) then, in each such case, the Indemnified Party alone shall be entitled to contest, defend, compromise and settle such Third Party Claim (but, with respect to any such settlement, subject to obtaining the consent of the Indemnifying Party when required in accordance with, and subject to the terms and conditions of, this Section 7.19(g)). If the Indemnifying Party (i) elects not assume the control and defense of a Third Party Claim, whether by not giving the Indemnified Party timely notice of its desire to so defend or otherwise, (ii) is not entitled to defend the Third Party Claim as provided in this Section 7.19(g) or (iii) after assuming the defense of a Third Party Claim, fails to take reasonable steps necessary to defend actively and diligently such Third Party Claim then, in each case, the Indemnified Party shall have the right but not the obligation to assume the defense (at the expense of the Indemnifying Party) and resolution of such Third Party Claim, and shall reasonably consult with the Indemnifying Party regarding the strategy for defense of such claim; it being understood that the Indemnified Party’s right to indemnification for a Third Party Claim shall not be adversely affected by assuming the defense of such Third Party Claim. If the Indemnifying Party shall assume the defense of such Third Party Claim, the Indemnified Party may participate, at its own expense, in the defense of such Third Party Claim; provided, however, that the Indemnified Party shall be entitled to participate in any such defense with separate counsel at the expense of the Indemnifying Party if (i) requested by the Indemnifying Party to so participate or (ii) in the reasonable opinion of counsel to the Indemnified Party, a conflict or potential conflict exists between the Indemnified Party and the Indemnifying Party that would make such separate representation advisable; and provided further that the Indemnifying Party shall not be required to pay for more than one such counsel for all Indemnified Parties in connection with such Third Party Claim. The Indemnifying Party and Indemnified Party shall cooperate fully with each other in connection with the defense, negotiation or settlement of such Third Party Claim. The Indemnifying Party
and Indemnified Party shall keep each other reasonably informed with respect to the status of such Third Party Claim. An Indemnifying Party shall not, without the written consent of the other, settle or compromise any Third Party Claim, permit a default judgment to be entered or consent to entry of a judgment (each, a “Settlement”); provided that such consent may be withheld in the sole discretion of the Indemnified Party if such Settlement (i) is or relates to an Indemnified Party Defense Matter, (ii) does not include from the claimant and such Indemnifying Party an unqualified release of the Indemnified Parties from all Liability in respect of such Third Party Claim, (iii) imposes any obligations or requirements (aside from customary confidentiality and similar administrative requirements) on the Indemnified Party other than the payment of money, which will be paid by the Indemnifying Party, or (iv) includes any admission of any Liability or wrongdoing (including any violation of Law or Order) by any Indemnified Party. The Indemnified Party shall have a reasonable period to review and comment upon drafts of any documentation relating to any Settlement that the Indemnifying Party proposed to enter into, and the Indemnifying Party shall accept any such comments if reasonable.
(h) Notwithstanding anything contained in this Agreement to the contrary, Seller shall not have any indemnification obligations under Section 7.19(a)(vi) (Environmental Representation), Section 7.19(a)(vii) (Labor), Section 7.19(a)(viii) (Pre-Closing Products), or Section 7.19(a)(ix) (Sufficiency of Assets) for any Losses incurred by the Purchaser Indemnified Parties until such Losses in the aggregate exceed $2,000,000 (the “Threshold”), whereupon Seller shall be liable for the amount of such Losses that exceed the Threshold.
(i) Any fact, circumstance or event that is disclosed on any Schedule to this Agreement will be deemed to qualify other representations or warranties in this Agreement, whether or not such Schedule includes a cross-reference to the specific Section containing such representation or warranty or the specific Section containing such representation or warranty includes a reference to such Schedule, to the extent that the applicability of such disclosure to such representation or warranty is readily apparent on the face of the disclosure. Further, Purchaser acknowledges that none of Seller, the Company Group, any Affiliate of Seller, or any of their Representatives, will be required to indemnify a Purchaser Indemnified Party under Section 7.19 for any claim made by such Purchaser Indemnified Party for any breach of any representation or warranty under Section 7.19(a)(ii) (Fundamental Representations), Section 7.19(a)(vi) (Environmental Representation), Section 7.19(a)(vii) (Labor), or Section 7.19(a)(ix) (Sufficiency of Assets), if the party seeking indemnification for such Losses has actual knowledge of such breach prior to the date hereof.
(j) No Purchaser Indemnified Party shall have any right to indemnification under this Agreement in respect of any matter to the extent such matter (i) is expressly taken into account as a purchase price reduction when calculating the Final Adjusted Purchase Price, or (ii) is a Separation Cost reimbursed by Seller in accordance with Section 7.11.
(k) The amount of any Losses for which indemnification is provided under this Section 7.19 shall be net of any amounts actually recovered by the Indemnified Party
(less any Recovery Expenses) under insurance policies (including the R&W Policy) or any indemnification by any third party (less any Recovery Expenses), and net of any Tax benefits to the Indemnified Party actually realized (that are not in the nature of a timing benefit which reverses over time), whether in the form of a reduced Tax liability, a Tax refund, or as a credit or other offset to Taxes payable and increased by any Tax detriment resulting from the receipt of indemnification, in each case with respect to such Losses; provided, for the avoidance of doubt, that a Tax detriment shall not include any increase in Taxes arising out of an indemnification payment to the extent such payment is treated as an adjustment to the Purchase Price as provided under Section 7.19(p). No Purchaser Indemnified Party shall have any right to make any claim for indemnification under Section 7.19(a)(i), Section 7.19(a)(ii) (Fundamental Representations), Section 7.19(a)(vi) (Environmental Representation), Section 7.19(a)(vii) (Labor), or Section 7.19(a)(ix) (Sufficiency of Assets) of this Agreement unless such Purchaser Indemnified Party has first used its commercially reasonable efforts to seek recovery under the R&W Policy and such recovery is denied or is insufficient; provided that this limitation shall not apply to the extent recovery under the R&W Policy is insufficient or unavailable to satisfy such claim (whether as a result of a retention, deductible, exclusion, expiration, breach, other limit under the R&W Policy or otherwise). For the avoidance of doubt, except as expressly provided in the preceding sentence, the pendency of any recovery under insurance policies or otherwise shall not relieve or delay any obligation of Seller to pay or indemnify the Purchaser Indemnified Parties pursuant to this Agreement. In the event that an insurance, indemnification or other recovery is actually received by any Indemnified Party with respect to any Losses for which any such Indemnified Party has been indemnified hereunder by an Indemnifying Party and such insurance, indemnification or other recovery was not taken into account with respect to the indemnification that was made to the Indemnified Party, then a refund equal to the aggregate amount of the applicable indemnification payment made by such Indemnifying Party shall be paid to such Indemnifying Party as promptly as practicable (and in any event within 30 days) after receipt of such insurance, indemnification or other recovery, which refund shall in no event exceed the amount of such insurance, indemnification or other recovery actually received by such Indemnified Party (less the full amount of any Tax costs or other costs and expenses incurred in connection with such recovery (including any increase in premiums) and net of any applicable deductibles or retentions (“Recovery Expenses”)). Each Indemnified Party shall take, and cause its Affiliates to take, all commercially reasonable steps required by law to mitigate any Loss after becoming aware of any event or circumstance that would be reasonably be expected to, or does, give rise thereto, including, to the extent commercially reasonable and required by law, incurring costs (which shall be recoverable hereunder) to the minimum extent necessary to mitigate further Losses.
(l) For purposes of the indemnification provision in this Agreement, all Materiality Qualifications included in the representations and warranties contained in this Agreement will be disregarded both for purposes of calculating the amount of Losses for which an Indemnified Party is entitled to indemnification under this Agreement and for purposes of determining whether a breach or inaccuracy of a representation or warranty has occurred.
(m) Notwithstanding anything to the contrary in this Agreement, from and after the Closing, Purchaser and its Affiliates shall have no recourse for a breach of any representation or warranty in ARTICLE V against Seller or any of its Affiliates, except to the extent specifically provided in Section 7.13 or Section 7.19(a) or in the case of intentional fraud.
(n) Seller, on behalf of itself and each of the other Seller Indemnified Parties, and Purchaser, on behalf of itself and each of the other Purchaser Indemnified Parties, acknowledge and agree that, from and after the Closing, the sole and exclusive remedy for any breach or inaccuracy, or alleged breach or inaccuracy, of any representation or warranty in this Agreement or any covenant or agreement under this Agreement, shall be indemnification in accordance with Section 7.13 (Tax Matters) and this Section 7.19, except (a) with respect to disputes under Section 3.4, which will be resolved in accordance therewith, (b) with respect to claims for specific performance or other equitable relief in accordance with Section 10.9, (c) intentional fraud and (d) in the case of Purchaser Indemnified Parties, recovery under the R&W Policy.
(o) Notwithstanding any other provision of this Agreement, the following provisions shall apply in respect of any claims for Seller Taxes and related damages which may be indemnified in accordance with Section 7.13(a) or this Section 7.19;
(i) Initial Tax Payments. In the case of a Third Party Claim that is a notice of assessment or reassessment, a notice of confirmation of an assessment or reassessment, a notice of garnishment, or a similar document in respect of any Seller Taxes, the Seller shall, within fifteen (15) days of receipt of written notice of such claim, reimburse the applicable Purchaser’s Indemnified Party for an amount equal to (A) the full amount of such Seller Taxes required to be paid to the applicable taxing authority to stay collection proceedings in respect of which a taxing authority is permitted to take collection action, or (B) the full amount that has been garnished and applied towards any Seller Taxes, as applicable.
(ii) Final Determination True-Up. Upon the occurrence of a Tax Indemnification Event, (A) to the extent that the total of the amounts previously paid by the Seller in respect of the relevant Seller Taxes is less than the amount so determined to be the amount of the Seller Taxes, the Seller shall forthwith (and, in any event, within fifteen (15) days of the time that the applicable Purchaser’s Indemnified Party notifies the Seller of the occurrence of the Tax Indemnification Event) pay to such Purchaser’s Indemnified Party the amount of the Seller Taxes less the total of the amounts previously paid, and (B) to the extent that the total of the amounts previously paid by the Seller in respect of such Seller Taxes exceeds the amount so determined to be the amount of the Seller Taxes, such Purchaser’s Indemnified Party shall
forthwith upon receipt or confirmation of any refund or credit of such Seller Taxes (and, in any event, within fifteen (15) days of the receipt or confirmation of such refund or credit) pay to the Seller the amount of such refund or credit (including any interest paid or credited with respect thereto but net of any Taxes payable by the Purchaser’s Indemnified Party in respect of such refund, credit or interest).
(p) Seller and Purchaser agree to treat any indemnity payment made pursuant to this Section 7.19 as an adjustment to the Purchase Price for foreign, federal, provincial, state and local income Tax purposes, to the extent permitted by applicable Law.
7.20 Non-Competition and Non-Solicitation.
(a) From the Closing Date until the fifth (5th) anniversary of the Closing (the “Restricted Period”), Seller will not, and will cause its Affiliates (including the Seller Group Members) not to, directly or indirectly, own an interest in, manage, operate, join, control, endorse, support, perform services for, serve as a consultant to, solicit business for, participate in, provide, or facilitate any, financing, be connected, in any manner, with the ownership, management, operation or control of, or otherwise be affiliated with, any Restricted Business anywhere in North America or anywhere else in the world (other than Brazil) where the Business or the Company Group does business or operates (or has done business or operated or intends to do business or operate) or actively solicits (or has solicited or intends to solicit) customers, in each case as of the Closing (the “Restricted Territory”). “Restricted Business” means any business that markets, distributes, offers, sells or provides any products or services marketed, distributed, offered, sold or provided by the Business as of the Closing or substitutes for any such products or services in each case for use in any of the non-row crop portion of the agricultural industry in the U.S. or the structural pest control, public health, industrial vegetation management, turf and ornamental, or animal health markets, or otherwise competes with the Business as conducted as of the Closing (and as contemplated to be conducted). Notwithstanding the foregoing, nothing in this Agreement shall prohibit or in any way restrict any Seller or any of its Affiliates from the following:
(i) making or maintaining passive investments of less than two percent (2%) of the outstanding equity securities in any entity listed for trading on any national securities exchange as long as Seller or such Affiliate of Seller owning such securities has no other connection or relationship with such Person listed on the applicable national securities exchange; or
(ii) acquiring a business or any interest in a business that is involved in the Restricted Business; provided, that such business does not derive more than ten percent (10%) of its annual revenues from the Restricted Business and Seller’s annual revenues attributable to Restricted Businesses is less than $20,000,000.00 during the fiscal year prior to such acquisition being made (or, if earlier, the entry into the definitive agreement providing for the making of such acquisition).
(b) During the Restricted Period, Seller will not, and will cause its Affiliates (including the Seller Group Members) not to, directly or indirectly, urge, induce, or seek to urge or induce any current or potential customer, supplier, vendor, licensee, licensor, distributor, franchisee or other business relationship of the Business to terminate their business relationship with the Business or the Company Group or Purchaser or any of its Affiliates or to cancel, reduce, limit or in any manner interfere with such business relationship of the Business or the Company Group or Purchaser or any of its Affiliates.
(c) During the Restricted Period, Seller will not, and will cause its Affiliates (including the Seller Group Members) not to, directly or indirectly, hire, offer to hire, entice away or in any other manner persuade or attempt to persuade any individual who is or was an officer, employee, consultant or agent of the Company Group or the Business as of or prior to the Closing Date or is or was an officer, employee, consultant or agent of the Company Group or the Business or Purchaser or any of its Affiliates after the date of this Agreement; provided, however, that no Seller shall be prohibited from conducting generalized searches for officers, employees or consultants through the use of general advertisement or through the engagement of firms to conduct such searches that are not targeted or focused on the officers, employees or consultants of the Company Group, Purchaser or their respective Affiliates or the Business.
(d) The nature and scope of the foregoing provisions of this Section 7.20 have been carefully considered by the Parties. The Parties agree and acknowledge that the duration, scope and geographic areas applicable to such provisions are fair, reasonable and necessary and that adequate compensation has been received, directly or indirectly, by Seller for such obligations. Seller agrees that it will not assert or claim, or raise as a defense, in any judicial proceeding or otherwise, that any of such provisions are unenforceable as a matter of public policy or otherwise or that any of the duration, scope or geographic areas applicable to such provisions is or was not fair, reasonable or necessary or that adequate compensation was not received by such Seller for such obligations. If, however, for any reason any court determines that any such provisions are or were not fair, reasonable or necessary or that consideration was inadequate, such provisions shall be interpreted, modified or rewritten to include as much of the duration, scope and geographic area identified in this Section 7.20 as will render such restrictions valid and enforceable.
(e) The Parties acknowledge and agree that no portion of the Purchase Price payable in respect of the Target 2 Securities is allocated to a “restrictive covenant” as that term is defined for the purposes of Section 56.4 of the ITA and its provincial equivalent. Any “restrictive covenant” under this Agreement or any other transaction document is intended to maintain or preserve the value of the Company Group Securities to the Purchasers.
7.21 Financing; Lien Releases.
(a) Purchaser shall use its reasonable best efforts to obtain the Debt Financing as soon as reasonably practicable after the date hereof on terms set forth in the Debt Commitment Letter including by using its commercially reasonable efforts to (i) maintain in effect and comply with its obligations under each Debt Commitment Letter, (ii) as promptly
as practicable negotiate, execute and deliver definitive agreements on the terms and conditions contained therein and (iii) subject to Seller’s and Company Group Entities’ cooperation under this Section 7.21, satisfy on a timely basis all conditions and obligations thereunder.
(b) Purchaser shall not amend, modify or change any provision in either the Equity Commitment Letter or the Debt Commitment Letter in any respect materially adverse to Seller without the prior written consent of Seller. Purchaser shall draw down on the financings referred to in the Debt Commitment Letter when the conditions set forth in the Debt Commitment Letter are satisfied, in each case in accordance with their respective terms.
(c) Purchaser shall deliver a prompt written notice to Seller if Purchaser has been notified in writing that any of its debt financing sources contemplated by the Debt Financing will not fund the transactions contemplated by this Agreement in accordance with the terms of the Debt Financing, with such written notice to Seller containing, if then known, a description and reasonable explanation for the basis of such failure. If any portion of the Debt Financing becomes unavailable on the terms and conditions (including the flex provisions) contemplated in the Debt Commitment Letter and Purchaser is therefore not able to pay the Adjusted Purchase Price and consummate the transactions contemplated by this Agreement and the Ancillary Agreements, Purchaser will use its reasonable best efforts to, as promptly as practicable, (i) obtain alternative financing from third party alternative sources in an amount sufficient to replace the Debt Financing on terms and conditions not materially less favorable in the aggregate to Purchaser than those contained in the Debt Commitment Letter and any related fee letter (the “Alternate Debt Financing”); and (ii) obtain one or more new financing commitment letters with respect to such Alternate Debt Financing, which new letters will replace the existing Debt Commitment Letters in whole or in part. For purposes of this Agreement, the term “Debt Financing” shall include Alternate Debt Financing and the term “Debt Commitment Letter” shall include financing commitment letters with respect to such Alternate Debt Financing.
(d) From and after the date hereof until the Closing, Seller will, and will cause its Affiliates, officers, directors, managers, employees and agents (including attorneys and accountants) to, provide all reasonable information and cooperation in connection with the arrangement and consummation of the Financing as may be reasonably requested by Purchaser (including (i) furnishing to Purchaser customary information regarding the Business necessary for the preparation of a customary confidential information memorandum; (ii) causing management of the Business with appropriate seniority and expertise to participate in a reasonable number of meetings, and presentations and diligence sessions with prospective lenders, investors and ratings agencies, in each case in connection with the Debt Financing; (iii) assisting Purchaser and the Debt Financing Sources in their preparation of any ratings agency presentations, bank information memoranda (including the delivery of customary authorization and representation letters to the extent contemplated by the Debt Commitment Letter) and related lender presentations; (iv) cooperating with the marketing efforts of Purchaser and the Debt Financing Sources; (v) providing Purchaser all documentation and other information with respect to the Business as shall have been reasonably requested in writing by Purchaser at least ten (10) 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 USA PATRIOT Act, Title III of Pub. L. 107-56 (signed into law October 26, 2001), as amended, or as required under 31 C.F.R. §1010.230, in each case, to the extent required by the Debt Commitment Letter; (vi) furnishing Purchaser with all financial information required to be delivered under the Debt Commitment Letter and assisting Purchaser in the preparation of pro forma financial statements; (vii) assisting in the preparation of, and executing and delivering, definitive documentation in connection with the Debt Financing (including credit, guarantee and collateral documents) and other customary certificates and documents relating thereto, and taking organizational actions in connection with the Debt Financing as may be reasonably requested by Purchaser; and (viii) using reasonable best efforts to take all actions reasonably requested by Purchaser to satisfy the conditions to the consummation of the Debt Financing set forth in the Debt Commitment Letter, to the extent satisfaction thereof requires the cooperation of the Seller Group Members; provided that Seller shall not be required to provide, or cause the Business to provide, cooperation under this Section 7.21(d) that: (A) unreasonably interferes with the ongoing business of the Company Group; (B) requires Seller to incur any liability (including, without limitation, any commitment fees) in connection with the Debt Financing prior to the Closing; or (C) other than customary authorization letters, requires Company Group or its directors, officers, managers or employees to execute, deliver or enter into, or perform any agreement, document, certificate or instrument, with respect to the Debt Financing, and the directors or managers of the Company Group shall not be required to adopt resolutions approving the agreements, documents and instruments pursuant to which the Debt Financing is obtained or deliver any certification that, in the good faith judgement of the signatory, is not accurate. Seller hereby consents to the use of the Business’s logos in connection with the Debt Financing; provided, that such logos are used solely in a manner that is not intended to, nor reasonably likely to, harm or disparage Seller). Any expenses, costs and/or fees incurred by Seller in connection with the performance of their obligations under this Section 7.21(d) shall, following delivery to Purchaser of a reasonably detailed invoice with respect thereto, be added to the Adjusted Purchase Price if the transactions contemplated hereby are consummated, and if the transactions contemplated hereby are not consummated, promptly reimbursed by Purchaser following termination of this Agreement for any reason.
(e) Seller shall deliver to Purchaser prior to the Closing (i) customary evidence of the release of all Liens on the assets and properties of the Company Group securing Indebtedness (including the Company Group Securities) under the agreements governing Indebtedness of the Seller Parent and the release of any guarantees of such Indebtedness by the Company Group (it being understood that Seller shall request from the holders of such Indebtedness (or the agent or trustee on behalf thereof) customary commitments by such holders (or such agent or trustee on behalf thereof) to execute and provide documentation and filings reasonably necessary to evidence the release or termination of such Liens (which release and termination shall be at Seller’s expense)) and (ii) a copy of any certificate or document required to be delivered under the agreements governing Indebtedness of the Seller Parent evidencing that the transactions contemplated hereby comply with the covenants and use of proceeds of such agreements.
7.22 Mail; Deliveries. After the Closing Date, each of the Seller Parent and its Subsidiaries, on the one hand, and Purchaser and its Affiliates (including the Company Group), on the other hand, may receive mail, packages, or other communications (including electronic communications) properly belonging to the other Party (or the other Party’s Affiliates or Subsidiaries, as applicable). Accordingly, at all times after the Closing Date, each of the Seller and Purchaser authorizes the other Party and their respective Subsidiaries and Representatives to receive and open all mail, packages, and other communications received by it and not clearly intended for the other Party (or its Subsidiaries) or any of the other Party’s (or its Subsidiaries’) officers or directors, and to retain the same to the extent that they relate to the Business (in the case of receipt by Purchaser and its Affiliates (including the Company Group)) or the Excluded Business (in the case of receipt by the Seller Parent and its Subsidiaries), or to the extent that they do not relate to the Business (in the case of receipt by Purchaser and its Affiliates (including the Company Group)) or do not relate to the Excluded Business (in the case of receipt by the Seller Parent and its Subsidiaries), the receiving Party shall promptly after becoming aware thereof refer, forward, or otherwise deliver such mail, packages, or other communications (or, in case the same relate to both the Business and the Excluded Business, copies thereof) to the other applicable Party. The provisions of this Section 7.22 are not intended to, and shall not be deemed to, constitute an authorization by either the Seller or Purchaser to permit the other to accept service of process on its behalf, and neither Party is or shall be deemed to be the agent of the other for purposes of the service of process.
7.23 Additional Asset Transfers.
(a) Notwithstanding anything in this Agreement to the contrary, at or prior to the Closing, Seller shall, and shall cause its Affiliates to, in each case at Seller’s sole cost (except for GST/HST or other creditable or recoverable transfer taxes, to the extent such taxes are actually recovered by Target 3, which taxes shall be assumed and paid by Target 3 to Seller 2, and Seller 2 shall remit same to the relevant tax authority in accordance with applicable Law) and expense, to the extent that any Business Assets are not held by the Company Group, sell, convey, assign and transfer to the Company Group, the Business Assets, free and clear of all Liens, other than Permitted Exceptions (collectively, the “Pre-Closing Asset Transfers”). Seller and Purchaser understand and agree that any transfers, assignments, sales or other dispositions of assets, interests, rights, capital stock, employees or otherwise, shall be at Seller’s sole cost and expense. Seller shall use commercially reasonable efforts to file, provide or otherwise obtain, as applicable, all consents, notices, filings, waivers, assignment agreements and recordings required in connection with the Pre-Closing Asset Transfers, including to enable the Company Group to conduct the Business in accordance with applicable Law and Contract requirements immediately following the Closing (and in the event the Closing occurs and any such costs and expenses associated with the foregoing matters described in this sentence have not been paid by Seller or such obligations have not been fulfilled, Seller shall, continue to be responsible for such costs, expenses and obligations and shall satisfy the same at Purchaser’s reasonable discretion). For the avoidance of doubt, no Restructuring Document will provide any rights, obligations or Liabilities of Seller or any of its Subsidiaries (excluding the Company Group), on the one hand, and any Company Group Entity, on the other hand, that are inconsistent with the terms of this Agreement. Without
limiting the foregoing, from and after the date hereof, Seller shall provide Restructuring Documents to Purchaser in draft form and an opportunity to review, and shall not finalize, enter into, execute or deliver any Restructuring Document, without Purchaser’s prior written consent (which consent shall not be unreasonably conditioned, withheld or delayed).
(b) If, at any time prior to the one year anniversary of the Closing Date, any asset held by Seller or its Affiliates is ultimately determined to be a Business Asset, for no additional consideration, (i) Seller shall return or transfer and convey (without further consideration) to Purchaser, or to such Affiliate of Purchaser as Purchaser may direct, such Business Asset; and (ii) Seller and Purchaser shall, and shall cause their appropriate Affiliates to, execute such documents or instruments of conveyance and take such further acts as are reasonably necessary or desirable to effect the transfer of such Business Asset to Purchaser or its appropriate Affiliate, in each case such that each Party and its Affiliates are put into the same economic position as if such action had been taken on or prior to the Closing Date.
(c) Seller shall, and shall cause its Affiliates to, promptly pay or deliver to Purchaser (or its designee) any monies or checks which have been sent to Seller or any of its Affiliates by customers, suppliers or other contracting parties of the Business in respect of the Business or which are otherwise due to the Business and which should have been sent to Purchaser or one of its Affiliates (including promptly forwarding invoices or similar documentation to Purchaser or its designee). Purchaser shall, and shall cause its Affiliates to, promptly pay or deliver to Seller any monies or checks which have been sent to Purchaser or the Company Group or any of their respective Affiliates by customers, suppliers or other contracting parties of the Excluded Business in respect of the Excluded Business or which are otherwise due to the Excluded Business and which should have been sent to Seller or one of its Affiliates (including promptly forwarding invoices or similar documentation to Seller or its designee).
(d) Prior to the Closing Date, (i) Seller 1 and Target 1 shall enter into the U.S. Contribution Agreement and effect the U.S. Business Restructuring and (ii) Seller 2 and Target 3 shall enter into the Canadian Contribution Agreement and effect the Canadian Business Restructuring.
(e) Seller shall, and shall cause its Affiliates to, assign to Purchaser and its applicable Affiliates the right to enforce any provisions in any agreement that constitutes a Business Asset that is not assigned to the Company pursuant to the Contribution Agreement, and to the extent requested by Purchaser and at Purchaser’s sole cost and expense, enforce such rights on behalf of Purchaser thereunder.
(f) Seller shall deliver to Purchaser no later than twenty (20) days after the Closing Date all original documents, agreements, instruments, licenses and permits related to Target 2 reasonably requested by Purchaser to the extent the same is in Seller’s possession or under its control.
7.24 IP Matters.
(a) Purchaser acknowledges that it is not purchasing or licensing any right, title or interest in or to the name “Univar,” or any abbreviations or variations thereof (collectively, the “Seller Trademarks”). Notwithstanding the foregoing, the Company Group and its Affiliates shall have a limited, non-exclusive, non-sublicensable, royalty-free right to use the Seller Trademarks in connection with the Company Group’s and its Affiliates’ products and any related services, trucks, equipment, signage, advertising and promotional materials, packing and shipping materials and other similar materials consistent with the manner used by Seller (with respect to the Business) prior to Closing for a period of 90 days after the Closing (the “Initial Univar License Period”). Purchaser acknowledges that Purchaser’s use of the Seller Trademarks is for the sole benefit of, and all times shall inure to the benefit of Seller and its Affiliates.
(b) On the day immediately following the last day of the Initial Univar License Period, Purchaser shall rebrand the Company Group name and stop actively marketing the Company Group with the Seller Trademarks. Following the Initial Univar License Period and until August 15, 2020 (the “Univar License Transition Period”), Purchaser shall cause the Company Group to, and the Company Group shall, begin the process of removing all Seller Trademarks from all products and related services and halt all references to each of the Seller Trademarks on any products and related materials.
(c) Beginning on the day immediately following the last day of the Univar License Transition Period, Purchaser and the Company Group shall discontinue the use of Seller Trademarks.
(d) Notwithstanding anything in this Agreement to the contrary, and without limiting the rights otherwise granted in this Section 7.24, Purchaser and the Company Group (i) may, at all times after the Closing, (x) keep records and other historical or archived documents containing or referencing the Seller Trademarks, and (y) refer to the historical fact that the Business was previously conducted under the Seller Trademarks as necessary, but not for marketing purposes; and (ii) have no obligation to alter, remove or otherwise eliminate any use or reference to any Seller Trademark in (x) any materials or documents stored in archival or electronic backup systems or that otherwise are not public-facing or client-facing or (y) in any existing Contract or in any products, materials (including business papers), documents or media (including Software) already distributed.
(e) For a period lasting until the one-year anniversary of the Closing Date, to the extent Purchaser identifies any Intellectual Property owned by Seller or its Affiliates: (i) at Closing, (ii) that was used in the operation of the Business as of the Closing, and (iii) that is not a Seller Trademark or otherwise addressed (directly or indirectly) under the Ancillary Agreements, Seller hereby grants to the Company Group and its Affiliates, on behalf of Seller and its Affiliates, a perpetual, irrevocable, non-exclusive, worldwide, assignable, sublicensable, royalty-free and fully-paid-up license to use such Intellectual Property so identified to Seller solely for use in the operation of the Business (and natural evolutions thereof) and the development, manufacture, sale and distribution of products and services by the Company Group and its Affiliates.
(f) Prior to the Closing, Seller shall, and shall cause its Affiliates (other than the Company Group) to, at Seller’s own expense, transfer all Registered Intellectual Property to a Company Group Entity and reflect the recordation of such transfers with the applicable Governmental Body and shall otherwise correct any chain-of-title defects or other discrepancies between record ownership and beneficial ownership of such Intellectual Property, including by preparing, executing, filing and recording with the applicable Governmental Bodies all instruments and documents necessary to cure such title defects (such actions, collectively, the “Chain of Title Clean-Up”). To the extent any Governmental Body has not recorded or otherwise processed any filings necessary to effect a complete Chain of Title Clean-up, Seller shall, and shall cause its Affiliates to, cooperate with and assist Purchaser and its Affiliates (including the Company Group) to correct the same following the Closing.
(g) For a period of 180 days from and after the Closing Date, Seller and its Affiliates shall ensure that the website (i) https://www.univarsolutions.com/ and any successor website that serves as each Seller’s primary website during such time and (ii) https://www.univarsolutions.com/markets/environmental-sciences/, each contain (x) a statement, to be agreed between the Parties prior to Closing (or as promptly as practicable thereafter), regarding the sale of the Business to Purchaser and (y) a link to the Company Group’s new website(s) (the domain names for which the Purchaser shall provide to the Seller prior to the Closing Date or as promptly as practicable thereafter).
7.25 ISRA Compliance. In connection with the transactions contemplated by this Agreement, the Seller covenants and agrees to comply, at the Seller’s sole cost and expense, with any and all applicable provisions of ISRA (including, without limitation, Section 7:26B 1.10 of ISRA) relating to the transfer of the ownership or operations of an “industrial establishment.” Without limiting the generality of the foregoing, the Seller shall diligently and in good faith, with reasonable diligence and in accordance with all applicable Laws, perform all covenants and agreements required under this Section 7.25, provide the Purchaser with periodic updates with respect to the efforts of the Seller hereunder and provide the Purchaser with copies of (x) any and all material filings, reports, work plans, forms, applications or other documents submitted by or on behalf of the Seller (including any LSRP engaged by the Seller) to the New Jersey Department of Environmental Protection (“NJ DEP”) in connection with ISRA requirements and (y) any and all material correspondence, agreements, certifications or other documents issued by or on behalf of the NJ DEP in connection with the matters described in this Section 7.25. The provisions of this Section 7.25 shall survive the Closing. To the extent that any of the Seller’s ISRA compliance activities occur after the Closing, the Seller shall perform, or cause to be performed, such activities to minimize any interference with Company Group’s operations.
7.26 Shared Contracts.
(a) Seller shall, and shall cause its Subsidiaries to, use their commercially reasonable efforts to, as reasonably requested by Purchaser, (i) cause the counterparty to any Shared Contract listed on Schedule 7.26(a) (each an “Operating Shared Contract” and collectively the “Operating Shared Contracts”) to enter into a new contract with the Company
Group Entities, on terms substantially similar (taking into account the difference in size and bargaining power of Seller and Company Group) to those applicable to the Business in such Operating Shared Contract including with respect to pricing, in order for the Business to receive the applicable benefits under such Operating Shared Contract (each such new contract, a “New Contract”) or (ii) split the respective rights under any Operating Shared Contract such that, effective at or prior to the Closing, (A) the Company Group shall be the assigned beneficiary of the rights under such Operating Shared Contract to the extent such rights relate to the Business, and (B) the relevant Seller Group Member shall remain the beneficiary of the remaining rights under such Operating Shared Contract.
(b) With respect to Shared Contracts (other than Operating Shared Contracts for which a New Contract was obtained or were otherwise assigned or Shared Contracts for services that are addressed in the Transition Services Agreement), for a period of twelve (12) months following the Closing, Seller, Purchaser and their respective Subsidiaries shall use commercially reasonable efforts to cause such counterparty to enter into a New Contract or assign to the Company Group the benefits under such Shared Contract as they relate to the Business and until the earlier of (A) eighteen (18) months after the Closing, (B) such time as a New Contract is executed or such Shared Contract is so assigned, and (C) the expiration of such Shared Contract’s current term to the extent the same is not renewed or extended by Seller (in Seller’s sole discretion), Seller and Purchaser shall use and shall cause their Subsidiaries to use commercially reasonable efforts to secure an alternative arrangement reasonably satisfactory to the parties under which the Business would, in compliance with applicable Law, obtain the benefits (and pay the liabilities that constitute Assumed Liabilities solely with respect thereto) associated with the applicable Shared Contract, but solely to the extent such benefits constitute Business Assets.
7.27 Privilege and Legal Cooperation.
(a) From and after the Closing, Seller, on the one hand, and Purchaser, on the other hand, shall, and shall cause their Subsidiaries to, use commercially reasonable efforts to make available to each other, upon reasonable written request, their (and their Subsidiaries’) respective officers, directors, employees, agents and other Representatives for fact finding, consultation and interviews and as witnesses to the extent that any such Person may reasonably be required in connection with any actions in which the requesting Party may from time to time be involved relating to the conduct of the Business or the Company Group prior to or after the Closing. Access to such Persons shall be granted during normal business hours at a location and in a manner reasonably calculated to minimize disruption to such Persons, Purchaser and its Subsidiaries and the Company Group and its Subsidiaries, as applicable. Each of Purchaser, on the one hand, and Seller, on the other hand, agrees to reimburse the other applicable Party for such Party’s reasonable, documented costs and expenses (internal or out-of-pocket), including attorneys’ fees, but excluding officers’ or employees’ salaries, incurred by the other Party in connection with providing individuals and witnesses pursuant to this Section 7.27; provided that no Party shall have any obligations to cooperate pursuant to this Section 7.27 in connection with a claim against it or its Subsidiary by the other Party or its Subsidiaries.
(b) Except as set forth in Section 10.12, each of Purchaser and Seller acknowledge and agree that their respective rights and obligations to maintain, preserve, assert or waive any attorney-client, business strategy, joint defense, common interest, and/or work product privileges belonging to either such Party with respect to the Business or the Company Group (collectively, “Privileges”) shall be governed by the provisions of this Section 7.27(b). Subject to Section 10.12, after the Closing, Purchaser shall have sole authority to determine whether to assert or waive any Privileges with respect to matters arising solely from, or primarily relating to, the Business or the Company Group.
(c) If Seller or any of its Subsidiaries, or Purchaser or any of its Subsidiaries (including, as of the Closing, the Company Group), (i) receives any subpoena, discovery or other request from any Person that calls for the production or disclosure of information arguably subject to any applicable Privileges (“Privileged Information”) of the other applicable Party or any of their Subsidiaries (including, in the case of Purchaser, as of the Closing, the Company Group or the Business) or (ii) obtains knowledge that any current or former employee of the Company Group or the Business or of any Affiliates of the Company Group or Purchaser or any of its Subsidiaries (including, as of the Closing, the Company Group or the Business) has received any subpoena, discovery or other request from any Person that actually or arguably calls for the production or disclosure of Privileged Information of one or more of the other Parties, or any of their Subsidiaries (including, as of the Closing, the Company Group or the Business), such Party, shall promptly notify the other applicable Party of the existence of the request and shall provide such other applicable Party a reasonable opportunity to review the subpoena, discovery or other request and to assert any rights it may have under this Section 7.27 or otherwise to prevent the production or disclosure of Privileged Information. The access to information being granted pursuant to this Agreement, the agreement to provide witnesses and individuals pursuant to this Section 7.27 and the disclosure to the Parties of Privileged Information, if any, relating to the Business or the Company Group pursuant to this Agreement in connection with the transactions contemplated hereby shall not be asserted by Seller or Purchaser to constitute, or otherwise deemed, a waiver of any Privilege that has been or may be asserted under this Section 7.27 or otherwise. Seller’s transfer of any information to Purchaser in accordance with this Agreement and Seller’s agreement to permit Purchaser to obtain information existing prior to the Closing are made in reliance on the Parties’ respective agreements, as set forth in this Section 7.27 and Section 7.6, to maintain the confidentiality of such information and to take the steps provided herein for the preservation of all Privileges that may belong to or be asserted by Seller or Purchaser, as the case may be.
ARTICLE VIII
CONDITIONS TO CLOSING
8.1 Conditions Precedent to Obligations of Purchaser. The obligation of Purchaser to consummate the transactions contemplated by this Agreement is subject to the fulfillment, at or prior to the Closing, of each of the following conditions (any or all of which may be waived by Purchaser, in writing, in whole or in part to the extent permitted by applicable Law):
(a)
(i) (A) the representations and warranties of Seller set forth in Section 5.8(a)(ii) shall be true and correct in all respects at and as of the date hereof and at and as of the Closing Date as though made on such dates, and (B) the Seller Fundamental Representations shall be true and correct in all respects except with respect to de minimis inaccuracies at and as of the date hereof and at and as of the Closing Date as though made on such dates, except for such representations and warranties of Seller that relate to an earlier date (in which case such representations and warranties shall be true and correct at and as of such earlier date); and
(ii) the other representations and warranties of Seller set forth in ARTICLE V (disregarding all Materiality Qualifications) shall be true and correct at and as of the date hereof and at and as of the Closing Date as though made on such dates, except, in each case, for such other representations and warranties of Seller that relate to an earlier date (in which case such other representations and warranties shall be true and correct at and as of such earlier date), except where the failure of such other representations and warranties of Seller to be true and correct has not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;
(b) Seller shall have complied in all material respects with all provisions of this Agreement required to be complied with by it on or prior to the Closing;
(c) there shall not be in effect any Order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby, and there shall be no proceeding brought by any Governmental Body pending before any court of competent jurisdiction seeking such an Order;
(d) the waiting period applicable to the transactions contemplated by this Agreement under the HSR Act and any other Antitrust Laws shall have expired;
(e) Seller 1 shall have delivered to Purchaser 1 at the Closing an assignment of Target 1 Securities (the “Target 1 Securities Assignment)”) substantially in the form attached hereto as Exhibit D, duly executed by Seller 1 and dated the Closing Date, transferring the Target 1 Securities to Purchaser 1;
(f) Seller 1 and Seller Parent shall have delivered to Purchaser 1 and Purchaser 3, respectively, at the Closing stock certificates representing all of the Target 2 Securities, duly endorsed in property (endoso en propiedad) by Seller Parent and Seller 1 in favor of Purchaser 1 and Purchaser 3, and evidence that the appropriate entry has been made in the Shares Registry Book (Libro de Registro de Acciones) of Target 2 duly signed by the
Secretary of the Board of Directors of Target 2, evidencing that title to the Target 2 Securities, as applicable, has been duly transferred to Purchaser 1 and Purchaser 3;
(g) Seller 1 and Seller Parent shall have delivered or caused to be delivered to Purchaser 1 before or at the Closing, a duly executed copy of the consent by the Board of Directors of Target 2 approving the transfer of the Target 2 Securities to Purchaser 1 and Purchaser 3, respectively, in each case reasonably acceptable to Purchaser;
(h) Seller 2 shall have delivered to Purchaser 2 at the Closing an assignment of Target 3 Securities (the “Target 3 Securities Assignment”, and, together with the Target 1 Securities Assignment the “Securities Assignments”) substantially in the form attached hereto as Exhibit E, duly executed by Seller 2 and dated the Closing Date, transferring the Target 3 Securities to Purchaser 2;
(i) Seller 1 shall have delivered, or caused to be delivered, to Purchaser at the Closing a duly executed and acknowledged affidavit, substantially in the form attached hereto as Exhibit F, stating that the seller (as determined for federal Income Tax purposes) is not a “foreign person” as defined in Section 1445 of the Code;
(j) Seller Parent shall have delivered, or caused to be delivered, to Purchaser at the Closing a duly executed and acknowledged affidavit, substantially in the form attached hereto as Exhibit F, stating that the seller (as determined for federal Income Tax purposes) is not a “foreign person” as defined in Section 1445 of the Code;
(k) Seller shall have delivered, or caused to be delivered, to Purchaser the Lien releases and certifications contemplated by Section 7.21(e), at times provided for in Section 7.21(e);
(l) Seller shall deliver to Purchaser a copy of the Letter of Credit duly executed by Bank of America, N.A.;
(m) Seller shall have delivered to Purchaser a duly executed copy of the Transition Services Agreement;
(n) Seller shall have delivered to Purchaser a duly executed copy of the License Agreement, substantially in the form attached hereto as Exhibit G (the “License Agreement (CropWeb)”);
(o) Seller shall have delivered to Purchaser a duly executed copy of a Lease for each facility identified on Schedule 8.1, in each case reasonably acceptable to Purchaser, provided the annual rent to be included in each such Lease shall be as set forth on Schedule 8.1 (each a “Lease”);
(p) Seller shall have delivered to Purchaser a duly executed copy of a Real Estate License Agreement for each facility identified on Schedule 8.1, substantially in the form attached hereto as Exhibit H (each a “Real Estate License Agreement”);
(q) Seller shall have delivered to Purchaser a duly executed copy of a 3PL Agreement for each facility identified on Schedule 8.1, substantially in the form attached hereto as Exhibit I (each a “3PL Agreement”);
(r) Seller shall have delivered to Purchaser a duly executed copy of a Supply Agreement reasonably acceptable to Purchaser (“Supply Agreement”);
(s) Since the date of this Agreement, there shall not have occurred any Event that, individually or in the aggregate, has resulted in, or would reasonably be expected to result in, a Material Adverse Effect;
(t) Seller shall have delivered to Purchaser at the Closing a certificate of Seller, dated the Closing Date, to the effect that the conditions set forth in Sections 8.1(a), 8.1(b) and 8.1(s) have been satisfied;
(u) unless otherwise requested by Purchaser, Seller shall have delivered to Purchaser at the Closing resignation letters, in form and substance reasonably satisfactory to Purchaser, from all directors, managers and officers of the Company Group;
(v) On or prior to the date that is one Business Day immediately prior to Closing, Seller 1 and Target 1 shall have entered into the U.S. Contribution Agreement and completed the U.S. Business Restructuring in accordance with the U.S. Contribution Agreement;
(w) On or prior to the date that is one Business Day immediately prior to Closing, Seller 2 and Target 3 shall have entered into the Canadian Contribution Agreement and completed the Canadian Business Restructuring in accordance with the Canadian Contribution Agreement;
(x) On or prior to the date that is one Business Day immediately prior to Closing, Seller Parent shall have delivered to Purchaser at the Closing a copy of the Seller Parent IP Assignment duly executed by Seller Parent and Target 1; and
(y) Seller shall have delivered a duly executed copy of the Corporativo Agreement.
8.2 Conditions Precedent to Obligations of Seller. The obligations of Seller to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions (any or all of which may be waived, in writing, by Seller in whole or in part to the extent permitted by applicable Law):
(a) the Purchaser Fundamental Representations shall be true and correct in all material respects at and as of the Closing Date as though made on the Closing Date, and the other representations and warranties of Purchaser set forth in ARTICLE VI (disregarding all Materiality Qualifications) shall be true and correct at and as of the Closing Date as though made on the Closing Date, except for such other representations and warranties that relate to
an earlier date (in which case such other representations and warranties shall be true and correct on and as of such earlier date), except where the failure of such other representations and warranties of Purchaser to be true and correct would not reasonably be expected to prevent or materially interfere with Purchaser’s ability to consummate the transactions contemplated by this Agreement;
(b) Purchaser shall have complied in all material respects with all provisions of this Agreement required to be complied with by it on or prior to the Closing;
(c) there shall not be in effect any Order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby, and there shall be no proceeding brought by any Governmental Body pending before any court of competent jurisdiction seeking such an Order;
(d) the waiting period applicable to the transactions contemplated by this Agreement under the HSR Act and any other Antitrust Laws shall have expired;
(e) Purchaser shall have delivered to Seller at the Closing a certificate of Purchaser, dated the Closing Date, to the effect that the conditions set forth in Sections 8.2(a) and 8.2(b) have been satisfied;
(f) Purchaser shall have delivered to Seller at the Closing the Securities Assignments, duly executed by Purchaser;
(g) Purchaser shall have delivered to Seller a duly executed copy of the Supply Agreement;
(h) Purchaser shall have delivered to Seller a duly executed copy of the Transition Services Agreement;
(i) Purchaser shall have delivered to Seller a duly executed copy of the License Agreement (CropWeb);
(j) Purchaser shall have delivered to Seller a duly executed copy of a Real Estate License Agreement for each of the facilities identified on Schedule 8.1;
(k) Purchaser shall have delivered to Seller a duly executed copy of a 3PL Agreement for each of the facilities identified on Schedule 8.1; and
(l) Purchaser shall have delivered to Seller a duly executed copy of a Lease for each of the facilities identified on Schedule 8.1.
8.3 Frustration of Closing Conditions. Neither Purchaser nor Seller may rely on the failure of any condition set forth in Sections 8.1 or 8.2, as the case may be, to refuse to consummate the transactions contemplated by this Agreement if such failure was caused by such Party’s failure to comply with any provision of this Agreement.
ARTICLE IX
LIMITATIONS ON LIABILITY; WAIVERS
9.1 Waivers of Representations and Warranties. None of the representations or warranties of the Parties contained in this Agreement shall survive the Closing other than as provided in Section 7.13 and Section 7.19. For the avoidance of doubt, all representations and warranties of the Parties contained in this Agreement (other than the Seller Fundamental Representations, the Purchaser Fundamental Representations and the representations and warranties set forth in Sections 5.9(a)(x), 5.9(c), 5.9(d), 5.9(e), 5.15, 5.18 and 5.21) shall terminate at Closing. Other than as provided in Section 7.13 and Section 7.19, after the Closing:
(a) there shall be no liability or obligation on the part of any Party (including such Party’s incorporator, member, stockholder, partner, Affiliates or Representatives) hereto to any other Party for any breach of any representation or warranty of the Parties contained in this Agreement;
(b) no Party shall bring any claim of any nature against any other Party (including such Party’s incorporator, member, stockholder, partner, Affiliates or Representatives) for any breach of any representation or warranty of the Parties contained in this Agreement; and
(c) each Party hereby irrevocably releases and waives all claims (including any claims for contribution) for any breach of any representation or warranty of the Parties contained in this Agreement.
Notwithstanding anything in this Agreement to the contrary, in no event shall anything contained herein (including Section 7.19) limit any claim for intentional fraud.
9.2 Other Limitations and Waivers.
(a) Seller shall be deemed not to have breached any representation or warranty contained in ARTICLE V as a consequence of the existence of any fact, circumstance or event that is disclosed on any Schedule to this Agreement, whether or not such Schedule includes a cross-reference to the specific Section containing such representation or warranty or the specific Section containing such representation or warranty includes a reference to such Schedule, so long as the applicability of such disclosure to such representation or warranty is readily apparent on the face of the disclosure.
(b) Notwithstanding anything contained in this Agreement to the contrary, Purchaser, on behalf of itself and its Affiliates, acknowledges and agrees that, except for the representations and warranties contained in ARTICLE V and any certificate provided hereunder and the other Ancillary Agreements, neither Seller nor any other Person is making any express or implied representation or warranty with respect to Seller, the Company Group, the Business or the transactions contemplated by this Agreement. Seller disclaims any other representations or warranties, whether made by Seller, the Company Group, any Affiliate of Seller or the Company Group or any of their respective Representatives and Purchaser
disclaims that it is relying upon or has relied upon any such other representations or warranties that may have been made by any Person. Purchaser, on behalf of itself and its Affiliates, acknowledges that it has conducted its own independent investigation of the Company Group and its properties and assets and the Business, and in making its determination to proceed with the transactions contemplated by this Agreement, Purchaser has relied on the results of Purchaser’s independent investigation and the representations and warranties set forth in this Agreement and the Ancillary Agreements.
9.3 No Right of Set-off. No Party shall have any right to set-off, net or offset any amounts owing to such Party or its Affiliates under this Agreement or any Ancillary Agreement against any payments to be made or owed by such Party or its Affiliates pursuant to this Agreement, the Ancillary Agreements or any other agreement among the Parties.
9.4 Waiver of Damages. Notwithstanding anything to the contrary contained in this Agreement or provided for under any applicable Law, neither Party shall, in any event, be liable to any other Person, either in contract or in tort, for any punitive damages or damages of the type not recoverable under Delaware law as of the Closing Date, in each case except to the extent incurred as a result of a third party claim against an Indemnified Party. Nothing in this ARTICLE IX shall reduce or alter the type of damages available to Purchaser under the R&W Policy.
ARTICLE X
MISCELLANEOUS
10.1 Payment of Transfer Taxes. All transfer, sales, use, intangible, recordation, registration, documentary, stamp or similar Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest, and for the avoidance of doubt, not including any taxes based upon or calculated by reference to income or gain, which shall be borne solely by the Seller), of any nature whatsoever (collectively, the “Transfer Taxes”), applicable to, or resulting from, the transactions contemplated by this Agreement shall be borne equally by Purchaser and the Seller provided that, any Transfer Taxes applicable to, or resulting from, the Restructuring shall be borne solely by the Seller. Notwithstanding the foregoing, the Seller shall not be required to bear GST/HST payable by Target 3 as a result of the Restructuring provided that such GST/HST liabilities are fully offset by GST/HST input tax credits available to Target 3 in connection with the payment of such tax
10.2 Expenses. Except as otherwise provided in this Agreement, each of Seller and Purchaser shall bear its own expenses incurred in connection with the negotiation and execution of this Agreement and each other agreement and document contemplated by this Agreement and the consummation of the transactions contemplated hereby and thereby.
10.3 Forum; Consent to Service of Process; Waiver of Jury Trial.
(a) Seller and Purchaser agree that the appropriate, exclusive and convenient forum (the “Forum”) for any disputes (whether at law or in equity and whether in tort, contract or otherwise) arising out of or related to this Agreement or the transactions
contemplated hereby shall be in the Court of Chancery in the City of Wilmington, New Castle County, Delaware, except where such court lacks subject matter jurisdiction. In such event, the Forum shall be in the federal district court sitting in Wilmington, Delaware or, in the event such federal district court lacks subject matter jurisdiction, then in the Superior Court in the City of Wilmington, New Castle County, Delaware. Each of Purchaser and Seller irrevocably submits to the jurisdiction of such courts, and any appellate court from any thereof, solely in respect of any disputes arising out of or related to this Agreement or the transactions contemplated hereby. Purchaser and Seller further agree that the Parties shall not bring a Legal Proceeding with respect to any disputes arising out of or related to this Agreement or the transactions contemplated hereby in any court or jurisdiction other than the above specified courts; provided, however, that the foregoing shall not limit the rights of the Parties to obtain execution of a judgment in any other jurisdiction. Purchaser and Seller further agree, to the extent permitted by Law, that a final nonappealable Order against a Party in any Legal Proceeding contemplated above shall be conclusive and may be enforced in any other jurisdiction within or outside the United States by suit on the judgment, with a certified or exemplified copy of such Order being conclusive evidence of the fact and amount of such judgment. Notwithstanding the foregoing, Seller, the Company Group and the Purchaser and their controlled Affiliates (A) agrees that it will not bring or support any Legal Proceeding against the Debt Financing Source Related Parties in any way relating to this Agreement, the Debt Financing or any of the transactions contemplated by this Agreement, including any dispute arising out of or relating in any way to the Debt Commitment Letter, the definitive documentation for the Debt Financing, the Debt Financing or the performance thereof or the transactions contemplated thereby, in any forum other than exclusively in the Supreme Court of the State of New York, County of New York, or, if under applicable Law exclusive jurisdiction is vested in the federal courts, the U.S. District Court for the Southern District of New York (and appellate courts thereof), (B) submits for itself and its property with respect to any such action to the exclusive jurisdiction of such courts, (C) agrees that service of process, summons, notice or document by registered mail addressed to it at its address provided in this Agreement shall be effective service of process against it for any such action brought in any such court, (D) waives and hereby irrevocably waives, to the fullest extent permitted by Law, any objection which it may now or hereafter have to the laying of venue of, and the defense of an inconvenient forum to the maintenance of, any such action in any such court and (E) agrees that a final judgment in any such action shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
(b) To the extent that a Party has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, such Party hereby irrevocably:
(i) waives such immunity in respect of its obligations with respect to this Agreement; and
(ii) submits to the personal jurisdiction of each court described in Section 10.3(a).
(c) Each of Seller, Company Group and Purchaser hereby consents to process being served on such Party in any Legal Proceeding contemplated by this Section 10.3 by delivery of a copy thereof in accordance with the provisions of Section 10.6.
(d) THE PARTIES HEREBY IRREVOCABLY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY DISPUTES (whether at law or IN equity and whether in tort, contract or otherwise) BETWEEN THE PARTIES ARISING OUT OF ALL RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR INVOLVING DEBT FINANCING SOURCE RELATED PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE DEBT FINANCING OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, INCLUDING ANY DISPUTE ARISING OUT OF OR RELATING IN ANY WAY TO THE DEBT COMMITMENT LETTER, THE DEFINITIVE DOCUMENTATION FOR THE DEBT FINANCING, OR THE PERFORMANCE THEREOF.
10.4 Entire Agreement; Amendments and Waivers. This Agreement (including the Exhibits and Schedules hereto), any Ancillary Agreements hereto and the Confidentiality Agreement represent the entire understanding and agreement between the Parties with respect to the subject matter hereof and thereof, and supersede all prior agreements and undertakings, both written and oral (including, in the case of any conflict, the Contribution Agreements). This Agreement can be supplemented or amended, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the Party against whom enforcement of any such supplement, amendment, or waiver is sought; provided, that the Xerox Provisions (and any definitions used in such provisions or other provisions of this Agreement to the extent an amendment, supplement, waiver or other modification of such definitions or other provisions would modify the substance of such Xerox Provisions) shall not be amended, supplemented, waived or otherwise modified in any manner that impacts or is otherwise adverse in any respect to the Debt Financing Sources without the prior written consent of the Debt Financing Sources. No action taken pursuant to this Agreement, including any investigation by or on behalf of a Party, shall be deemed to constitute a waiver by the Party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any Party of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of a Party to exercise, and no delay by a Party in exercising, any right, power or remedy hereunder shall operate as a waiver thereof by such Party, nor shall any single or partial exercise of such right, power or remedy by a Party preclude any other or further exercise thereof or the exercise of any other right, power or remedy by such Party.
10.5 Governing Law. The provisions of this Agreement, all of the agreements and documents delivered pursuant hereto, their execution, performance or nonperformance, interpretation, construction and all matters based upon, arising out of or related to this Agreement or the negotiation, execution or performance of this Agreement (including any claim or cause of action (whether at law or in equity and whether in tort, contract or otherwise) based upon, arising out of or related to any representation or warranty contained in or made in
connection with this Agreement or as an inducement to enter into this Agreement) shall be governed by the Laws, both procedural and substantive, of the State of Delaware without regard to its conflict of laws provisions that if applied might require the application of the Laws of another jurisdiction. Notwithstanding anything herein to the contrary, except to the extent the terms of the Debt Commitment Letter expressly provides for the application of the Laws of the State of Delaware, all claims or causes of action (whether in contract or tort or statute, whether at law or in equity) against any Debt Financing Source Related Party arising out of or relating to this Agreement, the Debt Commitment Letter, the definitive documentation relating to the Debt Financing or the transactions (including Debt Financing) contemplated hereby or thereby will 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 rules or provisions (whether of the State of New York or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than New York.
10.6 Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed given:
(a) when delivered personally by hand (with written confirmation of receipt);
(b) one Business Day after the day sent by overnight courier (with written confirmation of receipt); or
(c) when sent by electronic mail transmission (with receipt confirmed);
in each case to the following physical and electronic mail addresses (or to such other physical and electronic mail address as a Party may have specified by notice given to the other Party pursuant to this provision):
If to Seller, to:
Univar Solutions Inc.
3075 Highland Pkwy Ste 200
Downers Grove IL 60515
Attn: David Lim
Email: David.Lim@UnivarSolutions.com
with copies to (which shall not constitute notice):
Univar Solutions Inc.
3075 Highland Pkwy Ste 200
Downers Grove IL 60515
Attn: Julie Halperin
Email: julie.halperin@UnivarSolutions.com
and
Stinson LLP
7700 Forsyth Boulevard
St. Louis, Missouri 63105
Attn: Michael Campbell
Jack Bowling
Email: michael.campbell@stinson.com
jack.bowling@stinson.com
If to Purchaser, to:
ENS Holdings III Corp.
c/o AEA Investors SBF LP
666 Fifth Avenue
36th Floor
New York, NY 10103
Attn: General Counsel
Email: bburns@aeainvestors.com
with a copy to (which shall not constitute notice):
Fried, Frank, Harris, Shriver & Jacobson LLP
One New York Plaza
Attn: Steven Steinman and Maxwell Yim
Email: steven.steinman@friedfrank.com; maxwell.yim@friedfrank.com
10.7 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to either Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to supplement or amend 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 are consummated as originally contemplated to the greatest extent possible.
10.8 Binding Effect; No Third Party Beneficiaries; Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties and their respective permitted successors and assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any Person other than the Parties, except as provided in Section 7.7 and 10.12; provided, that the Debt Financing Source Related Parties are express third party beneficiaries of the Xerox Provisions. No assignment of this Agreement or of any rights or obligations hereunder may be made by either Seller or Purchaser, directly or indirectly (by operation of law or otherwise), without the prior written consent of the other Party and any
attempted assignment without the required consents shall be void; provided that Purchaser may assign its rights (but not its obligations) under this Agreement and any Ancillary Agreement to any Debt Financing Source or any Affiliate thereof as collateral security in connection with the Debt Financing. No assignment of any obligations hereunder shall relieve the Parties of any such obligations. Upon any such permitted assignment, the references in this Agreement to Purchaser shall also apply to any such assignee unless the context otherwise requires.
10.9 Specific Performance. Subject to Section 4.4 and this Section 10.9, each Party acknowledges and agrees that the subject matter of this Agreement is unique, that the other Party would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached, and that the remedies at Law would not be adequate to compensate any Party. Accordingly, each Party agrees that, subject to Section 4.4 and this Section 10.9, the other Party will be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions of this Agreement (including to enforce the obligations of the Parties to consummate the transactions contemplated by this Agreement pursuant to this Agreement) in addition to any other remedy to which they may be entitled (without any requirement that any Party provide any bond or other security). Each Party waives any defense that a remedy at Law is adequate and any requirement to post bond or provide similar security in connection with Legal Proceedings instituted for injunctive relief or specific performance of this Agreement. Notwithstanding anything in this Agreement to the contrary, the Parties hereto agree that Seller shall be entitled to obtain specific performance to enforce specifically the Purchaser’s obligation to cause the Equity Financing to be funded and to consummate the transactions contemplated hereby if, and only in the event that, (A) all conditions in Section 8.1 (Conditions Precedent to Obligations of Purchaser) have been satisfied (other than those conditions that by their nature are to be satisfied at the Closing but which conditions are capable of being satisfied at the Closing) and Purchaser fails to complete the Closing when required pursuant to this Agreement, (B) the Debt Financing has been funded or will be funded at the Closing, and (C) Seller has irrevocably confirmed in writing to Purchaser that when specific performance is granted and the Equity Financing and Debt Financing are funded, Seller will take such actions within its control to cause the Closing to occur. While Seller and Purchaser may pursue both a grant of specific performance to the extent permitted by this Section 10.9 and the payment of the Termination Fee as provided by Section 4.4(a), under no circumstances shall Seller be permitted or entitled to receive both such grant of specific performance and payment of the Termination Fee.
10.10 Non-Recourse. Notwithstanding anything to the contrary contained herein, this Agreement may only be enforced against, and any claims or causes of action based upon, arising out of or related to this Agreement, or the negotiation, execution or performance of this Agreement, may only be made against, the Parties (and the Company Group with respect to Section 7.19). Other than the Parties, no past, present or future incorporator, member, stockholder, partner, Affiliate or Representative of Seller or Purchaser, or any of their respective Affiliates or Representatives (collectively, the “Non-Contract Persons”), shall have any liability or obligation for any Liabilities (whether in contract or in tort, in law or in equity, or granted by statute) of Seller or Purchaser, as applicable, for any claims, causes of action, obligations, or
liabilities arising under, out of, in connection with, or related in any manner to this Agreement or the Ancillary Agreements or based on, in respect of, or by reason of this Agreement or the Ancillary Agreements or their negotiation, execution, performance, or breach; and, to the maximum extent permitted by law, each Party hereby waives and releases all such liabilities, claims, causes of action, and obligations against any such other Non-Contract Person; provided, that, for the avoidance of doubt, in no event shall the foregoing be deemed to limit the liability or obligation of any Non-Contract Person under any Ancillary Agreement to which such Non-Contract Person is a party or any other Surviving Arrangement to which such Non-Contract Person is a party. In no event will Seller, its Affiliates and each of their (and their respective Affiliates’) stockholders, partners, members, officers, directors, employees, controlling persons, agents and representatives seek to enforce this Agreement against, make any claims for breach of this Agreement against, or seek to recover monetary damages from any Debt Financing Source Related Party, or seek to enforce the commitments against, make any claims for breach of the commitments contained in the Debt Commitment Letter against, or seek to recover monetary damages from, or otherwise bring any claim, cause of action, action, cross-claim or third-party claim of any kind or description whether in law or in equity, whether in tort, contract or otherwise, against, any Debt Financing Source Related Party for any reason, in each case to the extent based upon, arising out of or related to this Agreement, the Debt Commitment Letter, the definitive documentation for the Debt Financing, the Debt Financing or the transactions contemplated hereby or thereby. Seller, its Affiliates and each of their (and their respective Affiliates’) stockholders, partners, members, officers, directors, employees, controlling persons, agents and representatives hereby waives any and all claims and causes of action, whether in law or equity, whether in tort, contract or otherwise, against the Debt Financing Source Related Parties that may be based upon, arise out of or relate to this Agreement, the Debt Commitment Letter, the definitive documentation for the Debt Financing, the Debt Financing or the transactions contemplated hereby or thereby; provided, that nothing in this Section 10.10 will limit Purchaser’s rights against the Debt Financing Sources under the Debt Commitment Letter and the definitive documentation for the Debt Financing. No Debt Financing Source Related Party shall be subject to any special, consequential, punitive or indirect damages or damages of a tortious nature.
10.11 Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together constitute one and the same instrument. Signatures transmitted by facsimile or electronic delivery in .pdf format will be deemed originals for purposes of this Agreement.
10.12 Waiver of Conflicts; Transaction Privilege.
(a) Purchaser hereby acknowledges and agrees that Stinson LLP and in house counsel of Seller and Univar Solutions Inc. (the “Seller Legal Counsel”) has represented Seller and certain of its Affiliates (including the Company Group) in connection with various matters, including the negotiation, preparation, execution and delivery of this Agreement, and that Seller and its Affiliates (other than the Company Group) (each a “Seller Group Member” and collectively, the “Seller Group Members”) have a reasonable expectation that, after the Closing, the Seller Legal Counsel will represent them in connection with various
matters, including any claim or Legal Proceeding involving any Seller Group Member, on the one hand, and Purchaser or any of its Affiliates (each a “Purchaser Group Member” and collectively the “Purchaser Group Members”), on the other hand, arising out of or related to this Agreement or the transactions contemplated hereby.
(b) Purchaser, on its own behalf and on behalf of the other Purchaser Group Members, hereby expressly waives and agrees not to assert any conflict of interest that may arise or be deemed to arise under applicable Law or standard of professional responsibility if, after the Closing, the Seller Legal Counsel represent the Seller Group Members or any of them in connection with any Legal Proceeding arising out of or related to this Agreement or the transactions contemplated hereby.
(c) In addition, each of the Parties irrevocably acknowledges and agrees that, from and after the Closing, any attorney-client privilege arising from communications relating to this Agreement prior to the Closing, including the negotiation, preparation, execution and delivery of this Agreement, between any one or more Representatives of the Company Group, on the one hand, and the Seller Legal Counsel, on the other hand, shall be excluded from the property, rights, privileges, powers, franchises and other interests held by the Company Group under applicable Law, that such attorney-client privilege shall be deemed held solely by Seller, and that no Purchaser Group Member shall have any right to assert, waive or otherwise alter any such attorney-client privilege at any time after the Closing. Accordingly, the Company Group and the Purchaser Group Members shall not have access to any such communications or to the files of the Seller Legal Counsel relating to such engagement. Further, to the extent that files of the Seller Legal Counsel in respect of such engagement constitute property of the client, only Seller for the benefit and on behalf of the Seller Group Members (and not the Purchaser Group Members) shall hold such property rights and the Seller Legal Counsel shall have no duty whatsoever to reveal or disclose any such attorney-client communications or files to the Purchaser Group Members by reason of any attorney-client relationship between the Seller Legal Counsel and the Company Group. In the event that any claim or Legal Proceeding arises after the Closing between the Purchaser Group Members, on the one hand, and a Person other than the Seller Group Members, on the other hand, any Purchaser Group Member may assert any applicable privilege held by Seller to prevent the disclosure of any such information to any third party.
(d) This Section 10.12 is for the benefit of the Seller Group Members and the Seller Legal Counsel and such Persons are intended third party beneficiaries of this Section 10.12. This Section 10.12 shall be irrevocable, and no term of this Section 10.12 may be amended or waived without the prior written consent of Seller (which may be withheld for any reason).
[The Remainder of This Page Is Intentionally Left Blank.]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first written above.
ENS HOLDINGS III CORP.
By: /s/ Benjamin Fischer
Name: Benjamin Fischer
Title: Vice President
ENS CANADA HOLDINGS CORP.
By: /s/ Benjamin Fischer
Name: Benjamin Fischer
Title: Vice President
ENS HOLDINGS II CORP.
By: /s/ Benjamin Fischer
Name: Benjamin Fischer
Title: Vice President
[Signature Page to Amended and Restated Securities Purchase Agreement]
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first written above.
UNIVAR SOLUTIONS INC., a Delaware corporation
By: /s/ Kerri Howard
Name: Kerri Howard
Title: Treasurer
UNIVAR SOLUTIONS USA INC., a Washington corporation
By: /s/ Kerri Howard
Name: Kerri Howard
Title: Treasurer
UNIVAR CANADA LTD., an Alberta limited corporation
By: /s/ Kerri Howard
Name: Kerri Howard
Title: Treasurer
[Signature Page to Amended and Restated Securities Purchase Agreement]
ANNEX A
DEFINITIONS
1. Certain Definitions: For purposes of the Agreement, the following terms shall have the meanings set forth as follows:
(a) “Adjusted Purchase Price” means an amount equal to:
(i) the Purchase Price, plus
(ii) Estimated Cash, minus
(iii) Estimated Indebtedness, minus
(iv) Estimated Seller Transaction Expenses, plus
(v) the Estimated Working Capital Adjustment Amount, minus
(vi) the Holdco Note Amount, minus
(vii) the Lease Deduct Amount.
(b) “Adjusted Reference Working Capital” means Reference Working Capital minus $3,000,000.
(c) “Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and 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 such Person, whether through ownership of voting securities, by Contract, by the ability to elect more than 50% of the members of the board of directors or other governing body of such Person, or otherwise; provided that in no event shall any Sponsor portfolio company be deemed an Affiliate of Purchaser.
(d) “Affiliated Group” means any affiliated group within the meaning of Section 1504 of the Code and any comparable or analogous group under state, local or foreign Tax Law.
(e) “Agreed Accounting Principles” means the accounting principles set forth on Schedule 1.1(e).
(f) “Ancillary Agreements” means the Transition Services Agreement, the License Agreement (CropWeb), Seller Parent IP Assignment, Leases, Real Estate License Agreements, 3PL Agreements, Supply Agreement, the Contribution Agreements, the Securities
Assignments, the Corporativo Agreement, and the other documents, agreements, exhibits, schedules or certificates being executed and delivered in connection with this Agreement and the consummation of the transactions contemplated herein.
(g) “Assumed Benefit Plan” means any Business Benefit Plan (or portion thereof) (i) that is sponsored or maintained by any Company Group Entity, (ii) for which Liabilities and assets will transfer to Purchaser under applicable Law as a result of the transactions contemplated by this Agreement, or (iii) that Purchaser has explicitly agreed to assume pursuant to this Agreement, and, in each case, which is identified as an Assumed Benefit Plan on Schedule 5.14(a).
(h) “Assumed Liabilities” means all of the following Liabilities to the extent resulting from or arising out of the Business, whether accrued, incurred or arising prior to, on or after the Closing (provided that Assumed Liabilities shall not include any Liabilities in respect of Excluded Liabilities):
i. All Liabilities relating to, resulting from or arising out of the Operating Shared Contracts to the extent relating to the Business or the Business Assets; provided that Assumed Liabilities shall not include the Liabilities in respect of any Operating Shared Contracts for which the Company Group does not receive the corresponding rights and benefits (directly or indirectly) under such Operating Shared Contracts relating to the Business or the Business Assets;
ii. Except as set forth in Section 7.10(h), all Liabilities in respect of any Business Employee;
iii. All Liabilities to suppliers (other than accounts payable) and customers under Contracts with Seller or Affiliates that constitute Business Assets;
iv. All accounts payable and all other Liabilities of the Business, in each case to the extent included as current liabilities in the calculation of Final Working Capital Adjustment Amount;
v. All Liabilities arising under Environmental Laws to the extent, resulting from or arising out of the ownership, operation, use or conduct of the Business or the Business Assets;
vi. All Liabilities arising under Assumed Benefit Plans;
vii. All Liabilities for which Purchaser or any of its Affiliates expressly has responsibility, or that are assumed by, retained by or agreed to be performed by Purchaser or its Affiliates, pursuant to the terms of this Agreement or any Ancillary Agreement; and
viii. All Liabilities to the extent relating to, resulting from or arising out of the ownership, operation, use or conduct of the Business or the Business Assets (other than (i) Liabilities that are more specifically addressed above, and (ii) obligations of the Seller Group Members under the Surviving Arrangements and this Agreement).
(i) “Business” means the business of marketing, offering, selling, providing and distributing pesticide and pesticide equipment to the structural pest control, public health, industrial vegetation management, turf and ornamental, and animal health markets and the U.S. non-row crop portion of the agricultural industry (and ancillary services related thereto), as conducted by Seller and its Affiliates for the past two (2) years and excluding the marketing, offering, selling, providing or distributing products containing glyphosate (the “Glyphosate Business”). For the avoidance of doubt, “Business” does not include the Seller’s distribution business to the agricultural industry market as conducted by Seller for the past two (2) years (which, for the avoidance of doubt, does not involve the distribution of pesticide or pesticide equipment in the U.S.).
(j) “Business Assets” means the assets, properties and other rights or claims of Seller and its Affiliates primarily used in, primarily held for use in, or primarily arising out of the Business (other than the Specified Excluded Assets), including the Contribution Agreement Assets.
(k) “Business Benefit Plan” means any “employee benefit plan” within the meaning of Section 3(3) of ERISA (whether or not subject to ERISA), any employment, retention, profit- sharing, bonus, stock option, stock appreciation right, stock purchase, restricted stock, phantom equity, and other equity- or equity-based, incentive, deferred compensation, retirement, severance, termination, change-in-control, transaction, defined benefit, pension, savings, retirement, vacation, group or individual health, dental, medical and life insurance, fringe benefit or other benefit or compensation plan, program, policy, agreement or arrangement sponsored, maintained or contributed to, or required to be contributed to, by Seller Parent or any of its Subsidiaries, whether formal or informal, written or unwritten, for the benefit of any current or former Business Employee, in which any current or former Business Employee participates or under which any current or former Business Employee has any present or future rights to benefits, or with respect to which Seller Parent or any of its Subsidiaries has any Liability relating to any current or former Business Employees, other than plans established pursuant to statute.
(l) “Business Day” means any day of the year on which national banking institutions in New York, New York are open to the public for conducting business and are not required or authorized to close.
(m) “Cash Amount” means the sum of all of the Company Group’s cash and cash equivalents, on a consolidated basis, determined in accordance with GAAP. For the avoidance of doubt, “Cash Amount” shall, without duplication for items in the Working Capital Adjustment Amount, (A) be calculated net of issued but uncleared checks and drafts, and (B) include uncleared checks and drafts received, and credit card receivables in transit, for the account of the Business. For the avoidance of doubt, “Cash Amount” shall not include any amounts paid by Purchaser in connection with the Closing.
(n) “Code” means the Internal Revenue Code of 1986.
(o) “Company Group” means, collectively, Target 1, Target 2 and Target 3.
(p) “Company Guarantees” means all guarantees, letters of credit, bonds, sureties and other credit support or assurances provided by Seller or its Affiliates in support of any obligations of any Company Group Entity, including those listed on Schedule 5.19(a).
(q) “Contract” means any legally binding contract, indenture, note, bond, lease, commitment, understanding, undertaking or other agreement or arrangement.
(r) “Contribution Agreement Assets” means the assets described on the schedules to the Contribution Agreements
(s) “Corporativo Agreement” means a services agreement between Target 2 and Univar Corporativo for the provision of services by the Corporativo Employees after Closing, in form and substance reasonably acceptable to Purchaser.
(t) “Corporativo Employees” means the Business Employees employed by Univar Corporativo.
(u) “Debt Financing Source Related Party” means any Debt Financing Source or any former, current or future Affiliate of any Debt Financing Source or any former, current or future director, officer, employee, agent, advisor, general or limited partner, manager, member, controlling person, representative, stockholder or Affiliate, successor or assignee of any of the foregoing.
(v) “Debt Financing Sources” means the agents, arrangers, lenders and other persons or entities that have committed to provide or arrange or have otherwise entered into agreements in connection with all or any part of the Debt Financing or any other debt financing in connection with the transactions contemplated hereby, including the parties to any joinder agreements, indentures or credit agreements entered into in connection therewith, including the parties named in the Debt Commitment Letter (but excluding in each case the Purchaser and the Company Group).
(w) “Effective Time” means 11:59 p.m. CT on the Closing Date.
(x) “Environmental Law” means any Law or legally binding guidance documents in effect on the date hereof regarding pollution, contamination, or pertaining to the protection of natural resources, the environment or public or employee health and safety, civil protection, facility operation and any matters relating to emissions, discharges, disseminations, Releases or threatened Releases, of Hazardous Materials into the air, surface water, groundwater, soil, land surface or subsurface, buildings, 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, including the Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C. Section 11001 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et seq.), the Mexican General Law for the Prevention and Integral Management of Waste (Ley General para la Prevención y Gestión Integral de los Residuos) and its regulations and the Federal Environmental Liability Law (Ley Federal de Responsabilidad Ambiental), the Occupational Safety and Health Act (29 U.S.C. Section 651 et seq.) and any such applicable state, provincial or local equivalents.
(y) “Equity Interests” means with respect to any Person, (i) equity interests, or voting interests of such Person, (ii) interests of such Person convertible into or exchangeable for equity interests, or voting interests of such Person, or (iii) options, warrants, or other rights to acquire from such Person, or other obligations of such Person (contingent or otherwise) to issue, deliver, or sell, any equity interests, or voting interests or interests convertible into or exchangeable for equity interests, or voting interests of such Person (or any phantom or similar interest therein).
(z) “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
(aa) “Event” means any fact, circumstance, occurrence, development, condition, matter, change, event or effect.
(bb) “Excluded Assets” means all the assets and properties that are owned, leased or licensed by the Seller or any of its Subsidiaries (other than the Business Assets), including the Specified Excluded Assets.
(cc) “Excluded Business” means the businesses and operations of Seller and its Affiliates (other than the Business), including the Glyphosate Business, prior to, on or after the Closing.
(dd) “Excluded Effect” means an effect resulting from any one or more of the following:
(i) any change, after the date of this Agreement, in the United States, Canada, Mexico, or foreign economies or securities or financial markets in general;
(ii) any change, after the date of this Agreement, that generally affects any industry in which the Company Group operates;
(iii) any change arising in connection with any natural disasters, hostilities, acts of war, sabotage, terrorism or military actions or any escalation or material worsening of any such natural disasters, hostilities, acts of war, sabotage, terrorism or military actions existing or underway as of the date hereof;
(iv) any action taken by Purchaser or its Affiliates with respect to the transactions contemplated hereby or with respect to the Company Group;
(v) any changes, after the date of this Agreement, in applicable Laws or accounting rules;
(vi) the failure of the Company Group or the Business to meet any forecasts or internal projections (provided that the exclusion in this clause shall not prevent or otherwise affect a determination that any change, effect, circumstance or development underlying such failure or decline or change (if not otherwise falling within any of the exclusions pursuant to the other clauses of this definition) has resulted in, or contributed to, a Material Adverse Effect); or
(vii) the public announcement of this Agreement (provided that no effect shall be given to this clause (vii) for purposes of any representation or warranty which expressly addresses the effect of the execution and delivery of, or the performance of the obligations under, this Agreement or consummation of the transactions contemplated hereby or for purposes of the condition set forth in Section 8.1(a) to the extent such condition relates to such representation or warranties);
(except, with respect to subclauses (i), (ii), (iii) and (v), to the extent such effect is disproportionately adverse to the Company Group or the Business as compared to other participants in the industries in which the Business operates).
(ee) “Excluded Liabilities” means all of the following Liabilities, whether accrued, incurred or arising prior to, on or after the Closing:
i. All Liabilities to the extent relating to, resulting from, or arising out of the Shared Contracts to the extent relating to the Excluded Business or the Excluded Assets;
ii. All Liabilities in respect of any employees of Seller or its Affiliates (other than Business Employees), any collective bargaining representative of any such employees or any multiemployer plan to which Seller or its Affiliates contributes on behalf of such employees;
iii. All Liabilities to the extent, resulting from or arising out of the ownership, operation, use or conduct of the Excluded Business or the Excluded Assets (but, for the avoidance of doubt, excluding the obligations of the Company Group under the Surviving Arrangements);
iv. All Liabilities with respect to, or claims for benefits under, any Business Benefit Plan subject to Title IV of ERISA that is not an Assumed Benefit Plan;
v. All Liabilities arising from the arrangement between Target 2 and Univar Corporativo, including the Intercompany Agreement, dated January 1, 2016 between Target 2 and Univar Corporativo, as amended by 2017 Addendum (and the services rendered thereunder), other than the Liabilities arising from the services to be provided by Univar Corporativo to Target 2 following Closing;
vi. All Liabilities arising under Environmental Laws to the extent relating to, resulting from or arising out of, (i) the Excluded Assets or the Excluded Business, (ii) Hazardous Materials at any real property no longer owned, leased or operated by the Business, (iii) any matters disclosed on Schedule 5.17(a) or Schedule 5.18(a) or (iv) any other matters first occurring or existing on or prior to the Closing to the extent within the Knowledge of Seller;
vii. All Liabilities resulting from or arising out of Pre-Closing Occurrences and of the type reflected as Medical Claims, Worker’s Compensation Claims or IBNR in the financial records of Seller;
viii. All Liabilities (excluding the Assumed Liabilities assumed by the Company Group pursuant to the terms of the Contribution Agreements) relating to, resulting from or arising out of the Restructuring and the transactions contemplated thereby; and
ix. All Liabilities for which Seller or any of its Affiliates (other than the Company Group) expressly has
responsibility, or that are assumed by, retained by or agreed to be performed by Seller or its Affiliates (other than the Company Group), pursuant to the terms of this Agreement or any Ancillary Agreement.
(ff) “Excluded Real Property” means the real property described on Schedule 8.1.
(gg) “Facilities” means the Company Properties and any buildings, facilities, located on, in, under, or above such real property.
(hh) “Final Adjusted Purchase Price” means an amount equal to (which, notwithstanding anything herein to the contrary, shall conclusively constitute the adjusted purchase price):
(i) the Purchase Price, plus
(ii) Final Cash, minus
(iii) Final Indebtedness, minus
(iv) Final Seller Transaction Expenses, plus
(v) the Final Working Capital Adjustment Amount, minus
(vi) the Holdco Note Amount, minus
(vii) the Lease Deduct Amount.
(ii) “Final Determination” means a determination made by a taxing authority or other governmental authority (including pursuant to a settlement) or court of competent jurisdiction where all rights to object to or appeal from the determination (including any right to obtain relief under a competent authority or similar process) have been exhausted or have expired.
(jj) “Glyphosate Business” has the meaning set forth in the definition of “Business”.
(kk) “GAAP” means generally accepted accounting principles in the United States, as in effect on the date hereof; provided that when used in respect of any Financial Record, GAAP shall be as in effect on the date of the relevant Financial Record.
(ll) “Governmental Body” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether foreign, federal, state or local, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private).
(mm) “Government Official” means any officer or employee of a foreign Governmental Body (including any entities that are owned or controlled by a Governmental Body), any non-U.S. political party and officials and employees thereof, any candidates for non-U.S. political offices, any officer or employee of a public international organization (as defined by the FCPA), or any Person acting in an official capacity for or on behalf of any such Governmental Body, or for or on behalf of any of the foregoing.
(nn) “Group Tax” means any U.S. federal, state or local, or non-U.S. Tax computed or imposed on an Affiliated Group basis for an Affiliated Group that includes (i) any Company Group Entity together with (ii) Seller or any Subsidiary of Seller that is not a Company Group Entity, including any interest, penalty, or addition thereto, whether disputed or not.
(oo) “Group Tax Return” means any Tax Return relating to Group Taxes.
(pp) “Hazardous Material” means any substance, material or waste that is regulated, classified, or otherwise characterized under or pursuant to any Environmental Law as “hazardous,” “toxic,” “pollutant,” “contaminant,” “radioactive,” or words of similar meaning or effect, or that could give rise to liability under Environmental Law, including petroleum and its by-products, asbestos, polychlorinated biphenyls, per- and polyfluoroalkyl substances, infectious, carcinogenic, mutagenic or etiologic agents, pesticides, defoliants, explosives, flammables, corrosives, radon, and urea formaldehyde insulation.
(qq) “Holdco Note” means a note substantially in the form attached hereto as Exhibit J.
(rr) “Holdco Note Amount” means $5,000,000.
(ss) “HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
(tt) “Income Taxes” means any Taxes imposed on net income.
(uu) “Indebtedness” of any Person means, without duplication, on a consolidated basis:
(i) indebtedness of such Person for money borrowed, or incurred in substitution or exchange for indebtedness for borrowed money, and obligations evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable;
(ii) all obligations of such Person issued or assumed as the deferred purchase price of property, assets or services, whether fixed or contingent (including any earnout, holdback or similar payment);
(iii) all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but
excluding trade accounts payable and other accrued current liabilities arising in the Ordinary Course of Business that are reflected in the Final Working Capital Adjustment Amount);
(iv) all obligations of such Person under any lease to the extent any such lease is required under GAAP to be classified as a finance lease (as provided under Accounting Standards Codification 842), which, for the avoidance of doubt, excludes from the definition of Indebtedness leases which are classified as operating leases and capitalized to the balance sheet in accordance with Accounting Standards Codification 842;
(v) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction, but only to the extent the same has been drawn or called;
(vi) all net obligations of such Person under interest rate or currency swap transactions or other hedging Contracts (in each case valued at their termination value at the date of determination);
(vii) all obligations of such Person for off balance sheet financing, including synthetic leases;
(viii) to current or former equityholders with respect to unpaid dividends or other distributions;
(ix) any intercompany indebtedness between Seller and its Subsidiaries (other than the Company Group), on the one hand, and the Company Group, on the other hand, to the extent not terminated prior to Closing, other than the intercompany balances set forth on Schedule 7.12;
(x) all accrued and unpaid bonuses under the Univar Solutions Incentive Plan, the ES: Sales Incentive Plan, and all other employee-related bonuses (except to the extent such amounts are being treated as Seller Transaction Expenses);
(xi) the Liability set forth on Schedule 1.1(uu);
(xii) all obligations of the type referred to in clauses above of other Persons the payment of which such Person is responsible or liable as obligor, guarantor, surety or otherwise, including guarantees of such obligations; and
(xiii) all obligations of the type referred to in clauses above of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person).
Notwithstanding anything herein to the contrary, Indebtedness (A) shall include all obligations (including all obligations in respect of principal, accrued interest, penalties, fees (including prepayment fees), expenses, costs, premiums, termination fees, breakage, make-whole payments, penalties and other payments associated with the repayment of such Indebtedness, in each case, assuming the repayment of the underlying obligations as of the relevant time) of such Person, but (B) shall not include the aggregate dollar amount of all liabilities properly characterized as current liabilities of the Company Group and included in the calculation of Final Working Capital Adjustment Amount or obligations under the Leases.
(vv) “Intentional Breach” means, with respect to any representation, warranty, covenant or agreement, an action or omission taken or omitted to be taken that the breaching party intentionally takes (or intentionally fails to take) and knows (or reasonably should have known) would, or would reasonably be expected to, cause a material breach of such representation, warranty, covenant or agreement.
(ww) “Intellectual Property” means all intellectual property rights arising from or in respect of the following:
(i) patents and applications therefor, including continuations, divisionals, continuations-in-part, or reissues of patent applications and patents issuing thereon;
(ii) trademarks, service marks, trade names, service names, brand names, trade dress rights, logos, internet domain names and corporate names, together with the goodwill associated with any of the foregoing, and all applications, registrations and renewals thereof (collectively, “Trademarks”);
(iii) copyrights and registrations and applications therefor, works of authorship and mask work rights;
(iv) Software; and
(v) Technology.
(xx) “Inventory” means inventory, finished goods, raw materials, packaging, supplies, spare parts, work-in process.
(yy) “ISRA” means the New Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq.
(zz) “IT Assets” means Software, systems, servers, computers, hardware, firmware, middleware, networks, data communications lines, routers, hubs, switches and all other information technology equipment, and all associated documentation.
(aaa) “ITA” means the Income Tax Act, R.S.C. 1985, c.1 (5th Supplement).
(bbb) “Knowledge of Purchaser” means the actual or constructive knowledge (assuming reasonable inquiry of their direct reports) of those Persons identified on Schedule 1.1(bbb).
(ccc) “Knowledge of Seller” means the actual or constructive knowledge (assuming reasonable inquiry of their direct reports) of those Persons identified on Schedule 1.1(ccc).
(ddd) “Law” means any foreign, federal, state or local law, statute, code, ordinance, common law, rule or regulation.
(eee) “Lease Deduct Amount” means $3,000,000.
(fff) “Legal Proceeding” means any judicial, administrative or arbitral action, prosecution, suit or proceeding (public or private) or investigations (including subpoenas by a Governmental Body) by or before a Governmental Body.
(ggg) “Liability” means any liability or obligation (whether direct or indirect, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due), including any direct or indirect indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost, Tax or expense (including attorneys’ fees and other professionals’ fees and attorneys’ and other professionals’ out-of-pocket costs).
(hhh) “Lien” means any lien, encumbrance, pledge, mortgage, deed of trust, security interest, claim, lease, license, community property interest, equitable interest, charge, option, right of first refusal, easement, encroachment, right of way, servitude or similar right of others or restriction of any kind, including any restriction on use, voting transfer, receipt of income, or exercise of any other attribute of ownership, or any agreement to give any of the foregoing.
(iii) “Losses” means all Liabilities, losses, damages, assessments, judgments, settlements, claims, interest, awards, costs, Taxes, fines, penalties and expenses (including attorneys’ fees and other costs and expenses of investigating or contesting any of the foregoing).
(jjj) “Material Adverse Effect” means any Event that, either individually or in the aggregate with all other Events:
(i) has had or would reasonably be expected to have a material adverse effect on the business, assets, properties, results of operations or financial condition of the Company Group or the Business, excluding any effect resulting from any Excluded Effect; or
(ii) would reasonably be likely to prevent or materially impair the ability of Seller to perform its obligations under this Agreement or consummate the transactions contemplated by this Agreement.
(kkk) “Materiality Qualifications” means all references to the terms “material” (and variations thereof), “material to the Business, taken as a whole” (and variations thereof), the term “Material Adverse Effect” and similar qualifications or exceptions included in the representations and warranties set forth in ARTICLE V and ARTICLE VI other than such references included in clause (ii) of Section 5.8(a).
(lll) “Net Working Capital” means, on a consolidated basis, the current assets of the Company Group minus the current liabilities of the Company Group, all as determined in accordance with the Agreed Accounting Principles as of the Effective Time and excluding (i) Indebtedness of the Company Group to the extent paid at the Closing, and (ii) Cash Amount at the Effective Time.
(mmm) “Open Source Software” means Software that is, contains or is derived from Software distributed as freeware, shareware or open source Software, or under similar licensing or distribution models that (a) require the licensing, disclosure or distribution of source code to any other Person; (b) prohibit or limit the receipt of consideration in connection with licensing or distributing any Software; (c) allow any Person to decompile, disassemble or reverse engineer any Software; (d) require the licensing or distribution of any Software to any other Person for the purpose of making derivative works; or (e) otherwise are identified as open source licensing or distribution models by the Open Source Initiative at www.opensource.org or the Free Software Foundation at www.fsf.org.
(nnn) “Order” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Body or settlement agreement.
(ooo) “Ordinary Course of Business” means the ordinary and usual course of business of the Business consistent with past practice.
(ppp) “Organizational Documents” means:
(i) with respect to any corporation, its articles or certificate of incorporation and bylaws;
(ii) with respect to any limited liability company, its articles or certificate of formation or organization (and any applicable certificate of conversion and articles of organization) and limited liability company agreement;
(iii) with respect to any partnership, its articles or certificate of formation and partnership agreement; and
(iv) with respect to any other entity, the comparable document governing the existence and operation of such entity.
(qqq) “Original SPA Date” means December 5, 2019.
(rrr) “Owned Intellectual Property” means all Intellectual Property owned or purported to be owned by or under obligation of assignment to a Company Group Entity.
(sss) “Permits” means any approvals, authorizations, consents, licenses, permits, clearances, closures, decisions, registrations, declarations, concessions, grants, franchises, certificates, identification numbers exemptions, waivers, and filings issued or required by any Governmental Body under applicable Law.
(ttt) “Permitted Exceptions” means:
(i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in title commitments or surveys that have been made available to Purchaser that do not adversely affect in any material respect the current use of the applicable property;
(ii) statutory liens for current Taxes not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings and for which proper reserves have been established on the financial statements in accordance with GAAP;
(iii) mechanics’, carriers’, workers’, repairers’ and similar Liens not yet overdue arising or incurred in the Ordinary Course of Business;
(iv) zoning ordinances, building codes, entitlements and other land use regulations promulgated by any Governmental Body, including Environmental Laws; provided the same are not violated by the current use of the applicable property;
(v) title of a lessor under a capital or operating lease;
(vi) matters identified on Schedule 1.1(ttt); and
(vii) Liens created by Purchaser or its successors and permitted assigns.
(uuu) “Person” means any individual, corporation, partnership, firm, joint venture, association, joint enterprise, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.
(vvv) “Pre-Closing Period” means the period beginning on the date of this Agreement and ending on the earlier of the Closing and the date this Agreement is terminated in accordance with its terms.
(www) “Purchaser Fundamental Representations” means the representations and warranties contained in Sections 6.1 (Organization and Good Standing), 6.2 (Authorization of Agreement) and 6.5 (Financial Advisors).
(xxx) “Reference Working Capital” means $42,105,144 (Forty-Two Million One Hundred Five Thousand One Hundred Forty-Four Dollars).
(yyy) “Registered” means issued or renewed by, registered, recorded or filed with, or the subject of a pending application before any Governmental Body or Internet domain name registrar.
(zzz) “Release” means any spill, emission, leaking, pumping, pouring, injection, deposit, dumping, emptying, disposal, discharge, dispersal, leaching, migration, emitting, escaping or other release into the indoor or outdoor environment.
(aaaa) “Remedial Action” means all actions to:
(i) clean up, remove, treat or in any other way address any Hazardous Material;
(ii) prevent the Release of any Hazardous Material so it does not endanger or threaten to endanger public health or welfare or the indoor or outdoor environment;
(iii) perform pre-remedial studies and investigations or post-remedial monitoring and care; and
(iv) respond to or correct a condition of noncompliance with Environmental Laws.
(bbbb) “Representatives” means, in relation to a Person, its Affiliates and its and its Affiliates’ directors, managers, officers, employees, agents, advisers, attorneys, accountants, financial advisors, consultants and other agents and representatives.
(cccc) “Restructuring Document” means any agreement, deed, bill of sale, endorsement, assignment, certificate or other instrument, including instruments of conveyance or assignment, to be entered into, executed or delivered by Seller or any of its Subsidiaries in connection with the Restructuring.
(dddd) “Seller Fundamental Representations” means the representations and warranties contained in Sections5.1(a) (Organization and Good Standing), 5.2 (Authorization of Agreement), 5.4 (Ownership and Transfer of the Company Group Securities), 5.5 (Capitalization), 5.6 (No Subsidiary or Minority Investment) and 5.20 (Financial Advisors).
(eeee) “Seller Parent IP Assignment” means the Intellectual Property Assignment, by and between Seller Parent and Target 1 in the form attached hereto as Exhibit K.
(ffff) “Seller Transaction Expenses” means the fees and expenses owed or incurred by any of Seller and the Company Group at any time and unpaid at the Effective Time (or paid as contemplated by Section 3.2(d)) in connection with the preparation, negotiation, or execution of this Agreement, any Ancillary Agreements or the consummation of the transactions contemplated hereby or thereby or the Restructuring, including (i) all fees, expenses and other costs of investment bankers, attorneys, accountants and other representatives and consultants and third party advisors, along with any data room manager expenses, payable or incurred by Seller and the Company Group in connection with the Restructuring, the consummation of the transactions contemplated by this Agreement or any Ancillary Agreements hereto, and (ii) all transaction bonuses, change in control payments and retention or “stay” bonuses, severance, and any other similar payments or compensatory amounts or entitlements, in each case, paid or payable to any Business Employee in connection with the transactions contemplated by this Agreement (excluding any amount that becomes payable solely due to any action taken by Purchaser or its Affiliates following the Closing), including the employer portion of any employment Taxes payable by Seller or its Subsidiaries in connection with such payments.
(gggg) “Software” means any and all of the following, other than “shrink wrap” licenses:
(i) computer programs, including any and all software implementations of algorithms, models and methodologies, whether in assemblers, applets, compilers, source code, object code or executable code;
(ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise;
(iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, design tools, templates, menus, buttons and icons; and
(iv) documentation, including user manuals and other training documentation, related to any of the foregoing..
(hhhh) “Specified Excluded Assets” means the Excluded IP, the Excluded Real Property (but, for the avoidance of doubt, excluding the rights of the Company Group under the Leases), the assets held by Univar Brasil Ltda, a Subsidiary of Seller Parent, and the products containing glyphosate.
(iiii) “Subsidiary” of any specified Person means any other Person of which such first Person owns (either directly or through one or more other Subsidiaries) at least fifty percent (50%) of the outstanding equity securities or securities carrying at least fifty percent
(50%) of the voting power in the election of the board of directors or other governing body of such Person, and with respect to which entity such first Person is not otherwise prohibited contractually or by other legally binding authority from exercising control.
(jjjj) “Straddle Period” means any taxable year or period beginning on or before and ending after the Closing Date.
(kkkk) “Taxes” means:
(i) all federal, state, provincial, local or foreign taxes, charges, fees, imposts, levies or other assessments, including all net income, gross receipts, capital, sales, use, estimated, ad valorem, value added (and similar taxes, such as Canadian HST), transfer, franchise, profits, inventory, license, withholding, payroll, employment, employer health, social security, unemployment, excise, severance, stamp, occupation, property and estimated and other taxes, customs duties, fees, assessments and charges of any kind whatsoever (including any government pension plan premiums and contributions, social security premiums, workers’ compensation premiums, and employment or unemployment insurance or compensation premiums and contributions); and
(ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any taxing authority in connection with any item described in clause (i), and any interest in respect of such amounts.
(llll) “Tax Indemnification Event” means a Final Determination having been made by a taxing authority, other governmental Authority or a court of competent jurisdiction regarding a liability for Taxes.
(mmmm) “Tax Return” means all returns, declarations, reports, elections, estimates, information returns and statements filed or required to be filed in respect of any Taxes, and whether in tangible or electronic form.
(nnnn) “Technology” means all designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how, research and development, technical data, programs, subroutines, tools, materials, specifications, processes, inventions (whether patentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship and other similar materials.
(oooo) “Trademarks” has the meaning set forth in subsection (ii) of the definition of “Intellectual Property”.
(pppp) “Transition Services Agreement” means the Transition Services Agreement, dated as of the Closing Date, by and between Seller and Target 1, in the form attached hereto as Exhibit L.
(qqqq) “Transactions” means the transactions contemplated by this Agreement, including the transactions contemplated by the Ancillary Agreements.
(rrrr) “WARN” means the Workers Adjustment and Retraining Notification Act of 1988, as amended, and any similar state or local Law and applicable regulation.
(ssss) “Working Capital Adjustment Amount” means:
(i) if the absolute value of the difference between Net Working Capital and Adjusted Reference Working Capital is more than $500,000.00 then the Working Capital Adjustment Amount (which may be a positive or negative number) will be an amount equal to Net Working Capital minus Reference Working Capital.
(ii) if the absolute value of difference between Net Working Capital and Adjusted Reference Working Capital is less than or equal to $500,000.00 then the Working Capital Adjustment Amount will be an amount equal to negative three million dollars (-$3,000,000).
(tttt) “Xerox Provisions” means Section 4.4, Section 10.3, Section 10.4, Section 10.5, Section 10.8 and Section 10.10(b) (and any related definitions used in the Xerox Provisions).
2. Terms Defined Elsewhere in the Agreement. For purposes of the Agreement, the following terms have meanings set forth in the sections indicated:
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Term
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Section
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3PL Agreement
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8.1(q)
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Act
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6.4
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Agreement
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Introduction
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Alternate Debt Financing
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7.21(c)
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Antitrust Division
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7.4(a)(ii)
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Anti-Corruption Laws
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5.17(c)
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Antitrust Laws
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5.3(b)(i)
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Available Insurance Policies Schedule
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5.22
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Business Employee
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5.15(e)
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Business Employee Schedule
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5.15(e)
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Canadian Business Restructuring
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Recitals
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Canadian Contribution Agreement
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Recitals
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Term
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Section
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Chain of Title Clean-Up
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7.24(f)
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Claims Notice
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7.19(e)
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Closing
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4.1
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Closing Date
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4.1
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Closing Statement
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3.3
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Closing Statement Delivery Date
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3.3
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COBRA
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7.10(k)
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Commitment Letters
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6.7(a)
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Company Group
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Recitals
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Company Group Entity
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Recitals
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Company Group Securities
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Recitals
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Company Property
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5.10(a)
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Company Properties
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5.10(a)
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Competing Proposal
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7.15
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Confidentiality Agreement
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7.6(a)
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Contingent Worker
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5.15(d)
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Continuing Employees
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7.10(f)
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Contribution Agreements
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Recitals
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Corporativo Employee Transfer
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7.10(d)
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Current 401(k) Plan
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7.10(i)
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Debt Commitment Letter
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6.7(a)
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Debt Financing
Enforcement Costs
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6.7(a)
4.4(b)
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Equity Commitment Letter
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6.7(a)
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Equity Financing
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6.7(a)
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Estimated Cash
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3.3(b)
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Estimated Indebtedness
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3.3(c)
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Estimated Seller Transaction Expenses
Estimated Working Capital Adjustment Amount
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3.3(d)
3.3(a)
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Excluded IP
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5.12(a)
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FCPA
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5.17(c)
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Final Cash
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3.4(a)(ii)
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Final Closing Calculations
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3.4(a)(iv)
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Final Closing Statement
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3.4(a)
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Final Indebtedness
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3.4(a)(iii)
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Term
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Section
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Final Seller Transaction Expenses
Final Working Capital Adjustment Amount
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3.4(a)(iv)
3.4(a)(i)
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Financial Records
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5.7
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Financing
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6.7(a)
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Foreign Continuing Employee
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7.10(f)
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Forum
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10.3(a)
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FTC
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7.4(a)(ii)
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General Enforceability Exceptions
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5.2
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Indemnified Party
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7.19(e)
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Indemnified Party Defense Matter
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7.19(g)
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Indemnifying Party
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7.19(e)
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Indemnitees
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7.7(a)
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Initial Univar License Period
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7.24(a)
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Insurance Policies
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5.22
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Interim Financial Records
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5.7
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Lease
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8.1(o)
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Leave Offered Employees
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7.10(a)
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Letter of Credit
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7.11(a)
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License Agreement (CropWeb)
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8.1(n)
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Limited Guarantee
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Recitals
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Material Contracts
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5.13(a)
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Material Service Providers
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5.23
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Material Customers
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5.23
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Material Shared Contract
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5.19(c)
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Material Suppliers
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5.23
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New 401(k) Plan
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7.10(i)
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New Contract
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7.26(a)
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Non-Assignable Assets
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7.3
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NJ DEP
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7.25
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Operating Shared Contract
Original SPA
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7.26(a)
Recitals
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Owned Software
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5.12(e)
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Party
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Introduction
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Parties
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Introduction
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Personal Property Leases
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5.11(a)
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Pre-Closing Asset Transfers
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7.23(a)
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Pre-Closing Occurrence
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7.14(a)
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Term
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Section
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PJC
Privileged Information
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5.20
7.27(c)
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Privileges
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7.27(b)
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Purchase Price
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3.1(a)
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Purchaser
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Introduction
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Purchaser 1
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Introduction
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Purchaser 2
Purchaser 3
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Introduction
Introduction
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Purchaser Documents
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6.2
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Purchaser Group Member
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10.12(a)
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Purchaser Group Members
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10.12(a)
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Purchaser Indemnified Parties
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7.19(a)
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Purchaser Plans
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7.10(g)
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Purchaser Taxes
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7.13(a)
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R&W Policy
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6.6
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Real Estate License Agreement
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8.1(p)
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Real Property Lease
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5.10(a)
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Real Property Leases
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5.10(a)
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Recall
Recovery Expenses
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5.24(a)
7.19(k)
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Related Person
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5.19(b)
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Restricted Period
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7.20(a)
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Restricted Territory
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7.20(a)
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Restricted Business
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7.20(a)
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Restructuring
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Recitals
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Required Permits
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5.17(a)(iv)
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Sanctions
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5.17(d)
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Securities Assignments
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8.1(h)
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Seller
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Introduction
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Seller 1
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Introduction
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Seller 2
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Introduction
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Seller Documents
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5.2
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Seller Group Member
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10.12(a)
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Seller Group Members
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10.12(a)
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Seller Indemnified Parties
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7.19(b)
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Seller Legal Counsel
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10.12(a)
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Seller Parent
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Introduction
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Term
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Section
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Seller Trademarks
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7.24(a)
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Seller Taxes
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7.13(a)
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Separation Costs
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7.11(a)
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Settlement
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7.19(g)
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Shared Contract
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5.19(c)
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Shared Facility
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5.19(c)
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Sponsor
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Recitals
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Supply Agreement
Surviving Arrangements
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8.1(r)
7.12
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SVIP
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7.10(j)
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Target 1
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Recitals
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Target 1 Securities
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Recitals
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Target 1 Securities Assignment
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8.1(e)
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Target 2
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Recitals
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Target 2 Securities
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Recitals
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Target 3
Target 3 Benefit Plans
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Recitals
7.10(b)
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Target 3 Securities
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Recitals
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Target 3 Securities Assignment
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8.1(h)
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Tax Allocation
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3.5
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Tax Allocation Statement
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3.5
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Tax Sharing Agreement
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5.9(x)
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Tax Proceeding
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7.13(e)
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Termination Date
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4.2(a)
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Termination Fee
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4.4(a)
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Third Party Consents
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7.3
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Third Party Claim
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7.19(g)
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Threshold
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7.19(h)
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Trade Controls
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5.17(d)
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Transfer Taxes
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10.1
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U.S. Business Restructuring
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Recitals
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U.S. Contribution Agreement
Univar Corporativo
Univar License Transition Period
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Recitals
7.10(d)
7.24(b)
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DESCRIPTION OF SECURITIES OF UNIVAR SOLUTIONS INC. REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
The following description sets forth certain material terms and provisions of our securities that are registered under Section 12 of the Securities Exchange Act of 1934. The following description is a summary that is not complete and is qualified in its entirety by reference to the Delaware General Corporation Law (the “DGCL”), the Company’s Third Amended and Restated Certificate of Incorporation (as amended from time to time, the “Certificate of Incorporation”) and the Company’s Third Amended and Restated Bylaws (as amended from time to time, the “Bylaws”).
General
The Company’s authorized capital stock consists of 2,000,000,000 shares of common stock, par value $0.01 per share and 200,000,000 shares of preferred stock, par value $0.01 per share.
Common Stock
Voting. Each share of common stock is entitled to one vote upon all matters to be voted on by the holders of the common stock.
Dividends. Holders of the Company’s stock are entitled to receive, on a pro rata basis, all dividends, if any, payable with respect to the common stock that the Company’s board may declare out of legally available funds. Any dividends declared by the Company’s board are subject to any applicable provisions of law and the Certificate of Incorporation (as defined below).
Liquidation, Dissolution and Winding Up. Subject to any rights or preferences of the preferred stock (as fixed by resolutions, if any, from the board), upon liquidation (whether voluntary or involuntary), dissolution or winding up of the affairs of the Company, or upon any distribution of the assets of the Company, the holders of the Company’s common stock are entitled to receive, pro rata, all of the assets of the Company.
Preemptive or Other Rights. The common stock has no preemptive or other subscription rights and there are no other conversion rights or redemption or sinking fund provisions with respect to the shares.
Election of Directors. The Company’s directors are elected annually. Prior to August 17, 2018, the Company’s directors were divided into three classes (Class I, Class II, Class III) and were elected for three-year terms. Beginning at the Company’s 2019 annual meeting, directors will be elected for one-year terms. Directors elected on or prior to the Company’s 2018 annual meeting will serve out their original three-year terms. Directors are elected by a plurality of votes cast. Stockholders do not have the right to cumulate their votes for the election of directors.
Preferred Stock
The board may issue, without further authorization from the Company’s stockholders, up to 200,000,000 shares of preferred stock in one or more classes or series. With respect to any such class or series, the board of directors may determine at the time of creating such class or series:
•voting powers;
•designations;
•preferences;
• relative, participating, optional or other special rights; and
•the qualifications, limitations or restrictions thereof.
Further, within the limits and restrictions stated in any resolution or resolutions of the board originally fixing the number of shares constituting any such class or series, the board is authorized to increase or decrease (but not below the number of shares of such class or series then outstanding) the number of shares of any such class or series subsequent to the issue of shares of that class or series.
Warrants
In connection with the closing of the Nexeo acquisition, the Company assumed 50.0 million warrants to purchase shares of Nexeo common stock, equivalent to 25.0 million shares of Nexeo common stock with an estimated aggregate fair value of $26.0 million at the February 28, 2019 closing date. Each warrant was converted into the right to receive, upon exercise, 0.1525 shares of the Company’s common stock and $1.51 in cash, which represents the merger consideration that would have been payable in respect of the one-half (1/2) share of Nexeo common stock that the holder of each warrant would have been entitled to receive had such holder exercised such warrant immediately prior to the effective time of the Nexeo acquisition, pursuant to the terms and conditions specified in the warrants and the Warrant Agreement, dated as of June 5, 2014, by and between WL Ross Holding Corp and Continental Stock Transfer & Trust Company, filed as Exhibit 4.1 to Nexeo’s Current Report on Form 8-K filed with the SEC on June 16, 2014 (the “Nexeo Warrant Agreement”). Effective February 28, 2019, the Company appointed Equiniti Trust Company (“Equiniti”) as successor warrant agent pursuant to Section 8.2.1 (Appointment of Successor Warrant Agent) of the Nexeo Warrant Agreement, and Equiniti assumed the obligations of the Warrant Agent under the Nexeo Warrant Agreement.
The Company may call the warrants for redemption: in whole and not in part; at a price of $0.01 per warrant; upon not less than 30 days’ prior written notice of redemption to each warrant holder; and if, and only if, the last reported sale price of the common stock equals or exceeds $68.79 per share for any 20 trading days within a 30 trading day period ending three business days before the Company sends the notice of redemption to the warrant holders. In the event of a redemption, the Company’s board of directors may elect to require all holders of warrants to exercise such warrant on a “cashless basis” by surrendering such warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the warrants, multiplied by the difference between the exercise price of the warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. Such notice of redemption will contain the information necessary to calculate the number of shares of common stock to be received upon exercise of the warrants, including the “fair market value” in such case.
The warrants have an exercise price of $27.80 and will expire on June 9, 2021. The exercise price may be adjusted in certain circumstances, including certain stock dividends and distributions, consolidations, combinations, reverse stock splits or reclassifications of shares of the Company’s common stock or other similar events, recapitalizations, reorganizations, mergers, consolidations, sales or conveyances of the Company.
The warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the subscription form set forth in the warrant certificate duly executed, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to the order of the warrant agent, for the number of warrants being exercised. Warrants may be exercised only for a whole number of shares of common stock. No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round down to the nearest whole number the number of shares of common stock to be issued to the warrant holder.
The warrant holders do not have any of the rights of a stockholder of the Company, including, without limitation, the right to receive dividends, or other distributions, exercise any preemptive rights to vote or to consent
or to receive notice as stockholders in respect of the meetings of stockholders or the election of directors of the Company or any other matter.
The Company may elect to cause the warrants to be exercisable only on a “cashless” basis under certain circumstances as described in the warrants and the Nexeo Warrant Agreement.
The warrants are not listed on a national securities exchange or any other nationally recognized trading system.
The foregoing description is a summary that is not complete and is qualified in its entirety by reference to the Nexeo Warrant Agreement.
Anti-Takeover Effects
The provisions of the Certificate of Incorporation and the Bylaws summarized below may have an anti-takeover effect.
The Certificate of Incorporation provides that, subject to the special rights of any series of preferred stock, and to the requirements of applicable law, a special meeting of stockholders may be called only by or at the direction of the Company’s directors pursuant to a resolution adopted by a majority of the Company’s directors then in office.
The Certificate of Incorporation provides that stockholder action may be taken only at an annual meeting or special meeting of stockholders and may not be taken by written consent in lieu of a meeting.
The Certificate of Incorporation and the Bylaws provide that directors may only be removed from office only for cause and only upon the affirmative vote of holders of at least 75% of the votes to which all the stockholders would be entitled to cast in any election of directors or class of directors.
The Certificate of Incorporation provides that specified provisions of the Certificate of Incorporation may not be amended, altered or repealed unless the amendment is approved by the affirmative vote of the holders of at least 75% of the voting power of the outstanding shares of the Company’s capital stock then entitled to vote generally in the election of directors, voting together as a single class, including the provisions governing management of the Company, the elimination of stockholder action by written consent and the prohibition on the rights of stockholders to call a special meeting, business opportunities, the election for the Company to not be governed by Section 203 of the DGCL, and amendments to the Certificate of Incorporation and Bylaws.
The Certificate of Incorporation and the Bylaws provide that the Bylaws may be amended, altered or repealed, or new bylaws may be adopted, by the affirmative vote of a majority of the Board of Directors, or by the affirmative vote of the holders of at least 75% of the voting power of the outstanding shares of the Company’s capital stock then entitled to vote generally in the election of directors, voting together as a single class.
The Bylaws provide that the Company’s stockholders may propose business to be brought before a meeting of stockholders or nominate directors, subject to specific requirements listed in the Bylaws and only if they provide notice not less than 90 days nor more than 120 days prior to the anniversary date of the previous year’s annual meeting. However, if the date of the annual meeting is advanced by more than 30 days or delayed by more than 70 days from the anniversary date of the immediately preceding annual meeting, a stockholder’s notice must be received not less than 90 days nor more than 120 days prior to the new annual meeting day or not later than the close of business on the 10th day after the first public announcement of the date of the meeting.
Section 203 of the DGCL prohibits a Delaware corporation from engaging in a “business combination” with an “interested stockholder” (i.e. , a stockholder owning 15% or more of the corporation’s outstanding voting
stock) for three years following the time that the “interested stockholder” becomes such, under certain circumstances and subject to certain exceptions. The Company has opted out of Section 203 of the DGCL in its certificate of incorporation and is therefore not governed by the terms of this provision of the DGCL.
AMENDMENT NO. 3, dated as of February 23, 2019 (this “Amendment”), to the Credit Agreement dated as of July 1, 2015, among UNIVAR USA INC., a Washington corporation (the “Borrower”), UNIVAR INC., a Delaware corporation (“Holdings”), the several banks and other financial institutions or entities from time to time party to the Credit Agreement (the “Lenders”), BANK OF AMERICA, N.A., as Administrative Agent (the “Administrative Agent”) and Collateral Agent and the other parties thereto (as amended, restated, modified and supplemented from time to time prior to the effectiveness of the Amendment, the “Credit Agreement”), by and between the Borrower and the Administrative Agent. Capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Credit Agreement.
WHEREAS, the Borrower desires to amend the Credit Agreement on the terms set forth herein;
WHEREAS, Section 11.1(d)(i) of the Credit Agreement provides that the Credit Agreement and the other Loan Documents may be amended to cure any ambiguity, mistake, omission, defect or inconsistency with the consent of the Borrower and the Administrative Agent;
NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1.Amendments.
(a)“Additional Obligations” is hereby amended by replacing the reference (a) to “Holdings or a Guarantor” with “a Loan Party” and (b) to “Borrower or Guarantors” with “Loan Parties”.
(b)“Foreign Segment Consolidated Total Assets” is hereby amended by replacing the reference to “Company” with “Borrower”.
(c)“LIBOR Rate” is hereby amended by replacing the reference to “(or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time)” with “(or such other commercially available source providing such quotations as may be designated by the Administrative Agent from time to time) (such applicable rate, the “LIBOR Screen Rate”)”.
(d)Section 7.1(b) of the Credit Agreement is hereby amended by replacing each reference to “the Parent Borrower” with “Holdings”.
(e)Section 8.1(b)(i) of the Credit Agreement is hereby amended by replacing each reference to “Holdings and the Guarantors” with “the Loan Parties”.
Section 2.Representations and Warranties, No Default. The Borrower hereby represents and warrants that as of the Amendment No. 3 Effective Date, after giving
effect to this Amendment, (i) no Default or Event of Default exists and is continuing and (ii) all representations and warranties contained in the Credit Agreement, as amended by this Amendment, are true and correct in all material respects on and as of the date hereof, as though made on and as of the date hereof, except to the extent that such representations and warranties specifically refer to an earlier date, in which case they were true and correct in all material respects as of such earlier date.
Section 3.Effectiveness. Section 1 of this Amendment shall become effective on the date (such date, if any, the “Amendment No. 3 Effective Date”) that the following conditions have been satisfied or waived:
(i)The Administrative Agent shall have received an executed counterpart of this Amendment from the Borrower.
(ii)The Administrative Agent shall have received a certificate of a Responsible Officer of the Borrower dated the Amendment No. 3 Effective Date certifying as to the satisfaction (or waiver) of the conditions set forth in Section 2.
Section 4.Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all of which when taken together shall constitute a single instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or any other electronic transmission shall be effective as delivery of a manually executed counterpart hereof.
Section 5.Applicable Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
Section 6.Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.
Section 7.Effect of Amendment. Except as expressly set forth herein, (i) this Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders, the Administrative Agent or any other Agent, in each case under the Credit Agreement or any other Loan Document, and (ii) 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 either such agreement or any other Loan Document. Each and every term, condition, obligation, covenant and agreement contained in the Credit Agreement as amended hereby, or any other Loan Document as amended hereby, is hereby ratified and re-affirmed in all respects and shall continue in full force and
effect. This Amendment shall constitute a Loan Document for purposes of the Credit Agreement and from and after the Amendment No. 3 Effective Date, all references to the Credit Agreement in any Loan Document and all references in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, shall, unless expressly provided otherwise, refer to the Credit Agreement as amended by this Amendment.
Section 8.WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.
UNIVAR USA INC.,
as Borrower
By: /s/ Kerri Howard
Name: Kerri Howard
Title: Vice President - Treasurer
[Signature Page to Univar Amendment No. 3]
BANK OF AMERICA, N.A.,
as Administrative Agent
By: /s/ Liliana Claar
Name: Liliana Claar
Title: Vice President
[Signature Page to Univar Amendment No. 3]
AMENDMENT NO. 1 TO TERM LOAN GUARANTEE AND COLLATERAL AGREEMENT
AMENDMENT NO. 1 TO TERM LOAN GUARANTEE AND COLLATERAL AGREEMENT (this “Amendment”), dated as of November 22, 2019 (the “Amendment No. 1 Effective Date”), is entered into by and among UNIVAR SOLUTIONS USA INC., a Washington corporation (the “U.S. Borrower”), UNIVAR SOLUTIONS INC., a Delaware corporation (“Holdings”), each of the Domestic Subsidiaries of Holdings party hereto, and BANK OF AMERICA, N.A., as collateral agent for the Secured Parties (in such capacity, and together with its successors and assigns in such capacity, the “Collateral Agent”) and administrative agent (in such capacity, and together with its successors and assigns in such capacity, the “Administrative Agent”) for the banks and other financial institutions from time to time parties to the Credit Agreement described below.
PRELIMINARY STATEMENTS
WHEREAS, reference is made to (i) that certain Term Loan Guarantee and Collateral Agreement, dated as of July 1, 2015 (as the same has been amended, supplemented or otherwise modified from time to time prior to, but not including, the date hereof, the “Guarantee and Collateral Agreement”), by and among U.S. Borrower, Holdings, each of the Domestic Subsidiaries of Holdings from time to time party thereto and the Collateral Agent and (ii) that certain Credit Agreement, dated as of July 1, 2015 (as the same has been amended, modified or supplemented prior to the date hereof and as amended by Amendment No. 5 dated as of the date hereof, the “Credit Agreement”), among Holdings, the U.S. Borrower, Univar Netherlands Holding B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands, having its statutory seat (statutaire zetel) in Rotterdam, the Netherlands and its registered office at Schouwburgplein 30, 3012CL Rotterdam, the Netherlands, registered with the Chamber of Commerce (Kamer van Koophandel) under number 24128225, the Subsidiary Borrowers that may from time to time become party thereto, Bank of America, N.A., as Administrative Agent and the Collateral Agent and the other financial institutions or entities from time to time party thereto;
WHEREAS, the Domestic Subsidiaries of Holdings party hereto are all of the Domestic Subsidiaries of Holdings party to the Guarantee and Collateral Agreement immediately prior to the execution of this Amendment; and WHEREAS, U.S. Borrower, Holdings and each Domestic Subsidiary of Holdings party hereto have requested that the Guarantee and Collateral Agreement be amended as set forth herein (the Guarantee and Collateral Agreement as amended by this Amendment, the “Amended Guarantee and Collateral Agreement”; capitalized terms used and not otherwise defined herein shall have the meanings assigned to such terms in the Amended Guarantee and Collateral Agreement);
NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
Section 1. Amendments. The Guarantee and Collateral Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the Amended Guarantee and Collateral Agreement attached as Exhibit A hereto.
Section 2. Confirmations and Reaffirmations.
(a) Each of the Guarantors hereby confirms and reaffirms its prior guarantees pursuant to Section 2.1(a) of the Guarantee and Collateral Agreement to the Administrative Agent, for the benefit of the Secured Parties, of the prompt and complete payment and performance by each Borrower when due and payable (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations owed to the Secured Parties, and confirms and reaffirms its continuing obligations under the Guarantee and Collateral Agreement as amended by this Amendment.
(b) Each Grantor hereby confirms and reaffirms its prior grant pursuant to Section 3.1 of the Guarantee and Collateral Agreement to the Collateral Agent, for the benefit of the Secured Parties, of a security interest in all of the Collateral of such Grantor, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations of such Grantor, and confirms and reaffirms that such security interest and its obligations under the Guarantee and Collateral Agreement as amended by this Amendment shall continue in full force and effect after giving effect to this Amendment.
(c) Each Granting Party that is a Pledgor, hereby confirms and reaffirms its prior grant pursuant to Section 3.2 of the Guarantee and Collateral Agreement to the Collateral Agent, for the benefit of the Secured Parties, of a security interest in all of the Pledged Collateral of such Pledgor now owned or at any time hereafter acquired by such Pledgor, including any Proceeds thereof, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations of such Pledgor, and confirms and reaffirms that such security interest and its obligations under the Guarantee and Collateral Agreement as amended by this Amendment shall continue in full force and effect after giving effect to this Amendment.
(d) To the extent applicable, the Grantors hereby acknowledge, confirm and agree that any financing statements, fixture filings, filings with the United States Patent and Trademark Office or the United States Copyright Office or other instrument similar in effect to the foregoing under applicable law covering all or any part of the Collateral previously filed in favor of the Collateral Agent under the Guarantee and Collateral Agreement and all control agreements executed in connection with the Guarantee and Collateral Agreement are in full force and effect after giving effect to this Amendment, except as amended, terminated or otherwise modified prior to the date of this Amendment in accordance with the Loan Documents.
Section 3. Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto on separate counterparts, each of which when so executed and delivered shall be deemed to be an original, but all of which when taken together shall constitute a single instrument. Delivery of an executed counterpart of a signature page of this Amendment by facsimile or any other electronic transmission shall be effective as delivery of a manually executed counterpart hereof.
Section 4. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
Section 5. Headings. The headings of this Amendment are for purposes of reference only and shall not limit or otherwise affect the meaning hereof.
Section 6. Effect of Amendment. This Amendment (i) shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Secured Parties under the Guarantee and Collateral Agreement and (ii) shall not, except as expressly set forth herein, alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in Guarantee and Collateral Agreement. Each and every term, condition, obligation, covenant and agreement contained in the Guarantee and Collateral Agreement as amended hereby, is hereby ratified and re-affirmed in all respects and shall continue in full force and effect. This Amendment shall constitute a Loan Document for purposes of the Credit Agreement and the other Loan Documents and from and after the Amendment No. 1 Effective Date, all references to the Guarantee and Collateral Agreement in any Loan Document and all references in the Guarantee and Collateral Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Guarantee and Collateral Agreement, shall, unless expressly provided otherwise, refer to the Amended Guarantee and Collateral Agreement. This Amendment shall not constitute a novation of the Guarantee and Collateral Agreement or any other Loan Document.
Section 7. WAIVER OF RIGHT TO TRIAL BY JURY.
EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AMENDMENT AND FOR ANY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the day and year first above written.
UNIVAR SOLUTIONS USA INC.,
as U.S. Borrower
By /s/ Kerri Howard
Name: Kerri Howard
Title: Vice President and Treasurer
UNIVAR SOLUTIONS INC.,
as Holdings
By /s/ Kerri Howard
Name: Kerri Howard
Title: Vice President and Treasurer
UNIVAR HOLDCO LLC,
UNIVAR HOLDCO III LLC,
CHEMPOINT.COM INC.,
UNIVAR USA DELAWARE INC.,
UNIVAR DELAWARE, INC.,
PILATES MERGER SUB II, LLC,
each, as a Granting Party, Guarantor, Grantor and Pledgor
By /s/ Kerri Howard
Name: Kerri Howard
Title: Vice President and Treasurer
TPG ACCOLADE DELAWARE, LLC,
NEXEO SOLUTIONS HOLDINGS, LLC,
NEXEO SOLUTIONS SUB HOLDING LLC,
NEXEO SOLUTIONS, LLC,
ARCHWAY SALES, LLC,
[Signature Page to Amendment No. 1 to Term Loan Guarantee and Collateral Agreement]
CHEMICAL SPECIALISTS AND DEVELOPMENT, LLC,
NEXEO SOLUTIONS FINANCE CORPORATION,
STARTEX DISTRIBUTION WEST, LLC,
STARTEX CHEMICAL, LLC, each, as a Granting Party, Guarantor, Grantor and Pledgor
By /s/ Kerri Howard
Name: Kerri Howard
Title: Vice President and Treasurer
[Signature Page to Amendment No. 1 to Term Loan Guarantee and Collateral Agreement]
BANK OF AMERICA, N.A.,
as Administrative Agent and Collateral Agent
By /s/ Anthony W. Kell
Name: Anthony W. Kell
Title: Vice President
[Signature Page to Amendment No. 1 to Term Loan Guarantee and Collateral Agreement]
Exhibit A
to Amendment No. 1
Amended Guarantee and Collateral Agreement
[Attached]
TERM LOAN GUARANTEE AND COLLATERAL AGREEMENT
made by
UNIVAR SOLUTIONS INC.
UNIVAR SOLUTIONS USA INC.
and certain of its Domestic Subsidiaries,
in favor of
BANK OF AMERICA, N.A.
as Collateral Agent
Dated as of July 1, 2015
as Amended on November 22, 2019
SECTION 1 DEFINED TERMS 2
1.1 Definitions. 2
1.2 Other Definitional Provisions. 1011
SECTION 2 GUARANTEE 1011
2.1 Guarantee. 1011
2.2 Right of Contribution. 1112
2.3 No Subrogation. 1213
2.4 Amendments, etc. with Respect to the Obligations. 1213
2.5 Guarantee Absolute and Unconditional. 1214
2.6 Reinstatement. 1415
2.7 Payments. 1415
SECTION 3 GRANT OF SECURITY INTEREST 1415
3.1 Grant. 1415
3.2 Pledged Collateral. 1517
3.3 Certain Limited Exceptions. 1517
3.4 Intercreditor Relations. 1819
SECTION 4 REPRESENTATIONS AND WARRANTIES 1820
4.1 Representations and Warranties of Each Guarantor. 1820
4.2 Representations and Warranties of Each Grantor. 1920
4.3 Representations and Warranties of Each Pledgor. 2123
SECTION 5 COVENANTS 2325
5.1 Covenants of Each Guarantor. 2325
5.2 Covenants of Each Grantor. 2325
5.3 Covenants of Each Pledgor. 2629
SECTION 6 REMEDIAL PROVISIONS 2831
6.1 Certain Matters Relating to Accounts. 2831
6.2 Communications with Obligors; Grantors Remain Liable. 2932
6.3 Pledged Stock. 3033
6.4 Proceeds to Be Turned Over to the Collateral Agent. 3034
6.5 Application of Proceeds. 3134
6.6 Code and Other Remedies. 3134
6.7 Registration Rights. 3235
6.8 Waiver; Deficiency. 3236
SECTION 7 THE COLLATERAL AGENT 3336
7.1 Collateral Agent’s Appointment as Attorney-in-Fact, etc. 3336
7.2 Duty of Collateral Agent. 3438
7.3 Financing Statements. 3539
7.4 Authority of Collateral Agent. 3539
7.5 Right of Inspection. 3539
SECTION 8 NON-LENDER SECURED PARTIES 3539
8.1 Rights to Collateral. 3539
8.2 Appointment of Agent. 3741
8.3 Waiver of Claims. 3741
8.4 Designation of Non-Lender Secured Parties. 3741
SECTION 9 MISCELLANEOUS 3742
9.1 Amendments in Writing. 3742
9.2 Notices. 3842
9.3 No Waiver by Course of Conduct; Cumulative Remedies. 3842
9.4 Enforcement Expenses; Indemnification. 3842
9.5 Successors and Assigns. 3943
9.6 Set-Off. 3943
9.7 Counterparts. 3944
9.8 Severability. 3944
9.9 Section Headings. 3944
9.10 Integration. 3944
9.11 GOVERNING LAW. 4044
9.12 Submission to Jurisdiction; Waivers. 4044
9.13 Acknowledgments. 4145
9.14 WAIVER OF JURY TRIAL. 4146
9.15 Additional Granting Parties. 4146
9.16 Releases. 4146
9.17 Judgment. 4347
9.18 Transfer Tax Acknowledgment. 4348
SCHEDULES
Schedule 1 -- Notice Addresses of Granting Parties
Schedule 2 -- Pledged Securities
Schedule 3 -- Perfection Matters
Schedule 4A -- Financing Statements
Schedule 4B -- Jurisdiction of Organization
Schedule 5 -- Intellectual Property
Schedule 6 -- Commercial Tort Claims
ANNEXES
Annex 1 -- Acknowledgement and Consent of Issuers who are not Granting Parties
Annex 2 -- Assumption Agreement
Annex 3 -- Supplemental Agreement
Annex 4 -- Joinder and Release
TERM LOAN GUARANTEE AND COLLATERAL AGREEMENT
TERM LOAN GUARANTEE AND COLLATERAL AGREEMENT, dated as of July 1, 2015, made by UNIVAR SOLUTIONS USA INC.(formerly known as Univar USA Inc.), a Washington corporation (the “U.S. Borrower”), Holdings (as defined below) and certain Domestic Subsidiaries of Holdings from time to time party hereto, in favor of BANK OF AMERICA, N.A., as collateral agent for the Secured Parties (as defined below) (in such capacity, and together with its successors and assigns in such capacity, the “Collateral Agent”) and administrative agent (in such capacity, and together with its successors and assigns in such capacity, the “Administrative Agent”) for the banks and other financial institutions (collectively, the “Lenders”; individually, a “Lender”) from time to time parties to the Credit Agreement described below.
W I T N E S S E T H :
WHEREAS, pursuant to that certain Credit Agreement, dated as of the date hereofJuly 1, 2015 (as amended, waived, supplemented or otherwise modified from time to time, together with any agreement extending the maturity of, or restructuring, refunding, refinancing or increasing the Indebtedness under such agreement or successor agreements, the “Credit Agreement”), among the U.S. Borrower, UNIVARafter giving effect to Section 1 of Amendment No. 5 (as defined below), UNIVAR NETHERLANDS HOLDING B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands, having its statutory seat (statutaire zetel) in Rotterdam, the Netherlands and its registered office at Schouwburgplein 30, 3012CL Rotterdam, the Netherlands, registered with the Chamber of Commerce (Kamer van Koophandel) under number 24128225 (the “Netherlands Borrower” and, together with the U.S. Borrower and any Subsidiary Borrowers from time to time party to the Credit Agreement, the “Borrowers”), UNIVAR SOLUTIONS INC., a Delaware corporation (formerly known as Univar Inc.) (“Holdings”), the Collateral Agent, the Administrative Agent, and the other parties from time to time party thereto, the Lenders have severally agreed to make extensions of credit to the BorrowerBorrowers upon the terms and subject to the conditions set forth therein;
WHEREAS, theeach Borrower is a member of an affiliated group of companies that includes Holdings, the U.S. Borrower, Holdings’ Domestic Subsidiaries that are party hereto and any other wholly owned Domestic Subsidiary of Holdings that becomes a party hereto from time to time after the date hereof (all of the foregoing collectively, the “Granting Parties”);
WHEREAS, the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the BorrowerBorrowers to make valuable transfers to one or more of the other Granting Parties in connection with the operation of their respective businesses;
WHEREAS, theeach Borrower and the other Granting Parties are engaged in related businesses, and each such Granting Party will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement;
WHEREAS, it is a condition to the obligation of the Lenders to make their respective extensions of credit under the Credit Agreement that the Granting Parties shall execute and deliver this Agreement to the Collateral Agent for the benefit of the Secured Parties; and
WHEREAS, the Collateral Agent and one or more Additional Agents mayhas entered into the ABL Intercreditor Agreement (as amended, amended and restated, waived, supplemented or otherwise modified from time to time (subject to Subsection 9.1), the “ABL Intercreditor Agreement”) and may from time to time in the future enter into an Intercreditor Agreement substantially in the form attached to the Credit Agreement as Exhibit J 2, and acknowledged by the U.S. Borrower and, the other Granting Parties and any other Borrower from time to time party to the Credit Agreement (as amended, amended and restated, waived, supplemented or otherwise modified from time to time (subject to Subsection 9.1), the “Base Intercreditor Agreement”), the ABL Intercreditor Agreement and or one or more Other Intercreditor Agreements or Intercreditor Agreement Supplements.; and
WHEREAS, pursuant to Amendment No. 5 to the Credit Agreement, dated as of November 22, 2019, by and among the U.S. Borrower, the Netherlands Borrower, Holdings, the other Granting Parties party thereto, the Administrative Agent and Collateral Agent and the Lenders party thereto (“Amendment No. 5”), the U.S. Borrower, Holdings and the other Granting Parties have agreed to guarantee and provide Collateral to secure the Borrower Obligations of the Netherlands Borrower and the Subsidiary Borrowers from time to time party to the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the BorrowerBorrowers thereunder, each Granting Party hereby agrees with the Administrative Agent and the Collateral Agent, for the benefit of the Secured Parties as follows:
SECTION 1
Defined Terms
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms that are defined in the Code (as in effect on the date hereof) are used herein as so defined: Cash Proceeds, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General Intangibles, Goods, Letter-of-Credit Rights, Money, Promissory Notes, Records, Securities, Securities Accounts and Supporting Obligations.
(b) The following terms shall have the following meanings:
“ABL Collateral Representative”: as defined in the ABL Intercreditor Agreement.
“ABL Intercreditor Agreement”: as defined in the recitals hereto.
“ABL Obligations”: as defined in the ABL Intercreditor Agreement.
“ABL Priority Collateral”: as defined in the ABL Intercreditor Agreement.
“Accounts”: all accounts (as defined in the Code) of each Grantor, including, without limitation, all Accounts (as defined in the Credit Agreement) and Accounts Receivable of such Grantor.
“Accounts Receivable”: any right to payment for goods sold or leased or for services rendered, which is not evidenced by an instrument (as defined in the Code) or Chattel Paper.
“Additional Agent”: as defined in the Base Intercreditor Agreement.
“Additional Collateral Documents”: as defined in the Base Intercreditor Agreement.
“Additional Credit Facilities”: as defined in the Base Intercreditor Agreement.
“Additional Obligations”: as defined in the Base Intercreditor Agreement.
“Additional Secured Parties”: as defined in the Base Intercreditor Agreement.
“Adjusted Net Worth”: of any Guarantor at any time, the greater of (x) $0 and (y) the amount by which the fair saleable value of such Guarantor’s assets on the date of the respective payment hereunder exceeds its debts and other liabilities (including contingent liabilities, but without giving effect to any of its obligations under this Agreement or any other Loan Document, or pursuant to its guarantee with respect to any Indebtedness then outstanding under the Senior Notes, the ABL Facility, any Additional Credit Facility or any Assumed Indebtedness) on such date.
“Administrative Agent”: as defined in the preamble hereto.
“Agreement”: this Guarantee and Collateral Agreement, as the same may be amended, supplemented, waived or otherwise modified from time to time.
“Applicable Law”: as defined in Subsection 9.8.
“Bank Products Agreement”: any agreement pursuant to which a bank or other financial institution agrees to provide (a) treasury services, (b) credit card, merchant card, purchasing card or stored value card services (including, without limitation, the processing of payments and other administrative services with respect thereto), (c) cash management services (including, without limitation, controlled disbursements, automated clearinghouse transactions, return items, netting, overdrafts, depository, lockbox, stop payment, electronic funds transfer, information reporting, wire transfer and interstate depository network services) and (d) other banking products or services as may be requested by any Grantor (other than letters of credit and other than loans except indebtedness arising from services described in clauses (a) through (c) of this definition).
“Bank Products Provider” shall mean any Person that has entered into a Bank Products Agreement with a Grantor with the obligations of such Grantor thereunder being secured by one or more Loan Documents as designated by the U.S. Borrower in accordance with Section 8.4 hereof (provided that no Person shall, with respect to any Bank Products Agreement, be at any time a Bank Products Provider with respect to more than one Credit Facility).
“Bankruptcy Case”: (i) Holdings or any of its Subsidiaries commencing any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or Holdings or any of its Subsidiaries making a general assignment for the benefit of its creditors; or (ii) there being commenced against Holdings or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days.
“Base Intercreditor Agreement”: as defined in the recitals hereto.
“Borrower”: as defined in the preamble hereto.
“Borrower Obligations”: the collective reference to all obligations of the BorrowerBorrowers from time to time arising under or in respect of (i) the due and punctual payment of (i) the principal of and premium, if any, and interest and fees, if any (including interest and fees accruing during (or that would accrue but for) the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Term Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other obligations and liabilities, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of Holdings and the other Loan Parties under the Credit Agreement and the other Loan Documents, any Hedging Agreement entered into with any Hedging Provider, any Bank Products Agreement entered into with any Bank Products Provider or any Guarantee Obligation of Holdings or any of its Subsidiaries as to which any Secured Party is a beneficiary (including any Management Guarantee entered into with any Management Credit Provider), or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, amounts payable in connection with any such Bank Products Agreement or a termination of any transaction entered into pursuant to any such Hedging Agreement, fees, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees, expenses and disbursements of counsel to the Administrative Agent or any other Secured Party that are required to be paid by the BorrowerBorrowers pursuant to the terms of the Credit Agreement or any other Loan Document); provided that the Borrower Obligations shall not include any Excluded Swap Obligations.
“Borrowers”: as defined in the recitals hereto.
“Code”: the Uniform Commercial Code as from time to time in effect in the State of New York.
“Collateral”: as defined in Section 3; provided that, for purposes of Section 8, “Collateral” shall have the meaning assigned to such term in the Credit Agreement.
“Collateral Account Bank”: a bank which at all times is a Collateral Agent or a Lender or an affiliate thereof as selected by the relevant Grantor and consented to in writing by the Collateral Agent (such consent not to be unreasonably withheld or delayed).
“Collateral Agent”: as defined in the preamble hereto.
“Collateral Proceeds Account”: a non-interest bearing cash collateral account established and maintained by the relevant Grantor at an office of the Collateral Account Bank in the name, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Parties.
“Commercial Tort Action”: any action, other than an action primarily seeking declaratory or injunctive relief with respect to claims asserted or expected to be asserted by Persons other than the Grantors, that is commenced by a Grantor in the courts of the United States of America, any state or territory thereof or any political subdivision of any such state or territory, in which any Grantor seeks damages arising out of torts committed against it that would reasonably be expected to result in a damage award to it exceeding $20,000,000.
“Commodity Exchange Act”: the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.
“Contracts”: with respect to any Grantor, all contracts, agreements, instruments and indentures in any form and portions thereof, to which such Grantor is a party or under which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented, waived or otherwise modified, and all rights of such Grantor thereunder, including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection therewith, (ii) all rights of such Grantor to damages arising thereunder and (iii) all rights of such Grantor to perform and to exercise all remedies thereunder.
“Copyright Licenses”: with respect to any Grantor, all United States written license agreements of such Grantor providing for the grant by or to such Grantor of any right under any United States copyright of such Grantor, other than agreements with any Person who is an Affiliate or a Subsidiary of Holdings or such Grantor, including, without limitation, any material license agreements listed on Schedule 5, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.
“Copyrights”: with respect to any Grantor, all of such Grantor’s right, title and interest in and to all United States copyrights, whether or not the underlying works of authorship have been published or registered, all United States copyright registrations and copyright applications, including, without limitation, any copyright registrations and copyright applications listed on Schedule 5, and (i) all renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof and (iii) the right to sue or otherwise recover for past, present and future infringements and misappropriations thereof.
“Credit Agreement”: as defined in the recitals hereto.
“Credit Facility”: the Credit Agreement or any Additional Credit Facility, as applicable.
“Discharge of ABL Obligations”: as defined in the ABL Intercreditor Agreement.
“Discharge of Additional Obligations”: as defined in the Base Intercreditor Agreement.
“Excluded Assets”: as defined in Subsection 3.3.
“Excluded Swap Obligations”: 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 unlawful 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 at the time the Guarantee of such Guarantor or the grant of such security interest would otherwise have become effective with respect to such related Swap Obligation but for such Guarantor’s failure to constitute an “eligible contract participant” at such time.
“Foreign Intellectual Property”: any right, title or interest in or to any copyrights, copyright licenses, patents, patent applications, patent licenses, trade secrets, trade secret licenses, trademarks, service marks, trademark and service mark applications, trade names, trade dress, trademark licenses, technology, know-how and processes or any other intellectual property governed by or arising or existing under, pursuant to or by virtue of the laws of any jurisdiction other than the United States of America or any state thereof.
“General Fund Account”: the general fund account of the relevant Grantor established at the same office of the Collateral Account Bank as the Collateral Proceeds Account.
“Granting Parties”: as defined in the recitals heretoHoldings, the U.S. Borrower, Holdings’ Domestic Subsidiaries that are party hereto and any other Domestic Subsidiary of Holdings that becomes a party hereto from time to time after the date hereof.
“Grantor”: Holdings, the U.S. Borrower, Holdings’ Domestic Subsidiaries that are party hereto and any other Domestic Subsidiary of Holdings that becomes a party hereto from time to time following the date hereof.
“Guarantor Obligations”: with respect to any Guarantor, the collective reference to (i) the Borrower Obligations guaranteed by such Guarantor pursuant to Section 2 and (ii) all obligations of the Guarantors from time to time arising under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest and fees, if any (including interest and fees accruing during (or that would accrue but for) the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Term Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other obligations and liabilities, including fees, costs, expenses
and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of Holdings and the other Loan Parties under the Credit Agreement and the other Loan Documents, any Hedging Agreement entered into with any Hedging Provider, any Bank Products Agreement entered into with any Bank Products Provider, or any Guarantee Obligation of Holdings or any of its Subsidiaries as to which any Secured Party is a beneficiary (including any Management Guarantee entered into with any Management Credit Provider), or any other document made, delivered or given in connection therewith; provided that the Guarantor Obligations shall not include any Excluded Swap Obligations.
“Guarantors”: the collective reference to each Granting Party, other than the Borrower.
“Hedging Agreement”: any Interest Rate Agreement, Commodities Agreement, Currency Agreement or any other credit or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity, credit or equity values or creditworthiness (including, without limitation, any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement.
“Hedging Provider”: any Person that has entered into a Hedging Agreement with a Grantor with the obligations of such Grantor thereunder being secured by one or more Loan Documents, as designated by the U.S. Borrower in accordance with Section 8.4 hereof (provided that no Person shall, with respect to any Hedging Agreement, be at any time a Hedging Provider with respect to more than one Credit Facility).
“Holdings”: as defined in the preamble hereto.
“Instruments”: as defined in Article 9 of the Code but excluding Pledged Securities.
“Intellectual Property”: with respect to any Grantor, the collective reference to such Grantor’s Copyrights, Copyright Licenses, Patents, Patent Licenses, Trade Secrets, Trade Secret Licenses, Trademarks and Trademark Licenses.
“Intercompany Note”: with respect to any Grantor, any promissory note in a principal amount in excess of $20,000,000 evidencing loans made by such Grantor to Holdings or any of its Restricted Subsidiaries.
“Intercreditor Agreements”: (a) the Base Intercreditor Agreement (upon and during the effectiveness thereof), (b) the ABL Intercreditor Agreement and (c) any Other Intercreditor Agreement that may be entered into in the future by the Collateral Agent and one or more Additional Agents and acknowledged by the U.S. Borrower and, the other Granting Parties (and any other Borrower from time to time (each as amended, amended and restated, waived, supplemented or otherwise modified from time to time (subject to Subsection 9.1)) (upon and during the effectiveness thereof).
“Inventory”: with respect to any Grantor, all inventory (as defined in the Code) of such Grantor, including, without limitation, all Inventory (as defined in the Credit Agreement) of such Grantor.
“Investment Property”: the collective reference to (i) all “investment property” as such term is defined in Section 9-102(a)(49) of the Code as in effect on the date hereof (other than (a) Capital Stock (including for these purposes any investment deemed to be Capital Stock for United States tax purposes) of any Foreign Subsidiary in excess of 65% of any series of such Capital Stock and (b) any Capital Stock excluded from the definition of “Pledged Stock”) and (ii) whether or not constituting “investment property” as so defined, all Pledged Securities.
“Issuers”: the collective reference to issuers of Pledged Stock, including (as of the Closing Date) the Persons identified on Schedule 2 as the issuers of Pledged Stock.
“Lender”: as defined in the preamble hereto.
“Management Credit Provider”: any Person that is a beneficiary of a Management Guarantee, with the obligations of the applicable Grantor thereunder being secured by one or more Loan Documents as designated by the U.S. Borrower in accordance with Section 8.4 hereof (provided that no Person shall, with respect to any Management Guarantee, be at any time a Management Credit Provider with respect to more than one Credit Facility).
“Non-Lender Secured Parties”: the collective reference to all Bank Products Providers, Hedging Providers and Management Credit Providers and their respective successors, assigns and transferees.
“Obligations”: (i) in the case of the U.S. Borrower or any Subsidiary Borrower that becomes a party hereto pursuant to Section 9.5 herein, its Borrower Obligations and its Guarantor Obligations and (ii) in the case of each Guarantor, its Guarantor Obligations.
“Patent Licenses”: with respect to any Grantor, all United States written license agreements of such Grantor providing for the grant by or to such Grantor of any right under any United States patent, patent application, or patentable invention other than agreements with any Person who is an Affiliate or a Subsidiary of Holdings or such Grantor, including, without limitation, the material license agreements listed on Schedule 5, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.
“Patents”: with respect to any Grantor, all of such Grantor’s right, title and interest in and to all United States patents, patent applications and patentable inventions and all reissues and extensions thereof, including, without limitation, all patents and patent applications identified in Schedule 5, and including, without limitation, (i) all inventions and improvements described and claimed therein, (ii) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past, present or future infringements thereof), and (iv) all other rights corresponding thereto in the United States and all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions
thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto.
“Pledged Collateral”: as to any Pledgor, the Pledged Securities, in all cases, now owned or at any time hereafter acquired by such Pledgor, and any Proceeds thereof.
“Pledged Notes”: with respect to any Pledgor, all Intercompany Notes at any time issued to, or held or owned by, such Pledgor.
“Pledged Securities”: the collective reference to the Pledged Notes and the Pledged Stock.
“Pledged Stock”: with respect to any Pledgor, the shares of Capital Stock listed on Schedule 2 as held by such Pledgor, together with any other shares of Capital Stock of any Subsidiary of such Pledgor required to be pledged by such Pledgor pursuant to Subsection 7.9 of the Credit Agreement, as well as any other shares, stock certificates, options or rights of any nature whatsoever in respect of any Capital Stock of any Issuer that may be issued or granted to, or held by, such Pledgor while this Agreement is in effect, in each case, unless and until such time as the pledge of such Capital Stock under this Agreement is released in accordance with the terms hereof and of the Credit Agreement; provided that in no event shall there be pledged, nor shall any Pledgor be required to pledge, directly or indirectly, (i) more than 65% of any series of the outstanding Capital Stock (including for these purposes any investment deemed to be Capital Stock for U.S. tax purposes) of any Foreign Subsidiary, (ii) any Capital Stock of a Subsidiary of any Foreign Subsidiary (other than a Loan Party), (iii) de minimis shares of a Foreign Subsidiary held by any Pledgor as a nominee or in a similar capacity, (iv) any Capital Stock of any Captive Insurance Subsidiary, (v) any Capital Stock of any Excluded Subsidiary that is not a Loan Party (other than, but without limiting clause (i) above, a Subsidiary described in clause (d) of the definition thereof) and (vi) without duplication, any Excluded Assets.
“Pledgor”: Holdings (with respect to Pledged Securities held by Holdings and all other Pledged Collateral of Holdings), the U.S. Borrower (with respect to Pledged Securities held by the U.S. Borrower and all other Pledged Collateral of the U.S. Borrower) and each other Granting Party (with respect to Pledged Securities held by such Granting Party and all other Pledged Collateral of such Granting Party).
“Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of the Code (as in effect on the date hereof) and, in any event, Proceeds of Pledged Securities shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon or distributions or payments with respect thereto.
“Restrictive Agreements”: as defined in Subsection 3.3(a).
“Secured Parties”: the collective reference to (i) the Administrative Agent, the Collateral Agent and each Other Representative, (ii) the Lenders, (iii) the Non-Lender Secured Parties and (iv) the respective successors and assigns and the permitted transferees and endorsees of each of the foregoing.
“Security Collateral”: with respect to any Granting Party, collectively, the Collateral (if any) and the Pledged Collateral (if any) of such Granting Party.
“Senior Priority Obligations”: as defined in the Base Intercreditor Agreement.
“Specified Asset”: as defined in Subsection 4.2.2.
“Swap Obligation”: 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.
“Trade Secret Licenses”: with respect to any Grantor, all United States written license agreements of such Grantor providing for the grant by or to such Grantor of any right under any United States trade secrets, including, without limitation, know-how, processes, formulae, compositions, designs, and confidential business and technical information, and all rights of any kind whatsoever accruing thereunder or pertaining thereto, other than agreements with any Person who is an Affiliate or a Subsidiary of Holdings or such Grantor, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.
“Trade Secrets”: with respect to any Grantor, all of such Grantor’s right, title and interest in and to all United States trade secrets, including, without limitation, know-how, processes, formulae, compositions, designs, and confidential business and technical information, and all rights of any kind whatsoever accruing thereunder or pertaining thereto, including, without limitation, (i) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses, non disclosure agreements and memoranda of understanding entered into in connection therewith, and damages and payments for past or future misappropriations thereof, and (ii) the right to sue or otherwise recover for past, present or future misappropriations thereof.
“Trademark Licenses”: with respect to any Grantor, all United States written license agreements of such Grantor providing for the grant by or to such Grantor of any right under any United States trademarks, service marks, trade names, trade dress or other indicia of trade origin or business identifiers, other than agreements with any Person who is an Affiliate or a Subsidiary of Holdings or such Grantor, including, without limitation, the material license agreements listed on Schedule 5, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.
“Trademarks”: with respect to any Grantor, all of such Grantor’s right, title and interest in and to all United States trademarks, service marks, trade names, trade dress or other indicia of trade origin or business identifiers, trademark and service mark registrations, and applications for trademark or service mark registrations (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 said Act has been filed and accepted, it being understood and agreed that the carve out in this parenthetical shall be applicable only if and for so long as a grant or enforcement of a security interest in such intent to use application would invalidate or otherwise jeopardize Grantor’s rights therein or in the resulting registration), and any renewals thereof, including, without limitation, each registration and application
identified in Schedule 5, and including, without limitation, (i) the right to sue or otherwise recover for any and all past, present and future infringements or dilutions thereof, (ii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (iii) all other rights corresponding thereto and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto in the United States, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark, service mark, trade name, trade dress or other indicia of trade origin or business identifiers.
“Vehicles”: all cars, trucks, trailers, construction and earth moving equipment and other vehicles covered by a certificate of title law of any state and all tires and other appurtenances to any of the foregoing.
1.2 Other Definitional Provisions. (a)The words “hereof”, “herein”, “hereto” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Annex references are to this Agreement unless otherwise specified. The words “include”, “includes”, and “including” shall be deemed to be followed by the phrase “without limitation”.
(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral, Pledged Collateral or Security Collateral, or any part thereof, when used in relation to a Granting Party shall refer to such Granting Party’s Collateral, Pledged Collateral or Security Collateral or the relevant part thereof.
(d) All references in this Agreement to any of the property described in the definition of the term “Collateral” or “Pledged Collateral”, or to any Proceeds thereof, shall be deemed to be references thereto only to the extent the same constitute Collateral or Pledged Collateral, respectively.
SECTION 2
Guarantee
2.1 Guarantee. (a) Each of the Guarantors hereby, jointly and severally (with the other Guarantors), unconditionally and irrevocably, guarantees to the Administrative Agent, for the benefit of the Secured Parties, the prompt and complete payment and performance by theeach Borrower when due and payable (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations owed to the Secured Parties.
(b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount that can be guaranteed by such Guarantor under applicable law, including applicable federal and state laws relating to the insolvency of debtors; provided that, to the maximum extent permitted under applicable law, it is the intent of the parties
hereto that the rights of contribution of each Guarantor provided in Subsection 2.2 be included as an asset of the respective Guarantor in determining the maximum liability of such Guarantor hereunder.
(c) Each Guarantor agrees that the Borrower Obligations guaranteed by it hereunder may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Administrative Agent or any other Secured Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in full force and effect until the earliest to occur of (i) the first date on which all of the Loans and all other Borrower Obligations then due and owing, and the obligations of each Guarantor under the guarantee contained in this Section 2 then due and owing shall have been satisfied by payment in full in cash and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement any of the BorrowerBorrowers may be free from any Borrower Obligations, (ii) as to any Guarantor, a sale or other disposition of all the Capital Stock of such Guarantor (other than to thea Borrower, Holdings or a Subsidiary Guarantor), or any other transaction or occurrence as a result of which such Guarantor ceases to be a Restricted Subsidiary of Holdings, in each case that is permitted under the Credit Agreement and (iii) as to any Guarantor, such Guarantor becoming an Excluded Subsidiary.
(e) No payment made by theany Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any other Secured Party from any of the BorrowerBorrowers, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of any of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment received or collected from such Guarantor in respect of any of the Borrower Obligations), remain liable for the Borrower Obligations of each Borrower guaranteed by it hereunder up to the maximum liability of such Guarantor hereunder until the earliest to occur of (i) the first date on which all the Loans and all other Borrower Obligations then due and owing are paid in full in cash and the Commitments are terminated, (ii) as to any Guarantor, a sale or other disposition of all the Capital Stock of such Guarantor (other than to thea Borrower, Holdings or a Subsidiary Guarantor), or any other transaction or occurrence as a result of which such Guarantor ceases to be a Restricted Subsidiary of Holdings, in each case that is permitted under the Credit Agreement and (iii) as to any Guarantor, such Guarantor becoming an Excluded Subsidiary.
2.2 Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share (based, to the maximum extent permitted by law, on the respective Adjusted Net Worth of the Guarantors on the date the respective payment is made) of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder that has not paid its proportionate share of such payment. Each Guarantor’s right of contribution shall be subject to the terms and conditions of Subsection 2.3. The provisions of this Subsection 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent and the other Secured Parties, and each
Guarantor shall remain liable to the Administrative Agent and the other Secured Parties for the full amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Administrative Agent or any other Secured Party, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any other Secured Party against theany Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any other Secured Party for the payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from theany Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Administrative Agent and the other Secured Parties by the BorrowerBorrowers on account of the Borrower Obligations are paid in full in cash and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations shall not have been paid in full in cash or any of the Commitments shall remain in effect, such amount shall be held by such Guarantor for the benefit of the Administrative Agent and the other Secured Parties and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be held as collateral security for all of the Borrower Obligations (whether matured or unmatured) guaranteed by such Guarantor and/or then or at any time thereafter may be applied against any Borrower Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine.
2.4 Amendments, etc. with Respect to the Obligations. To the maximum extent permitted by law, each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Borrower Obligations made by the Collateral Agent, the Administrative Agent or any other Secured Party may be rescinded by the Collateral Agent, the Administrative Agent or such other Secured Party and any of the Borrower Obligations continued, and the Borrower Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, waived, modified, accelerated, compromised, subordinated, waived, surrendered or released by the Collateral Agent, the Administrative Agent or any other Secured Party, and the Credit Agreement and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, waived, modified, supplemented or terminated, in whole or in part, as the Collateral Agent or the Administrative Agent (or the Required Lenders or the applicable Lender(s), as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Collateral Agent, the Administrative Agent or any other Secured Party for the payment of any of the Borrower Obligations may be sold, exchanged, waived, surrendered or released. None of the Collateral Agent, the Administrative Agent and each other Secured Party shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for any of the Borrower Obligations or for the guarantee contained in this Section 2 or any property subject thereto, except to the extent required by applicable law.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives, to the maximum extent permitted by applicable law, any and all notice of the creation, renewal, extension or
accrual of any of the Borrower Obligations and notice of or proof of reliance by the Collateral Agent, the Administrative Agent or any other Secured Party upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; each of the Borrower Obligations, and any obligation contained therein, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between any of the BorrowerBorrowers and any of the Guarantors, on the one hand, and the Collateral Agent, the Administrative Agent and the other Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives, to the maximum extent permitted by applicable law, diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon theany Borrower or any of the other Guarantors with respect to any of the Borrower Obligations. Each Guarantor understands and agrees, to the extent permitted by law, that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment and not of collection. Each Guarantor hereby waives, to the maximum extent permitted by applicable law, any and all defenses (other than any claim alleging breach of a contractual provision of any of the Loan Documents) that it may have arising out of or in connection with any and all of the following: (a) the validity or enforceability of the Credit Agreement or any other Loan Document, any of the Borrower Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Collateral Agent, the Administrative Agent or any other Secured Party, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available to or be asserted by any of the BorrowerBorrowers against the Collateral Agent, the Administrative Agent or any other Secured Party, (c) any change in the time, place, manner or place of payment, amendment, or waiver or increase in any of the Obligations, (d) any exchange, non-perfection, taking, or release of Security Collateral, (e) any change in the structure or existence of any of the BorrowerBorrowers, (f) any application of Security Collateral to any of the Obligations, (g) any law, regulation or order of any jurisdiction, or any other event, affecting any term of any Obligation or the rights of the Collateral Agent, the Administrative Agent or any other Secured Party with respect thereto, including, without limitation: (i) the application of any such law, regulation, decree or order, including any prior approval, which would prevent the exchange of any currency (other than Dollars) for Dollars or the remittance of funds outside of such jurisdiction or the unavailability of Dollars in any legal exchange market in such jurisdiction in accordance with normal commercial practice, (ii) a declaration of banking moratorium or any suspension of payments by banks in such jurisdiction or the imposition by such jurisdiction or any Governmental Authority thereof of any moratorium on, the required rescheduling or restructuring of, or required approval of payments on, any indebtedness in such jurisdiction, (iii) any expropriation, confiscation, nationalization or requisition by such country or any Governmental Authority that directly or indirectly deprives theany Borrower of any assets or itstheir use, or of the ability to operate its business or a material part thereof, or (iv) any war (whether or not declared), insurrection, revolution, hostile act, civil strife or similar events occurring in such jurisdiction which has the same effect as the events described in clause (i), (ii) or (iii) above (in each of the cases contemplated in clauses (i) through (iv) above, to the extent occurring or existing on or at any time after the date of this Agreement), or (h) any other circumstance whatsoever (other than payment in full in cash of the Borrower Obligations guaranteed by it hereunder) (with or without notice to or knowledge of any of the BorrowerBorrowers or such Guarantor) or any existence of or reliance on any representation by the Secured Parties that constitutes, or might be construed to constitute, an equitable or legal discharge of any of the BorrowerBorrowers for the Borrower Obligations, or of such Guarantor
under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Collateral Agent, the Administrative Agent and any other Secured Party may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against any of the BorrowerBorrowers, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations guaranteed by such Guarantor hereunder or any right of offset with respect thereto, and any failure by the Collateral Agent, the Administrative Agent or any other Secured Party to make any such demand, to pursue such other rights or remedies or to collect any payments from theany Borrower, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of any of the BorrowerBorrowers, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Collateral Agent, the Administrative Agent or any other Secured Party against any Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee of any Guarantor contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Borrower Obligations guaranteed by such Guarantor hereunder is rescinded or must otherwise be restored or returned by the Collateral Agent, the Administrative Agent or any other Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of theany Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, theany Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim, in Dollars (or in the case of any amount required to be paid in any other currency pursuant to the requirements of the Credit Agreement or other agreement relating to the respective Obligations, such other currency), at the Administrative Agent’s office specified in Subsection 11.2 of the Credit Agreement or such other address as may be designated in writing by the Administrative Agent to such Guarantor from time to time in accordance with Subsection 11.2 of the Credit Agreement.
SECTION 3
Grant of Security Interest
3.1 Grant. Each Grantor hereby grants to the Collateral Agent, for the benefit of the Secured Parties, a security interest in all of the Collateral of such Grantor, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations of such Grantor, except as provided in Subsection 3.3. The term “Collateral”, as to any Grantor, means the following property (wherever located) now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest, except as provided in Subsection 3.3:
(a) all Accounts;
(b) all Money (including all cash);
(c) all Cash Equivalents;
(d) all Chattel Paper;
(e) all Contracts;
(f) all Deposit Accounts;
(g) all Documents;
(h) all Equipment and Goods;
(i) all General Intangibles;
(j) all Instruments;
(k) all Intellectual Property;
(l) all Inventory;
(m) all Investment Property;
(n) all Fixtures;
(o) all Supporting Obligations;
(p) all Commercial Tort Claims constituting Commercial Tort Actions described in Schedule 6 (together with any Commercial Tort Actions subject to a further writing provided in accordance with Subsection 5.2.12);
(q) all books and records relating to the foregoing;
(r) the Collateral Proceeds Account; and
(s) to the extent not otherwise included, all Proceeds 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; provided that, Collateral shall not include any Pledged Collateral, or any property or assets described in the proviso to the definition of Pledged Stock.
3.2 Pledged Collateral. Each Granting Party that is a Pledgor, hereby grants to the Collateral Agent, for the benefit of the Secured Parties, a security interest in all of the Pledged Collateral of such Pledgor now owned or at any time hereafter acquired by such Pledgor, including any Proceeds thereof, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations of such Pledgor, except as provided in Subsection 3.3.
3.3 Certain Limited Exceptions. No security interest is or will be granted pursuant to this Agreement or any other Security Document in any right, title or interest of any Granting Party under or in, and “Collateral” and “Pledged Collateral” shall not include the following (collectively, the “Excluded Assets”):
(a) any Instruments, Contracts, Chattel Paper, General Intangibles, Copyright Licenses, Patent Licenses, Trademark Licenses, Trade Secret Licenses or other contracts or agreements with or issued by Persons other than Holdings, a Subsidiary of Holdings or the U.S. Borrower or an Affiliate of any of the foregoing (collectively, “Restrictive Agreements”) that would otherwise be included in the Security Collateral (and such Restrictive Agreements shall not be deemed to constitute a part of the Security Collateral) for so long as, and to the extent that, the granting of such a security interest pursuant hereto would result in a breach, default or termination of such Restrictive Agreements (in each case, except to the extent that, pursuant to the Code or any other applicable law, the granting of security interests therein can be made without resulting in a breach, default or termination of such Restrictive Agreements);
(b) any Equipment or other property that would otherwise be included in the Security Collateral (and such Equipment or other property shall not be deemed to constitute a part of the Security Collateral) if such Equipment or other property (x) is subject to a Lien described in clause (h) (with respect to Purchase Money Obligations or Capitalized Lease Obligations) or (o) (with respect to such Liens described in such clause (h)) of the definition of “Permitted Liens” in the Credit Agreement (or any corresponding provision of any Additional Credit Facility; provided that such provision is not materially less favorable to the Lenders than the corresponding provision in the Credit Agreement (as reasonably determined in writing by the U.S. Borrower and notified in writing to the Collateral Agent) (but in each case only for so long as such Liens are in place) or (y) is subject to any Lien in respect of Hedging Obligations permitted by Subsection 8.6 of the Credit Agreement as a “Permitted Lien” pursuant to clause (h) of the definition thereof in the Credit Agreement (or any corresponding provision of any Additional Credit Facility; provided that such provision is not materially less favorable to the Lenders than the corresponding provision in the Credit Agreement (as reasonably determined in writing by the U.S. Borrower and notified in writing to the Collateral Agent) (but in each case only for so long as such Liens are in place), and, in the case of such other property, such other property consists solely of (i) cash, Cash Equivalents or Temporary Cash Investments, together with proceeds, dividends and distributions in respect thereof, (ii) any assets relating to such assets, proceeds, dividends or distributions, or to such Hedging Obligations, and/or (iii) any other assets consisting of, relating to or arising under or in connection with (1) any Hedging Obligations or (2) any other agreements, instruments or documents related to any such Hedging Obligations or to any of the assets referred to in any of subclauses (i) through (iii) of this subclause (y);
(c) any property (and/or related rights and/or assets) that (A) would otherwise be included in the Security Collateral (and such property (and/or related rights and/or assets) shall not be deemed to constitute a part of the Security Collateral) if such property has been sold or otherwise transferred in connection with a Sale and Leaseback Transaction (as defined in the definition of “Exempt Sale and Leaseback Transaction” in the Credit Agreement) permitted under clause (x) or (xviii) of the definition of “Asset Disposition” in
the Credit Agreement (or any corresponding provision of any Additional Credit Facility; provided that such provision is not materially less favorable to the Lenders than the corresponding provision in the Credit Agreement (as reasonably determined in writing by the U.S. Borrower and notified in writing to the Collateral Agent), or (B) is subject to any Liens permitted under Subsection 8.6 of the Credit Agreement (or any corresponding provision of any Additional Credit Facility; provided that such provision is not materially less favorable to the Lenders than the corresponding provision in the Credit Agreement in any material respect (as reasonably determined in writing by the U.S. Borrower and notified in writing to the Collateral Agent) which relates to property subject to any such Sale and Leaseback Transaction (as defined in the definition of “Exempt Sale and Leaseback Transaction” in the Credit Agreement) or general intangibles related thereto (but only for so long as such Liens are in place); provided that, notwithstanding the foregoing, a security interest of the Collateral Agent shall attach to any money, securities or other consideration received by any Grantor as consideration for the sale or other disposition of such property as and to the extent such consideration would otherwise constitute Security Collateral;
(d) Capital Stock (including for these purposes any investment deemed to be Capital Stock for United States tax purposes) which is described in the proviso to the definition of Pledged Stock;
(e) any Money, cash, checks, other negotiable instruments, funds and other evidence of payment held in any Deposit Account of the U.S. Borrower or any of its Subsidiaries in the nature of a security deposit with respect to obligations for the benefit of the U.S. Borrower or any of its Subsidiaries, which must be held for or returned to the applicable counterparty under applicable law or pursuant to permitted Contractual Obligations;
(f) Letter-of-Credit Rights;
(g) any interest in leased real property (including Fixtures not constituting equipment related thereto) (and there shall be no requirement to deliver landlord lien waivers, estoppels or collateral access letters);
(h) any fee interest in owned real property (including Fixtures related thereto) if the Fair Market Value of such fee interest is less than $10,000,000 individually;
(i) any Vehicles and any assets subject to certificate of title;
(j) Commercial Tort Claims individually reasonably expected to result in a recovery of less than $20,000,000;
(k) assets to the extent the granting or perfecting of a security interest in such assets would result in costs or other consequences to Holdings or any of its Subsidiaries as reasonably determined in writing by the U.S. Borrower and the Administrative Agent, that are excessive in view of the benefits that would be obtained by the Secured Parties;
(l) those assets over which the granting of security interests in such assets would be prohibited by contract permitted under the Credit Agreement binding on any assets as of
the date hereof or acquired after the date hereof at the time of such acquisition and not incurred in contemplation of such acquisition, applicable law or regulation or the organizational or joint venture documents of any non wholly ownednon-Wholly Owned Subsidiary (including permitted liens, leases and licenses) (in each case, after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code, other than proceeds and receivables thereof to the extent that their assignment is expressly deemed effective under the Uniform Commercial Code notwithstanding such prohibitions), or to the extent that such security interests would result in adverse tax consequences to Holdings or any one or more of its Subsidiaries as reasonably determined in writing by Holdings and notified in writing to the Collateral Agent (it being understood that the Lenders shall not require Holdings or any of its subsidiaries to enter into any security agreements or pledge agreements governed by foreign law);
(m) [reserved];
(n) Foreign Intellectual Property;
(o) any aircraft, airframes, aircraft engines, helicopters, vessels or rolling stock or any Equipment or other assets constituting a part thereof;
(p) any Capital Stock and other securities of a Subsidiary of Holdings to the extent that the pledge of or grant of any other Lien on such Capital Stock and other securities for the benefit of any holders of securities results in Holdings or any of its Restricted Subsidiaries being required to file separate financial statements for such Subsidiary with the Securities and Exchange Commission (or any other governmental authority) pursuant to either Rule 3-10 or 3-16 of Regulation S-X under the Securities Act, or any other law, rule or regulation as in effect from time to time, but only to the extent necessary to not be subject to such requirement; and
(q) any Goods in which a security interest is not perfected by filing a financing statement in the applicable Grantor’s jurisdiction of organization.
3.4 Intercreditor Relations. Notwithstanding anything herein to the contrary, it is the understanding of the parties that the Liens granted pursuant to Subsections 3.1 and 3.2 shall be (i) prior to the Discharge of Additional Obligations that are Senior Priority Obligations, pari passu and equal in priority to the Liens granted to any Additional Agent for the benefit of the holders of the applicable Additional Obligations that are Senior Priority Obligations to secure such Additional Obligations that are Senior Priority Obligations pursuant to the applicable Additional Collateral Documents (except as may be separately otherwise agreed between the Collateral Agent, on behalf of itself and the Secured Parties, and any Additional Agent, on behalf of itself and the Additional Secured Parties represented thereby) and (ii) prior to the Discharge of ABL Obligations be subject to the priorities set forth in the ABL Intercreditor Agreement. The Collateral Agent acknowledges and agrees that the relative priority of the Liens granted to the Collateral Agent, the Administrative Agent, the ABL Representative and any Additional Agent shall be determined solely pursuant to any applicable Intercreditor Agreement, and not by priority as a matter of law or otherwise. Notwithstanding anything herein to the contrary, the Liens and security interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of each applicable Intercreditor Agreement. In the event
of any conflict between the terms of any Intercreditor Agreement and this Agreement, the terms of such Intercreditor Agreement shall govern and control as among (i) the Collateral Agent and any Additional Agent, in the case of the Base Intercreditor Agreement, (i) the Collateral Agent and the ABL Representative, in the case of the ABL Intercreditor Agreement and (iii) the Collateral Agent and any other secured creditor (or agent therefor) party thereto, in the case of any Other Intercreditor Agreement. In the event of any such conflict, each Grantor may act (or omit to act) in accordance with such Intercreditor Agreement, and shall not be in breach, violation or default of its obligations hereunder by reason of doing so. Notwithstanding any other provision hereof, (i) for so long as any Additional Obligations that are Senior Priority Obligations remain outstanding, any obligation hereunder to deliver to the Collateral Agent any Control Collateral (as defined in the Base Intercreditor Agreement) shall be satisfied by causing such Control Collateral to be delivered to the applicable Senior Priority Representative (as defined in the Base Intercreditor Agreement) to be held by such Senior Priority Representative for the benefit of the Agent in accordance with the Base Intercreditor Agreement and (ii) for so long as any ABL Obligations (as defined in the ABL Intercreditor Agreement) remain outstanding, any obligation hereunder to deliver to the Collateral Agent any ABL Priority Collateral shall be satisfied by causing such ABL Priority Collateral to be delivered to the ABL Collateral Representative (as defined in the ABL Intercreditor Agreement) to be held by such ABL Collateral Representative for the benefit of the Agent in accordance with the ABL Intercreditor Agreement.
SECTION 4
Representations and Warranties
4.1 Representations and Warranties of Each Guarantor. To induce the Collateral Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the BorrowerBorrowers thereunder, each Guarantor hereby represents and warrants to the Collateral Agent and each other Secured Party that the representations and warranties set forth in Section 5 of the Credit Agreement as they relate to such Guarantor or to the Loan Documents to which such Guarantor is a party, each of which representations and warranties is hereby incorporated herein by reference, are true and correct in all material respects, and the Collateral Agent and each other Secured Party shall be entitled to rely on each of such representations and warranties as if fully set forth herein; provided that each reference in each such representation and warranty to the U.S. Borrower’s knowledge shall, for the purposes of this Subsection 4.1, be deemed to be a reference to such Guarantor’s knowledge.
4.2 Representations and Warranties of Each Grantor. To induce the Collateral Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the BorrowerBorrowers thereunder, each Grantor hereby represents and warrants to the Collateral Agent and each other Secured Party that, in each case after giving effect to the Transactions:
4.2.1 Title; No Other Liens. Except for the security interests granted to the Collateral Agent for the benefit of the Secured Parties pursuant to this Agreement and the other Liens permitted to exist on such Grantor’s Collateral by the Credit Agreement (including, without limitation, Subsection 8.6 thereof), such Grantor owns each item of such Grantor’s Collateral free and clear of any and all Liens. As of the Closing Date, except as set forth on Schedule 3, to the knowledge of such Grantor, no currently effective financing statement or other similar public notice with respect to any
Lien securing Indebtedness on all or any part of such Grantor’s Collateral is on file or of record in any public office in the United States of America, any state, territory or dependency thereof or the District of Columbia, except such as have been filed in favor of the Collateral Agent for the benefit of the Secured Parties pursuant to this Agreement or as are permitted by the Credit Agreement (including, without limitation, Subsection 8.6 thereof) or any other Loan Document or for which termination statements will be delivered on the Closing Date.
4.2.2 Perfected First Priority Liens. (a) This Agreement is effective to create, as collateral security for the Obligations of such Grantor, valid and enforceable Liens on such Grantor’s Security Collateral in favor of the Collateral Agent for the benefit of the Secured Parties, except as to enforcement, as may be limited by applicable domestic or foreign 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 in equity or at law) and an implied covenant of good faith and fair dealing.
(b) Except with regard to (i) Liens (if any) on Specified Assets and (ii) any rights in favor of the United States government as required by law (if any), upon the completion of the Filings and, with respect to Instruments, Chattel Paper and Documents upon the earlier of such Filing or the delivery to and continuing possession by the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, of all Instruments, Chattel Paper and Documents a security interest in which is perfected by possession, and upon the obtaining and maintenance of “control” (as described in the Code) by the Collateral Agent, the Administrative Agent, the applicable Collateral Representative or any Additional Agent, as applicable (or their respective agents appointed for purposes of perfection), in accordance with any applicable Intercreditor Agreement of all Deposit Accounts, the Collateral Proceeds Account and all Electronic Chattel Paper a security interest in which is perfected by “control” (in the case of Deposit Accounts, to the extent required under the Credit Agreement) and in the case of Commercial Tort Actions (other than such Commercial Tort Actions listed on Schedule 6 on the date of this Agreement), upon the taking of the actions required by Subsection 5.2.12, the Liens created pursuant to this Agreement will constitute valid Liens on and (to the extent provided herein) perfected security interests in such Grantor’s Collateral in favor of the Collateral Agent for the benefit of the Secured Parties, and will be prior to all other Liens of all other Persons securing Indebtedness, in each case other than Liens permitted by the Credit Agreement (including Permitted Liens) (and subject to any applicable Intercreditor Agreement), and enforceable as such as against all other Persons other than Ordinary Course Transferees, except to the extent that the recording of an assignment or other transfer of title to the Collateral Agent, the Administrative Agent, the applicable Collateral Representative or any Additional Agent (in accordance with any applicable Intercreditor Agreement) or the recording of other applicable documents in the United States Patent and Trademark Office or United States Copyright Office may be necessary for perfection or enforceability, and except as to enforcement, as may be limited by applicable domestic or foreign 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 in equity or at law) and an
implied covenant of good faith and fair dealing. As used in this Subsection 4.2.2(b), the following terms shall have the following meanings:
“Filings”: the filing or recording of (i) the Financing Statements as set forth in Schedule 3, (ii) this Agreement or a notice thereof with respect to Intellectual Property as set forth in Schedule 3, and (iii) any filings after the Closing Date in any other jurisdiction as may be necessary under any Requirement of Law.
“Financing Statements”: the financing statements attached hereto on Schedule 4A for filing in the jurisdictions listed in Schedule 4B.
“Ordinary Course Transferees”: (i) with respect to goods only, buyers in the ordinary course of business and lessees in the ordinary course of business to the extent provided in Section 9-320(a) and 9-321 of the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction, (ii) with respect to general intangibles only, licensees in the ordinary course of business to the extent provided in Section 9-321 of the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction and (iii) any other Person who is entitled to take free of the Lien pursuant to the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction.
“Specified Assets”: the following property and assets of such Grantor:
(1) Patents, Patent Licenses, Trademarks and Trademark Licenses to the extent that (a) Liens thereon cannot be perfected by the filing of financing statements under the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction or by the filing and acceptance of intellectual property security agreements in the United States Patent and Trademark Office or (b) such Patents, Patent Licenses, Trademarks and Trademark Licenses are not, individually or in the aggregate, material to the business of the U.S. Borrower and its Subsidiaries taken as a whole;
(2) Copyrights and Copyright Licenses with respect thereto and Accounts or receivables arising therefrom to the extent that (a) Liens thereon cannot be perfected by filing and acceptance of intellectual property security agreements in the United States Copyright Office or (b) the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction is not applicable to the creation or perfection of Liens thereon;
(3) Collateral for which the perfection of Liens thereon requires filings in or other actions under the laws of jurisdictions outside of the United States of America, any State, territory or dependency thereof or the District of Columbia;
(4) goods included in Collateral received by any Person from any Grantor for “sale or return” within the meaning of Section 2-326(1)(b) of the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction, to the extent of claims of creditors of such Person;
(5) Fixtures, Vehicles, any other assets subject to certificates of title, and Money and Cash Equivalents (other than Cash Equivalents constituting Investment Property to the extent a security interest therein is perfected by the filing of a financing statement under the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction);
(6) Proceeds of Accounts or Inventory which do not themselves constitute Collateral or which do not constitute identifiable Cash Proceeds or which have not yet been transferred to or deposited in the Collateral Proceeds Account (if any); and
(7) uncertificated securities (to the extent a security interest is not perfected by the filing of a financing statement under the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction).
4.2.3 Jurisdiction of Organization. On the date hereof, such Grantor’s jurisdiction of organization is specified on Schedule 4B.
4.2.4 Farm Products. None of such Grantor’s Collateral constitutes, or is the Proceeds of, Farm Products.
4.2.5 Accounts Receivable. The amounts represented by such Grantor to the Administrative Agent or the other Secured Parties from time to time as owing by each account debtor or by all account debtors in respect of such Grantor’s Accounts Receivable constituting Security Collateral will at such time be the correct amount, in all material respects, actually owing by such account debtor or debtors thereunder, except to the extent that appropriate reserves therefor have been established on the books of such Grantor in accordance with GAAP. Unless otherwise indicated in writing to the Administrative Agent, each Account Receivable of such Grantor arises out of a bona fide sale and delivery of goods or rendition of services by such Grantor. Such Grantor has not given any account debtor any deduction in respect of the amount due under any such Account, except in the ordinary course of business or as such Grantor may otherwise advise the Administrative Agent in writing.
4.2.6 Patents, Copyrights and Trademarks. Schedule 5 lists all material Trademarks, material Copyrights and material Patents, in each case, registered in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, and owned by such Grantor in its own name as of the date hereof, and all material Trademark Licenses, all material Copyright Licenses and all material Patent Licenses (including, without limitation, material Trademark Licenses for registered Trademarks, material Copyright Licenses for registered Copyrights and material Patent Licenses for registered Patents but excluding licenses to commercially available “off-the-shelf” software) owned by such Grantor in its own name as of the date hereof, in each case, that is solely United States Intellectual Property.
4.3 Representations and Warranties of Each Pledgor. To induce the Collateral Agent, the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the BorrowerBorrowers thereunder, each Pledgor hereby represents and warrants to the Collateral Agent and each other Secured Party that:
4.3.1 Except as provided in Subsection 3.3, the shares of Pledged Stock pledged by such Pledgor hereunder constitute (i) in the case of shares of a Domestic Subsidiary, all the issued and outstanding shares of all classes of the Capital Stock of such Domestic Subsidiary owned by such Pledgor and (ii) in the case of any Pledged Stock constituting Capital Stock of any Foreign Subsidiary, as of the Closing Date such percentage (not more than 65%) as is specified on Schedule 2 of all the issued and outstanding shares of all classes of the Capital Stock of each such Foreign Subsidiary owned by such Pledgor.
4.3.2 [Reserved].
4.3.3 Such Pledgor is the record and beneficial owner of, and has good title to, the Pledged Securities pledged by it hereunder, free of any and all Liens securing Indebtedness owing to any other Person, except the security interest created by this Agreement and Liens permitted by the Credit Agreement (including Permitted Liens).
4.3.4 Upon the delivery to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, of the certificates evidencing the Pledged Securities held by such Pledgor together with executed undated stock powers or other instruments of transfer, the security interest created by this Agreement in such Pledged Securities constituting certificated securities, assuming the continuing possession of such Pledged Securities by the Collateral Agent, the applicable Collateral Representative or any Additional Agent as applicable, in accordance with any applicable Intercreditor Agreement, will constitute a valid, perfected first priority (subject, in terms of priority only, to the priority of the Liens of the applicable Collateral Representative and any Additional Agent) security interest in such Pledged Securities to the extent provided in and governed by the Uniform Commercial Code, enforceable in accordance with its terms against all creditors of such Pledgor and any Persons purporting to purchase such Pledged Securities from such Pledgor to the extent provided in and governed by the Uniform Commercial Code, in each case subject to Liens permitted by the Credit Agreement (including Permitted Liens) (and any applicable Intercreditor Agreement), and except as to enforcement, as may be limited by applicable domestic or foreign 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 in equity or at law) and an implied covenant of good faith and fair dealing.
4.3.5 Upon the earlier of (x) (to the extent a security interest in uncertificated securities may be perfected by the filing of a financing statement) the filing of the Financing Statements or of financing statements delivered pursuant to Subsection 7.9 of the Credit Agreement in the relevant jurisdiction and (y) the obtaining and maintenance of “control” (as described in the Code) by the Collateral Agent, the applicable Collateral Representative or any Additional Agent (or their respective agents appointed for purposes of perfection), as applicable, in accordance with each applicable Intercreditor Agreement, of all Pledged Securities that constitute uncertificated securities, the security interest created by this Agreement in such Pledged Securities that constitute uncertificated securities, will constitute a valid, perfected first priority subject, in terms of priority only, to the priority of the Liens of the applicable Collateral Representative and any Additional Agent) security interest in such Pledged Securities constituting uncertificated securities to the extent provided in and governed by the Code, enforceable in accordance with its terms against all creditors of such Pledgor and any persons purporting to purchase such Pledged Securities from such Pledgor, to the extent provided in and governed by the Code, in each case subject to Liens permitted by the Credit Agreement (including Permitted Liens) (and any applicable Intercreditor Agreement), and except as to enforcement, as may be limited by applicable domestic or foreign 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 in equity or at law) and an implied covenant of good faith and fair dealing.
SECTION 5
Covenants
5.1 Covenants of Each Guarantor. Each Guarantor covenants and agrees with the Collateral Agent and the other Secured Parties that, from and after the date of this Agreement until the earliest to occur of (i) the date upon which the Loans and all other Obligations then due and owing, shall have been paid in full in cash, and the Commitments shall have terminated, (ii) as to any Guarantor, a sale or other disposition of all the Capital Stock of such Guarantor (other than to thea Borrower or a Subsidiary Guarantor), or any other transaction or occurrence as a result of which such Guarantor ceases to be a Restricted Subsidiary of Holdings, in each case that is permitted under the Credit Agreement or (iii) as to any Guarantor, such Guarantor becoming an Excluded Subsidiary, such Guarantor shall take, or shall refrain from taking, as the case may be, each action that is necessary to be taken or not taken, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor or any of its Restricted Subsidiaries.
5.2 Covenants of Each Grantor. Each Grantor covenants and agrees with the Collateral Agent and the other Secured Parties that, from and after the date of this Agreement until the earliest to occur of (i) the date upon which the Loans and all other Obligations then due and owing shall have been paid in full in cash and the Commitments shall have terminated, (ii) a sale or other disposition of all the Capital Stock of such Grantor (other than to thea Borrower or a Subsidiary Guarantor), or any other transaction or occurrence as a result of which such Grantor ceases to be a Restricted Subsidiary of Holdings, in each case that is permitted under the Credit Agreement or (iii) as to any Grantor, such Grantor becoming an Excluded Subsidiary:
5.2.1 Delivery of Instruments and Chattel Paper. If any amount payable under or in connection with any of such Grantor’s Collateral shall be or become evidenced by any Instrument or Chattel Paper, such Grantor shall (except as provided in the following sentence) be entitled to retain possession of all Collateral of such Grantor evidenced by any Instrument or Chattel Paper, and shall hold all such Collateral for the Collateral Agent, for the benefit of the Secured Parties. In the event that an Event of Default shall have occurred and be continuing, upon the request of the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, such Instrument or Chattel Paper shall be promptly delivered to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, duly indorsed in a manner reasonably satisfactory to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, to be held as Collateral pursuant to this Agreement. Such Grantor shall not permit any other Person to possess any such Collateral at any time other than in connection with any sale or other disposition of such Collateral in a transaction permitted by the Credit Agreement or as contemplated by the Intercreditor Agreements.
5.2.2 Control Agreements. With respect to each Deposit Account and Securities Account subject to a control agreement for the benefit of an ABL Representative (the “ABL Control Agreement”), the applicable Grantor shall on such date as required pursuant to Section 7.13 of the Credit Agreement (with respect to any such control agreements in existence on the Closing Date) or simultaneously with the delivery thereof to the ABL Representative pursuant to the Senior ABL Facility, deliver to the Collateral Agent a duly executed control agreement, in form reasonably
satisfactory to the Collateral Agent, granting to the Collateral Agent “control” within the meaning of the UCC over such Deposit Account or Securities Account at the time it enters into such ABL Control Agreement; provided that any such control agreement shall terminate upon a Discharge of ABL Obligations.
5.2.3 Payment of Obligations. Such Grantor will pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all material taxes, assessments and governmental charges or levies imposed upon such Grantor’s Collateral or in respect of income or profits therefrom, as well as all material claims of any kind (including, without limitation, material claims for labor, materials and supplies) against or with respect to such Grantor’s Collateral, except that no such tax, assessment, charge, levy or claim need be paid, discharged or satisfied if the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of such Grantor and except to the extent that the failure to do so, in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
5.2.4 Maintenance of Perfected Security Interest; Further Documentation. (a) Such Grantor shall use commercially reasonable efforts to maintain the security interest created by this Agreement in such Grantor’s Security Collateral as a perfected security interest as and to the extent described in Subsection 4.2.2 and to defend the security interest created by this Agreement in such Grantor’s Security Collateral against the claims and demands of all Persons whomsoever (subject to the other provisions hereof).
(b) Such Grantor will furnish to the Collateral Agent from time to time statements and schedules further identifying and describing such Grantor’s Security Collateral and such other reports in connection with such Grantor’s Security Collateral as the Collateral Agent may reasonably request in writing, all in reasonable detail.
(c) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted by such Grantor, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code (or other similar laws) as in effect from time to time in any United States jurisdiction with respect to the security interests created hereby; provided that, notwithstanding any other provision of this Agreement or any other Loan Document, neither the U.S. Borrower nor any Grantor will be required to (v) other than in respect of the Capital Stock of Loan Parties, take any action in any jurisdiction other than the United States of America, or required by the laws of any such non-U.S. jurisdiction, or enter into any security agreement or pledge agreement governed by the laws of any such non-U.S. jurisdiction, in order to create any security interests (or other Liens) in assets located or titled outside of the United States of America or to perfect any security interests (or other Liens) in any such Collateral, (w) deliver control agreements with respect to, or confer perfection by “control” over, any deposit accounts, bank or securities account (except as provided in Section 5.2.2) or other Collateral, except in the case of Security Collateral that constitutes Capital Stock or Pledged Notes in certificated form, delivering such Capital Stock or Pledged Notes to the Collateral Agent, (or another Person as required under any applicable Intercreditor Agreement), (x) take any action in order to perfect any
security interests in any assets specifically requiring perfection through control (including cash, cash equivalents, deposit accounts or securities accounts) (except, in each case, as provided in Section 5.2.2, to the extent consisting of proceeds perfected by the filing of a financing statement under the Uniform Commercial Code or, in the case of Pledged Stock, by being held by the Collateral Agent or any Additional Agent as agent for the Collateral Agent), (y) deliver landlord lien waivers, estoppels or collateral access letters or (z) file any fixture filing with respect to any security interest in Fixtures affixed to or attached to any real property constituting Excluded Assets.
(d) The Collateral Agent may grant extensions of time for the creation and perfection of security interests in, or the obtaining a delivery of documents or other deliverables with respect to, particular assets of any Grantor where it determines that such action cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required to be accomplished by this Agreement or any other Security Documents.
5.2.5 Changes in Name, Jurisdiction of Organization, etc. Such Grantor will give prompt written notice to the Collateral Agent of any change in its name, legal form or jurisdiction of organization (whether by merger or otherwise) (and in any event within 30 days of such change); provided that, promptly thereafter such Grantor shall deliver to the Collateral Agent all additional financing statements and other documents reasonably necessary to maintain the validity, perfection and priority of the security interests created hereunder and other documents reasonably requested by the Collateral Agent to maintain the validity, perfection and priority of the security interests as and to the extent provided for herein and upon receipt of such additional financing statements the Collateral Agent shall either promptly file such additional financing statements or approve the filing of such additional financing statements by such Grantor. Upon any such approval such Grantor shall proceed with the filing of the additional financing statements and deliver copies (or other evidence of filing) of the additional filed financing statements to the Collateral Agent.
5.2.6 [Reserved]
5.2.7 Pledged Stock. In the case of each Grantor that is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Stock issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Subsection 5.3.1 with respect to the Pledged Stock issued by it and (iii) the terms of Subsections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Subsection 6.3(c) or 6.7 with respect to the Pledged Stock issued by it.
5.2.8 Accounts Receivable. At any time with respect to Accounts Receivable constituting Collateral, such Grantor will not, other than in the ordinary course of business or as permitted by the Loan Documents, (i) grant any extension of the time of payment of any of such Grantor’s Accounts Receivable, (ii) compromise or settle any such Accounts Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any such Accounts Receivable, (iv) allow any credit or discount whatsoever on any such Accounts Receivable, (v) amend, supplement or modify any such Accounts Receivable, unless such extensions, compromises, settlements, releases, credits, discounts, amendments, supplements or modifications would not reasonably be expected to materially adversely affect the value of the Accounts Receivable constituting Collateral taken as a whole or (vi) evidence any Accounts Receivable by an Instrument as Chattel Paper.
5.2.9 Maintenance of Records. Such Grantor will keep and maintain at its own cost and expense reasonably satisfactory and complete records of its Collateral, including, without limitation, a record of all payments received and all credits granted with respect to such Collateral.
5.2.10 Acquisition of Intellectual Property. Concurrently with the delivery of the annual Compliance Certificate pursuant to Subsection 7.2(a) of the Credit Agreement, the U.S. Borrower will notify the Collateral Agent of any acquisition by the Grantors of (i) any registration of any material United States Copyright, Patent or Trademark or (ii) any exclusive rights under a material United States Copyright License, Patent License or Trademark License constituting Collateral, and each applicable Grantor shall take such actions as may be reasonably requested by the Collateral Agent (but only to the extent such actions are within such Grantor’s control) to perfect the security interest granted to the Collateral Agent and the other Secured Parties therein, to the extent provided herein in respect of any United States Copyright, Patent or Trademark constituting Collateral, by (x) the execution and delivery of an amendment or supplement to this Agreement (or amendments to any such agreement previously executed or delivered by such Grantor) and/or (y) the making of appropriate filings (I) of financing statements under the Uniform Commercial Code as in effect from time to time in any applicable jurisdiction and/or (II) in the United States Patent and Trademark Office, or with respect to Copyrights and Copyright Licenses, the United States Copyright Office).
5.2.11 [Reserved].
5.2.12 Commercial Tort Actions. All Commercial Tort Actions reasonably expected to result in a recovery in excess of $20,000,000 of each Grantor in existence on the date of this Agreement, known to such Grantor on the date hereof, are described in Schedule 6 hereto. If any Grantor shall at any time after the date of this Agreement acquire a Commercial Tort Action reasonably expected to result in a recovery in excess of $20,000,000, such Grantor shall promptly notify the Collateral Agent thereof in a writing signed by such Grantor and describing the details thereof and shall grant to the Collateral Agent in such writing a security interest therein and in the proceeds thereof, all upon and subject to the terms of this Agreement.
5.2.13 [Reserved].
5.2.14 Protection of Trademarks. Such Grantor shall, with respect to any Trademarks that are material to the business of such Grantor, use commercially reasonable efforts not to cease the use of any of such Trademarks or fail to maintain the level of the quality of products sold and services rendered under any of such Trademarks at a level at least substantially consistent with the quality of such products and services as of the date hereof, and shall use commercially reasonable efforts to take all steps reasonably necessary to ensure that licensees of such Trademarks use such consistent standards of quality, except as would not reasonably be expected to have a Material Adverse Effect.
5.2.15 Protection of Intellectual Property. Subject to and except as permitted by the Credit Agreement, such Grantor shall use commercially reasonable efforts not to do any act or omit to do any act whereby any of the Intellectual Property that is material to the business of Grantor may lapse, expire, or become abandoned, or unenforceable, except as would not reasonably be expected to have a Material Adverse Effect.
5.2.16 [Reserved].
5.3 Covenants of Each Pledgor. Each Pledgor covenants and agrees with the Collateral Agent and the other Secured Parties that, from and after the date of this Agreement until the earlier to occur of (i) the Loans and all other Obligations then due and owing shall have been paid in full in cash and the Commitments shall have terminated, (ii) as to any Pledgor, a sale or other disposition of all the Capital Stock of such Pledgor (other than to theHoldings, a Borrower or a Subsidiary Guarantor), or any other transaction or occurrence as a result of which such Pledgor ceases to be a Restricted Subsidiary of Holdings, in each case that is permitted under the Credit Agreement or (iii) as to any Pledgor (other than the U.S. Borrower), such Pledgor becoming an Excluded Subsidiary:
5.3.1 Additional Shares. If such Pledgor shall, as a result of its ownership of its Pledged Stock, become entitled to receive or shall receive any stock certificate (including, without limitation, any stock certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), stock option or similar rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such Pledgor shall accept the same as the agent of the Collateral Agent and the other Secured Parties, hold the same for the benefit of the Collateral Agent and the other Secured Parties and deliver the same forthwith to the Collateral Agent (who will hold the same on behalf of the Secured Parties), any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, in the exact form received, duly indorsed by such Pledgor to the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor, to be held by the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, subject to the terms hereof, as additional collateral security for the Obligations (subject to Subsection 3.3 and provided that in no event shall there be pledged, nor shall any Pledgor be required to pledge, more than 65% of any series of outstanding Capital Stock (including for these purposes any investment deemed to be Capital Stock for United States tax purposes) of any Foreign Subsidiary pursuant to this Agreement). If an Event of Default shall have occurred and be continuing, any sums paid upon or in respect of the Pledged Stock upon the liquidation or dissolution of any Issuer (except any liquidation or dissolution of any Subsidiary of Holdings in accordance with the Credit Agreement) shall be paid over to the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement to be held by the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement subject to the terms hereof as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Stock or any property shall be distributed upon or with respect to the Pledged Stock pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Collateral Agent, be delivered to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, to be held by the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement
subject to the terms hereof as additional collateral security for the Obligations, in each case except as otherwise provided by any applicable Intercreditor Agreement. If any sums of money or property so paid or distributed in respect of the Pledged Stock shall be received by such Pledgor, such Pledgor shall, until such money or property is paid or delivered to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement hold such money or property for the benefit of the Secured Parties as additional collateral security for the Obligations.
5.3.2 [Reserved].
5.3.3 Pledged Notes. (a) Each Pledgor party hereto as of the date of this Agreement shall deliver to the Collateral Agent all Pledged Notes then held by such Granting Party, endorsed in blank or, at the request of the Collateral Agent, endorsed to the Collateral Agent, within 90 days following the date of this Agreement or with respect to any Pledged Notes acquired by any Pledgor after the date hereof, within 30 days following such acquisition, plus any extensions granted by the Collateral Agent in its sole discretion.
(b) Each Pledgor which becomes a party hereto after the Closing Date pursuant to Subsection 9.15 shall deliver to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with each applicable Intercreditor Agreement, all Pledged Notes then held by such Pledgor, endorsed in blank or, at the request of the Collateral Agent, endorsed to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with each applicable Intercreditor Agreement. Furthermore, within ten Business Days (or such longer period as may be agreed by the Collateral Agent in its sole discretion) after any Pledgor obtains a Pledged Note, such Pledgor shall cause such Pledged Note to be delivered to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, endorsed in blank or, at the request of the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, endorsed to the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement.
5.3.4 Maintenance of Security Interest. (a) Such Pledgor shall use commercially reasonable efforts to defend the security interest created by this Agreement in such Pledgor’s Pledged Collateral against the claims and demands of all Persons whomsoever. At any time and from time to time, upon the written request of the Collateral Agent and at the sole expense of such Pledgor, such Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted by such Pledgor; provided, that notwithstanding any other provision of this Agreement or any other Loan Documents, neither the U.S. Borrower nor any other Pledgor will be required to (v) other than in respect of the Capital Stock of Loan Parties, take any action in any jurisdiction other than the United States of America, or required by the laws of any such non-U.S. jurisdiction or enter into any security agreement or pledge agreement governed by the laws of any such non-U.S. jurisdiction, in order to create any security interests (or other Liens) in assets located or titled outside of the United States of America or to perfect any security interests (or other Liens) in any such Collateral, (w) except as provided in Section 5.2.2, deliver control agreements with respect to, or confer perfection by “control”
over, any deposit accounts, bank or securities account or other Collateral, except in the case of Security Collateral that constitutes Capital Stock or Pledged Notes in certificated form, delivering such Capital Stock or Pledged Notes to the Collateral Agent (or another Person as required under any Intercreditor Agreement), (x) except as provided in Section 5.2.2, take any action in order to perfect any security interests in any assets specifically requiring perfection through control (including cash, cash equivalents, deposit accounts or securities accounts) (except, in each case, to the extent consisting of proceeds perfected by the filing of a financing statement under the Code or, in the case of Pledged Stock, by being held by the Collateral Agent or an Additional Agent as agent for the Collateral Agent), (y) deliver landlord lien waivers, estoppels or collateral access letters or (z) file any fixture filing with respect to any security interest in Fixtures affixed to or attached to any real property constituting Excluded Assets.
(b) The Collateral Agent may grant extensions of time for the creation and perfection of security interests in, or obtaining or delivery of documents or other deliverables with respect to, particular assets of any Pledgor where it determines that such action cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required to be accomplished by this Agreement or any other Security Documents.
SECTION 6
Remedial Provisions
6.1 Certain Matters Relating to Accounts. (a) At any time and from time to time after the occurrence and during the continuance of an Event of Default, subject to each applicable Intercreditor Agreement, the Collateral Agent shall have the right to make test verifications of the Accounts Receivable constituting Collateral in any reasonable manner and through any reasonable medium that it reasonably considers advisable, and the relevant Grantor shall furnish all such assistance and information as the Collateral Agent may reasonably require in connection with such test verifications. At any time and from time to time after the occurrence and during the continuance of an Event of Default, subject to each applicable Intercreditor Agreement, upon the Collateral Agent’s reasonable request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others reasonably satisfactory to the Collateral Agent to furnish to the Collateral Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Accounts Receivable constituting Collateral.
(b) [Reserved].
(c) At any time and from time to time after the occurrence and during the continuance of an Event of Default specified in Subsection 9.1(a) of the Credit Agreement, subject to each applicable Intercreditor Agreement, at the Collateral Agent’s request, each Grantor shall deliver to the Collateral Agent copies or, if required by the Collateral Agent for the enforcement thereof or foreclosure thereon, originals of all documents held by such Grantor evidencing, and relating to, the agreements and transactions which gave rise to such Grantor’s Accounts Receivable constituting Collateral, including, without limitation, all statements relating to such Grantor’s Accounts Receivable constituting Collateral and all orders, invoices and shipping receipts.
(d) So long as no Event of Default has occurred and is continuing, subject to each applicable Intercreditor Agreement, the Collateral Agent shall instruct the Collateral Account
Bank to promptly remit any funds on deposit in each Grantor’s Collateral Proceeds Account to such Grantor’s General Fund Account or any other account designated by such Grantor. In the event that an Event of Default has occurred and is continuing, subject to each applicable Intercreditor Agreement, the Collateral Agent at its option may require that each Collateral Proceeds Account and the General Fund Account of each Grantor be established at the Collateral Agent or at another institution reasonably acceptable to the Collateral Agent. Each Grantor shall have the right, at any time and from time to time, to withdraw such of its own funds from its own General Fund Account, and to maintain such balances in its General Fund Account, as it shall deem to be necessary or desirable.
6.2 Communications with Obligors; Grantors Remain Liable. (a) The Collateral Agent in its own name or in the name of others, may at any time and from time to time after the occurrence and during the continuance of an Event of Default specified in Subsection 9.1(a) of the Credit Agreement, subject to each applicable Intercreditor Agreement, communicate with obligors under the Accounts Receivable constituting Collateral and parties to the Contracts (in each case, to the extent constituting Collateral) to verify with them to the Collateral Agent’s satisfaction the existence, amount and terms of any Accounts Receivable or Contracts.
(b) Upon the request of the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default specified in Subsection 9.1(a) of the Credit Agreement, subject to each applicable Intercreditor Agreement, each Grantor shall notify obligors on such Grantor’s Accounts Receivable and parties to such Grantor’s Contracts (in each case, to the extent constituting Collateral) that such Accounts Receivable and such Contracts have been assigned to the Collateral Agent, for the benefit of the Secured Parties, and that payments in respect thereof shall be made directly to the Collateral Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of such Grantor’s Accounts Receivable to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. None of the Collateral Agent, the Administrative Agent or any other Secured Party shall have any obligation or liability under any Accounts Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Party of any payment relating thereto, nor shall the Collateral Agent or any other Secured Party be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Accounts Receivable (or any agreement giving rise thereto) to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times.
6.3 Pledged Stock. (a) Unless an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given one Business Day’s prior written notice to the relevant Pledgor of the Collateral Agent’s intent to exercise its corresponding rights pursuant to Subsection 6.3(b), each Pledgor shall be permitted to receive all cash dividends and distributions paid in respect of the Pledged Stock and all payments made in respect of the Pledged Notes, and to exercise all voting and corporate rights with respect to the Pledged Stock.
(b) Subject to each applicable Intercreditor Agreement, if an Event of Default shall occur and be continuing and the Collateral Agent shall give one Business Day’s prior written
notice of its intent to exercise such rights to the relevant Pledgor or Pledgors (i) the Collateral Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Pledged Stock and make application thereof to the Obligations of the relevant Pledgor as provided in the Credit Agreement consistent with Subsection 6.5, and (ii) any or all of the Pledged Stock shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Pledged Stock at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by the relevant Pledgor or the Collateral Agent of any right, privilege or option pertaining to such Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may reasonably determine), all without liability to the maximum extent permitted by applicable law (other than for its gross negligence or willful misconduct) except to account for property actually received by it, but the Collateral Agent shall have no duty, to any Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing, provided that the Collateral Agent shall not exercise any voting or other consensual rights pertaining to the Pledged Stock in any way that would constitute an exercise of the remedies described in Subsection 6.6 other than in accordance with Subsection 6.6.
(c) Each Pledgor hereby authorizes and instructs each Issuer or maker of any Pledged Securities pledged by such Pledgor hereunder to, subject to each applicable Intercreditor Agreement, (i) comply with any instruction received by it from the Collateral Agent in writing with respect to Capital Stock in such Issuer that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Pledgor, and each Pledgor agrees that each Issuer or maker shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Pledged Securities directly to the Collateral Agent.
6.4 Proceeds to Be Turned Over to the Collateral Agent. In addition to the rights of the Collateral Agent specified in Subsection 6.1 with respect to payments of Accounts Receivable constituting Collateral, subject to each applicable Intercreditor Agreement, if an Event of Default shall occur and be continuing, and the Collateral Agent shall have instructed any Grantor to do so, all Proceeds of Security Collateral received by such Grantor consisting of cash, checks and other Cash Equivalent items shall be held by such Grantor for the benefit of the Collateral Agent and the other Secured Parties hereto and shall, forthwith upon receipt by such Grantor, be turned over to the Collateral Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent). All Proceeds of Security Collateral received by the Collateral Agent hereunder shall be held by the Collateral Agent in the relevant Collateral Proceeds Account maintained under its sole dominion and control, subject to each applicable Intercreditor Agreement. All Proceeds of Security Collateral while held by the Collateral Agent in such Collateral Proceeds Account (or by the relevant Grantor for the benefit of the Collateral Agent and the other Secured Parties) shall continue to be held as collateral security for all the Obligations of such Grantor and shall not constitute payment thereof until applied as provided in Subsection 6.5 and each applicable Intercreditor Agreement.
6.5 Application of Proceeds. It is agreed that if an Event of Default shall occur and be continuing, any and all Proceeds of the relevant Granting Party’s Security Collateral received by the Collateral Agent (whether from the relevant Granting Party or otherwise) shall be held by the Collateral Agent for the benefit of the Secured Parties as collateral security for the Obligations of the relevant Granting Party (whether matured or unmatured), and/or then or at any time thereafter may, in the sole discretion of the Collateral Agent, subject to each applicable Intercreditor Agreement, be applied by the Collateral Agent against the Obligations of the relevant Granting Party then due and owing in the order of priority set forth in Subsection 10.14 of the Credit Agreement.
6.6 Code and Other Remedies. Subject to each applicable Intercreditor Agreement, if an Event of Default shall occur and be continuing, the Collateral Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations to the extent permitted by applicable law, all rights and remedies of a secured party under the Code and under any other applicable law and in equity. Without limiting the generality of the foregoing, to the extent permitted by applicable law and subject to each applicable Intercreditor Agreement, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Granting Party or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances, forthwith collect, receive, appropriate and realize upon the Security Collateral, or any part thereof, and/or may forthwith, subject to any existing reserved rights or licenses, sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Security Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Collateral Agent or any other Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. To the extent permitted by law and subject to each applicable Intercreditor Agreement, the Collateral Agent or any other Secured Party shall have the right, upon any such sale or sales, to purchase the whole or any part of the Security Collateral so sold, free of any right or equity of redemption in such Granting Party, which right or equity is hereby waived and released. Each Granting Party further agrees, at the Collateral Agent’s request (subject to each applicable Intercreditor Agreement), to assemble the Security Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at such Granting Party’s premises or elsewhere. The Collateral Agent shall apply the net proceeds of any action taken by it pursuant to this Subsection 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Security Collateral or in any way relating to the Security Collateral or the rights of the Collateral Agent and the other Secured Parties hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations of the relevant Granting Party then due and owing, in the order of priority specified in Subsection 6.5, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9-615(a)(3) of the Code, need the Collateral Agent account for the surplus, if any, to such Granting Party. To the extent permitted by applicable law, (i) such Granting Party waives all claims, damages and demands it may acquire against the Collateral Agent or any other Secured Party arising out of the repossession, retention or sale of the Security Collateral, other than any such claims, damages and demands that may arise from the gross negligence or willful misconduct of any of the Collateral Agent or such other Secured Party, and (ii) if
any notice of a proposed sale or other disposition of Security Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.
6.7 Registration Rights. (a) Subject to each applicable Intercreditor Agreement, if the Collateral Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Subsection 6.6, and if in the reasonable opinion of the Collateral Agent it is necessary or reasonably advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, the relevant Pledgor will use its reasonable best efforts to cause the Issuer thereof to (i) execute and deliver, and use its reasonable best efforts to cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the reasonable opinion of the Collateral Agent, necessary or advisable to register such Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its reasonable best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of not more than one year from the date of the first public offering of such Pledged Stock, or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related prospectus which, in the reasonable opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. Such Pledgor agrees to use its reasonable best efforts to cause such Issuer to comply with the provisions of the securities or “Blue Sky” laws of any and all states and the District of Columbia that the Collateral Agent shall reasonably designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) that will satisfy the provisions of Section 11(a) of the Securities Act.
(b) Such Pledgor recognizes that the Collateral Agent may be unable to effect a public sale of any or all such Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Such Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, to the extent permitted by applicable law, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Collateral Agent shall not be under any obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so.
(c) Such Pledgor agrees to use its reasonable best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of such Pledged Stock pursuant to this Subsection 6.7 valid and binding and in compliance with any and all other applicable Requirements of Law. Such Pledgor further agrees that a breach of any of the covenants contained in this Subsection 6.7 will cause irreparable injury to the Collateral Agent and the Lenders, that the Collateral Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Subsection 6.7 shall be specifically enforceable against such Pledgor, and to the extent permitted by applicable law, such Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance
of such covenants (except for a defense that no Event of Default has occurred or is continuing under the Credit Agreement).
6.8 Waiver; Deficiency. Each Granting Party shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Security Collateral are insufficient to pay in full, the Loans and, to the extent then due and owing, all other Obligations of such Granting Party and the reasonable fees and disbursements of any attorneys employed by the Collateral Agent or any other Secured Party to collect such deficiency.
SECTION 7
The Collateral Agent
7.1 Collateral Agent’s Appointment as Attorney-in-Fact, etc. (a) Each Granting Party hereby irrevocably constitutes and appoints the Collateral Agent and any authorized officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact (which appointment shall terminate upon the date upon which the Loans and all other Obligations then due and owing shall have been paid in full in cash and the Commitments shall have terminated) with full irrevocable power and authority in the place and stead of such Granting Party and in the name of such Granting Party or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be reasonably necessary or desirable to accomplish the purposes of this Agreement to the extent permitted by applicable law, provided that the Collateral Agent agrees not to exercise such power except upon the occurrence and during the continuance of any Event of Default, and in accordance with and subject to each applicable Intercreditor Agreement. Without limiting the generality of the foregoing, at any time when an Event of Default has occurred and is continuing (in each case to the extent permitted by applicable law and subject to each applicable Intercreditor Agreement), (x) each Pledgor hereby gives the Collateral Agent the power and right, on behalf of such Pledgor, without notice or assent by such Pledgor, to execute, in connection with any sale provided for in Subsection 6.6 or 6.7, any endorsements, assessments or other instruments of conveyance or transfer with respect to such Pledgor’s Pledged Collateral, and (y) each Grantor hereby gives the Collateral Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Accounts Receivable of such Grantor that constitutes Collateral or with respect to any other Collateral of such Grantor and file any claim or take any other action or institute any proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Agent for the purpose of collecting any and all such moneys due under any Accounts Receivable of such Grantor that constitutes Collateral or with respect to any other Collateral of such Grantor whenever payable;
(ii) in the case of any Copyright, Patent, or Trademark constituting Collateral of such Grantor, execute and deliver any and all agreements, instruments, documents and papers as the Collateral Agent may reasonably request to such Grantor to evidence the Collateral Agent’s and the Lenders’ security interest in such Copyright, Patent, or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby, and
such Grantor hereby consents to the non-exclusive royalty free use by the Collateral Agent of any Copyright, Patent or Trademark owned by such Grantor included in the Collateral for the purposes of disposing of any Collateral;
(iii) pay or discharge taxes and Liens, other than Liens permitted under this Agreement or the other Loan Documents, levied or placed on the Collateral of such Grantor, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof; and (iv) (A) direct any party liable for any payment under any of the Security Collateral of such Grantor to make payment of any and all moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct; (B) ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Security Collateral of such Grantor; (C) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Security Collateral of such Grantor; (D) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Security Collateral of such Grantor or any portion thereof and to enforce any other right in respect of any Security Collateral of such Grantor; (E) defend any suit, action or proceeding brought against such Grantor with respect to any Security Collateral of such Grantor; (F) settle, compromise or adjust any such suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as the Collateral Agent may deem appropriate; (G) subject to any existing reserved rights or licenses, assign any Copyright, Patent or Trademark constituting Collateral of such Grantor (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), for such term or terms, on such conditions, and in such manner, as the Collateral Agent shall in its sole discretion determine; and (H) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Security Collateral of such Grantor as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and do, at the Collateral Agent’s option and such Grantor’s expense, at any time, or from time to time, all acts and things which the Collateral Agent deems necessary to protect, preserve or realize upon the Security Collateral of such Grantor and the Collateral Agent’s and the other Secured Parties’ security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.
(b) The reasonable expenses of the Collateral Agent incurred in connection with actions undertaken as provided in this Subsection 7.1 from the date of payment by the Collateral Agent to the date reimbursed by the relevant Granting Party, shall be payable by such Granting Party to the Collateral Agent on demand.
(c) Each Granting Party hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable as to the relevant Granting Party until this Agreement is terminated as to such Granting Party, and the security interests in the Security Collateral of such Granting Party created hereby are released.
7.2 Duty of Collateral Agent. The Collateral Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Security Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar property for its own account. None of the Collateral Agent or any other Secured Party nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Security Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Security Collateral upon the request of any Granting Party or any other Person or, except as otherwise provided herein, to take any other action whatsoever with regard to the Security Collateral or any part thereof. The powers conferred on the Collateral Agent and the other Secured Parties hereunder are solely to protect the Collateral Agent’s and the other Secured Parties’ interests in the Security Collateral and shall not impose any duty upon the Collateral Agent or any other Secured Party to exercise any such powers. The Collateral Agent and the other Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and to the maximum extent permitted by applicable law, neither they nor any of their officers, directors, employees or agents shall be responsible to any Granting Party for any act or failure to act hereunder, except as otherwise provided herein or for their own gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).
7.3 Financing Statements. Pursuant to any applicable law, each Granting Party authorizes the Collateral Agent to file or record financing statements and other filing or recording documents or instruments with respect to such Granting Party’s Security Collateral without the signature of such Granting Party in such form and in such filing offices as the Collateral Agent reasonably determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. Each Granting Party authorizes the Collateral Agent to use any collateral description reasonably determined by the Collateral Agent, including, without limitation, the collateral description “all personal property” or “all assets” or words of similar meaning in any such financing statements. The Collateral Agent agrees to use its commercially reasonable efforts to notify the relevant Granting Party of any financing or continuation statement filed by it, provided that any failure to give such notice shall not affect the validity or effectiveness of any such filing.
7.4 Authority of Collateral Agent. Each Granting Party acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement or any amendment, supplement or other modification of this Agreement shall, as between the Collateral Agent and the Secured Parties, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Granting Parties, the Collateral Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and no Granting Party shall be under any obligation, or entitlement, to make any inquiry respecting such authority.
7.5 Right of Inspection. Upon reasonable written advance notice to any Grantor and as often as may reasonably be desired, or at any time and from time to time after the occurrence and during the continuation of an Event of Default, the Collateral Agent shall have reasonable access during normal business hours to all the books, correspondence and records of such Grantor, and the
Collateral Agent and its representatives may examine the same, and to the extent reasonable take extracts therefrom and make photocopies thereof, and such Grantor agrees to render to the Collateral Agent at such Grantor’s reasonable cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. The Collateral Agent and its representatives shall also have the right, upon reasonable advance written notice to such Grantor subject to any lease restrictions, to enter during normal business hours into and upon any premises owned, leased or operated by such Grantor where any of such Grantor’s Inventory or Equipment is located for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein to the extent not inconsistent with the provisions of the Credit Agreement and the other Loan Documents (and subject to each applicable Intercreditor Agreement).
SECTION 8
Non-Lender Secured Parties
8.1 Rights to Collateral. (a) The Non-Lender Secured Parties shall not have any right whatsoever to do any of the following: (i) exercise any rights or remedies with respect to the Collateral (such term, as used in this Section 8, having the meaning assigned to it in the Credit Agreement) or to direct the Collateral Agent to do the same, including, without limitation, the right to (A) enforce any Liens or sell or otherwise foreclose on any portion of the Collateral, (B) request any action, institute any proceedings, exercise any voting rights, give any instructions, make any election, notify account debtors or make collections with respect to all or any portion of the Collateral or (C) release any Granting Party under this Agreement or release any Collateral from the Liens of any Security Document or consent to or otherwise approve any such release; (ii) demand, accept or obtain any Lien on any Collateral (except for Liens arising under, and subject to the terms of, this Agreement); (iii) vote in any Bankruptcy Case or similar proceeding in respect of Holdings or any of its Subsidiaries (any such proceeding, for purposes of this clause (a), a “Bankruptcy”) with respect to, or take any other actions concerning the Collateral; (iv) receive any proceeds from any sale, transfer or other disposition of any of the Collateral (except in accordance with this Agreement); (v) oppose any sale, transfer or other disposition of the Collateral; (vi) object to any debtor-in-possession financing in any Bankruptcy which is provided by one or more Lenders among others (including on a priming basis under Section 364(d) of the Bankruptcy Code); (vii) object to the use of cash collateral in respect of the Collateral in any Bankruptcy; or (viii) seek, or object to the Lenders or Agents seeking on an equal and ratable basis, any adequate protection or relief from the automatic stay with respect to the Collateral in any Bankruptcy.
(b) Each Non-Lender Secured Party, by its acceptance of the benefits of this Agreement and the other Security Documents, agrees that in exercising rights and remedies with respect to the Collateral, the Collateral Agent and the Lenders, with the consent of the Collateral Agent, may enforce the provisions of the Security Documents and exercise remedies thereunder and under any other Loan Documents (or refrain from enforcing rights and exercising remedies), all in such order and in such manner as they may determine in the exercise of their sole business judgment. Such exercise and enforcement shall include, without limitation, the rights to collect, sell, dispose of or otherwise realize upon all or any part of the Collateral, to incur expenses in connection with such collection, sale, disposition or other realization and to exercise all the rights and remedies of a secured lender under the Uniform Commercial Code as in effect from time to time in any applicable jurisdiction. The Non-Lender Secured Parties by their acceptance of the benefits of this Agreement and
the other Security Documents hereby agree not to contest or otherwise challenge any such collection, sale, disposition or other realization of or upon all or any of the Collateral. Whether or not a Bankruptcy Case has been commenced, the Non-Lender Secured Parties shall be deemed to have consented to any sale or other disposition of any property, business or assets of Holdings or any of its Subsidiaries and the release of any or all of the Collateral from the Liens of any Security Document in connection therewith.
(c) Notwithstanding any provision of this Subsection 8.1, the Non-Lender Secured Parties shall be entitled subject to each applicable Intercreditor Agreement to file any necessary responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleadings (A) in order to prevent any Person from seeking to foreclose on the Collateral or supersede the Non-Lender Secured Parties’ claim thereto or (B) in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of the Non-Lender Secured Parties. Each Non-Lender Secured Party, by its acceptance of the benefits of this Agreement, agrees to be bound by and to comply with each applicable Intercreditor Agreement and authorizes the Collateral Agent to enter into the Intercreditor Agreements on its behalf.
(d) Each Non-Lender Secured Party, by its acceptance of the benefits of this Agreement, agrees that the Collateral Agent and the Lenders may deal with the Collateral, including any exchange, taking or release of Collateral, may change or increase the amount of the Borrower Obligations and/or the Guarantor Obligations, and may release any Granting Party from its Obligations hereunder, all without any liability or obligation (except as may be otherwise expressly provided herein) to the Non-Lender Secured Parties.
8.2 Appointment of Agent. Each Non-Lender Secured Party, by its acceptance of the benefits of this Agreement and the other Security Documents, shall be deemed irrevocably to make, constitute and appoint the Collateral Agent, as agent under the Credit Agreement (and all officers, employees or agents designated by the Collateral Agent) as such Person’s true and lawful agent and attorney-in-fact, and in such capacity, the Collateral Agent shall have the right, with power of substitution for the Non-Lender Secured Parties and in each such Person’s name or otherwise, to effectuate any sale, transfer or other disposition of the Collateral. It is understood and agreed that the appointment of the Collateral Agent as the agent and attorney-in-fact of the Non-Lender Secured Parties for the purposes set forth herein is coupled with an interest and is irrevocable. It is understood and agreed that the Collateral Agent has appointed the Administrative Agent as its agent for purposes of perfecting certain of the security interests created hereunder and for otherwise carrying out certain of its obligations hereunder.
8.3 Waiver of Claims. To the maximum extent permitted by law, each Non-Lender Secured Party waives any claim it might have against the Collateral Agent or the Lenders with respect to, or arising out of, any action or failure to act or any error of judgment, negligence, or mistake or oversight whatsoever on the part of the Collateral Agent or the Lenders or their respective directors, officers, employees or agents with respect to any exercise of rights or remedies under the Loan Documents or any transaction relating to the Collateral (including, without limitation, any such exercise described in Subsection 8.1(b)), except for any such action or failure to act that constitutes willful misconduct or gross negligence of such Person. To the maximum extent permitted by applicable law, none of the Collateral Agent or any Lender or any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral
or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of Holdings, any Subsidiary of Holdings, any Non-Lender Secured Party or any other Person or to take any other action or forbear from doing so whatsoever with regard to the Collateral or any part thereof, except for any such action or failure to act that constitutes willful misconduct or gross negligence of such Person.
8.4 Designation of Non-Lender Secured Parties. The U.S. Borrower may from time to time designate a Person as a “Bank Products Provider,” a “Hedging Provider” or a “Management Credit Provider” hereunder by written notice to the Collateral Agent. Upon being so designated by the U.S. Borrower, such Bank Products Provider, Hedging Provider or Management Credit Provider shall be a Non-Lender Secured Party for the purposes of this Agreement for as long as so designated by the U.S. Borrower; provided that, at the time of the U.S. Borrower’s designation of such Non-Lender Secured Party, the obligations of the relevant Grantor under the applicable Hedging Agreement, Bank Products Agreement or Management Guarantee (as the case may be) have not been designated as ABL Obligations or Additional Obligations.
SECTION 9
Miscellaneous
9.1 Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each affected Granting Party and the Collateral Agent, provided that (a) any provision of this Agreement imposing obligations on any Granting Party may be waived by the Collateral Agent in a written instrument executed by the Collateral Agent and (b) if separately agreed in writing between the U.S. Borrower and any Non-Lender Secured Party (and such Non-Lender Secured Party has been designated in writing by the U.S. Borrower to the Collateral Agent for purposes of this sentence, for so long as so designated), no such waiver and no such amendment or modification shall amend, modify or waive Subsection 6.5 (or the definition of “Non-Lender Secured Party” or “Secured Party” to the extent relating thereto) if such waiver, amendment, supplement or modification would directly and adversely affect a Non-Lender Secured Party without the written consent of such affected Non-Lender Secured Party. For the avoidance of doubt, it is understood and agreed that any amendment, waiver, supplement or other modification of or to any Intercreditor Agreement that would have the effect, directly or indirectly, through any reference herein to any Intercreditor Agreement or otherwise, of waiving, amending, supplementing or otherwise modifying this Agreement, or any term or provision hereof, or any right or obligation of any Granting Party hereunder or in respect hereof, shall not be given such effect except pursuant to a written instrument executed by each affected Granting Party and the Collateral Agent in accordance with this Subsection 9.1.
9.2 Notices. All notices, requests and demands to or upon the Collateral Agent or any Granting Party hereunder shall be effected in the manner provided for in Subsection 11.2 of the Credit Agreement; provided that any such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 1, unless and until such Guarantor shall change such address by notice to the Collateral Agent and the Administrative Agent given in accordance with Subsection 11.2 of the Credit Agreement.
9.3 No Waiver by Course of Conduct; Cumulative Remedies. None of the Collateral Agent or any other Secured Party shall by any act (except by a written instrument pursuant
to Subsection 9.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Collateral Agent or such other Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
9.4 Enforcement Expenses; Indemnification. (a) Each Guarantor jointly and severally agrees to pay or reimburse each Secured Party and the Collateral Agent for all their respective reasonable costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement against such Guarantor and the other Loan Documents to which such Guarantor is a party, including, without limitation, the reasonable fees and disbursements of counsel to the Secured Parties, the Collateral Agent and the Administrative Agent.
(b) Each Grantor jointly and severally agrees to pay, and to save the Collateral Agent, the Administrative Agent and the other Secured Parties harmless from, (x) any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Security Collateral or in connection with any of the transactions contemplated by this Agreement and (y) any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement (collectively, the “indemnified liabilities”), in each case to the extent the BorrowerBorrowers would be required to do so pursuant to Subsection 11.5 of the Credit Agreement, and in any event excluding any taxes or other indemnified liabilities arising from gross negligence, bad faith or willful misconduct of the Collateral Agent, the Administrative Agent or any other Secured Party as determined by a court of competent jurisdiction in a final and nonappealable decision.
(c) The agreements in this Subsection 9.4 shall survive repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.
9.5 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Granting Parties, the Collateral Agent and the Secured Parties and their respective successors and assigns permitted by the Credit Agreement.
9.6 Set-Off. Each Guarantor hereby irrevocably authorizes each of the Administrative Agent and the Collateral Agent and each other Secured Party at any time and from time to time without notice to such Guarantor or any other Granting Party, any such notice being expressly waived by each Granting Party, to the extent permitted by applicable law, upon the occurrence and during the continuance of an Event of Default under Subsection 9.1(a) of the Credit Agreement so long as any amount remains unpaid after it becomes due and payable by such Guarantor hereunder, to set-off and appropriate and apply against any such amount any and all deposits (general or special, time or demand, provisional or final) (other than the Collateral Proceeds Account), in any currency, and any
other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Collateral Agent, the Administrative Agent or such other Secured Party to or for the credit or the account of such Guarantor, or any part thereof in such amounts as the Collateral Agent, the Administrative Agent or such other Secured Party may elect. The Collateral Agent, the Administrative Agent and each other Secured Party shall notify such Guarantor promptly of any such set-off and the application made by the Collateral Agent, the Administrative Agent or such other Secured Party of the proceeds thereof; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Collateral Agent, the Administrative Agent and each other Secured Party under this Subsection 9.6 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Collateral Agent, the Administrative Agent or such other Secured Party may have.
9.7 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy and other electronic transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
9.8 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating 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; provided that, with respect to any Pledged Stock issued by a Foreign Subsidiary, all rights, powers and remedies provided in this Agreement may be exercised only to the extent that they do not violate any provision of any law, rule or regulation of any Governmental Authority applicable to any such Pledged Stock or affecting the legality, validity or enforceability of any of the provisions of this Agreement against the Pledgor (such laws, rules or regulations, “Applicable Law”) and are intended to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any Applicable Law.
9.9 Section Headings. The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
9.10 Integration. This Agreement and the other Loan Documents represent the entire agreement of the Granting Parties, the Collateral Agent and the other Secured Parties with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Granting Parties, the Collateral Agent or any other Secured Party relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ANY CLAIM OR CONTROVERSY RELATING HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
9.12 Submission to Jurisdiction; Waivers. Each party hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party to the exclusive general jurisdiction of the Supreme Court of the State of New York for the County of New York (the “New York Supreme Court”), and the United States District Court for the Southern District of New York (the “Federal District Court,” and together with the New York Supreme Court, the “New York Courts”) and appellate courts from either of them; provided that nothing in this Agreement shall be deemed or operate to preclude (i) the Collateral Agent from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations (in which case any party shall be entitled to assert any claim or defense, including any claim or defense that this Subsection 9.12 would otherwise require to be asserted in a legal action or proceeding in a New York Court), or to enforce a judgment or other court order in favor of the Administrative Agent or the Collateral Agent, (ii) any party from bringing any legal action or proceeding in any jurisdiction for the recognition and enforcement of any judgment, (iii) if all such New York Courts decline jurisdiction over any Person, or decline (or in the case of the Federal District Court, lack) jurisdiction over any subject matter of such action or proceeding, a legal action or proceeding may be brought with respect thereto in another court having jurisdiction and (iv) in the event a legal action or proceeding is brought against any party hereto or involving any of its assets or property in another court (without any collusive assistance by such party or any of its Subsidiaries or Affiliates), such party from asserting a claim or defense (including any claim or defense that this Subsection 9.12(a) would otherwise require to be asserted in a legal proceeding in a New York Court) in any such action or proceeding;
(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient forum and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to any party at its address referred to in Subsection 9.2 or at such other address of which the Collateral Agent and the Administrative Agent (in the case of any other party hereto) and the U.S. Borrower (in the case of the Collateral Agent and the Administrative Agent) shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or (subject to clause (a) above) shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Subsection 9.12 any consequential or punitive damages.
9.13 Acknowledgments. Each Guarantor hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;
(b) none of the Collateral Agent, the Administrative Agent or any other Secured Party has any fiduciary relationship with or duty to any Guarantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Guarantors, on the one hand, and the Collateral Agent, the Administrative Agent and the other Secured Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Secured Parties or among the Guarantors and the Secured Parties.
9.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.15 Additional Granting Parties. Each new Subsidiary of Holdings that is required to become a party to this Agreement pursuant to Subsection 7.9(b) or (cd) of the Credit Agreement shall become a Granting Party for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement substantially in the form of Annex 2 hereto. Each existing Granting Party that is required to become a Pledgor with respect to Capital Stock of any new Subsidiary of Holdings pursuant to Subsection 7.9(b) or (cd) of the Credit Agreement shall become a Pledgor with respect thereto upon execution and delivery by such Granting Party of a Supplemental Agreement substantially in the form of Annex 3 hereto.
9.16 Releases. (a) At such time as the Loans and the other Obligations (other than any Obligations owing to a Non-Lender Secured Party) then due and owing shall have been paid in full, the Commitments have been terminated), all Security Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and each Granting Party hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Security Collateral shall revert to the Granting Parties. At the request and sole expense of any Granting Party following any such termination, the Collateral Agent shall deliver to such Granting Party (subject to Subsection 7.2, without recourse and without representation or warranty) any Security Collateral held by the Collateral Agent hereunder, and execute, acknowledge and deliver to such Granting Party such releases, instruments or other documents (including without limitation UCC termination statements), and do or cause to be done all other acts, as any Granting Party shall reasonably request to evidence such termination.
(b) Upon any sale or other disposition of Security Collateral permitted by the Credit Agreement (other than any sale or disposition to another Grantora Loan Party), the Lien pursuant to this Agreement on such sold or disposed of Security Collateral shall be automatically released. In connection with a sale or other disposition of all the Capital Stock of any Granting Party that is a Subsidiary Guarantor (other than to another Grantora Loan Party) or any other transaction or occurrence as a result of which such Granting Party ceases to be a Restricted Subsidiary of Holdings or the sale or other disposition of Security Collateral (other than a sale or disposition to another Grantora Loan Party) permitted under the Credit Agreement, the Collateral Agent shall, upon receipt from the U.S. Borrower of a written request for the release of such Granting Party from its Guarantee or the release of the Security Collateral subject to such sale, disposition or other transaction,
identifying such Granting Party or the relevant Security Collateral, together with a certification by the U.S. Borrower stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents, execute and deliver to the U.S. Borrower or the relevant Granting Party (subject to Subsection 7.2, without recourse and without representation or warranty), at the sole cost and expense of such Granting Party, any Security Collateral of such relevant Granting Party held by the Collateral Agent, or the Security Collateral subject to such sale or disposition (as applicable), and, at the sole cost and expense of such Granting Party, execute, acknowledge and deliver to such Granting Party such releases, instruments or other documents (including without limitation UCC termination statements), and do or cause to be done all other acts, as the U.S. Borrower or such Granting Party shall reasonably request (x) to evidence or effect the release of such Granting Party that is a Subsidiary Guarantor from its Guarantee (if any) and of the Liens created hereby (if any) on such Granting Party’s Security Collateral or (y) to evidence the release of the Security Collateral subject to such sale or disposition.
(c) Upon any Granting Party that is a Subsidiary Guarantor becoming an Excluded Subsidiary in accordance with the provisions of the Credit Agreement, the Lien pursuant to this Agreement on all Security Collateral of such Granting Party (if any) shall be automatically released, and the Guarantee (if any) of such Granting Party, and all obligations of such Granting Party hereunder, shall terminate, all without delivery of any instrument or performance of any act by any party, and the Collateral Agent shall, upon the request of the U.S. Borrower or such Granting Party, deliver to the U.S. Borrower or such Granting Party (subject to Subsection 7.2, without recourse and without representation or warranty) any Security Collateral of such Granting Party held by the Collateral Agent hereunder and the Collateral Agent and the Administrative Agent shall execute, acknowledge and deliver to the U.S. Borrower or such Granting Party (at the sole cost and expense of the U.S. Borrower or such Granting Party) all releases, instruments or other documents (including without limitation UCC termination statements), and do or cause to be done all other acts, necessary or reasonably desirable for the release of such Granting Party from its Guarantee (if any) or the Liens created hereby (if any) on such Granting Party’s Security Collateral, as applicable, as the U.S. Borrower or such Granting Party may reasonably request.
(d) Upon any Security Collateral being or becoming an Excluded Asset, the Lien pursuant to this Agreement on such Security Collateral shall be automatically released. At the request and sole expense of any Granting Party, the Collateral Agent shall deliver such Security Collateral (if held by the Collateral Agent) to such Granting Party and execute, acknowledge and deliver to such Granting Party such releases, instruments or other documents (including without limitation UCC termination statements), and do or cause to be done all other acts, as such Granting Party shall reasonably request to evidence such release.
(e) So long as no Event of Default has occurred and is continuing, the Collateral Agent shall at the direction of any applicable Granting Party return to such Granting Party any proceeds or other property received by it during any Event of Default pursuant to either Subsection 5.3.1 or 6.4 and not otherwise applied in accordance with Subsection 6.5.
(f) The Collateral Agent shall have no liability whatsoever to any other Secured Party as the result of any release of Security Collateral by it in accordance with (or which the Collateral Agent in good faith believes to be in accordance with) this Subsection 9.16.
9.17 Judgment. (a) If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in one currency into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Collateral Agent could purchase the first currency with such other currency on the Business Day preceding the day on which final judgment is given.
(b) The obligations of any Guarantor in respect of this Agreement to the Collateral Agent, for the benefit of each holder of Secured Obligations, shall, notwithstanding any judgment in a currency (the “judgment currency”) other than the currency in which the sum originally due to such holder is denominated (the “original currency”), be discharged only to the extent that on the Business Day following receipt by the Collateral Agent of any sum adjudged to be so due in the judgment currency, the Collateral Agent may in accordance with normal banking procedures purchase the original currency with the judgment currency; if the amount of the original currency so purchased is less than the sum originally due to such holder in the original currency, such Guarantor agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Collateral Agent for the benefit of such holder, against such loss, and if the amount of the original currency so purchased exceeds the sum originally due to the Collateral Agent, the Collateral Agent agrees to remit to the U.S. Borrower, such excess. This covenant shall survive the termination of this Agreement and payment of the Obligations and all other amounts payable hereunder.
9.18 Transfer Tax Acknowledgment. Each party hereto acknowledges that the shares delivered hereunder are being transferred to and deposited with the Collateral Agent (or other Person in accordance with any applicable Intercreditor Agreement) as security for the Obligations and that this Section 9.18 is intended to be the certificate of exemption from New York stock transfer taxes for the purposes of complying with Section 270.5(b) of the Tax Law of the State of New York.
[Remainder of page left blank intentionally; Signature pages to follow.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the date first written above.
BORROWER:
UNIVAR USA INC.,
B: y
Name: Kerri Howard
Title: Treasurer
GUARANTORS:
UNIVAR INC.
By:
Name: Kerri Howard
Title: Treasurer
CHEMPOINT.COM INC.,
MAGNABLEND, INC.
MAGNABLEND HOLDINGS, INC.,
PMF CAPITAL, LLC
UNIVAR HOLDCO, LLC
UNIVAR HOLDCO III, LLC
By:
Name: Kerri Howard
Title: Treasurer
[SIGNATURE PAGES TO GUARANTEE AND COLLATERAL AGREEMENT]
Acknowledged and Agreed to as of the date hereof by:
BANK OF AMERICA, N.A., as Collateral Agent
By:
Name:
Title:
[SIGNATURE PAGES TO GUARANTEE AND COLLATERAL AGREEMENT]
ANNEX 1
ACKNOWLEDGEMENT AND CONSENT*
The undersigned hereby acknowledges receipt of a copy of the Guarantee and Collateral Agreement, dated as of July 1, 2015 (the “Agreement”; capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Agreement or the Credit Agreement referred to therein, as the case may be), made by and among UNIVAR INC., UNIVAR USA INC. and the other Granting Parties party thereto in favor of BANK OF AMERICA, N.A., as Collateral Agent and Administrative Agent. The undersigned agrees for the benefit of the Collateral Agent, the Administrative Agent and the Lenders as follows:
The undersigned will be bound by the terms of the Agreement applicable to it as an Issuer (as defined in the Agreement) and will comply with such terms insofar as such terms are applicable to the undersigned as an Issuer.
The undersigned will notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Subsection 5.3.1 of the Agreement.
The terms of Subsections 6.3(c) and 6.7 of the Agreement shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Subsection 6.3(c) or 6.7 of the Agreement.
[NAME OF ISSUER]
By:
Name: [________________]
Title: [________________]`
Address for Notices:
[__________________]
* This consent is necessary only with respect to any Issuer that is not also a Granting Party.
ANNEX 2
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated as of [______________], 20[_], made by [_____________], a
[______________________] corporation [([each an][the] “Additional Granting Party”), in favor of BANK OF AMERICA, N.A., as collateral agent (in such capacity, the “Collateral Agent”) and as administrative agent (in such capacity, the “Administrative Agent”) for the banks and other financial institutions from time to time parties to the Credit Agreement referred to below and the other Secured Parties (as defined in the Guarantee and Collateral Agreement referred to below). All capitalized terms not defined herein shall have the meaning ascribed to them in the Guarantee and Collateral Agreement, or if not defined therein, in the Credit Agreement.
W I T N E S S E T H:
WHEREAS, UNIVAR SOLUTIONS USA INC., a Washington corporation (formerly known as Univar USA Inc.) (together with its successors and assigns, the “U.S. Borrower”), UNIVAR NETHERLANDS HOLDING B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands, having its statutory seat (statutaire zetel) in Rotterdam, the Netherlands and its registered office at Schouwburgplein 30, 3012CL Rotterdam, the Netherlands, registered with the Chamber of Commerce (Kamer van Koophandel) under number 24128225 (the “Netherlands Borrower” and, together with the U.S. Borrower and any Subsidiary Borrowers from time to time party to the Credit Agreement, the “Borrowers”), UNIVAR SOLUTIONS INC., a Delaware corporation (formerly known as Univar Inc.) (“Holdings”), the several banks and other financial institutions from time to time party thereto (the “Lenders”), the Administrative Agent, the Collateral Agent and the other parties party thereto are parties to a Credit Agreement, dated as of July 1, 2015 (as amended, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”);
WHEREAS, in connection with the Credit Agreement, the U.S. Borrower, certain Domestic Subsidiaries of Holdings and Holdings are, or are to become, parties to the Term Loan Guarantee and Collateral Agreement, dated as of July 1, 2015 (as amended, supplemented, waived or otherwise modified from time to time, the “Guarantee and Collateral Agreement”), in favor of the Collateral Agent, for the benefit of the Secured Parties;
WHEREAS, [the][each] Additional Granting Party is a member of an affiliated group of companies that includes theeach Borrower and each other Granting Party; the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the BorrowerBorrowers to make valuable transfers to one or more of the other Granting Parties (including such Additional Granting Party) in connection with the operation of their respective businesses; and theeach Borrower and the other Granting Parties (including such Additional Granting Party) are engaged in related businesses, and each such Granting Party (including [each] such Additional Granting Party) will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement;
WHEREAS, the Credit Agreement requires [the][each] Additional Granting Party to become a party to the Guarantee and Collateral Agreement; and
WHEREAS, [the][each] Additional Granting Party has agreed to execute and deliver this Assumption Agreement in order to become a party to the Guarantee and Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering this Assumption Agreement, [the][each] Additional Granting Party, as provided in Subsection 9.15 of the Guarantee and Collateral Agreement, hereby becomes a party to the Guarantee and Collateral Agreement as a Granting Party thereunder with the same force and effect as if originally named therein as a [Guarantor] [Borrower and Guarantor] [, Grantor and Pledgor] [and Grantor] [and Pledgor]2 and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a [Guarantor] [Borrower and Guarantor] [, Grantor and Pledgor] [and Grantor] [and Pledgor]3 thereunder. The information set forth in Annex 1-A hereto is hereby added to the information set forth in Schedules [_________] to the Guarantee and Collateral Agreement, and such Schedules are hereby amended and modified to include such information. [The][Each] Additional Granting Party hereby represents and warrants that each of the representations and warranties of such Additional Granting Party, in its capacities as a Guarantor [Borrower and Guarantor] [, Grantor and Pledgor] [and Grantor] [and Pledgor],4 contained in Section 4 of the Guarantee and Collateral Agreement is true and correct in all material respects on and as the date hereof (after giving effect to this Assumption Agreement) as if made on and as of such date. Each Additional Granting Party hereby grants, as and to the same extent as provided in the Guarantee and Collateral Agreement, to the Collateral Agent, for the benefit of the Secured Parties, a continuing security interest in the [Collateral (as such term is defined in Subsection 3.1 of the Guarantee and Collateral Agreement) of such Additional Granting Party] [and] [the Pledged Collateral (as such term is defined in the Guarantee and Collateral Agreement) of such Additional Granting Party, except as provided in Subsection 3.3 of the Guarantee and Collateral Agreement].
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ANY CLAIM OR CONTROVERSY RELATING HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
_____________________________
2Indicate the capacities in which the Additional Granting Party is becoming a Grantor.
3Indicate the capacities in which the Additional Granting Party is becoming a Grantor.
4Indicate the capacities in which the Additional Granting Party is becoming a Grantor.
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTING PARTY]
By:
Name:
Title:
Acknowledged and Agreed to as of the date hereof by:
BANK OF AMERICA, N.A.,
as Collateral Agent and Administrative Agent
By:
Name:
Title:
1 ANNEX 3
2 SUPPLEMENTAL AGREEMENT
3 SUPPLEMENTAL AGREEMENT, dated as of [__________________ ____], 20[ ], made by
4 [___________________________], a [____________________] corporation (the “Additional
5 Pledgor”), in favor of BANK OF AMERICA, N.A., as collateral agent (in such capacity, the
6 “Collateral Agent”) and as administrative agent (in such capacity, the “Administrative Agent”)
7 for the banks and other financial institutions from time to time parties to the Credit Agreement
8 referred to below and the other Secured Parties (as defined in the Guarantee and Collateral
9 Agreement referred to below). All capitalized terms not defined herein shall have the meaning
10 ascribed to them in the Guarantee and Collateral Agreement, or if not defined therein, in the
11 Credit Agreement.
12 W I T N E S S E T H:
13 WHEREAS, UNIVAR SOLUTIONS USA INC., a Washington corporation (formerly known
14 as Univar USA Inc.) (together with its successors and assigns, the “U.S. Borrower”), UNIVAR
15 NETHERLANDS HOLDING B.V., a private company with limited liability (besloten
16 vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the
17 Netherlands, having its statutory seat (statutaire zetel) in Rotterdam, the Netherlands and
18 its registered office at Schouwburgplein 30, 3012CL Rotterdam, the Netherlands,
19 registered with the Chamber of Commerce (Kamer van Koophandel) under number
20 24128225 (the “Netherlands Borrower” and, together with the U.S. Borrower and any
21 Subsidiary Borrowers from time to time party to the Credit Agreement, the “Borrowers”),
22 UNIVAR SOLUTIONS INC., a Delaware corporation (formerly known as Univar Inc.)
23 (“Holdings”), the several banks and other financial institutions from time to time party thereto
24 (the “Lenders”), and the Administrative Agent, the Collateral Agent and the other parties party
25 thereto are parties to a Credit Agreement, dated as of July 1, 2015 (as amended, supplemented,
26 waived or otherwise modified from time to time, the “Credit Agreement”);
27 WHEREAS, in connection with the Credit Agreement, the U.S. Borrower, certain Domestic
28 Subsidiaries of Holdings and Holdings are, or are to become, parties to the Term Loan
29 Guarantee and Collateral Agreement, dated as of July 1, 2015 (as amended, supplemented,
30 waived or otherwise modified from time to time, the “Guarantee and Collateral Agreement”), in
31 favor of the Collateral Agent, for the benefit of the Secured Parties;
32 WHEREAS, the Credit Agreement requires the Additional Pledgor to become a Pledgor under
33 the Guarantee and Collateral Agreement with respect to Capital Stock of certain new
34 Subsidiaries of the Additional Pledgor; and
35 WHEREAS, the Additional Pledgor has agreed to execute and deliver this Supplemental
36 Agreement in order to become such a Pledgor under the Guarantee and Collateral Agreement;
37 NOW, THEREFORE, IT IS AGREED:
38 1. Guarantee and Collateral Agreement. By executing and delivering this Supplemental
39 Agreement, the Additional Pledgor, as provided in Subsection 9.15 of the Guarantee and
40 Collateral Agreement, hereby becomes a Pledgor under the Guarantee and Collateral Agreement
41 with respect to the shares of Capital Stock of the Subsidiary of the Additional Pledgor listed in
42 Annex 1 hereto and will be bound by all terms, conditions and duties applicable to a Pledgor
43 under the Guarantee and Collateral Agreement, as a Pledgor thereunder. The information set
44 forth in Annex 1 hereto is hereby added to the information set forth in Schedule 2 to the
45 Guarantee and Collateral Agreement, and such Schedule 2 is hereby amended and modified to
46 include such information. The Additional Pledgor hereby represents and warrants that each of
47 the representations and warranties of such Additional Pledgor, in its capacity as a Pledgor,
48 contained in Subsection 4.3 of the Guarantee and Collateral Agreement is true and correct in all
49 material respects on and as the date hereof (after giving effect to this Supplemental Agreement)
50 as if made on and as of such date. The Additional Pledgor hereby undertakes each of the
51 covenants, in its capacity as a Pledgor, contained in Subsection 5.3 of the Guarantee and
52 Collateral Agreement. The Additional Pledgor hereby grants, as and to the same extent as
53 provided in the Guarantee and Collateral Agreement, to the Collateral Agent, for the benefit of
54 the Secured Parties, a continuing security interest in all of the Pledged Collateral of such
55 Additional Pledgor now owned or at any time hereafter acquired by such Pledgor, and any
56 Proceeds thereof, except as provided in Subsection 3.3 of the Guarantee and Collateral
57 Agreement. The Additional Pledgor represents and warrants to the Collateral Agent and the
58 other Secured Parties that this Supplemental Agreement has been duly authorized, executed and
59 delivered by it and constitutes its legal, valid and binding obligation, enforceable against it in
60 accordance with its terms.
61 2. GOVERNING LAW. THIS SUPPLEMENTAL AGREEMENT AND THE RIGHTS
62 AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ANY CLAIM OR
63 CONTROVERSY RELATING HERETO SHALL BE GOVERNED BY, AND CONSTRUED
64 AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
65 YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF 66 LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY
67 APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION
68 OF THE LAWS OF ANOTHER JURISDICTION.
69 IN WITNESS WHEREOF, the undersigned has caused this Supplemental Agreement to 70 be duly executed and delivered as of the date first above written.
71 [ADDITIONAL PLEDGOR]
72 By:
73 Name:
74 Title:
75 Acknowledged and Agreed to as of the date
76 hereof by:
77 BANK OF AMERICA, N.A.,
78 as Collateral Agent and Administrative
79 Agent
80 By:
81 Name:
82 Title:
83
84
85
86
AMENDED AND RESTATED ABL GUARANTEE AND COLLATERAL AGREEMENT
made by
UNIVAR INC.
and certain of its Domestic Subsidiaries,
in favor of
BANK OF AMERICA, N.A.
as Collateral Agent
Dated as of July 28, 2015
as Amended and Restated on February 28, 2019
TABLE OF CONTENTS
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Page
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SECTION 1
Defined Terms
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1.1 Definitions
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2
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1.2 Other Definitional Provisions
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10
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1.3 Amendment and Restatement
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10
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SECTION 2
Guarantee
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2.1 Guarantee
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11
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2.2 Right of Contribution
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12
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2.3 No Subrogation
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12
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2.4 Amendments, etc. with Respect to the Obligations
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13
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2.5 Guarantee Absolute and Unconditional
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13
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2.6 Reinstatement
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14
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2.7 Payments
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15
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SECTION 3
Grant of Security Interest
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3.1 Grant
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15
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3.2 Pledged Collateral
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16
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3.3 Certain Limited Exceptions
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16
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3.4 Intercreditor Relations
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19
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SECTION 4
Representations and Warranties
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4.1 Representations and Warranties of Each Guarantor
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20
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4.2 Representations and Warranties of Each Grantor
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20
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4.3 Representations and Warranties of Each Pledgor
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23
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SECTION 5
Covenants
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5.1 Covenants of Each Guarantor
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24
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5.2 Covenants of Each Grantor
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24
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5.3 Covenants of Each Pledgor
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28
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SECTION 6
Remedial Provisions
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6.1 Certain Matters Relating to Accounts
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30
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6.2 Communications with Obligors; Grantors Remain Liable
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32
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6.3 Pledged Stock
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32
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6.4 Proceeds to Be Turned Over to the Collateral Agent
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33
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Page
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6.5 Application of Proceeds
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33
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6.6 Code and Other Remedies
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34
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6.7 Registration Rights
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34
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6.8 Waiver; Deficiency
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35
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SECTION 7
The Collateral Agent
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7.1 Collateral Agent’s Appointment as Attorney-in-Fact, etc.
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36
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7.2 Duty of Collateral Agent
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37
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7.3 Financing Statements
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38
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7.4 Authority of Collateral Agent
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38
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7.5 Right of Inspection
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38
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SECTION 8
Non-Lender Secured Parties
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8.1 Rights to Collateral
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39
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8.2 Appointment of Agent
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40
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8.3 Waiver of Claims
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40
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8.4 Designation of Non-Lender Secured Parties
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40
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SECTION 9
Miscellaneous
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9.1 Amendments in Writing
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41
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9.2 Notices
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41
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9.3 No Waiver by Course of Conduct; Cumulative Remedies
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41
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9.4 Enforcement Expenses; Indemnification
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41
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9.5 Successors and Assigns
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42
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9.6 Set-Off
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42
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9.7 Counterparts
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42
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9.8 Severability
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43
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9.9 Section Headings
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43
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9.10 Integration
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43
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9.11 GOVERNING LAW
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43
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9.12 Submission to Jurisdiction; Waivers
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43
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9.13 Acknowledgments
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44
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9.14 WAIVER OF JURY TRIAL
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44
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9.15 Additional Granting Parties
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45
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9.16 Releases
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45
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9.17 Judgment
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46
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9.18 Transfer Tax Acknowledgment
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47
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SCHEDULES
Schedule 1 — Notice Addresses of Granting Parties
Schedule 2 — Pledged Securities
Schedule 3 — Perfection Matters
Schedule 4A — Financing Statements
Schedule 4B — Jurisdiction of Organization
Schedule 5 — Intellectual Property
Schedule 6 — Commercial Tort Claims
ANNEXES
Annex 1 — Acknowledgement and Consent of Issuers who are not Granting Parties
Annex 2 — Assumption Agreement
Annex 3 — Supplemental Agreement
AMENDED AND RESTATED ABL GUARANTEE AND COLLATERAL AGREEMENT
AMENDED AND RESTATED ABL GUARANTEE AND COLLATERAL AGREEMENT, dated as of July 28, 2015, as amended and restated as of February 28, 2019, made by UNIVAR INC., a Delaware corporation (the “U.S. Parent Borrower”) and certain Domestic Subsidiaries of the U.S. Parent Borrower from time to time party hereto (the “U.S. Subsidiary Borrowers”), in favor of BANK OF AMERICA, N.A., as collateral agent for the Secured Parties (as defined below) (in such capacity, and together with its successors and assigns in such capacity, the “Collateral Agent”) and U.S. administrative agent (in such capacity, and together with its successors and assigns in such capacity, the “Administrative Agent”) for the banks and other financial institutions (collectively, the “Lenders”; individually, a “Lender”) from time to time parties to the Credit Agreement described below.
W I T N E S S E T H :
WHEREAS, pursuant to that certain Amended and Restated ABL Credit Agreement, dated as of the date hereof (as amended, waived, supplemented or otherwise modified from time to time, together with any agreement extending the maturity of, or restructuring, refunding, refinancing or increasing the Indebtedness under such agreement or successor agreements, the “Credit Agreement”), among the U.S. Parent Borrower, the U.S. Subsidiary Borrowers party thereto, Univar Canada Ltd., as Canadian Borrower, the Collateral Agent, the Administrative Agent, Bank of America, N.A. (acting through its Canadian branch), as Canadian administrative agent and the other parties from time to time party thereto, the Lenders have severally agreed to make extensions of credit to the Borrowers upon the terms and subject to the conditions set forth therein;
WHEREAS, the Granting Parties (as defined below), the Administrative Agent and the Collateral Agent entered into that certain ABL Collateral Agreement dated as of July 28, 2015 (as amended, waived, supplemented or otherwise modified from time to time prior to the date hereof, the “Original ABL Collateral Agreement”);
WHEREAS, each Borrower is a member of an affiliated group of companies that includes the U.S. Parent Borrower, the U.S. Subsidiary Borrowers and any other wholly owned Domestic Subsidiary of the U.S. Parent Borrower that becomes a party hereto from time to time after the date hereof (all of the foregoing collectively, the “Granting Parties”);
WHEREAS, the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the Borrowers to make valuable transfers to one or more of the other Granting Parties in connection with the operation of their respective businesses;
WHEREAS, each Borrower and the other Granting Parties are engaged in related businesses, and each such Granting Party will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement;
WHEREAS, it is a condition to the obligation of the Lenders to make their respective extensions of credit under the Credit Agreement that the Granting Parties shall execute and deliver this Agreement to the Collateral Agent for the benefit of the Secured Parties; and
WHEREAS, the Collateral Agent has entered into the Intercreditor Agreement (as amended, amended and restated, waived, supplemented or otherwise modified from time to time (subject to Subsection 9.1), the “ABL Intercreditor Agreement”).
NOW, THEREFORE, in consideration of the premises and to induce the Administrative Agent and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrowers thereunder, each Granting Party hereby agrees with the Administrative Agent and the Collateral Agent to amend and restate the Original ABL Collateral Agreement as follows, and each Granting Party hereby agrees with the Administrative Agent and the Collateral Agent, for the benefit of the Secured Parties as follows:
SECTION 1
Defined Terms
1.1 Definitions.
(a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms that are defined in the Code (as in effect on the date hereof) are used herein as so defined: Cash Proceeds, Chattel Paper, Commercial Tort Claims, Deposit Accounts, Documents, Electronic Chattel Paper, Equipment, Farm Products, Fixtures, General Intangibles, Goods, Letter-of-Credit Rights, Money, Promissory Notes, Records, Securities, Securities Accounts and Supporting Obligations.
(b) The following terms shall have the following meanings:
“ABL Intercreditor Agreement”: as defined in the recitals hereto.
“Accounts”: all accounts (as defined in the Code) of each Grantor, including, without limitation, all Accounts (as defined in the Credit Agreement) and Accounts Receivable of such Grantor.
“Accounts Receivable”: any right to payment for goods sold or leased or for services rendered, which is not evidenced by an instrument (as defined in the Code) or Chattel Paper; provided that, solely for purposes of Subsections 4.2.5, 5.2.8, 6.1, 6.2 and 6.4 hereof, “Accounts Receivable” means any right to payment for goods sold or leased or for services rendered, whether or not evidenced by an instrument (as defined in the Code) or Chattel Paper.
“Additional ABL Agent”: as defined in the ABL Intercreditor Agreement.
“Additional ABL Collateral Documents”: as defined in the ABL Intercreditor Agreement.
“Additional ABL Obligations”: as defined in the ABL Intercreditor Agreement.
“Additional ABL Secured Parties”: as defined in the ABL Intercreditor Agreement.
“Additional Agent”: as defined in the ABL Intercreditor Agreement.
“Additional Credit Facility”: as defined in the ABL Intercreditor Agreement.
“Additional Term Obligations”: as defined in the ABL Intercreditor Agreement.
“Adjusted Net Worth”: of any Guarantor at any time, the greater of (x) $0 and (y) the amount by which the fair saleable value of such Guarantor’s assets on the date of the respective payment
hereunder exceeds its debts and other liabilities (including contingent liabilities, but without giving effect to any of its obligations under this Agreement or any other Loan Document, or pursuant to its guarantee with respect to any Indebtedness then outstanding under the Senior Notes, the Cash Flow Credit Facility, any Additional Credit Facility or any Assumed Indebtedness) on such date.
“Administrative Agent”: as defined in the preamble hereto.
“Agreement”: this Amended and Restated ABL Guarantee and Collateral Agreement, as the same may be amended, restated, supplemented, waived or otherwise modified from time to time.
“Applicable Law”: as defined in Subsection 9.8.
“Bank Products Agreement”: any agreement pursuant to which a bank or other financial institution agrees to provide (a) treasury services, (b) credit card, merchant card, purchasing card or stored value card services (including, without limitation, the processing of payments and other administrative services with respect thereto), (c) cash management services (including, without limitation, controlled disbursements, automated clearinghouse transactions, return items, netting, overdrafts, depository, lockbox, stop payment, electronic funds transfer, information reporting, wire transfer and interstate depository network services) and (d) other banking products or services as may be requested by any Grantor (other than letters of credit and other than loans except indebtedness arising from services described in clauses (a) through (c) of this definition).
“Bank Products Provider” shall mean any Person that has entered into a Bank Products Agreement with a Grantor with the obligations of such Grantor thereunder being secured by one or more Loan Documents as designated by the U.S. Parent Borrower in accordance with Section 8.4 hereof (provided that no Person shall, with respect to any Bank Products Agreement, be at any time a Bank Products Provider with respect to more than one Credit Facility).
“Bankruptcy Case”: (i) the U.S. Parent Borrower or any of its Subsidiaries commencing any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or the U.S. Parent Borrower or any of its Subsidiaries making a general assignment for the benefit of its creditors; or (ii) there being commenced against the U.S. Parent Borrower or any of its Subsidiaries any case, proceeding or other action of a nature referred to in clause (i) above which (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days.
“Borrower Obligations”: the collective reference to all obligations of the Borrowers from time to time arising under or in respect of (i) the due and punctual payment of the principal of and premium, if any, and interest and fees, if any (including interest and fees accruing during (or that would accrue but for) the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans and Letters of Credit and reimbursement obligations, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (ii) all other obligations and liabilities, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including
monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the U.S. Parent Borrower and the other Loan Parties under the Credit Agreement and the other Loan Documents, any Hedging Agreement entered into with any Hedging Provider, any Bank Products Agreement entered into with any Bank Products Provider or any Guarantor Obligation of the U.S. Parent Borrower or any of its Subsidiaries as to which any Secured Party is a beneficiary (including any Management Guarantee entered into with any Management Credit Provider) or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, amounts payable in connection with any such Bank Products Agreement or a termination of any transaction entered into pursuant to any such Hedging Agreement, fees, indemnities, costs, expenses or otherwise (including, without limitation, all reasonable fees, expenses and disbursements of counsel to the Administrative Agent or any other Secured Party that are required to be paid by the U.S. Parent Borrower pursuant to the terms of the Credit Agreement or any other Loan Document); provided that the Borrower Obligations shall not include any Excluded Swap Obligations.
“Code”: the Uniform Commercial Code as from time to time in effect in the State of New York.
“Collateral”: as defined in Section 3; provided that, for purposes of Section 8, “Collateral” shall have the meaning assigned to such term in the Credit Agreement.
“Collateral Account Bank”: a bank which at all times is the Collateral Agent or a Lender or an affiliate thereof as selected by the relevant Grantor and consented to in writing by the Collateral Agent (such consent not to be unreasonably withheld or delayed).
“Collateral Agent”: as defined in the preamble hereto.
“Collateral Proceeds Account”: a non-interest bearing cash collateral account established and maintained by the relevant Grantor at an office of the Collateral Account Bank in the name, and in the sole dominion and control of, the Collateral Agent for the benefit of the Secured Parties.
“Collateral Representative”: (i) the Term Loan Collateral Representative or the ABL Collateral Representative (each as defined in the ABL Intercreditor Agreement) with respect to the ABL Intercreditor Agreement and (ii) if any other Intercreditor Agreement is executed and then in effect, the Person acting as representative for the Collateral Agent and the Secured Parties thereunder for the applicable purpose contemplated by this Agreement.
“Commercial Tort Action”: any action, other than an action primarily seeking declaratory or injunctive relief with respect to claims asserted or expected to be asserted by Persons other than the Grantors, that is commenced by a Grantor in the courts of the United States of America, any state or territory thereof or any political subdivision of any such state or territory, in which any Grantor seeks damages arising out of torts committed against it that would reasonably be expected to result in a damage award to it exceeding $20,000,000.
“Contracts”: with respect to any Grantor, all contracts, agreements, instruments and indentures in any form and portions thereof, to which such Grantor is a party or under which such Grantor or any property of such Grantor is subject, as the same may from time to time be amended, supplemented, waived or otherwise modified, and all rights of such Grantor thereunder, including, without limitation, (i) all rights of such Grantor to receive moneys due and to become due to it thereunder or in connection
therewith, (ii) all rights of such Grantor to damages arising thereunder and (iii) all rights of such Grantor to perform and to exercise all remedies thereunder.
“Copyright Licenses”: with respect to any Grantor, all United States written license agreements of such Grantor providing for the grant by or to such Grantor of any right under any United States copyright of such Grantor, other than agreements with any Person who is an Affiliate or a Subsidiary of the U.S. Parent Borrower or such Grantor, including, without limitation, any material license agreements listed on Schedule 5, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.
“Copyrights”: with respect to any Grantor, all of such Grantor’s right, title and interest in and to all United States copyrights, whether or not the underlying works of authorship have been published or registered, all United States copyright registrations and copyright applications, including, without limitation, any copyright registrations and copyright applications listed on Schedule 5, and (i) all renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof and (iii) the right to sue or otherwise recover for past, present and future infringements and misappropriations thereof.
“Credit Agreement”: as defined in the recitals hereto.
“Credit Facility”: as defined in the ABL Intercreditor Agreement.
“Discharge of Additional ABL Obligations”: as defined in the ABL Intercreditor Agreement.
“Excluded Assets”: as defined in Subsection 3.3.
“Foreign Intellectual Property”: any right, title or interest in or to any copyrights, copyright licenses, patents, patent applications, patent licenses, trade secrets, trade secret licenses, trademarks, service marks, trademark and service mark applications, trade names, trade dress, trademark licenses, technology, know-how and processes or any other intellectual property governed by or arising or existing under, pursuant to or by virtue of the laws of any jurisdiction other than the United States of America or any state thereof.
“Granting Parties”: as defined in the recitals hereto.
“Grantor”: the U.S. Parent Borrower, the U.S. Subsidiary Borrowers that are party hereto and any other Domestic Subsidiary of the U.S. Parent Borrower that becomes a party hereto from time to time following the date hereof.
“Guarantor Obligations”: with respect to any Guarantor, the collective reference to (i) the Borrower Obligations guaranteed by such Guarantor pursuant to Section 2 and (ii) all obligations of the Guarantors from time to time arising under or in respect of the due and punctual payment of (a) the principal of and premium, if any, and interest and fees, if any (including interest and fees accruing during (or that would accrue but for) the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans and Letters of Credit and reimbursement obligations, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise and (b) all other obligations and liabilities, including fees,
costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the U.S. Parent Borrower and the other Loan Parties under the Credit Agreement and the other Loan Documents, any Hedging Agreement entered into with any Hedging Provider, any Bank Products Agreement entered into with any Bank Products Provider, or any Guarantor Obligation of the U.S. Parent Borrower or any of its Subsidiaries as to which any Secured Party is a beneficiary (including any Management Guarantee entered into with any Management Credit Provider) or any other document made, delivered or given in connection therewith; provided that the Guarantor Obligations shall not include any Excluded Swap Obligations.
“Guarantors”: the collective reference to each Granting Party.
“Hedging Agreement”: any Interest Rate Agreement, Commodities Agreement, Currency Agreement or any other credit or equity swap, collar, cap, floor or forward rate agreement, or other agreement or arrangement designed to protect against fluctuations in interest rates or currency, commodity, credit or equity values or creditworthiness (including, without limitation, any option with respect to any of the foregoing and any combination of the foregoing agreements or arrangements), and any confirmation executed in connection with any such agreement or arrangement.
“Hedging Provider”: any Person that has entered into a Hedging Agreement with a Grantor with the obligations of such Grantor thereunder being secured by one or more Loan Documents, as designated by the U.S. Parent Borrower in accordance with Subsection 8.4 hereof (provided that no Person shall, with respect to any Hedging Agreement, be at any time a Hedging Provider with respect to more than one Credit Facility).
“Instruments”: as defined in Article 9 of the Code but excluding Pledged Securities.
“Intellectual Property”: with respect to any Grantor, the collective reference to such Grantor’s Copyrights, Copyright Licenses, Patents, Patent Licenses, Trade Secrets, Trade Secret Licenses, Trademarks and Trademark Licenses.
“Intercompany Note”: with respect to any Grantor, any promissory note in a principal amount in excess of $20,000,000 evidencing loans made by such Grantor to the U.S. Parent Borrower or any of its Restricted Subsidiaries.
“Intercreditor Agreements”: (a) the ABL Intercreditor Agreement (upon and during the effectiveness thereof) and (b) any other intercreditor agreement that may be entered into in the future by the Collateral Agent and one or more Additional Agents and acknowledged by the U.S. Parent Borrower and the other Granting Parties (each as amended, amended and restated, waived, supplemented or otherwise modified from time to time (subject to Subsection 9.1)) (upon and during the effectiveness thereof).
“Inventory”: with respect to any Grantor, all inventory (as defined in the Code) of such Grantor, including, without limitation, all Inventory (as defined in the Credit Agreement) of such Grantor.
“Investment Property”: the collective reference to (i) all “investment property” as such term is defined in Section 9-102(a)(49) of the Code as in effect on the date hereof (other than (a) Capital Stock (including for these purposes any investment deemed to be Capital Stock for United States tax purposes) of any Foreign Subsidiary in excess of 65% of any series of such Capital Stock and (b) any
Capital Stock excluded from the definition of “Pledged Stock”) and (ii) whether or not constituting “investment property” as so defined, all Pledged Securities.
“Issuers”: the collective reference to issuers of Pledged Stock, including (as of the Restatement Effective Date) the Persons identified on Schedule 2 as the issuers of Pledged Stock.
“Lender”: as defined in the preamble hereto.
“Management Credit Provider”: any Person that is a beneficiary of a Management Guarantee, with the obligations of the applicable Grantor thereunder being secured by one or more Loan Documents as designated by the U.S. Parent Borrower in accordance with Subsection 8.4 hereof (provided that no Person shall, with respect to any Management Guarantee, be at any time a Management Credit Provider with respect to more than one Credit Facility).
“Non-Lender Secured Parties”: the collective reference to all Bank Products Providers, Hedging Providers and Management Credit Providers and their respective successors, assigns and transferees.
“Obligations”: (i) in the case of each U.S. Borrower, its Borrower Obligations and (ii) in the case of each Guarantor, its Guarantor Obligations.
“Original ABL Collateral Agreement”: as defined in the recitals hereto.
“Patent Licenses”: with respect to any Grantor, all United States written license agreements of such Grantor providing for the grant by or to such Grantor of any right under any United States patent, patent application, or patentable invention other than agreements with any Person who is an Affiliate or a Subsidiary of the U.S. Parent Borrower or such Grantor, including, without limitation, the material license agreements listed on Schedule 5, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.
“Patents”: with respect to any Grantor, all of such Grantor’s right, title and interest in and to all United States patents, patent applications and patentable inventions and all reissues and extensions thereof, including, without limitation, all patents and patent applications identified in Schedule 5, and including, without limitation, (i) all inventions and improvements described and claimed therein, (ii) the right to sue or otherwise recover for any and all past, present and future infringements and misappropriations thereof, (iii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past, present or future infringements thereof), and (iv) all other rights corresponding thereto in the United States and all reissues, divisions, continuations, continuations-in-part, substitutes, renewals, and extensions thereof, all improvements thereon, and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto.
“Pledged Collateral”: as to any Pledgor, the Pledged Securities, in all cases, now owned or at any time hereafter acquired by such Pledgor, and any Proceeds thereof.
“Pledged Notes”: with respect to any Pledgor, all Intercompany Notes at any time issued to, or held or owned by, such Pledgor.
“Pledged Securities”: the collective reference to the Pledged Notes and the Pledged Stock.
“Pledged Stock”: with respect to any Pledgor, the shares of Capital Stock listed on Schedule 2 as held by such Pledgor, together with any other shares of Capital Stock of any Subsidiary of such Pledgor required to be pledged by such Pledgor pursuant to Subsection 8.8 of the Credit Agreement, as well as any other shares, stock certificates, options or rights of any nature whatsoever in respect of any Capital Stock of any Issuer that may be issued or granted to, or held by, such Pledgor while this Agreement is in effect, in each case, unless and until such time as the respective pledge of such Capital Stock under this Agreement is released in accordance with the terms hereof and of the Credit Agreement; provided that in no event shall there be pledged, nor shall any Pledgor be required to pledge, directly or indirectly, (i) more than 65% of any series of the outstanding Capital Stock (including for these purposes any investment deemed to be Capital Stock for U.S. tax purposes) of any Foreign Subsidiary, (ii) any Capital Stock of a Subsidiary of any Foreign Subsidiary, (iii) de minimis shares of a Foreign Subsidiary held by any Pledgor as a nominee or in a similar capacity, (iv) any Capital Stock of any Captive Insurance Subsidiary, (v) any Capital Stock of any Excluded Canadian Subsidiary or Excluded U.S. Subsidiary (other than, but without limiting clause (i) above, a Subsidiary described in clause (d) of the definitions thereof) and (vi) without duplication, any Excluded Assets.
“Pledgor”: the U.S. Parent Borrower (with respect to Pledged Securities held by the U.S. Parent Borrower and all other Pledged Collateral of the U.S. Parent Borrower), each U.S. Subsidiary Borrower (with respect to Pledged Securities held by the such U.S. Subsidiary Borrower and all other Pledged Collateral of such U.S. Subsidiary Borrower) and each other Granting Party (with respect to Pledged Securities held by such Granting Party and all other Pledged Collateral of such Granting Party).
“Proceeds”: all “proceeds” as such term is defined in Section 9-102(a)(64) of the Code (as in effect on the date hereof) and, in any event, Proceeds of Pledged Securities shall include, without limitation, all dividends or other income from the Pledged Securities, collections thereon or distributions or payments with respect thereto.
“Restrictive Agreements”: as defined in Subsection 3.3(a).
“Secured Parties”: the collective reference to (i) the Administrative Agent, the Collateral Agent and each Other Representative, (ii) the Lenders, (iii) the Non-Lender Secured Parties, (iv) each Secured Party (as defined in the Credit Agreement) and (v) the respective successors and assigns and the permitted transferees and endorsees of each of the foregoing.
“Security Collateral”: with respect to any Granting Party, collectively, the Collateral (if any) and the Pledged Collateral (if any) of such Granting Party.
“Specified Asset”: as defined in Subsection 4.2.2.
“Term Loan Priority Collateral”: as defined in the ABL Intercreditor Agreement.
“Term Loan Secured Parties”: as defined in the ABL Intercreditor Agreement.
“Trade Secret Licenses”: with respect to any Grantor, all United States written license agreements of such Grantor providing for the grant by or to such Grantor of any right under any United States trade secrets, including, without limitation, know-how, processes, formulae, compositions, designs, and confidential business and technical information, and all rights of any kind whatsoever accruing
thereunder or pertaining thereto, other than agreements with any Person who is an Affiliate or a Subsidiary of the U.S. Parent Borrower or such Grantor, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.
“Trade Secrets”: with respect to any Grantor, all of such Grantor’s right, title and interest in and to all United States trade secrets, including, without limitation, know-how, processes, formulae, compositions, designs, and confidential business and technical information, and all rights of any kind whatsoever accruing thereunder or pertaining thereto, including, without limitation, (i) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto, including, without limitation, payments under all licenses, non-disclosure agreements and memoranda of understanding entered into in connection therewith, and damages and payments for past or future misappropriations thereof, and (ii) the right to sue or otherwise recover for past, present or future misappropriations thereof.
“Trademark Licenses”: with respect to any Grantor, all United States written license agreements of such Grantor providing for the grant by or to such Grantor of any right under any United States trademarks, service marks, trade names, trade dress or other indicia of trade origin or business identifiers, other than agreements with any Person who is an Affiliate or a Subsidiary of the U.S. Parent Borrower or such Grantor, including, without limitation, the material license agreements listed on Schedule 5, subject, in each case, to the terms of such license agreements, and the right to prepare for sale, sell and advertise for sale, all Inventory now or hereafter covered by such licenses.
“Trademarks”: with respect to any Grantor, all of such Grantor’s right, title and interest in and to all United States trademarks, service marks, trade names, trade dress or other indicia of trade origin or business identifiers, trademark and service mark registrations, and applications for trademark or service mark registrations (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 said Act has been filed and accepted, it being understood and agreed that the carve out in this parenthetical shall be applicable only if and for so long as a grant or enforcement of a security interest in such intent to use application would invalidate or otherwise jeopardize Grantor’s rights therein or in the resulting registration), and any renewals thereof, including, without limitation, each registration and application identified in Schedule 5, and including, without limitation, (i) the right to sue or otherwise recover for any and all past, present and future infringements or dilutions thereof, (ii) all income, royalties, damages and other payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), and (iii) all other rights corresponding thereto and all other rights of any kind whatsoever of such Grantor accruing thereunder or pertaining thereto in the United States, together in each case with the goodwill of the business connected with the use of, and symbolized by, each such trademark, service mark, trade name, trade dress or other indicia of trade origin or business identifiers.
“U.S. Parent Borrower”: as defined in the preamble hereto.
“U.S. Subsidiary Borrowers”: as defined in the preamble hereto.
“Vehicles”: all cars, trucks, trailers, construction and earth moving equipment and other vehicles covered by a certificate of title law of any state and all tires and other appurtenances to any of the foregoing.
1.2 Other Definitional Provisions.
(a) The words “hereof,” “herein,” “hereto” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Annex references are to this Agreement unless otherwise specified. The words “include,” “includes,” and “including” shall be deemed to be followed by the phrase “without limitation.”
(b) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.
(c) Where the context requires, terms relating to the Collateral, Pledged Collateral or Security Collateral, or any part thereof, when used in relation to a Granting Party shall refer to such Granting Party’s Collateral, Pledged Collateral or Security Collateral or the relevant part thereof.
(d) All references in this Agreement to any of the property described in the definition of the term “Collateral” or “Pledged Collateral,” or to any Proceeds thereof, shall be deemed to be references thereto only to the extent the same constitute Collateral or Pledged Collateral, respectively.
1.3 Amendment and Restatement.
(a) On the Restatement Effective Date, the Original ABL Collateral Agreement shall be amended and restated in its entirety by this Agreement. This Agreement shall not constitute a novation of the Original ABL Collateral Agreement or any of the other Security Documents. The parties hereto acknowledge and agree that (i) the grant by the Grantors of security interests in the Collateral (as amended and restated hereby) and by the Granting Parties of security interests in the Pledged Collateral (as amended and restated hereby), in each case, pursuant to the Original ABL Collateral Agreement was made as of the Closing Date (or as of such later date on which a Grantor became a party thereto) and the amendment and restatement of the Original ABL Collateral Agreement as contemplated hereby continues such grants, (ii) this Agreement and the other Loan Documents, whether executed and delivered in connection herewith or otherwise, do not constitute a novation or termination of the “Obligations” (as defined in Original ABL Collateral Agreement), which remain outstanding as of the Restatement Effective Date, (iii) the “Obligations” (as defined in Original ABL Collateral Agreement) are in all respects continuing (as amended and restated hereby and by the ABL Credit Agreement and which are in all respects hereinafter subject to the terms herein) and (iv) the Liens and security interests as granted under the Original ABL Collateral Agreement and the other applicable Loan Documents are in all respects continuing and in full force and effect and are reaffirmed hereby. To the extent applicable, the Grantors hereby acknowledge, confirm and agree that any financing statements, fixture filings, filings with the United States Patent and Trademark Office or the United States Copyright Office or other instrument similar in effect to the foregoing under applicable law covering all or any part of the Collateral previously filed in favor of the Collateral Agent under the Original ABL Collateral Agreement are in full force and effect as of the date hereof, except with respect to real property subject to a Mortgage (as defined in the Original Credit Agreement) in effect immediately prior to the date hereof, and each Grantor ratifies its authorization for the Collateral Agent to file in any relevant jurisdictions any such financing statement, fixture filing, filing or other instrument relating to all or any part of the Collateral if filed prior to the date hereof.
(b) On and after the Restatement Effective Date, (i) all references to the Original ABL Collateral Agreement or the “U.S. Security Agreement” in the Loan Documents (other than this
Agreement) shall be deemed to refer to this Agreement, (ii) all references to any section (or subsection) of the Original ABL Collateral Agreement or the “U.S. Security Agreement” in any Loan Document (but not herein) shall be deemed to refer to the corresponding provisions of this Agreement, (iii) except as the context otherwise provides, all references to this Agreement herein (including for purposes of indemnification) shall be deemed to be references to this Agreement and (iv) all references to the Original ABL Collateral Agreement or the “U.S. Security Agreement” in all Blocked Account Agreement executed in connection with the ABL Credit Agreement or the Original ABL Collateral Agreement shall be deemed to refer to this Agreement.
SECTION 2
Guarantee
2.1 Guarantee.
(a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the benefit of the Secured Parties, the prompt and complete payment and performance (x) by each Borrower when due and payable (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations owed to the Secured Parties and (y) the Canadian Obligations when due and payable (whether at stated maturity, by acceleration or otherwise) owed to the Secured Parties.
(b) Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount that can be guaranteed by such Guarantor under applicable law, including applicable federal and state laws relating to the insolvency of debtors; provided that, to the maximum extent permitted under applicable law, it is the intent of the parties hereto that the rights of contribution of each Guarantor provided in Subsection 2.2 be included as an asset of the respective Guarantor in determining the maximum liability of such Guarantor hereunder.
(c) Each Guarantor agrees that the Borrower Obligations and Canadian Obligations guaranteed by it hereunder may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of the Administrative Agent or any other Secured Party hereunder.
(d) The guarantee contained in this Section 2 shall remain in full force and effect until the earliest to occur of (i) the first date on which all of the Loans and all other Borrower Obligations and Canadian Obligations (other than any Obligations owing to a Non-Lender Secured Party not then due and payable) then due and owing, and the obligations of each Guarantor under the guarantee contained in this Section 2 then due and owing shall have been satisfied by payment in full in cash, all Letters of Credit are terminated or cash collateralized on terms reasonably satisfactory to the applicable Letter of Credit Issuer (or other arrangements have been made with respect thereto on terms reasonably satisfactory to the applicable Letter of Credit Issuer) and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement any of the Borrowers may be free from any Borrower Obligations and that no Canadian Obligations are outstanding or (ii) as to any Guarantor, a sale or other disposition of all the Capital Stock of such Guarantor (other than to the U.S. Parent Borrower, the U.S. Subsidiary Borrowers, or any other Guarantor), or any other transaction or occurrence as a result of which such Guarantor ceases to be a Restricted Subsidiary of the U.S. Parent Borrower, in each case that is permitted under the Credit Agreement.
(e) No payment made by any Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by the Administrative Agent or any other Secured Party from any of the Borrowers, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of any of the Borrower Obligations or Canadian Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or Canadian Obligations any payment received or collected from such Guarantor in respect of any of the Borrower Obligations or Canadian Obligations), remain liable for the Borrower Obligations of each Borrower guaranteed by it hereunder up to the maximum liability of such Guarantor hereunder until the earliest to occur of (i) the first date on which all the Loans and all other Borrower Obligations and Canadian Obligations (other than any Obligations owing to a Non-Lender Secured Party not then due and payable) then due and owing are paid in full in cash, all Letters of Credit are terminated or cash collateralized on terms reasonably satisfactory to the applicable Letter of Credit Issuer (or other arrangements have been made with respect thereto on terms reasonably satisfactory to the applicable Letter of Credit Issuer) and the Commitments are terminated or (ii) as to any Guarantor, a sale or other disposition of all the Capital Stock of such Guarantor (other than to the U.S. Parent Borrower, the U.S. Subsidiary Borrowers or any other Guarantor), or any other transaction or occurrence as a result of which such Guarantor ceases to be a Restricted Subsidiary of the U.S. Parent Borrower, in each case that is permitted under the Credit Agreement.
2.2 Right of Contribution. Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share (based, to the maximum extent permitted by law, on the respective Adjusted Net Worth of the Guarantors on the date the respective payment is made) of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder that has not paid its proportionate share of such payment. Each Guarantor’s right of contribution shall be subject to the terms and conditions of Subsection 2.3. The provisions of this Subsection 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the Administrative Agent and the other Secured Parties, and each Guarantor shall remain liable to the Administrative Agent and the other Secured Parties for the full amount guaranteed by such Guarantor hereunder.
2.3 No Subrogation. Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by the Administrative Agent or any other Secured Party, no Guarantor shall be entitled to be subrogated to any of the rights of the Administrative Agent or any other Secured Party against any Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by the Administrative Agent or any other Secured Party for the payment of the Borrower Obligations or the Canadian Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from any Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Administrative Agent and the other Secured Parties by the Borrowers on account of the Borrower Obligations and Canadian Obligations (other than any Obligations owing to a Non-Lender Secured Party not then due and payable) are paid in full in cash, all Letters of Credit are terminated or cash collateralized on terms reasonably satisfactory to the applicable Letter of Credit Issuer (or other arrangements have been made with respect thereto on terms reasonably satisfactory to the applicable Letter of Credit Issuer) and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations and Canadian Obligations shall not have been paid in full in cash, any Letters of Credit shall be outstanding (or shall not have been collateralized or otherwise provided for in a manner reasonably satisfactory to the applicable Letter of
Credit Issuer) or any of the Commitments shall remain in effect, such amount shall be held by such Guarantor for the benefit of the Administrative Agent and the other Secured Parties and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be held as collateral security for all of the Borrower Obligations and Canadian Obligations (whether matured or unmatured) guaranteed by such Guarantor and/or then or at any time thereafter may be applied against any Borrower Obligations or Canadian Obligations, whether matured or unmatured, in such order as the Administrative Agent may determine.
2.4 Amendments, etc. with Respect to the Obligations. To the maximum extent permitted by law, each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice to or further assent by any Guarantor, any demand for payment of any of the Borrower Obligations or Canadian Obligations made by the Collateral Agent, the Administrative Agent or any other Secured Party may be rescinded by the Collateral Agent, the Administrative Agent or such other Secured Party and any of the Borrower Obligations or Canadian Obligations continued, and the Borrower Obligations and Canadian Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, waived, modified, accelerated, compromised, subordinated, waived, surrendered or released by the Collateral Agent, the Administrative Agent or any other Secured Party, and the Credit Agreement and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, waived, modified, supplemented or terminated, in whole or in part, as the Collateral Agent or the Administrative Agent (or the Required Lenders or the applicable Lender(s), as the case may be) may deem advisable from time to time, and any collateral security, guarantee or right of offset at any time held by the Collateral Agent, the Administrative Agent or any other Secured Party for the payment of any of the Borrower Obligations or Canadian Obligations may be sold, exchanged, waived, surrendered or released. None of the Collateral Agent, the Administrative Agent and each other Secured Party shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for any of the Borrower Obligations or Canadian Obligations or for the guarantee contained in this Section 2 or any property subject thereto, except to the extent required by applicable law.
2.5 Guarantee Absolute and Unconditional. Each Guarantor waives, to the maximum extent permitted by applicable law, any and all notice of the creation, renewal, extension or accrual of any of the Borrower Obligations or Canadian Obligations and notice of or proof of reliance by the Collateral Agent, the Administrative Agent or any other Secured Party upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; each of the Borrower Obligations and Canadian Obligations, and any obligation contained therein, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between any of the Borrowers and any of the Guarantors, on the one hand, and the Collateral Agent, the Administrative Agent and the other Secured Parties, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor waives, to the maximum extent permitted by applicable law, diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon any Borrower or any of the other Guarantors with respect to any of the Borrower Obligations or Canadian Obligations. Each Guarantor understands and agrees, to the extent permitted by law, that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment and not of collection. Each Guarantor hereby waives, to the maximum extent permitted by applicable law, any and all defenses (other than any claim alleging breach of a contractual provision of any of the Loan Documents) that it may have arising out of or in
connection with any and all of the following: (a) the validity or enforceability of the Credit Agreement or any other Loan Document, any of the Borrower Obligations, any of the Canadian Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by the Collateral Agent, the Administrative Agent or any other Secured Party, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) that may at any time be available to or be asserted by any of the Borrowers against the Collateral Agent, the Administrative Agent or any other Secured Party, (c) any change in the time, place, manner or place of payment, amendment, or waiver or increase in any of the Obligations, (d) any exchange, non-perfection, taking, or release of Security Collateral, (e) any change in the structure or existence of any of the Borrowers, (f) any application of Security Collateral to any of the Obligations, (g) any law, regulation or order of any jurisdiction, or any other event, affecting any term of any Obligation or the rights of the Collateral Agent, the Administrative Agent or any other Secured Party with respect thereto, including, without limitation: (i) the application of any such law, regulation, decree or order, including any prior approval, which would prevent the exchange of any currency (other than Dollars) for Dollars or the remittance of funds outside of such jurisdiction or the unavailability of Dollars in any legal exchange market in such jurisdiction in accordance with normal commercial practice, (ii) a declaration of banking moratorium or any suspension of payments by banks in such jurisdiction or the imposition by such jurisdiction or any Governmental Authority thereof of any moratorium on, the required rescheduling or restructuring of, or required approval of payments on, any indebtedness in such jurisdiction, (iii) any expropriation, confiscation, nationalization or requisition by such country or any Governmental Authority that directly or indirectly deprives any Borrower of any assets or their use, or of the ability to operate its business or a material part thereof, or (iv) any war (whether or not declared), insurrection, revolution, hostile act, civil strife or similar events occurring in such jurisdiction which has the same effect as the events described in clause (i), (ii) or (iii) above (in each of the cases contemplated in clauses (i) through (iv) above, to the extent occurring or existing on or at any time after the date of this Agreement), or (h) any other circumstance whatsoever (other than payment in full in cash of the Borrower Obligations or Canadian Obligations guaranteed by it hereunder) (with or without notice to or knowledge of any of the Borrowers or such Guarantor) or any existence of or reliance on any representation by the Secured Parties that constitutes, or might be construed to constitute, an equitable or legal discharge of any of the Borrowers for the Borrower Obligations or Canadian Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, the Collateral Agent, the Administrative Agent and any other Secured Party may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against any of the Borrowers, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations or Canadian Obligations guaranteed by such Guarantor hereunder or any right of offset with respect thereto, and any failure by the Collateral Agent, the Administrative Agent or any other Secured Party to make any such demand, to pursue such other rights or remedies or to collect any payments from any Borrower, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of any of the Borrowers, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Collateral Agent, the Administrative Agent or any other Secured Party against any Guarantor. For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.
2.6 Reinstatement. The guarantee of any Guarantor contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Borrower Obligations or Canadian Obligations guaranteed by such Guarantor hereunder is
rescinded or must otherwise be restored or returned by the Collateral Agent, the Administrative Agent or any other Secured Party upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, any Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.
2.7 Payments. Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim, in Dollars (or in the case of any amount required to be paid in any other currency pursuant to the requirements of the Credit Agreement or other agreement relating to the respective Obligations, such other currency), at the Administrative Agent’s office specified in Subsection 11.2 of the Credit Agreement or such other address as may be designated in writing by the Administrative Agent to such Guarantor from time to time in accordance with Subsection 11.2 of the Credit Agreement.
SECTION 3
Grant of Security Interest
3.1 Grant. Each Grantor hereby grants (and hereby confirms and reaffirms its prior continuing grant pursuant to the Original ABL Collateral Agreement) to the Collateral Agent, for the benefit of the Secured Parties, a security interest in all of the Collateral of such Grantor, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations of such Grantor, except as provided in Subsection 3.3. The term “Collateral,” as to any Grantor, means the following property (wherever located) now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest, except as provided in Subsection 3.3:
(a) all Accounts;
(b) all Money (including all cash);
(c) all Cash Equivalents;
(d) all Chattel Paper;
(e) all Contracts;
(f) all Deposit Accounts;
(g) all Documents;
(h) all Equipment and Goods;
(i) all General Intangibles;
(j) all Instruments;
(k) all Intellectual Property;
(l) all Inventory;
(m) all Investment Property;
(n) all Fixtures;
(o) all Supporting Obligations;
(p) all Commercial Tort Claims constituting Commercial Tort Actions described in Schedule 6 (together with any Commercial Tort Actions subject to a further writing provided in accordance with Subsection 5.2.12);
(q) all books and records relating to the foregoing;
(r) the Collateral Proceeds Account; and
(s) to the extent not otherwise included, all Proceeds 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;
provided that, Collateral shall not include any Pledged Collateral, or any property or assets described in the proviso to the definition of Pledged Stock.
3.2 Pledged Collateral. Each Granting Party that is a Pledgor, hereby grants (and hereby confirms and reaffirms its prior continuing grant pursuant to the Original ABL Collateral Agreement) to the Collateral Agent, for the benefit of the Secured Parties, a security interest in all of the Pledged Collateral of such Pledgor now owned or at any time hereafter acquired by such Pledgor, including any Proceeds thereof, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of the Obligations of such Pledgor, except as provided in Subsection 3.3.
3.3 Certain Limited Exceptions. No security interest is or will be granted pursuant to this Agreement or any other Security Document in any right, title or interest of any Granting Party under or in, and “Collateral” and “Pledged Collateral” shall not include the following (collectively, the “Excluded Assets”):
(a) any Instruments, Contracts, Chattel Paper, General Intangibles, Copyright Licenses, Patent Licenses, Trademark Licenses, Trade Secret Licenses or other contracts or agreements with or issued by Persons other than the U.S. Parent Borrower, a Subsidiary of the U.S. Parent Borrower or the other U.S. Borrowers or an Affiliate of any of the foregoing (collectively, “Restrictive Agreements”) that would otherwise be included in the Security Collateral (and such Restrictive Agreements shall not be deemed to constitute a part of the Security Collateral) for so long as, and to the extent that, the granting of such a security interest pursuant hereto would result in a breach, default or termination of such Restrictive Agreements (in each case, except to the extent that, pursuant to the Code or any other applicable law, the granting of security interests therein can be made without resulting in a breach, default or termination of such Restrictive Agreements);
(b) any Equipment or other property that would otherwise be included in the Security Collateral (and such Equipment or other property shall not be deemed to constitute a part of the Security Collateral) if such Equipment or other property (x) is subject to a Lien described in clause (h) (with respect to Purchase Money Obligations or Capitalized Lease Obligations) or (o)
(with respect to such Liens described in such clause (h)) of the definition of “Permitted Liens” in the Credit Agreement (or any corresponding provision of any Additional Credit Facility; provided that such provision is not materially less favorable to the Lenders than the corresponding provision in the Credit Agreement (as reasonably determined in writing by the U.S. Parent Borrower and notified in writing to the Collateral Agent) (but in each case only for so long as such Liens are in place)) or (y) is subject to any Lien in respect of Hedging Obligations permitted by Subsection 9.6 of the Credit Agreement as a “Permitted Lien” pursuant to clause (h) of the definition thereof in the Credit Agreement (or any corresponding provision of any Additional Credit Facility; provided that such provision is not materially less favorable to the Lenders than the corresponding provision in the Credit Agreement (as reasonably determined in writing by the U.S. Parent Borrower and notified in writing to the Collateral Agent) (but in each case only for so long as such Liens are in place), and, in the case of such other property, such other property consists solely of (i) cash, Cash Equivalents or Temporary Cash Investments, together with proceeds, dividends and distributions in respect thereof, (ii) any assets relating to such assets, proceeds, dividends or distributions, or to such Hedging Obligations, and/or (iii) any other assets consisting of, relating to or arising under or in connection with (1) any Hedging Obligations or (2) any other agreements, instruments or documents related to any such Hedging Obligations or to any of the assets referred to in any of subclauses (i) through (iii) of this subclause (y);
(c) any property (and/or related rights and/or assets) that (A) would otherwise be included in the Security Collateral (and such property (and/or related rights and/or assets) shall not be deemed to constitute a part of the Security Collateral) if such property has been sold or otherwise transferred in connection with a Sale and Leaseback Transaction (as defined in the definition of “Exempt Sale and Leaseback Transaction” in the Credit Agreement) permitted under clause (x) or (xviii) of the definition of “Asset Disposition” in the Credit Agreement (or any corresponding provision of any Additional Credit Facility; provided that such provision is not materially less favorable to the Lenders than the corresponding provision in the Credit Agreement (as reasonably determined in writing by the U.S. Parent Borrower and notified in writing to the Collateral Agent), or (B) is subject to any Liens permitted under Subsection 9.6 of the Credit Agreement (or any corresponding provision of any Additional Credit Facility; provided that such provision is not materially less favorable to the Lenders than the corresponding provision in the Credit Agreement in any material respect (as reasonably determined in writing by the U.S. Parent Borrower and notified in writing to the Collateral Agent) which relates to property subject to any such Sale and Leaseback Transaction (as defined in the definition of “Exempt Sale and Leaseback Transaction” in the Credit Agreement) or general intangibles related thereto (but only for so long as such Liens are in place); provided that, notwithstanding the foregoing, a security interest of the Collateral Agent shall attach to any money, securities or other consideration received by any Grantor as consideration for the sale or other disposition of such property as and to the extent such consideration would otherwise constitute Security Collateral;
(d) Capital Stock (including for these purposes any investment deemed to be Capital Stock for United States tax purposes) which is described in the proviso to the definition of Pledged Stock;
(e) any Money, cash, checks, other negotiable instruments, funds and other evidence of payment held in any Deposit Account of the U.S. Parent Borrower or any of its Subsidiaries in the nature of a security deposit with respect to obligations for the benefit of the U.S. Parent Borrower or any of its Subsidiaries, which must be held for or returned to the applicable counterparty under applicable law or pursuant to permitted Contractual Obligations;
(f) Letter-of-Credit Rights;
(g) any interest in leased real property (including Fixtures not constituting equipment related thereto) (and there shall be no requirement to deliver landlord lien waivers, estoppels or collateral access letters);
(h) any fee interest in owned real property;
(i) any Vehicles and any assets subject to certificate of title;
(j) Commercial Tort Claims individually reasonably expected to result in a recovery of less than $20,000,000;
(k) assets to the extent the granting or perfecting of a security interest in such assets would result in costs or other consequences to the U.S. Parent Borrower or any of its Subsidiaries as reasonably determined in writing by the U.S. Parent Borrower and the Administrative Agent, that are excessive in view of the benefits that would be obtained by the Secured Parties;
(l) those assets over which the granting of security interests in such assets would be prohibited by contract permitted under the Credit Agreement binding on any assets on the date of the Original ABL Collateral Agreement or acquired after the date of the Original ABL Collateral Agreement at the time of such acquisition and not incurred in contemplation of such acquisition, applicable law or regulation or the organizational or joint venture documents of any non-wholly owned Subsidiary (including permitted liens, leases and licenses) (in each case, after giving effect to the applicable anti-assignment provisions of the Uniform Commercial Code, other than proceeds and receivables thereof to the extent that their assignment is expressly deemed effective under the Uniform Commercial Code notwithstanding such prohibitions), or to the extent that such security interests would result in adverse tax consequences to the U.S. Parent Borrower or any one or more of its Subsidiaries as reasonably determined in writing by the U.S. Parent Borrower and notified in writing to the Collateral Agent (it being understood that the Lenders shall not require the U.S. Parent Borrower or any of its subsidiaries to enter into any security agreements or pledge agreements governed by foreign law);
(m) [reserved];
(n) Foreign Intellectual Property;
(o) any aircraft, airframes, aircraft engines, helicopters, vessels or rolling stock or any Equipment or other assets constituting a part thereof;
(p) any Capital Stock and other securities of a Subsidiary of the U.S. Parent Borrower to the extent that the pledge of or grant of any other Lien on such Capital Stock and other securities for the benefit of any holders of securities results in the U.S. Parent Borrower or any of its Restricted Subsidiaries being required to file separate financial statements for such Subsidiary with the Securities and Exchange Commission (or any other governmental authority) pursuant to either Rule 3-10 or 3-16 of Regulation S-X under the Securities Act, or any other law, rule or regulation as in effect from time to time, but only to the extent necessary to not be subject to such requirement; and
(q) any Goods in which a security interest is not perfected by filing a financing statement in the applicable Grantor’s jurisdiction of organization.
3.4 Intercreditor Relations. Notwithstanding anything herein to the contrary, it is the understanding of the parties that the Liens granted pursuant to Subsections 3.1 and 3.2 shall be (a) with respect to all Security Collateral other than Security Collateral constituting ABL Priority Collateral, (x) prior to the Discharge of Term Loan Obligations (as defined in the ABL Intercreditor Agreement), be subject and subordinate to the Liens granted to the Cash Flow Collateral Agent for the benefit of the Term Loan Secured Parties to secure the Term Loan Obligations (as defined in the ABL Intercreditor Agreement) pursuant to the Term Loan Collateral Documents (as defined in the ABL Intercreditor Agreement) as and to the extent set forth in the ABL Intercreditor Agreement and (y) prior to the Discharge of Additional Term Obligations (as defined in the ABL Intercreditor Agreement), be subject and subordinate to the Liens granted to any Additional Term Agent (as defined in the ABL Intercreditor Agreement) for the benefit of the holders of the Additional Term Obligations to secure the Additional Term Obligations pursuant to any Additional Term Collateral Documents (as defined in the ABL Intercreditor Agreement) as and to the extent provided for in the ABL Intercreditor Agreement, and (b) with respect to all Security Collateral, prior to the Discharge of Additional ABL Obligations (as defined in the ABL Intercreditor Agreement), be pari passu and equal in priority to the Liens granted to any Additional ABL Agent for the benefit of the holders of the applicable Additional ABL Obligations to secure such Additional ABL Obligations pursuant to the applicable Additional ABL Collateral Documents (except, in the case of this clause (b) as may be separately otherwise agreed between the Collateral Agent, on behalf of itself and the Secured Parties, and any Additional ABL Agent, on behalf of itself and the Additional ABL Secured Parties represented thereby) as and to the extent set forth in the ABL Intercreditor. The Collateral Agent acknowledges and agrees that the relative priority of the Liens granted to the Collateral Agent, the Administrative Agent, the Cash Flow Collateral Agent and any Additional Agent shall be determined solely pursuant to any applicable Intercreditor Agreement, and not by priority as a matter of law or otherwise. Notwithstanding anything herein to the contrary, the Liens and security interest granted to the Collateral Agent pursuant to this Agreement and the exercise of any right or remedy by the Collateral Agent hereunder are subject to the provisions of each applicable Intercreditor Agreement. In the event of any conflict between the terms of any Intercreditor Agreement and this Agreement, the terms of such Intercreditor Agreement shall govern and control as among (i) the Collateral Agent, the Cash Flow Collateral Agent and any Additional ABL Agent, in the case of the ABL Intercreditor Agreement and (ii) the Collateral Agent and any Additional Agent or any other secured creditor (or agent therefor) party thereto, in the case of any other Intercreditor Agreement. In the event of any such conflict, each Grantor may act (or omit to act) in accordance with such Intercreditor Agreement, and shall not be in breach, violation or default of its obligations hereunder by reason of doing so. Notwithstanding any other provision hereof, (x) for so long as Term Loan Obligations (as defined in the ABL Intercreditor Agreement) or any Additional Term Obligations (as defined in the ABL Intercreditor Agreement) remain outstanding, any obligation hereunder to deliver to the Collateral Agent any Security Collateral constituting Term Loan Priority Collateral shall be satisfied by causing such Term Loan Priority Collateral to be delivered to the Term Loan Agent (as defined in the ABL Intercreditor Agreement) or the applicable Term Loan Collateral Representative (as defined in the ABL Intercreditor Agreement) to be held in accordance with the ABL Intercreditor Agreement and (y) for so long as any Additional ABL Obligations remain outstanding, any obligation hereunder to deliver to the Collateral Agent any Security Collateral shall be satisfied by causing such Security Collateral to be delivered to the applicable Collateral Representative or any Additional Agent to be held in accordance with the applicable Intercreditor Agreement.
SECTION 4
Representations and Warranties
4.1 Representations and Warranties of Each Guarantor. To induce the Administrative Agent, the Collateral Agent, the Lenders and the Issuing Lenders to enter into the Credit Agreement and to induce the Lenders and Issuing Lenders to make their respective extensions of credit to the Borrowers thereunder, each Guarantor hereby represents and warrants to the Collateral Agent and each other Secured Party that the representations and warranties set forth in Section 5 of the Credit Agreement as they relate to such Guarantor or to the Loan Documents to which such Guarantor is a party, each of which representations and warranties is hereby incorporated herein by reference, are true and correct in all material respects, and the Collateral Agent and each other Secured Party shall be entitled to rely on each of such representations and warranties as if fully set forth herein; provided that each reference in each such representation and warranty to the U.S. Parent Borrower’s knowledge shall, for the purposes of this Subsection 4.1, be deemed to be a reference to such Guarantor’s knowledge.
4.2 Representations and Warranties of Each Grantor. To induce the Administrative Agent, the Collateral Agent, the Lenders and the Issuing Lenders to enter into the Credit Agreement and to induce the Lenders and Issuing Lenders to make their respective extensions of credit to the Borrowers thereunder, each Grantor hereby represents and warrants to the Collateral Agent and each other Secured Party that, in each case after giving effect to the Transactions:
4.2.1 Title; No Other Liens. Except for the security interests granted to the Collateral Agent for the benefit of the Secured Parties pursuant to this Agreement and the other Liens permitted to exist on such Grantor’s Collateral by the Credit Agreement (including, without limitation, Subsection 9.6 thereof), such Grantor owns each item of such Grantor’s Collateral free and clear of any and all Liens. As of the Restatement Effective Date, except as set forth on Schedule 3, to the knowledge of such Grantor, no currently effective financing statement or other similar public notice with respect to any Lien securing Indebtedness on all or any part of such Grantor’s Collateral is on file or of record in any public office in the United States of America, any state, territory or dependency thereof or the District of Columbia, except such as have been filed in favor of the Collateral Agent for the benefit of the Secured Parties pursuant to this Agreement or as are permitted by the Credit Agreement (including, without limitation, Subsection 9.6 thereof) or any other Loan Document or for which termination statements will be delivered on the Restatement Effective Date.
4.2.2 Perfected First Priority Liens.
(a) This Agreement is effective to create, as collateral security for the Obligations of such Grantor, valid and enforceable Liens on such Grantor’s Security Collateral in favor of the Collateral Agent for the benefit of the Secured Parties, except as to enforcement, as may be limited by applicable domestic or foreign 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 in equity or at law) and an implied covenant of good faith and fair dealing.
(b) Except with regard to (i) Liens (if any) on Specified Assets and (ii) any rights in favor of the United States government as required by law (if any), upon the completion of the Filings and, with respect to Instruments, Chattel Paper and Documents upon the earlier of such Filing or the delivery
to and continuing possession by the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, of all Instruments, Chattel Paper and Documents a security interest in which is perfected by possession, and upon the obtaining and maintenance of “control” (as described in the Code) by the Collateral Agent, the Administrative Agent, the applicable Collateral Representative or any Additional Agent, as applicable (or their respective agents appointed for purposes of perfection), of all Deposit Accounts, the Collateral Proceeds Account and all Electronic Chattel Paper a security interest in which is perfected by “control” (in the case of Deposit Accounts, to the extent required under the Credit Agreement) and in the case of Commercial Tort Actions (other than such Commercial Tort Actions listed on Schedule 6 on the date of this Agreement), upon the taking of the actions required by Subsection 5.2.12, the Liens created pursuant to this Agreement will constitute valid Liens on and (to the extent provided herein) perfected security interests in such Grantor’s Collateral in favor of the Collateral Agent for the benefit of the Secured Parties, and will be prior to all other Liens of all other Persons securing Indebtedness, in each case other than Liens permitted by the Credit Agreement (including Permitted Liens) (and subject to any applicable Intercreditor Agreement), and enforceable as such as against all other Persons other than Ordinary Course Transferees, except to the extent that the recording of an assignment or other transfer of title to the Collateral Agent, the Administrative Agent, the applicable Collateral Representative or any Additional Agent (in accordance with any applicable Intercreditor Agreement) or the recording of other applicable documents in the United States Patent and Trademark Office or United States Copyright Office may be necessary for perfection or enforceability, and except as to enforcement, as may be limited by applicable domestic or foreign 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 in equity or at law) and an implied covenant of good faith and fair dealing. As used in this Subsection 4.2.2(b), the following terms shall have the following meanings:
“Filings”: the filing or recording of (i) the Financing Statements as set forth in Schedule 4A, (ii) this Agreement or a notice thereof with respect to Intellectual Property as set forth in Schedule 5, and (iii) any filings after the Restatement Effective Date in any other jurisdiction as may be necessary under any Requirement of Law.
“Financing Statements”: the financing statements attached hereto on Schedule 4A for filing in the jurisdictions listed in Schedule 4B.
“Ordinary Course Transferees”: (i) with respect to goods only, buyers in the ordinary course of business and lessees in the ordinary course of business to the extent provided in Section 9-320(a) and 9-321 of the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction, (ii) with respect to general intangibles only, licensees in the ordinary course of business to the extent provided in Section 9-321 of the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction and (iii) any other Person who is entitled to take free of the Lien pursuant to the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction.
“Specified Assets”: the following property and assets of such Grantor:
(1) Patents, Patent Licenses, Trademarks and Trademark Licenses to the extent that (a) Liens thereon cannot be perfected by the filing of financing statements under the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction or by the filing and acceptance of intellectual property security agreements in
the United States Patent and Trademark Office or (b) such Patents, Patent Licenses, Trademarks and Trademark Licenses are not, individually or in the aggregate, material to the business of the U.S. Parent Borrower and its Subsidiaries taken as a whole;
(2) Copyrights and Copyright Licenses with respect thereto and Accounts or receivables arising therefrom to the extent that (a) Liens thereon cannot be perfected by filing and acceptance of intellectual property security agreements in the United States Copyright Office or (b) the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction is not applicable to the creation or perfection of Liens thereon;
(3) Collateral for which the perfection of Liens thereon requires filings in or other actions under the laws of jurisdictions outside of the United States of America, any State, territory or dependency thereof or the District of Columbia;
(4) goods included in Collateral received by any Person from any Grantor for “sale or return” within the meaning of Section 2-326(1)(b) of the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction, to the extent of claims of creditors of such Person;
(5) Fixtures, Vehicles, any other assets subject to certificates of title, and Money and Cash Equivalents (other than Cash Equivalents constituting Investment Property to the extent a security interest therein is perfected by the filing of a financing statement under the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction); and
(6) uncertificated securities (to the extent a security interest is not perfected by the filing of a financing statement under the Uniform Commercial Code as in effect from time to time in the relevant jurisdiction).
4.2.3 Jurisdiction of Organization. On the date hereof, such Grantor’s jurisdiction of organization is specified on Schedule 4B.
4.2.4 Farm Products. None of such Grantor’s Collateral constitutes, or is the Proceeds of, Farm Products.
4.2.5 Accounts Receivable. The amounts represented by such Grantor to the Administrative Agent or the other Secured Parties from time to time as owing by each account debtor or by all account debtors in respect of such Grantor’s Accounts Receivable constituting Security Collateral will at such time be the correct amount, in all material respects, actually owing by such account debtor or debtors thereunder, except to the extent that appropriate reserves therefor have been established on the books of such Grantor in accordance with GAAP. Unless otherwise indicated in writing to the Administrative Agent, each Account Receivable of such Grantor arises out of a bona fide sale and delivery of goods or rendition of services by such Grantor. Such Grantor has not given any account debtor any deduction in respect of the amount due under any such Account, except in the ordinary course of business or as such Grantor may otherwise advise the Administrative Agent in writing.
4.2.6 Patents, Copyrights and Trademarks. Schedule 5 lists all material Trademarks, material Copyrights and material Patents, in each case, registered in the United States Patent and Trademark Office or the United States Copyright Office, as applicable, and owned by such Grantor in its own name as of the date hereof, and all material Trademark Licenses, all material Copyright Licenses and
all material Patent Licenses (including, without limitation, material Trademark Licenses for registered Trademarks, material Copyright Licenses for registered Copyrights and material Patent Licenses for registered Patents but excluding licenses to commercially available “off-the-shelf” software) owned by such Grantor in its own name as of the date hereof, in each case, that is solely United States Intellectual Property.
4.3 Representations and Warranties of Each Pledgor. To induce the Collateral Agent, the Administrative Agent, the Lenders and the Issuing Lenders to enter into the Credit Agreement and to induce the Lenders and the Issuing Lenders to make their respective extensions of credit to the Borrowers thereunder, each Pledgor hereby represents and warrants to the Collateral Agent and each other Secured Party that:
4.3.1 Except as provided in Subsection 3.3, the shares of Pledged Stock pledged by such Pledgor hereunder constitute (i) in the case of shares of a Domestic Subsidiary, all the issued and outstanding shares of all classes of the Capital Stock of such Domestic Subsidiary owned by such Pledgor and (ii) in the case of any Pledged Stock constituting Capital Stock of any Foreign Subsidiary, as of the Restatement Effective Date such percentage (not more than 65%) as is specified on Schedule 2 of all the issued and outstanding shares of all classes of the Capital Stock of each such Foreign Subsidiary owned by such Pledgor.
4.3.2 [Reserved].
4.3.3 Such Pledgor is the record and beneficial owner of, and has good title to, the Pledged Securities pledged by it hereunder, free of any and all Liens securing Indebtedness owing to any other Person, except the security interest created by this Agreement and Liens permitted by the Credit Agreement (including Permitted Liens).
4.3.4 Upon the delivery to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, of the certificates evidencing the Pledged Securities held by such Pledgor together with executed undated stock powers or other instruments of transfer, the security interest created by this Agreement in such Pledged Securities constituting certificated securities, assuming the continuing possession of such Pledged Securities by the Collateral Agent, the applicable Collateral Representative or any Additional Agent as applicable, in accordance with any applicable Intercreditor Agreement, will constitute a valid, perfected first priority (subject, in terms of priority only, to the priority of the Liens of the applicable Collateral Representative and any Additional Agent) security interest in such Pledged Securities to the extent provided in and governed by the Uniform Commercial Code, enforceable in accordance with its terms against all creditors of such Pledgor and any Persons purporting to purchase such Pledged Securities from such Pledgor to the extent provided in and governed by the Uniform Commercial Code, in each case subject to Liens permitted by the Credit Agreement (including Permitted Liens) (and any applicable Intercreditor Agreement), and except as to enforcement, as may be limited by applicable domestic or foreign 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 in equity or at law) and an implied covenant of good faith and fair dealing.
4.3.5 Upon the earlier of (x) (to the extent a security interest in uncertificated securities may be perfected by the filing of a financing statement) the filing of the Financing Statements or of financing statements delivered pursuant to Subsection 8.8 of the Credit Agreement in the relevant
jurisdiction and (y) the obtaining and maintenance of “control” (as described in the Code) by the Collateral Agent, the applicable Collateral Representative or any Additional Agent (or their respective agents appointed for purposes of perfection), as applicable, in accordance with each applicable Intercreditor Agreement, of all Pledged Securities that constitute uncertificated securities, the security interest created by this Agreement in such Pledged Securities that constitute uncertificated securities, will constitute a valid, perfected first priority subject, in terms of priority only, to the priority of the Liens of the applicable Collateral Representative and any Additional Agent) security interest in such Pledged Securities constituting uncertificated securities to the extent provided in and governed by the Code, enforceable in accordance with its terms against all creditors of such Pledgor and any persons purporting to purchase such Pledged Securities from such Pledgor, to the extent provided in and governed by the Code, in each case subject to Liens permitted by the Credit Agreement (including Permitted Liens) (and any applicable Intercreditor Agreement), and except as to enforcement, as may be limited by applicable domestic or foreign 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 in equity or at law) and an implied covenant of good faith and fair dealing.
SECTION 5
Covenants
5.1 Covenants of Each Guarantor. Each Guarantor covenants and agrees with the Collateral Agent and the other Secured Parties that, from and after the date of this Agreement until the earliest to occur of (i) the date upon which the Loans and all other Obligations (other than any Obligations owing to a Non-Lender Secured Party not then due and payable) then due and owing, shall have been paid in full in cash, all Letters of Credit are terminated or cash collateralized on terms reasonably satisfactory to the applicable Letter of Credit Issuer (or other arrangements have been made with respect thereto on terms reasonably satisfactory to the applicable Letter of Credit Issuer) and the Commitments shall have terminated or (ii) as to any Guarantor, a sale or other disposition of all the Capital Stock of such Guarantor (other than to the U.S. Parent Borrower, the U.S. Subsidiary Borrowers or any other Guarantor), or any other transaction or occurrence as a result of which such Guarantor ceases to be a Restricted Subsidiary of the U.S. Parent Borrower, in each case that is permitted under the Credit Agreement, such Guarantor shall take, or shall refrain from taking, as the case may be, each action that is necessary to be taken or not taken, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor or any of its Restricted Subsidiaries.
5.2 Covenants of Each Grantor. Each Grantor covenants and agrees with the Collateral Agent and the other Secured Parties that, from and after the date of this Agreement until the earliest to occur of (i) the date upon which the Loans and all other Obligations (other than any Obligations owing to a Non-Lender Secured Party not then due and payable) then due and owing shall have been paid in full in cash, all Letters of Credit are terminated or cash collateralized on terms reasonably satisfactory to the applicable Letter of Credit Issuer (or other arrangements have been made with respect thereto on terms reasonably satisfactory to the applicable Letter of Credit Issuer) and the Commitments shall have terminated, (ii) a sale or other disposition of all the Capital Stock of such Grantor (other than to the U.S. Parent Borrower, the U.S. Subsidiary Borrowers or any other Guarantor), or any other transaction or occurrence as a result of which such Grantor ceases to be a Restricted Subsidiary of the U.S. Parent Borrower, in each case that is permitted under the Credit Agreement or (iii) as to any Grantor, such Grantor becoming an Excluded U.S. Subsidiary:
5.2.1 Delivery of Instruments and Chattel Paper. If any amount payable under or in connection with any of such Grantor’s Collateral shall be or become evidenced by any Instrument or Chattel Paper, such Grantor shall (except as provided in the following sentence) be entitled to retain possession of all Collateral of such Grantor evidenced by any Instrument or Chattel Paper, and shall hold all such Collateral for the Collateral Agent, for the benefit of the Secured Parties. In the event that an Event of Default shall have occurred and be continuing, upon the request of the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, such Instrument or Chattel Paper shall be promptly delivered to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, duly indorsed in a manner reasonably satisfactory to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, to be held as Collateral pursuant to this Agreement. Such Grantor shall not permit any other Person to possess any such Collateral at any time other than in connection with any sale or other disposition of such Collateral in a transaction permitted by the Credit Agreement or as contemplated by the Intercreditor Agreements.
5.2.2 Control Agreements. With respect to each Deposit and Securities Account, the applicable Grantor shall comply with the requirements of the Credit Agreement, including Section 8.13 of the Credit Agreement.
5.2.3 Payment of Obligations. Such Grantor will pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all material taxes, assessments and governmental charges or levies imposed upon such Grantor’s Collateral or in respect of income or profits therefrom, as well as all material claims of any kind (including, without limitation, material claims for labor, materials and supplies) against or with respect to such Grantor’s Collateral, except that no such tax, assessment, charge, levy or claim need be paid, discharged or satisfied if the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of such Grantor and except to the extent that the failure to do so, in the aggregate, would not reasonably be expected to have a Material Adverse Effect.
5.2.4 Maintenance of Perfected Security Interest; Further Documentation.
(a) Such Grantor shall use commercially reasonable efforts to maintain the security interest created by this Agreement in such Grantor’s Security Collateral as a perfected security interest as and to the extent described in Subsection 4.2.2 and to defend the security interest created by this Agreement in such Grantor’s Security Collateral against the claims and demands of all Persons whomsoever (subject to the other provisions hereof).
(b) Such Grantor will furnish to the Collateral Agent from time to time statements and schedules further identifying and describing such Grantor’s Security Collateral and such other reports in connection with such Grantor’s Security Collateral as the Collateral Agent may reasonably request in writing, all in reasonable detail.
(c) At any time and from time to time, upon the written request of the Collateral Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted by such Grantor, including, without limitation, the filing of any
financing or continuation statements under the Uniform Commercial Code (or other similar laws) as in effect from time to time in any United States jurisdiction with respect to the security interests created hereby; provided that, notwithstanding any other provision of this Agreement or any other Loan Document, neither the U.S. Borrowers nor any Grantor will be required to (v) take any action in any jurisdiction other than the United States of America, or required by the laws of any such non-U.S. jurisdiction, or enter into any security agreement or pledge agreement governed by the laws of any such non-U.S. jurisdiction, in order to create any security interests (or other Liens) in assets located or titled outside of the United States of America or to perfect any security interests (or other Liens) in any Collateral, (w) deliver control agreements with respect to, or confer perfection by “control” over, any deposit accounts, bank or securities account (except as provided in Subsection 5.2.2) or other Collateral, except in the case of Security Collateral that constitutes Capital Stock or Pledged Notes in certificated form, delivering such Capital Stock or Pledged Notes to the Collateral Agent, (or another Person as required under any applicable Intercreditor Agreement), (x) take any action in order to perfect any security interests in any assets specifically requiring perfection through control (including cash, cash equivalents, deposit accounts or securities accounts) (except, in each case, as provided in Subsection 5.2.2, or to the extent consisting of proceeds perfected by the filing of a financing statement under the Uniform Commercial Code or, in the case of Pledged Stock, by being held by the Collateral Agent or any Additional Agent as agent for the Collateral Agent), (y) deliver landlord lien waivers, estoppels or collateral access letters or (z) file any fixture filing with respect to any security interest in Fixtures affixed to or attached to any real property constituting Excluded Assets.
(d) The Collateral Agent may grant extensions of time for the creation and perfection of security interests in, or the obtaining a delivery of documents or other deliverables with respect to, particular assets of any Grantor where it determines that such action cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required to be accomplished by this Agreement or any other Security Documents.
5.2.5 Changes in Name, Jurisdiction of Organization, etc. Such Grantor will give prompt written notice to the Collateral Agent of any change in its name, legal form or jurisdiction of organization (whether by merger or otherwise) (and in any event within 30 days of such change); provided that, promptly thereafter such Grantor shall deliver to the Collateral Agent all additional financing statements and other documents reasonably necessary to maintain the validity, perfection and priority of the security interests created hereunder and other documents reasonably requested by the Collateral Agent to maintain the validity, perfection and priority of the security interests as and to the extent provided for herein and upon receipt of such additional financing statements the Collateral Agent shall either promptly file such additional financing statements or approve the filing of such additional financing statements by such Grantor. Upon any such approval such Grantor shall proceed with the filing of the additional financing statements and deliver copies (or other evidence of filing) of the additional filed financing statements to the Collateral Agent.
5.2.6 Notices. Such Grantor will advise the Collateral Agent promptly, in reasonable detail, of:
(a) any Lien (other than security interests created hereby or Permitted Liens) on any of such Grantor’s ABL Priority Collateral which would materially adversely affect the ability of the Collateral Agent to exercise any of its remedies hereunder; and
(b) the occurrence of any other event which would reasonably be expected to have a material adverse effect on the security interests in the ABL Priority Collateral created hereby.
5.2.7 Pledged Stock. In the case of each Grantor that is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Pledged Stock issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Subsection 5.3.1 with respect to the Pledged Stock issued by it and (iii) the terms of Subsections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Subsection 6.3(c) or 6.7 with respect to the Pledged Stock issued by it.
5.2.8 Accounts Receivable.
(a) At any time with respect to Accounts Receivable constituting ABL Priority Collateral, such Grantor will not, other than in the ordinary course of business or as permitted by the Loan Documents, (i) grant any extension of the time of payment of any of such Grantor’s Accounts Receivable, (ii) compromise or settle any such Accounts Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any such Accounts Receivable, (iv) allow any credit or discount whatsoever on any such Accounts Receivable, (v) amend, supplement or modify any such Accounts Receivable, unless such extensions, compromises, settlements, releases, credits, discounts, amendments, supplements or modifications would not reasonably be expected to materially adversely affect the value of the Accounts Receivable constituting ABL Priority Collateral taken as a whole or (vi) evidence any Accounts Receivable by an Instrument as Chattel Paper.
(b) Such Grantor will deliver to the Collateral Agent a copy of each material demand, notice or document received by it from any obligor under the Accounts Receivable constituting ABL Priority Collateral that disputes the validity or enforceability of more than 10% of the aggregate amount of the then outstanding Accounts Receivable constituting ABL Priority Collateral.
5.2.9 Maintenance of Records.
(a) Such Grantor will keep and maintain at its own cost and expense reasonably satisfactory and complete records of its Collateral, including, without limitation, a record of all payments received and all credits granted with respect to such Collateral.
(b) In the case of ABL Priority Collateral, such Grantor shall mark the Accounts Receivable records referred to in the preceding clause (a) to evidence this Agreement and the Liens and the security interests created hereby.
5.2.10 Acquisition of Intellectual Property. Concurrently with the delivery of the annual certificate of an Authorized Officer pursuant to Subsection 8.1(f) of the Credit Agreement, the U.S. Parent Borrower will notify the Collateral Agent of any acquisition by the Grantors of (i) any registration of any material United States Copyright, Patent or Trademark or (ii) any exclusive rights under a material United States Copyright License, Patent License or Trademark License constituting Collateral, and each applicable Grantor shall take such actions as may be reasonably requested by the Collateral Agent (but only to the extent such actions are within such Grantor’s control) to perfect the security interest granted to the Collateral Agent and the other Secured Parties therein, to the extent provided herein in respect of any United States Copyright, Patent or Trademark constituting Collateral, by (x) the execution and delivery of an amendment or supplement to this Agreement (or amendments to any such agreement previously executed or delivered by such Grantor) and/or (y) the making of appropriate filings (I) of financing statements under the Uniform Commercial Code as in effect from time to time in any applicable
jurisdiction and/or (II) in the United States Patent and Trademark Office, or with respect to Copyrights and Copyright Licenses, the United States Copyright Office).
5.2.11 [Reserved].
5.2.12 Commercial Tort Actions. All Commercial Tort Actions reasonably expected to result in a recovery in excess of $20,000,000 of each Grantor in existence on the date of this Agreement, known to such Grantor on the date hereof, are described in Schedule 6 hereto. If any Grantor shall at any time after the date of this Agreement acquire a Commercial Tort Action reasonably expected to result in a recovery in excess of $20,000,000, such Grantor shall promptly notify the Collateral Agent thereof in a writing signed by such Grantor and describing the details thereof and shall grant to the Collateral Agent in such writing a security interest therein and in the proceeds thereof, all upon and subject to the terms of this Agreement.
5.2.13 [Reserved].
5.2.14 Protection of Trademarks. Such Grantor shall, with respect to any Trademarks that are material to the business of such Grantor, use commercially reasonable efforts not to cease the use of any of such Trademarks or fail to maintain the level of the quality of products sold and services rendered under any of such Trademarks at a level at least substantially consistent with the quality of such products and services as of the date hereof, and shall use commercially reasonable efforts to take all steps reasonably necessary to ensure that licensees of such Trademarks use such consistent standards of quality, except as would not reasonably be expected to have a Material Adverse Effect.
5.2.15 Protection of Intellectual Property. Subject to and except as permitted by the Credit Agreement, such Grantor shall use commercially reasonable efforts not to do any act or omit to do any act whereby any of the Intellectual Property that is material to the business of Grantor may lapse, expire, or become abandoned, or unenforceable, except as would not reasonably be expected to have a Material Adverse Effect.
5.2.16 [Reserved].
5.3 Covenants of Each Pledgor. Each Pledgor covenants and agrees with the Collateral Agent and the other Secured Parties that, from and after the date of this Agreement until the earlier to occur of (i) the Loans and all other Obligations (other than any Obligations owing to a Non-Lender Secured Party not then due and payable) then due and owing shall have been paid in full in cash, all Letters of Credit are terminated or cash collateralized on terms reasonably satisfactory to the applicable Letter of Credit Issuer (or other arrangements have been made with respect thereto on terms reasonably satisfactory to the applicable Letter of Credit Issuer) and the Commitments shall have terminated or, (ii) as to any Pledgor, a sale or other disposition of all the Capital Stock of such Pledgor (other than to the U.S. Parent Borrower , the U.S. Subsidiary Borrowers or any other Guarantor), or any other transaction or occurrence as a result of which such Pledgor ceases to be a Restricted Subsidiary of the U.S. Parent Borrower, in each case that is permitted under the Credit Agreement:
5.3.1 Additional Shares. If such Pledgor shall, as a result of its ownership of its Pledged Stock, become entitled to receive or shall receive any stock certificate (including, without limitation, any stock certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), stock option or similar rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or
otherwise in respect thereof, such Pledgor shall accept the same as the agent of the Collateral Agent and the other Secured Parties, hold the same for the benefit of the Collateral Agent and the other Secured Parties and deliver the same forthwith to the Collateral Agent (who will hold the same on behalf of the Secured Parties), any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, in the exact form received, duly indorsed by such Pledgor to the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor, to be held by the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, subject to the terms hereof, as additional collateral security for the Obligations (subject to Subsection 3.3 and provided that in no event shall there be pledged, nor shall any Pledgor be required to pledge, more than 65% of any series of outstanding Capital Stock (including for these purposes any investment deemed to be Capital Stock for United States tax purposes) of any Foreign Subsidiary pursuant to this Agreement). If an Event of Default shall have occurred and be continuing, any sums paid upon or in respect of the Pledged Stock upon the liquidation or dissolution of any Issuer (except any liquidation or dissolution of any Subsidiary of the U.S. Parent Borrower in accordance with the Credit Agreement) shall be paid over to the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement to be held by the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement subject to the terms hereof as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Pledged Stock or any property shall be distributed upon or with respect to the Pledged Stock pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Collateral Agent, be delivered to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, to be held by the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement subject to the terms hereof as additional collateral security for the Obligations, in each case except as otherwise provided by any applicable Intercreditor Agreement. If any sums of money or property so paid or distributed in respect of the Pledged Stock shall be received by such Pledgor, such Pledgor shall, until such money or property is paid or delivered to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement hold such money or property for the benefit of the Secured Parties as additional collateral security for the Obligations.
5.3.2 [Reserved].
5.3.3 Pledged Notes.
(a) Each Pledgor party hereto as of the date of this Agreement shall deliver to the Collateral Agent all Pledged Notes then held by such Granting Party, endorsed in blank or, at the request of the Collateral Agent, endorsed to the Collateral Agent, within 90 days following the date of this Agreement or with respect to any Pledged Notes acquired by any Pledgor after the date hereof, within 30 days following such acquisition, plus any extensions granted by the Collateral Agent in its sole discretion.
(b) Each Pledgor which becomes a party hereto after the Closing Date pursuant to Subsection 9.15 shall deliver to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with each applicable Intercreditor Agreement, all Pledged
Notes then held by such Pledgor, endorsed in blank or, at the request of the Collateral Agent, endorsed to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with each applicable Intercreditor Agreement. Furthermore, within ten Business Days (or such longer period as may be agreed by the Collateral Agent in its sole discretion) after any Pledgor obtains a Pledged Note, such Pledgor shall cause such Pledged Note to be delivered to the Collateral Agent, the applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, endorsed in blank or, at the request of the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement, endorsed to the Collateral Agent, any applicable Collateral Representative or any Additional Agent, as applicable, in accordance with any applicable Intercreditor Agreement.
5.3.4 Maintenance of Security Interest.
(a) Such Pledgor shall use commercially reasonable efforts to defend the security interest created by this Agreement in such Pledgor’s Pledged Collateral against the claims and demands of all Persons whomsoever. At any time and from time to time, upon the written request of the Collateral Agent and at the sole expense of such Pledgor, such Pledgor will promptly and duly execute and deliver such further instruments and documents and take such further actions as the Collateral Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted by such Pledgor; provided, that notwithstanding any other provision of this Agreement or any other Loan Documents, neither the U.S. Parent Borrower nor any other Pledgor will be required to (v) take any action in any jurisdiction other than the United States of America, or required by the laws of any such non-U.S. jurisdiction or enter into any security agreement or pledge agreement governed by the laws of any such non-U.S. jurisdiction, in order to create any security interests (or other Liens) in assets located or titled outside of the United States of America or to perfect any security interests (or other Liens) in any Collateral, (w) except as required by the Credit Agreement, deliver control agreements with respect to, or confer perfection by “control” over, any deposit accounts, bank or securities account or other Collateral, except in the case of Security Collateral that constitutes Capital Stock or Pledged Notes in certificated form, delivering such Capital Stock or Pledged Notes to the Collateral Agent (or another Person as required under any Intercreditor Agreement), (x) except as required by the Credit Agreement, take any action in order to perfect any security interests in any assets specifically requiring perfection through control (including cash, cash equivalents, deposit accounts or securities accounts) (except, in each case, to the extent consisting of proceeds perfected by the filing of a financing statement under the Code or, in the case of Pledged Stock, by being held by the Collateral Agent or an Additional Agent as agent for the Collateral Agent), (y) deliver landlord lien waivers, estoppels or collateral access letters or (z) file any fixture filing with respect to any security interest in Fixtures affixed to or attached to any real property constituting Excluded Assets.
(b) The Collateral Agent may grant extensions of time for the creation and perfection of security interests in, or obtaining or delivery of documents or other deliverables with respect to, particular assets of any Pledgor where it determines that such action cannot be accomplished without undue effort or expense by the time or times at which it would otherwise be required to be accomplished by this Agreement or any other Security Documents.
SECTION 6
Remedial Provisions
6.1 Certain Matters Relating to Accounts.
(a) At any time and from time to time after the occurrence and during the continuance of an Event of Default, subject to each applicable Intercreditor Agreement, the Collateral Agent shall have the right to make test verifications of the Accounts Receivable constituting Collateral in any reasonable manner and through any reasonable medium that it reasonably considers advisable, and the relevant Grantor shall furnish all such assistance and information as the Collateral Agent may reasonably require in connection with such test verifications. At any time and from time to time after the occurrence and during the continuance of an Event of Default, subject to each applicable Intercreditor Agreement, upon the Collateral Agent’s reasonable request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants or others reasonably satisfactory to the Collateral Agent to furnish to the Collateral Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Accounts Receivable constituting Collateral.
(b) The Collateral Agent hereby authorizes each Grantor to collect such Grantor’s Accounts Receivable constituting Collateral and the Collateral Agent may curtail or terminate said authority at any time, without limiting the Collateral Agent’s rights under Subsection 8.13 of the Credit Agreement, after the occurrence and during the continuance of an Event of Default specified in Subsections 10.1 or 10.5 of the Credit Agreement, subject to any applicable Intercreditor Agreement. If required by the Collateral Agent at any time, without limiting the Collateral Agent’s rights under Subsection 8.13 of the Credit Agreement, after the occurrence and during the continuance of an Event of Default specified in Subsections 10.1 or 10.5 of the Credit Agreement, subject to any applicable Intercreditor Agreement, any Proceeds constituting payments or other cash proceeds of Accounts constituting Collateral, when collected by such Grantor, (i) shall be forthwith (and, in any event, within 2 Business Days of receipt by such Grantor) deposited in, or otherwise transferred by such Grantor to, the Collateral Proceeds Account, subject to withdrawal by the Collateral Agent for the account of the Secured Parties only as provided in Subsection 6.5, and (ii) until so turned over, shall be held by such Grantor for the benefit of the Collateral Agent and the other Secured Parties. All Proceeds constituting collections or other cash proceeds of Accounts constituting Collateral while held by the Collateral Account Bank (or by any Grantor for the benefit of the Collateral Agent and the other Secured Parties) shall continue to be collateral security for all of the Obligations and shall not constitute payment thereof until applied as hereinafter provided. At any time when an Event of Default specified in Subsections 10.1 or 10.5 of the Credit Agreement has occurred and is continuing, subject to any applicable Intercreditor Agreement, at the Collateral Agent’s election, each of the Collateral Agent and the Administrative Agent may apply all or any part of the funds on deposit in the Collateral Proceeds Account established by the relevant Grantor to the payment of the Obligations of such Grantor then due and owing, such application to be made as set forth in Subsection 6.5. So long as no Event of Default has occurred and is continuing, the funds on deposit in the Collateral Proceeds Account shall be remitted as provided in Subsection 6.1(d).
(c) At any time and from time to time after the occurrence and during the continuance of an Event of Default specified in Subsection 10.1(a) of the Credit Agreement, subject to each applicable Intercreditor Agreement, at the Collateral Agent’s request, each Grantor shall deliver to the Collateral Agent copies or, if required by the Collateral Agent for the enforcement thereof or foreclosure thereon, originals of all documents held by such Grantor evidencing, and relating to, the agreements and transactions which gave rise to such Grantor’s Accounts Receivable constituting Collateral, including, without limitation, all statements relating to such Grantor’s Accounts Receivable constituting Collateral and all orders, invoices and shipping receipts.
(d) So long as no Event of Default has occurred and is continuing, subject to each applicable Intercreditor Agreement, the Collateral Agent shall instruct the Collateral Account Bank to promptly remit any funds on deposit in each Grantor’s Collateral Proceeds Account to a Blocked
Account. In the event that an Event of Default has occurred and is continuing, subject to each applicable Intercreditor Agreement, the Collateral Agent at its option may require that each Collateral Proceeds Account of each Grantor be established at the Collateral Agent or at another institution reasonably acceptable to the Collateral Agent. Each Grantor shall have the right, at any time and from time to time, to withdraw such of its own funds from its own Blocked Accounts, and to maintain such balances in its Blocked Accounts, as it shall deem to be necessary or desirable.
6.2 Communications with Obligors; Grantors Remain Liable.
(a) The Collateral Agent in its own name or in the name of others, may at any time and from time to time after the occurrence and during the continuance of an Event of Default specified in Subsection 10.1(a) of the Credit Agreement, subject to each applicable Intercreditor Agreement, communicate with obligors under the Accounts Receivable constituting ABL Priority Collateral and parties to the Contracts (in each case, to the extent constituting Collateral) to verify with them to the Collateral Agent’s satisfaction the existence, amount and terms of any Accounts Receivable or Contracts.
(b) Upon the request of the Collateral Agent at any time after the occurrence and during the continuance of an Event of Default specified in Subsection 10.1(a) of the Credit Agreement, subject to each applicable Intercreditor Agreement, each Grantor shall notify obligors on such Grantor’s Accounts Receivable and parties to such Grantor’s Contracts (in each case, to the extent constituting Collateral) that such Accounts Receivable and such Contracts have been assigned to the Collateral Agent, for the benefit of the Secured Parties, and that payments in respect thereof shall be made directly to the Collateral Agent.
(c) Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each of such Grantor’s Accounts Receivable to observe and perform all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. None of the Collateral Agent, the Administrative Agent or any other Secured Party shall have any obligation or liability under any Accounts Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by the Collateral Agent or any other Secured Party of any payment relating thereto, nor shall the Collateral Agent or any other Secured Party be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Accounts Receivable (or any agreement giving rise thereto) to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts that may have been assigned to it or to which it may be entitled at any time or times.
6.3 Pledged Stock.
(a) Unless an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given one Business Day’s prior written notice to the relevant Pledgor of the Collateral Agent’s intent to exercise its corresponding rights pursuant to Subsection 6.3(b), each Pledgor shall be permitted to receive all cash dividends and distributions paid in respect of the Pledged Stock and all payments made in respect of the Pledged Notes, and to exercise all voting and corporate rights with respect to the Pledged Stock.
(b) Subject to each applicable Intercreditor Agreement, if an Event of Default shall occur and be continuing and the Collateral Agent shall give one Business Day’s prior written notice of its
intent to exercise such rights to the relevant Pledgor or Pledgors (i) the Collateral Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Pledged Stock and make application thereof to the Obligations of the relevant Pledgor as provided in the Credit Agreement consistent with Subsection 6.5, and (ii) any or all of the Pledged Stock shall be registered in the name of the Collateral Agent or its nominee, and the Collateral Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Pledged Stock at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange, subscription and any other rights, privileges or options pertaining to such Pledged Stock as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Pledged Stock upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate structure of any Issuer, or upon the exercise by the relevant Pledgor or the Collateral Agent of any right, privilege or option pertaining to such Pledged Stock, and in connection therewith, the right to deposit and deliver any and all of the Pledged Stock with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Collateral Agent may reasonably determine), all without liability to the maximum extent permitted by applicable law (other than for its gross negligence or willful misconduct) except to account for property actually received by it, but the Collateral Agent shall have no duty, to any Pledgor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing, provided that the Collateral Agent shall not exercise any voting or other consensual rights pertaining to the Pledged Stock in any way that would constitute an exercise of the remedies described in Subsection 6.6 other than in accordance with Subsection 6.6.
(c) Each Pledgor hereby authorizes and instructs each Issuer or maker of any Pledged Securities pledged by such Pledgor hereunder to, subject to each applicable Intercreditor Agreement, (i) comply with any instruction received by it from the Collateral Agent in writing with respect to Capital Stock in such Issuer that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in accordance with the terms of this Agreement, without any other or further instructions from such Pledgor, and each Pledgor agrees that each Issuer or maker shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Pledged Securities directly to the Collateral Agent.
6.4 Proceeds to Be Turned Over to the Collateral Agent. In addition to the rights of the Collateral Agent specified in Subsection 6.1 with respect to payments of Accounts Receivable constituting Collateral, subject to each applicable Intercreditor Agreement, if an Event of Default shall occur and be continuing, and the Collateral Agent shall have instructed any Grantor to do so, all Proceeds of Security Collateral received by such Grantor consisting of cash, checks and other Cash Equivalent items shall be held by such Grantor for the benefit of the Collateral Agent and the other Secured Parties hereto and shall, forthwith upon receipt by such Grantor, be turned over to the Collateral Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Collateral Agent). All Proceeds of Security Collateral received by the Collateral Agent hereunder shall be held by the Collateral Agent in the relevant Collateral Proceeds Account maintained under its sole dominion and control, subject to each applicable Intercreditor Agreement. All Proceeds of Security Collateral while held by the Collateral Agent in such Collateral Proceeds Account (or by the relevant Grantor for the benefit of the Collateral Agent and the other Secured Parties) shall continue to be held as collateral security for all the Obligations of such Grantor and shall not constitute payment thereof until applied as provided in Subsection 6.5 and each applicable Intercreditor Agreement.
6.5 Application of Proceeds. It is agreed that if an Event of Default shall occur and be continuing, any and all Proceeds of the relevant Granting Party’s Security Collateral received by the
Collateral Agent (whether from the relevant Granting Party or otherwise) shall be held by the Collateral Agent for the benefit of the Secured Parties as collateral security for the Obligations of the relevant Granting Party (whether matured or unmatured), and/or then or at any time thereafter may, in the sole discretion of the Collateral Agent, subject to each applicable Intercreditor Agreement, be applied by the Collateral Agent against the Obligations of the relevant Granting Party then due and owing in the order of priority set forth in Section 10 of the Credit Agreement.
6.6 Code and Other Remedies. Subject to each applicable Intercreditor Agreement, if an Event of Default shall occur and be continuing, the Collateral Agent, on behalf of the Secured Parties, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations to the extent permitted by applicable law, all rights and remedies of a secured party under the Code and under any other applicable law and in equity. Without limiting the generality of the foregoing, to the extent permitted by applicable law and subject to each applicable Intercreditor Agreement, the Collateral Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Granting Party or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), may in such circumstances, forthwith collect, receive, appropriate and realize upon the Security Collateral, or any part thereof, and/or may forthwith, subject to any existing reserved rights or licenses, sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Security Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker’s board or office of the Collateral Agent or any other Secured Party or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. To the extent permitted by law and subject to each applicable Intercreditor Agreement, the Collateral Agent or any other Secured Party shall have the right, upon any such sale or sales, to purchase the whole or any part of the Security Collateral so sold, free of any right or equity of redemption in such Granting Party, which right or equity is hereby waived and released. Each Granting Party further agrees, at the Collateral Agent’s request (subject to each applicable Intercreditor Agreement), to assemble the Security Collateral and make it available to the Collateral Agent at places which the Collateral Agent shall reasonably select, whether at such Granting Party’s premises or elsewhere. The Collateral Agent shall apply the net proceeds of any action taken by it pursuant to this Subsection 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Security Collateral or in any way relating to the Security Collateral or the rights of the Collateral Agent and the other Secured Parties hereunder, including, without limitation, reasonable attorneys’ fees and disbursements, to the payment in whole or in part of the Obligations of the relevant Granting Party then due and owing, in the order of priority specified in Subsection 6.5, and only after such application and after the payment by the Collateral Agent of any other amount required by any provision of law, including, without limitation, Section 9-615(a)(3) of the Code, need the Collateral Agent account for the surplus, if any, to such Granting Party. To the extent permitted by applicable law, (i) such Granting Party waives all claims, damages and demands it may acquire against the Collateral Agent or any other Secured Party arising out of the repossession, retention or sale of the Security Collateral, other than any such claims, damages and demands that may arise from the gross negligence or willful misconduct of any of the Collateral Agent or such other Secured Party, and (ii) if any notice of a proposed sale or other disposition of Security Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.
6.7 Registration Rights.
(a) Subject to each applicable Intercreditor Agreement, if the Collateral Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Subsection 6.6, and if in the reasonable opinion of the Collateral Agent it is necessary or reasonably advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, the relevant Pledgor will use its reasonable best efforts to cause the Issuer thereof to (i) execute and deliver, and use its reasonable best efforts to cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the reasonable opinion of the Collateral Agent, necessary or advisable to register such Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its reasonable best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of not more than one year from the date of the first public offering of such Pledged Stock, or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related prospectus which, in the reasonable opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. Such Pledgor agrees to use its reasonable best efforts to cause such Issuer to comply with the provisions of the securities or “Blue Sky” laws of any and all states and the District of Columbia that the Collateral Agent shall reasonably designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) that will satisfy the provisions of Section 11(a) of the Securities Act.
(b) Such Pledgor recognizes that the Collateral Agent may be unable to effect a public sale of any or all such Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Such Pledgor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, to the extent permitted by applicable law, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Collateral Agent shall not be under any obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so.
(c) Such Pledgor agrees to use its reasonable best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of such Pledged Stock pursuant to this Subsection 6.7 valid and binding and in compliance with any and all other applicable Requirements of Law. Such Pledgor further agrees that a breach of any of the covenants contained in this Subsection 6.7 will cause irreparable injury to the Collateral Agent and the Lenders, that the Collateral Agent and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Subsection 6.7 shall be specifically enforceable against such Pledgor, and to the extent permitted by applicable law, such Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants (except for a defense that no Event of Default has occurred or is continuing under the Credit Agreement).
6.8 Waiver; Deficiency. Each Granting Party shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Security Collateral are insufficient to pay in full, the Loans and, to the extent then due and owing, all other Obligations of such Granting Party and the reasonable fees and disbursements of any attorneys employed by the Collateral Agent or any other Secured Party to collect such deficiency.
SECTION 7
The Collateral Agent
7.1 Collateral Agent’s Appointment as Attorney-in-Fact, etc.
(a) Each Granting Party hereby irrevocably constitutes and appoints the Collateral Agent and any authorized officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact (which appointment shall terminate upon the date upon which the Loans and all other Obligations (other than any Obligations owing to a Non-Lender Secured Party not then due and payable) then due and owing, shall have been paid in full in cash, all Letters of Credit are terminated or cash collateralized on terms reasonably satisfactory to the applicable Letter of Credit Issuer (or other arrangements have been made with respect thereto on terms reasonably satisfactory to the applicable Letter of Credit Issuer) and the Commitments shall have terminated) with full irrevocable power and authority in the place and stead of such Granting Party and in the name of such Granting Party or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments that may be reasonably necessary or desirable to accomplish the purposes of this Agreement to the extent permitted by applicable law, provided that the Collateral Agent agrees not to exercise such power except upon the occurrence and during the continuance of any Event of Default, and in accordance with and subject to each applicable Intercreditor Agreement. Without limiting the generality of the foregoing, at any time when an Event of Default has occurred and is continuing (in each case to the extent permitted by applicable law and subject to each applicable Intercreditor Agreement), (x) each Pledgor hereby gives the Collateral Agent the power and right, on behalf of such Pledgor, without notice or assent by such Pledgor, to execute, in connection with any sale provided for in Subsection 6.6 or 6.7, any endorsements, assessments or other instruments of conveyance or transfer with respect to such Pledgor’s Pledged Collateral, and (y) each Grantor hereby gives the Collateral Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following:
(i) in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Accounts Receivable of such Grantor that constitutes Collateral or with respect to any other Collateral of such Grantor and file any claim or take any other action or institute any proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Agent for the purpose of collecting any and all such moneys due under any Accounts Receivable of such Grantor that constitutes Collateral or with respect to any other Collateral of such Grantor whenever payable;
(ii) in the case of any Copyright, Patent, or Trademark constituting Collateral of such Grantor, execute and deliver any and all agreements, instruments, documents and papers as the Collateral Agent may reasonably request to such Grantor to evidence the Collateral Agent’s and the Lenders’ security interest in such Copyright, Patent, or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby, and such Grantor hereby consents to the non-exclusive royalty free use by the Collateral Agent of any Copyright, Patent or Trademark owned by such Grantor included in the Collateral for the purposes of disposing of any Collateral;
(iii) pay or discharge taxes and Liens, other than Liens permitted under this Agreement or the other Loan Documents, levied or placed on the Collateral of such Grantor,
effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof;
(iv) (A) direct any party liable for any payment under any of the Security Collateral of such Grantor to make payment of any and all moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct; (B) ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Security Collateral of such Grantor; (C) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Security Collateral of such Grantor; (D) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Security Collateral of such Grantor or any portion thereof and to enforce any other right in respect of any Security Collateral of such Grantor; (E) defend any suit, action or proceeding brought against such Grantor with respect to any Security Collateral of such Grantor; (F) settle, compromise or adjust any such suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as the Collateral Agent may deem appropriate; (G) subject to any existing reserved rights or licenses, assign any Copyright, Patent or Trademark constituting Collateral of such Grantor (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), for such term or terms, on such conditions, and in such manner, as the Collateral Agent shall in its sole discretion determine; and (H) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Security Collateral of such Grantor as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and do, at the Collateral Agent’s option and such Grantor’s expense, at any time, or from time to time, all acts and things which the Collateral Agent deems necessary to protect, preserve or realize upon the Security Collateral of such Grantor and the Collateral Agent’s and the other Secured Parties’ security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do; and
(v) provide any “notice of sole control” (or equivalent notice) under any Blocked Account Agreement (it being understood that the right to provide any “notice of sole control” granted hereby is in addition to such rights granted under the Credit Agreement and does not limit the exercise of such rights during the continuance of any Cash Dominion Period.
(b) The reasonable expenses of the Collateral Agent incurred in connection with actions undertaken as provided in this Subsection 7.1 from the date of payment by the Collateral Agent to the date reimbursed by the relevant Granting Party, shall be payable by such Granting Party to the Collateral Agent on demand.
(c) Each Granting Party hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable as to the relevant Granting Party until this Agreement is terminated as to such Granting Party, and the security interests in the Security Collateral of such Granting Party created hereby are released.
7.2 Duty of Collateral Agent. The Collateral Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Security Collateral in its possession, under Section 9-207 of the Code or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals
with similar property for its own account. None of the Collateral Agent or any other Secured Party nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Security Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Security Collateral upon the request of any Granting Party or any other Person or, except as otherwise provided herein, to take any other action whatsoever with regard to the Security Collateral or any part thereof. The powers conferred on the Collateral Agent and the other Secured Parties hereunder are solely to protect the Collateral Agent’s and the other Secured Parties’ interests in the Security Collateral and shall not impose any duty upon the Collateral Agent or any other Secured Party to exercise any such powers. The Collateral Agent and the other Secured Parties shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and to the maximum extent permitted by applicable law, neither they nor any of their officers, directors, employees or agents shall be responsible to any Granting Party for any act or failure to act hereunder, except as otherwise provided herein or for their own gross negligence or willful misconduct (as determined by a court of competent jurisdiction in a final and non-appealable decision).
7.3 Financing Statements. Pursuant to any applicable law, each Granting Party authorizes the Collateral Agent to file or record financing statements and other filing or recording documents or instruments with respect to such Granting Party’s Security Collateral without the signature of such Granting Party in such form and in such filing offices as the Collateral Agent reasonably determines appropriate to perfect the security interests of the Collateral Agent under this Agreement. Each Granting Party authorizes the Collateral Agent to use any collateral description reasonably determined by the Collateral Agent, including, without limitation, the collateral description “all personal property” or “all assets” or words of similar meaning in any such financing statements. The Collateral Agent agrees to use its commercially reasonable efforts to notify the relevant Granting Party of any financing or continuation statement filed by it, provided that any failure to give such notice shall not affect the validity or effectiveness of any such filing.
7.4 Authority of Collateral Agent. Each Granting Party acknowledges that the rights and responsibilities of the Collateral Agent under this Agreement with respect to any action taken by the Collateral Agent or the exercise or non-exercise by the Collateral Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement or any amendment, supplement or other modification of this Agreement shall, as between the Collateral Agent and the Secured Parties, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Collateral Agent and the Granting Parties, the Collateral Agent shall be conclusively presumed to be acting as agent for the Secured Parties with full and valid authority so to act or refrain from acting, and no Granting Party shall be under any obligation, or entitlement, to make any inquiry respecting such authority.
7.5 Right of Inspection. Upon reasonable written advance notice to any Grantor and as often as may reasonably be desired, or at any time and from time to time after the occurrence and during the continuation of an Event of Default, the Collateral Agent shall have reasonable access during normal business hours to all the books, correspondence and records of such Grantor, and the Collateral Agent and its representatives may examine the same, and to the extent reasonable take extracts therefrom and make photocopies thereof, and such Grantor agrees to render to the Collateral Agent at such Grantor’s reasonable cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. The Collateral Agent and its representatives shall also have the right, upon reasonable advance written notice to such Grantor subject to any lease restrictions, to enter during normal business hours into and upon any premises owned, leased or operated by such Grantor where any of such
Grantor’s Inventory or Equipment is located for the purpose of inspecting the same, observing its use or otherwise protecting its interests therein to the extent not inconsistent with the provisions of the Credit Agreement and the other Loan Documents (and subject to each applicable Intercreditor Agreement).
SECTION 8
Non-Lender Secured Parties
8.1 Rights to Collateral.
(a) The Non-Lender Secured Parties shall not have any right whatsoever to do any of the following: (i) exercise any rights or remedies with respect to the Collateral (such term, as used in this Section 8, having the meaning assigned to it in the Credit Agreement) or to direct the Collateral Agent to do the same, including, without limitation, the right to (A) enforce any Liens or sell or otherwise foreclose on any portion of the Collateral, (B) request any action, institute any proceedings, exercise any voting rights, give any instructions, make any election, notify account debtors or make collections with respect to all or any portion of the Collateral or (C) release any Granting Party under this Agreement or release any Collateral from the Liens of any Security Document or consent to or otherwise approve any such release; (ii) demand, accept or obtain any Lien on any Collateral (except for Liens arising under, and subject to the terms of, this Agreement); (iii) vote in any Bankruptcy Case or similar proceeding in respect of the U.S. Parent Borrower or any of its Subsidiaries (any such proceeding, for purposes of this clause (a), a “Bankruptcy”) with respect to, or take any other actions concerning the Collateral; (iv) receive any proceeds from any sale, transfer or other disposition of any of the Collateral (except in accordance with this Agreement); (v) oppose any sale, transfer or other disposition of the Collateral; (vi) object to any debtor-in-possession financing in any Bankruptcy which is provided by one or more Lenders among others (including on a priming basis under Section 364(d) of the Bankruptcy Code); (vii) object to the use of cash collateral in respect of the Collateral in any Bankruptcy; or (viii) seek, or object to the Lenders or Agents seeking on an equal and ratable basis, any adequate protection or relief from the automatic stay with respect to the Collateral in any Bankruptcy.
(b) Each Non-Lender Secured Party, by its acceptance of the benefits of this Agreement and the other Security Documents, agrees that in exercising rights and remedies with respect to the Collateral, the Collateral Agent and the Lenders, with the consent of the Collateral Agent, may enforce the provisions of the Security Documents and exercise remedies thereunder and under any other Loan Documents (or refrain from enforcing rights and exercising remedies), all in such order and in such manner as they may determine in the exercise of their sole business judgment. Such exercise and enforcement shall include, without limitation, the rights to collect, sell, dispose of or otherwise realize upon all or any part of the Collateral, to incur expenses in connection with such collection, sale, disposition or other realization and to exercise all the rights and remedies of a secured lender under the Uniform Commercial Code as in effect from time to time in any applicable jurisdiction. The Non-Lender Secured Parties by their acceptance of the benefits of this Agreement and the other Security Documents hereby agree not to contest or otherwise challenge any such collection, sale, disposition or other realization of or upon all or any of the Collateral. Whether or not a Bankruptcy Case has been commenced, the Non-Lender Secured Parties shall be deemed to have consented to any sale or other disposition of any property, business or assets of the U.S. Parent Borrower or any of its Subsidiaries and the release of any or all of the Collateral from the Liens of any Security Document in connection therewith.
(c) Notwithstanding any provision of this Subsection 8.1, the Non-Lender Secured Parties shall be entitled subject to each applicable Intercreditor Agreement to file any necessary
responsive or defensive pleadings in opposition to any motion, claim, adversary proceeding or other pleadings (A) in order to prevent any Person from seeking to foreclose on the Collateral or supersede the Non-Lender Secured Parties’ claim thereto or (B) in opposition to any motion, claim, adversary proceeding or other pleading made by any Person objecting to or otherwise seeking the disallowance of the claims of the Non-Lender Secured Parties. Each Non-Lender Secured Party, by its acceptance of the benefits of this Agreement, agrees to be bound by and to comply with each applicable Intercreditor Agreement and authorizes the Collateral Agent to enter into the Intercreditor Agreements on its behalf.
(d) Each Non-Lender Secured Party, by its acceptance of the benefits of this Agreement, agrees that the Collateral Agent and the Lenders may deal with the Collateral, including any exchange, taking or release of Collateral, may change or increase the amount of the Borrower Obligations and/or the Guarantor Obligations, and may release any Granting Party from its Obligations hereunder, all without any liability or obligation (except as may be otherwise expressly provided herein) to the Non-Lender Secured Parties.
8.2 Appointment of Agent. Each Non-Lender Secured Party, by its acceptance of the benefits of this Agreement and the other Security Documents, shall be deemed irrevocably to make, constitute and appoint the Collateral Agent, as agent under the Credit Agreement (and all officers, employees or agents designated by the Collateral Agent) as such Person’s true and lawful agent and attorney-in-fact, and in such capacity, the Collateral Agent shall have the right, with power of substitution for the Non-Lender Secured Parties and in each such Person’s name or otherwise, to effectuate any sale, transfer or other disposition of the Collateral. It is understood and agreed that the appointment of the Collateral Agent as the agent and attorney-in-fact of the Non-Lender Secured Parties for the purposes set forth herein is coupled with an interest and is irrevocable. It is understood and agreed that the Collateral Agent has appointed the Administrative Agent as its agent for purposes of perfecting certain of the security interests created hereunder and for otherwise carrying out certain of its obligations hereunder.
8.3 Waiver of Claims. To the maximum extent permitted by law, each Non Lender Secured Party waives any claim it might have against the Collateral Agent or the Lenders with respect to, or arising out of, any action or failure to act or any error of judgment, negligence, or mistake or oversight whatsoever on the part of the Collateral Agent or the Lenders or their respective directors, officers, employees or agents with respect to any exercise of rights or remedies under the Loan Documents or any transaction relating to the Collateral (including, without limitation, any such exercise described in Subsection 8.1(b)), except for any such action or failure to act that constitutes willful misconduct or gross negligence of such Person. To the maximum extent permitted by applicable law, none of the Collateral Agent or any Lender or any of their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of the U.S. Parent Borrower, any Subsidiary of the U.S. Parent Borrower, any Non-Lender Secured Party or any other Person or to take any other action or forbear from doing so whatsoever with regard to the Collateral or any part thereof, except for any such action or failure to act that constitutes willful misconduct or gross negligence of such Person.
8.4 Designation of Non-Lender Secured Parties. The U.S. Parent Borrower may from time to time designate a Person as a “Bank Products Provider,” a “Hedging Provider” or a “Management Credit Provider” hereunder by written notice to the Collateral Agent. Upon being so designated by the U.S. Parent Borrower, such Bank Products Provider, Hedging Provider or Management Credit Provider shall be a Non-Lender Secured Party for the purposes of this Agreement for as long as so designated by the U.S. Parent Borrower; provided that, at the time of the U.S. Parent Borrower’s
designation of such Non-Lender Secured Party, the obligations of the relevant Grantor under the applicable Hedging Agreement, Bank Products Agreement or Management Guarantee (as the case may be) have not been designated as Additional ABL Obligations.
SECTION 9
Miscellaneous
9.1 Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by each affected Granting Party and the Collateral Agent, provided that (a) any provision of this Agreement imposing obligations on any Granting Party may be waived by the Collateral Agent in a written instrument executed by the Collateral Agent and (b) if separately agreed in writing between the U.S. Parent Borrower and any Non-Lender Secured Party (and such Non-Lender Secured Party has been designated in writing by the U.S. Parent Borrower to the Collateral Agent for purposes of this sentence, for so long as so designated), no such waiver and no such amendment or modification shall amend, modify or waive Subsection 6.5 (or the definition of “Non-Lender Secured Party” or “Secured Party” to the extent relating thereto) if such waiver, amendment, supplement or modification would directly and adversely affect a Non-Lender Secured Party without the written consent of such affected Non-Lender Secured Party. For the avoidance of doubt, it is understood and agreed that any amendment, waiver, supplement or other modification of or to any Intercreditor Agreement that would have the effect, directly or indirectly, through any reference herein to any Intercreditor Agreement or otherwise, of waiving, amending, supplementing or otherwise modifying this Agreement, or any term or provision hereof, or any right or obligation of any Granting Party hereunder or in respect hereof, shall not be given such effect except pursuant to a written instrument executed by each affected Granting Party and the Collateral Agent in accordance with this Subsection 9.1.
9.2 Notices. All notices, requests and demands to or upon the Collateral Agent or any Granting Party hereunder shall be effected in the manner provided for in Subsection 12.2 of the Credit Agreement; provided that any such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 1, unless and until such Guarantor shall change such address by notice to the Collateral Agent and the Administrative Agent given in accordance with Subsection 12.2 of the Credit Agreement.
9.3 No Waiver by Course of Conduct; Cumulative Remedies. None of the Collateral Agent or any other Secured Party shall by any act (except by a written instrument pursuant to Subsection 9.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of the Collateral Agent or any other Secured Party, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by the Collateral Agent or any other Secured Party of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that the Collateral Agent or such other Secured Party would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.
9.4 Enforcement Expenses; Indemnification.
(a) Each Guarantor jointly and severally agrees to pay or reimburse each Secured Party and the Collateral Agent for all their respective reasonable costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement against such Guarantor and the other Loan Documents to which such Guarantor is a party, including, without limitation, the reasonable fees and disbursements of counsel to the Secured Parties, the Collateral Agent and the Administrative Agent.
(b) Each Grantor jointly and severally agrees to pay, and to save the Collateral Agent, the Administrative Agent and the other Secured Parties harmless from, (x) any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other similar taxes which may be payable or determined to be payable with respect to any of the Security Collateral or in connection with any of the transactions contemplated by this Agreement and (y) any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement (collectively, the “indemnified liabilities”), in each case to the extent the U.S. Parent Borrower would be required to do so pursuant to Subsection 12.5 of the Credit Agreement, and in any event excluding any taxes or other indemnified liabilities arising from gross negligence, bad faith or willful misconduct of the Collateral Agent, the Administrative Agent or any other Secured Party as determined by a court of competent jurisdiction in a final and nonappealable decision.
(c) The agreements in this Subsection 9.4 shall survive repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.
9.5 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Granting Parties, the Collateral Agent and the Secured Parties and their respective successors and assigns permitted by the Credit Agreement.
9.6 Set-Off. Each Granting Party hereby irrevocably authorizes each of the Administrative Agent and the Collateral Agent and each other Secured Party at any time and from time to time without notice to such Granting Party, any such notice being expressly waived by each Granting Party, to the extent permitted by applicable law, upon the occurrence and during the continuance of an Event of Default under Subsection 10.1(a) of the Credit Agreement so long as any amount remains unpaid after it becomes due and payable by such Granting Party hereunder, to set-off and appropriate and apply against any such amount any and all deposits (general or special, time or demand, provisional or final) (other than the Collateral Proceeds Account), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by the Collateral Agent, the Administrative Agent or such other Secured Party to or for the credit or the account of such Granting Party, or any part thereof in such amounts as the Collateral Agent, the Administrative Agent or such other Secured Party may elect. The Collateral Agent, the Administrative Agent and each other Secured Party shall notify such Granting Party promptly of any such set-off and the application made by the Collateral Agent, the Administrative Agent or such other Secured Party of the proceeds thereof; provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Collateral Agent, the Administrative Agent and each other Secured Party under this Subsection 9.6 are in addition to other rights and remedies (including, without limitation, other rights of set-off) which the Collateral Agent, the Administrative Agent or such other Secured Party may have.
9.7 Counterparts. This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy and other electronic
transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
9.8 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating 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; provided that, with respect to any Pledged Stock issued by a Foreign Subsidiary, all rights, powers and remedies provided in this Agreement may be exercised only to the extent that they do not violate any provision of any law, rule or regulation of any Governmental Authority applicable to any such Pledged Stock or affecting the legality, validity or enforceability of any of the provisions of this Agreement against the Pledgor (such laws, rules or regulations, “Applicable Law”) and are intended to be limited to the extent necessary so that they will not render this Agreement invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any Applicable Law.
9.9 Section Headings. The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.
9.10 Integration. This Agreement and the other Loan Documents represent the entire agreement of the Granting Parties, the Collateral Agent and the other Secured Parties with respect to the subject matter hereof, and there are no promises, undertakings, representations or warranties by the Granting Parties, the Collateral Agent or any other Secured Party relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ANY CLAIM OR CONTROVERSY RELATING HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
9.12 Submission to Jurisdiction; Waivers. Each party hereto hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party to the exclusive general jurisdiction of the Supreme Court of the State of New York for the County of New York (the “New York Supreme Court”), and the United States District Court for the Southern District of New York (the “Federal District Court,” and together with the New York Supreme Court, the “New York Courts”) and appellate courts from either of them; provided that nothing in this Agreement shall be deemed or operate to preclude (i) the Collateral Agent from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations (in which case any party shall be entitled to assert any claim or defense, including any claim or defense that this Subsection 9.12 would otherwise require to be asserted in a legal action or proceeding in a New York Court), or to enforce a judgment or other court order in favor of the Administrative Agent or the Collateral Agent, (ii) any party from bringing any
legal action or proceeding in any jurisdiction for the recognition and enforcement of any judgment, (iii) if all such New York Courts decline jurisdiction over any Person, or decline (or in the case of the Federal District Court, lack) jurisdiction over any subject matter of such action or proceeding, a legal action or proceeding may be brought with respect thereto in another court having jurisdiction and (iv) in the event a legal action or proceeding is brought against any party hereto or involving any of its assets or property in another court (without any collusive assistance by such party or any of its Subsidiaries or Affiliates), such party from asserting a claim or defense (including any claim or defense that this Subsection 9.12(a) would otherwise require to be asserted in a legal proceeding in a New York Court) in any such action or proceeding;
(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient forum and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to any party at its address referred to in Subsection 9.2 or at such other address of which the Collateral Agent and the Administrative Agent (in the case of any other party hereto) and the U.S. Parent Borrower (in the case of the Collateral Agent and the Administrative Agent) shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or (subject to clause (a) above) shall limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Subsection 9.12 any consequential or punitive damages.
9.13 Acknowledgments. Each Granting Party hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;
(b) none of the Collateral Agent, the Administrative Agent or any other Secured Party has any fiduciary relationship with or duty to any Granting Party arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Granting Parties, on the one hand, and the Collateral Agent, the Administrative Agent and the other Secured Parties, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Secured Parties or among the Granting Parties and the Secured Parties.
9.14 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
9.15 Additional Granting Parties. Each new Subsidiary of the U.S. Parent Borrower that is required to become a party to this Agreement pursuant to Subsection 8.8(a) of the Credit Agreement shall become a Granting Party for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement substantially in the form of Annex 2 hereto. Each existing Granting Party that is required to become a Pledgor with respect to Capital Stock of any new Subsidiary of the U.S. Parent Borrower pursuant to Subsection 8.8(a) of the Credit Agreement shall become a Pledgor with respect thereto upon execution and delivery by such Granting Party of a Supplemental Agreement substantially in the form of Annex 3 hereto.
9.16 Releases.
(a) At such time as the Loans and the other Obligations (other than any Obligations owing to a Non-Lender Secured Party not then due and payable) then due and owing shall have been paid in full, all Letters of Credit are terminated or cash collateralized on terms reasonably satisfactory to the applicable Letter of Credit Issuer (or other arrangements have been made with respect thereto on terms reasonably satisfactory to the applicable Letter of Credit Issuer) and the Commitments have been terminated, all Security Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Collateral Agent and each Granting Party hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Security Collateral shall revert to the Granting Parties. At the request and sole expense of any Granting Party following any such termination, the Collateral Agent shall deliver to such Granting Party (subject to Subsection 7.2, without recourse and without representation or warranty) any Security Collateral held by the Collateral Agent hereunder, and execute, acknowledge and deliver to such Granting Party such releases, instruments or other documents (including without limitation UCC termination statements), and do or cause to be done all other acts, as any Granting Party shall reasonably request to evidence such termination.
(b) Upon any sale or other disposition of Security Collateral permitted by the Credit Agreement (other than any sale or disposition to another Grantor), the Lien pursuant to this Agreement on such sold or disposed of Security Collateral shall be automatically released. In connection with a sale or other disposition of all the Capital Stock of any Granting Party (other than to another Grantor) or any other transaction or occurrence as a result of which such Granting Party ceases to be a Restricted Subsidiary of the U.S. Parent Borrower or the sale or other disposition of Security Collateral (other than a sale or disposition to another Grantor) permitted under the Credit Agreement, the Collateral Agent shall, upon receipt from the U.S. Parent Borrower of a written request for the release of such Granting Party from its Guarantee or the release of the Security Collateral subject to such sale, disposition or other transaction, identifying such Granting Party or the relevant Security Collateral, together with a certification by the U.S. Parent Borrower stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents, execute and deliver to the U.S. Parent Borrower or the relevant Granting Party (subject to Subsection 7.2, without recourse and without representation or warranty), at the sole cost and expense of such Granting Party, any Security Collateral of such relevant Granting Party held by the Collateral Agent, or the Security Collateral subject to such sale or disposition (as applicable), and, at the sole cost and expense of such Granting Party, execute, acknowledge and deliver to such Granting Party such releases, instruments or other documents (including without limitation UCC termination statements), and do or cause to be done all other acts, as the U.S. Parent Borrower or such Granting Party shall reasonably request (x) to evidence or effect the release of such Granting Party from its Guarantee (if any) and of the Liens created hereby (if any) on such Granting Party’s Security Collateral or (y) to evidence the release of the Security Collateral subject to such sale or disposition.
(c) Upon the release of any Granting Party pursuant to the last paragraph of Section 12.1 of the Credit Agreement, the Lien pursuant to this Agreement on all Security Collateral of such Granting Party (if any) shall be automatically released, and the Guarantee (if any) of such Granting Party, and all obligations of such Granting Party hereunder, shall terminate, all without delivery of any instrument or performance of any act by any party, and the Collateral Agent shall, upon the request of the U.S. Parent Borrower or such Granting Party, deliver to the U.S. Parent Borrower or such Granting Party (subject to Subsection 7.2, without recourse and without representation or warranty) any Security Collateral of such Granting Party held by the Collateral Agent hereunder and the Collateral Agent and the Administrative Agent shall execute, acknowledge and deliver to the U.S. Parent Borrower or such Granting Party (at the sole cost and expense of the U.S. Parent Borrower or such Granting Party) all releases, instruments or other documents (including without limitation UCC termination statements), and do or cause to be done all other acts, necessary or reasonably desirable for the release of such Granting Party from its Guarantee (if any) or the Liens created hereby (if any) on such Granting Party’s Security Collateral, as applicable, as the U.S. Parent Borrower or such Granting Party may reasonably request.
(d) Upon any Security Collateral being or becoming an Excluded Asset, the Lien pursuant to this Agreement on such Security Collateral shall be automatically released. At the request and sole expense of any Granting Party, the Collateral Agent shall deliver such Security Collateral (if held by the Collateral Agent) to such Granting Party and execute, acknowledge and deliver to such Granting Party such releases, instruments or other documents (including without limitation UCC termination statements), and do or cause to be done all other acts, as such Granting Party shall reasonably request to evidence such release.
(e) So long as no Event of Default has occurred and is continuing, the Collateral Agent shall at the direction of any applicable Granting Party return to such Granting Party any proceeds or other property received by it during any Event of Default pursuant to either Subsection 5.3.1 or 6.4 and not otherwise applied in accordance with Subsection 6.5.
(f) The Collateral Agent shall have no liability whatsoever to any other Secured Party as the result of any release of Security Collateral by it in accordance with (or which the Collateral Agent in good faith believes to be in accordance with) this Subsection 9.16.
9.17 Judgment.
(a) If for the purpose of obtaining judgment in any court it is necessary to convert a sum due hereunder in one currency into another currency, the parties hereto agree, to the fullest extent that they may effectively do so, that the rate of exchange used shall be that at which in accordance with normal banking procedures the Collateral Agent could purchase the first currency with such other currency on the Business Day preceding the day on which final judgment is given.
(b) The obligations of any Granting Party in respect of this Agreement to the Collateral Agent, for the benefit of each holder of Obligations, shall, notwithstanding any judgment in a currency (the “judgment currency”) other than the currency in which the sum originally due to such holder is denominated (the “original currency”), be discharged only to the extent that on the Business Day following receipt by the Collateral Agent of any sum adjudged to be so due in the judgment currency, the Collateral Agent may in accordance with normal banking procedures purchase the original currency with the judgment currency; if the amount of the original currency so purchased is less than the sum originally due to such holder in the original currency, such Granting Party agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Collateral Agent for the benefit of such holder,
against such loss, and if the amount of the original currency so purchased exceeds the sum originally due to the Collateral Agent, the Collateral Agent agrees to remit to the U.S. Parent Borrower, such excess. This covenant shall survive the termination of this Agreement and payment of the Obligations and all other amounts payable hereunder.
9.18 Transfer Tax Acknowledgment. Each party hereto acknowledges that the shares delivered hereunder are being transferred to and deposited with the Collateral Agent (or other Person in accordance with any applicable Intercreditor Agreement) as security for the Obligations and that this Subsection 9.18 is intended to be the certificate of exemption from New York stock transfer taxes for the purposes of complying with Section 270.5(b) of the Tax Law of the State of New York.
[Remainder of page left blank intentionally; Signature pages to follow.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the date first written above.
U.S. BORROWERS:
UNIVAR INC.
By: /s/ Carl Lukach
Name: Carl Lukach
Title: Executive Vice President and Chief Financial Officer
UNIVAR USA INC.
CHEMPOINT.COM INC.
UNIVAR HOLDCO LLC
UNIVAR HOLDCO III LLC
PILATES MERGER SUB II, LLC
By: /s/ Kerri Howard
Name: Kerri Howard
Title: Treasurer
UNIVAR USA DELAWARE, INC.
UNIVAR DELAWARE, INC.
By: /s/ Kerri Howard
Name: Kerri Howard
Title: Vice President -Treasurer
TPG ACCOLADE DELAWARE, LLC
NEXEO SOLUTIONS HOLDINGS, LLC
NEXEO SOLUTIONS SUB HOLDING CORP.
NEXEO SOLUTIONS, LLC
ARCHWAY SALES, LLC
CHEMICAL SPECIALISTS AND DEVELOPMENT, LLC
STARTEX DISTRIBUTION WEST, LLC
STARTEX CHEMICAL, LLC
NEXEO SOLUTIONS PLASTICS, LLC
NEXEO SOLUTIONS FINANCE CORPORATION
By: /s/ Kerri Howard
Name: Kerri Howard
Title: Treasurer
[Signature Pages to Guarantee and Collateral Agreement]
Acknowledged and Agreed to as of the date hereof by:
BANK OF AMERICA, N.A., as Collateral Agent
By: /s/ Brad Breidenbach
Name: Brad Breidenbach
Title: Senior Vice President
[Signature Pages to Guarantee and Collateral Agreement]
ANNEX 1
ACKNOWLEDGEMENT AND CONSENT1
The undersigned hereby acknowledges receipt of a copy of the Amended and Restated ABL Guarantee and Collateral Agreement, dated as of February 28, 2019 (the “Agreement”; capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Agreement or the Credit Agreement referred to therein, as the case may be), made by and among UNIVAR Inc. and the other Granting Parties party thereto in favor of BANK OF AMERICA, N.A., as Collateral Agent and U.S. Administrative Agent. The undersigned agrees for the benefit of the Collateral Agent, the Administrative Agent and the Lenders as follows:
The undersigned will be bound by the terms of the Agreement applicable to it as an Issuer (as defined in the Agreement) and will comply with such terms insofar as such terms are applicable to the undersigned as an Issuer.
The undersigned will notify the Collateral Agent promptly in writing of the occurrence of any of the events described in Subsection 5.3.1 of the Agreement.
The terms of Subsections 6.3(c) and 6.7 of the Agreement shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Subsection 6.3(c) or 6.7 of the Agreement.
[NAME OF ISSUER]
By:
Name: [__________________]
Title: [_______________]
Address for Notices:
[__________________]
1 This consent is necessary only with respect to any Issuer that is not also a Granting Party
ANNEX 2
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated as of [_______ __], 20[_], made by [______________________________], a [______________] corporation [([each an][the] “Additional Granting Party”), in favor of BANK OF AMERICA, N.A., as collateral agent (in such capacity, the “Collateral Agent”) and as U.S. administrative agent (in such capacity, the “Administrative Agent”) for the banks and other financial institutions from time to time parties to the Credit Agreement referred to below and the other Secured Parties (as defined in the Guarantee and Collateral Agreement referred to below). All capitalized terms not defined herein shall have the meaning ascribed to them in the Guarantee and Collateral Agreement, or if not defined therein, in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, UNIVAR INC., a Delaware corporation (together with its successors and assigns, the “U.S. Parent Borrower”), the U.S. Subsidiary Borrowers party thereto, Univar Canada Ltd., as Canadian Borrower, the several banks and other financial institutions from time to time party thereto (the “Lenders”), the Administrative Agent, the Collateral Agent, Bank of America, N.A. (acting through its Canadian branch), as Canadian administrative agent and the other parties party thereto are parties to a Amended and Restated Credit Agreement, dated as of February 28, 2019 (as amended, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”);
WHEREAS, in connection with the Credit Agreement, the U.S. Parent Borrower, certain Domestic Subsidiaries of the U.S. Parent Borrower are, or are to become, parties to the Amended and Restated ABL Guarantee and Collateral Agreement, dated as of February 28, 2019 (as amended, supplemented, waived or otherwise modified from time to time, the “Guarantee and Collateral Agreement”), in favor of the Collateral Agent, for the benefit of the Secured Parties;
WHEREAS, [the][each] Additional Granting Party is a member of an affiliated group of companies that includes the U.S. Parent Borrower and each other Granting Party; the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the Borrowers to make valuable transfers to one or more of the other Granting Parties (including such Additional Granting Party) in connection with the operation of their respective businesses; and the Borrowers and the other Granting Parties (including such Additional Granting Party) are engaged in related businesses, and each such Granting Party (including [each] such Additional Granting Party) will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement;
WHEREAS, the Credit Agreement requires [the][each] Additional Granting Party to become a party to the Guarantee and Collateral Agreement; and
WHEREAS, [the][each] Additional Granting Party has agreed to execute and deliver this Assumption Agreement in order to become a party to the Guarantee and Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering this Assumption Agreement, [the][each] Additional Granting Party, as provided in Subsection 9.15 of the Guarantee and Collateral Agreement, hereby becomes a party to the Guarantee and Collateral Agreement as a Granting Party thereunder with the same force and effect as if originally named therein as a
[Guarantor] [, Grantor and Pledgor] [and Grantor] [and Pledgor]2 and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a [Guarantor] [, Grantor and Pledgor] [and Grantor] [and Pledgor]3 thereunder. The information set forth in Annex 1-A hereto is hereby added to the information set forth in Schedules [____________] to the Guarantee and Collateral Agreement, and such Schedules are hereby amended and modified to include such information. [The][Each] Additional Granting Party hereby represents and warrants that each of the representations and warranties of such Additional Granting Party, in its capacities as a [Guarantor] [, Grantor and Pledgor] [and Grantor] [and Pledgor],4 contained in Section 4 of the Guarantee and Collateral Agreement is true and correct in all material respects on and as the date hereof (after giving effect to this Assumption Agreement) as if made on and as of such date. Each Additional Granting Party hereby grants, as and to the same extent as provided in the Guarantee and Collateral Agreement, to the Collateral Agent, for the benefit of the Secured Parties, a continuing security interest in the [Collateral (as such term is defined in Subsection 3.1 of the Guarantee and Collateral Agreement) of such Additional Granting Party] [and] [the Pledged Collateral (as such term is defined in the Guarantee and Collateral Agreement) of such Additional Granting Party, except as provided in Subsection 3.3 of the Guarantee and Collateral Agreement].
2. GOVERNING LAW. THIS ASSUMPTION AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ANY CLAIM OR CONTROVERSY RELATING HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL GRANTING PARTY]
By:
Name:
Title:
Acknowledged and Agreed to as of the date hereof by:
BANK OF AMERICA, N.A.,
as Collateral Agent and Administrative Agent
By:
Name:
Title:
1 Indicate the capacities in which the Additional Granting Party is becoming a Grantor
2 Indicate the capacities in which the Additional Granting Party is becoming a Grantor
3 Indicate the capacities in which the Additional Granting Party is becoming a Grantor
ANNEX 3
SUPPLEMENTAL AGREEMENT
SUPPLEMENTAL AGREEMENT, dated as of [_________ __], 20[ ], made by [______________________________], a [______________] corporation (the “Additional Pledgor”), in favor of BANK OF AMERICA, N.A., as collateral agent (in such capacity, the “Collateral Agent”) and as U.S. administrative agent (in such capacity, the “Administrative Agent”) for the banks and other financial institutions from time to time parties to the Credit Agreement referred to below and the other Secured Parties (as defined in the Guarantee and Collateral Agreement referred to below). All capitalized terms not defined herein shall have the meaning ascribed to them in the Guarantee and Collateral Agreement, or if not defined therein, in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, UNIVAR INC., a Delaware corporation (together with its successors and assigns, the “U.S. Parent Borrower”), the U.S. Subsidiary Borrowers party thereto, Univar Canada Ltd., as Canadian Borrower, the several banks and other financial institutions from time to time party thereto (the “Lenders”), the Administrative Agent, the Collateral Agent, Bank of America, N.A. (acting through its Canadian branch), as Canadian administrative agent and the other parties party thereto are parties to a Amended and Restated Credit Agreement, dated as of February 28, 2019 (as amended, supplemented, waived or otherwise modified from time to time, the “Credit Agreement”);
WHEREAS, in connection with the Credit Agreement, the U.S. Parent Borrower, certain Domestic Subsidiaries of the U.S. Parent Borrower are, or are to become, parties to the Amended and Restated ABL Guarantee and Collateral Agreement, dated as of February 28, 2019 (as amended, supplemented, waived or otherwise modified from time to time, the “Guarantee and Collateral Agreement”), in favor of the Collateral Agent, for the benefit of the Secured Parties;
WHEREAS, the Credit Agreement requires the Additional Pledgor to become a Pledgor under the Guarantee and Collateral Agreement with respect to Capital Stock of certain new Subsidiaries of the Additional Pledgor; and
WHEREAS, the Additional Pledgor has agreed to execute and deliver this Supplemental Agreement in order to become such a Pledgor under the Guarantee and Collateral Agreement;
NOW, THEREFORE, IT IS AGREED:
1. Guarantee and Collateral Agreement. By executing and delivering this Supplemental Agreement, the Additional Pledgor, as provided in Subsection 9.15 of the Guarantee and Collateral Agreement, hereby becomes a Pledgor under the Guarantee and Collateral Agreement with respect to the shares of Capital Stock of the Subsidiary of the Additional Pledgor listed in Annex 1 hereto and will be bound by all terms, conditions and duties applicable to a Pledgor under the Guarantee and Collateral Agreement, as a Pledgor thereunder. The information set forth in Annex 1 hereto is hereby added to the information set forth in Schedule 2 to the Guarantee and Collateral Agreement, and such Schedule 2 is hereby amended and modified to include such information. The Additional Pledgor hereby represents and warrants that each of the representations and warranties of such Additional Pledgor, in its capacity as a Pledgor, contained in Subsection 4.3 of the Guarantee and Collateral Agreement is true and correct in all material respects on and as the date hereof (after giving effect to this Supplemental Agreement) as if made on and as of such date. The Additional Pledgor hereby undertakes each of the
covenants, in its capacity as a Pledgor, contained in Subsection 5.3 of the Guarantee and Collateral Agreement. The Additional Pledgor hereby grants, as and to the same extent as provided in the Guarantee and Collateral Agreement, to the Collateral Agent, for the benefit of the Secured Parties, a continuing security interest in all of the Pledged Collateral of such Additional Pledgor now owned or at any time hereafter acquired by such Pledgor, and any Proceeds thereof, except as provided in Subsection 3.3 of the Guarantee and Collateral Agreement. The Additional Pledgor represents and warrants to the Collateral Agent and the other Secured Parties that this Supplemental Agreement 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.
2. GOVERNING LAW. THIS SUPPLEMENTAL AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND ANY CLAIM OR CONTROVERSY RELATING HERETO SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ITS PRINCIPLES OR RULES OF CONFLICT OF LAWS TO THE EXTENT SUCH PRINCIPLES OR RULES ARE NOT MANDATORILY APPLICABLE BY STATUTE AND WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
IN WITNESS WHEREOF, the undersigned has caused this Supplemental Agreement to be duly executed and delivered as of the date first above written.
[ADDITIONAL PLEDGOR]
By:
Name:
Title:
Acknowledged and Agreed to as of the date hereof by:
BANK OF AMERICA, N.A.,
as Collateral Agent and Administrative Agent
By:
Name:
Title:
Employee Stock Option Agreement
This Employee Stock Option Agreement (the “Agreement”), by and between Univar Solutions Inc., a Delaware corporation (the “Company”), and the Employee whose name is set forth on Exhibit A hereto (the “Employee”), is being entered into pursuant to the Univar Solutions Inc. 2017 Omnibus Equity Incentive Plan (as the same may be amended, modified or supplemented from time to time, the “Plan”) and is dated as of the Grant Date set forth on Exhibit A hereto (the “Grant Date”). Capitalized terms that are used but not defined herein shall have the respective meanings given to them in the Plan.
The Company and the Employee hereby agree as follows:
Section 1.Grant of Options
(a)Confirmation of Grant. The Company hereby evidences and confirms, effective as of the Grant Date, its grant to the Employee of the number of options to purchase Shares as set forth on Exhibit A hereto (the “Options”). The Options are not intended to be incentive stock options under the Code. This Agreement is entered into pursuant to, and the terms of the Options are subject to, the terms and conditions of the Plan, which are incorporated into the Agreement. If there is any inconsistency between this Agreement and any express term of the Plan, the express term of the Plan shall govern.
(b)Option Price. The Option Price for each Share covered by the Options is set forth on Exhibit A hereto.
Section 2.Vesting and Exercisability
(a)Vesting. Except as otherwise provided in Section 5 or Section 2(b) of this Agreement, the Options shall become vested, if at all, in the shares and on the vesting date(s) set forth on Exhibit A hereto (each, a “Vesting Date”), subject to the continued employment of the Employee by the Company through such date.
(b)Effective of Termination of Employment.
(i)If the Employee’s employment is terminated for Cause, all Options (whether or not then vested or exercisable) shall automatically terminate immediately upon such termination.
(ii)If the Employee’s employment with the Company is terminated by reason of the Employee’s death or Disability (either, a “Special Termination”), any unvested Options held by the Employee shall vest, as of the effective date of such Special Termination.
(iii)If the Employee’s employment with the Company is terminated by reason of the Employee’s Retirement, (x) if such Retirement occurs prior to the first Vesting Date, then any unvested Options subject to vesting on the first Vesting Date shall continue to vest in accordance with Section 2(a) as if the Employee’s employment had not terminated, and all other unvested Options shall terminate immediately upon the effective date of such Retirement, and (y) if such Retirement occurs on or after the first Vesting Date, then all unvested Options shall continue to vest in accordance with Section 2(a) as if the Employee’s employment had not terminated.
(iv)If the Employee’s employment with the Company terminates for any reason other than Cause or a Special Termination or Retirement (whether initiated by the Company or by the Employee), any Options held by the Employee that have not vested before the effective date of such termination of employment (determined without regard to any statutory or deemed or express contractual notice period) shall terminate immediately upon such termination of employment.
(c)Discretionary Acceleration. The Administrator, in its sole discretion, may accelerate the vesting or exercisability of all or a portion of the Options, at any time and from time to time.
(d)Exercise. Once vested in accordance with the provisions of this Agreement, the Options may be exercised at any time and from time to time prior to the date such Options terminate pursuant to Section 3. Options may be exercised only with respect to whole shares of Company Common Stock and must be exercised in accordance with Section 4.
(e)No Other Accelerated Vesting. The vesting and exercisability provisions set forth in this Section 2 or in Section 5, or expressly set forth in the Plan, shall be the exclusive vesting and exercisability provisions applicable to the Options and shall supersede any other provisions relating to vesting and exercisability, unless such other provisions unambiguously and expressly reference, in writing, the Plan by name and this Agreement by name and date.
Section 3.Termination of Options
(a)Normal Termination Date. Unless earlier terminated pursuant to Section 3(b) or Section 5, the Options shall terminate on the tenth anniversary of the Grant Date (the “Normal Termination Date”), if not exercised prior to such date.
(b)Early Termination. All vested Options that are not terminated upon the effective date of a termination of employment shall remain exercisable until the first to occur of:
(i) in the case of Retirement, the Normal Termination Date,
(ii) in the case of a termination by the Company without Cause or a termination by the Employee for Good Reason, one hundred and eighty (180) days after the effective date of such termination,
(iii) in the case of a Special Termination, twelve (12) months after the effective date of such termination,
(iv) in the case of any other termination of employment (other than a Special Termination, a Retirement, or a termination by the Company for Cause), ninety (90) days after the effective date of the Employee’s termination,
(v) the Normal Termination Date, or
(vi) the cancellation of the Options pursuant to Section 5.
If not exercised within the applicable period of shortest duration (as described in clauses (i)-(vi) above), the Options shall automatically terminate upon the expiration of such period. If on the first date of the periods set forth in Section 3(b)(i) through Section 3(b)(iv) the Options are not exercisable solely due to any of the restrictions set forth in Section 4(b)(i), (ii) or (iii), the Options will not expire until the earlier of the Normal Termination Date or the date determined by adding the number of days during which exercise of the Options would otherwise have been permitted to the first date on which exercise of the Option ceases to be barred by any such restriction. (For example, if the restriction lasted 15 days and was lifted on May 15, the Options would expire on May 30.)
Section 4.Manner of Exercise
(a)General. Subject to such reasonable administrative regulations as the Administrator may adopt from time to time, the exercise of vested Options by the Employee must be made pursuant to procedures contained in the Plan and such other procedures established by the Administrator from time to time. These procedures shall include the Employee specifying in writing the proposed date on which the Employee desires to exercise a vested Option (the “Exercise Date”), the number of whole shares with respect to which the Options are being exercised (the “Exercise Shares”) and the aggregate Option Price for such Exercise Shares (the “Exercise Price”), or such additional other or different requirements as may be specified by the Administrator. On or before any Exercise Date, at the Company’s request, the Company and the Employee shall enter into a Subscription Agreement that establishes the rights and obligations of the Company and the Employee relating to
the Exercise Shares, in the form then customarily used by the Company under the Plan for such purpose. Unless otherwise determined by the Administrator,
(i) on or before the Exercise Date, the Employee shall deliver to the Company full payment for the Exercise Shares plus any required withholding taxes or other reasonable taxes, charges or fees:
(A)in United States dollars in cash, or cash equivalents satisfactory to the Company, or,
(B)if there is a public market for the Shares at the time of exercise, the Employee may exercise vested Options by an exercise and sell (cashless exercise) procedure pursuant to a broker-assisted exercise program established by the Company, in which the Company receives full payment directly from the proceeds of the exercise of an Option
(ii) the Company shall register the issuance of the Exercise Shares on its records (or direct such issuance to be registered by the Company’s transfer agent).
The Administrator may require the Employee to furnish or execute such other documents as the Administrator shall reasonably deem necessary to evidence such exercise or to comply with or satisfy the requirements of the Securities Act, applicable state or non-U.S. securities laws or any other law.
(b)Restrictions on Exercise. Notwithstanding any other provision of this Agreement, the Options may not be exercised in whole or in part, unless:
(i) all requisite approvals and consents of any governmental authority of any kind shall have been secured;
(ii) the purchase of the Exercise Shares shall be exempt from registration under app.licable U.S. federal and state securities laws, and applicable non-U.S. securities laws, or the Exercise Shares shall have been registered under such laws;
(iii) the exercise of the Option would fully comply with the Company’s insider trading policy (including the Employee’s receipt of any needed pre-trading clearance for the exercise); and,
(iv) all applicable U.S. federal, state and local and non-U.S. tax withholding requirements shall have been satisfied.
The Company shall use its commercially reasonable efforts to obtain any consents or approvals referred to in clause (i) of the preceding sentence, but shall otherwise have no obligations to take any steps to prevent or remove any impediment to exercise described in such sentence.
Section 5.Change in Control.
In the event of a Change in Control, the treatment of any outstanding Options shall be governed by Article XIV of the Plan.
Section 6.Restrictive Covenants.
In consideration of the receipt of the Options granted pursuant to this Agreement, the Employee agrees to be bound by the covenants set forth in Exhibit B to this Agreement, which are incorporated by reference and made part of this Agreement.
Section 7.Certain Definitions.
As used in this Agreement, capitalized terms that are not defined herein have the respective meaning given in the Plan, and the following additional terms shall have the following meanings:
“Agreement” means this Employee Stock Option Agreement, as amended from time to time in accordance with the terms hereof.
“Code” means the United States Internal Revenue Code of 1986, as amended, and any successor thereto.
“Company” means Univar Solutions Inc., provided that for purposes of determining the status of Employee’s employment with the “Company,” such term shall include the Company and/or any of the Subsidiaries that employ the Employee.
“Employee” means the grantee of the Options, whose name is set forth on Exhibit A hereto; provided that for purposes of Section 4 and Section 8, following such person’s death “Employee” shall be deemed to include such person’s beneficiary or estate and following such Person’s Disability, “Employee” shall be deemed to include such person’s legal representative.
“Grant Date” has the meaning given in Section 1(a), which is the date on which the Options are granted to the Employee.
“Normal Termination Date” has the meaning given in Section 3(a).
“Option” means the right granted to the Employee hereunder to purchase one share of Company Common Stock for a purchase price equal to the Option Price subject to the terms of this Agreement and the Plan.
“Option Price” means, with respect to each share of Company Common Stock covered by an Option, the purchase price specified in Section 1(b) for which the Employee may purchase such share of Company Common Stock upon exercise of an Option.
“Plan” means the Univar Solutions Inc. 2017 Omnibus Equity Incentive Plan as the same may be amended, modified or supplemented from time to time.
“Retirement” means a termination of employment for any reason other than Cause or a Special Termination at age 60 or older, upon attainment of a minimum of 65 total age plus service points.
“Special Termination” has the meaning given in Section 2(b)(ii).
Section 8.Miscellaneous.
(a)Withholding. The Company or one of the Subsidiaries shall require the Employee to satisfy all applicable U.S. federal, state and local and non-U.S. tax withholding obligations (or other reasonable charges or fees) that may arise in connection with the grant, vesting, exercise or purchase of the Options.
(b)No Rights as Stockholder; No Voting Rights. The Employee shall have no rights as a stockholder of the Company with respect to any shares covered by the Options until the exercise of the Options and delivery of the shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the delivery of the shares. Any shares delivered in respect of the Options shall be subject to any Subscription Agreement, which the Company may require the Employee to accept and agree to as a condition of the issuance and delivery of those shares.
(c)No Right to Awards. The Employee acknowledges and agrees that the grant of any Options (i) is being made on an exceptional basis and is not intended to be renewed or repeated, (ii) is entirely voluntary on the part of the Company and the Subsidiaries and (iii) should not be construed as creating any obligation on the part of
the Company or any of the Subsidiaries to offer any Options or other Awards in the future.
(d)No Right to Continued Employment. Nothing in this Agreement shall be deemed to confer on the Employee any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.
(e)Non-Transferability of Options. The Options may be exercised only by the Employee, or, following the Employee’s death, by his designated beneficiary or by his estate in the absence of a designated beneficiary. The Options are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) other than by will or by the laws of descent and distribution to the estate of the Employee upon the Employee’s death or with the Company’s consent. Any purported transfer in violation of this Section 8(e) shall be void ab initio.
(f)Forfeiture of Awards. The Options granted hereunder (and gains earned or accrued in connection therewith) shall be subject to such generally applicable policies as to forfeiture and recoupment (including, without limitation, upon the occurrence of material financial or accounting errors, financial or other misconduct or Competitive Activity) as may be adopted by the Administrator or the Board from time to time and communicated to the Employee or as required by applicable law, and are otherwise subject to forfeiture or disgorgement of profits as provided by the Plan.
(g)Consent to Electronic Delivery. By entering into this Agreement and accepting the Options evidenced hereby, the Employee hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Employee pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, this Agreement and the Options via Company website or other electronic delivery.
(h)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 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 assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
(i)Waiver; Amendment.
(i) Waiver. Any party hereto or beneficiary hereof may by written notice to the other parties (A) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, (B) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and (C) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.
(ii) Amendment. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument validly executed by both the Employee and the Company.
(j)Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Employee without the prior written consent of the other party.
(k)Applicable Law. This Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction.
(l)Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding arising out of this Agreement or any transaction contemplated hereby. Each party (i) 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 (ii) acknowledges that it and the other parties have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this Section 8(l).
(m)Limitations of Actions. No lawsuit relating to this Agreement may be filed before a written claim is filed with the Administrator and is denied or deemed denied as provided in the Plan and any lawsuit must be filed within one year of such denial or deemed denial or be forever barred.
(n)Section and Other Headings, etc. 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.
(o)Acceptance of Options and Agreement. The Employee has indicated his or her consent and acknowledgement of the terms of this Agreement pursuant to the instructions provided to the Employee by or on behalf of the Company. The Employee acknowledges receipt of the Plan, represents to the Company that he or she has read and understood this Agreement and the Plan, and, as an express condition to the grant of the Options under this Agreement, agrees to be bound by the terms of both this Agreement and the Plan. The Employee and the Company each agrees and acknowledges that the use of electronic media (including, without limitation, a click-through button or checkbox on a website of the Company or a third-party administrator) to indicate the Employee’s confirmation, consent, signature, agreement and delivery of this Agreement and the Options is legally valid and has the same legal force and effect as if the Employee and the Company signed and executed this Agreement in paper form. The same use of electronic media may be used for any amendment or waiver of this Agreement.
(p)Authorization to Share Personal Data. The Employee authorizes the Company or any Affiliate of the Company that has or lawfully obtains personal data relating to the Employee to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent reasonably appropriate in connection with this Agreement or the administration of the Plan.
Exhibit A to
Employee Stock Option Agreement
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Employee:
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%%FIRST_NAME%-% %%LAST_NAME%-%
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Grant Date:
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%%OPTION_DATE,’Month DD, YYYY’%-%
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Options granted hereby:
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%%TOTAL_SHARES_GRANTED,'999,999,999'%-%
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Option Price:
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%%OPTION_PRICE,'$999,999,999.99'%-%
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Vesting Date
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Shares Vesting
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%%VEST_DATE_PERIOD1,’Month DD, YYYY’%-%
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%%SHARES_PERIOD1,'999,999,999'%-%
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%%VEST_DATE_PERIOD2,’Month DD, YYYY’%-%
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%%SHARES_PERIOD2,'999,999,999'%-%
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%%VEST_DATE_PERIOD3, ’Month DD, YYYY’%-%
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%%SHARES_PERIOD3,'999,999,999'%-%
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Exhibit B to
Employee Stock Option Agreement
Restrictive Covenants
Section 1 Confidential Information.
1.1The Employee recognizes that the success of the Company and its current or future Affiliates depends upon the protection of information or materials that are confidential and/or proprietary. “Confidential Information” means information or materials that (a) are identified as being confidential or proprietary at the time of disclosure to the Employee (or upon notice thereafter) or (b) should, based on their nature or the circumstances surrounding such disclosure, reasonably be deemed confidential. Confidential Information includes, without limitation, information to which the Employee has access while employed by the Company whether recorded in any medium or merely memorized. By way of example, “Confidential Information” includes without limitation, and whether or not such information is specifically designated as confidential or proprietary: all business plans and marketing strategies; information concerning existing and prospective markets, suppliers and customers; financial information; information concerning the development of new products and services; and technical and non-technical data related to software programs, design, specifications, compilations, Inventions (as defined in Section 3.1), improvements, patent applications, studies, research, methods, devices, prototypes, processes, procedures and techniques. Confidential Information expressly includes information provided to the Company or its Affiliates by third parties under circumstances that require them to maintain the confidentiality of such information. Notwithstanding the foregoing, the Employee shall have no confidentiality obligation with respect to disclosure of any Confidential Information that (a) was, or at any time becomes, available in the public domain other than through a violation of this Agreement or (b) the Employee can demonstrate by written evidence was furnished to the Employee by a third party in lawful possession thereof and who was not under an obligation of confidentiality to the Company or any of its Affiliates.
1.2The Employee agrees that during the Employee’s employment and after termination of employment irrespective of cause, the Employee will use Confidential Information only for the benefit of the Company and its Affiliates. Notwithstanding the foregoing, the Employee may disclose Confidential Information as (a) authorized by applicable law (including, but not limited to, any disclosure of information that satisfies
the procedures in SEC Regulation § 240.21F-17) or (b) as required pursuant to an order or requirement of a court, administrative agency or other government body.
This Agreement constitutes notice to the Employee that, under the 2016 Defend Trade Secrets Act (“DTSA”), the following rules shall be applicable: (i) No individual will be held criminally or civilly liable under federal or state trade secret law for the disclosure of a trade secret (as defined under the DTSA) that: (A) is made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and made solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public; and (ii) an individual who pursues a lawsuit for retaliation by an employer for reporting a suspected violation of the law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal, and does not disclose the trade secret, except as permitted by court order. In addition, if the Employee’s employment is governed by the laws of the United Kingdom, nothing in this Agreement shall prevent the Employee from making a protected disclosure under section 43A of the Employment Rights Act 1996.
1.3The Employee hereby assigns to the Company any rights the Employee may have or acquire in such Confidential Information and acknowledges that all Confidential Information shall be the sole property of the Company and/or its Affiliates or their assigns.
1.4There are no rights granted or any understandings, agreements or representations between the parties hereto, express or implied, regarding Confidential Information that are not specified herein.
1.5The Employee’s obligations under this Section 1 are in addition to any obligations that the Employee has under state or federal law.
1.6The Employee agrees that in the course of the Employee’s employment with the Company, the Employee will not violate in any way the rights that any entity, including former employers, has with regard to trade secrets or proprietary or confidential information.
1.7The Employee’s obligations under this Section 1 are indefinite in term and shall survive the termination of this Agreement.
Section 2Return of Company Property.
2.1The Employee acknowledges that all tangible items containing any Confidential Information, including without limitation memoranda, photographs, records, reports, manuals, drawings, blueprints, prototypes, notes, documents, drawings, specifications, software, media and other materials, including any copies thereof (including electronically recorded copies), are the exclusive property of the Company or its applicable Affiliate, and the Employee shall deliver to the Company all such material in the Employee’s possession or control upon the Company’s request and in any event upon the termination of the Employee’s employment with the Company. The Employee shall also preserve and return any keys, equipment, identification or credit cards, or other property belonging to the Company or its Affiliates upon termination of the Employee’s employment or request.
Section 3Inventions.
3.1The Employee understands and agrees that all Inventions are the exclusive property of the Company. As used in this Agreement, “Inventions” shall include without limitation ideas, discoveries, developments, concepts, inventions, original works of authorship, trademarks, mask works, trade secrets, ideas, data, information, know-how, documentation, formulae, results, prototypes, designs, methods, processes, products and techniques, improvements to any of the foregoing, and all other matters ordinarily intended by the words “intellectual property,” whether or not patentable, copyrightable, or otherwise able to be registered, that are developed, created conceived of or reduced to practice (a) by the Employee, alone or with others, (b) during the Employee’s employment with the Company or Affiliates, whether or not during working hours or using the Company’s facility or equipment, or within three (3) months thereafter and (c) related to the Company’s then existing or proposed business. In recognition of the Company’s ownership of all Inventions, the Employee shall make prompt and full disclosure to the Company of, will hold in trust for the sole benefit of the Company, and (subject to Section 3.2 below) herby assigns, and agrees to assign in the future, exclusively to the Company all of the Employee’s right, title, and interest in and to any and all such Inventions.
3.2NOTICE REQUIRED BY REVISED CODE OF WASHINGTON 49.44.140: The Employee understands that the Employee’s obligation to assign inventions shall not apply to any inventions for which no equipment, supplies, facilities, or trade secret information of the Company was used and that was developed entirely on the Employee’s own time, unless (a) the invention relates (i) directly to the business of the Company, or (ii) to the Company’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the Employee for the Company.
3.3To the extent any works of authorship created by the Employee made within the scope of employment may be considered “works made for hire” under United States copyright laws, they are hereby agreed to be works made for hire. To the extent any such works do not qualify as a “work made for hire” under applicable law, and to the extent they include material subject to copyright, the Employee hereby irrevocably and exclusively assigns and conveys all rights, title and interests in such works to the Company subject to no liens, claims or reserved rights. The Employee hereby waives any and all “moral rights” that may be applicable to any of the foregoing, for any and all uses, alterations, and exploitation hereof by the Company, or its Affiliates, or their successors, assignees or licensees. To the extent that any such “moral rights” may not be waived in accordance with law, the Employee agrees not to bring any claims, actions or litigation against the Company or its Affiliates, or their successors, assignees or licensees, based on or to enforce such rights. Without limiting the preceding, the Employee agrees that the Company may in its discretion edit, modify, recast, use, and promote any such works of authorship, and derivatives thereof, with or without the use of the Employee’s name or image, without compensation to the Employee other than that expressly set forth herein.
3.4The Employee hereby waives and quitclaims to the Company any and all claims of any nature whatsoever that the Employee now or hereafter may have for infringement of any patent or patents from any patent applications for any Inventions. The Employee agrees to cooperate fully with the Company and take all other such acts requested by the Company (including signing applications for patents, assignments, and other papers, and such things as the Company may require) to enable the Company to establish and protect its ownership in any Inventions and to carry out the intent and purpose of this Agreement, during the Employee’s employment or thereafter. If the Employee fails to execute such documents by reason of death, mental or physical incapacity or any other reason after reasonable attempts by the Company, the Employee hereby irrevocably appoints the Company and its officers and agents as the Employee’s agent and attorney-in-fact to execute such documents on the Employee’s behalf.
3.5The Employee agrees that there are no Inventions made by the Employee prior to the Employee’s employment with the Company and belonging to the Employee that the Employee wishes to have excluded from this Section 3 (the “Excluded Inventions”). If during the Employee’s employment with the Company, the Employee uses in the specifications or development of, or otherwise incorporates into a product, process, service, technology, or machine of the Company or its Affiliates, or otherwise uses any invention, proprietary know-how, or other intellectual property in existence before the commencement date of Employee’s employment with the Company or any Affiliate owned by the Employee or in which the Employee has any interest (“Existing Know-How”), the Company or its Affiliates, as the case may be, is hereby granted and
shall have a non-exclusive, royalty-free, fully paid up, perpetual, irrevocable, worldwide right and license under the Existing Know-How (including any patent or other intellectual property rights therein) to make, have made, use, sell, reproduce, distribute, make derivative works from, publicly perform and display, and import, and to sublicense any and all of the foregoing rights to that Existing Know-How (including the right to grant further sublicenses) without restriction as to the extent of the Employee’s ownership or interest, for so long as such Existing Know-How is in existence and is licensable by the Employee.
Section 4Nonsolicitation and Noncompetition.
4.1During the Employee’s employment with the Company, and for a period expiring twelve (12) months after the termination of the Employee’s employment (the “Restrictive Period”), regardless of the reason, if any, for such termination, the Employee shall not, in the continent in which the Employee is employed by the Company, directly or indirectly:
(a)solicit or entice away or in any other manner persuade or attempt to persuade any officer, employee, consultant or agent of the Company or any of its Affiliates to alter or discontinue his or her relationship with the Company or its Affiliates;
(b)solicit from any person or entity that was a customer of the Company or any of its Affiliates during the Employee’s employment with the Company, any business of a type or nature similar to the business of the Company or any of its Affiliates with such customer;
(c)solicit, divert, or in any other manner persuade or attempt to persuade any supplier of the Company or any of its Affiliates to discontinue its relationship with the Company or its Affiliates;
(d)solicit, divert, take away or attempt to solicit, divert or take away any customers of the Company or its Affiliates; or
(e)engage in or participate in (i) chemical or ingredient distribution; or (ii) waste remediation businesses.
4.2Nothing in Section 4.1 limits the Employee’s ability to hire an employee of the Company or any of its Affiliates in circumstances under which such employee first contacts the Employee regarding employment and the Employee does not violate any of subsections 4.1(a), 4.1(b), 4.1(c), 4.1(d) or 4.1(e) herein.
4.3The Company and the Employee agree that the provisions of this Section 4 do not impose an undue hardship on the Employee and are not injurious to the public; that this provision is necessary to protect the business of the Company and its Affiliates; that the nature of the Employee’s responsibilities with the Company under this Agreement provide and/or will provide the Employee with access to Confidential Information that is valuable and confidential to the Company and its Affiliates; that the Company would not grant Options to the Employee if the Employee did not agree to the provisions of this Section 4; that this Section 4 is reasonable in terms of length of time, geographic scope and nature of restricted activities; and that adequate consideration supports this Section 4. In the event that a court determines that any provision of this Section 4 is unreasonably broad or extensive, the Employee agrees that such court should narrow such provision to the extent necessary to make it reasonable and enforce the provisions as narrowed.
4.4Clawback.
(a)Without limiting the generality of the remedies available to the Company pursuant to Section 4.3, if, during the Restrictive Period, the Employee, except with the prior written consent of the Board, breaches the restrictive covenants contained in Section 4, the Employee shall pay to the Company in cash any gain the Employee realized in cash in connection with the exercise of the Options (and/or sale of Common Stock underlying the Options) within the eighteen-month period (or such other period as determined by the Board) ending on the date of the Employee’s breach. This right of recoupment is in addition to any other remedies the Company may have against the Employee for the Employee’s breach of the restrictive covenants contained in this Section 4. The Employee’s obligations under this Exhibit B shall be cumulative (but not duplicative, nor operate to extend the length of any such obligations) of any similar obligations the Employee has under the Plan, the Agreement or any other agreement with the Company or any Affiliate.
Section 5Definitions. As used in this Exhibit B, capitalized terms that are not defined herein have the respective meaning given in the Plan or the Agreement.
Employee Restricted Stock Unit Agreement
This Employee Restricted Stock Unit Agreement (the “Agreement”), by and between Univar Solutions Inc., a Delaware corporation (the “Company”), and the Employee whose name is set forth on Exhibit A hereto (the “Employee”), is being entered into pursuant to the Univar Solutions Inc. 2017 Omnibus Equity Incentive Plan (as the same may be amended, modified or supplemented from time to time, the “Plan”) and is dated as of the Grant Date set forth on Exhibit A hereto (the “Grant Date”). Capitalized terms that are used but not defined herein shall have the respective meanings given to them in the Plan.
The Company and the Employee hereby agree as follows:
Section 1.Grant of Restricted Stock Units. The Company hereby evidences and confirms its grant to the Employee, effective as of the Grant Date, of the number of Restricted Stock Units set forth on Exhibit A hereto. This Agreement is entered into pursuant to, and the Restricted Stock Units granted hereunder are subject to, the terms and conditions of the Plan, which are incorporated by reference and made part of the Agreement. If there is any inconsistency between any provision of this Agreement and any express term of the Plan, the express term of the Plan shall govern.
Section 2.Vesting of Restricted Stock Units.
(a)Vesting. Except as otherwise provided in this Section 2, the Restricted Stock Units shall become vested, if at all, in the shares and on the vesting date(s) set forth on Exhibit A hereto (each, a “Vesting Date”), subject to the continued employment of the Employee by the Company or any Subsidiary thereof through such date. Vested Restricted Stock Units shall be settled as provided in Section 3 of this Agreement.
(b)Effect of Termination of Employment.
(i) If the Employee’s employment is terminated by reason of the Employee’s death or Disability (such termination, a “Special Termination”), all outstanding unvested Restricted Stock Units shall vest as of the date of such Special Termination. Vested Restricted Stock Units shall be settled as provided in Section 3 of this Agreement.
(ii) If the Employee’s employment is terminated by reason of the Employee’s Retirement, (x) if such Retirement occurs prior to the first Vesting Date, then any outstanding unvested Restricted Stock Units subject to vesting on the first Vesting Date shall continue to vest in accordance with Section 2(a) as if the Employee’s employment had not terminated, and all other outstanding unvested Restricted Stock Units shall be forfeited and canceled as of the effective date of such Retirement, and
(y) if such termination occurs on or after the first Vesting Date, then all outstanding unvested Restricted Stock Units shall continue to vest in accordance with Section 2(a) as if the Employee’s employment had not terminated. For purposes of this Agreement, “Retirement” means a termination of employment for any reason other than Cause or a Special Termination at age 60 or older, upon attainment of a minimum of 65 total age plus service points. Vested Restricted Stock Units shall be settled as provided in Section 3 of this Agreement.
(iii) Any Other Reason. Upon termination of the Employee’s employment for any reason other than a Special Termination or Retirement (whether initiated by the Company or by the Employee), any unvested Restricted Stock Units shall be forfeited and canceled effective as of the date of such termination.
(c)Effect of a Change in Control. In the event of a Change in Control, the treatment of any unvested Restricted Stock Units shall be governed by Article XIV of the Plan. For avoidance of doubt, any accelerated vesting of Restricted Stock Units that are subject to Section 409A of the Code shall not accelerate the Settlement Date thereof unless permitted by Section 409A of the Code.
(d)Discretionary Acceleration. Notwithstanding anything contained in this Agreement to the contrary, the Administrator, in its sole discretion, may accelerate the vesting with respect to any Restricted Stock Units under this Agreement, at such times and upon such terms and conditions as the Administrator shall determine; provided, that, the acceleration of vesting of Restricted Stock Units that are subject to Section 409A of the Code shall not accelerate the Settlement Date thereof unless permitted by Section 409A of the Code.
(e)No Other Accelerated Vesting. The vesting and settlement provisions set forth in this Section 2, or in Section 3, or expressly set forth in the Plan, shall be the exclusive vesting and exercisability provisions applicable to the Restricted Stock Units and shall supersede any other provisions relating to vesting and exercisability, unless such other such provisions unambiguously and expressly references, in writing, the Plan by name and this Agreement by name and date.
Section 3.Settlement of Restricted Stock Units.
(a)Timing of Settlement. Subject to Section 7(a), any outstanding Restricted Stock Units that became vested on a Vesting Date shall be settled into an equal number of shares of Company Common Stock on a date selected by the Company that is within 30 days following such Vesting Date (each such date, a “Settlement Date”).
(b)Mechanics of Settlement. On each Settlement Date, the Company shall electronically issue to the Employee one whole share of Company Common Stock for each Restricted Stock Unit that then became vested (except as provided in Section 7(a)), and, upon such issuance, the Employee’s rights in respect of such Restricted Stock Unit shall be extinguished. On or before any Settlement Date, at the Company’s request, the Company and the Employee shall enter into a Subscription Agreement that establishes the rights and obligations of the Company and the Employee relating to the shares of Company Common Stock issued in respect of the Restricted Stock Units, in the form then customarily used by the Company under the Plan for such purpose. In the event that there are any fractional Restricted Stock Units that became vested on such date, such fractional Restricted Stock Units shall be settled through a cash payment equal to the portion of Restricted Stock Unit multiplied by the Fair Market Value of the Company Common Stock on such Settlement Date. No fractional shares of Company Common Stock shall be issued.
Section 4.Securities Law Compliance. Notwithstanding any other provision of this Agreement, the Employee may not sell the shares of Company Common Stock acquired upon settlement of the Restricted Stock Units unless such shares are registered under the Securities Act of 1933, as amended (the “Securities Act”), or, if such shares are not then so registered, such sale would be exempt from the registration requirements of the Securities Act. The sale of such shares must also comply with other applicable laws and regulations governing the Company Common Stock, and the Employee may not sell the shares of Company Common Stock if the Company determines that such sale would not be in material compliance with such laws and regulations.
Section 5.Restriction on Transfer; Non-Transferability of Restricted Stock Units. The Restricted Stock Units are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) other than to a trust for the benefit of the Employee or by will or by the laws of descent and distribution to the estate of the Employee upon the Employee’s death. Any purported transfer in violation of this Section 5 shall be void ab initio.
Section 6.Restrictive Covenants. In consideration of the receipt of the Restricted Stock Units granted pursuant to this Agreement, the Employee agrees to be bound by the covenants set forth in Exhibit B to this Agreement, which are incorporated by reference and made part of the Agreement.
Section 7.Miscellaneous.
(a)Tax Matters.
(i) Tax Withholding. The Company or one of the Subsidiaries shall require the Employee to remit to the Company an amount in cash sufficient to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding obligations that may arise in connection with the vesting of the Restricted Stock Units and the related issuance of shares of Company Common Stock. Notwithstanding the preceding sentence, if the Employee elects not to remit cash in respect of such obligations, the Company shall retain a number of shares issued in respect of the Restricted Stock Units then vesting that have an aggregate Fair Market Value as of the Settlement Date equal to the amount of such taxes required to be withheld (and the Employee shall thereupon be deemed to have satisfied his or her obligations under this Section 7(a)); provided that the number of such shares retained shall not be in excess of the minimum amount required to satisfy the statutory withholding tax obligations (it being understood that the value of any fractional share of Company Common Stock shall be paid in cash). The number of shares of Company Common Stock to be issued in respect of Restricted Stock Units shall thereupon be reduced by the number of shares of Company Common Stock so retained. The method of withholding set forth in the immediately preceding sentence shall not be available if withholding in this manner would violate any (1) law or regulation or (2) financing instrument of the Company or any of the Subsidiaries.
(ii) Compliance with Section 409A of the Code. If the Employee is not eligible for Retirement during the vesting period applicable to the Restricted Stock Units, the Restricted Stock Units are intended to be exempt from Section 409A of the Code. If the Employee is eligible for Retirement during the vesting period applicable to the Restricted Stock Units such that some or all of the Restricted Stock Units are subject to Section 409A of the Code, this Agreement and the Restricted Stock Units shall be administered and interpreted in compliance with Section 409A of the Code to the extent applicable. Notwithstanding the foregoing, if the Company determines that the Restricted Stock Units may not either be exempt from or compliant with Section 409A of the Code, the Company may adopt such amendments or other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate, as applicable, to (x) exempt the Restricted Stock Units from Section 409A of the Code, or (y) comply with the requirements of Section 409A of the Code; provided, however, that there is no obligation on the part of the Company to adopt any such amendment, policy or procedure or take any such other action. If the Employee is a “specified employee” as defined in Section 409A of the Code as of the
Employee’s separation from service, to the extent any Restricted Stock Units are subject to Section 409A of the Code, then to the extent required by Section 409A of the Code, no payments due under this Agreement may be made until the earlier of: (A) the first day of the seventh month following the Employee’s separation from service, or (B) the Employee’s date of death. If this Agreement fails to comply with the requirements of Section 409A of the Code, neither the Company nor any of its Affiliates shall have any liability for any tax, penalty or interest imposed on the Employee by Section 409A of the Code, and the Employee shall have no recourse against the Company or any of its Affiliates for payment of any such tax, penalty or interest imposed by Section 409A of the Code.
(b)Dividend Equivalents. Unless otherwise determined by the Administrator, in the event that the Company pays any ordinary dividend in cash on a share of Company Common Stock following the Grant Date and prior to an applicable Settlement Date, there shall be credited to the account of the Employee in respect of each outstanding Restricted Stock Unit an amount equal to the amount of such dividend. The amount so credited shall be deferred (without interest, unless the Administrator determines otherwise) until the settlement of such related Restricted Stock Unit and then paid in cash but shall be forfeited upon the forfeiture of such related Restricted Stock Unit.
(c)Authorization to Share Personal Data. The Employee authorizes the Company or any Affiliate of the Company that has or lawfully obtains personal data relating to the Employee to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent reasonably appropriate in connection with this Agreement or the administration of the Plan.
(d)No Rights as Stockholder; No Voting Rights. Except as provided in Section 7(b), the Employee shall have no rights as a stockholder of the Company with respect to any shares of Company Common Stock covered by the Restricted Stock Units prior to the issuance of such shares of Company Common Stock.
(e)No Right to Awards. The Employee acknowledges and agrees that the grant of any Restricted Stock Units (i) is being made on an exceptional basis and is not intended to be renewed or repeated, (ii) is entirely voluntary on the part of the Company and the Subsidiaries and (iii) should not be construed as creating any obligation on the part of the Company or any of the Subsidiaries to offer any Restricted Stock Units or other Awards in the future.
(f)No Right to Continued Employment. Nothing in this Agreement shall be deemed to confer on the Employee any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.
(g)Interpretation. The Administrator shall have full power and discretion to construe and interpret the Plan (and any rules and regulations issued thereunder) and this Award. Any determination or interpretation by the Administrator under or pursuant to the Plan or this Award shall be final and binding and conclusive on all persons affected hereby.
(h)Forfeiture of Awards. The Restricted Stock Units granted hereunder (and gains earned or accrued in connection therewith) shall be subject to such generally applicable policies as to forfeiture and recoupment (including, without limitation, upon the occurrence of material financial or accounting errors, financial or other misconduct or Competitive Activity) as may be adopted by the Administrator or the Board from time to time and communicated to the Employee or as required by applicable law, and are otherwise subject to forfeiture or disgorgement of profits as provided by the Plan.
(i)Consent to Electronic Delivery. By entering into this Agreement and accepting the Restricted Stock Units evidenced hereby, the Employee hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Employee pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, this Agreement and the Restricted Stock Units via Company website or other electronic delivery.
(j)Binding Effect; Benefits. This Agreement (including Exhibit B hereto) shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and 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 assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
(k)Waiver; Amendment.
(i) Waiver. Any party hereto or beneficiary hereof may by written notice to the other parties (A) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, (B) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and (C) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no
failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.
(ii) Amendment. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Employee and the Company.
(l)Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Employee without the prior written consent of the other party.
(m)Applicable Law. This Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction.
(n)Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right he, she or it may have to a trial by jury in respect of any suit, action or proceeding arising out of this Agreement or any transaction contemplated hereby. Each party (i) 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 (ii) acknowledges that he, she or it and the other party hereto have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this Section 7(n).
(o)Limitations of Actions. No lawsuit relating to this Agreement may be filed before a written claim is filed with the Administrator and is denied or deemed denied as provided in the Plan and any lawsuit must be filed within one year of such denial or deemed denial or be forever barred.
(p)Section and Other Headings, etc. 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.
(q)Acceptance of Restricted Stock Units and Agreement. The Employee has indicated his or her consent and acknowledgement of the terms of this Agreement pursuant to the instructions provided to the Employee by or on behalf of the Company. The Employee acknowledges receipt of the Plan, represents to the Company that he or she has read and understood this Agreement and the Plan, and, as an express condition to the grant of the Restricted Stock Units under this Agreement, agrees to be bound by the terms of both this Agreement and the Plan. The Employee and the Company each agrees
and acknowledges that the use of electronic media (including, without limitation, a clickthrough button or checkbox on a website of the Company or a third-party administrator) to indicate the Employee’s confirmation, consent, signature, agreement and delivery of this Agreement and the Restricted Stock Units is legally valid and has the same legal force and effect as if the Employee and the Company signed and executed this Agreement in paper form. The same use of electronic media may be used for any amendment or waiver of this Agreement.
Exhibit A to
Employee Restricted Stock Unit Agreement
Employee: %%FIRST_NAME%-% %%LAST_NAME%-%
Grant Date: %%OPTION_DATE,’Month DD, YYYY’%-%
Restricted Stock Units granted hereby: %%TOTAL_SHARES_GRANTED,'999,999,999'%-%
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Vesting Date
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Shares Vesting
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%%VEST_DATE_PERIOD1,’Month DD, YYYY’%-%
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%%SHARES_PERIOD1,'999,999,999'%-%
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%%VEST_DATE_PERIOD2,’Month DD, YYYY’%-%
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%%SHARES_PERIOD2,'999,999,999'%-%
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%%VEST_DATE_PERIOD3, ’Month DD, YYYY’%-%
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%%SHARES_PERIOD3,'999,999,999'%-%
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Exhibit B to
Employee Restricted Stock Unit Agreement
Restrictive Covenants
Section 1 Confidential Information.
1.1The Employee recognizes that the success of the Company and its current or future Affiliates depends upon the protection of information or materials that are confidential and/or proprietary. “Confidential Information” means information or materials that (a) are identified as being confidential or proprietary at the time of disclosure to the Employee (or upon notice thereafter) or (b) should, based on their nature or the circumstances surrounding such disclosure, reasonably be deemed confidential. Confidential Information includes, without limitation, information to which the Employee has access while employed by the Company whether recorded in any medium or merely memorized. By way of example, “Confidential Information” includes without limitation, and whether or not such information is specifically designated as confidential or proprietary: all business plans and marketing strategies; information concerning existing and prospective markets, suppliers and customers; financial information; information concerning the development of new products and services; and technical and non-technical data related to software programs, design, specifications, compilations, Inventions (as defined in Section 3.1), improvements, patent applications, studies, research, methods, devices, prototypes, processes, procedures and techniques. Confidential Information expressly includes information provided to the Company or its Affiliates by third parties under circumstances that require them to maintain the confidentiality of such information. Notwithstanding the foregoing, the Employee shall have no confidentiality obligation with respect to disclosure of any Confidential Information that (a) was, or at any time becomes, available in the public domain other than through a violation of this Agreement or (b) the Employee can demonstrate by written evidence was furnished to the Employee by a third party in lawful possession thereof and who was not under an obligation of confidentiality to the Company or any of its Affiliates.
1.2The Employee agrees that during the Employee’s employment and after termination of employment irrespective of cause, the Employee will use Confidential Information only for the benefit of the Company and its Affiliates. Notwithstanding the foregoing, the Employee may disclose Confidential Information as (a) authorized by applicable law (including, but not limited to, any disclosure of information that satisfies the procedures in SEC Regulation § 240.21F-17) or (b) as required pursuant to an order or requirement of a court, administrative agency or other government body.
This Agreement constitutes notice to the Employee that, under the 2016 Defend Trade Secrets Act (“DTSA”), the following rules shall be applicable: (i) No individual will be held criminally or civilly liable under federal or state trade secret law for the disclosure of a trade secret (as defined under the DTSA) that: (A) is made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and made solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public; and (ii) an individual who pursues a lawsuit for retaliation by an employer for reporting a suspected violation of the law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal, and does not disclose the trade secret, except as permitted by court order. In addition, if the Employee’s employment is governed by the laws of the United Kingdom, nothing in this Agreement shall prevent the Employee from making a protected disclosure under section 43A of the Employment Rights Act 1996.
1.3The Employee hereby assigns to the Company any rights the Employee may have or acquire in such Confidential Information and acknowledges that all Confidential Information shall be the sole property of the Company and/or its Affiliates or their assigns.
1.4There are no rights granted or any understandings, agreements or representations between the parties hereto, express or implied, regarding Confidential Information that are not specified herein.
1.5The Employee’s obligations under this Section 1 are in addition to any obligations that the Employee has under state or federal law.
1.6The Employee agrees that in the course of the Employee’s employment with the Company, the Employee will not violate in any way the rights that any entity, including former employers, has with regard to trade secrets or proprietary or confidential information.
1.7The Employee’s obligations under this Section 1 are indefinite in term and shall survive the termination of this Agreement.
Section 2Return of Company Property.
2.1The Employee acknowledges that all tangible items containing any Confidential Information, including without limitation memoranda, photographs, records, reports, manuals, drawings, blueprints, prototypes, notes, documents, drawings, specifications, software, media and other materials, including any copies thereof (including electronically recorded copies), are the exclusive property of the Company or its applicable Affiliate, and the Employee shall deliver to the Company all such material
in the Employee’s possession or control upon the Company’s request and in any event upon the termination of the Employee’s employment with the Company. The Employee shall also preserve and return any keys, equipment, identification or credit cards, or other property belonging to the Company or its Affiliates upon termination of the Employee’s employment or request.
Section 3Inventions.
3.1The Employee understands and agrees that all Inventions are the exclusive property of the Company. As used in this Agreement, “Inventions” shall include without limitation ideas, discoveries, developments, concepts, inventions, original works of authorship, trademarks, mask works, trade secrets, ideas, data, information, know-how, documentation, formulae, results, prototypes, designs, methods, processes, products and techniques, improvements to any of the foregoing, and all other matters ordinarily intended by the words “intellectual property,” whether or not patentable, copyrightable, or otherwise able to be registered, that are developed, created, conceived of or reduced to practice (a) by the Employee, alone or with others, (b) during the Employee’s employment with the Company or Affiliates, whether or not during working hours or using the Company’s facility or equipment, or within three (3) months thereafter and (c) related to the Company’s then existing or proposed business. In recognition of the Company’s ownership of all Inventions, the Employee shall make prompt and full disclosure to the Company of, will hold in trust for the sole benefit of the Company, and (subject to Section 3.2 below) herby assigns, and agrees to assign in the future, exclusively to the Company all of the Employee’s right, title, and interest in and to any and all such Inventions.
3.2NOTICE REQUIRED BY REVISED CODE OF WASHINGTON 49.44.140: The Employee understands that the Employee’s obligation to assign inventions shall not apply to any inventions for which no equipment, supplies, facilities, or trade secret information of the Company was used and that was developed entirely on the Employee’s own time, unless (a) the invention relates (i) directly to the business of the Company, or (ii) to the Company’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the Employee for the Company.
3.3To the extent any works of authorship created by the Employee made within the scope of employment may be considered “works made for hire” under United States copyright laws, they are hereby agreed to be works made for hire. To the extent any such works do not qualify as a “work made for hire” under applicable law, and to the extent they include material subject to copyright, the Employee hereby irrevocably and exclusively assigns and conveys all rights, title and interests in such works to the Company subject to no liens, claims or reserved rights. The Employee hereby waives any and all “moral rights” that may be applicable to any of the foregoing, for any and all uses, alterations, and exploitation hereof by the Company, or its Affiliates, or their
successors, assignees or licensees. To the extent that any such “moral rights” may not be waived in accordance with law, the Employee agrees not to bring any claims, actions or litigation against the Company or its Affiliates, or their successors, assignees or licensees, based on or to enforce such rights. Without limiting the preceding, the Employee agrees that the Company may in its discretion edit, modify, recast, use, and promote any such works of authorship, and derivatives thereof, with or without the use of the Employee’s name or image, without compensation to the Employee other than that expressly set forth herein.
3.4The Employee hereby waives and quitclaims to the Company any and all claims of any nature whatsoever that the Employee now or hereafter may have for infringement of any patent or patents from any patent applications for any Inventions. The Employee agrees to cooperate fully with the Company and take all other such acts requested by the Company (including signing applications for patents, assignments, and other papers, and such things as the Company may require) to enable the Company to establish and protect its ownership in any Inventions and to carry out the intent and purpose of this Agreement, during the Employee’s employment or thereafter. If the Employee fails to execute such documents by reason of death, mental or physical incapacity or any other reason after reasonable attempts by the Company, the Employee hereby irrevocably appoints the Company and its officers and agents as the Employee’s agent and attorney-in-fact to execute such documents on the Employee’s behalf.
3.5The Employee agrees that there are no Inventions made by the Employee prior to the Employee’s employment with the Company and belonging to the Employee that the Employee wishes to have excluded from this Section 3 (the “Excluded Inventions”). If during the Employee’s employment with the Company, the Employee uses in the specifications or development of, or otherwise incorporates into a product, process, service, technology, or machine of the Company or its Affiliates, or otherwise uses any invention, proprietary know-how, or other intellectual property in existence before the commencement date of Employee’s employment with the Company or any Affiliate owned by the Employee or in which the Employee has any interest (“Existing Know-How”), the Company or its Affiliates, as the case may be, is hereby granted and shall have a non-exclusive, royalty-free, fully paid up, perpetual, irrevocable, worldwide right and license under the Existing Know-How (including any patent or other intellectual property rights therein) to make, have made, use, sell, reproduce, distribute, make derivative works from, publicly perform and display, and import, and to sublicense any and all of the foregoing rights to that Existing Know-How (including the right to grant further sublicenses) without restriction as to the extent of the Employee’s ownership or interest, for so long as such Existing Know-How is in existence and is licensable by the Employee.
Section 4Nonsolicitation and Noncompetition.
4.1During the Employee’s employment with the Company, and for a period expiring twelve (12) months after the termination of the Employee’s employment (the “Restrictive Period”), regardless of the reason, if any, for such termination, the Employee shall not, in the continent in which the Employee is employed by the Company, directly or indirectly:
(a)solicit or entice away or in any other manner persuade or attempt to persuade any officer, employee, consultant or agent of the Company or any of its Affiliates to alter or discontinue his or her relationship with the Company or its Affiliates;
(b)solicit from any person or entity that was a customer of the Company or any of its Affiliates during the Employee’s employment with the Company, any business of a type or nature similar to the business of the Company or any of its Affiliates with such customer;
(c)solicit, divert, or in any other manner persuade or attempt to persuade any supplier of the Company or any of its Affiliates to discontinue its relationship with the Company or its Affiliates;
(d)solicit, divert, take away or attempt to solicit, divert or take away any customers of the Company or its Affiliates; or
(e)engage in or participate in (i) chemical or ingredient distribution; or (ii) waste remediation businesses.
Section 2Nothing in Section 4.1 limits the Employee’s ability to hire an employee of the Company or any of its Affiliates in circumstances under which such employee first contacts the Employee regarding employment and the Employee does not violate any of subsections 4.1(a), 4.1(b), 4.1(c), 4.1(d) or 4.1(e) herein.
Section 3The Company and the Employee agree that the provisions of this Section 4 do not impose an undue hardship on the Employee and are not injurious to the public; that this provision is necessary to protect the business of the Company and its Affiliates; that the nature of the Employee’s responsibilities with the Company under this Agreement provide and/or will provide the Employee with access to Confidential Information that is valuable and confidential to the Company and its Affiliates; that the Company would not grant Restricted Stock Units to the Employee if the Employee did not agree to the provisions of this Section 4; that this Section 4 is reasonable in terms of length of time, geographic scope and nature of restricted activities; and that adequate consideration supports this Section 4. In the event that a court determines that any provision of this Section 4 is unreasonably broad or extensive, the Employee agrees that such court should narrow such provision only to the extent necessary to make it reasonable and enforce the provisions as narrowed.
Section 4Clawback.
a.Without limiting the generality of the remedies available to the Company pursuant to Section 4.3, if, during the Restrictive Period, the Employee, except with the prior written consent of the Board, breaches the restrictive covenants contained in Section 4, the Employee shall pay to the Company in cash any gain the Employee realized in cash in connection with the vesting of the Restricted Stock Units, the related issuance of shares of Company Common Stock and the sale of Common Stock within the eighteen-month period (or such other period as determined by the Board) ending on the date of the Employee’s breach. This right of recoupment is in addition to any other remedies the Company may have against the Employee for the Employee’s breach of the restrictive covenants contained in this Section 4. The Employee’s obligations under this Exhibit B shall be cumulative (but not duplicative, nor operate to extend the length of any such obligations) of any similar obligations the Employee has under the Plan, the Agreement or any other agreement with the Company or any Affiliate.
Section 5Definitions. As used in this Exhibit B, capitalized terms that are not defined herein have the respective meaning given in the Plan or the Agreement.
UNIVAR USA INC.
SUPPLEMENTAL VALUED INVESTMENT PLAN
(As Amended and Restated Effective as of June 1, 2017)
1. Purpose. The purpose of this Univar USA Inc. Supplemental Valued Investment Plan is to provide a select group of management or highly compensated employees of Univar USA Inc. and certain affiliated companies designated by the President of Univar USA Inc. or the Pension Management Committee with a Plan benefit that permits them to defer the receipt of certain Compensation and be credited with employer contributions. It is the intention of the Company, and it is the understanding of those Participants covered under the Plan, that the Plan is unfunded for tax purposes and for purposes of Title I of ERISA. This Plan is intended to comply with Code Section 409A with respect to amounts that are accrued or become vested after 2004 (and earnings thereon), and shall be interpreted to the maximum extent possible in a manner consistent with such intent.
2. Effective Date. This Plan was originally established effective January 1, 2000. It was amended and restated effective January 1, 2005 to comply with Code Section 409A with respect to amounts that became accrued or vested after 2004 and earnings thereon and was not intended to materially modify the terms of the Plan applicable to amounts that were accrued and vested under the Plan as of December 31, 2004 and earnings thereon. The document was later amended and restated effective June 1, 2014. This document is a complete amendment and restatement of the Univar USA Inc. Supplemental Valued Investment Plan effective June 1, 2017 with changes to the deferral election process for 2017 and all other changes applying for Plan Years beginning on or after January 1, 2018, except as otherwise provided herein.
3. Definitions.
Beneficiary means the person or entity designated pursuant to and in accordance with the VIP.
Code means the Internal Revenue Code of 1986, as amended.
Company means Univar USA Inc., its corporate successors, and any corporation or corporations into which it may be merged or consolidated. It also means those affiliated companies of Univar USA Inc. which have been approved for participation by either the President of Univar USA Inc. or the Pension Management Committee. Affiliated companies participating in the Plan are listed in Appendix A, attached hereto and incorporated herein.
Company Match means the amount the Company will credit in accordance with the provisions of Section 6.1 of this Plan.
Compensation means compensation as defined in Article I of the VIP as amended from time to time, such definition to be incorporated herein by reference, except that (i) the Code Section 401(a)(17) limit specified therein shall not be part of the Compensation definition for purposes of this Plan, and (ii) for purposes of determining the amount of a Participant’s
Deferrals, Retirement Contributions and Company Match for a Plan Year, Deferrals a Participant makes to this Plan during such Plan Year shall be included in Compensation. Notwithstanding any provision in the Plan to the contrary, for purposes of Deferrals and Company Match, Compensation shall not include (1) Performance-Based Compensation if a Participant is hired after the Company establishes the performance criteria for such Performance-Based Compensation and (2) Compensation that is based on performance criteria but is not Performance-Based Compensation.
Deferral Election means the commitment made by the Participant to defer a specified percentage of the Participant’s Performance-Based Compensation and/or other Compensation to this Plan, with such deferrals applying to Compensation received or earned in the Plan Year immediately following the Plan Year in which the election is made.
Deferrals mean the Participant’s elective deferrals of Compensation under this Plan.
Distribution Event is as defined in Section 9.
Employee means any person who is employed by the Company who meets the definitional requirements of “Employee” as defined in the VIP.
ERISA means the Employee Retirement Income Security Act of 1974, as amended.
Participant means an Employee who meets the eligibility requirements set forth in Sections 4.1 or 5.3 and becomes a Plan Participant pursuant to Sections 4.2 or 5.3 of the Plan.
Performance-Based Compensation means Compensation received based upon the satisfaction of pre-established performance criteria of the Employee, Company or its affiliates as determined by the Company relating to a performance period of at least 12 consecutive months as defined under Code Section 409A and the regulations thereunder.
Plan means the Univar USA Inc. Supplemental Valued Investment Plan.
Plan Account means those bookkeeping accounts established by the Company for each Plan Participant, which shall reflect (a) all Deferrals and any investment earnings, gains and losses credited with respect thereto, (b) all Company Match credited by the Company to each Participant, and any investment earnings, gains, and losses credited with respect thereto, and (c) Retirement Contributions credited by the Company to each Participant who is eligible for such contributions, and any investment earnings, gains, and losses credited with respect thereto.
Plan Administrator means the Pension Management Committee as established from time to time by Univar USA Inc. (herein referred to as the “Pension Management Committee”).
Plan Year means the 12-month period commencing on January 1 and ending on December 31.
Post-2004 Account means amounts that are either credited to a Participant’s Plan Account or become vested after 2004 and earnings thereon.
Pre-2005 Account means amounts that were credited to a Participant’s Plan Account and vested as of December 31, 2004 and earnings thereon.
Retirement Contribution means the amount which the Company will credit in accordance with the provisions of Section 6.2 of this Plan.
VIP means the Univar USA Inc. Valued Investment Plan as amended from time to time.
4. Participation.
4.1 Employee Eligibility. Eligibility is determined each Plan Year. An Employee shall be eligible to make Deferrals and receive Company Match in the Plan for an up-coming Plan Year if on a specified date the Employee meets the following criteria:
(i) The Employee is employed by the Company (a) in a position of Director Level 1 or above, or (b) in a position of Director Level 2 and was making Participant Deferrals to the Plan in the 2016 Plan Year; and
(ii) The Employee is earning a base salary at least equal to the amount set forth in Code Section 414(q)(1)(B)(i) (as adjusted from time to time by the Secretary of the Treasury pursuant to Code Section 414(q)(1)) which would have caused the Employee to be considered a highly compensated employee pursuant to Code Section 414(q) for the up-coming Plan Year (e.g., $120,000 is the threshold for base salary for participation during the 2018 Plan Year because an employee has to earn at least $120,000 in total compensation in 2017 to be considered highly compensated in 2018 for VIP purposes).
Satisfaction of the criteria is determined on May 31 of the calendar year immediately preceding the applicable Plan Year with respect to the Employee’s eligibility to make Deferrals of his Performance-Based Compensation and January 1 of the following Plan Year with respect to the Employee’s eligibility to make Deferrals of his Compensation (other than Performance-Based Compensation). Because of the separate dates for determination of eligibility, an Employee may be eligible to defer Performance-Based Compensation but not other Compensation and vice-versa.
Notwithstanding the preceding, if an Employee described in subsection (i)(b) does not make a Deferral Election for either his Performance-Based Compensation or other Compensation during the 2017 enrollment periods, the Participant will become ineligible to participate in the Plan, unless the Employee meets the other eligibility criteria.
An Employee shall be eligible to receive Retirement Contributions for a Plan Year if the Employee (i) makes Deferrals to the Plan for such Plan Year, or (ii) is eligible to make Deferrals to the Plan for such Plan Year and has retirement contributions in the VIP limited by Code Sections 401(a)(17) or 415(c).
4.2 Participation. An eligible Employee shall become a Participant with respect to making Deferrals or receiving Company Match for a Plan Year when the Employee’s Deferral election form is received by the Plan Administrator or its delegate. An eligible Employee shall become a Participant in the Plan with respect to being eligible for Retirement Contributions for a Plan Year when he or she makes Deferrals in such Plan Year or has retirement contributions in the VIP limited by Code Sections 401(a)(17) or 415(c) for such Plan Year. Subject to Sections 5.3 and 5.4, individuals who first become an Employee eligible to participate in the Plan pursuant to Section 4.1, or who again become eligible to participate in the Plan pursuant to Section 4.1 after not being eligible in a prior Plan Year, shall not be allowed to commence (or recommence) active participation in this Plan until the following Plan Year.
4.3 Effect and Duration. Upon becoming a Participant, an Employee shall be entitled to the benefits and shall be bound by all terms and conditions of the Plan. Each Employee who becomes a Participant in the Plan shall remain a Participant until his termination of participation in the Plan, provided however, that such Participant shall be eligible to make deferrals to the Plan and receive Company Match and Retirement Contributions (if otherwise eligible) only as long as the Participant meets the requirements of Section 4.1 of the Plan, as amended from time to time.
4.4 Re-employment. If an Employee’s employment is terminated and such Employee is subsequently rehired by the Company, such Employee shall be eligible to participate in the Plan only if the Employee meets the eligibility criteria of Section 4.1.
5. Deferrals.
5.1 Manner. A Participant may defer not less than one percent (1%) and not more than seventy-five percent (75%) of his Performance-Based Compensation and/or not less than one percent (1%) and not more than seventy-five percent (75%) of Compensation (other than Performance-Based Compensation) to the Plan. A Participant shall make separate Deferral Elections with respect to his Performance-Based Compensation and his other Compensation. Deferrals shall be credited to the Participant’s Plan Account as of each applicable pay period in which the Participant makes Deferrals to the Plan. If an Employee who meets the eligibility criteria in Section 4.1 fails to properly complete the Deferral Election by the prescribed time or in the manner specified by the Plan Administrator, he will be deemed to have elected not to make any Deferrals for the applicable Plan Year. Unless the Pension Management Committee determines otherwise, Deferral Elections shall carry over from one year to the next.
5.2 Timing. Plan Participants must complete the Deferral Election with respect to an up-coming Plan Year during an enrollment period established by the Plan Administrator during the calendar year that immediately precedes such up-coming Plan Year. For Performance-Based Compensation, the enrollment period established will end no later than June 30 of the calendar year before the calendar year in which such Performance-Based Compensation is paid. Any such Deferral Elections shall become irrevocable on June 30. For all other Compensation, the enrollment period established will end no later than December 31 of the calendar year before the calendar year in which such other Compensation is earned. Any such Deferral Elections shall become irrevocable on December 31.
5.3 First Year Eligibility. Notwithstanding any other provisions in the Plan to the contrary, within 30 days after the date an Employee first becomes employed by the Company in a Director Level I or higher position between January 1 and November 1 who is earning a base salary at least equal to the amount described in Section 4.1(ii) for purposes of determining eligibility for the Plan Year in which such 30-day period commences, the Employee may complete a Deferral election to defer between one percent (I%) and seventy-five percent (75%) of the Employee’s Compensation (other than incentive compensation or Performance-Based Compensation) earned in pay periods commencing after the election is submitted through the end of the Plan Year in which the election is made.
Elections under this Section 5.3 shall only be made available in a manner consistent with the requirements of Code Section 409A and applicable regulations thereunder, and any administrative rules set forth by the Pension Management Committee or its delegate (including, without limitation, rules regarding use of paper election forms). Eligibility to make Deferral elections under this Section 5.3 is in addition to, and not in lieu of, any right an Employee has to make Deferral elections pursuant to Sections 5.1 and 5.2 above.
5.4 Irrevocability of Election. For Plan Years for which a Participant has timely filed and completed the Deferral Election, the Participant may not change, terminate or increase or decrease his Deferrals once the Deferral Election becomes irrevocable with respect to a Plan Year. A Participant who makes a Deferral Election pursuant to Section 5.3 with respect to base salary earned (or commenced to be earned) in the Plan Year in which such election is submitted may not change, terminate or increase or decrease such Deferrals. Notwithstanding the foregoing in this Section 5.4, during the period that a Participant is on either short term disability or long term disability under the Employer’s short-term or long-term disability plans, Deferrals shall not be made to the Plan. Once such a Participant returns to active employment with the Employer, Deferrals will immediately recommence to this Plan at the same deferral percentage rate as in effect before the Participant commenced his or her disability leave. For purposes of this Section 5.4, a Participant shall be considered disabled if the Participant has a medically determinable physical or mental impairment resulting in the Participant’s inability to perform the duties of his or her position or any substantially similar position, where such impairment can be expected to result in death or can be expected to last for a continuous period of not less than six months. A Participant who terminates employment after having submitted a deferral election for a Plan Year and is rehired before the end of such Plan Year in a position that meets the eligibility criteria of Section 4.1 will immediately recommence Deferrals to this Plan for such Plan Year at the same deferral percentage rate the Participant had elected prior to his or her termination of employment.
Notwithstanding any provisions of the Plan to the contrary, if a Participant takes a hardship withdrawal from the VIP, the Participant’s election for Deferrals under this Plan shall be cancelled for the remainder of the calendar year in which the withdrawal is made and for the calendar year that includes the six-month anniversary of the date in which the hardship withdrawal is received (if different), in accordance with the Treasury Regulations issued pursuant to Code Section 409A.
6. Employer Contributions.
6.1 Company Match. No later than the January after the end of a Plan Year, the Company shall credit to the Plan Account of any Participant an amount equal to the lesser of:
(i) the amount of the Participant’s Deferrals made during such Plan Year, or
(ii) 4% of the difference between
(a) the amount of Compensation the Participant received in such Plan Year and
(b) his compensation for purposes of the VIP for such Plan Year.
6.2 Retirement Contributions. For any Participant who is eligible to receive a retirement contribution pursuant to Section 3.5 of the VIP, the Company shall credit such Participant’s Plan Account with a Retirement Contribution. The Retirement Contribution shall be an amount equal to the difference between the amount of the retirement contribution allocated to the Participant’s retirement contribution account in the VIP for such Plan Year and the amount of the retirement contribution that would have been contributed and allocated to the Participant’s retirement contribution account in the VIP for such Plan Year if (i) the limits under Code Sections 401(a)(17) and 415(c) did not apply to the VIP, and (ii) Deferrals a Participant makes to this Plan during such Plan Year were included in the definition of compensation in Article I of the VIP. Retirement Contributions earned by a Participant for a Plan Year shall be credited no later than the January that immediately follows the Plan Year for which it is made.
7. Investments.
7.1 Plan Account. All Deferrals and Company Match and Retirement Contributions (if any) shall be credited to a Plan Account established in the Participant’s name. A Participant’s Plan Account is a bookkeeping device to track the amount of deferrals, Company Match and Retirement Contributions and earnings with respect thereto, the vested portion of which the Company owes the Participant. No assets shall be reserved or segregated in connection with any Plan Account, and no Plan Account shall be insured or otherwise secured.
7.2 Investment of Plan Account. A Participant’s Plan Account shall be deemed to be invested in the investment options and percentages that are selected by the Participant. The Plan Administrator shall determine and communicate to Participants the investment options available under the Plan which might not be the same investment options available under the VIP. If the Participant fails to make an investment election, his or her Plan Account will be deemed to be invested in a default fund that is specified by the Plan Administrator for the Plan. The Plan Account shall be adjusted to reflect the earnings, gains and losses, net of any allocable costs or expenses, such account would experience had it actually been invested in the specific funds at the relevant times. Participants may change their deemed investment elections under the Plan by notifying the Plan Administrator (or its delegate, or the Trustee of the rabbi trust that may be established for their Plan Account) of their change in investment election for their Plan Account. The Plan Administrator or its delegate shall set forth from time to time the procedures Participants are to use in making or changing their deemed investment elections for their Plan
Accounts. The Company is not obligated to actually invest any assets in the investment funds selected by the Participant.
7.3 Valuation of Plan Accounts. The Plan Administrator or its delegate shall determine the value of each Participant’s Plan Account balance on each date that the deemed investment options available under the Plan are valued by the managers of such investment options, and the value of the deemed investment earnings, gains and losses on Deferrals and Company Match and Retirement Contributions (if any) shall be determined in the same manner and consistent with the valuations given by the managers of such investment options.
7.4 Determination of Amount. The Plan Administrator or its delegate shall verify the amount of Deferrals, Company Match and Retirement Contributions (if any), and earnings, gains and losses to be credited to each Participant’s Plan Account in accordance with the provisions of the Plan. This determination shall be final and conclusive upon all Participants and Beneficiaries hereunder, absent manifest error. As soon as reasonably practicable after the close of the Plan Year, the Plan Administrator or its delegate shall send to each Participant an itemized accounting statement which shall reflect the Participant’s Plan Account balance.
7.5 Effect of Plan Termination. Notwithstanding anything to the contrary contained in the Plan, the termination of either the Plan or the VIP shall terminate the liability of the Company to make Company Match or Retirement Contributions to the Plan with respect to Compensation received after such plan termination. Termination of the Plan will also terminate the liability of the Company to make Deferrals to the Plan with respect to Compensation received after such plan termination at such time as is permitted by Code Section 409A and the applicable regulations and IRS guidance thereunder.
8. Vesting.
8.1 Vesting in Deferrals and Company Match. For purposes of determining a Participant’s vested interest in Company Match and deemed investment earnings, gains and losses thereon credited to a Participant’s Plan Account, a Participant shall become vested in those Company Match and deemed investment earnings, gains and losses thereon in accordance with the vesting provisions as set forth in Article 6 of the VIP, as amended from time to time, such provisions to be herein incorporated by reference. A Participant shall always be 100% vested in his Deferrals and deemed investment earnings, gains and losses thereon.
8.2 Vesting in Retirement Contributions. For purposes of determining a Participant’s vested interest in Retirement Contributions and deemed investment earnings, gains and losses thereon credited to a Participant’s Plan Account, a Participant shall become vested in those Retirement Contributions and deemed investment earnings, gains and losses thereon in accordance with the vesting provisions as set forth in Section 6.1 of the VIP relating to retirement contributions made under the VIP, as amended from time to time, such provisions to be herein incorporated by reference. Thus a Participant shall become vested in his or her Retirement Contributions under this Plan and deemed investment earnings, gains and losses thereon if and when he or she becomes vested in his or her retirement contribution account in the VIP.
9. Distribution. For purposes of this Plan, a Participant’s “Distribution Event” shall mean the first to occur of the following events: the Participant’s death, or separation from service with the Company, whether voluntary or involuntary. Notwithstanding the immediately preceding sentence, a Participant who separates from service with the Company in connection with a transfer of employment from the Company to an affiliate of the Company (including any affiliated companies that have not adopted the Plan as a participating employer) shall not be treated as having separated from service with the Company nor as having a Distribution Event for purposes of this Section 9. Such a Participant will be considered to have separated from service with the Company when he or she has terminated employment with the affiliate, the Company and all other affiliates of the Company.
For purposes of this Plan with respect to a Participant’s Pre-2005 Account, “separation from service” shall mean termination of employment (as that term was used and interpreted by the Plan Administrator under the terms of the Plan in effect prior to 2005). For purposes of this Plan with respect to a Participant’s Post-2004 Account, “separation from service” shall have the meaning set forth in Code Section 409A(a)(2)(A)(i) and Treasury Regulations thereunder and other applicable guidance from the Internal Revenue Service.
9.1 Distribution of Pre-2005 Account. The distribution of the Participant’s Pre-2005 Account shall be made in a single cash lump sum payment as soon as reasonably practicable after the Distribution Event occurs. Notwithstanding the foregoing, a Participant may elect that in lieu of the foregoing, the Participant will receive either a single cash lump sum payment during the month of January which immediately follows the calendar year in which the Distribution Event occurs or his benefit payment in three (3) substantially equal annual cash installments. If installment payments are elected, the first installment shall be paid as soon as reasonably practicable after the Distribution Event occurs, and the second and third payments shall be paid on the respective 1 year anniversary dates of the date of the Distribution Event. If a Participant wishes to receive his benefit payment in the January which immediately follows the calendar year in which the Distribution Event occurs or in three annual installments (as opposed to in an immediate lump sum payment), the Participant must make such an election (i) in the form and manner prescribed by the Plan Administrator, (ii) at least six (6) months prior to the Participant’s Distribution Event, and (iii) in a calendar year prior to the calendar year in which the Distribution Event occurs. A distribution election (or change in election) that does not meet these requirements will not be valid or effective.
If a Participant dies before the distribution of his Plan benefit has been made or commenced, the Participant’s entire vested interest under the Plan shall be distributed within 60 days of the date of death to his Beneficiary in the form of an immediate single cash lump sum payment. In the event the Participant dies without a designated beneficiary (or a designated beneficiary that survives the Participant), the Plan benefit shall be paid to the Participant’s estate. If a Participant elects to receive his or her Plan Account in the form of installments and the Participant dies after such installment payments have commenced but before the Participant receives his or her entire benefits, the Participant’s Beneficiary shall continue to receive the Participant’s vested Plan Account in the form of installment payments under the installment schedule elected by the Participant.
9.2 Distribution of Post-2004 Account. Except as set forth below in this Section 9.2 or in Sections 9.3 or 9.4, the vested portion of a Participant’s Post-2004 Account shall be distributed in a single cash lump sum during the month of January immediately following the calendar year in which the Participant’s Distribution Event occurs. A Participant may elect to receive the vested portion of his or her Post-2004 Account in a single cash lump-sum payable in the number of years (specified by the Participant and must be at least five (5) years) after the January immediately following the calendar year in which the Participant has a Distributable Event which is a separation from service. To be effective, a Participant’s distribution delay election must be submitted to the Plan Administrator prior to the calendar year in which the Participant has the Distribution Event in the form and manner prescribed by the Plan Administrator. A Participant may only submit one distribution delay election and, once submitted, the election cannot be revoked or changed by the Participant for any reason. If the Participant dies prior to receiving his or her Post-2004 Account, the vested portion of such account shall be distributed to his or her Beneficiary in a single cash lump-sum payment within 60 days of the Participant’s death.
9.3 Cash-Outs of Small Plan Accounts. Notwithstanding anything in this Article 9 of the Plan to the contrary (other than Section 9.4 below), if the vested portion of a Participant’s Plan Account payable to any person under the terms of this Plan is less than or equal to the dollar limit set forth in Code Section 402(g), as amended from time to time ($18,000 for 2017) and determined at the time of the Distribution Event, the Participant’s Plan Account shall be paid in a single cash lump sum payment as soon as reasonably practicable (and in no event later than 90 days) after a Distribution Event occurs.
9.4 Six Month Delay for Specified Employees. Notwithstanding the foregoing, if at the time a Participant separates from service the Participant is considered a “specified employee” subject to the required six month delay in benefit payments under Code Section 409A(a)(2)(B)(i), then any distribution of the Participant’s vested Post-2004 Account that would otherwise be made within the first six (6) months after such Participant’s separation from service shall be paid in a single lump sum on (or within 15 days after) the first day of the seventh month following the Participant’s separation from service. Nothing in this Section 9.4 shall change the form or timing of benefit payout if a Participant who is a specified employee dies after separation from service and before the six month anniversary of such separation from service.
10. Loans and Withdrawals. Prior to the Participant’s separation from service with the Company, the Participant may not withdraw any amounts from his Plan Account. Participants may not borrow from or against their Plan Accounts.
11. Administration of Plan. The Pension Management Committee, which shall be the “Administrator” of the Plan for purposes of ERISA and the “Plan Administrator” for purposes of the Code, shall be responsible for the general administration of the Plan, for carrying out the provisions hereof, and for determining the amount of payments hereunder. The Plan Administrator shall have the sole and absolute discretionary authority and power to interpret, construe and carry out the provisions of the Plan, including, but not limited to, the authority and power (a) to determine all questions relating to the eligibility for and the amount of any benefit to
be paid under the Plan, (b) to determine all questions pertaining to claims for benefits and procedures for claim review, (c) to interpret and construe ambiguous Plan terms and resolve all other questions arising under the Plan, including any questions of construction or interpretation, and (d) to take such further action as the Plan Administrator shall deem necessary or advisable in the administration of the Plan. Subject to the requirements of law, the Plan Administrator shall be the sole judge of the standard of proof required in any claim for benefits and in any determination of eligibility for a benefit. All decisions of the Plan Administrator shall be final and binding on all parties. The Plan Administrator may employ such attorneys, investment counsel, agents, and accountants and designate employees of the Company as it may deem necessary or advisable to assist it in carrying out its duties hereunder.
12. Amendment or Termination of the Plan.
12.1 Reservation of Rights. Univar USA Inc. may amend or terminate the Plan at any time by action of its Board of Directors, President or Pension Management Committee. No such action shall reduce the amount credited to any Participant’s Plan Account as of the effective date of such amendment or termination. Notwithstanding the foregoing, only the Board of Directors of Univar USA Inc. may adopt amendments that, at the time of adoption, are expected to significantly increase the cost of the Plan to the Company. In the event Univar USA Inc. terminates the Plan, Participants with existing Plan Account balances will automatically become 100% vested in their Plan Accounts.
12.2 Effect of Plan Termination. If Univar USA Inc. terminates the Plan, Participants shall receive a distribution of their Plan Accounts at the same time and in the same manner as if the Plan had not been terminated; provided however, that Univar USA Inc. may decide, in its sole discretion, to distribute Pre-2005 Accounts in a single cash lump-sum payment as soon as practicable (and in no event later than 90 days) following termination of the Plan.
13. Limitation of Rights. Nothing herein contained shall be construed as a commitment or agreement by the Company to any Employee hereunder to continue his employment with the Company for any period of time, in any position, or at any particular rate of compensation or compensation grade level. All Participants shall remain subject to discharge to the same extent as if the Plan had never been put into effect.
14. Participant’s Unsecured Rights. The benefits provided by this Plan are unfunded and unsecured. All benefits payable under this Plan are paid either from the general assets of the Company, or from the rabbi trusts established by Univar USA Inc. or its affiliates that are participating employers in this Plan (i.e., companies treated as the Company as herein defined). Univar USA Inc. and the participating employers listed on Appendix A hereto are jointly and severally liable for the payment of Plan benefits to Participants. Univar Delaware, Inc. has established a rabbi trust that will, absent the insolvency of Univar Delaware, Inc., pay Plan benefits to Participants employed (or last employed) by Univar Inc. or Univar Delaware, Inc. Univar USA Delaware, Inc. has established a rabbi trust that will, absent the insolvency of Univar USA Delaware, Inc., pay Plan benefits to Participants employed (or last employed) by Univar USA Inc. or Univar USA Delaware, Inc. or any affiliate of Univar USA Inc. other than Univar Inc. or Univar Delaware, Inc. Rabbi trust assets shall be subject to the claims of the
creditors of the company that established the trust should such company become insolvent. Nothing contained in this Plan requires the Company to set aside or hold in trust any amounts or assets for the purpose of paying benefits to Participants. This Plan creates only a contractual obligation on the part of the Company to pay to the Participant or Beneficiary an amount equal to the vested portion of the value of the Participant’s Plan Account. The Participant shall be no more than a general unsecured creditor of the Company with no special or prior right to any assets of the Company or any rabbi trust for payment of any obligations hereunder.
15. Claims Procedure.
15.1 Claims for Benefits. The Plan Administrator or its delegate shall notify a person making a claim for benefits under this Plan (herein referred to as the “Claimant”) in writing, within ninety (90) days after it receives his claim for benefits under the Plan. If the Plan Administrator or its delegate determines that a Claimant is not eligible for benefits or full benefits, the notice shall set forth: (i) the specific reasons for such denial; (ii) a specific reference to the provisions of the Plan on which the denial is based; (iii) a description of any additional information or material necessary for the Claimant to perfect his claim, and a description of why it is needed; and (iv) an explanation of the Plan’s claims review procedure, including the Claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial on review. If the Plan Administrator or its delegate determines that there are special circumstances requiring additional time to make a decision, the Plan Administrator or its delegate shall notify the Claimant of the special circumstances and the date by which a decision is expected to be made, and may extend the time of the initial review for up to an additional ninety-day period.
15.2 Appeals. If a Claimant is determined by the Plan Administrator or its delegate not to be eligible for benefits, or if the Claimant believes that he is entitled to greater or different benefits, the Claimant shall have the opportunity to have such claim reviewed by the Plan Administrator by filing a written appeal for review with the Plan Administrator within sixty (60) days after receipt of the denial notice issued by the Plan Administrator. The appeal shall state the specific reasons that the Claimant believes entitle him to benefits or to greater or different benefits. The Plan Administrator shall notify the Claimant of its decision in writing within the sixty (60) day period unless special circumstances require further time for processing, but in no event shall the decision on review be rendered more than one hundred twenty (120) days after the Plan Administrator received the request for review.. In the event the Plan Administrator confirms the denial of the application for benefits, in whole or in part, such notice shall set forth, in a manner calculated to be understood by the Claimant, the specific reasons for such denial and specific references to the Plan provisions on which the decision was based, the Applicant’s right to receive upon request, free of charge, reasonable access to, and copies of, all relevant documents, records and other information to his claim, and his right to bring a civil action under Section 502(a) of ERISA. The Plan Administrator’s decision on appeal shall be final, binding and conclusive on all parties.
Upon receipt of a request for review, the Plan Administrator shall issue a written decision reaffirming, modifying or setting aside its former action within 45 days after receipt of the
written request for review, or 90 days if special circumstances require an extension. The Claimant shall be notified in writing of any such extension within 45 days following the request for review. A copy of the decision shall be furnished to the Claimant. The decision shall set forth the Plan Administrator’s reasons for the decision, pertinent Plan provisions on which the decision is based, a statement that the Claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents relevant to the Claimant’s claim for benefits, a statement of the Claimant’s right to bring an action under ERISA Section 502(a), and a copy of the specific rule, guideline, protocol or other specific criterion that was relied upon in making the decision (or a statement that such guideline or protocol will be provided free of charge upon request).
16. Miscellaneous.
16.1 Corporate Assets. All Deferrals, Company Match and Retirement Contributions and any earnings, gains and losses credited to a Participant’s Plan Account remain the assets and property of the Company (or, to the extent such amounts are held in a rabbi trust, assets and property of such trust), which shall be subject to distribution to the Participant only in accordance with Section 9 of the Plan. With the exception of the creation of rabbi trusts as described in Section 14 above, nothing contained in the Plan shall create, or be construed as creating a trust of any kind or any other fiduciary relationship between the Participant, the Company or any person. It is the intention of the Company and the Participants that the Plan be unfunded for tax purposes and for purposes of Title I of ERISA, as amended.
16.2 No Present Interest. Subject to any federal statute to the contrary, no right or benefit under the Plan and no right or interest in any Participant’s Plan Account shall be subject to anticipation, alienation, sale, assignment, pledge, encumbrance, or charge, and any attempt to anticipate, alienate, sell, assign, pledge, encumber, or charge any right or benefit under the Plan, or Participant’s Plan Account, shall be void. No right, interest, or benefit under the Plan or Participant’s Plan Account shall be liable for or subject to the debts, contracts, liabilities, or torts of the Participant or Beneficiary. If the Participant or Beneficiary becomes bankrupt or attempts to alienate, sell, assign, pledge, encumber, or charge any right under the Plan or Participant’s Plan Account, such attempt shall be void and unenforceable.
16.3 ERISA Plan. The Plan is intended to be an unfunded program maintained primarily to provide deferred compensation benefits for “a select group of management or highly compensated employees” within the meaning of Sections 201, 301 and 401 of ERISA and therefore to be exempt from Parts 2, 3 and 4 of Title I of ERISA.
16.4 Gender, Singular and Plural. All pronouns and variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may be read as the plural and the plural as the singular.
16.5 Captions. The captions of the sections and subsections of the Plan are for convenience only and shall not control or affect the meaning or construction of any of its provisions.
16.6 Validity. If any provision of the Plan is held invalid, void or unenforceable, the same shall not affect, in any respect whatsoever, the validity of any other provisions of the Plan.
16.7 Waiver of Breach. The waiver by the Company of any breach of any provision of the Plan by the Participant shall not operate or be construed as a waiver of any subsequent breach by the Participant.
16.8 Notice. Any notice or filing required or permitted to be given to the Plan Administrator under the Plan shall be sufficient if in writing and hand-delivered, or sent by first class mail to the principal office of Univar USA Inc., directed to the attention of the Plan Administrator. Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark.
16.9 Expenses. The expenses of administration of the Plan shall be paid by the Company.
16.10 Withholding. The Company shall withhold any taxes that the Company in its discretion deems necessary to be withheld from any payment to any Participant or Beneficiary hereunder, by reason of any present or future law.
17. Legally Binding. In the event of any consolidation, merger, acquisition or reorganization, the obligations of the Company under this Plan shall continue and be binding on the Company and its successors or assigns. The rights, privileges, benefits and obligations under the Plan are intended to be legal obligations of the Company and binding upon the Company, its successors and assigns.
18. Other Benefits. Nothing in this Plan shall diminish or impair the Participant’s eligibility, participation or benefit entitlement under any qualified retirement plan for employees of the Company, or any other benefit, insurance or compensation plan or agreement of the Company now or hereinafter in effect. Notwithstanding the foregoing, benefits paid under this Plan shall not be considered as salary, wages or other compensation for purposes of calculating the amount of benefits payable under any other benefit plan, program or arrangement sponsored by the Company, its subsidiaries or affiliates including, without limitation, any pension, profit sharing, life, disability or severance benefits.
19. Venue and Governing Law. In the event the Company, Plan Administrator or any Participant (or in the case of the Participant’s death, his Beneficiary) initiates litigation related to this Plan, it is agreed and understood that venue for such action will be in King County, Washington. It is further agreed and understood that this Plan shall be governed by and construed under the laws of the State of Washington, or federal law to the extent it preempts Washington law.
20. Attorneys’ Fees and Costs. In the event that a dispute regarding benefits arises between the Plan Administrator and Participants and such dispute is resolved through arbitration or litigation in court, the prevailing party(ies) shall be entitled to their reasonable attorneys’ fees and costs incurred in such action.
21. Former Accounts of Ellis & Everard (US Holdings) Inc. Deferred Compensation Plan. Effective as of July 1, 2002, accounts in the Ellis & Everard (US Holdings) Inc. Deferred Compensation Plan (“E&E Plan”) were transferred to this Plan and the provisions of this Plan (including, without limitation, provisions regarding deemed investments and the form and timing of benefit distributions) will govern such transferred accounts. Notwithstanding the foregoing, participants in the E&E Plan who are currently receiving payment of their E&E Plan benefit in a series of fixed annual installments over five, ten or fifteen years shall continue to receive such installment payments over the applicable time period with respect to their transferred E&E Plan account. Participants in the E&E Plan shall have all rights under this Plan with respect to their transferred accounts and such accounts are fully vested and nonforfeitable.
IN WITNESS WHEREOF, Univar USA Inc. hereby adopts and executes the foregoing Plan this 20th day of December, 2017.
UNIVAR USA INC.
By: /s/ David Jukes
Its: President
APPENDIX A
AFFILIATED COMPANIES PARTICIPATING IN THE PLAN
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Company
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Effective Date
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ChemPoint.com, Inc.
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January 1, 2000
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Univar Inc.
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July 4, 2002
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Univar Delaware, Inc.
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July 1, 2004
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Univar USA Delaware, Inc.
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July 1, 2004
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Magnablend
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July 1, 2014
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UNIVAR USA INC.
SUPPLEMENTAL VALUED INVESTMENT PLAN
(As Amended and Restated as of June 1, 2017)
First Amendment
WHEREAS, Univar USA Inc. (“Company”) sponsors and maintains the Univar USA Inc. Supplemental Valued Investment Plan as amended and restated as of June 1, 2017 (the “Plan”);
WHEREAS, pursuant to Section 12.1 of the Plan, the Board of Directors of the Company has certain authority to amend the Plan; and
WHEREAS, the Company desires to amend certain governance provisions and delegate amendment authority under the Plan.
NOW THEREFORE, the Plan is hereby amended as follows, effective as of October 10, 2018:
1.The definition of Plan Administrator in Section 3 of the Plan is hereby amended to read as follows:
Plan Administrator means Univar USA Benefits Committee, as may be renamed from time to time, or such other successor committee or individuals appointed by the Company, and includes any delegate of the committee pursuant to applicable committee approvals.
2.Any reference to “Pension Management Committee” is replaced with “Plan Administrator” wherever it may appear.
3.Section 11 is amended in its entirety to read as follows:
11. Administration of the Plan. The Plan Administrator has all duties and obligations imposed on a Plan Administrator by ERISA. In addition, the Plan Administrator shall have the following discretionary powers and duties, and those powers and duties as further provided in the Univar USA Inc. Employee Benefit Plans Charter, as adopted by the Company, and as may be renamed and/or amended from time to time:
(a) establish and enforce certain rules, regulations and procedures as it deems necessary or proper for the efficient administration of the Plan and for the determination of benefit claims and appeals under, and in accordance with, the Plan;
(b) interpret the Plan, in its sole discretion, with its interpretations made in good faith to be final and conclusive, and to decide all questions concerning the Plan, and claims and appeals for benefits under the Plan. Subject to the requirements of law, the Plan Administrator shall be the sole judge of the standard of proof required in any claim for benefits and in any determination of eligibility for a benefit;
(c) determine the eligibility of any employee to participate in the Plan, in its sole discretion, and to require any person to furnish any information as it may
request to properly administer the Plan as a condition to that person receiving any benefit under one or more of the Plan;
(d) compute the amount of benefits that are payable to any Participant, retired Participant, spouse, joint annuitant or Beneficiary in accordance with the provisions of the Plan, to determine the person or persons to whom those benefits will be paid, and to correct any error and remedy any defect related to a payment of benefits;
(f) authorize the payment of benefits from the Plan, in its sole discretion, if it determines that the claimant is entitled to the benefits;
(g) maintain records for each individual Participant as to benefits, options, beneficiaries and other pertinent information;
(j) recover any payment or overpayment of a benefit made by mistake; and
(n) take other actions as are necessary or desirable in connection with its administration duties with respect to the Plan.
Any duties and responsibilities of the Company under the Plan shall be carried out by the directors, officers, and employees of the Company, acting on behalf of and in the name of the Company in their capacities as directors, officers, and employees and not as Plan Administrator.
In exercising its authority to control and manage the operation and administration of the Plan, the Plan Administrator may allocate all or any part of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons, committees, service providers or third party administrators selected by it. Any such allocation or delegation may be revoked at any time. Any member or delegate exercising Plan Administrator responsibilities and powers under this Section shall periodically report to the Plan Administrator on its exercise thereof and the discharge of such responsibilities.
4.Section 12.1 is amended in its entirety to read as follows:
12.1 Reservation of Rights. Univar USA Inc. may amend or terminate the Plan at any time by action of its Board of Directors. In addition, the Retirement Oversight Committee may amend the Plan at any time. No such action shall reduce the amount credited to any Participant’s Plan Account as of the effective date of such amendment or termination. In the event Univar USA Inc. terminates the Plan, Participants with existing Plan Account balances will automatically become 100% vested in their Plan Accounts.
5.Sections 15.1 and 15.2 are amended in their entirety to read as follows:
15.1 Claims Procedures. A Participant or Beneficiary shall have the right to file a claim, inquire if he has any right to benefits and the amounts thereof, or appeal the denial of a claim.
(a) A claim will be considered filed when a written communication is made by the Participant, Beneficiary, or his authorized representative to the Plan Administrator (the “claimant”). The Plan Administrator shall notify the claimant in writing within a reasonable period of time, but no later than 90 days after receipt of the claim if the claim is wholly or partially denied. If an extension of time beyond the initial 90-day period for processing the claim is required, written notice of the extension shall be provided to the claimant before the initial 90-day period expires. In no event shall the period, as extended, exceed 180 days. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render a final decision. Benefits under the Plan will be paid only if the Plan Administrator decides in its sole discretion that the claimant is entitled to them.
(b) Written notice of a wholly or partially denied claim for benefits shall include, in a manner calculated to be understood by the claimant:
(i) the reason or reasons for denial;
(ii) specific reference to the Plan provisions on which the denial is based;
(iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and
(iv) an explanation of the Plan’s claim appeal procedure, which shall include a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following a denial of the claim upon review.
(c) If a claim is wholly or partially denied, the claimant may file an appeal requesting the Plan Administrator to conduct a full and fair review of his claim. The claimant must file his written appeal no more than 60 days after he receives written notice of the denial. The claimant may review any relevant documents that apply to the case and may also submit points of disagreement and other comments in writing along with the appeal. The Plan Administrator’s decision on appeal shall be given to the claimant in writing no later than 60 days following receipt of the appeal. However, if the Plan Administrator, in its sole discretion, grants a hearing, or there are special circumstances involved, the decision will be given no later than 120 days after receiving the appeal. If such an extension of time for review is required, written notice of the extension shall be furnished to the claimant before the initial 60 days expires and shall
indicate the special circumstances requiring an extension of time and the date by which the Plan Administrator expects to render a final decision. Benefits under the Plan will be paid only if the Plan Administrator decides in its sole discretion that the claimant is entitled to them. The written decision on appeal shall be in a manner calculated to be understood by the claimant and shall include:
(i) specific reasons for the decision;
(ii) specific references to the pertinent Plan provisions on which the decision is based;
(iii) a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records or other information relevant to the claimant’s claim; and
(iv) a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following a wholly or partially denied claim for benefits.
If a claimant files an appeal under this subsection (c), the claimant may review or receive copies, upon request and free of charge, of any documents, records or other information “relevant” (within the meaning of Department of Labor Regulation Section 2560.503-1(m)(8)) to the claimant’s claim. The claimant may also submit written comments, documents, records and other information relating to his claim. The Plan Administrator shall take into account all comments, documents, records and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial review of the claim. Notwithstanding the foregoing, if at any time the Plan Administrator, or delegate authorized by the Plan Administrator to resolve appeals, is a committee that holds regularly scheduled meetings not less often than quarterly, then, in lieu of the time periods set forth above, the decision on appeal shall be made at the first meeting that occurs after the appeal is received unless the appeal is received within 30 days prior to the date of the meeting, in which case the decision shall be made not later than the second meeting held after the appeal is received. If special circumstances require an extension, the decision may be made not later than the third meeting following receipt of the appeal, provided that the claimant is notified of the reason for the extension and the date as of which the appeal will be decided not later than beginning of the extension. The notice of the committee’s decision, written in a manner calculated to be understood by the claimant and containing the information described above, shall be furnished to the claimant as soon as reasonably possible after the meeting at which the decision on appeal is made.
(d) In order for a claimant to initiate any action for any benefit under the Plan before any court, under ERISA Section 502 or otherwise, or before any administrative agency or quasi-judicial tribunal, such claimant must have first filed a claim for such benefit and requested review of any adverse decision on such claim in
accordance with this Section and the procedures established by the Plan Administrator pursuant to this Section. Such action must be initiated not more than 180 days after receipt of the decision on review of the adverse claim decision.
15.2 ERISA Section 503. The provisions of Section 15.2 are intended to comply with ERISA Section 503 and the Department of Labor regulations issued pursuant thereto, and shall be so construed and applied. Consistent with such regulations, each claimant shall have the right to have an authorized representative act on his behalf, to submit arguments and information in support of his claim, and to receive, upon written request and without charge, copies of all documents, records, or other information that either (a) were relied upon in determining his benefit under the Plan, (b) were submitted, considered, or generated in the course of making the benefit determination, even if not relied upon, or (c) demonstrate compliance with the administrative processes and safeguards of the claims and review procedure. In addition, any notice and decisions by the Plan Administrator under Section 15.2 may be furnished electronically in accordance with Department of Labor Regulation Section 2520.104b-1(c)(i), (iii), and (iv).
6.Section 19 is amended in its entirety to read as follows:
19. Governing Law. This Plan and all rights hereunder shall be governed by applicable federal law, including ERISA, and to the extent not preempted by federal law, construed and administered in accordance with the laws of the State of Illinois with the exception of any trust agreement, which shall be construed and enforced in all respects under and by the laws of the state in which the Trustee is located.
* * *
IN WITNESS WHEREOF, the Senior Vice President and Chief Human Resources Officer of Univar USA Inc. has executed this First Amendment to the Univar USA Inc. Supplemental Valued Investment Plan as of October 9, 2018, to evidence its adoption by Univar USA Inc.
UNIVAR USA INC.
By: /s/ Kim Dickens
Kim Dickens
Senior Vice President & Chief Human
Resources Officer
48620810v.2
UNIVAR USA INC.
SUPPLEMENTAL VALUED INVESTMENT PLAN
(As Amended and Restated as of June 1, 2017)
Second Amendment
WHEREAS, Univar Solutions USA Inc. (“Company”) sponsors and maintains the Univar USA Inc. Supplemental Valued Investment Plan as amended and restated as of June 1, 2017 (the “Plan”);
WHEREAS, pursuant to Section 12.1 of the Plan, the Retirement Oversight Committee has certain authority to amend the Plan; and
WHEREAS, the Retirement Oversight Committee desires to amend the Plan to change the Plan name and to reflect the change in the Company’s name.
NOW THEREFORE, the Plan is amended in the following respects:
1.Effective September 1, 2019, any reference to “Univar USA Inc.” is replaced with “Univar Solutions USA Inc.” wherever the former may appear.
2.The definition of Company in Section 3 is hereby amended, effective September 1, 2019 to read as follows:
Company means Univar Solutions USA Inc. (previously, Univar USA Inc.), its corporate successors, and any corporation or corporations into which it may be merged or consolidated. It also means those affiliated companies of Univar Solutions USA Inc. which have been approved for participation by either the President of Univar Solutions USA Inc. or the Plan Administrator. Affiliated companies participating in the Plan are listed in Appendix A, attached hereto and incorporated herein.
3.Effective as of January 1, 2020, the reference to the “Univar USA Inc. Supplemental Valued Investment Plan” is changed to the “Univar Solutions Supplemental Savings Plan (previously named the “Univar USA Inc. Supplemental Valued Investment Plan”)” in Section 1 and, except for the reference in Section 2, any other reference to the “Univar USA Inc. Supplemental Valued Investment Plan” is replaced with “Univar Solutions Supplemental Savings Plan, wherever the former may appear.
4.The definition of Plan in Section 3 is hereby amended, effective January 1, 2020, to read as follows:
Plan means Univar Solutions Supplemental Savings Plan.
* * *
[signature page follows]
IN WITNESS WHEREOF, the Secretary of Univar Solutions USA Inc. has executed this Second Amendment to the Univar USA Inc. Supplemental Valued Investment Plan as of December 30, 2019, to evidence its adoption by Univar Solutions USA Inc.
UNIVAR SOLUTIONS USA INC.
By: /s/ Noelle Perkins
Noelle Perkins
Secretary
60599231v.1
UNIVAR INC. 2017 OMNIBUS EQUITY INCENTIVE PLAN
First Amendment
WHEREAS, Univar Solutions Inc. (“Company”) sponsors and maintains the Univar Inc. 2017 Omnibus Equity Incentive Plan (the “Plan”);
WHEREAS, pursuant to Section 15.2 of the Plan, the Compensation Committee of the Board of Directors of the Company, as administrator of the Plan, has authority to amend the Plan; and
WHEREAS, the Company desires to amend the Plan, effective as of the dates set forth below to change the name of the Plan and reflect the name change of the Plan sponsor:
NOW THEREFORE, the Plan is hereby amended as follows, effective as of the dates set forth below:
1.Effective as of September 1, 2019, “Univar Inc.” is changed to “Univar Solutions Inc.” wherever the former appears in the Plan.
2.Effective as of September 1, 2019, the Plan name is changed to the “Univar Solutions Inc. 2017 Omnibus Equity Incentive Plan.”
* * *
IN WITNESS WHEREOF, the undersigned authorized individual has executed this First Amendment to the Plan as of December 6, 2019, to evidence its adoption by Univar Solutions Inc.
UNIVAR SOLUTIONS INC.
By: /s/ Noelle J. Perkins
Noelle J. Perkins
SVP, General Counsel and Secretary
UNIVAR INC. AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
First Amendment
WHEREAS, Univar Solutions Inc. (“Company”) sponsors and maintains the Univar, Inc. Amended and Restated Employee Stock Purchase Plan (the “Plan”);
WHEREAS, pursuant to Section 10.8 of the Plan, the Compensation Committee of the Board of Directors of the Company, as administrator of the Plan, has authority to amend the Plan; and
WHEREAS, the Company desires to amend the Plan, effective as of the dates set forth below to change the name of the Plan and reflect the name change of the Plan sponsor.
NOW THEREFORE, the Plan is hereby amended as follows, effective as of the dates set forth below:
1.Effective as of September 1, 2019, “Univar Inc.” is changed to “Univar Solutions Inc.” wherever the former appears in the Plan.
2.Effective as of December 1, 2019, the Plan name is changed to the “Univar Solutions Inc. Employee Stock Purchase Plan.”
3.Effective as of September 1, 2019, Section (i) of Article II of the Plan is amended in its entirety to read as follows:
“Company” means Univar Solutions, Inc., a Delaware corporation, and any successor thereto.
4.Effective as of December 1, 2019, Section (r) of Article II of the Plan is amended in its entirety to read as follows:
“Omnibus Equity Plan” means the Univar Solutions Inc. 2017 Omnibus Equity Incentive Plan, as may be amended from time to time.
* * *
IN WITNESS WHEREOF, the undersigned authorized individual has executed this First Amendment to the Plan as of December 6, 2019, to evidence its adoption by Univar Solutions Inc.
UNIVAR SOLUTIONS INC.
By: /s/ Noelle J. Perkins
Noelle J. Perkins
SVP, General Counsel and Secretary
Form of Employee Performance-Based Restricted Stock Unit Agreement
This Employee Performance-Based Restricted Stock Unit Agreement (the “Agreement”), by and between Univar Solutions Inc., a Delaware corporation (the “Company”), and the Employee whose name is set forth on Exhibit A hereto, is being entered into pursuant to the Univar Solutions Inc. 2017 Omnibus Equity Incentive Plan (as the same may be amended, modified or supplemented from time to time, the “Plan”). This Agreement shall be dated as of the date set forth on Exhibit A hereto (the “Grant Date”). Capitalized terms that are used but not defined herein shall have the respective meanings given to them in the Plan.
The Company and the Employee hereby agree as follows:
Section 1.Grant of Performance-Based Restricted Stock Units. The Company hereby evidences and confirms its grant to the Employee, effective as of the Grant Date, of the number of Performance-Based Restricted Stock Units (“PRSUs”) as shall be determined pursuant to Exhibit A and Section 2 hereof, subject to adjustment pursuant to the Plan. Each PRSU that becomes earned and vested in accordance with the terms of this Agreement (including Exhibit A) will entitle the Employee to receive from the Company one (1) share of Company Common Stock as provided under Section 3. This Agreement is entered into pursuant to, and the PRSUs granted hereunder are subject to, the terms and conditions of the Plan, which are incorporated by reference and made part of the Agreement. If there is any inconsistency between any express provision of this Agreement and any express term of the Plan, the express term of the Plan shall govern.
Section 2.Vesting of Performance-Based Restricted Stock Units.
(a)Vesting. Except as otherwise explicitly provided in this Section 2, the PRSUs shall become “Vested PRSUs”, if at all, in accordance with the terms and conditions of this Agreement (including, but not limited to, the provisions relating to the earning, vesting and forfeiture of PRSUs as set forth on Exhibit A) and the Plan, subject to the continued employment of the Employee by the Company or any Subsidiary thereof through the Vesting Date set forth on Exhibit A. Earned PRSUs (as defined on Exhibit A) that become Vested PRSUs shall be settled as provided in Section 3 of this Agreement.
(b)Effect of Termination of Employment.
(i)If the Employee’s employment is terminated by the Company without Cause prior to the Vesting Date and such termination constitutes a “separation from service” for purposes of Section 409A of the Code (such termination, a “Qualifying Termination”), (x) any PRSUs that are or become Earned PRSUs for the Performance Period(s) prior to the Performance Period during which the Qualifying Termination occurs shall become Vested PRSUs as of the date of such Qualifying Termination, and (y) any PRSUs that are not Earned PRSUs for the Performance Period(s) prior to the Performance Period during which the Employee’s Qualifying Termination occurs (which for avoidance of doubt shall include any PRSUs subject to be earned for the Performance Period(s) in which the Qualifying Termination occurs or subject to be earned in
respect of Performance Period(s) not yet commenced as of the date of the Qualifying Termination) shall automatically be forfeited and canceled as of the date of such Qualifying Termination. Vested PRSUs shall be settled as provided in Section 3 of this Agreement.
(ii)If the Employee’s employment is terminated by reason of the Employee’s death or Disability prior to the Vesting Date and such termination constitutes a “separation from service” for purposes of Section 409A of the Code (such termination, a “Special Termination”), (x) any PRSUs that are Earned PRSUs for the Performance Period(s) prior to the Performance Period during which the Employee’s Special Termination occurs shall become Vested PRSUs as of the date of such Special Termination, (y) any PRSUs that are not Earned PRSUs for the Performance Period(s) ending prior to the Performance Period during which the Employee’s Special Termination occurs shall automatically be forfeited and canceled as of the date of the Special Termination, and (z) any PRSUs subject to be earned for the Performance Period(s) in which the Special Termination occurs or subject to be earned in respect of Performance Period(s) not yet commenced as of the date of the Special Termination shall become Vested RSUs as of such Special Termination, with performance levels deemed to be met at “target”. Vested PRSUs shall be settled as provided in Section 3 of this Agreement.
(iii)If the Employee’s employment is terminated by reason of the Employee’s Retirement prior to the Vesting Date, (x) any PRSUs that are Earned PRSUs for the Performance Period(s) prior to the Performance Period during which the Employee Retires shall become Vested RSUs as of the date of such Retirement, (y) any PRSUs that are not Earned PRSUs for the Performance Period(s) ending prior to the Performance Period during which the Employee retires shall be forfeited, and (z) any PRSUs subject to be earned for the Performance Period(s) in which the Retirement occurs or subject to be earned in respect of Performance Period(s) not yet commenced as of the date of the Retirement shall remain outstanding (the “Outstanding PRSUs”) and shall become Vested RSUs, if at all, on the date such Outstanding PRSUs become Earned PRSUs in accordance with Section 2(a) based upon the level at which the applicable performance goals were satisfied; provided, that, if the Employee’s Retirement occurs prior to the first (1st) anniversary of the Grant Date, then any Outstanding PRSUs that are not subject to be earned for the Performance Period in which the Retirement occurs shall automatically be forfeited and canceled as of the effective date of such Retirement. For purposes of this Agreement, “Retirement” or “Retires” means a termination of employment for any reason other than Cause at age 60 or older, upon attainment of a minimum of 65 total age plus service points, and that also constitutes a “separation from service” for purposes of Section 409A of the Code. Vested PRSUs shall be settled as provided in Section 3 of this Agreement.
(iv)Any Other Reason. Upon termination of the Employee’s employment prior to the Vesting Date for any reason (whether initiated by the Company or by the Employee) other than a Qualifying Termination, a Special Termination or Retirement, all PRSUs (including any Earned PRSUs that have not become Vested PRUs) shall be forfeited and canceled for no consideration effective as of the date of such termination.
(c)Effect of a Change in Control. A Change in Control that is consummated prior to the Vesting Date shall not accelerate the vesting or settlement of unvested PRSUs; provided, however, that if the Administrator reasonably determines in good faith, prior to the occurrence of the Change in Control, that no Alternative Awards will be provided in respect of PRSUs, (i) the Earned PRSUs shall become Vested PRSUs and (ii) any PRSUs that are not Earned PRSUs and that relate to a Performance Period that is not yet complete shall vest at the Target Amount, in each case effective as of the date of the Change in Control; provided, further, that the acceleration of vesting of PRSUs that are subject to Section 409A of the Code shall not accelerate the Settlement Date thereof unless permitted by Section 409A of the Code.
(d)Discretionary Acceleration. Notwithstanding anything contained in this Agreement to the contrary, but subject to any limits prescribed in the Plan, the Administrator, in its sole discretion, may accelerate the vesting with respect to any PRSUs under this Agreement, at such times and upon such terms and conditions as the Administrator shall determine; provided, that the acceleration of vesting of PRSUs that are subject to Section 409A of the Code shall not accelerate the Settlement Date thereof unless permitted by Section 409A of the Code.
(e)No Other Accelerated Vesting. The vesting and settlement provisions set forth in this Section 2, or in Section 3, shall be the exclusive vesting and settlement provisions applicable to the PRSUs and shall supersede any other provisions relating to vesting and settlement, unless such other such provision unambiguously and expressly references, in writing, the Plan by name and this Agreement by name and date.
Section 3.Settlement of PRSUs.
(a)Timing of Settlement. Subject to Section 6(a), any Earned PRSUs that become vested on the Vesting Date shall be settled into an equal number of shares of Company Common Stock on a date selected by the Company that is on or within 30 days following the date of the Administrator’s certification of achievement of the Performance Goals for the applicable Performance Period(s) that include the Vesting Date, but not later than March 15th of the calendar year immediately following the Vesting Date (each such date, a “Settlement Date”). Notwithstanding the foregoing, in the case of accelerated vesting of PRSUs pursuant to Section 2(b)(i), 2(b)(ii), 2(b)(iii) or 2(c) (but, for PRSUs that are subject to Section 409A of the Code, only if permitted by Section 409A of the Code), the Settlement Date shall occur on a date selected by the Company that is within 30 days following the date upon which such PRSUs became Vested PRSUs.
(b)Mechanics of Settlement. On the Settlement Date, the Company shall electronically issue to the Employee one whole share of Company Common Stock for each PRSU that became earned and vested as of the Settlement Date (except as provided in Section 6(a)), and, upon such issuance, the Employee’s rights in respect of such PRSU shall be extinguished. On or before any Settlement Date, at the Company’s request, the Company and the Employee shall enter into a Subscription Agreement that establishes the rights and obligations of the Company and the Employee relating to the shares of Company Common Stock issued in respect of the PRSUs, in the form then customarily used by the
Company under the Plan for such purpose. In the event that there are any fractional PRSUs that became vested on such date, such fractional PRSUs shall be settled through a cash payment equal to such fractional PRSU multiplied by the Fair Market Value of one (1) share of Company Common Stock on the Settlement Date. No fractional shares of Company Common Stock shall be issued in respect of the PRSUs.
Section 4.Securities Law Compliance. Notwithstanding any other provision of this Agreement, the Employee may not sell the shares of Company Common Stock acquired upon settlement of the PRSUs unless such shares are registered under the Securities Act of 1933, as amended (the “Securities Act”), or, if such shares are not then so registered, such sale would be exempt from the registration requirements of the Securities Act. The sale of such shares must also comply with other applicable laws and regulations governing the Company Common Stock, and the Employee may not sell the shares of Company Common Stock if the Company determines that such sale would not be in material compliance with such laws and regulations.
Section 5.Restriction on Transfer; Non-Transferability of PRSUs. The PRSUs are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) other than by will or by the laws of descent and distribution to the estate of the Employee upon the Employee’s death. Any purported transfer in violation of this Section 5 shall be void ab initio.
Section 6.Miscellaneous.
(a)Tax Matters
(i)Tax Withholding. The Company or one of the Subsidiaries shall, if specifically approved by the Administrator, require the Employee to remit to the Company an amount in cash sufficient to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding obligations that may arise in connection with the vesting of the PRSUs and/or the related issuance of shares of Company Common Stock. Notwithstanding the preceding sentence, if the Employee does not remit cash in respect of such obligations, (x) the Company shall retain a number of shares of Company Common Stock issued in respect of the PRSUs then vesting or being settled that have an aggregate Fair Market Value as of such time equal to the amount of such taxes required to be withheld or paid not in excess of such amount as may be necessary to avoid liability award accounting and any remaining amount shall be remitted in cash or withheld and (y) the number of shares of Company Common Stock to be issued in respect of the PRSUs shall thereupon be reduced by the number of shares of Company Common Stock so retained (and the Employee shall thereupon be deemed to have satisfied his or her obligations under this Section 6(a)). The method of withholding set forth in the immediately preceding sentence shall not be available if withholding in this manner would violate any financing instrument of the Company or any of the
Subsidiaries, or result in the acceleration of any Settlement Date in a manner that would be an impermissible acceleration under Section 409A of the Code.
(ii)Compliance with Section 409A of the Code. If the Employee is not eligible for Retirement during the vesting period applicable to the PRSUs, the PRSUs are intended to be exempt from Section 409A of the Code. If the Employee is eligible for Retirement during the vesting period applicable to the PRSUs such that some or all of the PRSUs are subject to Section 409A of the Code, this Agreement and the PRSUs shall be administered and interpreted in compliance with Section 409A of the Code to the extent applicable. Notwithstanding the foregoing, if the Company determines that the PRSUs may not either be exempt from or compliant with Section 409A of the Code, the Company may adopt such amendments or other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, that the Company determines are necessary or appropriate, as applicable, to (x) exempt the PRSUs from Section 409A of the Code, or (y) comply with the requirements of Section 409A of the Code; provided, however, that there is no obligation on the part of the Company to adopt any such amendment, policy or procedure or take any such other action. If the Employee is a “specified employee” as defined in Section 409A of the Code as of the Employee’s separation from service, to the extent any PRSUs are subject to Section 409A of the Code, then to the extent required by Section 409A of the Code, no payments due under this Agreement may be made until the earlier of: (A) the first day of the seventh month following the Employee’s separation from service, or (B) the Employee’s date of death. If this Agreement fails to comply with the requirements of Section 409A of the Code, neither the Company nor any of its Affiliates shall have any liability for any tax, penalty or interest imposed on the Employee by Section 409A of the Code, and the Employee shall have no recourse against the Company or any of its Affiliates for payment of any such tax, penalty or interest imposed by Section 409A of the Code.
(b)Dividend Equivalents. In the event that the Company pays any ordinary dividend in cash on a share of Company Common Stock following the Grant Date and prior to the Settlement Date with respect to any PRSUs, there shall be credited to the account of the Employee in respect of each outstanding PRSU an amount equal to the amount of such dividend. The amount so credited shall be deferred (without interest, unless the Administrator determines otherwise) until the applicable Settlement Date of the PRSUs and then paid in cash proportionate to the amount of the PRSUs, if any, that have been earned or vested, but to the extent any PRSUs are canceled a proportionate amount of such accumulated amounts shall be forfeited.
(c)Authorization to Share Personal Data. The Employee authorizes the Company or any Affiliate of the Company that has or lawfully obtains personal data relating to the Employee to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent reasonably appropriate in connection with this Agreement or the administration of the Plan.
(d)No Rights as Stockholder; No Voting Rights. Except as provided in Section 6(b), the Employee shall have no rights as a stockholder of the Company with respect to any shares of Company Common Stock covered by the PRSUs prior to the issuance of such shares of Company Common Stock.
(e)No Right to Awards. The Employee acknowledges and agrees that the grant of any PRSUs (i) is being made on an exceptional basis and is not intended to be renewed or repeated, (ii) is entirely voluntary on the part of the Company and the Subsidiaries and (iii) should not be construed as creating any obligation on the part of the Company or any of the Subsidiaries to offer any PRSUs or other Awards in the future.
(f)No Right to Continued Employment. Nothing in this Agreement shall be deemed to confer on the Employee any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.
(g)Nature of Award. This award of PRSUs and any delivery or payment in respect thereof constitutes a special incentive payment to the Employee and shall not be taken into account in computing the amount of salary or compensation of the Employee for the purpose of determining any retirement, death or other benefits under (x) any retirement, bonus, life insurance or other employee benefit plan of the Company, or (y) any agreement between the Company and the Employee, except as such plan or agreement shall otherwise expressly provide.
(h)Interpretation. The Administrator shall have full power and discretion to construe and interpret the Plan (and any rules and regulations issued thereunder) and this Award. Any determination or interpretation by the Administrator under or pursuant to the Plan, this Agreement (including Exhibit A) or this Award shall be final and binding and conclusive on all persons affected hereby.
(i)Forfeiture of Awards. The PRSUs granted hereunder (and gains earned or accrued in connection therewith) shall be subject to such generally applicable policies as to forfeiture and recoupment (including, without limitation, upon the occurrence of material financial or accounting errors, financial or other misconduct or Competitive Activity) as may be adopted by the Administrator or the Board from time to time and communicated to the Employee or as required by applicable law, and are otherwise subject to forfeiture or disgorgement of profits as provided by the Plan.
(j)Consent to Electronic Delivery. By entering into this Agreement and accepting the PRSUs evidenced hereby, the Employee hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Employee pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, this Agreement and the PRSUs via Company website or other electronic delivery.
(k)Binding Effect; Benefits. This Agreement (including Exhibit B hereto) shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and 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 assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
(l)Waiver; Amendment.
(i)Waiver. Any party hereto or beneficiary hereof may by written notice to the other parties (A) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, (B) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and (C) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.
(ii)Amendment. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Employee and the Company.
(m)Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Employee without the prior written consent of the other party.
(n)Applicable Law. This Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction.
(o)Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right he, she or it may have to a trial by jury in respect of any suit, action or proceeding arising out of this Agreement or any transaction contemplated hereby. Each party (i) 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 (ii) acknowledges that he, she or it and the other party hereto have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this Section 6(o).
(p)Limitations of Actions. No lawsuit relating to this Agreement may be filed before a written claim is filed with the Administrator and is denied or deemed denied as provided in the Plan and any lawsuit must be filed within one year of such denial or deemed denial or be forever barred.
(q)Section and Other Headings, etc. 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.
(r)Restrictive Covenants. In consideration of the receipt of the PRSUs granted pursuant to this Agreement, if requested by the Administrator as evidenced by the attachment of Exhibit B hereto, the Employee agrees to be bound by the covenants set forth in Exhibit B to this Agreement, which are incorporated by reference and made part of this Agreement.
(s)Acceptance of PRSUs and Agreement. The Employee has indicated his or her consent and acknowledgement of the terms of this Agreement pursuant to the instructions provided to the Employee by or on behalf of the Company. The Employee acknowledges receipt of the Plan, represents to the Company that he or she has read and understood this Agreement and the Plan, and, as an express condition to the grant of the PRSUs under this Agreement, agrees to be bound by the terms of both this Agreement and the Plan. The Employee and the Company each agrees and acknowledges that the use of electronic media (including, without limitation, a clickthrough button or checkbox on a website of the Company or a third-party administrator) to indicate the Employee’s confirmation, consent, signature, agreement and delivery of this Agreement and the PRSUs is legally valid and has the same legal force and effect as if the Employee and the Company signed and executed this Agreement in paper form. The same use of electronic media may be used for any amendment or waiver of this Agreement.
Exhibit A to
Employee Performance-Based Restricted Stock Unit Agreement
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Employee:
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Grant Date:
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Target Amount of Performance-Based Restricted Stock Units granted hereby (the “Target Amount”):
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Vesting Date:
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December 31, 2022
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1.Performance-Based Restricted Stock Units. The total number of PRSUs subject to this Award that become Vested PRUs will be determined in a range of 0% to 200% of the Target Amount, subject to the terms and conditions set forth below. A portion of the Target Award (each such portion, a “Goal”) shall be eligible to be earned in respect of each Performance Period based on achievement of each of the applicable Performance Goals for such period, as indicated below. The PRSUs that become Earned PRSUs shall become Vested PRSUs on the Vesting Date specified above, subject to the continued employment of the Employee by the Company or any Subsidiary thereof through the Vesting Date, except as otherwise set forth in Section 2 of the Agreement.
2.Performance Period. “Performance Period” means the three (3)-year period commencing January 1, 2020 and ending December 31, 2022.
3.Performance Goals; Administrator Certification.
(a)Performance Goals. The total number of PRSUs which shall be earned with respect to each Goal shall be determined based on the Company’s performance against each of the applicable Performance Goals during the applicable Performance Period, as set forth in the tables below. The Administrator shall establish Performance Goals for the applicable Performance Period, and may subsequently adjust Performance Goals at the Administrator’s discretion. Payout of each Goal as a percentage of Target shall be (i) 0% for performance below “threshold”, (ii) 50% for performance at “threshold”, (iii) 100% for performance at “target” and (iv) 200% for performance at or above “maximum”, with the applicable “threshold,” “target” and “maximum” set forth in the table below. For achievement between threshold and target performance, or between target and maximum performance, the number of PRSUs earned in each case shall be interpolated on a straight-line basis. In each case, the final number of shares of Company Common Stock that are issued shall be rounded down to the nearest whole number of shares.
(i)Average Adjusted EBITDA (in millions)
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Adjusted EBITDA Goal
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Performance Period
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Portion of Target Award
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Performance Goal
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Performance Goal
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Threshold
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Target
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Maximum
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Goal 1
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January 1, 2020 and ending December 31, 2022
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50%
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Average Adjusted EBITDA for Performance Period
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(ii)Average Return on Invested Capital
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ROIC Goal
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Performance Period
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Portion of Target Award
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Performance Goal
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Performance Goal
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Threshold
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Target
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Maximum
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Goal 2
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January 1, 2020 and ending December 31, 2022
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50%
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Average ROIC for Performance Period
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“Return on Invested Capital” or “ROIC” is defined as last twelve months (LTM) adjusted net income divided by net assets deployed, both as disclosed in the Company’s public earnings releases.
The PRSUs in each Goal shall become “Earned PRSUs” as of the last day of the applicable Performance Period to the extent earned in accordance with the applicable Performance Goal, subject to the Administrator certifying the achievement of the applicable Performance Goal pursuant to Section 3(b) of Exhibit A. Any PRSUs in respect of a Goal that do not become Earned PRSUs shall be forfeited and canceled as of the date of the Administrator’s certification pursuant to Section 3(b) of this Exhibit A. Earned PRSUs shall be “Vested PRSUs” contingent upon the satisfaction of the continued employment requirements as set for in the Agreement.
For the avoidance of doubt, (x) if the performance results for the applicable Performance Period (as certified by the Administrator pursuant to Section 3(b) of this Exhibit A) do not meet or exceed the threshold level of achievement of the applicable Performance Goal, the Goal PRSUs eligible to be earned in respect of such Performance Period shall immediately be forfeited and canceled, and (y) in no event shall the number of PRSUs earned in respect of each Goal exceed the maximum amount for such Goal.
(b)Certification of Achievement Relative to Performance Goal. As soon as practicable after the end of a Performance Period but in any event within ninety (90) days after the end of such Performance Period, the Administrator shall certify the extent to which the Performance Goal has been achieved with respect to the applicable Performance Period and the resulting number of PRSUs that become “Earned PRSUs”.
Exhibit B to
Employee Performance-Based Restricted Stock Unit Agreement
Restrictive Covenants
Section 1Confidential Information.
1.1.The Employee recognizes that the success of the Company and its current or future Affiliates depends upon the protection of information or materials that are confidential and/or proprietary. “Confidential Information” means information or materials that (a) are identified as being confidential or proprietary at the time of disclosure to the Employee (or upon notice thereafter) or (b) should, based on their nature or the circumstances surrounding such disclosure, reasonably be deemed confidential. Confidential Information includes, without limitation, information to which the Employee has access while employed by the Company whether recorded in any medium or merely memorized. By way of example, Confidential Information includes without limitation, and whether or not such information is specifically designated as confidential or proprietary: all business plans and marketing strategies; information concerning existing and prospective markets, suppliers and customers; financial information; information concerning the development of new products and services; and technical and non-technical data related to software programs, design, specifications, compilations, Inventions (as defined in Section 3.1), improvements, patent applications, studies, research, methods, devices, prototypes, processes, procedures and techniques. Confidential Information expressly includes information provided to the Company or its Affiliates by third parties under circumstances that require them to maintain the confidentiality of such information. Notwithstanding the foregoing, the Employee shall have no confidentiality obligation with respect to disclosure of any Confidential Information that (a) was, or at any time becomes, available in the public domain other than through a violation of this Agreement or (b) the Employee can demonstrate by written evidence was furnished to the Employee by a third party in lawful possession thereof and who was not under an obligation of confidentiality to the Company or any of its Affiliates.
1.2.The Employee agrees that during the Employee’s employment and after termination of employment irrespective of cause, the Employee will use Confidential Information only for the benefit of the Company and its Affiliates. Notwithstanding the foregoing, the Employee may disclose Confidential Information as (a) authorized by applicable law (including, but not limited to, any disclosure of information that satisfies the procedures in SEC Regulation § 240.21F- 17) or (b) as required pursuant to an order or requirement of a court, administrative agency or other government body.
This Agreement constitutes notice to the Employee that, under the 2016 Defend Trade Secrets Act (“DTSA”), the following rules shall be applicable: (i) No individual will be held criminally or civilly liable under federal or state trade secret law for the disclosure of a trade secret (as defined under the DTSA) that: (A) is made in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and made solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal so that it is not made public; and (ii) an individual who pursues a lawsuit for retaliation by an employer for reporting a suspected violation of the law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court
proceeding, if the individual files any document containing the trade secret under seal, and does not disclose the trade secret, except as permitted by court order. In addition, if the Employee’s employment is governed by the laws of the United Kingdom, nothing in this Agreement shall prevent the Employee from making a protected disclosure under section 43A of the Employment Rights Act 1996.
1.3.The Employee hereby assigns to the Company any rights the Employee may have or acquire in such Confidential Information and acknowledges that all Confidential Information shall be the sole property of the Company and/or its Affiliates or their assigns.
1.4.There are no rights granted or any understandings, agreements or representations between the parties hereto, express or implied, regarding Confidential Information that are not specified herein.
1.5.The Employee’s obligations under this Section 1 are in addition to any obligations that the Employee has under state or federal law.
1.6.The Employee agrees that in the course of the Employee’s employment with the Company, the Employee will not violate in any way the rights that any entity, including former employers, has with regard to trade secrets or proprietary or confidential information.
1.7.The Employee’s obligations under this Section 1 are indefinite in term and shall survive the termination of this Agreement.
Section 2Return of Company Property.
2.1.The Employee acknowledges that all tangible items containing any Confidential Information, including without limitation memoranda, photographs, records, reports, manuals, drawings, blueprints, prototypes, notes, documents, drawings, specifications, software, media and other materials, including any copies thereof (including electronically recorded copies), are the exclusive property of the Company or its applicable Affiliate, and the Employee shall deliver to the Company all such material in the Employee’s possession or control upon the Company’s request and in any event upon the termination of the Employee’s employment with the Company. The Employee shall also preserve and return any keys, equipment, identification or credit cards, or other property belonging to the Company or its Affiliates upon termination of the Employee’s employment or request.
Section 3Inventions.
3.1.The Employee understands and agrees that all Inventions are the exclusive property of the Company. As used in this Agreement, “Inventions” shall include without limitation ideas, discoveries, developments, concepts, inventions, original works of authorship, trademarks, mask works, trade secrets, ideas, data, information, know-how, documentation, formulae, results, prototypes, designs, methods, processes, products, formulas and techniques, improvements to any of the foregoing, and all other matters ordinarily intended by the words “intellectual property,” whether or not patentable, copyrightable, or otherwise able to be registered, that are developed, created conceived of or reduced to practice (a) by the Employee, alone or with others, (b) during the Employee’s employment with the Company or Affiliates, whether or not during working hours or using the Company’s facility or equipment, or within three
(3) months thereafter and (c) related to the Company’s then existing or proposed business. In recognition of the Company’s ownership of all Inventions, the Employee shall make prompt and full disclosure to the Company of, will hold in trust for the sole benefit of the Company, and (subject to Section 3.2 below) herby assigns, and agrees to assign in the future, exclusively to the Company all of the Employee’s right, title, and interest in and to any and all such Inventions.
3.2.NOTICE REQUIRED BY REVISED CODE OF WASHINGTON 49.44.140: The Employee understands that the Employee’s obligation to assign inventions shall not apply to any inventions for which no equipment, supplies, facilities, or trade secret information of the Company was used and that was developed entirely on the Employee’s own time, unless (a) the invention relates (i) directly to the business of the Company, or (ii) to the Company’s actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the Employee for the Company.
3.3.To the extent any works of authorship created by the Employee made within the scope of employment may be considered “works made for hire” under United States copyright laws, they are hereby agreed to be works made for hire. To the extent any such works do not qualify as a “work made for hire” under applicable law, and to the extent they include material subject to copyright, the Employee hereby irrevocably and exclusively assigns and conveys all rights, title and interests in such works to the Company subject to no liens, claims or reserved rights. The Employee hereby waives any and all “moral rights” that may be applicable to any of the foregoing, for any and all uses, alterations, and exploitation hereof by the Company, or its Affiliates, or their successors, assignees or licensees. To the extent that any such “moral rights” may not be waived in accordance with law, the Employee agrees not to bring any claims, actions or litigation against the Company or its Affiliates, or their successors, assignees or licensees, based on or to enforce such rights. Without limiting the preceding, the Employee agrees that the Company may in its discretion edit, modify, recast, use, and promote any such works of authorship, and derivatives thereof, with or without the use of the Employee’s name or image, without compensation to the Employee other than that expressly set forth herein.
3.4.The Employee hereby waives and quitclaims to the Company any and all claims of any nature whatsoever that the Employee now or hereafter may have for infringement of any patent or patents from any patent applications for any Inventions. The Employee agrees to cooperate fully with the Company and take all other such acts requested by the Company (including signing applications for patents, assignments, and other papers, and such things as the Company may require) to enable the Company to establish and protect its ownership in any Inventions and to carry out the intent and purpose of this Agreement, during the Employee’s employment or thereafter. If the Employee fails to execute such documents by reason of death, mental or physical incapacity or any other reason after reasonable attempts by the Company, the Employee hereby irrevocably appoints the Company and its officers and agents as the Employee’s agent and attorney-in-fact to execute such documents on the Employee’s behalf.
3.5.The Employee agrees that there are no Inventions made by the Employee prior to the Employee’s employment with the Company and belonging to the Employee that the Employee wishes to have excluded from this Section 3 (the “Excluded Inventions”). If during the Employee’s employment
with the Company, the Employee uses in the specifications or development of, or otherwise incorporates into a product, process, service, technology, or machine of the Company or its Affiliates, or otherwise uses any invention, proprietary know-how, or other intellectual property in existence before the commencement date of Employee’s employment with the Company or any Affiliate owned by the Employee or in which the Employee has any interest (“Existing Know-How”), the Company or its Affiliates, as the case may be, is hereby granted and shall have a non-exclusive, royalty-free, fully paid up, perpetual, irrevocable, worldwide right and license under the Existing Know-How (including any patent or other intellectual property rights therein) to make, have made, use, sell, reproduce, distribute, make derivative works from, publicly perform and display, and import, and to sublicense any and all of the foregoing rights to that Existing Know-How (including the right to grant further sublicenses) without restriction as to the extent of the Employee’s ownership or interest, for so long as such Existing Know-How is in existence and is licensable by the Employee.
Section 4Nonsolicitation and Noncompetition.
4.1.During the Employee’s employment with the Company, and for a period expiring eighteen (18) months after the termination of the Employee’s employment (the “Restrictive Period”), regardless of the reason, if any, for such termination, the Employee shall not, in the Restricted Geographic Area, directly or indirectly:
(a)solicit or entice away or in any other manner persuade or attempt to persuade any officer, employee, consultant or agent of the Company or any of its Affiliates to alter or discontinue his or her relationship with the Company or its Affiliates;
(b)solicit from any person or entity that was a customer of the Company or any of its Affiliates during the Employee’s employment with the Company, any business of a type or nature similar to the business of the Company or any of its Affiliates with such customer;
(c)solicit, divert, or in any other manner persuade or attempt to persuade any supplier of the Company or any of its Affiliates to discontinue its relationship with the Company or its Affiliates;
(d)solicit, divert, take away or attempt to solicit, divert or take away any customers of the Company or its Affiliates; or
(e)engage in or participate in (i) chemical or ingredient distribution; or (ii) waste remediation businesses.
As used herein, “Restricted Geographic Area” shall mean the geographic area in which the Employee performed any services, or others supervised by the Employee performed services, on behalf of the Company and its Affiliates during the twenty four (24) month period immediately preceding the termination of Employee’s employment, provided that the Restricted Geographic Area shall at least include the United States, Canada, Mexico, Brazil, and Western Europe.
4.2.Nothing in Section 4.1 limits the Employee’s ability to hire an employee of the Company or any of its Affiliates in circumstances under which such employee first contacts the Employee regarding employment and the Employee does not violate any of subsections 4.1(a), 4.1(b), 4.1(c), 4.1(d) or 4.1(e) herein.
4.3.The Company and the Employee agree that the provisions of this Section 4 do not impose an undue hardship on the Employee and are not injurious to the public; that this provision is necessary to protect the business of the Company and its Affiliates; that the nature of the Employee’s responsibilities with the Company under this Agreement provide and/or will provide the Employee with access to Confidential Information that is valuable and confidential to the Company and its Affiliates; that the Company would not grant Options to the Employee if the Employee did not agree to the provisions of this Section 4; that this Section 4 is reasonable in terms of length of time, geographic scope and nature of restricted activities; and that adequate consideration supports this Section 4. In the event that a court determines that any provision of this Section 4 is unreasonably broad or extensive, the Employee agrees that such court should narrow such provision to the extent necessary to make it reasonable and enforce the provisions as narrowed.
4.4.Clawback.
(a)Without limiting the generality of the remedies available to the Company pursuant to Section 4.3, if, during the Restrictive Period, the Employee, except with the prior written consent of the Board, breaches the restrictive covenants contained in Section 4, the Employee shall pay to the Company in cash any gain the Employee realized in cash in connection with the vesting of the PRSUs, the related issuance of shares of Company Common Stock and the sale of Common Stock) within the eighteen-month period (or such other period as determined by the Board) ending on the date of the Employee’s breach. This right of recoupment is in addition to any other remedies the Company may have against the Employee for the Employee’s breach of the restrictive covenants contained in this Section 4. The Employee’s obligations under this Exhibit B shall be cumulative (but not duplicative, nor operate to extend the length of any such obligations) of any similar obligations the Employee has under the Plan, the Agreement or any other agreement with the Company or any Affiliate.
Section 5Definitions. As used in this Exhibit B, capitalized terms that are not defined herein have the respective meaning given in the Plan or the Agreement.
Director Deferred Share Unit Agreement
This Director Deferred Share Unit Agreement (the “Agreement”), by and between Univar Solutions Inc., a Delaware corporation (the “Company”), and the director whose name is set forth on Exhibit A hereto (the “Director”), is being entered into pursuant to the Univar Solutions Inc. 2017 Omnibus Equity Incentive Plan (as the same may be amended, modified or supplemented from time to time, the “Plan”) and is dated as of the Grant Date specified on Exhibit A hereto (the “Grant Date”). Capitalized terms that are used but not defined herein shall have the respective meanings given to them in the Plan.
WHEREAS, the Board of Directors of the Company (the “Board”) authorized the Director’s annual compensation for service as a member of the Board (the “Annual Fee”), a portion of which will be paid in cash.
NOW, THEREFORE, the Company and the Director hereby agree as follows:
1.Grant of Deferred Share Units. Effective as of the Grant Date, the Company hereby evidences and confirms its grant to the Director the number of Deferred Share Units set forth on Exhibit A, as satisfaction of the deferral of the cash portion of the Director’s Annual Fee for the current year that would otherwise be payable on the Grant Date (the “Shares”). The number of Deferred Share Units will be set forth on Exhibit A hereto (calculated, in the case of an annual cash fee, by dividing such fee by the Fair Market Value of a share of Company Common Stock on the Grant Date). This Agreement is entered into pursuant to, and the Deferred Share Units granted hereunder are subject to, the terms and conditions of the Plan, which are incorporated by reference herein; it being understood that this deferral is made pursuant to the Director’s irrevocable election on a form provided by the Company not later than the time permitted by Section 409A or similar provision (the “Applicable Section”) of the Code (if any). If there is any inconsistency between any express provision of this Agreement and any express term of the Plan, the express term of the Plan shall govern. No fractional Deferred Share Units are granted hereby.
2.Vesting and Forfeiture.
(a)Vesting. The Shares granted hereunder are fully vested as of the Grant Date.
3.Settlement of Deferred Share Units.
(a)Timing of Settlement. Subject to Section 6(a), the Deferred Share Units shall be settled into an equal number of shares of Company Common Stock on the earlier of the termination of the Director’s service on the Board (if vested) and a Change in Control that constitutes a “change in control” within the meaning of the Applicable Section (such date, the “Settlement Date”).
(b)Mechanics of Settlement. On the Settlement Date, the Company shall electronically issue to the Director one whole share of Company Common Stock for each Deferred Share Unit, and, upon such issuance, the Director’s rights in respect of such Deferred Share Unit shall be extinguished.
4.Securities Law Compliance. Notwithstanding any other provision of this Agreement, the Director may not sell the shares of Company Common Stock acquired upon settlement of the Deferred Share Units unless such shares are registered under the Securities Act of 1933, as amended (the “Securities Act”), or, if such shares are not then so registered, such sale would be exempt from the registration requirements of the Securities Act. The sale of such shares must also comply with other applicable laws and regulations governing the Company Common Stock, and the Director may not sell the shares of Company Common Stock if the Company determines that such sale would not be in material compliance with such laws and regulations.
5.Restriction on Transfer; Non-Transferability of Deferred Share Units. The Deferred Share Units are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) other than to a trust for the benefit of the Director or by will or by the laws of descent and distribution to the estate of the Director upon the Director’s death. Any purported transfer in violation of this Section 5 shall be void ab initio.
6.Miscellaneous.
(a)Tax Withholding. Upon the settlement of Deferred Share Units, the Director shall be obligated to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding or other similar charges or fees that may arise in connection therewith.
(b)Dividend Equivalents. In the event that the Company pays any ordinary dividend in cash on a share of Company Common Stock following the Grant Date and prior to an applicable Settlement Date, there shall be credited to the account of the Director in respect of each outstanding Deferred Share Unit an amount equal to the amount of such dividend. The amount so credited shall be deferred (without interest) until the settlement of such related Deferred Share Unit.
(c)Authorization to Share Personal Data. The Director authorizes the Company or any Affiliate of the Company that has or lawfully obtains personal data relating to the Director to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent reasonably appropriate in connection with this Agreement or the administration of the Plan.
(d)No Rights as Stockholder; No Voting Rights. The Director shall have no rights as a stockholder of the Company with respect to any shares of Company Common Stock covered by the Deferred Share Units prior to the issuance of such shares of Company Common Stock.
(e)No Right to Continued Service on Board. Nothing in this Agreement shall be deemed to confer on the Director any right to continue in the service of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such service at any time.
(f)Interpretation. The Administrator shall have full power and discretion to construe and interpret the Plan (and any rules and regulations issued thereunder) and this Agreement. Any determination or interpretation by the Administrator under or pursuant to the Plan or this Agreement shall be final and binding and conclusive on all persons affected hereby.
(g)Consent to Electronic Delivery. By entering into this Agreement and accepting the Deferred Share Units evidenced hereby, the Director hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Director pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, this Agreement and the Deferred Share Units via the Company’s website or other electronic delivery.
(h)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 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 assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
(i)Waiver. Any party hereto or beneficiary hereof may by written notice to the other parties (A) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, (B) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and (C) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s
rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.
(j)Amendment. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Director and the Company.
(k)Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Director without the prior written consent of the other party.
(l)Applicable Law. This Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction.
(m)Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right he, she or it may have to a trial by jury in respect of any suit, action or proceeding arising out of this Agreement or any transaction contemplated hereby. Each party (i) 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 (ii) acknowledges that he, she or it and the other party hereto have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this Section 6(m).
(n)Limitations of Actions. No lawsuit relating to this Agreement may be filed before a written claim is filed with the Administrator and is denied or deemed denied as provided in the Plan and any lawsuit must be filed within one year of such denial or deemed denial or be forever barred.
(o)Section and Other Headings, etc. 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.
(o)Acceptance of Deferred Share Unit Award and Agreement. The Director has indicated his or her consent and acknowledgement of the terms of this Agreement and receipt of the Plan by electing to receive Deferred Share Units. In any event, the Director shall be deemed to accept this Agreement unless the Director provides the Company with written notice to the contrary prior to the expiration of the 60-day period following the Grant Date. The Director acknowledges receipt of the Plan, represents to the Company that he or she has read and understood this Agreement and the Plan, and, as an express condition to the grant of the Shares under this Agreement, agrees to be bound by the terms of both this Agreement and the Plan.
Exhibit A to
Director Deferred Share Unit Agreement
Director: %%FIRST_NAME%-% %%LAST_NAME%-%
Grant Date: %%OPTION_DATE,’Month DD, YYYY’%-%
Deferred Share Units granted hereby: %%TOTAL_SHARES_GRANTED,'999,999,999'%-%
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Vesting Date
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Shares Vesting
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%%VEST_DATE_PERIOD1,’Month DD, YYYY’%-%
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%%SHARES_PERIOD1,'999,999,999'%-%
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Director Deferred Share Unit Agreement
This Director Deferred Share Unit Agreement (the “Agreement”), by and between Univar Solutions Inc., a Delaware corporation (the “Company”), and the director whose name is set forth on Exhibit A hereto (the “Director”), is being entered into pursuant to the Univar Solutions Inc. 2017 Omnibus Equity Incentive Plan (as the same may be amended, modified or supplemented from time to time, the “Plan”) and is dated as of the Grant Date specified on Exhibit A hereto (the “Grant Date”). Capitalized terms that are used but not defined herein shall have the respective meanings given to them in the Plan.
WHEREAS, the Board of Directors of the Company (the “Board”) authorized the Director’s annual compensation for service as a member of the Board (the “Annual Fee”), a portion of which will be paid in the form of equity in the Company.
NOW, THEREFORE, the Company and the Director hereby agree as follows:
1.Grant of Deferred Share Units. Effective as of the Grant Date, the Company hereby evidences and confirms its grant to the Director the number of Deferred Share Units set forth on Exhibit A, as satisfaction of the deferral of the equity portion of the Director’s Annual Fee for the current year that would otherwise be payable on the Grant Date (the “Shares”). The number of Deferred Share Units will be set forth on Exhibit A hereto. This Agreement is entered into pursuant to, and the Deferred Share Units granted hereunder are subject to, the terms and conditions of the Plan, which are incorporated by reference herein; it being understood that this deferral is made pursuant to the Director’s irrevocable election on a form provided by the Company not later than the time permitted by Section 409A or similar provision (the “Applicable Section”) of the Code (if any). If there is any inconsistency between any express provision of this Agreement and any express term of the Plan, the express term of the Plan shall govern. No fractional Deferred Share Units are granted hereby.
2.Vesting and Forfeiture.
(a)Vesting. Except as otherwise provided in this Section 2, the Shares granted hereunder shall become vested, if at all, on the earlier to occur of (i) the first anniversary of the Grant Date or (ii) the date of the Company’s annual meeting of stockholders in the year following the year of the Grant Date (the “Vesting Date”), subject to the Director’s continued service on the Board from the Grant Date until the Vesting Date.
(b)Effect of Termination of Services.
(i) Death or Disability. If the Director’s service on the Board is terminated due to the Director’s death or Disability (each, a “Special Termination”), all outstanding unvested Shares shall vest as of the date of such
Special Termination. Vested Shares shall be settled as provided in Section 3 of this Agreement.
(ii) Any Other Reason. Upon termination of the Director’s services on the Board for any reason other than a Special Termination (whether initiated by the Company or by the Director), any unvested Shares shall be forfeited and canceled effective as of the date of such termination.
(c) Effect of a Change in Control. In the event of a Change in Control occurring prior to the Vesting Date, the treatment of any unvested Shares shall be governed by Article XIV of the Plan.
(d)Discretionary Acceleration. Notwithstanding anything contained in this Agreement to the contrary, the Administrator, in its sole discretion, may accelerate the vesting with respect to any Shares under this Agreement, at such times and upon such terms and conditions as the Administrator shall determine.
3.Settlement of Deferred Share Units.
(a)Timing of Settlement. The Deferred Share Units shall be settled into an equal number of shares of Company Common Stock on the earlier of the termination of the Director’s service on the Board (if vested) and a Change in Control that constitutes a “change in control” within the meaning of the Applicable Section (such date, the “Settlement Date”).
(b)Mechanics of Settlement. On the Settlement Date, the Company shall electronically issue to the Director one whole share of Company Common Stock for each Deferred Share Unit, and, upon such issuance, the Director’s rights in respect of such Deferred Share Unit shall be extinguished.
4.Securities Law Compliance. Notwithstanding any other provision of this Agreement, the Director may not sell the shares of Company Common Stock acquired upon settlement of the Deferred Share Units unless such shares are registered under the Securities Act of 1933, as amended (the “Securities Act”), or, if such shares are not then so registered, such sale would be exempt from the registration requirements of the Securities Act. The sale of such shares must also comply with other applicable laws and regulations governing the Company Common Stock, and the Director may not sell the shares of Company Common Stock if the Company determines that such sale would not be in material compliance with such laws and regulations.
5.Restriction on Transfer; Non-Transferability of Deferred Share Units. The Deferred Share Units are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by
gift, operation of law or otherwise) other than to a trust for the benefit of the Director or by will or by the laws of descent and distribution to the estate of the Director upon the Director’s death. Any purported transfer in violation of this Section 5 shall be void ab initio.
6.Miscellaneous.
(a)Tax Withholding. Upon the settlement of Deferred Share Units, the Director shall be obligated to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding or other similar charges or fees that may arise in connection therewith.
(b)Dividend Equivalents. Unless otherwise determined by the Administrator, in the event that the Company pays any ordinary dividend in cash on a share of Company Common Stock following the Grant Date and prior to an applicable Settlement Date, there shall be credited to the account of the Director in respect of each outstanding Deferred Share Unit an amount equal to the amount of such dividend. The amount so credited shall be deferred (without interest, unless the Administrator determines otherwise) until the settlement of such related Deferred Share Unit and then paid in cash, but shall be forfeited upon the forfeiture of such related Deferred Share Unit.
(c)Authorization to Share Personal Data. The Director authorizes the Company or any Affiliate of the Company that has or lawfully obtains personal data relating to the Director to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent reasonably appropriate in connection with this Agreement or the administration of the Plan.
(d)No Rights as Stockholder; No Voting Rights. Except as provided in Section 6(b), the Director shall have no rights as a stockholder of the Company with respect to any shares of Company Common Stock covered by the Deferred Share Units prior to the issuance of such shares of Company Common Stock.
(e)No Right to Continued Service on Board. Nothing in this Agreement shall be deemed to confer on the Director any right to continue in the service of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such service at any time.
(f)Interpretation. The Administrator shall have full power and discretion to construe and interpret the Plan (and any rules and regulations issued thereunder) and this Agreement. Any determination or interpretation by the Administrator under or pursuant to the Plan or this Agreement shall be final and binding and conclusive on all persons affected hereby.
(g)Consent to Electronic Delivery. By entering into this Agreement and accepting the Deferred Share Units evidenced hereby, the Director hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Director pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, this Agreement and the Deferred Share Units via the Company’s website or other electronic delivery.
(h)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 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 assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
(i)Waiver. Any party hereto or beneficiary hereof may by written notice to the other parties (A) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, (B) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and (C) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.
(j)Amendment. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Director and the Company.
(k)Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Director without the prior written consent of the other party.
(l)Applicable Law. This Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction.
(m)Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right he, she or it may have to a trial by jury in respect of any suit, action or proceeding arising out of this Agreement or any transaction contemplated hereby. Each party (i) 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 (ii) acknowledges that he, she or it and the other party hereto have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this Section 6(m).
(n)Limitations of Actions. No lawsuit relating to this Agreement may be filed before a written claim is filed with the Administrator and is denied or deemed denied as provided in the Plan and any lawsuit must be filed within one year of such denial or deemed denial or be forever barred.
(o)Section and Other Headings, etc. 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.
(o)Acceptance of Deferred Share Unit Award and Agreement. The Director has indicated his or her consent and acknowledgement of the terms of this Agreement and receipt of the Plan by electing to receive Deferred Share Units. In any event, the Director shall be deemed to accept this Agreement unless the Director provides the Company with written notice to the contrary prior to the expiration of the 60-day period following the Grant Date. The Director acknowledges receipt of the Plan, represents to the Company that he or she has read and understood this Agreement and the Plan, and, as an express condition to the grant of the Shares under this Agreement, agrees to be bound by the terms of both this Agreement and the Plan.
Exhibit A to
Director Deferred Share Unit Agreement
Director: %%FIRST_NAME%-% %%LAST_NAME%-%
Grant Date: %%OPTION_DATE,’Month DD, YYYY’%-%
Deferred Share Units granted hereby: %%TOTAL_SHARES_GRANTED,'999,999,999'%-%
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Vesting Date
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Shares Vesting
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%%VEST_DATE_PERIOD1,’Month DD, YYYY’%-%
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%%SHARES_PERIOD1,'999,999,999'%-%
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Director Restricted Stock Agreement
This Director Restricted Stock Agreement (the “Agreement”), by and between Univar Solutions Inc., a Delaware corporation (the “Company”), and the director whose name is set forth on Exhibit A hereto (the “Director”), is being entered into pursuant to the Univar Solutions Inc. 2017 Omnibus Equity Incentive Plan (as the same may be amended, modified or supplemented from time to time, the “Plan”) and is dated as of the Grant Date specified on Exhibit A hereto (the “Grant Date”). Capitalized terms that are used but not defined herein shall have the respective meanings given to them in the Plan.
WHEREAS, the Board of Directors of the Company (the “Board”) authorized the Director’s annual compensation for service as a member of the Board (the “Annual Fee”), a portion of which will be paid in the form of equity in the Company.
NOW, THEREFORE, the Company and the Director hereby agree as follows:
Section 1.Grant of Shares of Restricted Stock. The Company hereby evidences and confirms its grant to the Director, effective as of the Grant Date, of the aggregate number of shares of Restricted Stock as set forth on Exhibit A hereto, as satisfaction of the equity portion of the Director’s Annual Fee for the current year (the “Shares”). This Agreement is entered into pursuant to, and the Shares granted hereunder are subject to, the terms and conditions of the Plan, which are incorporated by reference herein. If there is any inconsistency between any express provision of this Agreement and any express term of the Plan, the express term of the Plan shall govern.
Section 2.Vesting and Forfeiture.
(a)Vesting. Except as otherwise provided in this Section 2, the Shares granted hereunder shall become vested, if at all, on the earlier to occur of (i) the first anniversary of the Grant Date or (ii) the date of the Company’s annual meeting of stockholders in the year following the year of the Grant Date (the “Vesting Date”), subject to the Director’s continued service on the Board from the Grant Date until the Vesting Date.
(b)Effect of Termination of Services.
(i) Death or Disability. If the Director’s service on the Board is terminated due to the Director’s death or Disability (each, a “Special Termination”), all outstanding unvested Shares shall vest as of the date of such Special Termination.
(ii) Any Other Reason. Upon termination of the Director’s services on the Board prior to the Vesting Date for any reason other than a Special Termination (whether initiated by the Company or by the Director), any unvested Shares shall be forfeited and canceled effective as of the date of such termination.
(c)Effect of a Change in Control. In the event of a Change in Control occurring prior to the Vesting Date, the treatment of any unvested Shares shall be governed by Article XIV of the Plan.
(d)Discretionary Acceleration. Notwithstanding anything contained in this Agreement to the contrary, the Administrator, in its sole discretion, may accelerate the vesting with respect to any Shares under this Agreement, at such times and upon such terms and conditions as the Administrator shall determine.
Section 3.Restriction on Transfer of Shares. Prior to the vesting thereof, the Shares are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise), other than to a trust for the benefit of the Director or by will or by the laws of descent and distribution to the estate of the Director upon the Director’s death. Any purported transfer in violation of this Section 3 shall be void ab initio. Furthermore, notwithstanding any other provision of this Agreement, the Director may not sell the Shares unless such shares are registered under the Securities Act of 1933, as amended (the “Securities Act”), or, if such shares are not then so registered, such sale would be exempt from the registration requirements of the Securities Act. The sale of the Shares must also comply with other applicable laws and regulations governing the Common Stock, and the Director may not sell the Shares if the Company determines that such sale would not be in material compliance with such laws and regulations.
Section 4.Miscellaneous.
(a)Authorization to Share Personal Data. The Director authorizes the Company or any Affiliate of the Company that has or lawfully obtains personal data relating to the Director to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent reasonably appropriate in connection with this Agreement or the administration of the Plan.
(b)No Right to Continued Service on Board. Nothing in this Agreement shall be deemed to confer on the Director any right to continue in the service of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such service at any time.
(c)Interpretation. The Administrator shall have full power and discretion to construe and interpret the Plan (and any rules and regulations issued thereunder) and this Agreement. Any determination or interpretation by the Administrator under or pursuant to the Plan or this Agreement shall be final and binding and conclusive on all persons affected hereby.
(d)Consent to Electronic Delivery. By entering into this Agreement and accepting the Shares evidenced hereby, the Director hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Director pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, this Agreement and the Shares via the Company’s website or other electronic delivery.
(e)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 assigns. No provision of 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 assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
(f)Waiver. Any party hereto or beneficiary hereof may by written notice to the other parties (A) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, (B) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and (C) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.
(g)Amendment. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Director and the Company.
(h)Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Director without the prior written consent of the other party.
(i)Applicable Law. This Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction.
(j)Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right he, she or it may have to a trial by jury in respect of any suit, action or proceeding arising out of this Agreement or any transaction contemplated hereby. Each party (i) 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 (ii) acknowledges that he, she or it and the other party hereto have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this Section 4(j).
(k)Limitations of Actions. No lawsuit relating to this Agreement may be filed before a written claim is filed with the Administrator and is denied or deemed denied as provided in the Plan and any lawsuit must be filed within one year of such denial or deemed denial or be forever barred.
(l)Section and Other Headings, etc. 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.
(m)Acceptance of Restricted Stock Award and Agreement. The Director has indicated his or her consent and acknowledgement of the terms of this Agreement and receipt of the Plan by electing to receive Restricted Stock. In any event, the Director shall be deemed to accept this Agreement unless the Director provides the Company with written notice to the contrary prior to the expiration of the 60-day period following the Grant Date. The Director acknowledges receipt of the Plan, represents to the Company that he or she has read and understood this Agreement and the Plan, and, as an express condition to the grant of the Shares under this Agreement, agrees to be bound by the terms of both this Agreement and the Plan.
Exhibit A to Director Restricted Stock Agreement
Director: %%FIRST_NAME%-% %%LAST_NAME%-%
Grant Date: %%OPTION_DATE,’Month DD, YYYY’%-%
Shares of Restricted Stock granted hereby: %%TOTAL_SHARES_GRANTED,'999,999,999'%-%
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Vesting Date
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Shares Vesting
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%%VEST_DATE_PERIOD1,’Month DD, YYYY’%-%
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%%SHARES_PERIOD1,'999,999,999'%-%
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Director Restricted Stock Unit Agreement
This Director Restricted Stock Unit Agreement (the “Agreement”), by and between Univar Solutions Inc., a Delaware corporation (the “Company”), and the Director whose name is set forth on Exhibit A hereto (the “Director”), is being entered into pursuant to the Univar Solutions Inc. 2017 Omnibus Equity Incentive Plan (as the same may be amended, modified or supplemented from time to time, the “Plan”) and is dated as of the Grant Date specified on Exhibit A hereto (the “Grant Date”). Capitalized terms that are used but not defined herein shall have the respective meanings given to them in the Plan.
WHEREAS, the Board of Directors of the Company (the “Board”) authorized the Director’s annual compensation for service as a member of the Board (the “Annual Fee”), a portion of which will be paid in the form of cash.
NOW, THEREFORE, the Company and the Director hereby agree as follows:
Section 1. Grant of Restricted Stock Units. The Company hereby evidences and confirms its grant to the Director, effective as of the Grant Date, of the number of Restricted Stock Units set forth on Exhibit A hereto, as satisfaction of the equity portion of the Director’s Annual Fee for the current year. This Agreement is entered into pursuant to, and the Restricted Stock Units granted hereunder are subject to, the terms and conditions of the Plan, which are incorporated by reference and made part of the Agreement. If there is any inconsistency between any express provision of this Agreement and any express term of the Plan, the express term of the Plan shall govern. No fractional Restricted Stock Units are granted hereby.
Section 2. Vesting of Restricted Stock Units. The Restricted Stock Units granted hereby are fully vested as of the Grant Date.
Section 3. Settlement of Restricted Stock Units.
(a)Timing of Settlement. Subject to Section 6(a), any outstanding Restricted Stock Units that became vested on a Grant Date shall be settled into an equal number of shares of Company Common Stock on a date selected by the Company that is within 30 days following such Grant Date (each such date, a “Settlement Date”).
(b)Mechanics of Settlement. On each Settlement Date, the Company shall electronically issue to the Director one whole share of Company Common Stock for each Restricted Stock Unit that then became vested and, upon such issuance, the Director’s rights in respect of such Restricted Stock Unit shall be extinguished. No fractional shares of Company Common Stock shall be issued.
Section 4.Securities Law Compliance. Notwithstanding any other provision of this Agreement, the Director may not sell the shares of Company Common Stock acquired upon settlement of the Restricted Stock Units unless such shares are registered under the Securities Act of 1933, as amended (the “Securities Act”), or, if such shares are not then so registered, such sale would be exempt from the registration requirements of the Securities Act. The sale of such shares must also comply with other applicable laws and regulations governing the Company Common Stock, and the Director may not sell the shares of Company Common Stock if the Company determines that such sale would not be in material compliance with such laws and regulations.
Section 5.Restriction on Transfer; Non-Transferability of Restricted Stock Units. The Restricted Stock Units are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) other than to a trust for the benefit of the Director or by will or by the laws of descent and distribution to the estate of the Director upon the Director’s death. Any purported transfer in violation of this Section 5 shall be void ab initio.
Section 6.Miscellaneous.
(a)Tax Withholding. Upon the settlement of Restricted Stock Units, the Director shall be obligated to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding or other similar charges or fees that may arise in connection therewith.
(b)Dividend Equivalents. Unless otherwise determined by the Administrator, in the event that the Company pays any ordinary dividend in cash on a share of Company Common Stock following the Grant Date and prior to an applicable Settlement Date, there shall be credited to the account of the Director in respect of each outstanding Restricted Stock Unit an amount equal to the amount of such dividend. The amount so credited shall be deferred (without interest, unless the Administrator determines otherwise) until the settlement of such related Restricted Stock Unit and then paid in cash, but shall be forfeited upon the forfeiture of such related Restricted Stock Unit.
(c)Authorization to Share Personal Data. The Director authorizes the Company or any Affiliate of the Company that has or lawfully obtains personal data relating to the Director to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent reasonably appropriate in connection with this Agreement or the administration of the Plan.
(d)No Rights as Stockholder; No Voting Rights. Except as provided in Section 6(b), the Director shall have no rights as a stockholder of the Company with respect to any shares of Company Common Stock covered by the Restricted Stock Units prior to the issuance of such shares of Company Common Stock.
(e)No Right to Continued Service on Board. Nothing in this Agreement shall be deemed to confer on the Director any right to continue in the service of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such service at any time.
(f)Interpretation. The Administrator shall have full power and discretion to construe and interpret the Plan (and any rules and regulations issued thereunder) and this Agreement. Any determination or interpretation by the Administrator under or pursuant to the Plan or this Agreement shall be final and binding and conclusive on all persons affected hereby.
(g)Consent to Electronic Delivery. By entering into this Agreement and accepting the Restricted Stock Units evidenced hereby, the Director hereby consents to the delivery of information (including, without limitation, information required to be delivered to the Director pursuant to applicable securities laws) regarding the Company and the Subsidiaries, the Plan, this Agreement and the Restricted Stock Units via the Company’s website or other electronic delivery.
(h)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 assigns. No provision of 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 assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.
(i)Waiver. Any party hereto or beneficiary hereof may by written notice to the other parties (A) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, (B) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and (C) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s
rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.
(j)Amendment. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Director and the Company.
(k)Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Director without the prior written consent of the other party.
(l)Applicable Law. This Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction.
(m)Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right he, she or it may have to a trial by jury in respect of any suit, action or proceeding arising out of this Agreement or any transaction contemplated hereby. Each party (i) 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 (ii) acknowledges that he, she or it and the other party hereto have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this Section 6(m).
(n)Limitations of Actions. No lawsuit relating to this Agreement may be filed before a written claim is filed with the Administrator and is denied or deemed denied as provided in the Plan and any lawsuit must be filed within one year of such denial or deemed denial or be forever barred.
(o)Section and Other Headings, etc. 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.
(p)Acceptance of Restricted Stock Units and Agreement. The Director has indicated his or her consent and acknowledgement of the terms of this Agreement by electing to receive cash payments in shares of Common Stock. In any event, the Director shall be deemed to accept this Agreement unless the Director provides the Company with written notice to the contrary prior to the expiration of the 60-day period following the Grant Date, in which case, the Director shall receive cash payment of equivalent value. The Director acknowledges receipt of the Plan, represents to the Company that he or she has read and understood this
Agreement and the Plan, and, as an express condition to the grant of the Restricted Stock Units under this Agreement, agrees to be bound by the terms of both this Agreement and the Plan.
Exhibit A to Director Restricted Stock Unit Agreement
Director: %%FIRST_NAME%-% %%LAST_NAME%-%
Grant Date: %%OPTION_DATE,’Month DD, YYYY’%-%
Restricted Stock Units granted hereby: %%TOTAL_SHARES_GRANTED,'999,999,999'%-%
Code Handbook
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CEO statement
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Does this apply to me?
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What about our other policies, procedures, or other requirements?
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Univar Solutions cultural values
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What is expected of us?
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What is expected of managers?
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Our commitment to integrity and safety
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Honest and ethical conduct
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Speaking up – raising a concern
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Environmental, health and safety
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Corporate responsibility and sustainability
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Fair employment practices
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Preventing discrimination, harassment, or violence in the workplace
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Ensuring a substance abuse–free workplace
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Preventing corruption and bribery
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Antitrust and fair competition
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Avoiding insider trading
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International trade: import and export compliance
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Avoiding conflicts of interest
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Gifts and business entertainment
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Accurate financial reporting and accounting and record keeping
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Protecting Univar Solutions’ assets, information, and data
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Protecting intellectual property
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CEO statement
Dear Colleague,
Doing the right thing is critical to how Univar Solutions operates, which means ethical business conduct in all things. This underpins our vision of being the most valued chemical and ingredient distributor in the world. By incorporating our guiding principles and cultural values, our Code Handbook puts into words the way we should all act as One Univar Solutions and helps us remain accountable by sharing the Company’s expectations.
Be sure to take a moment and review this important material so that you can live our cultural values and work in a manner that is aligned with our Code Handbook. I want every employee to know what to do when a difficult situation arises and not hesitate to stop and question it. We are the ones who make Univar Solutions a place that demonstrates the Company’s commitment to ethical business.
Always remember that as Univar Solutions, we do what we say and we do the right thing—it is truly the responsibility of each of us to continue this pledge.
Sincerely,
David Jukes
President & Chief Executive Officer
Does this apply to me?
Our Code Handbook applies to every employee of Univar Solutions and all of its subsidiaries. Affiliates, third-party representatives, as well as vendors, consultants, and members of Univar Solutions’ Board of Directors are an extension of Univar Solutions, and their behavior can have a direct impact on our organization. For this reason, we work with business partners who share our commitment to ethics and compliance. We expect all of our partners and employees to act in a manner consistent with our Code Handbook.
Waivers
Waivers to this Code Handbook for executive officers or directors may be made only by the Board of Directors or an authorized Board committee.
What about our other policies, procedures, or other requirements?
This Code applies to all of our activities. In many of the areas covered, we will have more detailed policies and procedures in place. These policies and procedures operate in addition to this Code, adding detail to the
general principles set out here. In some cases, those policies will set higher standards than those contained
in this Code. If that is the case, you should always follow the higher standards.
Is it legal?
Is it consistent with our policies, Guiding Principles, or Code Handbook?
Is it consistent with our long-term goals and interests?
Have I thought about the consequences and risks involved?
Would I be comfortable with my decision if it was made public?
If the answer to any of these questions is “NO” or you are uncertain, STOP and seek guidance.
Univar Solutions cultural values
SERIOUS ABOUT SAFETY
WE DO WHAT WE SAY
WHERE PEOPLE MATTER
VALUABLE TO OTHERS
TOGETHER WE WIN
SERIOUS ABOUT SAFETY
We prepare to prevent.
Safety comes before profit.
Spot it, stop it.
WE DO WHAT WE SAY
We stand by our word and the trust of others.
We make commitments we can keep.
We hold ourselves accountable.
WHERE PEOPLE MATTER
We care about others and value their contributions.
We seek diversity and inclusion.
We grow ourselves to grow our business.
VALUABLE TO OTHERS
We solve problems with our customers and suppliers.
We improve the communities where we live and work.
TOGETHER WE WIN
We play to win.
We work toward common goals.
We use common processes to continuously improve.
What is expected of us?
Every member of Univar Solutions has a responsibility to maintain our reputation for high ethical standards and safety. It is expected that you:
•Do everything safely and with integrity. This means being professional, honest, and following safety procedures.
•Read and understand our Code Handbook and other policies that pertain to your job.
•Complete all Company trainings that are required for your position in a timely manner and apply the
knowledge to your daily tasks.
•Speak up and report concerns about possible unethical behavior, violations of policies, procedures, laws, or regulations.
What is expected of managers?
Managers of Univar Solutions have an added responsibility to:
•Be a role model. Lead with integrity; promote a culture of ethics, respect, and safety.
•Keep an open door; encourage your team to speak up and raise questions or concerns.
•Be supportive of your team and help team members understand what is expected of them.
•Understand it is your obligation to report any unacceptable behavior or ethical issues brought to
your attention.
•Never retaliate or allow others to retaliate against someone who raised concerns.
Q&A
Q: What happens if I do not follow the Policy?
A: Violating our Code Handbook or any other Company policy may result in disciplinary action, civil and/or criminal penalties.
Our commitment to integrity and safety
Honest and ethical conduct
Why is it important?
Doing everything safely and with integrity means we must always conduct ourselves in an honest, candid, lawful, and ethical manner. Making ethical decisions requires knowing our ethical obligations, respecting the importance of ethics in conducting our business, and using our best judgment when making decisions with ethical implications.
What is required?
Complying with laws, regulations, and rules
Complying with the law is fundamental to our company values. We comply with all applicable laws, regulations, rules, and regulatory orders applicable in the country, state, and locations where we do business. If a Univar Solutions policy or our Code Handbook conflicts with an applicable law, we will always comply with the law.
Complying with our code and policies
Our commitment to growing our business is always aligned with our commitment to integrity. Each of us has a responsibility to report incidents or violations of any company standards, procedures, policies, or our Code Handbook as part of that commitment.
This Code Handbook does not change the employment relationship between you and the Company, nor does it modify your legal or other rights. Failure to read or acknowledge this Code Handbook, however, does not exempt anyone from the responsibility to comply with
the Code Handbook, applicable laws, regulations, and applicable Univar Solutions policies.
What to look out for
When faced with ethical questions or dilemmas that our Code Handbook may not directly address, we expect our employees to seek advice from leadership, legal, or human resources on the issue to minimize any ethical issues for themselves or the Company.
If you are unsure about a potential legal or compliance issue or violation, seek advice from the Legal &
Compliance department.
For questions about our Code Handbook, please contact the Legal & Compliance department. For questions about specific policies or operating procedures, speak with your supervisor, manager, or the owner of the specific policy or procedures.
Q&A
Q: What if I’m facing a situation that is not covered in our Code Handbook?
A: Our Code Handbook cannot address all of the issues that may arise at work. If you’re ever unsure of the right course of action, check our policies. If the answer is still unclear, it’s always appropriate—in any situation—to ask for help. Start with your manager or any of the resources identified in the Code.
Speaking up – raising a concern
Why is it important?
We rely on you to tell us when something isn’t right. If you witness or experience something at work that does not seem right or become aware of a situation that compromises our Code Handbook or cultural values, report it—your voice counts.
Bringing your concerns to light ensures we address and resolve issues before serious harm occurs. Keeping quiet can result in serious damage to the health and safety of yourself, your coworkers, and the community. It can also result in loss of employee morale, company reputation and/or public trust, financial penalties, and/or fines for you and the Company.
What is required?
Univar Solutions’ open door policy
We encourage you to raise work-related issues or concerns with your direct supervisor or manager as soon as possible. When necessary, you should feel free to raise an issue with another manager, up to and including
our executive officers. We are committed to prioritizing and addressing all employee concerns efficiently and respectfully. If you are not comfortable raising your concerns with a manager, you may always contact the Human Resources department or you may report your concern to our Compliance and Ethics Alertline.
Compliance and Ethics Alertline
Univar Solutions provides a reporting service for suspected issues or violations. You may contact the reporting line by telephone or through a web submission. For your local phone number or the independent reporting site, please access the Alertline information page on Universe or contact the Legal & Compliance department. The Alertline is available 24 hours a day, 7 days a week.
Protection from retaliation
We have a duty to report suspected wrongdoing and must be able to do so without fear of retaliation.
Univar Solutions does not tolerate retaliation or threats of retaliation for reporting a violation or suspected
violation of the law, company policies, or this Code Handbook when you make the report in good faith.
Retaliation can take many forms, from unfair dismissal to bullying or derogatory comments by managers or peers. We take all claims of retaliation seriously, investigate each one thoroughly, and take appropriate
action. We consider acts of retaliation to be acts of misconduct, which could result in disciplinary action
or dismissal.
Rights to report to the government
While Univar Solutions encourages you to use its open door policy or Compliance and Ethics Alertline to report concerns, these reporting channels do not prevent employees from reporting suspected hazards or
violations of law or regulations to the government or appropriate regulators. Univar Solutions strictly prohibits retaliation against any employee who makes a good faith external report.
What to look out for
If you witness or experience something at work that does not seem right or become aware of a situation that compromises our Code Handbook or cultural values, report it—your voice counts.
Q&A
Q: Who answers Univar Solutions’ Alertline calls? Do I have to use English?
A: A third-party vendor, Navex Global, answers Univar Solutions’ Alertline. Navex Global has no affiliation with Univar Solutions and cannot trace calls. The website and hotline operate in over 20 languages.
Q: What happens once I contact the Alertline?
A: Once you report your concern, an investigator is assigned to your case and will contact you (if contact details are provided). However, even if you submit an anonymous report, the Alertline website provides the ability for you and your investigator to communicate without revealing the reporter’s name or identity. At any time, you may call or log into the Alertline website to provide more information, even if you reported anonymously. We investigate all appropriate concerns reported to the Alertline. However, due to confidentiality and privacy reasons, we are not always able to discuss the findings with the reporter.
Q: What if I do not have all the facts?
A: It is helpful to provide as much information as you have, but you do not need to have all the evidence to report a concern. Univar Solutions will investigate your concern and take appropriate action.
Environmental, health and safety
Why is it important?
Univar Solutions is Serious about Safety. We are committed to safety, health, and the environment of our employees and communities. All employees are accountable for their own safety and responsible for spotting and helping eliminate unsafe conditions. We must also help to protect our facilities from unauthorized breaches by reporting suspected threats to our physical security and following company procedures.
Safe transport and storage of products, safe operational practices, and safe working conditions enable us to protect our employees, customers, suppliers, and the environment. We comply with all applicable environmental and safety laws and standards and regulations, as well as company Environmental, Health and Safety policies and procedures.
What is required?
•Follow all Environmental, Health and Safety policies and procedures that apply to your work.
•Attend training that is provided on those policies and procedures.
•If you see something that can be improved, such as unsafe conditions or behaviors, or if you’re not sure how to do something safely, implement Spot It & Stop It.
•Managers and directors bear a particular responsibility to provide clear leadership on health and safety issues.
What to look out for
•Any unsafe practice—even if a member of management is sanctioning it.
•Any risk that has not already been spotted and for which improvements can be made.
Q&A
Q: My boss has just told me to do something, and I know it’s not safe. Should I move forward?
A: No. If you are not satisfied that an activity is safe, do not proceed. Discuss the issue and agree how the work can be done in a safe manner. You can always raise a concern if you need to.
Corporate responsibility and sustainability
Why is it important?
We believe that, in a world of finite resources, social challenges, and a changing climate, we all have a responsibility to work toward a sustainable future. As a leading global chemical distributor, we understand the need to responsibly manage the economic, environmental, and social impacts of our activities.
Our Global Sustainability Policy sets out our commitment and principles to reduce our impacts throughout our
operations and supply chain. Our performance against the requirements and goals originating from this and associated policies is detailed in the annual Univar Solutions Sustainability Report. For questions about Univar Solutions’ approach to sustainability, please contact sustainability@univar.com.
What is required?
We ask all our employees to consider the short- and long-term effects to the environment and the community when they make business decisions. Univar Solutions’ Six Key Areas for Sustainability list focus areas where we can all make a difference.
•Energy & Emissions
•Resource Use
•Responsible Handling
•Safety
•Sustainable Supply Chain
•Equality and Diversity
What to look out for
•Activities that compromise any of the Six Key Areas
•Activities that are not energy efficient
•Opportunities to better our practice of safe chemical handling
Q&A
Q: How does my role relate to Univar Solutions’ Six Key Areas for Sustainability? How can I make a difference?
A: We all have our part to play and, collectively, we can make a difference. Please read Univar Solutions’
Sustainability Report to help identify where your actions count most. You may well think that your actions are small, but you are not alone, and if we all act as One Univar Solutions, we will meet our collective goals.
Q: I received a Corporate Responsibility/Sustainability questionnaire from a customer, should I complete it?
A: Univar Solutions’ sustainability resources will help you complete any sustainability-related requests.
If you would like support, please email sustainability@univar.com.
Q: I see many areas across our warehouses and offices where waste is produced unnecessarily, but I don’t feel like it is my place to suggest changes. What should I do?
A: We are all the eyes and ears of Univar Solutions. If you see areas that can be improved, you can bring your suggestions to your supervisor or line manager who in turn can spread these good practices throughout Univar Solutions. We all own sustainability as it is our home and responsibility.
Fair employment practices
Why is it important?
Univar Solutions is committed to fair employment practices for all employees regardless of race, color, nationality, gender, age, disability, sexual orientation, or any other status protected by law. We value diversity in our workforce and provide equal employment opportunities for all applicants and employees.
We comply with employment laws in all markets where we operate. Univar Solutions will not tolerate abuses of applicable labor standards, including any forced labor or employment of workers below the minimum legal age
of employment.
What is required?
•We must always treat employees and job applicants with dignity and respect.
•We must ensure no employee or job applicant is adversely treated because of a protected status.
What to look out for
Anyone discriminating against any person based on their age, gender, pregnancy, marital status, sexual orientation, religion, race, disability, union membership, political affiliation, or other protected characteristic.
•If you believe that you or another employee has been subjected to a violation of applicable labor standards, report it immediately to a supervisor, manager, upper management, Human Resources department, or the Legal & Compliance department.
Q&A
I’m the hiring manager for a position that involves international work. The best qualified person I’ve interviewed is a woman, but I know that some businessmen in some of these countries do not like dealing with women. Her skills are the best match, but her gender might affect our business.
Q: What should I do?
A: It is against company policy to exclude a job candidate because of gender. It is important that we follow the right path in what we do, regardless of location.
Preventing discrimination, harassment, or violence in the workplace
Why is it important?
All employees of Univar Solutions have the right to work in an environment free from discrimination, harassment, and/or acts or threats of violence. We are committed to a safe working environment and embrace a culture of mutual respect and appreciation for the differences of others.
What is required?
•We must help create an environment where colleagues can contribute, develop, and fully utilize their talents.
•Keep an open mind to new ideas and points of view.
•Threats or acts of violence against coworkers, customers, or business partners are not permitted. If you observe or experience a threat or act of violent behavior in or near your workplace, you must report it immediately.
•Managers who receive information about a threat or act of violence must notify the Human Resources department promptly.
•Never bully or harass others and never tolerate any action that could be seen as harassment or bullying.
•Never inappropriately use personal information; respect the privacy of all employees, job applicants, customers, or anyone with whom we interact.
•Understand that offensive messages, derogatory remarks, and inappropriate jokes are never acceptable.
What to look out for
•Any behavior that creates a hostile or intimidating workplace, such as inappropriate jokes or comments.
•Excessively aggressive or violent behavior or stated threats of violence
•Retaliation against someone who reported wrongdoing
Q&A
My colleague constantly makes jokes that sometimes poke fun at gender, race, religion, and other personal differences. I find some of them offensive.
Q: What should I do?
A: Humor is very much a matter of personal taste; however, these types of jokes are not appropriate for the workplace. Speak with your supervisor, upper management, Human Resources, or other appropriate reporting channels including the Alertline. Jokes, graphics, verbal comments, gestures, and other communications that embarrass or degrade people damage our working environment.
Ensuring a substance abuse–free workplace
Why is it important?
Univar Solutions’ zero tolerance for substance abuse reinforces our commitment to safety and minimizes the threat of safety-related accidents. Alcohol or drug abuse can endanger the health, safety, and security of our employees, customers, suppliers, and community; it can greatly affect the quality, effectiveness, and reputation of our business.
What is required?
•Zero tolerance for substance abuse. Anyone found working while under the influence will be subject to immediate disciplinary action, including and up to termination.
•We must all comply with Univar Solutions’ Drug and Alcohol Policy with respect to the use or possession of narcotics and other controlled substances on Univar Solutions premises.
What to look out for
If you suspect someone is compromising Univar Solutions’ Drug and Alcohol Policy, report it immediately to your manager, Human Resources, or Legal & Compliance department.
Q&A
Elaine suspects that a coworker is abusing prescription drugs. Even though the individual has a doctor’s prescription and the drug is not an illegal substance, Elaine feels it is dangerous for that person to be operating equipment and handling Univar Solutions product.
Q: Should Elaine tell someone?
A: Yes. Abuse of legally prescribed drugs can be as dangerous as abuse of illegal substances. Elaine should share her concerns with her manager, Human Resources, and any other appropriate reporting channels.
Preventing corruption and bribery
Why is it important?
Anti-corruption laws prohibit companies and individuals from gaining an unfair advantage by giving bribes to government officials or private parties. We will comply with the UK Bribery Act, the United States Foreign Corrupt Practices Act, and all applicable international anti-corruption laws
and conventions.
What is required?
•Never offer or accept bribes or kickbacks or facilitate corrupt activities of any kind. This prohibition on bribes extends to third parties acting or working on behalf of Univar Solutions, such as agents, contractors, and consultants.
•Refuse any requests for payments to government officials that are not required by law or part of an existing contract agreement.
•Keep accurate books and records so that payments can be honestly described.
•Report any actual or suspected requests for bribes to your manager, the Legal & Compliance department or the Alertline.
What to look out for
Be aware of our Anti-Corruption and Anti-Bribery policies, as they provide general requirements to prevent corruption and bribery. Every employee is expected to comply with the requirements in these policies. Below are some examples of items of value that could violate company policy or even the law:
•Gifts
•Money (including cash equivalents)
•Stocks, bonds, or other securities
•Entertainment
•Meals or lodging
•Transportation
•Offers of employment for a government official or a relative of a government official
•Payment or reimbursement of travel expenses
•Discounts on Univar Solutions products not otherwise generally available
•Assumption or forgiveness of debt
•Political contributions
•Charitable contributions
•Personal favors
Q&A
I often work with an agent in another country to help navigate the local contracting process. I suspect he may be providing bribes to government officials to expedite things.
Q: What should I do?
A: If you believe an agent is acting improperly by paying bribes while working on behalf of Univar Solutions, you must cease further payments to the agent and immediately report your concerns to the Legal & Compliance department, Internal Audit, or the Alertline.
Antitrust and fair competition
Why is it important?
Antitrust laws, sometimes also called competition laws, govern the way companies behave in the marketplace. The laws generally outline how companies should deal with competitors, customers, and suppliers. Violating antitrust laws could result in criminal penalties to the individual involved, as well as the company. Competition laws protect the buyers by preventing certain types of agreements and arrangements between businesses that harm competition.
We are committed to free and open competition. We attain our competitive advantages by competing vigorously and fairly and by earning the trust and confidence of our business partners through excellence in our performance.
What is required?
Be familiar with and attend any training provided on antitrust policies and procedures. Never have discussions with competitors, whether verbal or written, on:
•Pricing, any terms that affect pricing, or supply availability to any competitor
•Dividing or allocating markets or customers (or agreeing to divide either of them)
•Making agreements with competitors about employee compensation, hiring, or recruitment
•Agreeing to boycott another business with a competitor
•Exchanging commercially sensitive information; or
•Placing inappropriate or unreasonable conditions on purchases or sales.
•Contact the Legal department if you are unsure of a situation or a competitor has approached you with questionable requests.
What to look out for
•Contact with competitors that is or could be seen as improper
•Trading of commercially sensitive information between competitors, whether directly or indirectly
•Industry association meetings or similar venues where improper topics are mentioned
•Restrictions imposed by suppliers on resale prices and sales to particular customers or suppliers
Q&A
I will be attending a trade association meeting next month, and I know that many of our competitors are also planning to attend.
Q: Would it be appropriate for me to ask our competitors about their new pricing strategies?
A: No. While trade association meetings and conferences do serve an important function in promoting information sharing and the discussion of new developments, they also raise serious competition law and antitrust concerns. As an attendee on behalf of the Company, you should avoid any discussion of prices, discounts, terms or conditions of sale, product specifications, or warranties. If you become aware of such discussions, excuse yourself immediately and contact the Legal department.
Avoiding insider trading
Why is it important?
During the course of your job, you may come across information that is not publicly available, information that could influence someone’s decision to buy or sell Univar Solutions stock. This type of information is often referred to as “inside information,” and buying or selling the securities of a company on the basis of inside information is known as “insider trading.”
Univar Solutions may come into information from business partners based on our relationships that may also be considered inside information.
Insider trading is a criminal offense in most countries.
What is required?
•Do not engage in trading any company’s securities based on inside information.
•Using inside information for personal gain, sharing it with others, or spreading false rumors is illegal and against our values.
•Be familiar with and attend training provided on Univar Solutions’ Insider Trading Policy. If you have any questions on insider trading, seek advice from the Legal department or Investor Relations.
•To avoid consequences, do not share or trade inside information with others.
•If a third party asks for information, before sharing inside information, make sure there is a confidentiality agreement in place and that you are authorized to share the information.
What to look out for
In determining whether information is considered inside information, ask yourself the following:
•Is the information open to the public by press release or by other means?
•Does information I have learned about the Company (or another company) make me want to buy or sell that company’s securities?
•If the newspaper published what I know, would it cause the value of the securities of the Company (or another company) to rise or fall?
•How would the proposed trade appear to government prosecutors if it became the subject of an investigation?
Q&A
I don’t work with stocks or securities in my job.
Q: Would prohibitions on insider trading apply to me?
A: Yes, anyone with knowledge of inside information can violate
insider trading laws if they provide material, nonpublic information to third parties who then trade stock based on that information or if you trade stock based on that information. Even during casual conversations with family and friends, you must exercise caution and not disclose any of our Company’s confidential information.
International trade: import and export compliance
Why is it important?
Sometimes governments across the world restrict or prohibit business dealings with specific people, organizations, or governments because of their involvement in criminal activities, embargoes, trade sanctions, or anti-boycott provisions.
Our supply chain organization provides logistics management in a global marketplace. There are a wide variety of complex laws and regulations that govern imports and exports of products and certain data. We have a responsibility to comply with these laws and regulations.
What is required?
•Follow Univar Solutions’ Global Trade Compliance Policy to ensure we are doing business with the proper people.
•Ensure proper background checks are conducted on agents and distributors in accordance with Univar Solutions’ policy on working with agents and distributors.
•Ensure our sales contracts and agreements are in place with appropriate trade controls.
What to look out for
•Transactions involving high-risk countries or people from high-risk countries
•The appointment of suppliers, agents, or customers based in or doing work for us in high-risk countries before suitable background checks have been done and controls put in place
•Customers reselling products they buy from us into high-risk countries
•Export arrangements that appear unusual
•Transactions involving controlled products where suitable checks have not been done
Q&A
We have used an agent in China several times. We have never conducted a background check; however, we have never had problems with this agent.
Q: Can I just trust that everything is ok?
A: We should always ensure that suitable checks are done even though we have not had any problems with a particular agent. And we must be sure the agent is conducting business on our behalf in a manner we would expect in compliance with the law and our policies.
Avoiding conflicts of interest
Why is it important?
A conflict of interest may occur when we put our own personal interests before Univar Solutions’ interests and are then unable to perform our responsibilities for the Company effectively and objectively. A conflict of
interest can arise if you have a social, financial, political, or personal interest that influences a Univar Solutions business decision or business-partner relationship.
What is required?
•If you become aware of a potential conflict, disclose it to your supervisor, manager, Human Resources, Legal department, or the Alertline.
•Avoid conflicts of interest and situations that could be perceived as conflicts of interest.
•Because our personal interests or connections could have an influence on our responsibilities to Univar Solutions, any potential conflict of interest must be disclosed.
•Never direct business or give favorable terms to a company that you, a close friend, or a family member has an interest in.
•Never hire friends or family unless they are the best qualified candidate, you are removed from the hiring process, and the relationship is disclosed and approved by management.
•Never allow situations where family members or close relatives are in direct reporting relationships or relationships involving supervision, evaluation, or determination of pay or other benefits.
What to look out for
Examples of conflicts of interest include:
•Influencing a Univar Solutions decision that would personally benefit you or a family member
•Engaging in a personal business transaction involving Univar Solutions, its property, information, or business relationships for profit or gain without first discussing it with your direct supervisor or manager and disclosing it to the Legal department as appropriate
•Learning of a business opportunity through Univar Solutions or taking the opportunity personally without first offering it to Univar Solutions
Q&A
My wife owns a cleaning service. Our office is looking for a new janitorial vendor.
Q: Can my wife provide janitorial services to Univar Solutions?
A: It would not be a conflict of interest as long as we pay close attention to and ensure the following:
1.Selection process for new service would include a fair bidding process where other companies are allowed to enter their bids.
2.You, or anyone that you may have influence over do not select the winning bid.
3.If your wife is selected, you do not manage the account for Univar Solutions and proper disclosure is made and kept within your HR file.
Gifts and business entertainment
Why is it important?
Part of doing business and maintaining business relationships in certain circumstances, locations, or cultures is the exchange of gifts and entertainment. As giving or receiving gifts or entertainment can be seen as a bribe, we must always make sure that any gifts and entertainment exchanged between Univar Solutions and third parties is associated with legitimate business purposes and within policy. The Univar Solutions Gifts and Entertainment Policy defines permissible types of gifts and the procedure for approval of gifts.
What is required?
•Gifts and entertainment should be reasonable, with a legitimate business purpose and in compliance with anti-corruption and anti-bribery laws and Company policy.
•When doing business with government entities, consult with the Legal & Compliance department to understand any compliance risks. Always obtain approval from the Legal & Compliance department prior to accepting or providing anything of value to or from a government official.
•Consult with your manager or the Legal & Compliance department if you have questions about the processes associated with gift reporting and approvals.
What to look out for
Follow these guidelines whenever offering or accepting anything of value:
•Entertainment or hospitality should be reasonable in value, quantity, and frequency.
•Gifts given or received in an effort to influence a business decision are illegal and improper.
•It does not violate the normal and accepted business ethics or laws of the country where it is provided.
•It should not violate Univar Solutions policy.
•It cannot reasonably be construed as a bribe, payoff, or kickback.
•It should not be concealed.
•Do not under any circumstances, as an employee, provide or accept cash, cash equivalents, or personal loans in conjunction with Univar Solutions business.
Q&A
A supplier called me on the phone inviting me to attend a conference. The supplier will cover any business entertainment and they offered to pay for my travel and conference fees. I need to give my response on the phone right away as they are making the travel bookings.
Q: Is it okay for me to accept the invitation and tell them to make my travel arrangements?
A: Employees may not accept airfare or lodging (regardless of value) from customers, suppliers, or other business-related third parties without prior approval from Univar Solutions’ Chief Financial Officer or General Counsel. Acceptance of conference fees and business entertainment while at the conference would be subject to the same rules and limits on gifts and entertainment as in any other circumstance.
Accurate financial reporting and accounting and record keeping
Why is it important?
Keeping complete and accurate records is important in order to enable
proper and accurate accounting and financial statements. It allows us to
run the business effectively and to report to our shareholders and other stakeholders accurately.
We must keep honest and accurate business records to:
•Make good business decisions;
•Meet legal, financial, regulatory, and management obligations; and
•Maximize the benefits of our prior knowledge and previous experience.
What is required?
•Maintain effective management and internal controls.
•Report any suspected inaccuracies or fraud.
•Ensure accurate financial reporting as related to our jobs.
•Never hide, falsify, or alter transactions or records. This applies to all records, including email communications, internal memos, and formal reports.
•We investigate all allegations of fraud in accordance with internal procedures, and any financial fraud or significant internal control deficiencies will be disclosed to Univar Solutions’ Board of Directors or Audit Committee.
What to look out for
•Inaccurate recording of financial or business performance
•False or misleading reporting
•Financial policies or procedures not being followed or being circumvented
Q&A
My manager asked me to change some numbers in our expense report. I do not have supporting
documents to support these new figures.
Q: Should I go ahead and make the change?
A: No. Without proper supporting documents, you could be falsifying records. Ask your manager for the required information and, if it is not provided, do not make the edits. Consult with your local Finance team if you should go ahead with the edits.
Protecting Univar Solutions’ assets, information, and data
Why is it important?
Company assets include our facilities, property and equipment, computers and information systems, time, confidential and proprietary information, intellectual property, corporate opportunities, and funds. We each have a responsibility to follow all procedures that protect the value of these assets, information, and data.
Loss of data due to missing equipment, such as a lost or stolen laptop or mobile device, compromises confidential and proprietary information. The Information Security and Protection Policy directs the use of our systems, provides us with standards that help protect Univar
Solutions data from unauthorized access or security breaches, and provides guidance and requirements to manage internal information and documents generated by Univar Solutions employees or our systems.
What is required?
•Protect any data created with company equipment or systems.
•Proprietary information concerning Univar Solutions’ financial performance, strategies, customers, and
vendors is protected information and may not be distributed.
•Limit use of company computer equipment, mobile phones, or other network devices to business
purposes. Occasional personal use is allowed if it is reasonable and kept to a minimum.
•Financial resources such as company credit cards are subject to the same asset protection and are not to be used for any non-business purpose. Misappropriation of company funds for personal gain is fraud and subject to disciplinary action and possible criminal penalties. For guidelines on the use of company credit cards, please refer to the Company Travel & Expense Policies, as well as local policies governing company credit cards.
•Company information and information systems must be used in accordance with the Information Security and Protection Policy.
•Report suspected IT security breaches or violation of the Data Protection Standards to your immediate
supervisor, manager, and to your local Help Desk.
•Should you experience loss of equipment or device, report it immediately to your local Help Desk or IT Compliance (ITCompliance@univar.com).
What to look out for
•Weak or missing controls to prevent misuse of assets
•Confidential information not properly secured
•Proprietary information improperly distributed
•Deliberate misuse of company assets
Q&A
While traveling on Univar Solutions business, Andrei left his laptop at the airport.
Q: Should Andrei wait until he returns from his business trip to report the lost laptop?
A: Andrei should report the loss of his laptop as quickly as possible. Even though the laptop is password protected, there is still a potential for the laptop to be compromised. Information saved on the laptop could be accessed and used inappropriately.
Protecting intellectual property
Why is it important?
Intellectual property rights are important for protecting the investments that Univar Solutions makes in developing products and brands. We protect our intellectual property and respect the intellectual property rights of others. Some examples of intellectual property include trademarks, copyrights, and patents.
What is required?
•Do not copy, reproduce, or transmit protected material, such as publications, images, video, or software that belong to Univar Solutions or others unless we have authorization or license to do so.
•Follow all applicable laws and regulations that protect intellectual property.
What to look out for
•Improper use of Univar Solutions intellectual property, such as trademarks
•Misuse of our customers’ or suppliers’ intellectual property
Q&A
To help with a sales bid, Hilda decided to create an information sheet with company logos of local customers. Hilda figured that since they are our customers it is ok to use their logos, but beforehand she sent an email to all the customers asking their permission.
Q: Are Hilda’s actions ok?
A: Yes. Hilda ensured she had permission to use customers’ logos for a specific purpose.
Social Media
Why is it important?
The rapid growth of social media technologies combined with their ease of use and pervasiveness make them attractive channels of communication. However, these tools also hold the possibility of a host of unintended consequences. Because we all benefit from the valuable experiences and insights of others, the use of social media is permitted. Social media use may not be excessive or exceed the scope of Univar’s business objectives. Improper use of social media can lead to data loss, lawsuits, regulatory fines, or penalties and can damage Univar’s reputation and business.
What is Required?
• Employees using social media for business purposes must meet the requirements documented in Univar’s Social Media Policy.
• When commenting on company-related topics, disclose your relationship with the Company.
• Do not release nonpublic information related to the Company or other companies.
• Always take precautions to ensure posts are factually accurate. If you are expressing an opinion, state clearly that it’s your opinion and not that of the Company’s.
• Be respectful, do not make comments that harass or discriminate, and do not post negative comments about the competition.
• Post with caution; your post could “go viral.”
• If contacted by a customer on a social media channel, listen to the customer then direct the conversation to the appropriate Univar representative.
• When in doubt, contact Corporate Communications.
What to Look Out For?
Always consider the context of what you are posting. Ensure it is in line with:
• The Univar Code Handbook;
• All Policies and Standards; and
• Our Values.
Q&A
Our office had a fantastic summer picnic and I took pictures of everyone having fun. I don’t know who most of these people are, and I am not connected to any of my coworkers through social media.
Q: Can I post these pictures online to my personal networking sites to show what a great company I work for?
A: If taken while engaged in company business or at company events, then employees cannot post on personal blogs or social networking sites any photographs of other employees, customers, or suppliers.
Privacy
Why is it important?
It is our policy to protect the privacy of those we do business with, including our customers, business partners (e.g., suppliers), and employees. Privacy laws define how Univar manages personal data across the globe. Personal data is any information that relates to how a person could be identified and may or may not include sensitive personal information such as race, gender, or ethnicity.
What is Required?
• Always respect the privacy of others and the confidentiality of personal information.
• Keep personal information safe and secure.
• Take precautions when sharing personal information.
• Respect local privacy laws.
What to Look Out For?
• Information not properly protected or kept secured.
• Personal information being used in ways that have not been agreed to.
• Suspicious requests asking for personal information.
Q&A
Sally received an email from the “Company President” requesting personal information of all employees. The email instructed her not to discuss the request with anyone and to send the information only to a specified personal email address.
Q: Should Sally send the information?
A: Sally should verify the authenticity of the email and only once the request has been verified should Sally send the information in accordance with Univar’s Privacy Policy.
Univar, Inc.
3075 Highland Pkwy, Suite 200
Downers Grove, IL 60515
+1 331-777-6000
© 2019 Univar Inc. All rights reserved. Univar, the collaboration insignia,
and other identified trademarks are the property of Univar Inc. or affiliated
companies. All other trademarks not owned by Univar Inc. or affiliated companies
that appear in this material are the property of their respective owners.
Published January 2019
IN-1752-0119
Exhibit 21.1
UNIVAR SOLUTIONS INC. SUBSIDIARIES
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Entity Name
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State or Other Jurisdiction of Incorporation
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Basic Chemical Solutions (Proprietary) Limited
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South Africa
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Bodine Environmental Services, Inc.
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Illinois
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Bodine Services of Clinton, LLC
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Illinois
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Bodine Services of Decatur, Inc.
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Delaware
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Bodine Services of Evansville, LLC
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Illinois
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Bodine Services of Peoria LLC
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Illinois
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Chain Reaction, LLC
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Delaware
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ChemCare Acquisition LLC
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Delaware
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ChemPoint.com Inc.
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Nevada
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ChemPoint.com-EMEA B.V.
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Netherlands
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Cravenhurst Properties Limited
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United Kingdom
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Distrupol B.V.
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Netherlands
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Distrupol Ireland Limited
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Ireland
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Distrupol Limited
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United Kingdom
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Distrupol Nordic AB
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Sweden
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Ellis & Everard Distribution Limited
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United Kingdom
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Fiske Food Limited
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United Kingdom
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Future Transfer Co. Inc.
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Canada
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Juffali-Univar Saudi Arabia Chemicals Company, LLC
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Saudi Arabia
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Kemetyl Norge AS
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Norway
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Olympic Chemical Corporation
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Washington
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Pilates Merger Sub LLC
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Delaware
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Polymer Technologies Ltd.
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United Kingdom
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Tagma Brasil Ltda.
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Brazil
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Ulixes Limited
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United Kingdom
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Univar (Hong Kong) Limited
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Hong Kong
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Univar A/S
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Denmark
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Univar AB
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Sweden
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Univar AG
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Switzerland
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Univar AS
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Norway
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Univar Belgium NV
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Belgium
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Univar Brasil Ltda.
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Brazil
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Univar BV
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Netherlands
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Univar Canada Ltd.
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Canada
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Univar China B.V.
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Netherlands
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Univar China Ltd
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China
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Univar Colombia SAS
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Colombia
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Univar Corporativo SA de CV
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Mexico
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Univar Czech sro
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Czech Republic
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Univar de Mexico, S.A. de C.V.
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Mexico
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Univar Delaware, Inc.
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Delaware
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Entity Name
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State or Other Jurisdiction of Incorporation
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Univar Distribution (Malaysia) Sdn Bhd
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Malaysia
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Univar Egypt LLC
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Egypt
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Univar Europe Limited
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United Kingdom
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Univar Foundation
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Washington
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Univar France SNC
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France
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Univar GmbH
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Germany
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Univar Hellas EPE
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Greece
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Univar Holdco III LLC
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Delaware
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Univar Holdco LLC
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Delaware
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Univar Hungary Sales Limited Liability Co
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Hungary
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Univar Iberia SA
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Portugal
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Univar Iberia SA (Spain)
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Spain
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Univar Ireland Ltd.
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Ireland
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Univar Kimya Sanayi ve Dıs Ticaret Limited Sirketi
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Turkey
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Univar Limited
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United Kingdom
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Univar LLC
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Russian Federation
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Univar Middle East-Africa FZE
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Dubai
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Univar Netherlands Holding B.V.
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Netherlands
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Univar Oy
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Finland
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Univar Poland Sp.zo.o
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Poland
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Univar SAS
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France
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Univar Services (PTY) Ltd.
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South Africa
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Univar Singapore PTE LTD
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Singapore
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Univar South-East Europe S.r.l.
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Romania
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Univar SpA
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Italy
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Univar Specialty Consumables Limited
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United Kingdom
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Univar Tunisia SARL
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Tunisia
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Univar UK Limited
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United Kingdom
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Univar USA Delaware, Inc.
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Delaware
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Univar USA Inc.
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Washington
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Univar Zwijndrecht N.V.
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Netherlands
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UnivarMEA SARL
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Morocco
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UVX Scandinavia AB
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Sweden
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Weavertown Transport Leasing, Inc.
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Pennsylvania
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Nexeo Solutions Holdings, LLC
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Delaware
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TPG Accolade Delaware, LLC
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Delaware
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Nexeo Solutions Sub Holding Corp.
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Delaware
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Nexeo Solutions, LLC
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Delaware
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Nexeo Solutions Mexico Holdings, LLC
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Mexico
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Nexeo Solutions Canada Corp
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Canada
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Nexeo Solutions Mexico SRL
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Mexico
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Nexeo Solutions Services Mexico SRL
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Mexico
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Nexeo Solutions Costa Rica SRL
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Costa Rica
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Nexeo Solutions Guatemala SA
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Guatemala
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Archway Sales LLC
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Delaware
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Chemical Specialists and Development LLC
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Delaware
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Entity Name
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State or Other Jurisdiction of Incorporation
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Nexeo Solutions Finance Corporation
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Delaware
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Startex Distribution West, LLC
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Delaware
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Startex Chemical, LLC
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Delaware
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Nexeo Solutions Pico Holdings, LLC
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Delaware
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Univar Solutions Puerto Rico, LLC
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Puerto Rico
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Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
1)Registration Statement (Form S-3 No. 333-228154) of Univar Inc.,
2)Registration Statement (Form S-8 No. 333-205176) pertaining to the Univar Inc. 2015 Omnibus Equity Incentive Plan, the Univar Inc. 2011 Stock Incentive Plan, and the Univar Inc. Employee Stock Purchase Plan, and
3)Registration Statement (Form S-8 No. 333-217757) pertaining to the Univar Inc. 2017 Omnibus Equity Incentive Plan
of our reports dated February 25, 2020, with respect to the consolidated financial statements of Univar Solutions Inc. and schedule and the effectiveness of internal control over financial reporting of Univar Solutions Inc., incorporated by reference in this Annual Report (Form 10-K) for the year ended December 31, 2019.
/s/ Ernst & Young LLP
Chicago, Illinois
February 25, 2020
Exhibit 31.1
UNIVAR SOLUTIONS INC.
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a) OF THE EXCHANGE ACT, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, David C. Jukes, certify that:
1.I have reviewed this Annual Report on Form 10-K of Univar Solutions Inc.
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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February 25, 2020
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By: /s/ DAVID C. JUKES
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David C. Jukes
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President and Chief Executive Officer
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Exhibit 31.2
UNIVAR SOLUTIONS INC.
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) OF THE EXCHANGE ACT, AS AMENDED,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Nicholas W. Alexos, certify that:
1.I have reviewed this Annual Report on Form 10-K of Univar Solutions Inc.
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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February 25, 2020
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By: /s/ NICHOLAS W. ALEXOS
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Nicholas W. Alexos
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Executive Vice President and Chief Financial Officer
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EXHIBIT 32.1
UNIVAR SOLUTIONS INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350 and in connection with the Annual Report on Form 10-K (the “Report”) for the fiscal year ended December 31, 2019, I, David C. Jukes, President and Chief Executive Officer of Univar Solutions Inc. (the “Company”), certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ DAVID C. JUKES
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David C. Jukes
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President and Chief Executive Officer
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February 25, 2020
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This certification accompanies the Report and shall not, except to the extent required by the Exchange Act, be deemed filed by the Company. A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
EXHIBIT 32.2
UNIVAR SOLUTIONS INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. Section 1350 and in connection with the Annual Report on Form 10-K (the “Report”) for the fiscal year ended December 31, 2019, I, Nicholas W. Alexos, Executive Vice President and Chief Financial Officer of Univar Solutions Inc. (the “Company”), certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ NICHOLAS W. ALEXOS
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Nicholas W. Alexos
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Executive Vice President and Chief Financial Officer
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February 25, 2020
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This certification accompanies the Report and shall not, except to the extent required by the Exchange Act, be deemed filed by the Company. A signed original of this certification has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
