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Item 1.01 | Entry into a Material Definitive Agreement. |
The information provided in the Introductory Note of this Current Report on Form 8-K is incorporated by reference into this Item 1.01.
In connection with the AIS Transaction, at the Closing, the Company, Atkinson Holding Company LLC, a wholly-owned subsidiary of the Company, and Purchaser entered into the First Amended and Restated Limited Liability Company Agreement of the AIS JV, dated September 30, 2022 (the “AIS JV Operating Agreement”) pursuant to which the parties thereto agreed to certain rights, covenants, and obligations, including those summarized below.
The AIS JV Operating Agreement, provides that the AIS JV will be governed by a board of directors initially comprised of three directors designated by Purchaser and two directors appointed by the Company. Each of Purchaser and the Company will maintain its director appointee rights so long as it meets certain equity ownership threshold requirements set forth in the AIS JV Operating Agreement. The chairman of the board of directors of the AIS JV will be designated by Purchaser so long as it maintains the right to appoint at least two directors.
Pursuant to the AIS JV Operating Agreement, the AIS JV may make cash distributions to the members on a pro rata basis equal to the unrestricted cash held by the AIS JV at the election of the board of directors of the AIS JV (subject to the AIS JV maintaining an amount of cash to cover its costs and expenses and to fund its operations and complying with the terms of its financing arrangements). The members of the AIS JV are entitled to receive tax distributions based on an assumed allocation of taxable income, subject to certain specified adjustments and calculated assuming a tax rate equal to the highest effective marginal combined U.S. federal, state, and local income tax rate for an individual or corporate resident in New York, New York.
Certain decisions of the AIS JV require the approval of both the Company and Purchaser, including, among others, changes in the constituent documents or the size of the board of directors of the AIS JV, the issuance of equity interests in the AIS JV having economic rights and preferences senior to those held by the Company and Purchaser, certain related party transactions, certain transfers of equity interests in the AIS JV by any member, and certain other material business decisions of the AIS JV.
The AIS JV Operating Agreement further provides that so long as Purchaser has the right to designate at least a majority of the members of the board of directors of the AIS JV, Purchaser shall have the right to initiate certain dispositions of AIS JV equity interest and assets, including an initial public offering of the AIS JV and a sale of the AIS JV to a third party (in accordance with certain drag-along sale procedures). Other than in connection with an initial public offering of the AIS JV, the parties have agreed to general restrictions on transfers of interests in the AIS JV until the third anniversary of the Closing, subject to certain limited exceptions. The AIS JV Operating Agreement also contains certain tag-along rights for the members of the AIS JV and rights of first refusal in favor of the Company, Purchaser, and the AIS JV, in each case, in connection with certain sales of membership interests in the AIS JV.
In certain enumerated involuntary transfers of equity interests of the AIS JV by a member, the AIS JV shall have the right to right to purchase the equity interests of such member. Additionally, in the event of a change of control of the Company, Purchaser will have the right to either purchase all the Company's equity interests in the AIS JV on the terms set forth in the AIS JV Operating Agreement or terminate all rights afforded to the Company as a "Principal Member" under the AIS JV Operating Agreement. The AIS JV Operating Agreement also contains customary covenants regarding cooperation and information sharing. Additionally, the Company and Purchaser and their respective affiliates are restricted from competing with the AIS JV Operating Agreement until September 30, 2027. The AIS JV Operating Agreement also includes certain cross-indemnities among the AIS JV, the Company and Purchaser with respect to certain specified liabilities of the AIS Business under multi-employer pension plans to which the AIS Business contributes.
The foregoing summary of the AIS JV Operating Agreement does not purport to be complete and is qualified in its entirety by the full text of the AIS JV Operating Agreement, which is attached hereto as Exhibit 10.1, and is incorporated herein by reference.
The Purchase Agreement and AIS JV Operating Agreement have been included to provide investors with information regarding its terms. They are not intended to provide any other factual information about the Company, Purchaser, or their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Purchase Agreement and the AIS JV Operating Agreement were made only for purposes of the Purchase Agreement and the AIS JV Operating Agreement, respectively, and as of specific dates, were solely for the benefit of the parties to the Purchase Agreement and the AIS JV Operating Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Purchase Agreement and the AIS JV Operating Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Purchase Agreement or the AIS JV Operating Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Purchase Agreement and the AIS JV Operating Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.